WAST 10-Q
Waste Energy Corp. (WAST)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
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) (Zip Code)
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act
| Title of Each Class | Trading Symbol(s) | Name of each exchange on which registered | ||
| Nil | 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 that 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.
| 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
☐ No |
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: shares of common stock issued and outstanding as at August 19, 2024.
TABLE OF CONTENTS
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PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
Our unaudited condensed interim consolidated financial statements are stated in United States dollars and are prepared in accordance with United States generally accepted accounting principles.
It is the opinion of management that the unaudited condensed interim consolidated financial statements for the quarter ended June 30, 2024 include all adjustments necessary in order to ensure that the unaudited condensed interim consolidated financial statements are not misleading.
| 3 |
MetaWorks Platforms, Inc.
Condensed Consolidated Balance Sheets
| June 30, 2024 | December 31, 2023 | |||||||
| (unaudited) | ||||||||
| Assets | ||||||||
| Current Assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable | ||||||||
| Prepaid expenses | ||||||||
| Interest receivable, related party – net (See note 6) | ||||||||
| Notes receivable, related party – net (see note 6) | ||||||||
| Notes receivable – net (see note 6) | ||||||||
| Total Current Assets | ||||||||
| Long-Term Assets | ||||||||
| Intangible asset, net | ||||||||
| Total Long-Term Assets | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current Liabilities | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Accounts payable and accrued expenses, related party | ||||||||
| Deferred revenue | ||||||||
| Notes payable – current portion, net | ||||||||
| Convertible notes payable – software acquisition | ||||||||
| Convertible notes payable – other | ||||||||
| Total Current Liabilities | ||||||||
| Total Liabilities | ||||||||
| Commitments and Contingencies | ||||||||
| Stockholders’ Equity | ||||||||
| Common stock, $ par value, shares authorized; and shares issued and outstanding as at June 30, 2024 and December 31, 2023, respectively | ||||||||
| Additional paid-in-capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total MetaWorks Platforms, Inc. Stockholders’ Equity | ( | ) | ( | ) | ||||
| Non-controlling interest | ( | ) | ( | ) | ||||
| Total Stockholders’ Equity | ( | ) | ( | ) | ||||
| Total Liabilities and Stockholders’ Equity | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements.
| 4 |
MetaWorks Platforms, Inc.
Condensed Consolidated Statement of Operations
(Unaudited)
| Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | |||||||||||||
| Revenues | ||||||||||||||||
| NFT revenues | $ | $ | $ | $ | ||||||||||||
| Consulting service | ||||||||||||||||
| Movie distribution revenue | ||||||||||||||||
| Total revenues | ||||||||||||||||
| Operating expenses | ||||||||||||||||
| General and administrative expenses | ||||||||||||||||
| Service costs | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Net loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense) | ||||||||||||||||
| Note interest revenue | ||||||||||||||||
| Note interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Bad debt recovery | ( | ) | ||||||||||||||
| Investment write off | ||||||||||||||||
| Asset write off | ( | ) | ( | ) | ||||||||||||
| Interest write off | ( | ) | ( | ) | ||||||||||||
| Total other income (expense) | ( | ) | ( | ) | ||||||||||||
| Net loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net income (loss) from non-controlling interest | ( | ) | ||||||||||||||
| Net income (loss) attributable to MetaWorks Platforms, Inc. | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Earnings (loss) per common share – basic and diluted | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
| Weighted average number of common shares outstanding – basic and diluted | ||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements.
| 5 |
MetaWorks Platforms, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | |||||||
| Operating activities | ||||||||
| Net loss for the period | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities | ||||||||
| Stock-based compensation | ||||||||
| Stock-based compensation and forfeitures, related party | ||||||||
| Derivative liability | ||||||||
| Loan payable non-cash expenses – legal, discount, & interest | ||||||||
| Asset write off | ||||||||
| Changes in operating assets and liabilities | ||||||||
| Accounts receivable | ( | ) | ||||||
| Prepaid expenses | ||||||||
| Accounts payable and accrued expenses | ( | ) | ||||||
| Accounts payable and accrued expenses, related party | ( | ) | ||||||
| Accrued interest on convertible notes payable | ||||||||
| Accrued interest on notes receviable | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Financing activities | ||||||||
| Proceeds from share issuance | ||||||||
| Proceeds from issuance of convertible note | ||||||||
| Proceeds from issuance of note payable | ||||||||
| Payments made on notes payable | ( | ) | ( | ) | ||||
| Proceeds from repayment on note receivable | ||||||||
| Net cash provided by financing activities | ||||||||
| Net changes in cash and equivalents | ( | ) | ( | ) | ||||
| Cash and equivalents at beginning of the period | ||||||||
| Cash and equivalents at end of the period | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements.
| 6 |
MetaWorks Platforms, Inc.
Condensed Consolidated Statements of Cash Flows (cont’d)
(Unaudited)
| SUPPLEMENTAL CASH FLOW INFORMATION | ||||||||
| Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | |||||||
| Cash paid in interest | $ | $ | ||||||
| Cash paid for income taxes | $ | $ | ||||||
| Non-cash share issue costs | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES | ||||||||
| Stock-based compensation | $ | $ | ||||||
| Stock-based compensation and forfeitures, related party | $ | $ | ||||||
| Conversion of convertible debt | $ | $ | ||||||
| Accounts payable settled against amounts owed from the acquisition of EnderbyWorks | $ | $ | ||||||
| Non-controlling interest in EnderbyWorks acquired for no cash consideration | $ | $ | ||||||
| Notes receivable due from acquisition of EnderbyWorks | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements.
| 7 |
MetaWorks Platforms, Inc.
Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit)
(Unaudited)
| Common Stock | Additional | Non- | ||||||||||||||||||||||
| Number of Shares | Amount | Paid-in Capital | Accumulated Deficit | Controlling interest | Total | |||||||||||||||||||
| Balance, December 31, 2022 | ( | ) | ( | ) | ||||||||||||||||||||
| Stock-based compensation and forfeitures | - | |||||||||||||||||||||||
| Stock-based compensation, related party | - | |||||||||||||||||||||||
| Share issuance for services – software development | ||||||||||||||||||||||||
| Share issuance for services | ||||||||||||||||||||||||
| Shares issuances for services – related party | ||||||||||||||||||||||||
| Private placements for cash | ||||||||||||||||||||||||
| Shares issued for compensation – related party | ||||||||||||||||||||||||
| Acquisition of non-controlling interest of EnderbyWorks | - | |||||||||||||||||||||||
| Allocation of net loss to non-controlling interest of Moto Club | - | ( | ) | |||||||||||||||||||||
| Net income (loss) for the year | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance, December 31, 2023 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||||||
| Stock-based compensation, related party | - | |||||||||||||||||||||||
| Shares issued for cash – private placement | ||||||||||||||||||||||||
| Shares issuances for services - marking | ||||||||||||||||||||||||
| Shares issuances for services, related party | ||||||||||||||||||||||||
| Shares issued on conversion of loan payable | ||||||||||||||||||||||||
| Net income (loss) for the period | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance March 31, 2024 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||||||
| Stock-based compensation, related party | - | |||||||||||||||||||||||
| Share issuance on conversion of note | ||||||||||||||||||||||||
| Net income (loss) for the period | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance June 30, 2024 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements.
| 8 |
MetaWorks Platforms, Inc.
Notes to Unaudited Condensed Interim Consolidated Financial Statements
As of June 30, 2024 and for the six months ended June 30, 2024 and 2023
1. NATURE AND CONTINUANCE OF OPERATIONS
MetaWorks
Platforms, Inc. (the “Company”) was incorporated under the laws of the State of
On August 1, 2017 the Company incorporated a Nevada subsidiary, AppCoin Innovations (USA) Inc., which was formed to provide blockchain consulting services.
On February 14, 2018, we effected a name change for our subsidiary from “AppCoin Innovations (USA) Inc.” to “ICOx USA, Inc.”
On November 28, 2018, we incorporated a new Delaware subsidiary, Cathio, Inc, to provide blockchain technology opportunities to the Catholic community. Cathio was dissolved on October 20, 2020.
On November 28, 2018, we incorporated a new Delaware subsidiary, GN Innovations, Inc. to provide blockchain technology opportunities to the sports and entertainment industry by working with large and well-established brands.
Effective December 5, 2018, we effected a name change for our subsidiary from “GN Innovations, Inc.” to “GNI, Inc.”
Effective February 6, 2019, we effected a name change for our subsidiary from “GN1, Inc.” to “sBetOne, Inc.”. On August 12, 2021, the Company’s subsidiary sBetOne, Inc. (“sBetOne”) entered into a business combination with a related party, VON Acquisition Inc. (“VON”), whereby sBetOne became a wholly owned subsidiary of VON.
On September 3, 2019, the Company changed its name from “ICOx Innovations Inc.” to “CurrencyWorks Inc.” and a subsidiary of the Company changed its name from “ICOx USA, Inc.” to “CurrencyWorks USA Inc.”.
On June 22, 2021, we incorporated a new Delaware subsidiary, Motoclub LLC, to create a marketplace for digital automotive collectibles.
On June 22, 2021, we incorporated a new Delaware subsidiary, EnderbyWorks, LLC, (“EnderbyWorks”) to create a direct-to-consumer, feature-length film viewing and distribution platform delivering feature-length films and digital collectible entertainment content as NFTs.
On August 24, 2022, the Company changed its name from CurrencyWorks Inc. to MetaWorks Platforms, Inc (“MWRKS”).
The Company’s business model is to provide a turnkey set of services to develop and integrate Web 3.0 / Metaverse technologies, NFT, blockchain, and cryptocurrency technologies. The Company’s services include strategic planning, project planning, structure development and administration, business plan modeling, technology development support, whitepaper preparation, due diligence reporting, governance planning and management, and movie distribution.
Going Concern
These
unaudited condensed interim consolidated financial statements have been prepared on a going concern basis which assumes the Company will
be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. The Company
has incurred losses since inception resulting in an accumulated deficit of $
The financial statements do not include any adjustments relating to the recoverability and classification of assets or the amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern. Such adjustments could be material.
| 9 |
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed interim consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States if America of (“US. GAAP”) as found in the Accounting Standards Codification (“ASC”), and the Accounting Standards Update (“ASU”) of the Financial Accounting Standards Board (“FASB”) and are expressed in US Dollars, unless otherwise noted. The unaudited condensed interim consolidated financial statements should be read in conjunction with the notes contained herein as part of the Company’s Quarterly Report in its Form 10-Q filing under the Securities Exchange Commission.
Basis of Consolidation
The
consolidated statements include the accounts of the Company and its subsidiaries. CurrencyWorks USA Inc.(“CW”) (formerly
ICOx USA, Inc.) and Enderby Works LLC (“EW”) are wholly owned subsidiaries. EW became a wholly owned subsidiary in 2023,
see Note 6 Notes Receivable. MotoClub (“MB”) is a majority-owned subsidiary,
Use of Estimates
The preparation of the unaudited condensed interim consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates and these differences could be material.
The most significant estimates made by management in the preparation of the financial statements relate to the estimates used to calculate the fair value of certain liabilities, the derivative liability, the present value of notes payable and notes receivable, the valuation of the investments and any impairment and the net book value of long-lived assets. Management bases its estimates on historical experience and on other various 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. Actual results could differ materially from such estimates under different assumptions and conditions.
Cash and Cash Equivalents
Cash and cash equivalents include short-term, highly liquid investments, such as cash on account with commercial banks, certificates of deposit or money market funds that are readily convertible to known amounts of cash and have original maturities of three months or less. All cash balances are held by major banking institutions.
| 10 |
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
Contingent Liabilities:
The Company accounts for its contingent liabilities in accordance with ASC No. 450 “Contingencies”. A provision is recorded when it is both probable that liability has been incurred and the amount of the loss can be reasonably estimated.
With respect to legal matters, provisions are reviewed, and financial information is adjusted to reflect the impact of negotiations, estimated settlements, legal rulings, advice of legal counsel and other information and events pertaining to a particular matter. As of June 30, 2024, and December 31, 2023, the Company was not a party to any litigation.
Income Taxes
The Company follows the liability method of accounting for income taxes. Under this method, deferred income tax assets and liabilities are recognized for the estimated tax consequences attributable to differences between the financial statement carrying values and their respective income tax basis (temporary differences). The effect on deferred income tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
FASB Accounting Standards Codification Topic 740, Income Taxes (“ASC 740”), clarifies the accounting for uncertainty in income taxes recognized in the financial statements. ASC 740 provides that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits of the position. Income tax positions must meet a more-likely-than-not recognition threshold to be recognized. ASC 740 also provides guidance on measurement, derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. We have determined that the Company does not have uncertain tax positions on its tax returns for the years 2022, and prior. Based on the evaluation of the 2023 transactions and events, the Company does not believe it has any material uncertain tax positions that require measurement.
