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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2023 OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from __________ to __________

 

Commission File Number: 000-55726

 

THE CRYPTO COMPANY

(Exact name of registrant as specified in its charter)

 

Nevada   46-4212105
(State or other jurisdiction of   (I.R.S. Employer
incorporation or organization)   Identification No.)

 

23823 Malibu Road, # 50477

Malibu, California 90265

(Address of principal executive offices)

 

(424) 228-9955

(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. Yes ☒ No ☐

 

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). Yes ☒ No ☐

 

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 ☐
     
  Non-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

 

As of November 20, 2023 the issuer had 309,809,873 shares of common stock, par value $0.001 per share, outstanding.

 

 

 

 

 

 

TABLE OF CONTENTS

 

    Page No.
     
PART I FINANCIAL INFORMATION 4
     
Item 1. Condensed Financial Statements 4
     
  Unaudited Condensed Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022 4
     
  Unaudited Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2023 and 2022 5
     
  Unaudited Condensed Consolidated Statements of Stockholders’ (Deficit) for the Three and Nine Months Ended September 30, 2023 and 2022 6
     
  Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2023 and 2022 7
     
  Notes to Unaudited Condensed Consolidated Financial Statements 8
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 20
     
Item 3. Quantitative and Qualitative Disclosures About Market Risk 22
     
Item 4. Controls and Procedures 22
     
PART II OTHER INFORMATION  
     
Item 1. Legal Proceedings 23
     
Item 1A. Risk Factors 23
     
Item 3. Defaults upon Senior Securities 23
     
Item 4. Mine Safety Disclosures 23
     
Item 5. Other Information 23
     
Item 6. Exhibits 23
     
SIGNATURES 24

 

2
 

 

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”).

 

3
 

 

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  $20,435   $110,606 
Prepaid expenses   3,750    81,317 
Total current assets   24,185    191,923 
Fixed assets   

-

    50,000 
Goodwill   740,469    740,469 
Intangible assets   541,670    574,169 
TOTAL ASSETS  $1,306,324   $1,556,561 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY          
           
CURRENT LIABILITIES          
Accounts payable and accrued expenses  $2,632,066   $2,265,548 
Notes payable, net   2,440,845    2,211,353 
Total current liabilities   5,072,911    4,476,901 
Convertible debt   125,000    125,000 
Notes payable - other   13,510    14,100 
TOTAL LIABILITIES   5,211,421    4,616,001 
           
STOCKHOLDERS’ DEFICIT          
Common stock, $0.001 par value; 2,000,000,000 shares authorized, 208,688,464 and 23,950,380 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively   208,688    23,950 
Additional paid-in-capital   39,340,646    36,448,046 
Accumulated deficit   (43,454,431)   (39,531,436)
TOTAL STOCKHOLDERS’ DEFICIT   (3,905,097)   (3,059,440)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT  $1,306,324   $1,556,561 

 

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

 

4
 

 

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  $124,195   $252,733   $379,107   $515,767 
Cost of services   14,900    94,532    248,136    266,292 
Gross margin   109,295    158,201    130,971    249,475 
                     
Operating expenses:                    
General and administrative expenses   244,183    305,723    979,324    1,414,054 
Amortization   10,833    10,833    32,499    32,499 
Depreciation   -    32,708    -    76,319 
Share-based compensation - employee   -    17,875    6,761    272,447 
Share-based compensation - non-employee   113,818    163,612    613,537    1,693,550 
Total Operating Expenses   368,834    530,752    1,632,121    3,488,869 
Operating loss   (259,539)   (372,551)   (1,501,150)   (3,239,394)
Other income   -    4,100    25,775    85,865 
Loss on Sale of Equipment   -         (31,000)     
Interest expense   (99,306)   (47,286)   (2,416,621)   (1,671,486)
                     
Loss before provision for income taxes   (358,845)   (415,737)   (3,922,996)   (4,825,015)
Provision for income taxes   -    -    -    - 
Net (loss)   (358,845)   (415,737)   (3,922,996)   (4,825,015)
                     
Net income (loss) per share  $(0.00)  $(0.02)  $(0.07)  $(0.21)
Weighted average common shares outstanding – basic and diluted   110,774,232    23,357,250    57,709,544    22,956,299 

 

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

 

5
 

 

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   23,950,380   $23,950   $36,448,046   $(39,531,436)  $(3,059,440)
Stock issued for cash at $5.00 per share   125,000    125    24,875         25,000.00 
Stock compensation expense in connection with issuance of common stock   1,665,157    1,666    386,409         388,075.05 
Debt discount for warrants             2,031,499         2,031,499.00 
Stock issued for loan payments   182,947,927    182,948    449,818         632,766 
Net loss                  (3,922,996)   (3,922,996)
Balance, September 30, 2023   208,688,464   $208,689   $39,340,647   $(43,454,432)  $(3,905,097)

 

