Table of Contents
As filed with the Securities and Exchange Commission
on January 12, 2024
Registration No. 333-262629
UNITED STATES
SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 5 to
FORM S-1/A
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Athena Bitcoin
Global
(Exact name of registrant as specified in its
charter)
Nevada |
6099 |
87-0493596 |
(State or other jurisdiction of |
(Primary Standard Industrial |
(I.R.S. Employer |
incorporation or organization) |
Classification Code Number) |
Identification Number) |
800 NW 7th Avenue,
Miami, Florida 33136
(312) 690-4466
(Address, including zip code, and telephone number,
including area code, of registrant’s principal executive offices)
Matias Goldenhorn
Chief Executive Officer
800 NW 7th Avenue,
Miami, Florida 33136
(312) 690-4466
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
Copies
of all communications to:
Iwona Alami, Esq. |
|
Robert
S. Matlin |
Law Office of Iwona J. Alami |
|
K&L Gates, LLP |
620 Newport Center Dr. |
|
599
Lexington Avenue |
Suite 1100 |
|
New
York, NY 10022 |
Newport Beach, CA 92660 |
|
(212)
536-3901 |
(949) 200-4626 |
|
|
Approximate
date of commencement of the proposed sale to the public: As soon as practicable after this registration statement becomes effective.
If
any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act, check the following box: ☒
If
this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of the earlier effective registration statement for the same
offering. ☐
If
this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If
this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,”
“smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ |
Accelerated filer ☐ |
Non-accelerated filer ☒ |
Smaller reporting company ☒ |
|
Emerging growth company ☒ |
If
an emerging growth company, indicate by checkmark if the registrant has not elected to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐
The Registrant hereby amends this Registration
Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities
Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission,
acting pursuant to said Section 8(a), may determine.
The
information in this prospectus is not complete and may be changed. These securities may not be sold until the registration statement
filed with the Securities and Exchange Commission is declared effective. This prospectus is not an offer to sell nor does it seek an
offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
Subject
to completion, dated January 12, 2024
444,583,937 Shares of Common
Stock
This prospectus relates to the resale or other
disposition of up to 444,583,937 shares of Athena Bitcoin Global common stock, par value $0.001 per share (the “common stock”
or “shares”), which may be offered for sale from time to time by the selling shareholders named in this prospectus (each
a “Selling Shareholder” and, collectively, the “Selling Shareholders”). The shares of our common stock covered
by this prospectus include: (i) 409,933,937 shares of common stock that were issued by us to the Selling Shareholders in the share exchange
transaction or were purchased by the Selling Shareholders in private transactions, and (ii) up to 34,650,000 shares of common
stock issued upon conversion of our outstanding 6% Convertible Debentures Due 2023 (the “Convertible Debentures”)
which were issued in connection with a private placement financing in 2021. We are registering the resale of the shares of common stock
underlying the Convertible Debentures as required by the Securities Purchase Agreement that we entered into with the Selling Shareholders
as of June 22, 2021, which provided said Selling Shareholders with certain registration rights with respect to the common stock issuable
upon conversion of the Convertible Debentures. We are not selling any shares of common stock under this prospectus and will not receive
any proceeds from the sale of any shares of common stock by the Selling Shareholders. The Selling Shareholders will bear all commissions
and discounts, if any, attributable to the sale or other disposition of the shares of common stock. We will bear all costs, expenses
and fees in connection with the registration of the shares of common stock.
Our common stock is quoted on the OTC Pink Market
(“OTC Pink”) operated by the OTC Markets Group, Inc. under the symbol “ABIT”. On January 2, 2024, the last
reported sale of our common stock was $0.28. There is a limited public trading market for our common stock. You are urged to obtain
current market quotations for the common stock.
Until such time as our common stock is quoted
on the over-the-counter bulletin board (“OTCBB”), or the OTCQX, or the OTCQB or listed on any national securities exchange
or automated interdealer quotation system, the shares covered by this prospectus will be sold by the Selling Shareholders from time to
time at a fixed price of $[●] per share, representing the average of the high and low prices as reported on the OTC Pink on [●],
2024. If and when our common stock is regularly quoted on the over-the-counter bulletin board (“OTCBB”), or the OTCQX,
or the OTCQB or listed on any national securities exchange or automated interdealer quotation system, the Selling Shareholders may sell
their respective shares of common stock, from time to time, at prevailing market prices or in privately negotiated transactions.
Our registration of the shares of common stock
covered by this prospectus does not mean that the Selling Shareholders will offer or sell any of the shares. See “Plan
of Distribution” which begins on page 109 of this prospectus for more information.
This offering will terminate on the earlier of
(i) the date when all of the shares have been sold pursuant to this prospectus or Rule 144 under the Securities Act of 1933, as amended
(the “Securities Act”), (ii) or the date that all of the securities may be sold pursuant to Rule 144 without volume or manner-of-sale
restrictions, (iii) or we decide at any time to terminate the registration of the shares at our sole discretion.
We have made no written communications as defined
under Rule 405 of the Securities Act to prospective investors or investors.
You should rely only on the information contained
in this prospectus. We have not authorized anyone to provide you with information different from that contained in this prospectus. The
information contained in this prospectus is accurate only as of the date of this prospectus.
Investing in our shares involves a high degree
of risk. You should carefully consider the Risk Factors beginning on page 15 of this prospectus before you make an investment
in our securities.
The Company has an accumulated deficit of
$11,576,000 as of December 31, 2022 and our auditor has expressed substantial doubt about our ability to continue as a going concern.
See Note 1 to our audited Consolidated Financial Statements.
We are an “emerging growth company”
as that term is used in the Jumpstart Our Business Startups Act (the “Jobs Act”) and defined under the federal securities
laws and, as such, may elect to comply with certain reduced public company reporting requirements in future reports after the completion
of this offering. See “Prospectus Summary—Implications of Being an Emerging Growth Company.”
We may amend or supplement this prospectus from
time to time by filing amendments or supplements as required. You should carefully consider the risks and uncertainties described under
the heading “Risk Factors” beginning on page 15 of this prospectus before you make an investment
decision.
Neither the Securities and Exchange Commission
nor any state securities commission has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus.
Any representation to the contrary is a criminal offense.
This Prospectus is dated
January 12, 2024.
![](https://www.sec.gov/Archives/edgar/data/1095146/000168316824000275/kiosk.jpg)
TABLE
OF CONTENTS
You should rely only on information contained
in this prospectus. We have not authorized anyone to provide you with information other than that contained in this prospectus or in
any free writing prospectus we may authorize to be delivered or made available to you. We take no responsibility for and cannot provide
any assurance as to the reliability of any other information others may give you. The Selling Shareholders are not offering to sell or
seeking offers to buy shares of common stock in jurisdictions where offers and sales are not permitted. The information in this prospectus
or any free writing prospectus is accurate only as of its date, regardless of its time of delivery or of any sale of shares of our common
stock. Our business, financial condition, results of operations, and prospects may have changed since that date. We are responsible
for updating this prospectus to ensure that all material information is included and will update this prospectus to the extent required
by law.
For investors outside of the United States: Neither
we nor any of the Selling Shareholders have done anything that would permit this offering or possession or distribution of this prospectus
in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the United States who
come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of common
stock by the Selling Shareholders and the distribution of this prospectus outside of the United States.
ABOUT THIS PROSPECTUS
This prospectus is a part
of a registration statement on Form S-1 that we filed with the Securities and Exchange Commission (the “SEC”) using a “shelf”
registration or continuous offering process. Under this shelf process, the Selling Shareholders may, from time to time, sell the shares
of common stock covered by this prospectus in the manner described in the section titled “Plan of Distribution.” Additionally,
we may provide a prospectus supplement to add information to, or update or change information contained in, this prospectus (except for
the section titled “Plan of Distribution,” which additions, updates, or changes that are material shall only be made pursuant
to a post-effective amendment). You may obtain this information without charge by following the instructions under the section titled
“Additional Information” appearing elsewhere in this prospectus. You should read this prospectus and any prospectus supplement
before deciding to invest in our shares.
INDUSTRY AND MARKET DATA
Market data and certain industry
data and forecasts used throughout this prospectus were obtained from internal Company surveys, market research, consultant surveys,
publicly available information, reports of governmental agencies and industry publications and surveys. Industry surveys, publications,
consultant surveys and forecasts generally state that the information contained therein has been obtained from sources believed to be
reliable, but the accuracy and completeness of such information is not guaranteed. We have not independently verified any of the data
from third party sources, nor have we ascertained the underlying economic assumptions relied upon therein. Similarly, internal surveys,
industry forecasts and market research, which we believe to be reliable based on our management’s knowledge of the industry, have
not been independently verified. Forecasts are particularly likely to be inaccurate, especially over long periods of time. Statements
as to our market position are based on the most currently available data. While we are not aware of any misstatements regarding the industry
data presented in this prospectus, our estimates involve risks and uncertainties and are subject to change based on various factors,
including those discussed under the heading “Risk Factors” in this prospectus.
Glossary of Bitcoin
and Crypto Terms
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Address: An alphanumeric reference to where crypto assets can
be sent or stored. |
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Bitcoin: The first system of global, decentralized, scarce,
digital money as initially introduced in a white paper titled Bitcoin: A Peer-to-Peer Electronic Cash System by Satoshi Nakamoto.
Bitcoin, while having several of the primary attributes of money, is not considered a currency or money in the jurisdictions that
the Company operates, with the exception of El Salvador where it is legal tender. |
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Bitcoin ATM: A kiosk that can be used by a Customer to buy or
sell Bitcoin or other crypto assets in exchange for Cash. |
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Bitcoin Cash (BCH):
A fork of Bitcoin that seeks to add more transaction capacity to the network in order to be useful for everyday transactions. BCH
is based on the original Bitcoin blockchain with some distinct differences. A major one is an increased maximum block size of 32MB,
compared to just 1MB on Bitcoin. Increased block size allows BCH to process transactions faster than Bitcoin, with lower fees and
an increased per-second transaction capacity. |
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Bitcoin SV: A fork
of Bitcoin Cash (BCH), also known as Bitcoin Satoshi’s Vision, that attempts to restore the original Bitcoin protocol to align
with Bitcoin inventor Satoshi Nakamoto’s original vision for the blockchain network. |
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Block: A grouping of Transactions validated by Miners and disseminated
by the Network to servers that maintain the records in a blockchain. Blocks are added to an existing blockchain as transactions occur
on the network. Miners are rewarded for “mining” a new block. |
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Blockchain: A cryptographically secure digital ledger that maintains
a record of all transactions that occur on the network and follows a consensus protocol for confirming new blocks to be added to
the blockchain. |
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Cash: The physical specie or banknotes of a sovereign country including the US Dollar and
other countries that issue fiat currency in paper formats. |
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Chivo: CHIVO, Sociedad Anonima de Capital Variable,
a private company incorporated under the laws of the Republic of El Salvador, which is politically controlled by the Government of
El Salvador (GOES), is the official Bitcoin service provider of the government of El Salvador. Chivo’s platform is used
to support the use of Bitcoin as legal tender in the country. The platform facilitates the exchange of Bitcoin and US dollar between
users and their counterparties. The Chivo brand, which is the exclusive property of CHIVO, Sociedad Anonima de Capital Variable,
is used across multiple products and services including a mobile wallet (Chivo wallet), integrated ATMs (Chivo ATMs) and point-of-sale
(“POS”) terminals. |
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Cold storage: The storage of private keys in any fashion that is disconnected from the internet.
Common cold storage examples include offline computers, USB drives, or paper records. |
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Confirmation: A Bitcoin or similar transaction is considered confirmed when it is included
in a new Block in the Blockchain. Each time another block is appended to the chain, the Transaction is confirmed again. |
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Crypto: A broad term for any cryptography-based market, system, application, or decentralized
network. |
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Cryptocurrency: Bitcoin and alternative coins, or ‘altcoins’. This category of
crypto asset is designed to work as a medium of exchange, store of value, or to power applications and excludes security tokens. |
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Customer: A retail user of our Bitcoin ATMs or client of one
of our other services. |
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Customer Buying: When a Customer acquires Bitcoin or crypto
asset in exchange for Cash or a Wire Transfer. In these transactions, the Company is selling Bitcoin or crypto asset and acquiring
Fiat Currency. |
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Customer Selling: When a Customer acquires Fiat Currency, either
Cash or Wire Transfer, in exchange for Bitcoin or crypto asset. In these transactions, the Company is acquiring Bitcoin or crypto
asset in exchange for Fiat Currency. |
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Crypto Asset or Digital Asset:
Bitcoin and alternative digital forms of money, or ‘altcoins’, launched after the success of Bitcoin. This category
of crypto asset is designed to work as a medium of exchange or store of value. This term is inclusive of Ethereum, Litecoin,
Tether, and Bitcoin Cash, but not securities. In the Company’s marketing documents and website, this would be referred
to as “cryptocurrency,” however in this document we refer to this category of digital token as a “crypto asset.”
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Ethereum: A decentralized global computing platform that supports smart contract transactions
and peer-to-peer applications, or “Ether,” the native crypto assets on the Ethereum network. |
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Fiat Currency: The currency issued by a sovereign government
or bloc including the US Dollar, Argentine Peso, or Euro. |
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Fork: A fundamental change to the software underlying a blockchain
which results in two different blockchains, the original, and the new version. In some instances, the fork results in the creation
of a new token. |
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Hot Wallet: A wallet that
is connected to the internet, enabling it to broadcast transactions. |
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Miner: Individuals or entities who operate a computer or group
of computers that add new transactions to blocks, and verify blocks created by other miners. Miners collect transaction fees and
are rewarded with new tokens for their services. |
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Mining: The process by which new blocks are created, and thus
new transactions are added to the blockchain. |
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Monero:
A cryptocurrency focused on privacy, which allows users to send and receive transactions without making this data available to anyone
examining its blockchain. |
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Network: The collection of all Miners and Nodes that use computing
power to maintain the ledger and add new blocks to the blockchain. Most networks are decentralized, reducing the risk of a single
point of failure. |
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Node: A server that maintains a record of the blockchain and
can communicate with other Nodes on the Network to propagate new Transactions. Nodes can also maintain wallets and safeguard Private
Keys. |
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Protocol: A type of algorithm or software that governs how a
blockchain operates. |
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Public key or private
key: Each public address has a corresponding public key and private key that are cryptographically
generated. A private key allows the recipient to access any funds belonging to the address, similar
to a bank account password. A public key helps validate transactions that are broadcasted to and
from the address. Addresses are shortened versions of public keys, which are derived from private
keys. |
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Stable Coin: A Token issued for the purpose
of maintaining a constant value relative to a fiat currency, most commonly the U.S. Dollar. Examples include Tether, USDC, Dai, BinanceUSD
or GUSD. Many of these operate as un-regulated money market fund equivalents. Stable coins are a popular method to transfer funds
between exchanges without taking price risk. |
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Tether: A blockchain-based cryptocurrency whose tokens in circulation are backed by an equivalent
amount of U.S. dollars, making it a stablecoin with a price pegged to USD $1.00. |
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Token: A unit of a crypto asset or other instrument secured
by and recorded on a blockchain. Tokens could include the primary units of a blockchain as in Ethereum or Bitcoin, or be a separate
construct whose ownership is recorded using such a blockchain as in an ERC-20 Token, whose ownership might convey any number of properties. |
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Transaction: The transfer of Bitcoin or a crypto asset from
one Address to one or more Addresses. The Transaction is validated by Nodes and Miners according to the Protocol and specifically
must be signed using the private key of the sending Address to be included in a block, whereby it becomes Confirmed. |
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Wallet: A place to store public and private keys for crypto
assets. Wallets are typically software, hardware, or paper-based. |
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Wire Transfer: A permanent inter-bank transfer on a national
or international settlement system including the Fedwire system in the United States or the SWIFT international system but excluding
non-permanent systems like ACH. |
Prospectus Summary
This summary highlights selected information
contained elsewhere in this prospectus. This summary does not contain all the information that you should consider before investing in
our common stock. You should carefully read the entire Prospectus, including “Risk Factors”, “Management’s Discussion
and Analysis of Financial Condition and Results of Operations” and the Financial Statements, before making an investment decision.
Unless the context suggests otherwise, all references to “Athena”, “we”, “us”, “our”,
or “the Company” refer to Athena Bitcoin Global, a Nevada corporation and all of its subsidiaries, and all references to
“Athena Bitcoin” refer solely to Athena Bitcoin, Inc., a Delaware corporation and a wholly-owned subsidiary of the Company.
As used below, Bitcoin with an uppercase “B” is used to describe the system as a whole that is involved in maintaining the
ledger of bitcoin ownership and facilitating the transfer of bitcoin among parties. When referring to the crypto asset within the Bitcoin
network, bitcoin is written with a lower case “b” (except, of course, at the beginning of sentences or paragraph sections,
as below). The name “Athena Bitcoin” and the Athena Bitcoin logo service mark appearing in this prospectus are the property
of Athena Bitcoin, Inc., a wholly-owned subsidiary of the Company. Solely for convenience, the trademarks, servicemarks and trade names
in this prospectus are referred to without the ® and ™ symbols, but such references should not be construed
as any indicator that the owner of such trademarks, servicemarks and trade names will not assert, to the fullest extent under applicable
law, their rights thereto. We do not intend the use or display of other companies’ trademarks and trade names to imply a relationship
with, or endorsement or sponsorship of us by, any other companies.
Introduction
We are an early entrant in the crypto asset market
and one of the first U.S. publicly traded companies using crypto assets and blockchain technologies in our business operations which
include a global network of Athena Bitcoin ATMs.
Our management has determined that it is in our
best interests to become a reporting company under the Securities and Exchange Act of 1934 as amended (“Exchange Act”), and
endeavor to establish a public trading market for our common stock on the OTCQB or other trading systems. Currently our trading volume
is limited and we are subject to the Alternative Reporting Standard of OTC Pink Market. Our management believes that establishing a public
market on OTCQB or another exchange: (i) will increase our profile as a leading company in the international operation of Bitcoin ATMs,
giving us greater identity and recognition, and (ii) will make it easier for us to attract additional equity capital, which we need to
expand our business. There is no assurance that we will accomplish any of the foregoing goals and prospective investors are cautioned
to carefully read the risk factors set forth herein prior to making an investment decision.
![](https://www.sec.gov/Archives/edgar/data/1095146/000168316824000275/bitcoin_image.jpg)
Athena
Bitcoin connects the world’s
cash to the world of cryptocurrency.
Overview
Athena Bitcoin Global owns and operates a global
network of Athena Bitcoin ATMs, which we refer to as our ATMs, that allow our customers to buy or sell Bitcoin in exchange for their
local fiat currency, such as the U.S. dollar. We are focused on making Bitcoin more easily accessible, functional and usable for people,
business and other organizations. Athena believes the great promise of Bitcoin is the democratization of money. The traditional system
of money and banking, with its many layers, costs and inefficiencies, results in the disenfranchisement of enormous numbers of individuals
and businesses in the world. According to the World Bank, 1.4 billion people in the world are unbanked. This is typically due to geographic
and socio-economic factors. Bitcoin, altcoins, blockchains and smart contracts are poised to transform the international financial order
by providing the unbanked and billions of others in the world with a connection to the new global digital financial system.
Bitcoin is a system for decentralized digital
value exchange that is designed to enable units of bitcoin to be transferred across borders without the need for currency conversion.
Bitcoin is not legal tender, except in the country of El Salvador. The supply of bitcoin is not determined by a central government, but
rather by an open-source software program that limits both the total amount of bitcoin that will be produced and the rate at which it
is released into the network. The responsibility for maintaining the official ledger of who owns what bitcoin and for validating new
bitcoin transactions is not entrusted to any single central entity. Instead, it is distributed among the network’s participants.
As such, crypto assets are transferred entirely online, with no physical coins or bills. Instead of being held at a bank, crypto assets
are held in one’s digital wallet, which is an online vault for holding public and private keys for crypto assets. Instead
of being transferred through banks, brokers, clearing houses, custodians and payment processors, crypto assets are transferred directly
to the recipient online and transactions are recorded on a blockchain or public ledger. This allows for an efficient and fully transparent
transfer of funds. The value of each crypto asset is determined by trading among buyers and sellers all over the world. At the end of
2022, the overall market capitalization of crypto assets reached $795 billion, representing a compounded average growth rate (CAGR) of
approximately 62% since the end of 2013. The supply of Bitcoin is greater than the M1 money supplies of the Swiss Franc and the Russian
Ruble. One challenge for Bitcoin and other crypto assets is that they typically cannot be used to pay for common expenditures like groceries,
utility bills, or a house. When someone wants to spend their bitcoin, they will generally need to convert it to their local currency.
Crypto asset owners can use crypto exchanges like Coinbase and acquire U.S. dollars by selling their crypto asset(s). On Coinbase or
other crypto asset exchanges, users can oftentimes sell their bitcoin or other crypto assets for up to 50,000 U.S. dollars a day which
can be wired or otherwise sent directly to a bank account and typically usable after one or two business days. Crypto exchanges are well
suited for larger, planned transactions but can be inconvenient or entirely unsuitable for smaller or more immediate transactional needs
or for those who do not have access to institutionalized banking in their country. They also do not offer the level of convenience that
bank customers are accustomed to. Most people in the United States use bank ATMs rather than bank tellers to get spending cash due to
their convenience.
ATM Market
According to a University of Florida study, there
were over 470,135 traditional ATMs operating in the United States in 2018. Our two-way ATMs play a similar role by providing cash conveniently
and quickly. Individuals that own Bitcoin can visit our two-way ATMs and get up to $2,000 in cash in a single transaction. While our
two-way ATMs dispense cash for Bitcoin owners like a typical ATM cash machine does for a bank customer, our ATMs capabilities are more
akin to currency exchange booths at international airports. Our ATMs perform real-time exchange between Bitcoin and fiat currency. The
majority of our customers use our services to purchase Bitcoin with U.S. dollars. However, in Central and South America, there is a more
even distribution between purchases and sales of crypto assets. While our two-way ATMs differ substantially in function from bank ATMs,
they provide a similar level of convenience. Our two-way ATMs benefit from the public’s vast experience using bank ATMs, which
contributes to making our two-way ATMs a user-friendly and familiar method for anyone who wishes to buy or sell Bitcoin.
The Birth of Bitcoin ATMs
In the earliest days of Bitcoin, most transactions
were done in person - often facilitated by websites. These sites matched prospective buyers with sellers and facilitated communications
and wallet coordination, allowing them to meet in public places like coffee shops and street corners, and exchange bitcoin for envelopes
of cash. The first Bitcoin ATMs began appearing in 2014. These ATMs were an instant success with retail customers because they offered
instantaneous access to bitcoin in a familiar and safe method.
According to Reuters in a March, 2021 article
titled “Bitcoin ATMs are coming to a gas station near you”, the industry has grown from a handful of machines operated by
hobbyists to more than 15,000 kiosks worldwide primarily operated by increasingly larger organizations. There are many operators of Bitcoin
ATM networks, from crypto businesses to major corporate and conventional kiosk companies including Coinstar.
Some Bitcoin ATMs offer one-way exchange, allowing customers to only
buy crypto assets. Others offer two-way exchange, so customers can buy crypto assets for cash, or sell some of their crypto assets and
receive cash. Athena Bitcoin ATMs currently serve clients with only one crypto asset, Bitcoin, in either one-way or two-way exchanges,
depending on the functionality of the ATM machine.