Our policy is to recognize interest and/or penalties related to income tax matters in income tax expense. We had no accrual for interest or penalties on our consolidated balance sheets at June 30, 2024 or December 31, 2023, and have not recognized interest and/or penalties in the consolidated statement of operations for the period ended June 30, 2024 or year ended December 31, 2023.
We are subject to taxation in the U.S. and the state of California. The Company’s tax returns for tax years from 2021 to recent filings remain subject to potential examination by the tax authorities.
Accounts Receivable
The collectability of accounts receivable is determined by the Company’s legal obligation to receive payment by the customer, as well as the ability of the customer to pay its debts. The carrying amount of accounts receivable represents the maximum credit exposure of this balance.
Accounts
receivable balances relate to the consulting services business and are reported at their net realizable value. From management’s
best estimate, there is
| 11 |
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
The Company computes earnings (loss) per share (“EPS”) in accordance with ASC 260, “Earnings per Share” which requires presentation of both basic and diluted EPS on the face of the statement of operations. Basic EPS is computed by dividing net income (loss) available to common shareholders by the weighted average number of shares outstanding during the period. Diluted EPS gives effect to all diluted potential common shares outstanding during the period. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of warrants or stock options (Note 12 and Note 14 respectively). Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive.
At
June 30, 2024 the Company had convertible debt outstanding, warrants exercisable to
Stock-Based Compensation
The Company has adopted FASB guidance on stock-based compensation. Under ASC 718-10-30-2 “Stock Compensation”, all share-based payments to employees, including grants of employee stock options, are to be recognized in the income statement based on their fair values. The fair value of the options is calculated using the Black Scholes valuation model (Note 14).
The Company has issued stock options to employees and non-employees. Stock options granted to non-employees for services or performance not yet rendered would be expensed over the service period or until the goals had been reached. Stock options granted to employees are expensed over the vesting period of the options. The fair value of stock options are determined on the grant date.
Forfeitures of options are recognized as they occur. Compensation cost previously recognized is reversed on the date of forfeiture for any options that are forfeited prior to the completion of the requisite service period or vesting period.
Cancellation of an award accompanied by the concurrent grant of (or offer to grant) a replacement award of other valuable consideration is accounted for as a modification of the terms of the canceled award. The total compensation cost measured on the date of a cancellation and replacement is the portion of the grant-date fair value of the original award for which the requisite service is expected to be rendered (or has already been rendered) at that date plus the incremental cost resulting from the cancellation and replacement.
A cancellation of an award that is not accompanied by the concurrent grant of (or offer to grant) a replacement award of other valuable consideration is accounted for as a repurchase for no consideration. Accordingly, any previously unrecognized compensation cost is recognized on the cancellation date.
Fair Value of Financial Instruments
The fair value is an exit price representing the amount that would be received to sell an asset or required to transfer a liability in an orderly transaction between market participants. As such, the fair value of a financial instrument is a market-based measurement that should be determined based on the assumptions that market participants would use in pricing an asset or a liability.
A three-tier fair value hierarchy is established as a basis for considering such assumptions and for inputs used in the valuation methodologies in measuring fair value:
| ● | Level 1: Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets. | |
| ● | Level 2: Observable inputs that reflect quoted prices for identical assets or liabilities in markets that are not active; quoted prices for similar assets or liabilities in active markets; inputs other than quoted prices that are observable for the assets or liabilities; or inputs that are derived principally from or corroborated by observable market data by correlation or other means. | |
| ● | Level 3: Unobservable inputs reflecting our own assumptions incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participants assumptions that are reasonably available. |
| 12 |
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
The Company’s financial instruments consist of equity investments, note receivables, derivative liabilities and notes payable. The Company’s note receivables were indirectly written down to zero due to potential non-collections. The Company’s derivative liabilities have a fair value of zero principally due to a decline in the stock price. These instruments are in level 3 of the fair value hierarchy.
When determining fair value, whenever possible, the Company uses observable market data, and relies on unobservable inputs only when observable market data is not available. As at June 30, 2024 and December 31, 2023, the Company did not have any level 1 or 2 financial instruments. At June 30, 2024 and December 31, 2023 the Company’s level 3 financial instruments were derivative liabilities for warrants issued and outstanding that were not indexed to the Company’s stock, notes payable and notes receivable valued at their present values and equity investments in other entities.
The following table presents the Company’s assets and liabilities that are measured at fair value on a non-recurring basis at June 30, 2024.
Quoted Prices in Active Markets for Identical Assets | Significant Other Observable Inputs (Level2) | Significant Unobservable Inputs (Level3) | ||||||||||
| Assets | ||||||||||||
| Note Recevable | ||||||||||||
| Liabilities | ||||||||||||
| Notes Payable | $ | |||||||||||
| Convertible note payable | $ | |||||||||||
The following table presents the Company’s assets and liabilities that are measured at fair value on a non-recurring basis at December 31, 2023.
Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level2) | Significant Unobservable Inputs (Level3) | ||||||||||
| Assets | ||||||||||||
| Note Recevable | ||||||||||||
| Liabilities | ||||||||||||
| Notes Payable | $ | |||||||||||
| Convertible note payable | $ | |||||||||||
Derivative Liabilities
When the Company issues warrants, it evaluates the proper balance sheet classification of the warrant to determine whether the warrant should be classified as equity or as a derivative liability on the consolidated balance sheet. In accordance with ASC 815-40, Derivatives and Hedging, the Company classifies a warrant as equity if it is indexed to the Company’s equity and several specific conditions for equity classification are met. A warrant is not considered indexed to the Company’s equity in general when it contains certain types of exercise contingencies or adjustments to exercise price. If a warrant is not indexed to the Company’s equity or it has net cash settlement that results in the warrants to be accounted for under ASC 480, Distinguishing Liabilities from Equity, or ASC 815-40, it is classified as a derivative liability which is carried on the consolidated balance sheet at fair value with any changes in its fair value recognized currently in the statement of operations. As of June 30, 2024 and December 31, 2023, the Company had warrants that were classified as liabilities and warrants that were classified as equity.
| 13 |
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
Some
of the warrants issued by the Company have strike prices denominated in Canadian dollars (“CAD”). The Company’s functional
currency is USD. Therefore, in accordance with ASC 815 and EITF Issue No. 07-5, when the strike price of warrants is denominated in a
currency other than an entity’s functional currency, the warrants would not be considered indexed to the entity’s own stock
and would consequently be evaluated for a derivative liability under the conditions that the strike price is indexed to a foreign currency.