   Shares   Amount   capital   Deficit   Equity 
       Additional       Total 
   Common stock   paid-in-   Accumulated   Stockholders’ 
   Shares   Amount   capital   Deficit   Equity 
Balance, December 31, 2021   22,205,248   $22,205   $32,830,497   $(33,868,518)  $(1,015,817)
Stock issued for cash at $3.28 per share   8,000    8    26,232                26,240 
Stock compensation expense in connection with issuance of common stock   1,258,075    1,258    1,920,989         1,922,247 
Stock issued in connection with warrant exercise   73,250    73    43,677         43,750 
Debt discount for warrants        -    1,488,928         1,488,928 
Return of shares for financing commitment   

(62,500

)   

(63

)   63    -     - 
Net loss   -     -     -     (4,825,015)   (4,825,015)
Balance, September 30, 2022   23,482,073   $23,482   $36,310,385   $(38,693,533)  $(2,359,666)

 

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

 

6
 

 

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)  $(3,922,996)  $(4,825,015)
Adjustments to reconcile net loss to net cash used in operations:            
Depreciation and amortization     32,499       108,818  
Share-based compensation   620,298    1,965,997 
Debt discount for warrants   2,031,499    1,488,929 
Loss on disposal of equipment   31,000    - 
Prepaid expenses   77,567    (33,246)
Accounts payable and accrued expenses   366,518    197,932 
Deferred revenue   -    21,000 
Net cash provided by/used in operating activities   (763,615)   (1,075,585)
           
Cash flows from investing activities:          
Purchase of computer equipment   -    (1,033,500)
Net cash used in investing activities   -    (1,033,500)
           
Cash flows from financing activities:          
Payment of notes payable   (195,702)   (39,265)
Proceeds from issuance of notes payable   844,146    2,132,472 
Proceeds from common stock issuance   25,000    26,240 
Net cash provided by financing activities   673,444    2,119,447 
           
Net (decrease) increase in cash and cash equivalents   (90,171)   10,362 
Cash and cash equivalents at the beginning of the period   110,606    75,699 
Cash and cash equivalents at the end of the period  $20,435   $86,061 

 

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

 

7
 

 

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 $20,435. In addition, the Company’s net loss was $3,922,996 for the nine months ended September 30, 2023 and the Company’s had a working capital deficit of $5,048,726. As of September 30, 2023, the accumulated deficit amounted to $43,454,431. As a result of the Company’s history of losses and financial condition, there is substantial doubt about the ability of the Company to continue as a going concern.

 

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.

 

8
 

 

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.

 

9
 

 

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.

 

10
 

 

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.

 

Share-based Compensation

 

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.

 

11
 

 

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.

 

Net Loss per Common Share

 

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 $600,000 in cash, promissory notes in the total principal amount of $150,000 bearing 1% interest per annum, and an aggregate of 201,439 shares of the Company’s common stock valued at $604,317, in accordance with the terms of the SPA. Additionally, the Company acquired $4,860 in cash from BTA.

 

As a result of the foregoing, the Company initially recorded goodwill of $1,349,457. The Company conducted a valuation study upon the closing of the acquisition of BTA. The final valuation report determined the amount goodwill to be $740,469, with the remaining $650,000 of the goodwill relating to amortizable intangibles amortized over a fifteen-year period, or approximately $54,166 per year.

 

During the nine months ended September 30, 2023, the Company recorded $32,499 in amortization expense.

 

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 $3,000,000. During 2018, CoinTracking borrowed $1,500,000 in exchange for three promissory notes (collectively, the “CoinTracking Note”) in the principal amounts of $300,000, $700,000, and $500,000, respectively. On December 31, 2018, the CoinTracking Note was still outstanding. On January 2, 2019, the Company sold its equity ownership stake in CoinTracking GmbH, and $1,200,000 of the sales proceeds were applied toward repayment of the $1,500,000 outstanding loan amount under the CoinTracking Note. The remaining balance of $300,000 was outstanding as of September 30, 2022, with a due date of March 31, 2023, which due date was extended from the prior due date of March 31, 2021 pursuant to an amendment dated December 28, 2018. The CoinTracking Note bears interest at 3%, which is payable monthly, in arrears. All payments shall be applied first to all accrued and unpaid interest and second to the outstanding principal balance, as applicable. The maturity date of the CoinTracking Note has not been extended nor has any default been asserted by the lender.

 

Interest expense for Notes Payable was $380,448 for the nine-month period ended September 30, 2023, compared to $205,756, during the same nine-month period ended September 30, 2022, respectively.

 

 

On June 10, 2020, the Company received a loan from the Small Business Administration of $14,100 (the “2020 SBA Loan”). The 2020 SBA Loan bears interest at 3.75% per annum and is payable over 30 years with all payments of principal and interest deferred for the first 12 months.

 

As of September 30, 2023, the balance remaining under the 2020 SBA Loan is $13,510.

     
 

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 $300,000 (the “Feb. Note”) to AJB in a private transaction for a purchase price of $275,000 (giving effect to an original issue discount). The Feb. Note had a maturity date of August 24, 2022, but it may be extended for six months upon the consent of AJB and the Company. The Feb. Note bears interest at 10% per year, and principal and accrued interest is due on the maturity date. The Company may prepay the Feb. Note at any time without penalty. The Company’s failure to make required payments under the AJB Note or to comply with various covenants, among other matters, would constitute an event of default. Upon an event of default under the Feb. SPA or Feb. Note, the Feb. Note will bear interest at 18%, AJB may immediately accelerate the Feb. Note due date, AJB may convert the amount outstanding under the Feb. Note into shares of Company common stock at a discount to the market price of the stock, and AJB will be entitled to its costs of collection, among other penalties and remedies.