Bitcoin Adoption
Parties that want to use their bank accounts
to buy Bitcoin can do so without an ATM. These transactions are the domain of exchanges and specialty apps including services from Coinbase,
Gemini, Binance, Kraken, and Square. These services generally accept U.S. dollar transfers from bank accounts and do not accept physical
currency. These services may or may not, depending on several factors including method of deposit, allow the purchaser of a crypto asset
on their platforms to immediately transfer the crypto asset into their own wallet. These services cater to larger purchasers and investors
of crypto assets. Users of exchanges and specialty apps may use ATMs as a convenient method to get spending cash, similar to how bank
account and credit card holders use bank ATMs.
In second quarter of 2023, PayPal reported
that its crypto revenue increased by 56% to $1.1 billion, and that Venmo's crypto volume grew by 29% to $67 billion. PayPal and
Venmo have also expanded their crypto offerings, such as allowing users to transfer crypto to third-party wallets and exchanges, and
introducing crypto transfers via Venmo. These features have increased the utility and accessibility of crypto for their customers,
and have helped drive more adoption in the U.S. and beyond. Per Chainalysis.com, the aggregate global index score, which is based
on countries’ usage of different types of cryptocurrency services, has demonstrated that global adoption has increased since
Q3 2020. This index score is based on five sub-indexes, which is a quantitative measure of countries’ usage of different types
of cryptocurrency services. These sub-indexes are based on crypto currency transactions on centralized crypto exchanges (weighted by
purchasing power parity), on-chain retail value received at centralized exchanges (weighted by purchasing power parity per capita),
peer-to-peer exchange trade volume (weighted by purchasing power parity per capita and number of internet users), on-chain
cryptocurrency received from Defi protocols (weighted by purchasing power parity per capita) and on-chain retail value received from
Defi protocols (weighted by purchasing power parity per capital). The scores for all 155 countries utilized by chainalysis.com are
summed for each quarter from Q3 2020 to Q2 2023 and re-indexed to show adoption growth over time across the world.
We believe this trend is due in part to
an increase in companies and online service providers that are helping to make Bitcoin and other crypto assets more widely and
easily usable. This trend is also correlated with the increase in the price of Bitcoin and significant events that have occurred in
the crypto economy. Given the infancy of the new digital global financial system, there has been significant variability of price
since the inception of Bitcoin. There has also been negative press events, such as the FTX bankruptcy and Terra (LUNA), that have
caused fluctuations in the price of Bitcoin and in Bitcoin’s global adoption. These negative events played a significant role
in the reduction of the Global Index Score from Q4 2021 to Q4 2022. However, despite the variability of the price and these negative
events, the global index score has increased significantly since Q3 2020 and prior. We believe that this demonstrates the durability of
the new digital global financial system and that as worldwide adoption continues, the Company is optimistic that the variability of
the price and the frequency of these negative events will decrease.
While the COVID-19 pandemic detrimentally impacted
the world economy overall and aspects of our business operations, we also believe that the COVID-19 pandemic demonstrated the benefits
of crypto assets to the world. According to Christine Zhenwei Qiang, Global Director for Digital Development Global Practice for the
World Bank, “the COVID-19 pandemic has highlighted the fundamental role that digital infrastructure can play in rapidly delivering
services and social assistance to people. Integration of digital ID, digital payments, and trusted data sharing platforms is critical
for serving the poor at scale and connecting communities to opportunities.”
We believe that the use of Bitcoin ATMs will
continue to rise as the Bitcoin and crypto industry and its many interconnected service providers expand.
Corporate
History and Other Information
The Company was incorporated in the state of
Nevada in 1991 under the name “GamePlan, Inc.” for the sole purpose of merging with Sunbeam Solar, Inc., a Utah corporation,
which merger occurred as of December 31, 1991 with GamePlan, Inc. as a sole surviving entity. The Company was involved in various businesses,
including, gaming and other consulting services, prior to becoming a company seeking acquisitions (a “shell company” as defined
in Rule 405 of the Securities Act). The Company was a reporting issuer under the Securities and Exchange Act of 1934 (the “Exchange
Act”) from 1999 until 2015 when it filed Form 15 pursuant to Rule 12g-4(a)(1) with the Commission and ceased to be a reporting
company.
On January 14, 2020 the Company entered into
a Share Exchange Agreement (the “Agreement”), by and among the Company, Athena Bitcoin, Inc., a Delaware corporation (“Athena
Bitcoin”) incorporated in 2015, and certain shareholders of Athena Bitcoin. The Agreement provides for the reorganization of Athena
Bitcoin, with and into the Company, resulting in Athena Bitcoin becoming a wholly-owned subsidiary of the Company. The agreement is for
the exchange of 100% shares of the outstanding common stock of Athena, for 3,593,644,680 shares of GamePlan, Inc. common stock (an exchange
rate of 1,244.69 shares of common stock of GamePlan, Inc. for each share of Athena Bitcoin common stock). The closing of the transaction
occurred as of January 30, 2020. Subsequently, in May, 2020, the Company filed its amended and restated articles of incorporation authorizing
a total of 4,409,605,000 shares of common stock.
The Company approved the name change from “GamePlan,
Inc.” to “Athena Bitcoin Global” on March 10, 2021 by the unanimous consent of its Board of Directors and a majority
consent of its shareholders. The Company filed an amendment to its Articles of Incorporation with the Secretary of State of the state
of Nevada on April 6, 2021, with the effective date of April 15, 2021. The Company’s name change and trading symbol change to “ABIT”
was declared effective by FINRA on OTC Pink Market as of June 9, 2021.
In January 2023, the Company filed its second
amended and restated articles of incorporation authorizing a total of 10,000,000,000 shares of common stock and 5,000,000,000 shares
of preferred stock, par value $0.001 per share.
Our domestic business operations are conducted
by our subsidiary, Athena Bitcoin, Inc., a Delaware corporation. We have operating subsidiaries in the specific countries where we operate,
as more fully described in the following:
![](https://www.sec.gov/Archives/edgar/data/1095146/000168316824000275/org_chart.jpg)
(1) | Athena Bitcoin, Inc. owns 99% of Athena
Holdings El Salvador SA de CV and Eric Gravengaard holds 1% on behalf of the Company. |
| |
(2) | Athena Bitcoin, Inc. beneficially owns and controls Athena
Holdings SAS which is nominally owned by Eric Gravengaard 95% and Matias Goldenhörn
5%. |
| |
(3) | Athena Bitcoin, Inc. beneficially owns and controls Athena
Holding Company SRL which is nominally owned by Eric Gravengaard 45%, Gilbert Valentine 45%,
and Matias Goldenhörn 10%. |
| |
(4) | Athena Bitcoin, Inc. owns 2,999 Shares of Athena Bitcoin
SRL de CV and Eric Gravengaard owns 1 Share on behalf of the Company. |
| |
(5) | Athena Bitcoin, Inc. is the only member of Athena Holdings
of PR, LLC. |
| |
(6) | Athena Bitcoin, Inc. owns 100% Athena Business Holdings
Panama S.A. |
Our corporate office is located at 800 NW 7th
Avenue, Miami, Florida 33136, and our telephone number is 312-690-4466. Our website is www.athenabitcoin.com. The information
on, or that can be accessed through, our website is not part of this prospectus and is not incorporated by reference herein.
Industry Summary
The Company is an active participant in the operation
of Bitcoin ATMs in the United States and Latin America. More broadly we operate in the market of retail sales of crypto assets, where
we facilitate small purchases of Bitcoin. There are multiple avenues that retail consumers, individuals purchasing small amounts from
one dollar to a few thousand dollars’ worth, can purchase or dispose of crypto assets.
Company Summary
Athena Bitcoin ATMs
The Company is focused on developing, owning
and operating a global network of Athena Bitcoin ATMs, which are free standing kiosks that permit customers to either buy or sell Bitcoin
(two-way ATMs) in exchange for fiat currencies or to just have the ability to buy Bitcoin (one-way ATMs) in exchange for fiat currencies.
The Company at this time only transacts in Bitcoin. The Company places its ATMs in convenience stores, shopping centers, and other easily
accessible locations. Our network presently includes ATMs in 26 U.S. states, the territory of Puerto Rico and 4 countries in Central
and South America. We seek to expand our network in the U.S. and globally, and to further develop Athena Bitcoin as a trusted and preferred
brand for parties seeking to exchange currency for Bitcoin.
Customers can purchase as little as $1 of Bitcoin
but normally choose between $100 and $1,000 using Athena Bitcoin ATMs. The typical ATM that the Company operates is about 5-feet tall
and features a large touchscreen for customer interaction. The customer typically needs to have a wallet application on their smart phone
to buy or sell Bitcoin on our ATM. To initiate the transaction, the customer will follow the steps prompted on the screen. When a customer
is buying Bitcoin, the machine will require the customer to insert paper fiat currency since our ATMs do not accept debit or credit
cards. When the transaction is complete, a receipt will print showing exactly how many crypto assets have been bought and the receiving
address.
The Company’s ATMs do not contain the crypto
asset’s private key. The Company sells Bitcoin from cloud-based wallets in each country, enabling real-time supply of crypto assets
to its customers. For the nine months ending September 30, 2023, and September 30, 2022, and twelve months ended December 31,
2022, and 2021, the Company’s breakdown of volume of ATM transactions per crypto asset is as follows:
Crypto Asset |
For the
Nine Months Ended
September 30, 2023 |
For the
Nine Months Ended
September 30, 2022 |
For the
Twelve Months Ended
December 31, 2022 |
For the
Twelve Months Ended
December 31, 2021 |
Bitcoin
|
59,134 |
37,752 |
42,731
|
87,818
|
Ethereum
(1) |
300 |
878 |
1,220
|
1,936
|
Litecoin
(1) |
861 |
3065 |
3,868
|
5,513
|
Bitcoin
Cash (1) |
69 |
270 |
396 |
865
|
Total
|
60,364 |
41,965 |
48,215
|
96,132 |
| (1) | The Company stopped transacting in
Ethereum, Litecoin and Bitcoin Cash on July 19, 2023 |
The Company buys most of its crypto assets through
automated purchases on crypto exchanges and with digital assets trading firms based on algorithms the Company has developed for balancing
its holdings with anticipated demand. The Company is also active in the over-the-counter dealer market and has bilateral relationships
with several large crypto asset trading desks. We replenish our supply of Bitcoin, multiple times daily as needed, and hold Bitcoin
in our wallet to sell to users of our ATMs. On average, we sell our holdings of Bitcoin within 2 days of purchase and we had sold
our holdings of Ethereum, Litecoin and BCH holdings within 7 to 10 days of purchase. At this time, we only transact in Bitcoin at our
machines. We strive to keep holding periods short to reduce the effect of changes in crypto assets/U.S. dollar exchange rates on our
business and to maximize our working capital. We do not invest or have long term holdings of Bitcoin, Ethereum, Litecoin or BCH.
We charge a fee per crypto asset available through
our Athena Bitcoin ATM, equal to the prevailing price at U.S.- based exchanges plus a markup that typically ranges between 13% and
26%. The prices shown to customers on our Bitcoin ATM are inclusive of this price spread and are calculated by multiplying the prevailing
price level of crypto asset by one plus the markup. The markup varies by location. It is determined by a proprietary method that
is maintained as a trade secret. Our revenues associated with our ATM transactions are recognized at the time when the crypto asset is
delivered to the customer’s wallet.
The average
markup by crypto asset for each period are shown below:
Crypto Asset |
For the Nine Months Ended
September 30, 2023 |
For the Twelve Months Ended
December 31, 2022 |
For the Twelve Months Ended
December 31, 2021 |
Bitcoin
|
26% |
14% |
15% |
Ethereum
|
22% |
13% |
15% |
Litecoin
|
21% |
14% |
15% |
Bitcoin
Cash |
22% |
14% |
15% |
Total
(Average) |
23% |
14% |
15% |
Athena
Plus
We generate revenue by selling crypto assets
directly to institutional traders, individuals and organizations. These transactions are typically done through the phone for
amounts that exceed $10,000 USD. The Company utilizes crypto assets on hand and additional purchases, if necessary, to provide the crypto
assets for the transaction. We charge a fee per crypto asset available, equal to the prevailing price at U.S.- based exchanges plus a
markup.
White-label Service
The Company began working with the government
of El Salvador in June 2021 to support the implementation of its Bitcoin Law. The Bitcoin Law gave Bitcoin the status of legal tender
within the country of El Salvador after September 7, 2021. To assist the government of El Salvador with adoption of Bitcoin as legal
tender, the Company provided the white-label service as well as certain ancillary services to Chivo, a private company incorporated under
the laws of the Republic of El Salvador, which is politically controlled by the Government of El Salvador (discussed in next section).
This white-label service is comprised of installing
and operating a fixed number of ATMs to Chivo. Our services provide Company owned ATMs to Chivo, which we operate on their behalf. Our
responsibilities operating the ATMs include ensuring that the ATM have sufficient cash, performing repairs and maintenance, loading and
unloading cash, setting up the network connections, and software upgrades, as necessary. We charge a separate fixed fee for installation
of the ATM and a separate monthly fixed fee to operate the machine. Company does not sell crypto assets to the users of the machine,
as the crypto assets are the property of the government of El Salvador. The Company since the initial installation of the agreed upon
ATMs only provides on-going support services for these ATMs. The Company has not installed any new ATMs since 2021.
Ancillary
The Company engages in ancillary services
to customers as part of its mission to bring the new digital financial system to the world. This includes the sale of point-of-sale terminals
(“POS Terminals”) and developing crypto ecosystems. In 2021, the Company agreed to develop and support the Chivo Ecosystem
for the El Salvadoran government. The Chivo Ecosystem acts as the interface to El Salvador’s Bitcoin Digital Wallet and Website
for El Salvador and its users. The Company’s contract to develop the Chivo Ecosystem ended December 31, 2021. The Company continued
to provide support services to the El Salvadoran government during fiscal year 2022 to assist with the Chivo Ecosystem, as necessary.
The Company provided no services related to Chivo in 2023.
Competitive Strengths
We are focused on strategically placing our ATMs
in optimal locations that maximize both current income and future potential. Our ATMs are in urban, suburban, and rural locations. Our
site selection criteria and metrics are a closely guarded proprietary aspect of our business. In placing our ATMs, we employ a data driven
strategy based on a multitude of factors. In addition to data metrics, our placement strategy includes analysis of immediate trends,
as we are in a dynamic business where usage is widening dramatically and often in unpredicted ways. Each location is chosen to complement
the rest of the fleet and offer customers of diverse backgrounds access to convenient crypto assets transactions.
We are constantly improving our operational efficiency.
Our ATMs serve as remote tellers that connect individuals to our cloud-based transaction operations. We utilize proprietary systems and
methods of managing our currency transaction operations. Our founders and executives are well-versed in high-frequency trading and
were some of the first to electronically trade Bitcoin on multiple exchanges simultaneously. The objective of our purchasing algorithms
is to frequently re-balance our crypto holdings to meet the dynamic demand of our many customers while minimizing risk of crypto asset
rate fluctuations. Over-buying of Bitcoin can result in inefficiencies and exposure to fluctuations price while under-buying may temporarily
prevent us from selling Bitcoin at our ATMs. We strive to improve the efficiency of our currency transaction operations to maximize
our profits, manage risk and facilitate growth.
Our ATMs permit users to obtain Bitcoin
directly in their personal bitcoin wallet, which allows users to have full control of their crypto assets. Other payment providers often
utilize a centralized system where the users, while able to make payments in crypto for everyday expenditures, do not have control of
their crypto wallet due to not controlling the private keys to their crypto assets. This is contrary to many user’s preferences,
which is be part of a transparent de-centralized digital financial system.
Business Strategies
We seek to grow and distinguish Athena Bitcoin
services based on our method of location selection, our global expansion, operational efficiencies, and our authenticity as a crypto
industry forerunner with respect to Bitcoin ATMs.
Our strategy is to become a global financial
services company that can connect the world’s cash to the world of crypto assets, predominantly Bitcoin, and Ethereum, Litecoin,
and BCH (Athena Plus). We have spent years learning how to expand our business across borders. We have assembled the people, processes,
and technologies to enable us to continue to grow our global footprint that we believe is unmatched by our competition.
According to the US Census Bureau the median
age in the United States is 38.9 years (Vintage 2022 Population Estimates released June 22, 2023 by the U.S. Census Bureau). In Latin
America and the Caribbean it is 31 years (database.earth) and Africa has a median age of only 18.8 years (Statista, April 28, 2023)
As the youth digital generation accumulate their
wealth, they are far more likely to embrace crypto assets than the predecessor generations. According to the joint Finra-CFA Institute
report dated May 2023, 55 percent of US-based Gen Z investors currently invest in crypto, which is significantly higher than prior
generations.
Bitcoin is poised to quickly become a part of
the lives of a huge percentage of the developing world’s population. This “global south” offers a large green field
expansion opportunity for us because it combines high usage of physical currency with low median age and reduced access to quality banking
and the legacy global financial system.
On June 8, 2021, El Salvador became the first
country to officially adopt the cryptocurrency as legal tender when its congress passed the Bitcoin Law proposed by President Nayib Bukele.
On September 7, 2021, the Bitcoin Law was implemented and Bitcoin became legal tender in El Salvador, alongside the U.S. dollar, the
country’s other official currency. Under the new law, Salvadorans can pay taxes in Bitcoin and businesses are obliged to accept
Bitcoin as payment for goods and services, in addition to the U.S. dollar. Given that more than 70% of the adult population of El Salvador
does not have access to the traditional banking system, the government of El Salvador believes that Bitcoin will greatly help the unbanked
get access to electronic payments.
See table below for our ATM breakdown by country,
as of September 30, 2023.
Country |
Number of Athena Bitcoin ATMs
(as of September 30, 2023) |
Type
of Fiat Currency |
Total |
Two-Way |
United
States |
1,378 |
27 |
U.S.
Dollar |
El
Salvador |
14 |
14 |
U.S.
Dollar |
Argentina |
12 |
12 |
Argentine
peso |
Colombia |
17 |
17 |
Colombian
peso |
Mexico |
1 |
1 |
Mexican
peso |
TOTAL |
1,422 |
71 |
|
The
Company began working with the government of El Salvador in late June 2021 to support the implementation of its Bitcoin Law by installing
and operating ATMs on behalf of the El Salvador government. In the third quarter of 2022, the Company completed contract negotiations
with Chivo, Sociedad Anónima de Capital Variable, a wholly owned private company of the Government of El Salvador (“CHIVO”
). These ATMs are located in El Salvador and in their consulates and other locations in the United States. In the U.S. the Company
operates a total of 249 ATMS for Chivo and 1,378 Athena Bitcoin
branded machines as of September 30, 2023.
The Company developed the Chivo Ecosystem &
Chivo Website, which acts as El Salvador’s Bitcoin ecosystem (i.e., bitcoin digital wallet and platform). The development of the
Chivo Ecosystem & Website was completed in 2021.
The Company is actively working to expand its
geographic presence throughout the world, in particular in Latin America, by expanding our global Bitcoin ATMs and discussing with potential
partners the service offerings that we are able to provide as the world continues to adopt the new digital financial system. By increasing
our geographic service area, including our expansion of operations in El Salvador, we aim to make Athena into a global financial services
company that can connect the world’s cash to the world of crypto assets.
Going Concern
Our auditor expressed substantial doubt about
our ability to continue as a going concern in its audit report dated December 31, 2022. As discussed in Note 1 to our Consolidated Financial
Statements, the Company has an accumulated deficit of $11,576,000 as of December 31, 2022. These conditions and events create an uncertainty
about the ability of the Company to continue as a going concern for the next twelve months. The Company has not been able to generate
sufficient cash from operating activities to fund its ongoing operations and current liabilities. There is no guarantee that the Company
will be able to generate enough revenue and/or raise capital to support its operations. The financial statements do not include any adjustments
that might be necessary should the Company be unable to continue as a going concern. The ultimate impact of these matters to the Company
and its consolidated financial condition is presently unknown. See also “Risk Factors” on page 15.
Risk Factors Associated with Our Business
Investing in our shares of common stock involves
significant risks. You should carefully consider the risks described in “Risk Factors” before deciding
to invest in our shares. If we are unable to successfully address these risks and challenges, our business, financial condition, results
of operations, or prospects could be materially adversely affected. In any of such cases, the trading price of our common stock would
likely decline, and you may lose all or part of your investment. Below is a summary of some of the risks we face.
|
· |
Our shares are subject to liquidity risks. |
|
|
|
|
· |
A majority of our net revenue is derived from transactions in Bitcoin. If demand for crypto assets
declines, our business, operating results, and financial condition could be adversely affected. |
|
|
|
|
· |
The future development and growth of crypto is subject to a variety of factors that are difficult
to predict and evaluate. If crypto does not grow as we expect, our business, operating results, and financial condition could be
adversely affected. |
|
|
|
|
· |
Cyberattacks and security breaches of our platform, or those impacting our customers or third parties,
could adversely impact our brand and reputation and our business, operating results, and financial condition. |
|
|
|
|
· |
We operate in a highly competitive industry and we
complete against unregulated companies and companies with greater financial and other resources and our business, operating results
and financial condition may be adversely affected if we are unable to respond to our competitors effectively |
|
|
|
|
· |
We are subject to an extensive and highly-evolving regulatory landscape and any adverse changes to,
or our failure to comply with, any laws and regulations could adversely affect our brand, reputation, business, operating results,
and financial condition. |
|
|
|
|
· |
As we continue to expand and localize our international activities, our obligations to comply with
the laws, rules, regulations, and policies of a variety of jurisdictions will increase and we may be subject to investigations and
enforcement actions by regulators and governmental authorities. |
|
|
|
|
· |
We currently rely on third-party service providers and exchanges for certain aspects of our
operations, and any interruptions in services provided by these third parties may impair our ability to support our customers. |
|
|
|
|
· |
Loss of a critical banking relationship could adversely impact our business, operating results, and
financial condition. |
|
|
|
|
· |
Any significant disruption in our products and services, in our information technology systems, or
in any of the blockchain networks we support, could result in a loss of customers or funds and adversely impact our brand and reputation
and business, operating results, and financial condition. |
|
|
|
|
· |
The loss or destruction of private keys required to access any crypto assets held for our business
transactions with our customers may be irreversible. If we are unable to access our private keys or if we experience a hack or other
data loss relating to our ability to access any crypto assets, it could cause adversely impact our business operations, operating
results, regulatory scrutiny, reputational harm, and other losses. |
|
|
|
|
· |
None of our stockholders are party to any contractual lock-up agreement or other contractual restrictions
on transfer. Following the registration of our shares, the sales or distribution of substantial amounts of our common stock, or the
perception that such sales or distributions might occur, could cause the market price of our common stock to decline. |
Offering Summary
We are registering the resale of 444,583,937
shares of our common stock that include: (i) 409,933,937 shares of common stock that were issued by us to the Selling Shareholders
in the share exchange transaction or were purchased by the Selling Shareholders in private transactions, and (ii) up to 34,650,000
shares of common stock issued upon conversion of our outstanding 6% Convertible Debentures Due 2023 (the ”Convertible
Debentures”) which were issued in connection with a private placement financing in 2021.
Implications of Being an Emerging Growth Company
and Smaller Reporting Company
We are an emerging growth company, as defined
in the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”). For as long as we continue to be an emerging growth company,
we may take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not emerging
growth companies, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley
Act of 2002, or the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in this prospectus and our periodic
reports and proxy statements and exemptions from the requirements of holding nonbinding advisory votes on executive compensation and
stockholder approval of any golden parachute payments not previously approved. We could remain an emerging growth company for up to five
years after the effective date of this Registration Statement, although circumstances could cause us to lose that status earlier, including
if the market value of our common stock held by non-affiliates exceeds $700 million as of any December 31 before that time or if we have
total annual gross revenue of $1.07 billion or more during any fiscal year before that time, in which cases we would no longer be an
emerging growth company as of the following December 31 or, if we issue more than $1.07 billion in non-convertible debt during any three-year
period before that time, we would cease to be an emerging growth company immediately. Even after we no longer qualify as an emerging
growth company, we may still qualify as a “smaller reporting company” which would allow us to take advantage of many of the
same exemptions from disclosure requirements, including reduced disclosure obligations regarding executive compensation in our periodic
reports and proxy statements. Additionally, even if we no longer qualify as an emerging growth company, as long as we are neither a “large
accelerated filer” nor an “accelerated filer,” we would not be required to comply with the auditor attestation requirements
of Section 404 of the Sarbanes-Oxley Act. We cannot predict if investors will find our securities less attractive because we may rely
on these exemptions, which could result in a less active trading market for our securities and increased volatility in the price of our
securities.