The derivative liability associated with these warrants was valued on the date of issuance and is revalued at each reporting period.
Due to the stock price on the report date, the derivative liability was valued at
Digital assets
The Company applies accounting for digital assets in accordance with the AICPA Practice Aid “Accounting for and Auditing of Digital Assets”, the guide is dated as of June 30, 2022, and the SEC issued Staff Accounting Bulletin No. 121, which is effective for periods after June 15, 2022, which are the current nonauthoritative guidance for accounting for digital assets under U.S. generally accepted accounting principles (GAAP). The AICPA Practice Aid is non-authoritative guidance that represents the views of the Digital Assets Working Group and AICPA staff. There is currently no official pronouncement or authoritative guidance on accounting for digital assets and digital asset transactions. Accordingly digital assets that lack physical substance meet the definition of intangible assets and would generally be accounted for under FASB ASC 350, Intangibles, Goodwill and Other. The Company holds no digital assets at June 30, 2024 and December 31, 2023. Though its business is in the development of digital asset platforms and the creation of non-fungible tokens, digital assets are not regularly used to conduct transactions or held during the year.
Revenue recognition
The Company recognizes revenue under ASC 606, Revenue from Contracts with Customers. 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
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, the Company also considers the effects of all of the following:
| ● | Variable consideration | |
| ● | Constraining estimates of variable consideration | |
| ● | The existence of a significant financing component in the contract | |
| ● | Noncash consideration | |
| ● | Consideration payable to a customer |
The Company generates revenues from three main sources, NFT sales, consulting services, and movie distribution.
| 14 |
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
Consulting Services
Consulting Service revenue is derived from providing professional knowledge and skills for creation of digital assets platforms and advisory services to third-party customers. The contract and performance obligations are created based on the needs of the customer and the abilities of the Company to provide the required services. The allocation of the transaction price to the individual performance obligations in the contract may be specified by task or by phase depending on the work being done. Revenue is recognized upon completion of the performance obligations. Revenues from ongoing services are recognized ratably over the related period. Revenue is recognized for the creation of software and web-based platforms upon completion and delivery. There are various tasks associated with providing this service for which customers are charged, nevertheless, no single task has a standalone fair value and each task is only valuable to the customer when the project’s objective is accomplished. Therefore, consulting services are considered a single revenue stream requiring all related tasks to accomplish a specified customer objective.
NFT Revenue
NFT revenue is derived from the sale of NFTs. These NFTs are created by the Company’s subsidiaries and are sold through an online sales platform or through an auction. Revenue is recognized when the Company transfers the ownership of the NFT to the customer.
Movie Distribution Revenue
Movie distribution revenue is derived from the use of the Company’s intangible assets. Revenues earned to date are from nonrefundable minimum guaranteed payments recognized on the date distribution rights were granted to the purchaser and royalty revenues when certain cost recuperation thresholds and other contractual conditions are met. Future revenues may be recognized from revenue generated by the purchaser or by additional distribution sales over the term of the movie rights license.
Funds received for unearned revenue are deferred revenue on the consolidated balance sheet and are recognized as revenue upon completion of milestones or specified tasks.
Disaggregated Revenue Disclosure
Principally all customers are located in the USA. During the six moths ended June 30, 2024, the Company generated no revenues.
Recent Accounting Pronouncements
ASU 2022-01 “Derivatives and Hedging (Topic 815): Fair Value Hedging - Portfolio Layer Method”. Effective for public companies for fiscal years beginning after 15 December 2022, including interim periods within those fiscal years. ASU 2021-08. “Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers”. “Effective for public companies for fiscal years beginning after 15 December 2022, including interim periods within those fiscal years. ASU 2023-04. “Liabilities (Topic 405): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 121”. Effective upon the issuance date, July 14, 2023. Management has not yet evaluated the impact that the adoption of these pronouncements will have on the Company’s consolidated financial statement presentation or disclosures. The Company periodically reviews new accounting standards that are issued. Although some of these accounting standards may be applicable to the Company, the Company has not identified any new standards that it believes merit further discussion, and the Company expects that none would have a significant impact on its financial statements.
In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures,” which requires a public entity to disclose significant segment expenses and other segment items on an annual and interim basis and provide in interim periods all disclosures about a reportable segment’s profit or loss and assets that are currently required annually. Additionally, it requires a public entity to disclose the title and position of the Chief Operating Decision Maker (“CODM”). The ASU does not change how a public entity identifies its operating segments, aggregates them, or applies the quantitative thresholds to determine its reportable segments. The new standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. A public entity should apply the amendments in this ASU retrospectively to all prior periods presented in the financial statements. The Company is currently evaluating the impact that adoption of this accounting standard will have on its financial disclosures. The Company plans to adopt the guidance int the fiscal year December 31st 2024 and interim period beginning after December 31st 2024.
Management has evaluated other recently issued accounting pronouncements and does not believe that any of these pronouncements will have a significant impact on our consolidated financial statements and related disclosures.