 

As of September 30, 2023, the balance remaining under the Feb. Note is $308,353.

     
  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 $220,000 to Efrat (the “Efrat Note”) in a private transaction for a purchase price of $198,000 (giving effect to an original issue discount).

 

12
 

 

The Efrat Note had a maturity date of September 7, 2022, although the maturity date may be extended for six months upon the consent of Efrat and the Company. The Efrat Note bears interest at 10% per year, and principal and accrued interest is due on the maturity date. The Company may prepay the Efrat Note at any time without penalty. Any failure by the Company to make required payments under the Efrat Note or to comply with various covenants, among other matters, would constitute an event of default. Upon an event of default under the April SPA or the Efrat Note, the Efrat Note will bear interest at 18%, Efrat may immediately accelerate the Efrat Note due date, Efrat may convert the amount outstanding under the Efrat Note into shares of Company common stock at a discount to the market price of the stock, and Efrat will be entitled to its costs of collection, among other penalties and remedies.

 

As of September 30, 2023, the balancing remaining under the Efrat Note is $220,836.

 

  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 $1,000,000 (the “May AJB Note”) to AJB in a private transaction for a purchase price of $900,000 (giving effect to a 10% original issue discount). In connection with the sale of the AJB Note, the Company also paid certain fees and due diligence costs of AJB and brokerage fees.

 

At the closing the Company repaid all obligations owed to AJB pursuant to a 10% promissory note in the principal amount of $750,000 issued in favor of AJB in February 2022 as generally described above. After the repayment of that promissory note, and after payment of the fees and costs, the $138,125 net proceeds from the issuance of the May AJB Note was utilized for working capital and other general corporate purposes.

 

The May AJB Note had a maturity date of November 3, 2022, but it may be extended by the Company for six months with the interest rate to increase during the extension period. The Company has extended the maturity date of the May AJB Note. The May AJB Note bears interest at 10% per year, and principal and accrued interest is due on the maturity date. The Company may prepay the May AJB Note at any time without penalty. Under the terms of the May AJB Note, the Company may not sell a significant portion of its assets without the approval of AJB, may not issue additional debt that is not subordinate to AJB, must comply with the Company’s reporting requirements under the Securities Exchange Act of 1934, and must maintain the listing of the Company’s common stock on the OTC Market or other exchange, among other restrictions and requirements. The Company’s failure to make required payments under the May AJB Note or to comply with any of these covenants, among other matters, would constitute an event of default. Upon an event of default under the May AJB SPA or May AJB Note, the May AJB Note will bear interest at 18%, AJB may immediately accelerate the May AJB Note due date, AJB may convert the amount outstanding under the May AJB Note into shares of Company common stock at a discount to the market price of the stock, and AJB will be entitled to its costs of collection, among other penalties and remedies.

 

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 $125,000 (resulting in proceeds to the Company of $100,000 after giving effect to an original issue discount of $25,000), and, as a result the May AJB Amendment served to increase the face amount of the Note to $1,125,000 to give effect to the additional funds loaned to the Company. All transaction documents originally entered into by the parties in connection with the issuance of the May AJB Note were amended to cause the term “Principal” to mean the sum of $1,125,000. Except as amended by the Amendment all of the original terms and conditions of the May AJB Note remain as set forth in the original transaction documents.

 

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 $79,250 issued in favor of 1800 Diagonal Lending, LLC in July 2022. As a result, the July Diagonal note was satisfied in full and was terminated.

 

As of September 30, 2023, the balancing remaining under the May AJB Note is $1,091,547.

 

  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 10% unsecured promissory Note (the “Coventry Note”) from the Company in the principal amount of $200,000, of which $40,000 was retained by Coventry through an “Original Issue Discount” for due diligence and origination related to the transaction. Pursuant to the terms of the Purchase Agreement, the Company also agreed to issue 25,000 shares of restricted common stock to Coventry as additional consideration for the purchase of the Coventry Note. In addition, in the Purchase Agreement the Company granted Coventry a right of first refusal with respect to certain types of equity financing transactions the Company may pursue or effect.

 

13
 

 

The Coventry Note bears interest at a rate of 10% per annum, with guaranteed interest (the “Guaranteed Interest”) of $20,000 being deemed earned as of date of issuance of the Coventry Note. The Coventry Note matures on July 15, 2023. The principal amount and the Guaranteed Interest is due and payable in seven equal monthly payments of $31,428.57, beginning on December 15, 2022 and continuing on the third day of each month thereafter until paid in full.

 

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.

 

If an Event of Default (as defined in the Coventry Note) occurs, consistent with the terms of the Coventry Note, the Coventry Note will become convertible, in whole or in part, into shares of the Company’s common stock at Coventry’s option, subject to a 4.99% beneficial ownership limitation (which may be increased up to 9.99% by Coventry). The per share conversion price is 90% of the lowest volume-weighted average trading price during the 20-trading day period before conversion.