Finally, we are a “smaller reporting company”
(and may continue to qualify as such even after we no longer qualify as an emerging growth company) and accordingly may provide less
public disclosure than larger public companies, including the inclusion of only two years of audited financial statements and only two
years of management’s discussion and analysis of financial condition and results of operations disclosure. As a result, the information
that we provide to our stockholders may be different than you might receive from other public reporting companies in which you hold equity
interests.
Summary Consolidated Financial and Other
Data
The following tables set forth a summary of our
historical consolidated financial data as of and for the periods indicated. The summary consolidated statements of operations data for
the periods ended December 31, 2022, and December 31, 2021, have been derived from our audited consolidated financial statements and
related notes thereto included elsewhere in this prospectus. The summary consolidated statements of operations data for the periods ended
September 30, 2023, and September 30, 2022, have been derived from our unaudited condensed consolidated financial statements
and related notes thereto included elsewhere in this prospectus. Our historical results are not necessarily indicative of the results
to be expected in the future. When you read this summary consolidated financial data, it is important that you read it together with
the historical consolidated financial statements and the related notes thereto included elsewhere in this prospectus, which qualify this
summary consolidated financial data in their entirety, as well as the sections of this prospectus titled “Selected Consolidated
Financial Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
The summary financial data in this section are not intended to replace our audited consolidated financial statements and the related
notes, and are qualified in their entirety by such financial statements and related notes included elsewhere in this prospectus.
(in thousands) Balance
Sheet Summary | |
September
30 2023 Unaudited | | |
December 31 2022 Audited | | |
December 31 2021 Audited | |
Current assets | |
$ | 15,226 | | |
$ | 4,505 | | |
$ | 7,948 | |
Other assets | |
| 21,557 | | |
| 9,005 | | |
| 7,053 | |
Total assets | |
$ | 36,783 | | |
$ | 13,510 | | |
$ | 15,001 | |
| |
| | | |
| | | |
| | |
Current liabilities | |
$ | 15,103 | | |
$ | 8,138 | | |
$ | 11,999 | |
Long-term liabilities | |
| 13,752 | | |
| 5,575 | | |
| 10,576 | |
Total stockholders’ equity (deficit) | |
| 7,928 | | |
| (203 | ) | |
| (7,574 | ) |
Total liabilities and stockholders’ equity (deficit) | |
$ | 36,783 | | |
$ | 13,510 | | |
$ | 15,001 | |
(in thousands) Statement
of Operations Summary | |
For the nine months ended September
30 | |
| |
2023 Unaudited | | |
2022 Unaudited | |
Revenues | |
$ | 120,210 | | |
$ | 53,750 | |
Cost of revenues | |
| 103,833 | | |
| 46,794 | |
Gross profit | |
| 16,377 | | |
| 6,956 | |
| |
| | | |
| | |
Operating expenses | |
| 4,038 | | |
| 5,819 | |
Income from operations | |
| 12,339 | | |
| 1,137 | |
| |
| | | |
| | |
| |
| | | |
| | |
Interest expense | |
| 330 | | |
| 526 | |
Fees on virtual vault services | |
| 543 | | |
| 67 | |
Other expense | |
| 134 | | |
| 178 | |
Income before taxes | |
| 11,332 | | |
| 366 | |
| |
| | | |
| | |
Income tax expense | |
| 3,141 | | |
| 1,977 | |
Net income (loss) | |
$ | 8,191 | | |
$ | (1,611 | ) |
(in thousands) Statement
of Operations Summary | |
For the twelve months ended
December 31 | |
| |
2022 Audited | | |
2021 Audited | |
Revenues | |
$ | 73,686 | | |
$ | 81,747 | |
Cost of revenues | |
| 59,643 | | |
| 76,178 | |
Gross profit | |
| 14,043 | | |
| 5,569 | |
| |
| | | |
| | |
Operating expenses | |
| 7,184 | | |
| 6,774 | |
Income (loss) from operations | |
| 6,859 | | |
| (1,205 | ) |
| |
| | | |
| | |
Fair value adjustment on crypto asset borrowing derivatives | |
| – | | |
| 515 | |
Interest expense | |
| 668 | | |
| 661 | |
Fees on borrowings | |
| 113 | | |
| 341 | |
Other expense | |
| 169 | | |
| 39 | |
Income (loss) before taxes | |
| 5,909 | | |
| (2,761 | ) |
| |
| | | |
| | |
Income tax expense | |
| 1,770 | | |
| 883 | |
Net income (loss) | |
$ | 4,139 | | |
$ | (3,644 | ) |
Key Business Metrics and Non-GAAP Financial Measure
In addition to our financial
results, we use the following business metrics to evaluate our business, measure our performance, identify trends affecting our business,
and make strategic decisions. To evaluate our operating performance, and for internal planning and forecasting purposes, we also use
EBITDA, a non-GAAP financial measure. For additional information regarding these measures, see the section titled “Selected Consolidated
Financial and Other Data—Key Business Metrics and Non-GAAP Financial Measure.”
(in thousands) | |
Nine
Months Ended
September 30 2023 Unaudited | | |
Twelve Months Ended December 31
2022 Audited | | |
Twelve Months Ended December 31
2021 Audited | |
Number of Athena bitcoin ATMs end of period | |
| 1,422 | | |
| 430 | | |
| 385 | |
Number of bitcoin ATM transactions | |
| 59,134 | | |
| 42,731 | | |
| 87,818 | |
| |
| | | |
| | | |
| | |
Net income (loss) | |
$ | 8,191 | | |
$ | 4,139 | | |
($ | 3,644 | ) |
EBITDA | |
$ | 13,761 | | |
$ | 8,349 | | |
($ | 1,177 | ) |
The Offering
Common Stock offered by Selling Shareholders |
|
444,583,937
shares of common stock which include: (i) 409,933,937 shares of common stock that were issued by us to the Selling Shareholders in
the share exchange transaction or were purchased by the Selling Shareholders in private transactions, and (ii) up to 34,650,000
shares of common stock issued upon conversion of our outstanding 6% Convertible Debentures Due 2023 (the “Convertible
Debentures”) which were issued in connection with a private placement financing in 2021. We are registering the resale of the
shares of common stock underlying the principal amount of the Convertible Debentures, as required by the Securities Purchase Agreement
that we entered into with the Selling Shareholders as of June 22, 2021, which provided said Selling Shareholders with certain registration
rights with respect to the common stock issuable upon conversion of the principal amount of the Convertible Debentures (the “Purchase
Agreement”). |
|
|
|
Common Stock outstanding before the offering |
|
4,094,459,545 shares of common stock |
|
|
|
Exchange Symbol |
|
ABIT |
|
|
|
CUSIP |
|
046839106 |
|
|
|
Terms of the Offering |
|
Until our shares are quoted on the over-the-counter bulletin board
("OTCBB"), or the OTCQX, or the OTCQB or listed on any national securities exchange or automated interdealer quotation
system, the prices at which the selling shareholders may sell their shares is $[●], which was determined by the average of
the high and low prices as reported on the OTC Pink Tier of the OTC Markets on [●], 2024. The Selling Shareholders have
not engaged any underwriter regarding the sale of their shares of common stock. If our common stock becomes quoted on the over-the-counter
bulletin board ("OTCBB"), or the OTCQX, or the OTCQB or listed on any national securities exchange or automated interdealer
quotation system, then the sale price to the public will vary according to prevailing market prices or privately negotiated prices
by the Selling Shareholders. |
|
|
|
Termination of the Offering |
|
The offering will conclude upon the earliest of (i) such time as all
the common stock has been sold pursuant to the registration statement or (ii) such time as all the common stock becomes eligible
for resale without volume limitations pursuant to Rule 144 under the Securities Act (iii) or we decide at any time to terminate the
registration of the shares at our sole discretion. |
|
|
|
Trading Market |
|
Our common stock is currently quoted on the OTC Pink Market operated
by OTC Markets Group, Inc. There is an uneven and limited trading market for our securities. We intend to apply for quotation on
the OTCQB once we become a fully reporting company with the SEC. |
|
|
|
Use of proceeds |
|
We are not selling any shares of the common stock covered by this prospectus.
As such, we will not receive any of the offering proceeds from the registration of the shares of common stock covered by this prospectus. |
|
|
|
Expenses |
|
We will pay all expenses associated with this registration statement. |
|
|
|
Risk Factors |
|
The shares offered hereby involve a high degree of risk
and should not be purchased by investors who cannot afford the loss of their entire investment. See “Risk
Factors” beginning on page 15. |
The number of shares of common stock to be
outstanding immediately after this offering is based on 4,094,459,545 shares of common stock outstanding as of September 30,
2023, and excludes 250,000,000 shares of common stock issuable upon conversion of 8% Convertible
Debenture Due 2025 issued to KGPLA Holdings, LLC.
Risk Factors
Investing in the Shares involves a high degree
of risk. You should carefully consider the risks and uncertainties described below, together with all of the other information in this
prospectus, before deciding to invest in the Shares. If any of the risks occur, our business, results of operations, financial condition,
and prospects could be harmed. In that event, the trading price of the Shares could decline, and you could lose part or all your investment.
Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations.
The Most Material Risks Related to Our Business
and Financial Position
Our total revenue is substantially dependent
on the volume of transactions conducted by our customers. If such volume declines, our business, operating results, and financial position
would be adversely affected.
We generate substantially all our revenue from
the sale of crypto assets to our customers, either using our Bitcoin ATMs or over the phone. Revenue is based on the prices that we charge
our customers based on prevailing market prices. This revenue may fluctuate based on the price of crypto assets. As such, any declines
in the volume of transactions, the price of crypto assets, or market liquidity for crypto assets generally may result in lower total
revenue to us.
The price of crypto assets and associated demand
for buying, selling, and trading crypto assets have historically been subject to significant volatility. The price and trading volume
of any crypto asset is subject to significant uncertainty and volatility, depending on several factors, including:
| · | market
conditions across all elements of the crypto-economy; |
| | |
| · | Our
business is in a relatively new consumer product segment, which is difficult to forecast.
|
| | |
| · | Our operating
results may fluctuate due to the highly volatile nature of crypto. |
| | |
| · | changes
in liquidity, market-making volume, and trading activities; |
| | |
| · | trading
activities on other crypto platforms worldwide, many of which may be unregulated, and may
include manipulative activities; |
| | |
| · | investment
and trading activities of highly active retail and institutional users, speculators, miners,
and investors; |
| | |
| · | the
speed and rate at which crypto assets and specifically Bitcoin can gain adoption as a medium
of exchange, utility, store of value, consumptive asset, security instrument, or other financial
assets worldwide, if at all; |
| | |
| · | decreased
user and investor confidence in crypto assets and associated exchanges and service providers; |
| | |
| · | negative
publicity and events relating to Bitcoin, blockchain technology, or the digital currency
economy as a whole; |
| | |
| · | unpredictable
social media coverage or “trending” of Bitcoin or other crypto assets; |
| | |
| · | the
ability for crypto assets to meet user and investor demands; |
| | |
| · | consumer
preferences and perceived utility and value of crypto assets and associated markets; |
| | |
| · | increased
competition from other payment services or other crypto assets that exhibit better speed,
security, scalability, or other characteristics; |
| | |
| · | regulatory
or legislative changes and updates affecting the use, storage, ownership, exchange, or any
other aspect of the crypto-economy; |
| | |
| · | the
characterization of crypto assets under the laws of various jurisdictions around the world; |
| · | the
maintenance, troubleshooting, and development of the blockchain networks underlying crypto
assets, including by miners, validators, and developers worldwide; |
| | |
| · | the
ability for protocol networks to attract and retain miners or validators to secure and confirm
transactions accurately and efficiently; |
| | |
| · | ongoing
technological viability and security of protocols and their associated crypto assets, smart
contracts, applications, and networks, including vulnerabilities against hacks and scalability; |
| | |
| · | fees
and speed associated with processing blockchain transactions, including on the underlying
protocol networks and on exchanges and other platforms for trading; |
| | |
| · | financial
strength of wholesale market participants; |
| | |
| · | the
availability and cost of funding and capital; |
| | |
| · | the
liquidity of over-the-counter trading desks, market-makers, exchanges, and other wholesale
dealers of crypto assets; |
| | |
| · | interruptions
in service from or failures of major crypto asset exchanges and platforms; |
| | |
| · | availability
of banking and payment services to support crypto-related projects; |
| | |
| · | level
of interest rates and inflation in both G-10 economies and emerging markets; |
| | |
| · | monetary
policies of governments, trade restrictions, and fiat currency valuation changes; and |
| | |
| · | national
and international economic and political conditions. |
There is no assurance that any supported crypto
asset will maintain its value or that there will be meaningful levels of interest from customers. If the demand for purchasing or selling
crypto assets declines, our business, operating results, and financial condition would be adversely affected.
The prices of Bitcoin and other crypto assets
are volatile.
We generate substantially all our revenue from
the sale of crypto assets to our customers, either using our Bitcoin ATMs or over the phone. Revenue is based on the prices that we charge
our customers based on prevailing market prices. The price at which we are able to purchase crypto assets prior to selling those same
crypto assets may not be lower than the sale price if the market conditions change between those two points in time. Purchasing Bitcoin
or other crypto assets for prices higher than they can be later sold could result in an impairment of the asset value and our operating
results could be adversely affected. The value of the entirety of our crypto assets held could be lost if the prices of those crypto
assets were to significantly decrease, which would adversely affect our operating results. There are no assurances that the crypto assets
we hold will have value from one day to the next and we could suffer a loss if any of the prices of those crypto assets declines or is
permanently depressed.
As discussed in our financial statements included
in this prospectus, we account for our crypto assets as indefinite-lived intangible assets, which are subject to impairment losses if
the fair value of our crypto assets decreased below their carrying value. As of December 31, 2022, management’s estimate of the
effect on fair values due to a +/- 20% uniform change in the market prices of all crypto assets, with all other variables held constant,
was +/- $73.0 thousand (December 31, 2021: +/- 168.4 thousand). As of September 30, 2023, management’s estimate of the effect
on fair values due to a +/- 20% uniform change in the market prices of all crypto assets, with all other variables held constant was
+/- $60.6 thousand.
Our transaction volume may be partially
dependent on the prices of Bitcoin we sell, which can be volatile. If such prices decline, the volume of user transactions could decrease
and our business, operating results, and financial condition would be adversely affected.
We generate substantially all of our revenue
from the cash paid by customers to purchase Bitcoin from our ATMs. The number of user transactions and our transaction volumes may be
partially dependent on the prices of Bitcoin, as well as the associated demand for buying, selling and trading Bitcoin, which can be
and historically have been volatile. If such prices decline, the number of user transactions or our transaction volumes could decrease.
As such, any such declines, or any declines in the price of Bitcoin or market liquidity for cryptocurrency generally, may result in lower
total revenue to us. The price and trading volume of any cryptocurrency, including Bitcoin, is subject to significant uncertainty and
volatility, depending on a number of factors, including:
|
· |
market conditions of, and overall sentiment towards, cryptocurrency;
|
|
· |
changes in liquidity, market-making volume, and trading activities;
|
|
· |
trading activities in cryptocurrency, including on other cryptocurrency
platforms worldwide, many of which may be unregulated, and may include manipulative activities; |
|
· |
investment and trading activities of highly active retail and institutional
users, speculators, miners, and investors; |
|
· |
the speed and rate at which cryptocurrency is able to gain adoption
as a medium of exchange, utility, store of value, consumptive asset, security instrument, or other financial assets worldwide, if
at all; |
|
· |
changes in user and investor confidence in cryptocurrency and cryptocurrency
platforms; |
|
· |
negative publicity and events relating to the digital financial
system; |
|
· |
unpredictable social media coverage or “trending” of,
or other rumors and market speculation regarding cryptocurrency; |
|
· |
the ability for cryptocurrency to meet user and investor demands;
|
|
· |
the functionality and utility of cryptocurrency and its associated
ecosystems and networks, including cryptocurrency designed for use in various applications; |
|
· |
retail user preferences and perceived value of cryptocurrency and
cryptocurrency markets; |
|
· |
increased competition from other payment services or cryptocurrency
for which we do not sell that exhibit better speed, security, scalability, or other characteristics; |
|
· |
regulatory or legislative changes and updates affecting the digital
financial system; |
|
· |
the characterization of cryptocurrency under the laws of various
jurisdictions around the world; |
|
· |
the adoption of unfavorable taxation policies on cryptocurrency
investments by governmental entities; |
|
· |
the maintenance, troubleshooting, and development of the blockchain
networks underlying cryptocurrency, including by miners, validators, and the development community; |
|
· |
the ability for cryptocurrency networks to attract and retain miners
or validators to secure and confirm transactions accurately and efficiently; |
|
· |
legal and regulatory changes affecting the operations of miners
and validators of blockchain networks, including limitations and prohibitions on mining activities, or new legislative or regulatory
requirements as a result of growing environmental concerns around the use of energy in mining cryptocurrency, including Bitcoin,
and other proof-of-work mining activities; |
|
· |
ongoing technological viability and security of cryptocurrency and
its associated smart contracts, applications and networks, including vulnerabilities against hacks and scalability; |
|
· |
fees and speed associated with processing cryptocurrency transactions,
including on the underlying blockchain networks and on cryptocurrency platforms; |
|
· |
financial strength of market participants; |
|
· |
the availability and cost of funding and capital; |
|
· |
interruptions in service from or failures of major cryptocurrency
platforms; |
|
· |
availability of an active derivatives market for various cryptocurrencies;
|
|
· |
availability of banking and payment services to support cryptocurrency-related
projects; |
|
· |
level of interest rates and inflation; |
|
· |
monetary policies of governments, trade restrictions, and fiat currency
devaluations; and |
|
· |
national, North American and international economic and political
conditions. |
There is no assurance that any given cryptocurrency
will maintain or increase in value or that there will be meaningful transaction volumes from our users. In the event that the price or
trading of, or demand for, cryptocurrency declines, our business, operating results, and financial condition would be adversely affected.
Bankruptcies of major crypto asset market
participants have impacted the broader crypto economy
The failure of several prominent crypto trading
venues and lending platforms, such as FTX, Celsius Networks and Voyager has impacted and may continue to impact the broader cryptoeconomy.
The full extent of these impacts may not yet be known. Impacts include, but are not limited to, the consequent and ongoing financial
distress and bankruptcy of certain crypto market participants, loss of confidence in the broader cryptoeconomy, reputational harm to
crypto asset platforms generally, increased negative publicity of the broader cryptoeconomy, heightened scrutiny by regulators and lawmakers
and calls for increased regulation of crypto assets and crypto asset platforms. We have had no material direct impact to our business,
financial condition, customers or counterparties from these bankruptcies; however, these bankruptcies did cause a change to crypto market
prices, crypto market volatility and customer sentiment, and each of these drivers do indirectly impact our business and our revenue
potential. We do not have any known material financial exposure to other cryptoeconomy participants that faced insolvency and liquidity
issues, experienced excessive redemptions or suspended redemptions or withdrawals of crypto assets, allegedly mishandled customer funds,
or experienced significant corporate compliance failures in connection with these bankruptcies.
Our business is in a new consumer product
segment, which is difficult to forecast.
Our industry segment is new and is constantly
evolving. As a result, there is a lack of available information with which to forecast industry trends or patterns. There is no assurance
that sustainable industry trends or preferences will develop that will lead to predictable growth or earnings forecasts for individual
companies or the industry segment. We are also unable to determine what impact future governmental regulation may have on trends and
preferences or patterns within our industry segment. See “Risk Factors Related to Current and
Future Regulations and other Law Enforcement Actions” for a discussion of the risks associated with governmental regulation.
The Company's auditors have issued a going
concern opinion that the Company may not be able to continue without generating sufficient cash to fund its operations.
Our auditors and management have concluded that
there is substantial doubt about our ability to continue as a going concern. The accompanying audited consolidated financial statements
do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be
necessary should the Company be unable to continue as a going concern. Although the Company had generated net income of $4,139,000 for
the year ended December 31, 2022, the Company has an accumulated deficit of $11,576,000 and negative working capital of $3,633,000 as
of December 31, 2022. The Company needs to generate sufficient cash from operating activities to fund its ongoing operations and current
liabilities. There can be no assurances that we will be able to continue a level of revenues adequate to generate sufficient cash flow
from operations or obtain additional financing through private placements, public offerings and/or bank financing necessary to support
our working capital requirements. Additional equity financing is anticipated to take the form of one or more private placements to accredited
investors under exemptions from the registration requirements of the Securities Act of 1933 or a subsequent public offering. However,
there are no current agreements or understandings with regard to the form, time or amount of such financing and there is no assurance
that any of this financing can be obtained or that the Company can continue as a going concern. To the extent that funds generated from
any private placements, public offerings and/or bank financing are insufficient, we will have to raise additional working capital and
no assurance can be given that additional financing will be available, or if available, will be on acceptable terms. These conditions
raise substantial doubt about our ability to continue as a going concern. If adequate working capital is not available, we may be forced
to discontinue operations, which would cause investors to lose their entire investment.
We have a substantial level of indebtedness
that may have an adverse impact on us.
As
of September 30, 2023, our total indebtedness, excluding lease liabilities, was $8,020,000 including $4,000,000 senior secured revolving
credit note, $3,000,000 secured convertible debenture, $666,000 bank loan and $353,000 in outstanding 6% convertible debentures.
Our substantial level of indebtedness could have important consequences for us, including the following:
| · | requiring a substantial
portion of cash flow from operations to be dedicated to the payment of principal and interest
on our indebtedness, therefore reducing our ability to use our cash flow to fund our operations
and future business opportunities; |
| · | restricting us from
making strategic acquisitions or causing us to make non-strategic divestitures; |
| · | limiting our ability
to obtain additional equity or debt financing for general corporate purposes, acquisitions,
investments, capital expenditures or other strategic purposes; |
| · | limiting our ability
to adjust to changing business conditions and placing us at a competitive disadvantage to
our less highly leveraged competitors; and |
| · | making us more vulnerable
to general economic downturns and adverse developments in our business. |
The above factors could limit
our financial and operational flexibility and, as a result, could have a material adverse effect on our business, financial condition
and results of operations. Furthermore, if our debt obligations are not repaid or converted into equity (with respect to convertible
debentures) prior to their respective maturity dates, they will go into default which could cause you to lose a portion or all of your
investment.
Our senior secured revolving credit note and
senior secured loan agreement with our senior secured lender contain restrictions that may limit our flexibility in operating our business.
Our debt
obligations which include $4,000,000 senior secured credit note and $3,000,000 amended and restated secured convertible debenture are
secured by substantially all assets of the Company and contain various covenants that limit our ability to engage in specified types
of transactions. These covenants may limit our ability to, among other things:
| · | incur additional indebtedness; |
| · | pay dividends on,
repurchase or make distributions in respect of equity interests or make other restricted
payments; |
| · | make certain investments; |
| · | sell certain assets; |
| · | create liens on certain
assets to secure debt; |
| · | consolidate, merge,
sell or otherwise dispose of all or substantially all of our assets; |
| · | designate our subsidiaries
as unrestricted subsidiaries. |
The future development and growth of crypto
assets and protocols is subject to a variety of factors that are difficult to predict and evaluate. If the future does not develop and
grow as we expect, our business, operating results, and financial condition could be adversely affected.