| 15 |
3. CONCENTRATION AND CREDIT RISK
Financial
instruments which potentially subject the Company to credit risk consist of cash. Cash is maintained with a major financial institution
in the USA that is creditworthy. The Company maintains cash in bank accounts insured up to $
During
the period ended June 30, 2024, the Company generated no revenues, and there are no significant customers. During the period ended June
30, 2023 one customer made up
4. ACCOUNTS RECEIVABLE
As
at June 30, 2024, the Company had accounts receivables of $
5. PREPAID EXPENSES
On June 30, 2024 and year ended December 31, 2023, prepaid expenses were comprised of:
| June 30, 2024 | December 31, 2023 | |||||||
| Prepaid expenses - deposit | $ | $ | ||||||
| $ | $ | |||||||
Prepaid
expenses consist of a
6. NOTES RECEIVABLE – RELATED PARTY
| June 30, 2024 | December 31, 2023 | |||||||
| Interest receivable, related party – current portion | ||||||||
| Allowance for doubtful accounts, related party | ( | ) | ( | ) | ||||
| Interest receivable, related party – net | ||||||||
| Notes receivable, related party – current portion | ||||||||
| Allowance for doubtful accounts, related party | ( | ) | ( | ) | ||||
| Notes receivable, related party – net | ||||||||
| Notes receivable – current portion | ||||||||
| Allowance for doubtful accounts | ( | ) | ( | ) | ||||
| Notes receivable – net | ||||||||
On May 5, 2021, the Company loaned $
The
allowance for doubtful accounts for the notes receivable converted in the quarter ended June 30, 2024 was recovered resulting in a gain
of $
On August 20, 2021, the Company loaned an additional $
On
April 10, 2024, the Company and Fogdog agreed to an extension of terms on the $
There
have been several extensions of the maturity dates of these notes from their issuance and we have deemed them potentially non
collectible. In 2023 an allowance for potential non collections was allocated to these notes resulting in net realizable value of
zero and an impairment loss of $
On
March 15, 2023, the Company signed an agreement with its partner in the jointly-owned subsidiary EnderbyWorks to become the
| 16 |
7. INTANGIBLE ASSET
On
July 7, 2023, MetaWorks acquired software from Utopia, a notable customized software provider in the industry. Software included a
Web3 business metaverse platform, Chat GPT-powered AI avatar technology, and a domain portfolio, including UtopiaVR.com. The
intended use of this software was to generate subscription-based fees for education and investor relations industries. This
acquisition also includes a patent-pending IP technology for metaverse haptics, which was to held for potential development and
licensing opportunities. The consideration paid for the acquisition of the assets included: (i) the issuance of shares
of common stock of the Company; (ii) the issuance of a convertible promissory note in the principal amount of $
8. NOTES PAYABLE
On
June 14, 2022, the Company issued a promissory note payable for $
On
November 8, 2022, the Company entered into a promissory note agreement (“Note B”) to raise $
On
April 19, 2023, the Company entered into a promissory note agreement (“Note C”) with one subscriber to raise a net amount
of $
On
September 5, 2023, the Company entered into a promissory note agreement (“Note D”) that was dated September 5, 2023 with
one subscriber (the “Holder”) to raise a net amount of US$
| 17 |
8. NOTES PAYABLE (CONT’D)
On
December 5, 2023, the Company entered into a promissory note agreement with one subscriber (the “Holder”) to raise a net
amount of $
On
April 28, 2023, the company received a $
On
July 5, 2023, MetaWorks acquired software, including a Web3 business metaverse platform, Chat GPT-powered AI avatar technology, and domain
portfolio, including UtopiaVR.com. This acquisition also includes a patent-pending IP technology relating to metaverse haptics that will
hold potential for future development and licensing opportunities. Consideration for the acquisition of the assets included: (i) the
issuance of shares of common stock of the Company (each, a “Share”); (ii) the issuance of a convertible
promissory note in the principal amount of $
On
March 4, 2024, the Company closed on a promissory note and entered into a promissory note agreement that was dated March 1, 2024
with one subscriber (the “Holder”) to raise a net amount of $
On
June 11th, 2024, the Company entered into a Convertible Loan Agreement (the “Convertible Loan Agreement”) for a total of
$
| 18 |
9. DEFERRED REVENUE
Prior
to June 30, 2024, the Company received $
10. COMMITMENTS AND CONTINGENCIES
Litigation
From time to time, the Company may be subject to legal proceedings, claims, and liabilities that arise in the ordinary course of business. The Company is not aware of any pending litigation as of the date of this report, and therefore, in the opinion of management and based upon the advice of its outside counsels, the liability, if any, from any pending litigation is not expected to have a material effect in the Company’s financial position, result or operations, and cash flows.
11. RELATED PARTY TRANSACTIONS
On
January 22, 2018, the Company appointed James Geiskopf as Lead Director. As of June 30, 2024 and December 31, 2023, the Company had accounts
payable and accrued expenses owing to this related party of $
On
April 1, 2021, the Company appointed Cameron Chell as Executive Chairman. As of June 30, 2024 and December 31, 2023, the Company had
accounts payable and accrued expenses owed to this related party of $
On
August 1, 2022, the Company appointed Scott Gallagher as President. As of June 30, 2024 and December 31, 2023, the Company had accounts
payable and accrued expenses owing to this related party of $
On
October 9, 2017, the Company signed an agreement with a company owned by Swapan Kakumanu to provide accounting services. As of June
30, 2024 and December 31, 2023, the Company had accounts payable and accrued expenses oweinf to this related party of $
On
May 5, 2021, the Company loaned Fogdog $
| 19 |
12. WARRANTS
The
Company granted and common stock warrants, during the period ended June 30, 2024 and year ended December 31, 2023, respectively.
During the period ended June 30, 2024 warrant holders did not exercise any warrants and warrants expired. During 2023 warrant
holders did not exercise any warrants, and warrants expired. The weighted average exercise price of warrants outstanding on
June 30, 2024, is $
Since the expected life of the warrants was greater than the Company’s historical stock information available, the Company determined the expected volatility based on price fluctuations of comparable public companies.
The following table summarizes changes in warrants outstanding in each year:
| June 30, 2024 | December 31, 2023 | |||||||
| Outstanding at beginning of year | ||||||||
| Issuances | ||||||||
| Expirations | ( | ) | ( | ) | ||||
| Outstanding at end of year | ||||||||
| Weighted Average Price | $ | $ | ||||||
13. SHARE CAPITAL
On
February 10, 2023, the Company completed a private placement for shares at a price of $ per share for total gross proceeds
of $
On
March 7, 2023, the Company issued common shares for services rendered to the Company. The common shares were issued at a price
of $ per share, for a total value of $
On
March 30, 2023, the Company completed a private placement for shares at a price of $ per share for total gross proceeds
of $
On
April 4, 2023, the Company issued shares of our common stock at a deemed price of $ per share for services rendered to the
Company in the amount of $
On April 25, 2023, the Company issued common shares to vendors for services rendered to the Company. There were common shares issued at a price of $ and common shares were issued at a price of $ per share, for a total value of $.
On July 5, 2023, the Company issued common shares for software purchased by the Company. There were common shares issued at a price of $ for a total value of $.