 

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 18% per annum or the maximum rate permitted by law.

 

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 $17,916.94 of principal and $2,083.06 of interest under the Coventry Note into Conversion Shares of the Company.

 

With respect to the outstanding Coventry Note, Coventry has agreed to accept $15,000 (the “Coventry Settlement Amount”) in complete and full settlement of the Coventry Note. The Company paid off fifty percent of the Coventry Settlement Amount on November 13, 2023, with a total payment of $7,500, and the other fifty percent of the Coventry Settlement Amount is due within 120 days.

 

  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 $88,760 (giving effect to an original issue discount). Net proceeds from the sale of the Second Diagonal Note will be used primarily for general working capital purposes. The SPA contains customary representations and warranties by the Company and Diagonal typically contained in such documents.

 

The Second Diagonal Note has a maturity date of December 9, 2023, and the Company has agreed to pay interest on the unpaid principal balance of the Second Diagonal Note at the rate of twelve percent (12.0%) per annum, with interest being payable through a one-time interest charge of $10,651 being applied on the principal amount of the Second Diagonal Note on the issuance date. Payments are due monthly, beginning on January 30, 2023. The Company has the right to prepay the Second Diagonal Note in accordance with the terms set forth in the Note.

 

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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 75% of the lowest trading price with a 10-day lookback immediately preceding the date of conversion. In no event may the lender effect a conversion if such conversion, along with all other shares of Company common stock beneficially owned by the lender and its affiliates would exceed 4.99% of the outstanding shares of Company common stock. In addition, upon the occurrence and during the continuation of an event of default the Note will become immediately due and payable and the Company shall pay to the lender, in full satisfaction of its obligations thereunder, additional amounts as set forth in the Note.

 

  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 $79,250. Pursuant to the SPA, the Company agreed to reimburse Diagonal for certain fees in connection with entry into the SPA and the issuance of the Third Diagonal Note. The SPA contains customary representations and warranties by the Company and Diagonal typically contained in such documents.

 

The maturity date of the Third Diagonal Note is January 3, 2024 (the “Maturity Date”). The Note bears interest at a rate of 10% per annum, and a default interest of 22% per annum. Diagonal has the option to convert all of the outstanding amounts due under the Third Diagonal Note into shares of the Company’s common stock beginning on the date which is 180 days following the date of the Third Diagonal Note and ending on the later of: (i) the Maturity Date and (ii) the date of payment of the default amount, as such term is defined under the Third Diagonal Note. The conversion price under the Third Diagonal Note for each share of common stock is equal to 65% of the lowest trading price of the Company’s common stock for the 10 trading days prior to the conversion date. The conversion of the Third Diagonal Note is subject to a beneficial ownership limitation of 4.99% of the number of shares of common stock outstanding immediately after giving effect to such conversion. Failure of the Company to convert the Third Diagonal Note and deliver the common stock when due will result in the Company paying Diagonal a monetary penalty for each day beyond such deadline.

 

The Company may prepay the Third Diagonal Note in whole, however, if it does so between the issuance date and the date which is 60 days from the issuance date, the repayment percentage is 115%. If the Company prepays the Third Diagonal Note on or between the 61st day after issuance and the 90th day after issuance, the prepayment percentage is 120%. If the Company prepays the Third Diagonal Note on or between the 91st day after issuance and 180 days after issuance, the prepayment percentage is 125%. After such time, the Company can submit an optional prepayment notice to Diagonal, however the prepayment shall be subject to the agreement between the Company and Diagonal on the applicable prepayment percentage.

 

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. Upon an “Event of Default”, interest shall accrue at a default interest rate of 22%, and the Company may be obligated to pay to the Diagonal an amount equal to 150% of all amounts due and owing under the Third Diagonal Note.

 

With respect to the two outstanding Diagonal Notes, Diagonal has agreed to accept $126,500.00 (the “Diagonal Settlement Amount”) in complete and full settlement of the Diagonal Notes. The Company paid the Diagonal Settlement Amount and the Diagonal Notes were deemed paid off on November 13, 2023.

 

  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 10% convertible promissory note (the “Fast Capital Note”) from the Company in the aggregate principal amount of $115,000. The Fast Capital Note has an original issue discount of $10,000, resulting in gross proceeds to the Company of $105,000. Pursuant to the SPA, the Company agreed to reimburse Fast Capital for certain fees in connection with entry into the SPA and the issuance of the Fast Capital Note. The SPA contains certain covenants and customary representations and warranties by the Company and Fast Capital typically contained in such documents.

 

The maturity date of the Fast Capital Note is January 30, 2024. The Fast Capital Note bears interest at a rate of 10% per annum, and a default interest of 24% per annum. Interest is payable in shares of Company common stock.

 

15
 

 

For the first six months, the Company has the right to prepay principal and accrued interest due under the Fast Capital Note at a premium of between 15% and 40% depending on when it is repaid. The Fast Capital Note may not be prepaid after the 180th day of its issuance.