Blockchain technology was only introduced in
2008 and remains in the early stages of development. In addition, different protocols are designed for different purposes. Bitcoin, for
instance, was designed to serve as a peer-to-peer electronic cash system, while Ethereum was designed to be a smart contract and decentralized
application platform. Many other protocol networks—ranging from cloud computing to tokenized securities networks—have only
recently been established. The further growth and development of any crypto assets and their underlying networks and other cryptographic
and algorithmic protocols governing the creation, transfer, and usage of crypto assets represent a new and evolving paradigm that is
subject to a variety of factors that are difficult to evaluate, including:
| · | Many
protocol networks have limited operating histories, have not been validated in production,
and are still in the process of developing and making significant decisions that will affect
the design, supply, issuance, functionality, and governance of their respective tokens and
underlying blockchain networks, any of which could adversely affect their respective usefulness. |
| | |
| · | Many
networks are in the process of implementing software upgrades and other changes to their
protocols, which could introduce bugs, security risks, or adversely affect the respective
crypto networks. |
| | |
| · | Several
large networks, including Bitcoin and Ethereum, are developing new features to address fundamental
speed, scalability, and energy usage issues. If these issues are not successfully addressed,
or are unable to receive widespread adoption, it could adversely affect the underlying crypto
asset. |
| | |
| · | Security
issues, bugs, and software errors have been identified with many protocols and their underlying
blockchain networks, some of which have been exploited by malicious actors. There are also
inherent security weaknesses in some crypto assets and their networks and protocols, such
as when creators of certain crypto networks use procedures that could allow hackers to counterfeit
tokens. Any weaknesses identified with a protocol, token or blockchain could adversely affect
its price, security, liquidity, and adoption. If a malicious actor or botnet (a volunteer
or hacked collection of computers controlled by networked software coordinating the actions
of the computers) obtains a majority of the compute or staking power on a crypto network,
as has happened in the past, it may be able to manipulate transactions, which could cause
financial losses to holders, damage the network’s reputation and security, and adversely
affect its value. |
| · | The
development of new technology for mining, such as improved application-specific integrated
circuits (commonly referred to as ASICs), or changes in industry patterns, such as the consolidation
of mining power in a small number of large mining farms, could reduce the security of blockchain
networks, lead to increased liquid supply of the crypto asset token, and reduce its price
and attractiveness. |
| | |
| · | If
rewards and transaction fees for miners or validators on any protocol network are not sufficiently
high to attract and retain miners, a network’s security and speed may be adversely
affected, increasing the likelihood of a malicious attack. |
| | |
| · | The
governance of many decentralized blockchain networks is by voluntary consensus and open competition,
and many developers are not directly compensated for their contributions. As a result, there
may be a lack of consensus or clarity on the governance of any crypto network, a lack of
incentives for developers to maintain or develop the network, and other unforeseen issues,
any of which could result in unexpected or undesirable errors, bugs, or changes, or stymie
such network’s utility and ability to respond to challenges and grow. |
| | |
| · | Many
crypto networks are in the early stages of developing partnerships and collaborations, all
of which may not succeed and adversely affect the usability and adoption of the respective
crypto asset token. |
| | |
| · | Various
other technical issues have also been uncovered from time to time that resulted in disabled
functionalities, exposure of certain users’ personal information, theft of users’
assets, and other negative consequences, and which required resolution with the attention
and efforts of their global miner, user, and development communities. If any such risks or
other risks materialize, and if they are not resolved, the development and growth of crypto
assets, blockchain technology, or Bitcoin may be significantly affected and, as a result,
our business, operating results, and financial condition could be adversely affected. |
Loss of a banking relationship could adversely
impact our business, operating results, and financial condition.
Athena depends on having regular and normalized
access to a bank checking account for normal business purposes and also for taking deposits of the cash received from the ATM fleet.
As a money services business registered with the Financial Crimes Enforcement Network (“FinCEN”) under the Bank Secrecy Act,
as amended by the USA PATRIOT Act of 2001, and its implementing regulations enforced by FinCEN, our banking partners view us as a higher
risk customer for purposes of their anti-money laundering programs. We may face difficulty establishing or maintaining banking relationships
due to our banking partners’ policies and some prior bank partners have terminated their relationship with Athena. The loss of
these banking partners or the imposition of operational restrictions by these banking partners and the inability for us to utilize other
redundant financial institutions may result in a disruption of business activity as well as regulatory risks. In addition, financial
institutions in the United States and globally may, because of the myriad of regulations or the perceived risks of crypto assets, decide
to not provide accounts, payments other financial services to us. Such events could negatively affect an investment in the Shares.
We may be unable to generate sufficient
cash to service all of our indebtedness and financial commitments.
Our ability to make scheduled payments on
or to refinance our indebtedness and financial commitments depends on our financial condition and operating performance, which are subject
to prevailing economic and competitive conditions including financial, business and other factors beyond our control. We may be unable
to generate sufficient cash flow to permit us to pay the principal, premium, if any, and interest on our indebtedness.
If our cash flows and capital resources are
insufficient to fund debt and other obligations, we may be forced to reduce or delay capital expenditures, sell assets, seek additional
capital or restructure our indebtedness. Our ability to restructure or refinance indebtedness will depend on the condition of the capital
markets and our financial condition at such time. Any refinancing of indebtedness could be at higher interest rates and may require us
to comply with more onerous covenants, which could further restrict our operations. The terms of existing or future debt instruments
may restrict us from adopting some of these alternatives. In addition, any failure to service our debt would likely result in a reduction
of our credit rating, which could harm our ability to incur additional indebtedness. If we face substantial liquidity problems, we might
be required to sell assets to meet debt and other obligations. Our debt restricts our ability to dispose of assets and dictates our use
of the proceeds from such disposition.
We may not be able to consummate dispositions,
and the proceeds of any such disposition may be inadequate to meet obligations. We may be unable to access adequate funding as a result
of a decrease in lender commitments due to an unwillingness or inability on the part of lending counterparties to meet their funding
obligations and the inability of other lenders to provide additional funding to cover a defaulting lender’s portion. As a result,
we may be unable to execute our plan of operations, make acquisitions or otherwise conduct operations, which would have a material adverse
effect on our financial condition and results of operations.
We might require additional capital to support business growth,
and this capital might not be available.
We have funded our operations since inception
primarily through debt and revenue generated by our operations. While we believe that our existing cash and cash equivalents and availability
under our debt financing agreements are sufficient to meet our working capital needs and planned capital expenditures, and to service
our debt, there is no guarantee that this will continue to be true in the future. We cannot be certain when or if our operations will
generate sufficient cash to fully fund our ongoing operations or the growth of our business. We intend to continue to make investments
in our business to respond to business opportunities and challenges, including developing new products and services, enhancing our operating
infrastructure, expanding our non-U.S. operations, and acquiring complementary businesses and technologies, all of which may require
us to secure additional funds. In the future, we may also require additional capital due to refinancing needs, regulatory surety bond
requirements, or unforeseen circumstances and may decide to engage in equity, equity-linked or debt financings, or enter into additional
debt financing agreements for any of the foregoing reasons. We may not be able to secure any such additional financing on terms favorable
to us, in a timely manner or at all.
The trading prices for our common stock may
be highly volatile, which may reduce our ability to access capital on favorable terms or at all. In addition, a slowdown or other sustained
adverse downturn in the general economic or digital asset markets could adversely affect our business and the value of our common stock.
Because our decision to raise capital in the future will depend on numerous considerations, including factors beyond our control, we
cannot predict or estimate the amount, timing, or nature of any future issuances of securities. As a result, our stockholders bear the
risk of future issuances of debt or equity securities reducing the value of the common stock and diluting their interests. Our inability
to obtain adequate financing or financing on terms satisfactory to us, when we require it, could significantly limit our ability to continue
supporting our business growth and responding to business challenges.
The Company may be forced to cease operations.
It is possible that, due to any number of reasons,
including, but not limited to, an unfavorable fluctuation in the value of cryptographic and fiat currencies, the inability by the Company,
whether in the United States or globally, to obtain clients, the failure of commercial relationships, the failure of development of the
necessary technical environment, the failure of government actors to provide needed regulatory clarity, the failure of technology development
by third parties, or intellectual property ownership challenges, the Company may no longer be viable to operate and the Company may dissolve,
either in whole or part, or take actions that result in a dissolution event. During the past six years there have been several rumors
that regulation specifically aimed at terminating the practice of selling crypto assets via kiosks, such as the Company’s fleet
of Bitcoin ATMs, would be forthcoming. While the regulations hypothesized by these rumors have never been enacted, it remains a risk
to the Company’s principal operations and could be detrimental to an investment in the Shares.
Other Risk Factors Related to Our Business
Operations and Financial Position
Currently, there is a small use of Bitcoin
in the retail and commercial marketplace in comparison to relatively large use by speculators, thus contributing to price volatility
that could adversely affect an investment in the Shares.
Bitcoin and the Bitcoin Network have only recently
become accepted as a means of payment for goods and services by certain major retail and commercial outlets, and the use of Bitcoin by
consumers to pay such retail and commercial outlets remains limited. Conversely, a significant portion of Bitcoin demand is generated
by speculators and investors seeking to profit from the short- or long-term holding of Bitcoin. A lack of expansion by Bitcoin or other
crypto assets into retail and commercial markets, or a contraction of such use, may result in decreased demand for the Company’s
services or increased demand for services the Company is not able to provide, either of which could adversely affect an investment in
the Shares.
The Company’s assets could be stolen
and would be difficult to recover due to the nature of cash and crypto assets.
It is possible that, due to any number of reasons,
including, but not limited to, a robbery by either a malicious external actor or an employee of the Company could adversely affect the
Company’s operations and assets. From time to time, the Company has been the victim of vandalism and targeted attacks on our ATMs,
which have resulted in loss of cash and equipment. The Company has also been the target of cyberattacks and has suffered security breaches
of its websites, email, cellphones, and other systems related to the operations of the business. On March 31, 2021, we suffered a security
breach which resulted in a loss of 29 bitcoin (approximately $1.7 million of market value as of March 31, 2021). We have initiated two
independent investigations of the attack with the assistance of law enforcement and outside counsel. See also Management
Discussion and Analysis of Financial Condition and Results of Operations on page 40. Historically, stolen Bitcoin, crypto
assets of multiple types, and cash have been difficult to recover by law enforcement or other means due to their fundamental nature as
fungible instruments of value. At this time, we have no information if the stolen crypto assets can be recovered. The Company’s
losses may negatively affect an investment in the Company’s shares. The Company has not experienced a security breach since March
31, 2021.
Crypto assets and funds that the Company holds
on Bitcoin exchanges could be lost, stolen, or otherwise impaired.
From time to time and for customary reasons of
procuring crypto assets, the Company holds assets including dollar deposits, Bitcoin, Ethereum, Tether, Litecoin, and BCH on crypto asset
exchanges. The Company carefully selects the platforms that it chooses to do business with, however this may not be sufficient to avoid
losses if those exchanges suffer losses or other impairments. In 2018, Quadriga filed for bankruptcy protection following the death of
its Chief Executive Officer and subsequent discovery of its insolvency. In addition, several other well-known and highly regarded exchanges
have suffered similar fates. For example, in February 2014, Mt. Gox, then the largest Bitcoin exchange worldwide, filed for bankruptcy
protection in Japan after an estimated 700,000 bitcoin were stolen from its wallets. In May 2019, Binance, one of the world’s largest
exchanges was hacked, resulting in losses of approximately $40 million. Neither of these incidents had any impact on the Company. Any
such losses by an exchange could have a negative impact on the financial position of the Company and adversely impact an investment in
the Shares.
The theft, loss, or destruction of private
keys required to access any Bitcoin may be irreversible. If we are unable to access our private keys or if we experience a hack or other
data loss relating to our ability to access any Bitcoin, it could cause regulatory scrutiny, reputational harm, and other losses.
Bitcoin is generally accessible only by the
possessor of the unique private key relating to the digital wallet in which the Bitcoin is held. While blockchain protocols typically
require public addresses to be published when used in a transaction, private keys must be safeguarded and kept private to prevent a third
party from accessing the Bitcoin held in the applicable wallet. To the extent that any of the private keys relating to our wallets containing
Bitcoin held for our own account or our users’ private keys relating to their un-hosted wallets is lost, destroyed, or otherwise
compromised or unavailable, and no backup of the private key is accessible, we or our users will be unable to access the Bitcoin held
in the related wallet. Further, we cannot provide assurance that our or our users’ wallets will not be hacked or otherwise compromised.
Cryptocurrency and blockchain technologies have been, and may in the future be, subject to security breaches, hacking, or other malicious
activities. Any loss of private keys relating to, or any hack or other compromise of, digital wallets used to store our users’
Bitcoin could adversely affect our users’ ability to access or sell their Bitcoin, as well as result in loss of user trust in us.
As such, any loss of private keys due to a hack, employee or service provider misconduct or error, or other compromise by third parties
could hurt our brand and reputation, result in significant losses, and adversely impact our business.
Any significant disruption in our ATMs
or software, information technology systems, or any of the blockchain networks related to our business, could result in a loss of users
or funds and adversely impact our brand and reputation and our business, operating results, and financial condition.
Our reputation and ability to attract and
retain users and grow our business depends on our ability to operate our products and services at high levels of reliability, scalability,
and performance, including the ability to process and monitor, on a daily basis, the transactions that occur across multiple systems.
Our ATMs and software, the ability of our users to transact in Bitcoin, and our ability to operate at a high level, are dependent on
our ability to access the blockchain networks underlying the supported Bitcoin, for which access is dependent on our systems’ ability
to access the internet. Further, the successful and continued operations of such blockchain networks will depend on a network of computers,
miners, or validators, and their continued operations, all of which may be impacted by service interruptions.
Our ATMs and certain cryptocurrency and blockchain
networks have experienced from time to time, and may experience in the future, service interruptions or degradation because of hardware
and software defects or malfunctions, distributed denial-of-service and other cyberattacks, insider threats, break-ins, sabotage, human
error, vandalism, earthquakes, hurricanes, floods, fires, and other natural disasters, power losses, disruptions in telecommunications
services, fraud, military or political conflicts, terrorist attacks, computer viruses or other malware, or other events. In addition,
extraordinary transactions or site usage could cause our kiosks to operate at an unacceptably slow speed or even fail.
If any of our ATMs are disrupted for any reason,
our products and services may fail, resulting in unanticipated disruptions, slower response times and delays in our users’ transaction
execution and processing, failed transactions, incomplete or inaccurate accounting, recording or processing of transactions, unauthorized
transactions, loss of user information, increased demand on limited user support resources, user claims, complaints with regulatory organizations,
lawsuits, or enforcement actions. A prolonged interruption in the availability or reduction in the availability, speed, or functionality
of our products and services could harm our business. Significant or persistent interruptions in our services could cause current or
potential users to believe that our ATMs or software are unreliable, leading them to switch to our competitors or to avoid or reduce
the use of our products and services, and could permanently harm our reputation and brands. Moreover, to the extent that any system failure
or similar event results in damages to our users, these users could seek significant compensation from us for their losses, and those
claims, even if unsuccessful, would likely be time-consuming and costly for us to address. Problems with the reliability or security
of our ATMs or software would harm our reputation, and damage to our reputation and the cost of resolving these problems could negatively
affect our business, operating results, and financial condition.
Because we are a regulated money services
business in certain jurisdictions, interruptions have resulted and in the future may result in regulatory scrutiny, and significant or
persistent interruptions could lead to significant fines and penalties, and mandatory and costly changes to our business practices, and
ultimately could cause us to lose existing licenses or banking and other relationships that we need to operate or prevent or delay us
from obtaining additional authorizations, registrations or licenses that may be required for our business.
In addition, we are continually improving
and upgrading our information systems and technologies. We also rely on technologies developed by others, and if we are unable to continue
to obtain licenses for such technologies or licenses to substitute for similar technologies, our business could be adversely impacted.
Implementation of new systems and technologies is complex, expensive, time-consuming, and may not be successful. If we fail to timely
and successfully implement new information systems and technologies, or improvements or upgrades to existing information systems and
technologies, or if such systems and technologies do not operate as intended, it could have an adverse impact on our business, internal
controls (including internal controls over financial reporting), operating results, and financial condition.
Our failure to safeguard and manage the
customer’s crypto assets could adversely impact our business, operating results, and financial condition.
The Company acts as a custodian for certain
customer’s crypto assets, which could include having access to and managing cryptographic private keys. The Company defines this
process as “safeguarding.” As of September 30, 2023, we were responsible for safeguarding $45 thousand in crypto assets,
all in the form of Bitcoin. Those Bitcoin are not insured or guaranteed by any government or government agency. Our ability to manage
and accurately safeguard these user assets requires a high level of internal controls, including use of authentication protocols, passwords
and multi-step approval processes. As our business continues to grow and we expand our product and service offerings, we must continue
to strengthen our associated internal controls. Our success and the success of our offerings requires significant public confidence in
our ability to properly manage security. The Company is not the legal owner of these crypto assets. However, because we safeguard cryptographic
key information such cryptographic key information may be considered to be the property of a bankruptcy estate, in the event of a bankruptcy,
the users may not be able to access their crypto assets. This may result in customers finding our services riskier and less attractive
and any failure to increase our customer base, discontinuation or reduction in use of our platform and products by existing customers
as a result could adversely impact our business, operating results, and financial condition. If we do not successfully manage the security
needs associated with safeguarding such crypto assets for users, this loss could cause a substantial business disruption of our operations,
adverse reputational impact, inability to compete with our competitors, regulatory scrutiny, and consequently, it could adversely impact
an investment in our shares of common stock.
Our lack of insurance protection for crypto
assets held by the Company could adversely impact our business, operating results, and financial condition.
The crypto assets held by us are not insured.
We also do not rely on insurance carriers to insure losses resulting from a breach of our physical security, cyber security, or by employee
or service provider theft since we do not carry crime and specie insurance. We only maintain a general liability insurance which does
not cover crypto assets or breaches described above. Therefore, we may suffer a loss which is not covered by insurance in damages. Such
a loss could cause a substantial business disruption of our operations, adverse reputational impact, inability to compete with our competitors,
regulatory scrutiny, and consequently, it could adversely impact an investment in our shares of common stock.
The Company operates in locations outside
of the United States and, as such, is subject additional risks with respect to enforcement of its contractual rights.
We currently operate and intend to grow our operations
in a number of jurisdictions outside of the United States. Laws and business practices that favor local competitors or prohibit or limit
foreign ownership of certain businesses, or our failure to adapt our practices, systems, processes, and business models effectively to
the traveler and supplier preferences (as well as the regulatory and tax landscapes) of each country into which we expand, could impede
our ability to enter into, negotiate or enforce contracts in those markets. In addition to the other risks described in this prospectus,
our company’s international operations would be subject to numerous other risks, including, but not limited to, weaker enforcement
of our company’s contractual rights, longer payment cycles, and difficulties in collecting accounts receivable.
The countries, we operate in, may or may not
have stable economies, stable banking sectors, or stable governments which may or may not permit us to repatriate profits, maintain ownership
of our business or its assets, or continue operations.
From time to time, certain governments have seized
foreign companies, their assets, and or their operations. It is possible for us to face significant losses if such an event occurs, either
specific to us or broadly across the entire country or industry in which we operate. We may, for example no longer be permitted to purchase
additional crypto assets, or operate our machines, or return capital or profits to our parent company in the United States. This may
result in a total and complete loss of our assets within that country as well as further costs to continue to pay our existing liabilities
within that country.
The countries we operate in may not have
stable governments or may face significant political, social, or civil unrest.
The countries where the Company operates, or
may choose to operate in the future, may face significant periods of political, military, social, or civil unrest. This may result in
the destruction of the Company’s property, the destruction of the Company’s other assets, or other harm to the Company and
its personnel, which may cause losses or for the Company to incur significant liabilities. Nationalization of certain industries has
occurred in some of the countries where Athena currently operates. The loss of access to those nationalized assets may adversely impact
an investment in the Shares.
Fluctuations in currency exchange rates
could harm our operating results and financial condition.
Revenue generated and expenses incurred from
our international operations are often denominated in the currencies of the local countries. Accordingly, changes in the value of foreign
currencies relative to the U.S. dollar can affect our revenue and operating results reflected in our U.S. dollar-denominated consolidated
financial statements. Our financial results are also subject to changes in exchange rates that impact the settlement of transactions
in non-local currencies. As a result, it could be more difficult to detect underlying trends in our business and operating results. To
the extent that fluctuations in currency exchange rates cause our operating results to differ from the expectations of investors, the
market price of the Shares could be adversely impacted. To date, we have not engaged in currency hedging activities to limit the risk
of exchange fluctuations. Even if we use derivative instruments to hedge exposure to fluctuations in foreign currency exchange rates,
the use of such hedging activities may not offset any or more than a portion of the adverse financial effects of unfavorable movements
in foreign exchange rates over the limited time the hedges are in place and may introduce additional risks if we are unable to structure
effective hedges with such instruments.
If we fail to retain existing users
or add new users, or if our users decrease their level of engagement with our products and services, our business, operating results,
and financial condition may be significantly harmed.
Our success depends on our ability to retain
existing users and attract new users to increase engagement with our products and services. To do so, we must continue to offer leading
technologies and ensure that our products and services are secure, reliable, and engaging. We must also expand our products and services
and offer competitive transaction and other fees in an increasingly crowded and price-sensitive market. There is no assurance that we
will be able to continue to do so, that we will be able to retain our current users or attract new users, or keep our users engaged.
Any number of factors can negatively affect user retention, growth, and engagement, including if:
|
· |
we fail to increase awareness of our brand and successfully compete
with the offerings and prices other companies, or if our users otherwise increasingly engage with competing products and services,
including those that we are unable to offer due to regulatory reasons; |
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· |
we fail to introduce new and improved products and services, or
if we introduce new products or services that are not favorably received; |
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we fail to successfully identify and acquire or invest in businesses,
products or technologies that we believe could complement or expand our business; |
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we fail to support new and in-demand cryptocurrencies or if we elect
to support cryptocurrencies with negative reputations; |
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· |
there are changes in sentiment about the quality or usefulness of
our products and services or concerns related to privacy, security, or other factors including, without limitation, changes in macro-level
user preference for using cash to purchase Bitcoin; |
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there are adverse changes in our products and services that are
mandated by legislation, regulatory authorities, or litigation; |
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we fail to maintain existing authorizations as well as obtain newly
required authorizations, registrations and licenses for our products; |
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users perceiving Bitcoin and other cryptocurrencies to be a bad
investment, or experiencing significant losses in Bitcoin or other cryptocurrencies, may not desire to utilize our products and services;
|
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technical or other problems prevent us from delivering our products
and services with the speed, functionality, security and reliability that our users expect, or if we fail to otherwise gain and maintain
the trust and confidence of our users; |
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there are cybersecurity incidents, employee or service provider
misconduct or other unforeseen activities that cause losses to us or our users; |
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there are modifications to our fee model, including as a result
of changes in or the adoption of any laws or regulations imposing restrictions or limitations on the markup at which we sell Bitcoin
to users or the separate flat transaction fee that we are able to charge our users, or modifications by competitors to their fee
models; |
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we fail to provide adequate customer service for our users and retail
partners; |
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regulatory and governmental bodies in countries that we target for
expansion express negative views towards cryptocurrency-related services and, more broadly, the digital financial system; or |
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we or other companies in our industry are the subject of adverse
media reports or other negative publicity. |
From time to time, certain of these factors
have negatively affected user retention, growth, and engagement to varying degrees. If we are unable to maintain or increase our user
base and user engagement, our revenue and financial results may be adversely affected. Any decrease in user retention, growth, or engagement
could render our products and services less attractive to users, which may have an adverse impact on our revenue, business, operating
results, and financial condition. If our user growth rate slows or declines, we will become increasingly dependent on our ability to
maintain or increase levels of user engagement and monetization in order to drive growth of revenue.