On
July 28, 2023, the Company completed private placements for common shares at a price of $ for total gross proceeds of $
On
August 16, 2023, the Company issued shares of common stock of the Company at a deemed price of $ USD per share as compensation
for services in the amount of $
On
January 6, 2024, the Company issued shares of common stock of the Company at a deemed price of $ per share in settlement
of amounts owed for services totaling $
On
March 1, 2024, the Company issued shares of common stock of the Company at a price of $ per share for aggregate gross proceeds
of $
On
March 1, 2024 the Company converted $
On March 1, 2024 the Company issued shares of our common stock in payment for a one-year production and media broadcast agreement.
On
June 7, 2024 the company converted $
On
June 20, 2024 the Company converted $
On
June 27, 2024 the Company converted $
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14. STOCK-BASED COMPENSATION
The
Company has adopted the 2017 Equity Incentive Plan (“the Plan”) under which non-transferable options to purchase common shares
of the Company may be granted to directors, officers, employees, or consultants of the Company.
The Company has also granted stock options to non-employees. These stock options were granted to consultants who have provided their services for cash compensation below cost, with the stock options providing additional compensation in lieu of cash.
On August 26, 2022, the Company granted a total of stock options to officers and directors of the Company. The stock options are exercisable at the exercise price of $ per share for a period of from the date of grant. The stock options have a fair value of $ and are exercisable as follows:
| (i) | 1/2 the date of the grant; and | |
| (ii) | 1/2 on the first anniversary date; |
On August 26, 2022, the Company granted a total of stock options to an officer of the Company. The stock options are exercisable at the exercise price of $ per share for a period of from the date of grant. The stock options have a fair value of $ and are exercisable as follows:
| (i) | 1/3 the date of the grant; | |
| (ii) | 1/3 on the first anniversary date; and | |
| (iii) | 1/3 on the second anniversary date. |
On February 22, 2023, the Company granted a total of stock options to an officer of the Company. The stock options are exercisable at the exercise price of $ per share for a period of from the date of grant. The stock options have a fair value of $ and are exercisable as follows:
| (i) | 1/3 the first anniversary date of the grant; | |
| (ii) | 1/3 on the second anniversary date; and | |
| (iii) | 1/3 on the third anniversary date. |
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14. STOCK-BASED COMPENSATION (CONT’D)
Stock-based compensation expense recognized for the period ended June 30, 2023, and years ended December 31, 2023 were $ and $, respectively. Stock options granted are valued at fair value calculation based off the Black-Scholes valuation model.
On April 21, 2023, the Company granted a total of stock options to officers and directors of the Company. The stock options are exercisable at the exercise price of $ per share for a period of from the date of grant. The stock options have a fair value of $ and are exercisable immediately at issuance.
On April 21, 2023 the Company granted a total of stock options to consultants of the Company. The stock options are exercisable at the exercise price of $ per share for a period of from the date of grant. The stock options have a fair value of $ and are exercisable immediately at issuance.
| (i) | 1/3 on the date of the grant; | |
| (ii) | 1/3 on the first anniversary date; and | |
| (iii) | 1/3 on the second anniversary date. |
On April 21, 2023 the Company granted a total of stock options to a consultant of the Company. The stock options are exercisable at the exercise price of $ per share for a period of from the date of grant. The stock options have a fair value of $ and are exercisable immediately at issuance.
| (i) | on the date of the grant; and | |
| (ii) | on the third anniversary date. |
On January 6, 2024, the Company granted a total of stock options to directors, officers and consultants of the Company. The stock options are exercisable at the exercise price of $ per share for a period of ten years from the date of grant. The stock options have a fair value of $. The options vested immediately upon issuance.
Stock-based compensation expense recognized for the period ended June 30, 2024 and year ended December 31, 2023, were $ and $, respectively. Stock options granted are valued at fair value based off the Black-Scholes valuation model. The weighted average assumptions used in the calculation are as follows:
Period ended June 30, 2024 | Year ended December 31, 2023 | |||||||
| Share price | $ | $ | ||||||
| Exercise price | $ | $ | ||||||
| Time to maturity (years) | ||||||||
| Risk-free interest rate | % | % | ||||||
| Expected volatility | % | % | ||||||
| Dividend per share | $ | $ | ||||||
| Forfeiture rate | ||||||||
| Number of Options | Weighted Average Grant-Date Fair Value ($) | Weighted Average Exercise Price ($) | Weighted Average Remaining Life (Yrs) | |||||||||||||
| Options outstanding, December 31, 2023 | ||||||||||||||||
| Granted | ||||||||||||||||
| Cancelled | - | |||||||||||||||
| Options outstanding, June 30, 2024 | ||||||||||||||||
| Options exercisable, June 30, 2024 | ||||||||||||||||
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14. STOCK-BASED COMPENSATION (CONT’D)
As vesting conditions are not wholly dependent on the employee and there is no timeline for them, for accounting purposes, the fair value is calculated and the expense is recognized upon the achievement of the milestones.
Nonvested options are valued at the date of the grant at the fair value of the common stock and are expensed over the vesting period. As at the grant date of the nonvested options, the fair value of the common stock was based upon the issuance of the founder shares at $ per share.
15. INCOME TAXES
For the period ended June 30, 2024 and year ended December 31 2023, there was provision for income taxes and deferred tax assets have been entirely offset by valuation allowances.
As
of June 30, 2024 and December 31, 2023, the Company had net operating loss carry forwards of approximately $
For the period ended June 30, 2024 | For the year ended December 31, 2023 | |||||||
| Net operating loss before taxes | $ | ( | ) | $ | ( | ) | ||
| Adj to reconcile to taxable loss | ||||||||
| Taxable loss | ( | ) | ||||||
| Federal income tax rate | % | % | ||||||
| State Tax Rate | % | |||||||
| Tax expense (benefit) at the statutory rate – federal | ( | ) | ( | ) | ||||
| Tax expense (benefit) at the statutory rate – state | ( | ) | ||||||
| Non-deductible items | ||||||||
| Tax effect of stock-based compensation (non-qualifying options) | ||||||||
| Change in Derivatives | ||||||||
| Change in valuation allowance | ||||||||
| Total | $ | $ | ||||||
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15. INCOME TAXES (CONT’D)
The tax effects of the temporary differences between reportable financial statement income and taxable income are recognized as deferred tax assets and liabilities. The tax effect of significant components of the Company’s deferred tax assets at June 30, 2024 and December 31, 2023, respectively, are as follows:
| 2024 | 2023 | |||||||
| Deferred tax asset: | ||||||||
| Net operating loss carryforwards | $ | $ | ||||||
| Total gross deferred tax assets | ||||||||
| Less: Deferred tax asset valuation allowance | ( | ) | ( | ) | ||||
| Total net deferred tax assets | $ | $ | ||||||
In assessing the ability to realize the deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment.