 

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 60% of the lowest closing price of the Company’s common stock for the 20 prior trading days, including the day upon which a notice of conversion is delivered.

 

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 24%, and certain defined events of default may give rise to other remedies (such as, if the Company is delinquent in its periodic report filings with the Securities and Exchange Commission then the conversion price of the Fast Capital Note may be decreased).

 

As of September 30, 2023, the balancing remaining under the Fast Capital Note is $120,208.

 

  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 $54,250. Pursuant to the SPA, the Company agreed to reimburse Diagonal for certain fees in connection with entry into the SPA and the issuance of the Fourth Diagonal Note. The SPA contains customary representations and warranties by the Company and Diagonal typically contained in such documents.

 

The maturity date of the Fourth Diagonal Note is March 2, 2024 (the “Maturity Date”). The Fourth Diagonal Note bears interest at a rate of 10% per annum, and a default interest of 22% per annum. Diagonal has the option to convert all of the outstanding amounts due under the Fourth Diagonal Note into shares of the Company’s common stock beginning on the date which is 180 days following the date of the Fourth Diagonal Note and ending on the later of: (i) the Maturity Date and (ii) the date of payment of the default amount, as such term is defined under the Fourth Diagonal Note. The conversion price under the Fourth Diagonal Note for each share of common stock is equal to 65% of the lowest trading price of the Company’s common stock for the 10 trading days prior to the conversion date. The conversion of the Fourth Diagonal Note is subject to a beneficial ownership limitation of 4.99% of the number of shares of common stock outstanding immediately after giving effect to such conversion. Failure of the Company to convert the Note and deliver the common stock when due will result in the Company paying Diagonal a monetary penalty for each day beyond such deadline.

 

The Company may prepay the Fourth Diagonal Note in whole, however, if it does so between the issuance date and the date which is 60 days from the issuance date, the repayment percentage is 115%. If the Company prepays the Fourth Diagonal Note on or between the 61st day after issuance and the 90th day after issuance, the prepayment percentage is 120%. If the Company prepays the Fourth Diagonal Note on or between the 91st day after issuance and 180 days after issuance, the prepayment percentage is 125%. After such time, the Company can submit an optional prepayment notice to Diagonal, however the prepayment shall be subject to the agreement between the Company and Diagonal on the applicable prepayment percentage.

 

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. Upon an “Event of Default”, interest shall accrue at a default interest rate of 22%, and the Company may be obligated to pay to the Diagonal an amount equal to 150% of all amounts due and owing under the Note.

 

With respect to the two outstanding Diagonal Notes, Diagonal has agreed to accept $126,500.00 (the “Diagonal Settlement Amount”) in complete and full settlement of the Diagonal Notes. The Company paid the Diagonal Settlement Amount and the Diagonal Notes were deemed paid off on November 13, 2023.

 

  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 $550,000 (the “AJB June Note”) to AJB in a private transaction for a purchase price of $500,000 (giving effect to a 10% original issue discount). In connection with the sale of the AJB June Note, the Company also paid certain fees and due diligence costs to AJB’s management company and legal counsel. After payment of the fees and costs, the net proceeds to the Company were $487,500, which will be used for working capital and other general corporate purposes, provided that up to $200,000 may be drawn upon for potential acquisitions.

 

The maturity date of the AJB June Note is January 23, 2024. The AJB June Note bears interest at 12% per year, and principal and accrued interest is due on the maturity date. The Company may prepay the AJB June Note at any time without penalty. The AJB June Note contains standard and customary events of default, such as, among other restrictions and requirements, that the Company timely make payments under the AJB June Note; the Company may not sell a significant portion of its assets without the approval of AJB; the Company may not issue additional debt that is not subordinate to AJB; the Company must comply with the reporting requirements under the Securities Exchange Act of 1934; and the Company must maintain the listing of the Company’s common stock on the OTC Market or other exchange. The Company’s breach of any representation or warranty, or failure to comply with the covenants would constitute an event of default. Upon an event of default under the AJB SPA or AJB June Note, the AJB June Note will bear interest at 18%; AJB may immediately accelerate the AJB June Note due date; AJB may convert the amount outstanding under the AJB June Note into shares of Company common stock at a discount to the market price of the stock; and AJB will be entitled to its costs of collection, among other penalties and remedies.

 

As of September 30, 2023, the balancing remaining under the AJB June Note is $430,792.

 

  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 $500,000 to AJB (the “Nov. Note”) in a private transaction for a purchase price of $425,000 (giving effect to an original issue discount). After payment of the fees and costs, the net proceeds to the Company were $405,000, which will be used for working capital and other general corporate purposes.

 

The maturity date of the Nov. Note is May 10, 2024. The Nov. Note bears interest at 12% per year, and principal and accrued interest is due on the maturity date. The Company may prepay the Nov. Note at any time without penalty. The Company’s failure to make required payments under the Nov. Note or to comply with various covenants, among other matters, would constitute an event of default. Upon an event of default under the Nov. SPA or the Nov. Note, the Nov. Note will bear interest at 18%, AJB may immediately accelerate the Nov. Note due date, AJB may convert the amount outstanding under the Nov. Note into shares of Company common stock at a discount to the market price of the stock, and AJB will be entitled to its costs of collection, among other penalties and remedies.