Adverse economic conditions may affect our
business.
Our performance is subject to general economic
conditions, and their impact on the digital currency markets and our customers. The United States and other international economies have
experienced cyclical downturns from time to time in which economic activity declined resulting in lower consumption rates, restricted
credit, reduced profitability, weaknesses in financial markets, bankruptcies, and overall uncertainty with respect to the economy. The
impact of general economic conditions on the Company is highly uncertain and dependent on a variety of factors, including global adoption
of cryptocurrencies, central bank monetary policies, and other events beyond our control. Geopolitical developments, such as trade wars
and foreign exchange limitations can also increase the severity and levels of unpredictability globally and increase the volatility of
global financial and digital currency markets. To the extent that conditions in the general economic and digital currency markets materially
deteriorate, our ability to attract and retain customers may suffer.
Due to unfamiliarity and some negative
publicity associated with cryptocurrency-related businesses, existing and potential users may lose confidence in cryptocurrency-related
products and services, which could negatively affect our business.
Cryptocurrency and related products and services
are relatively new. Many of our competitors are unlicensed, unregulated, operate without supervision by any governmental authorities,
and do not provide the public with significant information regarding their ownership structure, management team, corporate practices,
cybersecurity, and regulatory compliance. As a result, users and the general public may lose confidence in cryptocurrency businesses,
including regulated businesses like ours.
Since the inception of the digital financial
system, numerous cryptocurrency businesses have been sued, investigated, or shut down due to fraud, manipulative practices, business
failure, and security breaches. In many of these instances, customers of these businesses were not compensated or made whole for their
losses. Larger businesses like us are more appealing targets for hackers and malware and may also be more likely to be targets of regulatory
enforcement actions. For example, in May 2019, Binance, one of the world’s largest platforms, was hacked, resulting in losses of
approximately $40 million, and in February 2021, Bitfinex settled a long-running legal dispute with the State of New York related to
Bitfinex’s alleged misuse of over $800 million of customer assets. Further, in the first half of 2022, major cryptocurrency lending
platforms declared bankruptcy, resulting in a loss of confidence in participants of the digital financial system and negative publicity
surrounding cryptocurrency more broadly.
If our estimates or judgment relating to our
critical accounting policies prove to be incorrect, our operating results could be adversely affected.
The preparation of financial statements in conformity
with generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect
the amounts reported in the consolidated financial statements and accompanying notes. We base our estimates on historical experience
and on various other assumptions that we believe to be reasonable under the circumstances, as provided in the section titled “Management’s
Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Policies and Estimates.” The results
of these estimates form the basis for making judgments about the carrying values of assets, liabilities, and equity, and the amount of
revenue and expenses that are not readily apparent from other sources. Significant estimates and judgments involve the identification
of performance obligations in revenue recognition, evaluation of tax positions, and crypto assets we hold, among others. Our operating
results may be adversely affected if our assumptions change or if actual circumstances differ from those in our assumptions, which could
cause our operating results to fall below the expectations of analysts and investors, resulting in a decline in the trading price of
our common stock.
Risk Factors
Related to Our Operations in El Salvador
Expansion of business operations in El Salvador
may not produce the positive results as planned.
We have established significant operations in
El Salvador to support the country’s efforts to use Bitcoin as legal tender. However, there are many factors that could disrupt
the implementation of Bitcoin Law in El Salvador, and as a result, our operations in El Salvador. Any of such disruptions can have a
negative impact on the financial position of the Company. They could jeopardize our expansion plan and be detrimental to our business.
Those risks, as summarized below include:
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Exposure to Bitcoin volatility.
While Bitcoin can be used as a speculative asset to generate significant gains, it can also generate major losses. Bitcoin pricing
has fluctuated more than $46,000 per Bitcoin on December 31, 2021, to $16,500 on December 31, 2022 to $27,000 on September 30,
2023. Holding or transacting in such an unstable asset is particularly risky for people with low incomes, who can ill afford
to sustain price swings as large as 30% in a single day and may become victims of a significant collapse. If there was a significant
reduction in the fair value of Bitcoin, the reduction of value of Bitcoin held in the El Salvadoran national reserves could be a
destabilizing event for the country and could impact the existing Bitcoin Law. |
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· | Depletion of banking
assets. In today’s El Salvador, banks connect savers and borrowers. If most Salvadorans
start using Bitcoin, their savings will be stored in digital wallets away from potential
borrowers who would otherwise use it to fund projects. Massive adoption of Bitcoin would
likely drain banks of savings and raise the cost of borrowing for companies and individuals,
who will face higher interests. If that occurs, the economy of El Salvador and implementation
of the Bitcoin Law can be negatively affected. |
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· | Lack of transparency/money
laundering. Adopting Bitcoin as legal tender is not without certain challenges or risks
since Bitcoin’s practical implementation has yet to be defined by regulators. Internationally,
the cryptocurrency has been used for money laundering and to facilitate illegal activities.
The intergovernmental Financial Action Task Force (“FATF”) may increase monitoring
of El Salvadoran banks, businesses, and other financial institutions. The FATF is the international
“money laundering and terrorist financing watchdog.” It reviews countries’
anti-money laundering and counter-financing terrorism practices. If the FATF determines that
a country is exposed to financial crime, the flagged country is placed on either the list
of “Jurisdictions under Increased Monitoring,” known as the “grey list,”
or the list of “Jurisdictions subject to a Call for Action,” known as the “black
list.” When a country is placed on the grey list, it must cooperate with increased
FATF monitoring. When a country is placed on the black list, the FATF urges its 39 member
nations and over 200 affiliated nations to apply enhanced due diligence and impose countermeasures,
such as sanctions. From an FATF regulatory perspective, El Salvador has been in full compliance,
however, that may likely change after the Bitcoin Law has been fully implemented. For example,
the FATF mandates that the parties engaging in virtual-asset transactions provide complete
and sufficient know-your-customer information. It also requires that senders and recipients
of virtual assets obtain accurate knowledge and information about “the transaction,
the source of funds, and the relationship with the counterparty.” The chances of Bitcoin
transactions meeting such requirements are unlikely and El Salvador may be subject to sanctions. |
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· | Loss of central bank
reserves. El
Salvador currently carries a large debt burden (about 78% of GDP as of December 31, 2022)
and has a challenging amortization schedule. To navigate this difficult fiscal environment
during the pandemic, El Salvador has reached out to the International Monetary Fund (“IMF”)
for a $1.3 billion financing package. However, the IMF opposes the adoption of Bitcoin as
a legal tender. Thus, the funding program could be put in jeopardy at a time when El Salvador
is running out of financial alternatives. Furthermore, the IMF has warned against
adopting cryptocurrencies as legal tender, citing risks to macroeconomic stability, financial
integrity, consumer protection and the environment (creating Bitcoin consumes large amounts
of electricity). The World Bank turned down a request to help advise El Salvador on Bitcoin.
Moody’s rating agency has downgraded the country’s debt further from B3 to Caa3,
with its outlook stable. Those factors may negatively affect the economy of El Salvador and
disrupt the implementation of the Bitcoin Law. |
· |
Continued negative publicity in the media with respect
to Chivo S.A. de C.V, the Chivo Ecosystem, of Bitcoin ATMs in general, or of the Company’s services could have a material adverse
effect on our business. The government of El Salvador, through Chivo operates the Chivo digital wallet. The government purchased
software and related services from the Company and used this software from the launch of the Chivo digital wallet in September of
2021 until December of 2021. According to media reports, the Chivo company’s operation of the Chivo digital wallet is not subject
to public reporting or auditing by a banking regulator. Therefore, there is no way for an outside observer to know that the assets
held by Chivo S.A. de C.V. are sufficient to cover the liabilities (user balances) of the Chivo digital wallet. If there are negative
views presented in the news about the assets held by Chivo S.A. de C.V, or of the quality of its service offerings, or its lack of
transparency, or fraud, or identity theft connected with the usage of the Chivo digital wallet, or any reported problems related
to the Chivo digital wallet (either the version written by the Company or any subsequent version not using the Company’s Intellectual
Property), then the Company’s reputation could be damaged which may negatively affect an investment in the Shares. |
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Failure to maintain sufficient cash in Chivo branded
ATMs to meet demand could have a material adverse effect on our reputation. Chivo S.A. de C.V. also directs the Company as to
how much physical cash should be loaded into the Chivo ATMs in El Salvador for the purpose of ATM users retrieving U.S. dollar currency
in exchange for their Bitcoin or dollars held in the Chivo digital wallet. If for any reason, there is not sufficient physical cash
loaded into a Chivo ATM to meet the total demand for such cash, the ATM will be unable to initiate additional transactions to dispense
cash to a user and the user will see the machine as non-functional. This could create negative impression of the Chivo Ecosystem,
of Bitcoin ATMs in general, of the Company’s services, or the Company’s reputation and negatively affect an investment
in the Shares. |
|
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· | Capital flight.
Bitcoin Law could facilitate a capital flight, especially during a crisis. Many emerging
markets control the flow of capital in and out of their countries to avoid a macroeconomic
crisis or to prevent one from worsening. However, Bitcoin can facilitate such a flight: Once
dollars are converted to Bitcoin, they can easily be sent to anyone in the world, without
any control or tracking. Such an event would have a negative effect on the economy of El
Salvador. |
| |
· | Environmental concerns
about Bitcoin mining. The system on which Bitcoin is currently based consumes large amounts
of electricity, making it particularly taxing for the environment. President Bukele believes
that the country’s cheap, clean, and renewable geothermal energy from volcanoes can
power Bitcoin mining rigs, thus reducing its carbon footprint. It is not clear at this time
if such a solution would solve the environmental concerns. |
Political and economic developments in El
Salvador may adversely affect Bitcoin Law.
El Salvador's Bitcoin Law has been greeted with
skepticism from both Salvadorans and international financial institutions. The population might not fully embrace Bitcoin. Requiring every
business to accept Bitcoin for goods and services without adequate access to technology may be a difficult obstacle to overcome and Bitcoin
Law can be changed if it remains unpopular under a successor administration. Any of these concerns could disrupt our operations in El
Salvador and have a negative impact on the financial position of the Company. Although several political leaders around the globe have
voiced support for the Bitcoin Law enacted by El Salvador, and cryptocurrencies such as Bitcoin are widely used and accepted as forms
of payment in many countries, only Paraguay, Venezuela, Anguilla and Ukraine have taken official steps to adopt Bitcoin as legal tender.
There is political discontent in El Salvador
with President Bukele's ouster of Supreme Court judges and the potential for the president to seek a second consecutive term. The presidential
period is five years in El Salvador. Consecutive re-election is not permitted, though previously elected presidents may run for a second,
non-consecutive term. Recently, El Salvador’s top court and its election authority have removed what seemed to be a constitutional
ban on consecutive presidential reelection, which has resulted in President Nayib Bukele seeking a second term in 2024. If there is a
change in El Salvador’s administration after 2024, it may negatively affect Bitcoin Law and our operations in El Salvador.
Our contracts with the El Salvador government
may be negatively impacted
We have entered into agreements with El Salvador's
Department of Treasury, pursuant to which we have installed and are operating 200 Chivo Bitcoin ATMs in El Salvador, 10 Chivo Bitcoin
ATMs at El Salvador consulates in the U.S., 45 Chivo Bitcoin ATMs in other U.S. locations (as of fiscal year end December 31, 2022),
importing and delivering 950 Chivo POS terminals for local businesses in El Salvador to transact with Bitcoin, and developing and maintaining
the software for the Chivo digital wallet. Each obligation comes with its own set of operational risks in addition to risks set forth
herein, including but not limited to the volatile nature of crypto assets, data breach and crypto hacks, fraud conducted by users of
the services offered by the government of El Salvador, changes in U.S. and foreign laws and regulations, talent acquisition and retention,
and general economic conditions. If we fail to fulfil our contractual obligations, our agreements may be terminated which may negatively
impact our financial standing and reputation. For the nine months ended September 30, 2023, approximately 3% of our revenues are from
the El Salvador government through our white-label service. Our current agreements may also be modified or terminated by El Salvador’s
Department of Treasury for any reason including but not limited to regime change, additional competition, and loss of political support.
Any such unfavorable change in our business operations in El Salvador, including the termination of any contracts with the government
of El Salvador, would adversely affect our revenues and profitability, and could negatively affect an investment in our shares of common
stock. Only six white-label ATMs have been terminated by the El Salvador government through September 30, 2023
Risk Factors Related to the Bitcoin Network,
Wallets, Bitcoin, and Crypto Assets
Bitcoin, and most other crypto assets based
on public key cryptography, are controllable only by the possessor of both the unique public key and private key relating to the local
or online digital wallet in which the bitcoin are held.
While the Bitcoin Network, and similar blockchain
protocol networks, require a public key relating to a digital wallet to be published when used in a spending transaction, private keys
must be safeguarded and kept private in order to prevent a third party from accessing the bitcoin held in such wallet. To the extent
a private key is lost, destroyed, or otherwise compromised and no backup of the private key is accessible, Athena will be unable to access
the Bitcoin, or other digital currency, held in the related digital wallet. Any loss of private keys relating to digital wallets used
to store Athena’s Bitcoin, or other crypto assets, could adversely affect an investment in the Shares.
The future and development of the Bitcoin
Protocol and other blockchain technologies are subject to a variety of factors that are difficult to evaluate.
The further development and acceptance of the
Bitcoin Network and other cryptographic and algorithmic protocols governing the issuance of transactions in bitcoin and other crypto
asset, which represent a new and rapidly changing industry, are subject to a variety of factors that are difficult to evaluate. Athena
does not participate in the development of the Bitcoin Network and has little to no influence over the software developers who write
the code or the miners who run the Bitcoin Network. The slowing or stopping of the development or acceptance of the Bitcoin Network may
adversely affect an investment in the Shares.
The
further development and acceptance of cryptocurrency networks and other cryptocurrencies, which represent a new and rapidly changing
industry, are subject to a variety of factors that are difficult to predict and evaluate. The slowing or stopping of the development
or acceptance of digital asset systems may adversely affect an investment in us.
Cryptocurrency that may be used to buy and
sell goods and services, among other things, are a new and rapidly evolving industry which is subject to a high degree of uncertainty.
The factors affecting the further development of the digital asset industry, as well as the digital asset networks, include:
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continued worldwide growth in the adoption and
use of cryptocurrencies; |
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governmental and quasi-governmental regulation
of cryptocurrencies and their use, or restrictions on or regulation of access to and operation of the digital asset network or similar
cryptocurrency systems; |
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the maintenance and development of the open-source
software protocol of cryptocurrency networks; |
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· |
changes in consumer demographics and public tastes
and preferences; |
|
· |
the availability and popularity of other forms
or methods of buying and selling goods and services, including new means of using fiat currencies; |
|
· |
general economic conditions and the regulatory
environment relating to cryptocurrency; and |
|
· |
the impact of regulators focusing on cryptocurrencies
and digital securities and the costs associated with such regulatory oversight. A decline in the popularity or acceptance of the
digital asset networks could adversely affect an investment in us. |
We are, or may in the future, be susceptible
to risks arising from disruptions in crypto asset markets. Such risks could potentially result in, among other things:
|
· |
the depreciation of investments held in us, including
the depreciation in the price of our publicly traded stock; |
|
· |
decreased user demand for our products and services; |
|
· |
financing risks to us, including relating to our
ability to obtain equity and debt financing; |
|
· |
increased losses or impairments of the crypto assets
held by us; |
|
· |
legal proceedings and government investigations
involving us or our affiliates or other third-parties with which we do business; or |
|
· |
indirect risks to our business due to any adverse
impact of recent or future crypto market disruptions on our users, suppliers or other counterparties. |
Additionally, although we are not directly
connected to recent crypto market events, we may still suffer reputational harm due to our association with the cryptocurrency industry
in light of the recent disruption in, or as a result of any future disruptions in, the crypto asset markets. Specifically, recent negative
publicity stemming from these market disruptions and speculation of potential future disruptions increases our risk of reputational harm
simply by association with the industry.
Further, any future market disruptions resulting
in overall decreased interest in Bitcoin could harm our business. The prevalence of cryptocurrency is a relatively recent trend, and
the long-term adoption of cryptocurrency by investors, consumers, and businesses remains uncertain.
The number of user transactions and our transaction
volumes is partially dependent on the price of Bitcoin, as well as the associated demand for buying, selling, and trading Bitcoin, which
can be and historically have been volatile. If such prices decline, the number of user transactions or our transaction volumes could
decrease. As such, any such declines, or any declines in the price of Bitcoin or market liquidity for cryptocurrency generally, may result
in lower total revenue to us due to an associated decrease in demand for our products and services. The price and trading volume of any
cryptocurrency, including Bitcoin, is subject to significant uncertainty and volatility, depending on a number of factors, as discussed
elsewhere in this section under the subheading “Our transaction volume may be partially dependent on the prices of Bitcoin we sell,
which can be volatile. If such prices decline, the volume of user transactions could decrease and our business, operating results, and
financial condition would be adversely affected.”
Stable Coins may not have any intrinsic value.
Tether, USD Coin, Dai and TrueUSD are
examples of Stablecoins. Stablecoins are crypto assets designed to have a stable value over time as compared to typically volatile
crypto assets and are typically marketed as being pegged to a fiat currency, most commonly the U.S. dollar, at a rate of 1:1. Stable
coins make up an estimated 11% of the total market cap of crypto assets. The largest stable coin is Tether, which is the third
largest crypto asset by market cap at 83.3 billion USD per Coinmarketcap.com as of September 30, 2023. The Company sells
Tether as part of its Athena Plus services. Some have argued that some stable coins, particularly Tether, are improperly issued
without sufficient backing, and have also argued that those associated with certain stable coins may be involved in laundering
money. On February 17, 2021, the New York Attorney General entered an agreement with Tether’s operators, requiring them to
cease any further trading activity with New York persons and pay $18.5 million in penalties for false and misleading statements made
regarding the assets backing Tether. Terra (LUNA), another stable coin, collapsed in May 2022 due to issues with its algorithm,
resulting in the stable coin losing all value. This sent shockwaves through the crypto market, with the total market cap of crypto
assets decreasing by approximately 22% during May 2022. Volatility in stable coins, operational issues with stable coins (for
example, technical issues that prevent settlement), concerns about the sufficiency of any reserves that support stable coins, or
regulatory concerns about stable coin issuers or intermediaries, such as crypto asset spot markets, that support stable coins, could
have a significant impact on the global crypto market. This could reduce the market price of all of the crypto assets that the
Company utilizes in its operations, impact any individual’s willingness to purchase Tether from the Company and may adversely
affect the Company’s operating results and value of the Company’s Shares.
A temporary or permanent blockchain “fork”
to any supported crypto asset could adversely affect our business.
Blockchain protocols, including Bitcoin, Ethereum,
and Litecoin, are open source. Any user can download the software, modify it, and then propose that Bitcoin, Ethereum, Litecoin, or other
blockchain protocols users and miners adopt the modification. When a modification is introduced and a substantial majority of users and
miners consent to the modification, the change is implemented and the Bitcoin, Ethereum, Litecoin, or other blockchain protocol networks,
as applicable, remain uninterrupted. However, if less than a substantial majority of users and miners consent to the proposed modification,
and the modification is not compatible with the software prior to its modification, the consequence would be what is known as a “fork”
(i.e., “split”) of the impacted blockchain protocol network and respective blockchain, with one prong running the pre-modified
software and the other running the modified software. The effect of such a fork would be the existence of two parallel versions of the
Bitcoin, Ethereum, Litecoin, or other blockchain protocol network, as applicable, running simultaneously, but with each split network’s
crypto asset lacking interchangeability.
Both Bitcoin and Ethereum protocols have been
subject to “forks” that resulted in the creation of new networks, including Bitcoin Cash ABC, Bitcoin Cash SV, Bitcoin Diamond,
Bitcoin Gold, Ethereum Classic, and others. Some of these forks have caused fragmentation among platforms as to the correct naming convention
for forked crypto assets. Due to the lack of a central registry or rulemaking body, no single entity can dictate the nomenclature of
forked crypto assets, causing disagreements and a lack of uniformity among platforms on the nomenclature of forked crypto assets, and
which results in further confusion to customers as to the nature of assets they hold on platforms. In addition, several of these forks
were contentious and as a result, participants in certain communities may harbor ill will towards other communities. As a result, certain
community members may take actions that adversely impact the use, adoption, and price of Bitcoin, Ethereum, Litecoin, or any of their
forked alternatives.
Furthermore, hard forks can lead to new security
concerns. For instance, when the Ethereum and Ethereum Classic networks split in July 2016, replay attacks, in which transactions from
one network were rebroadcast on the other network to achieve “double-spending”, plagued platforms that traded Ethereum through
at least October 2016, resulting in significant losses to some crypto asset platforms. Similar replay attacks occurred in connection
with the Bitcoin Cash and Bitcoin Cash SV network split in November 2018. Another result of a hard fork is an inherent decrease in the
level of security due to the splitting of some mining power across networks, making it easier for a malicious actor to exceed 50% of
the mining power of that network, thereby making crypto assets that rely on proof-of-work more susceptible to attack, as has occurred
with Ethereum Classic.
Future forks may occur at any time. A fork can
lead to a disruption of networks and our information technology systems, cybersecurity attacks, replay attacks, or security weaknesses,
any of which can further lead to temporary or even permanent loss of our assets.
From time to time, we may encounter technical
issues in connection with the integration of supported crypto assets and changes and upgrades to their underlying networks, which could
adversely affect our business.
To support any crypto asset, a variety of front
and back-end technical and development work is required ensure proper operations including pricing, transfer, accounting, and other solutions
for our Bitcoin ATM fleet, and to integrate such supported crypto asset with our existing infrastructure. For certain crypto assets,
a significant amount of development work is required and there is no guarantee that we will be able to integrate successfully with any
existing or future crypto asset. In addition, such integration may introduce software errors or weaknesses into our platform, including
our existing infrastructure. Even if such integration is initially successful, any number of technical changes, software upgrades, soft
or hard forks, cybersecurity incidents, or other changes to the underlying blockchain network may occur from time to time, causing incompatibility,
technical issues, disruptions, or security weaknesses to our platform. If we are unable to identify, troubleshoot and resolve any such
issues successfully, we may no longer be able to support such crypto assets, our assets may be frozen or lost, the security of our crypto
asset wallets may be compromised, and technical infrastructure may be affected, all of which could adversely impact our business.
If miners or validators of any crypto asset
network demand high transaction fees, our operating results may be adversely affected.
We pay miner fees when transmitting crypto assets
including Bitcoin to customers upon completion of their purchase. In addition, we also pay miner fees when we move crypto assets for
various operational purposes, such as when we transfer Bitcoin between our regional wallets. However, miner fees can be unpredictable.
For instance, in 2017, Bitcoin miner fees increased from approximately $0.35 per transaction in January 2017 to over $50 per transaction
in December 2017. Even though Bitcoin’s miner fees have since decreased to $2 per transaction as of September 30, 2023,
if the demand for Bitcoin remains at current levels, we could experience high costs in excess of our historical performance. Although
we attempt to adjust our pricing to pass through these expenses to our customers, we have in the past incurred, and expect to incur from
time to time, losses associated with the payment of miner fees in excess of what we charge our customers, resulting in adverse impacts
on our operating results.