The returns filed from the year 2019 going forward are subject to examination by the IRS.
16. NON-CONTROLLING INTEREST
On
March 15, 2023, the Company signed an agreement with its partner in the jointly owned subsidiary EnderbyWorks, LLC to become the
The reported non-controlling interest represents that in MC the Company holds 80% interest in this business which was acquired on June 22, 2021.
The following table sets forth a summary of the changes in non-controlling interest:
| June 30, 2024 | December 31, 2023 | |||||||
| Non-controlling interest beginning of the period | $ | ( | ) | ( | ) | |||
| Issuance of shares by EnderbyWorks, LLC | ||||||||
| Net income (loss) | ( | ) | ||||||
| Acquisition | ||||||||
| Non-controlling interest end of period | $ | ( | ) | ( | ) | |||
17. SUBSEQUENT EVENTS
On
July 2nd, 2024, the Company closed on a convertible promissory note (the “Promissory Note”) and entered into a
securities purchase agreement dated July 1st, 2024 with one subscriber (the “Holder”) to raise a net amount of
$
| 24 |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Forward-Looking Statements
This Form 10-Q contains forward-looking statements regarding our business, customer prospects, or other factors that may affect future earnings or financial results that are subject to the safe harbor created by the Private Securities Litigation Reform Act of 1995. Such statements involve risks and uncertainties which could cause actual results to vary materially from those expressed in the forward-looking statements. Investors should read and understand the risk factors detailed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 (the “Annual Report”) and in other filings with the Securities and Exchange Commission.
We operate in a rapidly changing environment that involves a number of risks, some of which are beyond our control. This list highlights some of the risks which may affect future operating results. These are the risks and uncertainties we believe are most important for you to consider. Additional risks and uncertainties, not presently known to us, which we currently deem immaterial, or which are similar to those faced by other companies in our industry or business in general, may also impair our business operations. If any of the following risks or uncertainties actually occur, our business, financial condition and operating results would likely suffer. These risks include, among others, the following:
| ● | our proposed plan of operations; | |
| ● | our financial and operating objectives and strategies to achieve them; | |
| ● | the costs and timing of our services; | |
| ● | our use of available funds; | |
| ● | our capital and funding requirements; and | |
| ● | our other financial or operating performances. |
The material assumptions supporting these forward-looking statements include, among other things:
| ● | our future growth potential, results of operations, future prospects and opportunities; | |
| ● | execution of our business strategy; | |
| ● | there being no material variations in current regulatory environments; | |
| ● | our operating expenses, including general and administrative expenses; | |
| ● | our ability to obtain any necessary financing on acceptable terms; | |
| ● | timing and amount of capital expenditures; | |
| ● | retention of skilled personnel; | |
| ● | continuation of current tax and regulatory regimes; and | |
| ● | general economic and financial market conditions. |
Although management considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect.
These forward-looking statements are only predictions and involve known and unknown risks, uncertainties and other factors, including:
| ● | inability to efficiently manage our operations; | |
| ● | general economic and business conditions; | |
| ● | our negative operating cash flow; | |
| ● | our ability to obtain additional financing; | |
| ● | our ability to collect outstanding loans; | |
| ● | increases in capital and operating costs; | |
| ● | risks relating to regulatory changes or actions; | |
| ● | other risk factors discussed in our annual report on Form 10K filed on April 16th, 2024 |
any of which may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Further, although we have attempted to identify factors that could cause actual results, levels of activity, performance or achievements to differ materially from those described in forward-looking statements, there may be other factors that cause results, levels of activity, performance or achievements not to be as anticipated, estimated or intended.
| 25 |
All financial information contained herein is shown in United States dollars unless otherwise stated. Our financial statements are prepared in accordance with United States generally accepted accounting principles. Unless otherwise stated, “$” refers to United States dollars.
In this quarterly report, unless otherwise specified, all references to “shares” refer to shares of common stock in the capital of our company.
As used in this quarterly report, the terms “we”, “us”, “the Company”, “our” and “MetaWorks” mean MetaWorks Platforms, Inc. and its wholly owned subsidiaries, CurrencyWorks USA Inc. and EnderbyWorks LLC., Energy Works Corp. and its majority-owned subsidiary Motoclub LLC, unless otherwise specified.
Overview
MetaWorks is focused on developing emerging technology solutions and businesses that solve real world problems. The Company is focused on two primary areas of technology;
Waste-to-Energy Technology
MetaWorks has since 2021, been developing a waste-to-energy conversion technology and business through its relationship with Fogdog Energy Solutions, Inc, a privately held company controlled by its CFO Mr. Swapan Kakamanu. MetaWorks owns an 11% equity stake in Fog Dog Energy Solutions, Inc. and currently has an $850,000 outstanding investment in Fogdog Energy. MetaWorks management feels that the Fogdog technology is ready for commercialization by Q4 of 2024 and into 2025 and is working to begin the implementation of the technology-based business. MetaWorks mission in this area is to play an important role in the conversion of plastic waste-to-energy and aid in the solving of this massive problem in an efficient and profitable manner.
Technology Integration Business
MetaWorks also focuses on developing technology-based solutions for itself and for customers that leverage the concept of decentralization and technologies such as Web3 and AI to improve future operations as these new technologies mature and become more important. MetaWorks anticipates that it will enable companies to focus on their core competencies while providing the necessary resources and expertise to execute a strategy that will enable companies to integrate these new Web3 and AI technologies into their business models and operations. MetaWorks plan is to be compensated on a fee-for-services model, technology licensing model and recurring transactions revenue model.
Results of Operations
Six Months Ended June 30, 2024 compared to the Six Months Ended June 30, 2023
Revenue
We recognized no revenue for the six months ended June 30, 2024. During the six months ended June 30, 2023 we recognized total revenues of $354,882, with $4,882 coming from the sale of NFTs, $230,000 from consulting services and $120,000 in movie distribution rights.