 

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NOTE 6 – CONVERTIBLE NOTES

 

The balance of outstanding Convertible Notes was $125,000 as of September 30, 2023 and December 31, 2022, respectively.

 

In June 2020, the Company issued Convertible Notes (“June 2020 Notes”) to an accredited investor for an aggregate amount of $5,000. The June 2020 Notes mature in June 2025, unless earlier converted. The June 2020 Notes bear interest at a rate of 5% per year. The June 2020 Notes will automatically convert into shares of common stock on the earlier to occur of a) a qualified equity financing, with the conversion price equal to 50% of the common stock price paid by the purchasers of the equity, or b) on the maturity date, at a price per share equal to the fair market value of the Company’s common stock on that date. If a change in control occurs before either of the automatic conversion events, the holders of the June 2020 Notes will have the option to convert the June 2020 Notes at a price per share equal to the fair market value of the common stock at the time of such conversion. The Company can prepay the principal and interest, in cash, at any time without any premium or penalty. The June 2020 Notes have no voting rights, do not participate in dividends, and are unsecured. The Company believes it is more likely than not that the June 2020 Notes will not be automatically converted in connection with a qualified equity financing prior to either prepayment or automatic conversion on maturity.

 

In April 2020, the Company issued three Convertible Notes (“April 2020 Notes”) to three accredited investors for an aggregate amount of $22,500. The April 2020 Notes mature in April 2025, unless earlier converted. The April 2020 Notes bear interest at a rate of 5% per year. The April 2020 Notes will automatically convert into shares of common stock on the earlier to occur of a) a qualified equity financing, with the conversion price equal to 50% of the common stock price paid by the purchasers of the equity, or b) on the maturity date, at a price per share equal to the fair market value of the Company’s common stock on that date. If a change in control occurs before either of the automatic conversion events, the holders of the April 2020 Notes will have the option to convert the April 2020 Notes at a price per share equal to the fair market value of the common stock at the time of such conversion. The Company can prepay the principal and interest, in cash, at any time without any premium or penalty. The April 2020 Notes have no voting rights, do not participate in dividends, and are unsecured. The Company believes it is more likely than not that the April 2020 Notes will not be automatically converted in connection with a qualified equity financing prior to either prepayment or automatic conversion on maturity.

 

In February 2020, the Company issued three Convertible Notes (“February 2020 Notes”) to three accredited investors for an aggregate amount of $22,500. The February 2020 Notes mature in February 2025, unless earlier converted. The February 2020 Notes bear interest at a rate of 5% per year. The February 2020 Notes will automatically convert into shares of common stock on the earlier to occur of a) a qualified equity financing, with the conversion price equal to 50% of the common stock price paid by the purchasers of the equity, or b) on the maturity date, at a price per share equal to the fair market value of the Company’s common stock on that date. If a change in control occurs before either of the automatic conversion events, the holders of the February 2020 Notes will have the option to convert the February 2020 Notes at a price per share equal to the fair market value of the common stock at the time of such conversion. The Company can prepay the principal and interest, in cash, at any time without any premium or penalty. The February 2020 Notes have no voting rights, do not participate in dividends, and are unsecured. The Company believes it is more likely than not that the February 2020 Notes will not be automatically converted in connection with a qualified equity financing prior to either prepayment or automatic conversion on maturity.

 

Interest expense for Convertible Notes was $4,675 for the nine months ended September 30, 2023, and September 30, 2022, respectively.

 

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:

 

Issuance Date  Exercisable for  Expiration Date  Exercise Price  

Number of Shares

Outstanding

Under Warrants

 
September 2019  Common Shares  September 24, 2022  $0.01    75,000 
February 2020  Common Shares  February 6, 2030  $0.01    10,000 
February 2020  Common Shares  February 12, 2030  $0.01    2,500 
February 2020  Common Shares  February 19, 2030  $0.01    10,000 
April 2020  Common Shares  April 20, 2030  $0.01    22,500 
June 2020  Common Shares  June 9, 2030  $0.01    5,000 
March 2021  Common Shares  February 28, 2026  $0.50    362,500 
January 2022  Common Shares  January 12, 2025  $5.25    500,000 
February 2022  Common Shares  February 24, 2025  $5.25    200,000 
April 2022  Common Shares  April 7, 2025  $5.25    146,667 
May 2022  Common Stock  May 3, 2025  $5.25    750,000 
March 2023  Common Stock  March 8, 2028  $0.00001    474,780 
March 2023  Common Stock  March 13, 2028  $0.00001    7,000,000 
April 2023  Common Stock  April 14. 2028  $0.00001    1,000,000 
May 2023  Common Stock  May 12, 2028  $0.00001    1,500,000 
June 2023  Common Stock  June 23, 2028  $0.00001    1,500,000 

 

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.

 

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NOTE 8 - SUMMARY OF STOCK OPTIONS

 

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 10 years and may be subject to vesting conditions, as determined by the Administrator. Options granted generally vest over eighteen to thirty-six months. 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.