We are subject to an extensive and rapidly
evolving regulatory environment, and if a particular crypto asset we transact or transacted in is characterized as a “security”,
we may be subject to regulatory scrutiny, investigations, fines, and other penalties, which may adversely affect our business, operating
results, and financial condition.
The SEC and its staff have taken the position
that certain crypto assets fall within the definition of a “security” under the U.S. federal securities laws. The legal test
for determining whether any given crypto asset is a security is a highly complex, fact-driven analysis that evolves over time, and the
outcome is difficult to predict. The SEC generally does not provide advance guidance or confirmation on the status of any particular
crypto asset as a security. Furthermore, the SEC’s views in this area have evolved over time and it is difficult to predict the
direction or timing of any continuing evolution. It is also possible that a change in the governing administration or the appointment
of new SEC commissioners could substantially impact the views of the SEC and its staff. Public statements by senior officials at the
SEC indicate that the SEC does not intend to take the position that Bitcoin or Ether are securities (in their current form). Bitcoin
and Ethereum are the only crypto assets as to which senior officials at the SEC have publicly expressed such a view. Moreover, such statements
are not official policy statements by the SEC and reflect only the speakers’ views, which are not binding on the SEC or any other
agency or court and cannot be generalized to any other crypto asset. With respect to all other crypto assets, there is currently no certainty
under the applicable legal test that such assets are not securities, notwithstanding the conclusions we may draw based on our risk-based
assessment regarding the likelihood that a particular crypto asset could be deemed a “security” under applicable laws. Similarly,
though the SEC’s Strategic Hub for Innovation and Financial Technology published a framework for analyzing whether any given crypto
asset is a security in April 2019, this framework is also not a rule, regulation or statement of the SEC and is not binding on the SEC.
We
currently offer only Bitcoin for sale at all our ATM machines. We also operate Athena Plus for private clients and trade customers of
the Company. We predominantly buy and sell Bitcoin through our Athena Plus services, but we have also facilitated transactions in other
crypto assets. For the year ended December 31, 2022, we had 199, 1 and 19 Athena Plus transactions for Bitcoin, Ethereum and Tether,
respectively. For the year ended December 31, 2021, we had 258, 16, 7, 5 and 1 Athena Plus transactions for Bitcoin, Ethereum, Litecoin,
Tether and Ankr, respectively. As of the date of this prospectus, and effective as of July 19, 2023, we do not transact, or make
offers to transact to with our customers, in any crypto assets except Bitcoin, and Ethereum, Tether, Litecoin, and BCH (Athena Plus only).
We will update this prospectus if we decide to transact in other crypto assets. Such a change would only happen if there were significant
customer demand for a specific crypto asset and that crypto asset was available to us through multiple trading partners, crypto asset
exchanges and crypto asset brokers.
The classification of a crypto asset as a security
under applicable law has wide-ranging implications for the regulatory obligations that flow from the offer, sale, trading, and clearing
of such assets. For example, a crypto asset that is a security in the United States may generally only be offered or sold in the United
States pursuant to a registration statement filed with the SEC or in an offering that qualifies for an exemption from registration. Persons
that effect transactions in crypto assets that are securities in the United States may be subject to registration with the SEC as a “broker”
or “dealer.” Platforms that bring together purchasers and sellers to trade crypto assets that are securities in the United
States are generally subject to registration as national securities exchanges, or must qualify for an exemption, such as by being operated
by a registered broker-dealer as an alternative trading system, or ATS, in compliance with rules for ATSs. Persons facilitating clearing
and settlement of securities may be subject to registration with the SEC as a clearing agency. If Bitcoin, Ether, Litecoin, and BCH or
any other crypto asset we transacted in the past as listed above, is deemed to be a security under any U.S. federal, state, or foreign
jurisdiction, or in a proceeding in a court of law or otherwise, it may have adverse consequences for such supported crypto asset (if
it is still being used in our transactions) or for our Company if it is determined that certain securities laws were violated and we
may be subject to regulatory scrutiny, investigation and penalties. Moreover, the networks on which such supported crypto assets are
utilized may be required to be regulated as securities intermediaries, and subject to applicable rules, which could effectively render
the network impracticable for its existing purposes. Further, it could draw negative publicity and a decline in the general acceptance
of the crypto asset. Also, it may make it difficult for such supported crypto asset to be traded, cleared, and custodied as compared
to other crypto asset that are not considered to be securities. Additionally, new laws, regulations, or interpretations may result in
litigation, regulatory investigations, and enforcement or other actions, including preventing or delaying us from offering certain products
or services, or could impact how we offer such products and services. Foreign jurisdictions may have similar regulations and licensing,
registration, and qualification requirements.
Any failure to obtain or maintain necessary money transmission
and virtual currency business activity registrations and licenses could adversely affect our operations.
In the United States, we have obtained licenses
to operate as a money transmitter, or the equivalent, in the states where we understand such licenses or equivalent are required to conduct
our business. We also currently operate in states where we do not believe we are required, or have been informed by the relevant jurisdiction
that we are not required, to obtain money transmitter licenses or any other required licenses. This belief is based on our analysis of
the applicable laws and regulations and/or our communications with the regulators in the relevant jurisdiction. We plan to apply for
money transmitter or virtual currency licenses or their equivalents in additional jurisdictions as needed. As we obtain additional licenses,
we may be required to bear substantial costs to comply with the requirements of the additional states or jurisdictions. If our licenses
are not renewed, we are denied licenses in additional states or jurisdictions where we choose to apply for a license, or jurisdictions
that have previously not required a license require a license in the future, we could be forced to seek a license or change our business
practices.
As a money services business and a money transmitter,
we are subject to a range of legal obligations and requirements including bonding, net worth maintenance, user notice and disclosure,
reporting, recordkeeping and cybersecurity requirements, and obligations that apply to the safeguarding of third-party funds and crypto
assets. In addition, the licensed entity within our corporate structure is subject to inspection and examination by the state licensing
agencies and certain actions involving that entity, such as changes in controlling equity holders, board members, and senior management,
may require regulatory approval. Further, if we were found by these regulators to be in violation of any applicable laws, rules, or regulations,
we could be subject to fines, penalties, lawsuits, and enforcement actions, additional compliance requirements, increased regulatory
scrutiny of our business, restriction of our operations, or damage to our reputation or brand. Regulatory requirements are constantly
evolving, and we cannot predict whether we will be able to meet changes to existing regulations or the introduction of new regulations
without such compliance harming our business, financial condition, and operating results.
Certain jurisdictions have enacted rules that
require money transmitters, money services businesses, or virtual currency businesses to establish and maintain transaction monitoring,
filtering, scanning and cybersecurity. programs. Wherever we are subject to these rules, we are required to adopt business practices
that require additional expenditures and impact our operating results.
Additionally, if federal, state, or international
regulators were to take actions that limit or prohibit us or our business partners from continuing to operate our business or their businesses
as currently operated, whether by imposing additional requirements, compliance obligations or sanctions, such actions could harm our
business. Any change to our business practices that makes our service less attractive to users or prohibits use of our services by residents
of a particular jurisdiction could decrease our transaction volume and harm our business.
Risk
Factors Related to Current and Future Regulations and Other Law Enforcement Actions
The regulations that govern our primary
business operations are in flux and could change in unpredictable ways that negatively affect our business operations, demand for our
services, or our financial position.
Current regulations acknowledge and allow for
companies to sell Bitcoin and other crypto assets in the United States and other countries where Athena operates. If regulations change
to disallow the sale of Bitcoin or other crypto assets such a change could have a negative impact on revenues and adversely affect an
investment in the Shares. Current regulations require Know Your Customer (“KYC”) information be collected as part of a Customer
Information Program (“CIP”).
The Company currently has an AML/BSA policy
and Procedures Manual to comply with FinCEN regulatory requirements regarding CIP and KYC. Athena employs a risk-based approach and a
tiered system using a number of systems and AML analysts as well as various compliance triggers associated with its software. For transactions
up to $2,000 per day (Tier 1) customers insert a phone number and Athena utilizes an onboarding tool which provides a name and address
associated with the phone number provided. If a customer wishes to purchase greater than $2,000 a day (Tier 2), Athena requires a driver's
license ID scan which captures name, birthdate, physical address, and ID number. A customer cannot proceed at this level without complying
with this step. If a customer wishes to use a passport, at this level, the customer can contact Athena to validate the passport. If a
customer purchases $3,000, the customer will also be required to submit their social security number. Athena has other compliance triggers
for similar information over the course of a customer’s spending as well as photos taken of the customer at each transaction. Athena
has defined procedures for enhanced due diligence procedures based on a risk-based approach. These procedures utilize investigative software
and customer question forms to obtain additional KYC and source of funds information. Athena also uses a sophisticated tool to ensure
that when the Company transmits bitcoin, it is not sent to a high risk or prohibited wallet. The tool will block any such transmissions.
Finally, Athena utilizes a variety of anti-fraud measures including various warnings and a pledge of ownership that the customer owns
and controls the submitted wallet.
If regulations change and require significantly more information to be collected from customers,
this change may have a negative impact on customer behavior and could adversely affect an investment in the Shares.
We are subject to an extensive and highly
evolving regulatory landscape and any adverse changes to, or our failure to comply with, any laws, rules, and regulations could adversely
affect our brand, reputation, business, operating results, and financial condition.
Our business is subject to extensive laws,
rules, regulations, policies, orders, determinations, directives, and legal and regulatory interpretations and guidance in the markets
in which we operate. The scope of laws, rules, and regulations that can impact our business is expansive and includes certain of the
requirements that apply to financial services, money transmission, privacy protection, cybersecurity, electronic payments, securities
and commodities regulation, data governance, data protection, fraud detection, marketing. civil rights (including the Americans with
Disabilities Act, which generally requires, among other things, that our employees be accessible to individuals with disabilities), competition,
bankruptcy, tax, anti-bribery, economic and trade sanctions, anti-money laundering, and counter-terrorist financing. These laws include
bespoke cryptocurrency and cryptocurrency laws that have been adopted in some jurisdictions that can impact cryptocurrency custody, exchange,
and transfer, cross-border and domestic crypto asset transmissions.
Many of these laws, rules and regulations
were adopted prior to the advent of the internet, mobile technologies, crypto assets and related technologies. As a result, some applicable
laws, rules and regulations do not contemplate or address unique issues associated with crypto assets or the digital financial system,
are subject to significant uncertainty, and vary widely across U.S. federal, state, and local and international jurisdictions. These
legal and regulatory regimes evolve frequently and may be modified, interpreted, and applied in an inconsistent manner from one jurisdiction
to another, and may conflict with one another. Moreover, the complexity and evolving nature of our business and the significant uncertainty
surrounding the regulation of cryptocurrencies and the digital financial system requires us to exercise our judgment as to whether certain
laws, rules, and regulations apply to us, and it is possible that governmental bodies and regulators may disagree with our conclusions.
To the extent we have not complied with such
laws, rules, and regulations, we could be subject to significant fines, revocation of authorizations, registrations or licenses, limitations
on our products and services, whistleblower complaints, reputational harm, and other regulatory consequences, each of which may be significant
and could adversely affect our business, operating results, and financial condition.
In addition to existing laws, rules and regulations,
various governmental and regulatory bodies, including legislative and executive bodies, in the U. S. and in other jurisdictions may adopt
new laws, rules, regulations and regulatory requirements. For example, we could become subject to laws, regulations or other regulatory
action imposing restrictions, disclosure requirements or limitations on the transaction fees that we are able to charge our users for
Bitcoin transactions, including the markup at which we sell Bitcoin to users and the separate flat transaction fee that we charge. As
a result, we may not be able to sell Bitcoin at a profitable margin, which would adversely affect our revenue and financial condition.
Furthermore, new interpretations of existing laws, rules, and regulations may be issued by such bodies or the judiciary, which may adversely
impact the development of the digital financial system as a whole and our legal and regulatory status in particular by changing how we
operate our business, how our products and services are regulated, and what products or services we and our competitors can offer, requiring
changes to our compliance and risk mitigation measures, imposing new registration or licensing requirements, or imposing a total ban
on certain Bitcoin transactions, as has occurred in certain jurisdictions in the past.
We are subject to ongoing supervision, examination, oversight,
and reviews and currently are, and expect in the future, to be subject to investigations and inquiries, by U.S. federal and state regulators,
and foreign financial service regulators. As a result of findings from these reviews and examinations, regulators have, are, and may
in the future require us to take certain actions, including amending, updating, or revising our compliance policies and procedures from
time to time, limiting the kinds of users that we provide services to, changing, terminating, or delaying our registrations or licenses
and the introduction of our existing or new product and services, and undertaking further external audits. From time to time, we may
receive examination reports citing violations of rules and regulations, inadequacies in existing compliance programs, and requiring us
to enhance certain practices with respect to our compliance program, including user due diligence, transaction monitoring, training,
and regulatory reporting and recordkeeping. Implementing appropriate measures to properly remediate these examination findings may require
us to incur significant costs, and if we fail to properly remediate any of these examination findings, we could face civil litigation,
significant fines, damage awards, forced removal of certain employees including members of our executive team, barring of certain employees
from participating in our business in whole or in part, revocation of existing authorizations, registrations or licenses, limitations
on existing and new products and services, reputational harm, negative impact to our existing relationships with regulators, exposure
to criminal liability, or other regulatory consequences. Further, we believe increasingly strict legal and regulatory requirements and
additional regulatory investigations and enforcement, any of which could occur or intensify, may continue to result in changes to our
business practices, as well as increased costs, and supervision and examination for ourselves and our service providers. Moreover, new
laws, rules, regulations, or interpretations may result in additional litigation, regulatory investigations, and enforcement or other
actions, including preventing or delaying us from offering certain products or services offered by our competitors or could impact how
we offer such products and services. Adverse changes to, or our failure to comply with, any laws, rules, and regulations have had, and
may continue to have, an adverse effect on our reputation and brand and our business, operating results, and financial condition.
It may become illegal to acquire, own, hold, sell, or use Bitcoin
or other cryptocurrencies, participate in blockchains or utilize cryptocurrencies in other countries, which would adversely affect us.
Although currently the use of crypto assets
generally is not restricted in most countries, countries such as China and Russia have taken harsh regulatory actions to curb the use
of cryptocurrencies and may continue to take regulatory actions in the future that could severely restrict the right to acquire, own,
hold, sell or use cryptocurrencies or to exchange them for fiat currency. In September 2021, China instituted a blanket ban on all cryptocurrency
transactions and mining, including services provided by overseas cryptocurrency exchanges in mainland China, effectively making all cryptocurrency-related
activities illegal in China. In other nations, including Russia, it is illegal to accept payment in cryptocurrency for consumer transactions,
and banking institutions are barred from accepting deposits of Bitcoin or other cryptocurrencies. In January 2022, the Central Bank of
Russia called for a ban on crypto asset activities ranging from mining to trading. While our operations are currently limited to the
U.S. and Latin America, such restrictions may adversely affect our growth potential or us if the restrictions limit the large-scale use
of cryptocurrency or if the use of cryptocurrency becomes confined to certain regions globally. Such circumstances could have a material
adverse effect on our business, prospects, operating results, and financial condition.
The digital financial system is continually
being developed. As a result, governments and policymakers are still considering what a regulatory regime for cryptocurrencies should
look like. If we are unable to effectively react to future proposed legislation and regulation of cryptocurrencies or cryptocurrency
businesses, our business, operating results, and financial condition could be adversely affected.
The digital financial system is continually
being developed and the new laws are being proposed and enacted. As a result, many policymakers are just beginning to consider what a
regulatory regime for cryptocurrency should look like and the elements that would serve as the foundation for such a regime. As cryptocurrency
has grown in both popularity and market size, various U.S. federal, state, and local and foreign governmental organizations, consumer
protection agencies, and public advocacy groups have been examining the operations of cryptocurrency networks, users and platforms, with
a focus on how cryptocurrencies can be used to launder the proceeds of illicit activities, fund criminal or terrorist enterprises, and
the safety and soundness of platforms and other service providers that hold cryptocurrencies for users. Many of these entities have called
for heightened regulatory oversight, and have proposed legislation and regulations, undertaken enforcement actions and/or issued consumer
advisories describing the risks posed by cryptocurrencies to users and investors. The impacts of such potential and proposed heightened
regulatory oversight are not yet known. For example, on November 20, 2023, the California Department of Financial Protection and Innovation
(“DFPI”) issued an invitation for comments on a potential rulemaking relating to two new California laws that will impose
sweeping obligations on companies engaged in virtual currency activities in California and with California residents. The first law,
Assembly Bill 39, prohibits people from engaging in digital financial asset business activity – or holding themselves out as being
able to engage in digital financial asset business activity – without meeting certain criteria and obtaining a license from the
DFPI, including compliance obligations and stablecoin approvals among other guidelines. The second, Senate Bill 401, imposes requirements
on operators of digital financial asset transaction kiosks. The DFPI refers to the two bills collectively as the Digital Financial Assets
Law (“DFAL”). The DFAL begins taking effect on January 1, 2024, with covered persons required to be licensed, or to have
submitted a license application and be awaiting approval or denial of that application, on or before July 1, 2025. For further discussion
of DFAL and its potential impact on the Company’s business operations, see page___ of this prospectus.
Competitors, including traditional financial
services, have spent years cultivating professional relationships with relevant policymakers on behalf of their industry so that those
policymakers may understand that industry, the current legal landscape affecting that industry, and the specific policy proposals that
could be implemented to responsibly develop that industry. The lobbyists working for these competitors have similarly spent years developing
and working to implement strategies to advance these industries. Members of the digital financial system have started to engage policymakers
directly and with the help of external advisors and lobbyists, but this work is still in a relatively nascent stage. As a result, new
laws, rules, and regulations may be proposed and adopted in the U.S. and internationally, or existing laws, rules, and regulations may
be interpreted in new ways, that harm the digital financial system or digital asset businesses, which could adversely impact our business.
Our obligations to comply with the laws,
rules, regulations, and policies of a variety of jurisdictions may increase and we may be subject to inquiries, investigations, and enforcement
actions by U.S. and non-U.S. regulators and governmental authorities, including those related to sanctions, export control, and anti-money
laundering.
If we expand our activities to other countries
we do not currently operate in, we may become obligated to comply with additional laws, rules, regulations, policies, and legal interpretations
of both the jurisdictions in which we operate and those into which we offer products and services on a cross-border basis. For instance,
financial regulators outside the U.S. have in recent months significantly increased their scrutiny of digital asset exchanges, such as
by requiring digital asset exchanges operating in their local jurisdictions to be regulated and licensed under local laws. Moreover,
laws regulating financial services, the internet, mobile technologies, cryptocurrencies, and related technologies outside of the U.S.
are evolving, extensive and could impose different, more specific, or even conflicting obligations on us, as well as broader liability.
In addition, we are required to comply with laws, rules, and regulations related to economic sanctions and export controls enforced by
U.S. Department of Commerce’s Bureau of Industry and Security, and U.S. anti-money laundering and counterterrorist financing laws,
rules, and regulations enforced by FinCEN and certain state financial services regulators. U.S. sanctions and export control laws and
regulations generally restrict dealings by persons subject to U.S. jurisdiction with certain jurisdictions that are the target of comprehensive
embargoes, currently the Crimea Region, the Donetsk People’s Republic of Ukraine, the Luhansk People’s Republic of Ukraine,
Cuba, Iran, North Korea, and Syria, as well as with persons, entities, and governments identified on certain prohibited party lists.
Moreover, as a result of the Russian invasion of Ukraine, the U.S., the E.U., the United Kingdom, and other jurisdictions have imposed
wide-ranging sanctions on Russia and Belarus and persons and entities associated with Russia and Belarus. There can be no certainty regarding
whether such governments or other governments will impose additional sanctions, or other economic or military measures against Russia
or Belarus.
We have an Office of Foreign Assets Control
(“OFAC”) compliance program in place that includes monitoring of IP addresses to identify prohibited jurisdictions and of
blockchain addresses that have either been identified by OFAC as prohibited or that otherwise are believed by us to be associated with
prohibited persons or jurisdictions. Nonetheless, there can be no guarantee that our compliance program will prevent transactions with
particular persons or addresses or prevent every potential violation of OFAC sanctions, and our expansion into additional jurisdictions
may subject us to additional risks related to use of our services by sanctioned persons.
From time to time, we have submitted voluntary
disclosures to OFAC or responded to administrative subpoenas from OFAC. Certain of these voluntary self-disclosures are currently under
review by OFAC. To date, none of those proceedings has resulted in a monetary penalty or finding of violation. Any present or future
government inquiries relating to sanctions could result in negative consequences for us, including costs related to government investigations,
financial penalties, and harm to our reputation. The impact on us related to such matters could be substantial. Although we have implemented
controls and are working to implement additional controls and screening tools designed to prevent sanctions violations, there is no guarantee
that we will not inadvertently provide access to our products and services to sanctioned parties or jurisdictions in the future
Regulators worldwide frequently study each
other’s approaches to the regulation of the digital financial system. Consequently, developments in any jurisdiction may influence
other jurisdictions. New developments in one jurisdiction may be extended to additional services and other jurisdictions. As a result,
the risks created by any new law or regulation in one jurisdiction are magnified by the potential that they may be replicated, affecting
our business in another place or involving another service. Conversely, if regulations diverge worldwide, we may face difficulty adjusting
our products, services, and other aspects of our business with the same effect. The complexity of U.S. federal and state and international
regulatory and enforcement regimes could result in a single event prompting numerous overlapping investigations and legal and regulatory
proceedings by multiple government authorities across different jurisdictions. Any of the foregoing could, individually or in the aggregate,
harm our reputation, damage our brands and business, and adversely affect our operating results and financial condition. Due to the uncertain
application of existing laws, rules, and regulations, it may be that, despite our regulatory and legal analysis concluding that certain
products and services are currently unregulated, such products or services may indeed be subject to financial regulation, licensing,
or authorization obligations that we have not obtained or with which we have not complied. As a result, we are at a heightened risk of
enforcement action, litigation, regulatory, and legal scrutiny which could lead to sanctions, cease and desist orders, or other penalties
and censures which could significantly and adversely affect our continued operations and financial condition.
Complex and evolving U.S. and international
laws, rules and regulation regarding privacy and data protection could result in claims, changes to our business practices, penalties,
increased cost of operations, or otherwise harm our business.
We are subject to requirements relating to
data privacy and the collection, processing, storage, transfer, and use of data under U.S. federal, state and foreign laws. For example,
the FTC routinely investigates the privacy practices of companies and has commenced enforcement actions against many, resulting in multi-million
dollar settlements and multi-year agreements governing the settling companies’ privacy practices. The California Consumer Protection
Act, which became effective on January 1, 2020, imposes heightened data privacy requirements on companies that collect information from
California residents. If we are unable to meet any such requirements, we may be subject to significant fines or penalties. As the number
of jurisdictions enacting privacy and related laws increases and the scope of these laws and enforcement efforts expands, we will increasingly
become subject to new and varying requirements. Failure to comply with existing or future data privacy laws, rules, regulations and requirements,
including by reason of inadvertent disclosure of personal information, could result in significant adverse consequences, including reputational
harm, civil litigation, regulatory enforcement, costs of remediation, increased expenses for security systems and personnel, and harm
to our users. These consequences could materially adversely affect our business, financial condition and results of operations.