Operating Expenses
We incurred general and administrative expenses of $967,897 and $1,363,828 for the six months ended June 30, 2024 and 2023, respectively, representing an decrease of $395,931 between the two periods. These expenses consisted primarily of stock-based compensation expenses for issuance of options, consulting fees, pre-licensing fees, professional fees, amortization, and other general and administrative costs. The decrease in general and administrative expenses was mainly due to the reduction in current project work.
Other Income (Expense)
Other income includes zero note interest revenue for the six months ended June 30, 2024 compared to $92,955 note interest revenue. Other expenses were $48,655 and $21,389 for the six months ended June 30, 2024 and 2023, respectively, consisting of interest expense from the loan payable.
| 26 |
Net Loss from Operations
We incurred net losses from operations of $2,570,801 and $1,341,916 for the six months ended June 30, 2024 and 2023, respectively, representing a net change of $1,243,079, primarily attributable to the factors discussed above under the headings “Revenue” and “Operating Expenses”.
Liquidity and Capital Resources
Working Capital
| As at June 30, 2024 | As at December 31, 2023 | |||||||
| Current Assets | $ | 56,003 | $ | 127,884 | ||||
| Current Liabilities | 2,943,225 | 2,580,767 | ||||||
| Working Capital (Deficit) | $ | (2,887,222 | ) | $ | (2,452,883 | ) | ||
Current Assets
Current assets were $56,003 as at June 30, 2024 and $127,884 at December 31, 2023. The decrease in current assets is mainly due to the collection of accounts receivable.
Current Liabilities
Current liabilities of $2,943,225 as at June 30, 2024 were attributable to accounts payable, accrued expenses, loans payable and convertible notes payable, compared to $2,580,767 in accounts payable, accrued expenses, loans payable and convertible notes payable as at December 31, 2023.
Cash Flow
Six months ended June 30, 2024 | Six months ended June 30, 2023 | |||||||
| Net cash used in operating activities | $ | (430,267 | ) | $ | (775,137 | ) | ||
| Net cash provided by financing activities | 428,498 | 748,458 | ||||||
| Net changes in cash and cash equivalents | $ | (1,769 | ) | $ | (26,679 | ) | ||
Operating Activities
Net cash used in operating activities was $430,267 for the six-month period ended June 30, 2024, as compared to net cash used of $775,137 for the six-month period ended June 30, 2023, a decrease of $344,870. The decrease in net cash used in operating activities was primarily due to reduction in operating activities.
Investing Activities
There were no investing activities for the six-month periods ended June 30, 2024 and June 30, 2023.
| 27 |
Financing Activities
Financing activities provided cash of $428,498 for the six months ended June 30, 2024 and $748,458 for the six months ended June 30, 2023, a decrease of $319,960. This decrease is mainly due to less share issuances during the six months ended June 30, 2024.
Cash Requirements
We expect that we will require $1,200,000, including our current working capital, to fund our operating expenditures for the next twelve months. Projected working capital requirements for the next twelve months are as follows:
Estimated Working Capital Expenditures During the Next Twelve Months
| General and administrative expenses | $ | 1,200,000 | ||
| Total | $ | 1,200,000 |
Our estimated general and administrative expenses for the next 12 months are $1,200,000 and are comprised of consulting fees, accounting services, board of directors and advisory board fees, investor relations consultants, public relations and marketing consultants; legal and professional fees (including auditing fees); for insurance; marketing and advertising expenses; trade shows; travel expenses; office rent and miscellaneous and office expenses.
We will require additional cash resources to meet our planned capital expenditures and working capital requirements for the next 12 months. We expect to derive such cash through the sale of equity or debt securities or by obtaining a credit facility. The sale of additional equity securities will result in dilution to our stockholders. The incurrence of indebtedness will result in debt service obligations, could cause additional dilution to our stockholders, and could require us to agree to financial covenants that could restrict our operations or modify our plans to source a new business opportunity. Financing may not be available in amounts or on terms acceptable the Company, if at all. Failure to raise additional funds could cause cast doubt on the Company’s ability to continue as a going concern.
Going Concern
Our unaudited condensed interim consolidated financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. We have not yet established a source of revenues sufficient to cover our operating costs and to allow us to continue as a going concern. We have incurred losses since inception resulting in an accumulated deficit of $49,649,071 as of June 30, 2024 (December 31, 2023: $47,078,270). Our ability to operate as a going concern is dependent on obtaining adequate capital to fund operating losses until we become profitable.
In their reports on our financial statements for the years ended December 31, 2023 and 2022, our current independent registered public accounting firms included an explanatory paragraph regarding substantial doubt about our ability to continue as a going concern. Our consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
| 28 |
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended, and are not required to provide the information under this item.
ITEM 4. CONTROLS AND PROCEDURES.
Disclosure Controls and Procedures
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed by the Company is recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the SEC. Our principal executive officer, who is our president, and our principal financial officer, who is our chief financial officer, are responsible for establishing and maintaining disclosure controls and procedures for the Company.
Our management conducted an evaluation, with the participation of our principal executive officer and our principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) under the Securities Exchange Act of 1934, as of the end of the period covered by this quarterly report on Form 10-Q. Based upon that evaluation, our principal executive officer and our principal financial officer concluded that as a result of the material weaknesses in our internal control over financial reporting described in our annual report on Form 10-K for the fiscal year ended December 31, 2023, our disclosure controls and procedures were not effective as of June 30, 2024.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the fiscal quarter ended June 30, 2024, that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
We know of no material pending legal proceedings to which the Company is a party or of which any of our properties is subject. In addition, we do not know of any such proceedings contemplated by any governmental authorities.
We know of no material proceedings in which any of our directors, officers or affiliates, or any registered or beneficial stockholder is a party adverse to the Company or has a material interest adverse to the Company.
ITEM 1A. RISK FACTORS.
As we are a smaller reporting company, we are not required to provide the information required by this item.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
Since the beginning of the fiscal quarter ended June 30, 2024, we have not sold any equity securities that were not registered under the Securities Act of 1933, as amended, that were not previously reported in a quarterly report on Form 10-Q or a current report on Form 8-K.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
ITEM 5. OTHER INFORMATION.
None.
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ITEM 6. EXHIBITS.
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*Filed herewith.
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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.
| METAWORKS PLATFORMS, INC. | |
| /s/ Swapan Kakumanu | |
| Swapan Kakumanu | |
| Chief Financial Officer | |
| (Duly Authorized Officer) | |
| Dated: August 19, 2024 | |
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