 

5,000,000 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 2,281,429 shares of the Company’s common stock and there remain reserved for future awards 2,718,571 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   2,281,429   $2.26    3.25    - 
Options granted   -    -    -    - 
Options canceled   -    -    -    - 
Options exercised   -    -    -    - 
Options outstanding, on September 30, 2023   2,281,429   $2.26    2.50   $- 
Vested and exercisable   2,281,429   $2.26    2.50   $- 

 

The Company recognized $0 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 6,713,093 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 $511,527 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 $0 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 $0 for the nine months ended September 30, 2023, and September 30, 2022, respectively.

 

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 $425,000 (giving effect to an original issue discount). After payment of the fees and costs, the net proceeds to the Company were $405,000, which will be used for working capital and other general corporate purposes.

 

The maturity date of the Nov. Note is May 10, 2024. The Nov. Note bears interest at 12% per year, and principal and accrued interest is due on the maturity date. The Company may prepay the Nov. Note at any time without penalty. The Company’s failure to make required payments under the Nov. Note or to comply with various covenants, among other matters, would constitute an event of default. Upon an event of default under the Nov. SPA or the Nov. Note, the Nov. Note will bear interest at 18%, AJB may immediately accelerate the Nov. Note due date, AJB may convert the amount outstanding under the Nov. Note into shares of Company common stock at a discount to the market price of the stock, and AJB will be entitled to its costs of collection, among other penalties and remedies.

 

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 10,000,000 shares of the Company’s common stock for $0.00001 per share. The Warrant also includes various covenants of the Company for the benefit of the warrant holder and includes a beneficial ownership limitation on the holder that, in certain circumstances, may serve to restrict the holder’s right to exercise the warrant. The Company also entered into a Security Agreement with AJB pursuant to which the Company granted to AJB a security interest in substantially all of the Company’s assets to secure the Company’ obligations under the Nov. SPA, Nov. Note and Warrant.

 

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.

 

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On November 13, 2023, the Company paid 1800 Diagonal Lending, LLC (“Diagonal”) an agreed upon settlement amount, $126,500, in full satisfaction of the two Diagonal outstanding promissory notes.

 

On November 13, 2023, the Company paid Coventry $7,500 towards an agreed upon settlement amount of $15,000, as partial satisfaction of the outstanding Coventry promissory note. The Company has agreed to pay the remaining balance of the settlement amount within 120 days.

 

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 501 shares of AllFi Technologies’ common stock, which represents 50.1% of the current issued and outstanding shares of AllFi Technologies, for a purchase price of $100,000. Upon the execution of the AllFi Technologies Subscription Agreement, the Company became a shareholder of AllFi Technologies. The Company and AllFi Technologies made customary representations, warranties, and covenants in the AllFi Technologies Subscription Agreement. The AllFi Technologies Subscription Agreement was adopted by the sole director of AllFi Technologies and the board of directors of the Company.

 

On October 7, 2023, the Company sold an aggregate of 22,104,583 shares of the Company’s restricted common stock to AllFi Holdings LLC, for a total purchase price of $1.00, 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 $101,121,409 of convertible debt.

 

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 $300,000, paid in accordance with the fee schedule set forth in the Licensing Agreement. The Company also agreed to pay TelBill for all security system infrastructure costs and to manage the code instance, which will both be billed at actual cost with no markup. In addition, TelBill is entitled to share in the revenue generated by the Company through the use of TelBill’s software, at a rate of 15% of net program profits. As additional consideration for the license, the Company granted TelBill a 19.98% equity stake in the Company in the form of warrants with a 30-year expiration, and which vest in accordance with the vesting schedule set forth in the Licensing Agreement.

 

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.

 

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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 adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

 

ITEM 6. Exhibits.

 

Exhibit

Number

  Document
     
10.1   Code Licensing Commerical Agreement dated as of August 29, 2023 by and between The Crypto Company and TelBill, LLC (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K as filed on September 7, 2023 (File No. 000-55726)).
     
10.2   Intellectual Property Assignment Agreement dated as of October 3, 2023 by and between The Crypto Company and AllFi Technologies, Inc. (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K as filed on October 10, 2023 (File No. 000-55726)).
     
10.3   Subscription Agreement by and between the Crypto Company and AllFi Technologies, Inc. ((incorporated by reference to Exhibit 10.2 of the Company’s Form 8-K as filed on October 10, 2023 (File No. 000-55726)).
     
10.4   Securities Purchase Agreement dated as of November 13, 2023 by and between The Crypto Company and AJB Capital Investments, LLC.
     
10.5   Promissory Note in favor of AJB Capital Investments, LLC, dated November 13, 2023.
     
10.6   AJB Capital Investments, LLC Pre-Funded Common Stock Purchase Warrant, dated November 13, 2023.
     
10.7   Security Agreement dated as of November 13, 2023 by and between The Crypto Company and AJB Capital Investments, LLC.
     