In addition, we make information
available to certain U.S. federal and state agencies, as well as certain foreign, government agencies in connection with regulatory
requirements to assist in the prevention of money laundering and terrorist financing and pursuant to legal obligations and
authorizations. In recent years, we have experienced increasing data sharing requests by these agencies, particularly in connection
with efforts to prevent terrorist financing or reduce the risk of identity theft. During the same period, there has also been
increased public attention to the corporate use and disclosure of personal information, accompanied by legislation and regulations
intended to strengthen data protection, information security, and consumer privacy. These regulatory goals may conflict, and the law
in these areas may not be consistent or settled. While we believe that we are compliant with our regulatory responsibilities, the
legal, political, and business environments in these areas are rapidly changing, and subsequent legislation, regulation, litigation,
court rulings or other events could expose us to increased program costs, liability and reputational damage that could have a
material adverse effect on our business, financial condition, and results of operations.
Future developments in tax laws or regulations
regarding the treatment and reporting of cryptocurrencies for U.S. and foreign tax purposes could adversely impact our tax expense and
liabilities, reporting obligations, liquidity, and business.
Due to the new and evolving nature of cryptocurrencies
and the absence of comprehensive legal and tax guidance with respect to digital asset products and transactions, many significant aspects
of the U.S. and foreign tax treatment of transactions involving cryptocurrencies, such as the purchase and sale of cryptocurrencies,
are uncertain, and it is unclear whether, when and what guidance may be issued in the future on the treatment of digital asset transactions
for U.S. and foreign income tax purposes. In 2014, the IRS released Notice 2014-21, discussing certain aspects of “virtual currency”
for U.S. federal income tax purposes and, in particular, stating that such virtual currency (i) is “property,” (ii) is not
“currency” for purposes of the rules relating to foreign currency gain or loss, and (iii) may be held as a capital asset.
In 2019, the IRS released Revenue Ruling 2019-24 and a set of “Frequently Asked Questions” (which have been periodically
updated), that provide additional guidance, including guidance to the effect that, under certain circumstances, hard forks of digital
currencies are taxable events giving rise to ordinary income and guidance with respect to the determination of the tax basis of virtual
currency. However, this guidance does not address other significant aspects of the U.S. federal income tax treatment of cryptocurrencies
and related transactions.
There continues to be uncertainty with respect
to the timing, character and amount of income inclusions for various digital asset transactions. Although we believe our treatment of
digital asset transactions for federal income tax purposes is consistent with existing guidance provided by the IRS and existing U.S.
federal income tax principles, because of the rapidly evolving nature of digital asset innovations and the increasing variety and complexity
of digital asset transactions and products, it is possible the IRS and various U.S. states may disagree with our treatment of certain
digital asset transactions for U.S. tax purposes, which could adversely affect our users and our business. Similar uncertainties exist
in the foreign markets in which we operate, affecting our non-U.S. user base, and these uncertainties and potential adverse interpretations
of tax law could affect our non-U.S. users and the vitality of our platforms outside of the U.S. There can be no assurance that the IRS,
the U.S. state revenue agencies or other foreign tax authorities, will not alter their respective positions with respect to cryptocurrencies
in the future or that a court would uphold the treatment set forth in existing guidance. It also is unclear what additional guidance
may be issued in the future on the treatment of existing digital asset transactions and future digital asset innovations for purposes
of U.S. tax or other foreign tax regulations. Any such alteration of existing IRS, U.S. state and foreign tax authority positions or
additional guidance regarding digital asset products and transactions could result in adverse tax consequences for holders of cryptocurrencies
and could have an adverse effect on the value of cryptocurrencies and the broader cryptocurrency markets. Future technological and operational
developments that may arise with respect to cryptocurrencies may increase the uncertainty with respect to the treatment of cryptocurrency
for U.S. and foreign tax purposes. The uncertainty regarding tax treatment of digital asset transactions impacts our users, and could
adversely impact our business, including if the volume of cryptocurrency transactions decreases due to adverse tax effect.
Sanctions could cause us to cease operations
in foreign countries or dealings with foreign citizens.
Sanctions, such as those promulgated by the U.S.
Department of Treasury, could be brought against countries where the Company operates, or against citizens of certain countries regardless
of where they reside. Ceasing operations in such a country would have a negative impact on revenues and the Company may also incur extraordinary
costs which may adversely impact an investment in the Shares.
Heightened scrutiny by regulators could
be detrimental to the operations of the Company or its brand image.
Our existing operations and any future operations
or investments may become the subject of heightened scrutiny by regulators, stock exchanges and other authorities in the United States
or globally. As a result, we may be subject to significant direct and indirect interaction with public officials. There can be no assurance
that this heightened scrutiny will not in turn lead to the imposition of certain restrictions on our ability to operate or invest in
the United States or any other jurisdiction, in addition to those described herein. Further any negative connotations directed at the
Company by such public officials could be detrimental to the Company’s brand image and adversely impact an investment in the Shares.
We or our assets may become subject to federal
and state asset forfeiture laws which could negatively impact our business operations or financial position.
Violations of any federal laws and regulations
could result in significant fines, penalties, administrative sanctions, convictions, or settlements arising from civil proceedings conducted
by either the federal government or private citizens, or criminal charges, including, but not limited to, seizure of assets, disgorgement
of profits, cessation of business activities or divestiture.
As an entity that conducts business in cash (physical
currency), we are potentially subject to federal and state forfeiture laws (criminal and civil) that permit the government to seize the
proceeds of suspected criminal activity. Civil forfeiture laws could provide an alternative for the federal government or any state (or
local police force) that wants to discourage residents from conducting transactions with crypto asset related businesses. Also, an individual
can be required to forfeit property suspected to be the proceeds of a crime even if the individual is not charged or convicted of a crime.
Many law enforcement agencies consider large amounts of cash to be suspicious of criminal activity and have been known to seize such
property when discovered. Any seizure or forfeiture of the Company’s assets, even if only temporary, could disrupt its normal operations
or financial position and negatively affect an investment in the Shares.
Regulators and payment processors have historically
taken actions relating to access to banking services, which could materially adversely affect our business.
Actions by the U.S. Department of Justice (the
“Justice Department”), the Federal Deposit Insurance Corporation, (“FDIC”), and certain state regulators beginning
in 2013, referred to as “Operation Choke Point,” appear to have been intended to discourage banks and payment processors
from providing access to banking for certain businesses that are considered high-risk. This heightened regulatory scrutiny by the Justice
Department, the FDIC and other regulators has caused various banks and payment processors to cease doing business with Bitcoin ATM companies
or companies who do business with Bitcoin ATM companies, without consideration of the actual risk to the banks or processors, simply
to avoid heightened federal and state regulatory scrutiny. The operation was officially ended in August 2017; however, future discouragement
by the Justice Department, the FDIC, or the Office of the Comptroller of the Currency (“OCC”) could cause the Company, or
its service providers including locations where the Company places its fleet of Bitcoin ATMs, to have restricted access to the U.S. financial
system as provided by banks, payment providers, or other financial intermediaries, and that could have a negative impact on the Company’s
operations, its ability to perform its contractual obligations, or its financial position.
If the Company is unable to satisfy data
protection, security, privacy, and other government- and industry-specific requirements, its growth could be harmed.
There are several data protections, security,
privacy, and other government and industry-specific requirements, including those that require companies to notify individuals of data
security incidents involving certain types of personal data, enacted across various jurisdictions globally. In addition, our agreements
to deliver software may have requirements for the protection of user data. Security compromises or cyberattacks could harm the Company’s
reputation, erode market confidence in the effectiveness of its security measures and reliability of its endorsements, negatively impact
its ability to attract new clients, or cause clients to stop using the Company’s services.
The nature of our business requires the
application of complex financial accounting rules, and there is limited guidance from accounting standard setting bodies. If financial
accounting standards undergo significant changes, our operating results could be adversely affected.
The accounting rules and regulations that we
must comply with are complex and subject to interpretation by the Financial Accounting Standards Board (the “FASB”), the
SEC, and various bodies formed to promulgate and interpret appropriate accounting principles. In addition to the United States, the Company
operates in several Latin American countries that may or may not offer similar accounting treatments to some of the Company’s transactions.
This could have a significant effect on the ability of the Company to offer comparable results segmented by country in the future. A
change in these principles or interpretations could have a significant effect on our reported financial results and may even affect the
reporting of transactions completed before the announcement or effectiveness of a change. Recent actions and public comments from the
FASB and the SEC have focused on the integrity of financial reporting and internal controls. In addition, many companies’ accounting
policies are being subject to heightened scrutiny by regulators and the public. Further, there has been limited precedents for the financial
accounting of crypto assets and related valuation and revenue recognition, and no official guidance has been provided by the FASB or
the SEC. As such, there remains significant uncertainty on how companies can account for crypto asset transactions, crypto asset balances,
derivatives and liabilities denominated in crypto asset tokens, and related revenue and expense. Uncertainties in or changes to regulatory
or financial accounting standards could result in the need to change our accounting methods and restate our financial statements and
impair our ability to provide timely and accurate consolidated financial information, which could adversely affect our financial statements,
result in a loss of investor confidence, and more generally impact our business, operating results, and financial position.
Our products and services may be negatively
characterized by consumer advocacy groups, the media or certain federal, state and local government of officials, and if those negative
characterizations become increasingly accepted by current or potential new users and/or our retail partners, or result in restrictions
or limitations on the fees we charge to users, our reputation could be significantly impacted, which when coupled with required modifications
to our fee model could result in decreased demand for our products and services and a corresponding decrease in our transaction volume,
all of which could materially and adversely impact our business.
Certain media reports have asserted that
laws and regulations regarding cryptocurrencies and related transactions and activities should be broader and more restrictive. In
many cases, these media reports can focus on fees charged to users, which are often alleged to be higher than the fees typically
charged by banks or similar institutions, as well as marketing tactics, which are alleged to target socioeconomically vulnerable
communities. The fees and marketing strategies associated with our kiosks are from time to time characterized by consumer advocacy
groups and media reports as predatory or abusive without discussing the numerous benefits to users. If the negative characterization
of our marketing strategies and/or fee structure becomes increasingly accepted by current or potential new users of our ATMs demand
for our products and services could decrease, which could have a material adverse effect on our business, results of operations and
financial condition.
If we are unable to effectively respond to
such characterizations, or if there are modifications to our fee model, including as a result of changes in or the adoption of any laws
or regulations imposing restrictions or limitations on the markup at which we sell Bitcoin to users, we may experience declines in user
loyalty and transactions, which could have a material adverse effect on our business, results of operations and financial condition.
Additionally, any actions by our competitors that are challenged by users, advocacy groups, the media or governmental agencies or entities
as being abusive or predatory, could result in our products and services being perceived as unlawful or inappropriate activities or business
practices, merely because we operate in the same general industries as such competitors. Such perception, whether or not accurate, could
have a material adverse effect on our business, results of operations and financial condition.
Litigation or investigations involving
us, our agents or other contractual counterparties could result in material settlements, fines or penalties and may adversely affect
our business, financial condition and results of operations.
We have been, and in the future may be,
subject to allegations and complaints that individuals or entities have used our products and services for fraud-induced money
transfers, as well as certain money laundering activities, which may result in fines, penalties, judgments, settlements and
litigation expenses. We also are the subject from time to time of litigation related to our business (see “Legal
Proceedings”, page 99). The outcome of such allegations, complaints, claims and litigation cannot be predicted.
Regulatory and judicial proceedings and potential
adverse developments in connection with ongoing litigation may adversely affect our business, financial condition and results of operations.
There may also be adverse publicity associated with lawsuits and investigations that could decrease third-party and consumer use and
acceptance of our products and services. Additionally, our business may be the subject of class action lawsuits including securities
litigation, regulatory actions and investigations and other general litigation. The outcome of class action lawsuits, including securities
litigation, regulatory actions and investigations and other litigation is difficult to assess or quantify but may include substantial
fines and expenses, as well as the revocation of required authorizations, registrations or licenses or the loss of approved status, which
could have a material adverse effect on our business, financial position, and results of operations or users’ confidence in our
business. Plaintiffs or regulatory agencies in these lawsuits, actions or investigations may seek recovery of very large or indeterminate
amounts, and the magnitude of these actions may remain unknown for substantial periods of time. The cost to defend or settle future lawsuits
or investigations may be significant. In addition, improper activities, lawsuits or investigations involving third-parties may adversely
impact our business operations or reputation even if we are not directly involved.
Proposed new regulation or legislation
may impact our business operations and financial results.
The Proposed Rule on Gross Proceeds and Basis
Reporting by Brokers and Determination of Amount Realized and Basis for Digital Asset Transactions requires brokers, including digital
asset trading platforms, digital asset payment processors, and certain digital asset hosted wallets, to file information returns, and
furnish payee statements, on dispositions of digital assets effected for customers in certain sale or exchange transactions. The IRS
has received a significant amount of commentary on the Proposed Rule on Gross Proceeds and Basis Reporting by Brokers and Determination
of Amount Realized and Basis for Digital Asset Transactions. The comment period for this proposed rulemaking was extended, indicating
a high level of interest and engagement from the public. The Securities Industry and Financial Markets Association (SIFMA) provided comments
to the IRS on the proposed digital asset reporting regulations as has the American Institute of Certified Public Accountants (AICPA.) These
comments are part of the regulatory process, allowing stakeholders to provide feedback and raise concerns about proposed rules.
This feedback can influence the final form of the regulations. The impact of this act on our business will depend on the final form
of the regulations and how they are implemented.
The impact of these regulations on businesses
can be significant. Complying with federal regulations costs U.S. businesses over $46 billion a year. Regulations in the federal government
are estimated to cost the American economy up to $1.9 trillion annually in direct costs, lost productivity, and higher prices. Small
businesses with fewer than 50 employees spend nearly 20% more on taxes than the average firm.
These regulations, if enacted, could increase
compliance costs, create operational challenges, cause our general and administrative costs to increase and potentially impact the profitability
of our businesses. To comply with laws adopted by the United States government or other United States or foreign regulatory bodies, we
may be required to increase our expenditures and hire additional personnel and additional outside legal, accounting and advisory
services, all of which may cause our general and administrative and compliance costs to increase without an ability to pass through any
increased expenses through higher prices considering that other federal and state regulations may also place restrictions on volume,
margin and pricing.
The Company is diligently monitoring developments
related to these regulations, but the ultimate outcome and the specific requirements that may be imposed remain uncertain. The
uncertainty surrounding the interpretation and enforcement of these regulations may create additional challenges in our digital asset
transactions and reporting practices as the regulatory landscape evolves.
Risk Factors Related to Intellectual Property
Our intellectual property rights are valuable,
and any inability to protect them could adversely impact our business, operating results, and financial condition.
Our business depends in large part on our proprietary
technology and our brand. We rely on, and expect to continue to rely on, a combination of trademark, trade dress, domain name, copyright,
and trade secret and laws, as well as confidentiality and license agreements with our employees, contractors, consultants, and third
parties with whom we have relationships, to establish and protect our brand and other intellectual property rights. However, our efforts
to protect our intellectual property rights may not be sufficient or effective. Our proprietary technology and trade secrets could be
lost through misappropriation or breach of our confidentiality and license agreements, and any of our intellectual property rights may
be challenged, which could result in them being narrowed in scope or declared invalid or unenforceable. There can be no assurance that
our intellectual property rights will be sufficient to protect against others offering products, services, or technologies that are substantially
like ours and that compete with our business.
We may in the future be sued by third parties
for alleged infringement of their proprietary rights.
In recent years, there has been considerable
patent, copyright, trademark, domain name, trade secret and other intellectual property development activity in the crypto economy, as
well as litigation, based on allegations of infringement or other violations of intellectual property, including by large financial institutions.
Furthermore, individuals and groups (collectively “patent trolls”) can purchase patents and other intellectual property assets
for the purpose of making claims of infringement to extract settlements from companies like ours. Our use of third-party intellectual
property rights also may be subject to claims of infringement or misappropriation. We cannot guarantee that our internally developed
or acquired technologies and content do not or will not infringe the intellectual property rights of others. From time to time, our competitors
or other third parties may claim that we are infringing upon or misappropriating their intellectual property rights, and we may be found
to be infringing upon such rights. Any claims or litigation could cause us to incur significant expenses and, if successfully asserted
against us, could require that we pay substantial damages or ongoing royalty payments, prevent us from offering our products or services
or using certain technologies, force us to implement expensive workarounds, or impose other unfavorable terms. We expect that the occurrence
of infringement claims is likely to grow as the market grows and matures. Accordingly, our exposure to damages resulting from infringement
claims could increase and this could further exhaust our financial and management resources. Further, during any litigation, we may make
announcements regarding the results of hearings and motions, and other interim developments. If securities analysts and investors regard
these announcements as negative, the market price of our common stock may decline. Even if intellectual property claims do not result
in litigation or are resolved in our favor, these claims, and the time and resources necessary to resolve them, could divert the resources
of our management and require significant expenditures. Any of the foregoing could prevent us from competing effectively and could have
an adverse effect on our business, operating results, and financial condition and negatively affect an investment in the Shares.
Risk Factors Related to Our Employees and
Other Service Providers
Our management team has limited experience
managing a public company.
Our management team has limited experience managing
a publicly traded company, interacting with public company investors, and complying with the increasingly complex laws pertaining to
public companies. Our management team may not successfully or efficiently manage our transition to being a public company subject to
significant regulatory oversight and reporting obligations under the federal securities laws and the continuous scrutiny of securities
analysts, and investors. These new obligations and constituents will require significant attention from our senior management and could
divert their attention away from the day-to-day management of our business, which could adversely affect our business, operating results,
and financial position.
The loss of one or more of our key personnel,
or our failure to attract and retain other highly qualified personnel in the future, could adversely impact our business, operating results,
and financial position.
We operate in a new industry that is not widely
understood and requires highly skilled and technical personnel. We believe that our future success is highly dependent on the talents
and contributions of our senior management team, members of our executive team, and other key employees across operations, customer support,
finance, and compliance. Our future success depends on our ability to attract, develop, motivate, and retain highly qualified and skilled
employees. Due to the nascent nature of the crypto asset industry, in particular the Bitcoin ATM market, the pool of qualified talent
is extremely limited, particularly with respect to executive talent, engineering, cross-border operations, risk management, and financial
regulatory expertise. We face intense competition for qualified individuals from numerous software, finance and other technology companies.
To attract and retain key personnel, we incur significant costs, including salaries, benefits and equity incentives. Even so, these measures
may not be enough to attract and retain the personnel we require to operate our business effectively. The loss of even a few qualified
employees, or an inability to attract, retain and motivate additional highly skilled employees required for the planned expansion of
our business could adversely impact our operating results and impair our ability to grow.
We currently rely and are dependent on one
third-party service provider for certain aspects of our operations, and any interruptions in services provided by that third party may
impair our ability to support our customers.
We rely on and are dependent on Genesis Coin,
Inc., an unrelated third party, in connection with many aspects of our business operations. They manufacture the majority of our Bitcoin
ATMs and are responsible for the development of related software systems that provide advanced security protections, which are critical
to our operations. Although we use other suppliers of Bitcoin ATMs, primarily outside the U.S., our main income is generated by the ATMs
that we purchase from Genesis Coin. Because we rely heavily on one third party to provide these services and to facilitate certain of
our business activities, we face increased operational risks. We do not control the operation of that third party. That third party may
be subject to financial, legal, regulatory, and labor issues, cybersecurity incidents, break-ins, computer viruses, denial-of-service
attacks, sabotage, acts of vandalism, privacy breaches, service terminations, disruptions, interruptions, and other misconduct. They
may also be vulnerable to damage or interruption from human error, power loss, telecommunications failures, fires, floods, earthquakes,
hurricanes, tornadoes, pandemics (including the COVID-19 pandemic) and similar events. In addition, we do not have a written contract
with that third party and our relationship is based on oral agreement and previous working relationship. That third party may breach
such oral agreement with us, refuse to continue to provide their services to us, take actions that degrade the functionality of our services,
impose additional costs or requirements on us, or give preferential treatment to competitors. There can be no assurance that such third
party that provides services to us will continue to do so on acceptable terms, or at all. If such a third party does not adequately or
appropriately provide its services or perform its responsibilities to us, we may be unable to procure alternatives in a timely and efficient
manner and on acceptable terms, or at all, and we may be subject to business disruptions, losses or costs to remediate any of the deficiencies,
customer dissatisfaction, reputational damage, legal or regulatory proceedings, or other adverse consequences which could harm our business.
In the event of employee or service provider
misconduct or error, our business may be adversely impacted.
Employee or service provider misconduct or error
could subject us to legal liability, financial losses, and regulatory sanctions and could seriously harm our reputation and negatively
affect our business. Such misconduct could include engaging in improper or unauthorized transactions or activities, misappropriation of
funds, identity theft, misappropriation of information, failing to supervise other employees or service providers, and improperly using
confidential information. Employee or service provider errors, including mistakes in executing, recording, or processing transactions
for customers, could expose us to the risk of material losses even if the errors are detected. Although we have implemented processes
and procedures and provide training to our employees and service providers to reduce the likelihood of misconduct and error, these efforts
may not be successful. Moreover, the risk of employee or service provider error or misconduct may be even greater for novel products and
services. It is not always possible to deter misconduct, and the precautions we take to prevent and detect such activities may not be
effective in all cases. If we were found to have not met our regulatory oversight, compliance and other obligations, we could be subject
to regulatory sanctions, financial penalties, and restrictions on our activities for failure to properly identify, monitor and respond
to potentially problematic activity and seriously damage our reputation. Our employees, contractors, and agents could also commit errors
that subject us to financial claims for negligence, as well as regulatory actions, or result in financial liability. Further, allegations
by regulatory or criminal authorities of improper trading activities could affect our brand and reputation.
Our officers, directors, employees, and
large shareholders may encounter potential conflicts of interests with respect to their positions or interests in certain crypto assets,
projects, entities, and other initiatives, which could adversely affect our business and reputation.
We frequently engage in a wide variety of transactions
and maintain relationships with a significant number of other firms in the broad economy surrounding Bitcoin, blockchain and other crypto
assets. These transactions and relationships could create potential conflicts of interests in management decisions that we make. For
instance, certain officers, directors, and employees of the Company are active investors in crypto projects themselves, and may make
investment decisions that favor projects that they have personally invested in. Many of our large shareholders also make investments
in these crypto projects.
Similarly, certain directors, officers, employees,
and large shareholders of the Company may hold crypto assets or have other beneficial ownership of sponsors of such crypto assets, tokens,
or stable coins that we are considering supporting with our Bitcoin ATM fleet and may be more supportive of such listing notwithstanding
legal, regulatory, and other issues associated with such crypto assets. If we fail to manage these conflicts of interests, our business
may be harmed and the brand, reputation and credibility of our company may be adversely affected.
Risk Factors Related to Ownership of Our
Common Stock
Our founders, single major shareholder, and
director control, and may continue to control, our Company for the foreseeable future, including the outcome of matters requiring shareholder
approval.
Our founders, single major shareholder, and director
collectively beneficially own approximately 69% of our outstanding shares of common stock. As a result, such individuals will, for the
foreseeable future, have the ability, if acting together, to control the election of our directors and the outcome of corporate actions
requiring shareholder approval, such as: (i) a merger or a sale of our company, (ii) a sale of all or substantially all of our assets,
and (iii) amendments to our articles of incorporation and bylaws. This concentration of voting power and control could have a significant
effect in delaying, deferring, or preventing an action that might otherwise be beneficial to our other shareholders and be disadvantageous
to our shareholders with interests different from those entities and individuals. See “Management and Certain Security Holders” for further discussion of the board of directors’ structure and principal shareholders’ agreements. Therefore,
you should not invest in reliance on your ability to have any control over our Company.
Our securities may be treated as “Penny
Stocks” that may make them less desirable or accessible by investors or potential investors.
Rule 15g-9 under the Securities Exchange Act
of 1934, as amended (the “Exchange Act”) establishes the definition of a “penny stock,” for the purposes relevant
to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share,
subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require: (a) that a broker or dealer
must approve a person’s account for transactions in penny stocks; and (b) the broker or dealer must receive from the investor a
written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.