31.1   Certification of the Company’s Principal Executive Officer, Principal Financial and Accounting Officer pursuant to Rule 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
     
32.1   Certification of the Company’s Principal Executive Officer, Principal Financial and Accounting Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
     
101.INS*   Inline XBRL Instance Document
     
101.SCH*   Inline XBRL Taxonomy Extension Schema
     
101.CAL*   Inline XBRL Taxonomy Extension Calculation Linkbase
     
101.DEF*   Inline XBRL Taxonomy Extension Definitions Linkbase
     
101.LAB*   Inline XBRL Taxonomy Extension Label Linkbase
     
101.PRE*   Inline XBRL Taxonomy Extension Presentation Linkbase
     
104*   Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

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)

 

 

 

 

v3.23.3
Cover - shares
9 Months Ended
Sep. 30, 2023
Nov. 20, 2023
Cover [Abstract]    
Document Type 10-Q  
Amendment Flag false  
Document Quarterly Report true  
Document Transition Report false  
Document Period End Date Sep. 30, 2023  
Document Fiscal Period Focus Q3  
Document Fiscal Year Focus 2023  
Current Fiscal Year End Date --12-31  
Entity File Number 000-55726  
Entity Registrant Name THE CRYPTO COMPANY  
Entity Central Index Key 0001688126  
Entity Tax Identification Number 46-4212105  
Entity Incorporation, State or Country Code NV  
Entity Address, Address Line One 23823 Malibu Road  
Entity Address, Address Line Two # 50477  
Entity Address, City or Town Malibu  
Entity Address, State or Province CA  
Entity Address, Postal Zip Code 90265  
City Area Code (424)  
Local Phone Number 228-9955  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Non-accelerated Filer  
Entity Small Business true  
Entity Emerging Growth Company false  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding   309,809,873
v3.23.3
Condensed Consolidated Balance Sheets (Unaudited) - USD ($)
Sep. 30, 2023
Dec. 31, 2022
CURRENT ASSETS    
Cash and cash equivalents $ 20,435 $ 110,606
Prepaid expenses 3,750 81,317
Total current assets 24,185 191,923
Fixed assets 50,000
Goodwill 740,469 740,469
Intangible assets 541,670 574,169
TOTAL ASSETS 1,306,324 1,556,561
CURRENT LIABILITIES    
Accounts payable and accrued expenses 2,632,066 2,265,548
Notes payable, net 2,440,845 2,211,353
Total current liabilities 5,072,911 4,476,901
Convertible debt 125,000 125,000
Notes payable - other 13,510 14,100
TOTAL LIABILITIES 5,211,421 4,616,001
STOCKHOLDERS’ DEFICIT    
Common stock, $0.001 par value; 2,000,000,000 shares authorized, 208,688,464 and 23,950,380 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively 208,688 23,950
Additional paid-in-capital 39,340,646 36,448,046
Accumulated deficit (43,454,431) (39,531,436)
TOTAL STOCKHOLDERS’ DEFICIT (3,905,097) (3,059,440)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT $ 1,306,324 $ 1,556,561
v3.23.3
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares
Sep. 30, 2023
Dec. 31, 2022
Statement of Financial Position [Abstract]    
Common stock, par value $ 0.001 $ 0.001
Common stock shares authorized 2,000,000,000 2,000,000,000
Common stock, shares issued 208,688,464 23,950,380
Common stock, shares outstanding 208,688,464 23,950,380
v3.23.3
Condensed Consolidated Statements of Operations (Unaudited) - USD ($)
3 Months Ended 9 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Sep. 30, 2023
Sep. 30, 2022
Revenue:        
Services $ 124,195 $ 252,733 $ 379,107 $ 515,767
Cost of services 14,900 94,532 248,136 266,292
Gross margin 109,295 158,201 130,971 249,475
Operating expenses:        
General and administrative expenses 244,183 305,723 979,324 1,414,054
Amortization 10,833 10,833 32,499 32,499
Depreciation 32,708 76,319
Share-based compensation     620,298 1,965,997
Total Operating Expenses 368,834 530,752 1,632,121 3,488,869
Operating loss (259,539) (372,551) (1,501,150) (3,239,394)
Other income 4,100 25,775 85,865
Loss on Sale of Equipment   (31,000)
Interest expense (99,306) (47,286) (2,416,621) (1,671,486)
Loss before provision for income taxes (358,845) (415,737) (3,922,996) (4,825,015)
Provision for income taxes
Net (loss) $ (358,845) $ (415,737) $ (3,922,996) $ (4,825,015)
Net income (loss) per share, Basic $ (0.00) $ (0.02) $ (0.07) $ (0.21)
Net income (loss) per share, diluted $ (0.00) $ (0.02) $ (0.07) $ (0.21)
Weighted average number of shares outstanding, Basic 110,774,232 23,357,250 57,709,544 22,956,299
Weighted average number of shares outstanding, diluted 110,774,232 23,357,250 57,709,544 22,956,299
Share-Based Payment Arrangement, Employee [Member]        
Operating expenses:        
Share-based compensation $ 17,875 $ 6,761 $ 272,447
Share-Based Payment Arrangement, Nonemployee [Member]        
Operating expenses:        
Share-based compensation $ 113,818 $ 163,612 $ 613,537 $ 1,693,550