In order to approve a person’s account
for transactions in penny stocks, the broker or dealer must: (a) obtain financial information and investment experience objectives of
the person and (b) make a reasonable determination that the transactions in penny stocks are suitable for that person and the person
has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.
The broker or dealer must also deliver, prior
to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which, in highlight
form: (a) sets forth the basis on which the broker or dealer made the suitability determination; and (b) confirms that the broker or
dealer received a signed, written agreement from the investor prior to the transaction. Generally, brokers may be less willing to execute
transactions in securities subject to the “penny stock” rules. This may make it more difficult for investors to dispose of
our common stock and cause a decline in the market value of our common stock.
Disclosure also has to be made about the risks
of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker or
dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor
in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the
penny stock held in the account and information on the limited market in penny stocks. Management believes that the penny stock rules
could discourage investor interest in and limit the marketability of our Shares.
The market price of our common stock may
be volatile and could decline significantly and rapidly.
The market price of our common stock could
be subject to wide fluctuations in response to the risk factors beyond our control, including:
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the number of shares of common stock publicly owned and available for trading; |
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overall performance of the equity markets or publicly-listed financial services, cryptocurrency
and technology companies; |
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our actual or anticipated operating performance and the operating performance of our competitors; |
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changes in the projected operational and financial results we provide to the public or our failure
to meet those projections; |
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failure of securities analysts to initiate or maintain coverage
of us, changes in financial estimates by any securities analysts who follow our company or our failure to meet the estimates or the
expectations of investors; |
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any major change in our board of directors, management or key personnel; |
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the highly volatile nature of the digital financial system and the prices of cryptocurrencies; |
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rumors and market speculation involving the digital financial system or us or other companies
in our industry; |
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announcements by us or our competitors of significant innovations,
new products, services, features, integrations or capabilities, acquisitions, strategic investments, partnerships, joint ventures,
or capital commitments; and |
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other events or factors, including those resulting from political
instability, and acts of war, or terrorism, or responses to these events, including the current conflict in Ukraine. |
In addition, broad market and industry fluctuations,
as well as general macroeconomic, political and market conditions such as recessions, interest rate changes or international currency
fluctuations, may negatively impact the market price of our common stock. In the past, companies that have experienced volatility in
the market price of their stock have been subject to securities class action litigation. Securities litigation against us could result
in substantial costs and divert our management’s attention from other business concerns, which could harm our business.
Changes in accounting principles and guidance,
or their interpretation, could result in unfavorable accounting charges or effects, including changes to our previously filed financial
statements, which could cause our stock price to decline.
We prepare our consolidated financial statements
in accordance with U.S. generally accepted accounting principles (“GAAP”). These principles are subject to interpretation
by the SEC and various bodies formed to interpret and create appropriate accounting principles and guidance. A change in these principles
or guidance, or in their interpretations, may have a significant effect on our reported results and retroactively affect previously reported
results.
Our Shares are subject to FINRA sales practice
requirements that may make them less desirable or accessible by investors or potential investors.
The U.S. Financial Industry Regulatory Authority
(“FINRA”) has adopted rules that require a broker-dealer to have reasonable grounds for believing that an investment is suitable
for a customer before recommending an investment to a customer. Prior to recommending speculative, low priced securities to non-institutional
customers, broker-dealers must make reasonable efforts to obtain information about the customer's financial status, tax status, investment
objectives, and other information. Pursuant to the interpretation of these rules, FINRA believes that there is a high probability that
speculative, low priced securities will not be suitable for at least some customers. Thus, the FINRA requirements make it more difficult
for broker-dealers to recommend the Common Shares to customers which may limit an investor's ability to buy and sell the Common Shares,
have an adverse effect on the market for the Common Shares, and thereby negatively impact the price of the Common Shares.
Our Shares may be subject to dilution.
We may make future acquisitions or enter financings
or other transactions involving the issuance of securities of the Company which may be dilutive to the other shareholders and any new
equity securities issued could have rights, preferences, and privileges superior to those of holders of Common Shares.
We have never paid dividends on our common
stock and have no plans to do so in the future.
Holders of shares of our common stock are entitled
to receive such dividends as may be declared by our board of directors. To date, we have paid no cash dividends on our shares of common
stock and we do not expect to pay cash dividends on our common stock in the foreseeable future. We intend to retain future earnings,
if any, to provide funds for operations of our business. Therefore, any return investors in our common stock may have, will be in the
form of appreciation, if any, in the market value of their shares of common stock. See “Dividend Policy.”
We will indemnify and hold harmless our officers
and directors to the maximum extent permitted by Nevada law.
Our bylaws provide that we will indemnify and
hold harmless our officers and directors against claims arising from our activities, to the maximum extent permitted by Nevada law. In
addition, if we are called upon to perform under our indemnification agreements entered into with each one of our directors, then the
portion of our assets expended for such purpose would reduce the amount otherwise available for our business.
We may engage in acquisitions, mergers,
strategic alliances, joint ventures, and divestures that could result in results that are different than expected.
In the normal course of business, we engage in
discussions relating to acquisitions, equity investments, mergers, strategic alliances, joint ventures, and divestitures. Such transactions
are accompanied by a number of risks, including the use of significant amounts of cash, potentially dilutive issuances of equity securities,
incurrence of debt on potentially unfavorable terms, accruement of impairment expenses related to goodwill and amortization expenses
related to other intangible assets, the possibility that we overpay for an acquisition relative to the economic benefits that we ultimately
derive from such acquisition, and various potential difficulties involved in integrating acquired businesses into our operations.
We might require additional capital to support
business growth, and this capital might not be available.
We have funded our operations since inception
primarily through debt and equity financings and revenue generated by our services. We cannot be certain when or if our operations will
generate sufficient cash to fully fund our ongoing operations or the growth of our business. We intend to continue to make investments
in our business to respond to business challenges, including deploying more Bitcoin ATMs both in the United States and globally, enhancing
our operating infrastructure, expanding our international operations to include additional regions and countries, and acquiring complementary
businesses and technologies, all of which may require us to secure additional funds. Additional financing may not be available on terms
favorable to us, if at all. If we incur additional debt, the debt holders would have rights senior to holders of our common stock to
make claims on our assets, and the terms of any debt could restrict our operations, including our ability to pay dividends on our common
stock.
The trading prices for our common stock may be
highly volatile, which may reduce our ability to access capital on favorable terms or at all. In addition, a slowdown or other sustained
adverse downturn in the general economic or crypto markets could adversely affect our business and the value of our common stock. Because
our decision to raise capital in the future will depend on numerous considerations, including factors beyond our control, we cannot predict
or estimate the amount, timing, or nature of any future issuances of securities. As a result, our shareholders bear the risk of future
issuances of debt or equity securities reducing the value of our common stock and diluting their interests. Our inability to obtain adequate
financing or financing on terms satisfactory to us, when we require it, could significantly limit our ability to continue supporting
our business growth and responding to business challenges.
Our Common Stock is subject to liquidity
risks.
Our Common Stock is quoted on the OTC Pink Market
Tier of the OTC Markets under the symbol “ABIT”. On November 3, 2023, the last reported sale of our Common Stock was $0.07
per share. As of the date of this prospectus, our Common Stock is quoted on the OTC Pink, and it is not otherwise regularly quoted on
any other over-the-counter market or exchange. We intend for our shares to trade on the OTCQB, an inter-dealer, over-the-counter market
that provides significantly less liquidity than other national or regional exchanges. However, there is no guarantee that our shares
will be listed on the OTCQB, or any other “over- the- counter” marketplace. Moreover, securities traded on the OTCQB are
usually thinly traded, highly volatile, have fewer market makers and are not followed by analysts. The SEC's order handling rules, which
apply to NASDAQ-listed securities, do not apply to securities quoted on the OTCQB. Quotes and other important information for stocks
listed on the OTCQB are not listed in newspapers and may be incorrectly listed by prominent financial websites. Therefore, prices for
securities traded solely on the OTCQB may be difficult to obtain and holders of our securities may be unable to resell their securities
at or near their original acquisition price, or at any price.
The Company and its Common Stock may be negatively
affected if any of the Company’s restricted securities are resold without registration or an available exemption from registration
requirements under the Securities Act.
On March 17, 2022, the Company learned that one
million shares of its restricted common stock owned by an existing shareholder was transferred by its transfer agent to another party.
Such shares were subsequently deposited by a new holder into Depository Trust Company (see Note 25 of the Company’s audited consolidated
financial statements), and some portion of said shares (approximately 50%) has been sold on the trading market. Our stock certificates
representing restricted shares of common stock carry a legend that states that such shares “have not been registered under the
Securities Act of 1933, and may not be sold, transferred, or otherwise disposed unless, in the opinion of counsel satisfactory to the
issuer, the transfer qualifies for an exemption from or exemption to the registration provisions thereof.” The transfer took place
without the Company’s knowledge, approval or required authorization. The Company has immediately notified the relevant parties
to cease any sales of such shares into the public market, and has been assured by the new holder that no shares will be sold pending
the Company’s ongoing investigation. The Company believes that even though it was an unusual event (and the Company took immediate
remedial steps to ensure that the resale of such shares was immediately ceased and prevented in the future, including termination of
its transfer agent), any future sale of restricted and unregistered securities without registration or an available exemption can expose
the Company and its Common Stock to the number of adverse consequences, including: (i) regulatory scrutiny, investigations, enforcement
or other actions, potentially preventing or delaying us from offering our shares or trading our stock, which could negatively impact
an investment in the Shares; (ii) decline or volatility of the market price of our Common Stock as a result of sales of a material number
of shares of our Common Stock in the thinly trading public market, or (iii) securities litigation targeting the Company which could result
in substantial costs and which could harm our business.
We cannot predict at what prices the Common
Stock of the Company will trade and there can be no assurance that an active trading market will develop or be sustained. There is a
significant liquidity risk associated with an investment in the Company.
The shares of our common stock we may issue in
the future and the options we may issue in the future may have an adverse effect on the market price of our common stock and cause dilution
to investors.
We may issue shares of common stock and warrants
to purchase common stock pursuant to private offerings and we may issue options to purchase common stock to our executive officers and
employees pursuant to their employment agreements. The sale, or even the possibility of sale, of shares pursuant to a separate offering
or to executive officers and employees could have an adverse effect on the market price of our common stock or on our ability to obtain
future financing.
We do not anticipate paying any cash dividends
on our Common Stock in the foreseeable future.
We have never declared or paid cash dividends
on our common stock. We currently intend to retain all of our future earnings, if any, to finance the growth and development of our business,
and we do not anticipate paying any cash dividends on our common stock in the foreseeable future. In addition, the terms of any future
debt agreements may preclude us from paying dividends.
We will incur increased costs as a result
of operating as a public company, and our management will be required to devote substantial time to compliance with our public company
responsibilities and corporate governance practices.
As a public company, we will incur significant
legal, accounting, and other expenses that we did not incur as a private company, which we expect to further increase after we are no
longer an “emerging growth company.” The Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act,
and other applicable securities rules and regulations impose various requirements on public companies. Our management and other personnel
devote a substantial amount of time to compliance with these requirements. Moreover, these rules and regulations will increase our legal
and financial compliance costs and will make some activities more time-consuming and costly. We cannot predict or estimate the amount
of additional costs we will incur as a public company or the specific timing of such costs.
Being a public company results in additional
expenses, diverts management’s attention and could also adversely affect our ability to attract and retain qualified directors.
As a public reporting company, we are subject
to the reporting requirements of the Exchange Act. These requirements generate significant accounting, legal and financial compliance
costs and make some activities more difficult, time consuming or costly and may place significant strain on our personnel and resources.
The Exchange Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over
financial reporting. In order to establish the requisite disclosure controls and procedures and internal control over financial reporting,
significant resources and management oversight are required.
As a result, management’s attention may
be diverted from other business concerns, which could have an adverse and even material effect on our business, financial condition and
results of operations. These rules and regulations may also make it more difficult and expensive for us to obtain director and officer
liability insurance. If we are unable to obtain appropriate director and officer insurance, our ability to recruit and retain qualified
officers and directors, especially those directors who may be deemed independent, could be adversely impacted.
Our officers, directors, employees, and
large stockholders may encounter potential conflicts of interests with respect to their positions or interests in cryptocurrencies, entities,
and other initiatives and digital asset-related businesses, which could adversely affect our business and reputation.
Certain of our officers, directors, and employees
are involved with or active investors in certain digital asset-related businesses, such as cryptocurrency miners, as well as active investors
in digital asset projects themselves, and may make investment decisions that favor projects that they have personally invested in. Our
largest stockholders may also make investments in these digital asset projects. Similarly, certain of our directors, officers, employees,
and large stockholders may hold cryptocurrencies that we are considering supporting, and may be more supportive of such listing notwithstanding
legal, regulatory, and other issues associated with such cryptocurrencies. While we have instituted policies and procedures to limit
and mitigate such risks, there is no assurance that such policies and procedures will be effective, or that we will be able to manage
such conflicts of interests adequately. If we fail to manage these conflicts of interests, or we receive unfavorable media coverage with
respect to actual or perceived conflicts of interest, our business may be harmed and the brand, reputation and credibility of our company
may be adversely affected.
We are an emerging growth company and a smaller
reporting company within the meaning of the Securities Act, and if we take advantage of certain exemptions from disclosure requirements
available to “emerging growth companies” or “smaller reporting companies,” this could make our securities less
attractive to investors and may make it more difficult to compare our performance with other public companies.
We are an “emerging growth company,”
as defined in the Jumpstart Our Business Startups Act of 2012, or JOBS Act, and, for as long as we continue to be an “emerging
growth company,” we intend to take advantage of certain exemptions from various reporting requirements applicable to other public
companies but not to “emerging growth companies,” including, but not limited to, not being required to comply with the auditor
attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in
our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation
and stockholder approval of any golden parachute payments not previously approved. We could be an “emerging growth company”
for up to five years following the effectiveness of this registration statement, or until the earliest of (i) the last day of the first
fiscal year in which our annual gross revenues exceed $1.07 billion, (ii) the date that we become a “large accelerated filer”
as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common stock that is held by non-affiliates
exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, or (iii) the date on which we
have issued more than $1.0 billion in non-convertible debt during the preceding three year period.
Because we are not subject to compliance with
rules requiring the adoption of certain corporate governance measures, our stockholders have limited protection against interested director
transactions, conflicts of interest and similar matters.
The Sarbanes-Oxley Act of 2002, as well as rule
changes proposed and enacted by the SEC, the New York and American Stock Exchanges and the Nasdaq Stock Market, as a result of Sarbanes-Oxley,
require the implementation of various measures relating to corporate governance. These measures are designed to enhance the integrity
of corporate management and the securities markets and apply to securities that are listed on those exchanges or the Nasdaq Stock Market.
Because we are not presently required to comply with many of the corporate governance provisions and because we chose to avoid incurring
the substantial additional costs associated with such compliance any sooner than legally required, we have not yet adopted these measures.
We do not currently have an independent audit
or a compensation committee. As a result, directors have the ability, among other things, to determine each other’s level of compensation.
Until we comply with such corporate governance measures, regardless of whether such compliance is required, the absence of such standards
of corporate governance may leave our stockholders without protections against interested director transactions, conflicts of interest,
if any, and similar matters and investors may be reluctant to provide us with funds necessary to expand our operations.
We intend to comply with all corporate governance
measures relating to director independence as and when required. However, we may find it very difficult or be unable to attract and retain
qualified officers, directors and members of board committees required to provide for our effective management as a result of Sarbanes-Oxley
Act of 2002. The enactment of the Sarbanes-Oxley Act of 2002 has resulted in a series of rules and regulations by the SEC that increase
responsibilities and liabilities of directors and executive officers. The perceived increased personal risk associated with these recent
changes may make it costlier or deter qualified individuals from accepting these roles.
In addition to the above risks, businesses are often subject to
risks not foreseen or fully appreciated by management. In reviewing this Prospectus, potential investors should keep in mind other risks
that could be important.
SPECIAL NOTE REGARDING
Forward-Looking Statements
This prospectus contains “forward-looking
statements.” Forward-looking statements reflect the current view about future events. When used in this prospectus, the words “anticipate,”
“believe,” “estimate,” “expect,” “future,” “intend,” “plan,”
or the negative of these terms and similar expressions, as they relate to us or our management, identify forward-looking statements.
Such statements include, but are not limited to, statements contained in this prospectus relating to our business strategy, our future
operating results and liquidity and capital resources outlook. Forward-looking statements are based on our current expectations and assumptions
regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject
to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Our actual results may differ materially
from those contemplated by the forward-looking statements. They are neither statements of historical fact nor guarantees of assurance
of future performance. We caution you therefore against relying on any of these forward-looking statements.
Important factors that could cause actual results
to differ materially from those in the forward-looking statements include, without limitation, market acceptance of our products; our
ability to protect our intellectual property rights; the impact of any infringement actions or other litigation brought against us; competition
from other providers and products; our ability to develop and commercialize new and improved products and services and successfully pursue
innovation; our ability to complete capital raising transactions; and other factors (including the risks contained in the section of
this prospectus entitled “Risk Factors”) relating to our industry, our operations and results of operations. Actual results
may differ significantly from those anticipated, believed, estimated, expected, intended, or planned. Important factors that could cause
such differences include, but are not limited to:
| · | our
future financial performance, including our expectations regarding our net revenue, operating
expenses, and our ability to achieve and maintain future profitability; |
| · | our
business plan and our ability to effectively manage our growth; |
| · | anticipated
trends, growth rates, and challenges in our business, the crypto economy, and in the markets
in which we operate; |
| · | market
acceptance of our products and services; |
| · | beliefs
and objectives for future operations; |
| · | our
ability to further penetrate our existing customer base and maintain and expand our customer
base; |
| · | our
ability to develop new products and services and grow our business in response to changing
technologies, customer demand, and competitive pressures; |
| · | our
expectations concerning relationships with third parties; |
| · | our
ability to maintain, protect, and enhance our intellectual property; |
| · | our
ability to continue to expand internationally; |
| · | the
effects of increased competition in our markets and our ability to compete effectively; |
| · | future
acquisitions of or investments in complementary companies, products, services, or technologies
and our ability to successfully integrate such companies or assets; |
| · | our
ability to stay in compliance with laws and regulations that currently apply or become applicable
to our business both in the United States and internationally; |
| · | economic
and industry trends, projected growth, or trend analysis; |
| · | trends
in revenue, cost of revenue, and gross margin; |
| · | trends
in operating expenses, including technology and development expenses, sales and marketing
expenses, and general and administrative expenses, and expectations regarding these expenses
as a percentage of revenue; |
| · | increased
expenses associated with being a public company; and |
| · | other
statements regarding our future operations, financial condition, and prospects and business
strategies. |
In some cases, you can identify forward-looking
statements by terminology such as “may,” “will,” “should,” “expects,” “intends,”
“plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,”
“continue” or the negative of these terms or other comparable terminology. These statements are only predictions. You should
not place undue reliance on forward-looking statements, because they involve known and unknown risks, uncertainties, and other factors,
which are, in some cases, beyond our control and which could materially affect results. Actual events or results may vary significantly
from those implied or projected by the forward-looking statements due to these risk factors. No forward-looking statement is a guarantee
of future performance. You should read this prospectus and the documents that we reference in this prospectus and have filed with the
SEC as exhibits to the registration statement of which this prospectus forms a part with the understanding that our actual future results,
performance, and events and circumstances may be materially different from what we expect.
Forward-looking statements are made based on
management’s beliefs, estimates and opinions on the date the statements are made and we undertake no obligation to update forward-looking
statements if these beliefs, estimates and opinions or other circumstances should change, except as may be required by applicable law.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results,
levels of activity, performance, or achievements.
Capitalization
The following table details the Company’s
capitalization as of September 30, 2023:
| · | On
an actual basis; |
| · | On
a pro forma basis to give effect to the sale of the shares by employees who have outstanding
loans to exercise options and the pro-rata repayment of those loans; and |
| · | On
a pro forma basis as adjusted basis to give effect to the transaction described in the preceding
bullet point as well as the conversion of the Convertible Debenture. |
In January 2020, the Company allowed its employees
with vested stock options to exercise such options with the use of a non-recourse loan agreement. The Company’s employees exercised
their respective stock options into a total of 157,635,309 shares of common stock at a weighted average exercise price of $0.0060 per
share. The loan amount at exercise of such options was $945,812. The terms of the non-recourse loan agreement include a maturity date
of 48 months from the date of exercise and an interest rate of 1.69%. As of September 30, 2023, the outstanding balance due from employees
was $1,006,000. The amount receivable from employees is presented in the balance sheet as a deduction from stockholders' equity.
This is generally consistent with Rule 5-02.30 of Regulation S-X which states that accounts or notes receivable arising from transactions
involving the registrant's capital stock should be presented as deductions from stockholders' equity and not as assets. When the shares
held by employees who have outstanding loans are sold, those loans will be paid in a pro-rata manner as described below.
A total of 1,692,400 shares of common stock
held by employees (approximately 15% of each employees shares) are being registered in this offering. In the event the employees sell
any or all of these shares before repaying the loan, an amount that bears the same proportion to the total loan including accrued interest
thereon, as the registered number of shares bears to the total holding of the employee against which said loan has been given, will become
due and payable to the Company. If all the registered shares are sold and using the outstanding balance due of $1,006,000 as of September
30, 2023, the loan will be reduced by $150,000.
The pro-forma capitalization would then have
both cash and equity going up by the amount being repaid.
The purchasers of the Company's 8% Convertible
Debentures have an option to convert the outstanding principal and accrued interest amount of their respective Convertible Debentures
into shares of common stock of the Company at the lower of $0.012 per share or 20% discount to the next major financing or change in
control. On conversion the purchasers of these convertible debentures will get shares issue of which will be recorded as increase in
share capital of $250,000 and increase in additional paid in capital of $2,750,000. The pro forma basis as adjusted basis column in the
table below gives effect to the conversion of the Convertible Debenture as well as the return of outstanding employee loans as described
above. The Company expects that the Convertible Debentures will convert at $0.012 per share. If the conversion happens at a price lower
than $0.012 per share the pro forma basis as adjusted numbers will change accordingly.
The pro forma and pro forma as adjusted information
below is illustrative only, and our cash and cash equivalents and total capitalization following the completion of this offering will
be adjusted based on several factors. You should read the following table together with the “Management’s Discussion and
Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and related notes thereto
appearing elsewhere in this prospectus.
| |
As of September 30, 2023 | |
(in thousands) | |
Actual | | |
Pro forma | | |
Pro forma as adjusted (1) | |
Cash and cash equivalents | |
| | | |
| | | |
| | |
Total cash and cash equivalents (2) | |
$ | 13,168 | | |
$ | 13,318 | | |
$ | 13,318 | |
| |
| | | |
| | | |
| | |
Long-term liabilities | |
| | | |
| | | |
| | |
Other long-term debt | |
| 10,752 | | |
| 10,752 | | |
| 10,752 | |
Related party convertible debt (1) | |
| 3,000 | | |
| 3,000 | | |
| – | |
Convertible debt (1) | |
| – | | |
| – | | |
| – | |
Related party note payable | |
| – | | |
| – | | |
| – | |
Total long-term liabilities | |
| 13,752 | | |
| 13,752 | | |
| 10,752 | |
| |
| | | |
| | | |
| | |
Equity: | |
| | | |
| | | |
| | |
Common stock, $0.001 par value (3) | |
| 4,095 | | |
| 4,095 | | |
| 4,345 | |
Loans to employees for options exercised (4) | |
| (1,006 | ) | |
| (856 | ) | |
| (856 | ) |
Additional paid in capital (5) | |
| 8,446 | | |
| 8,446 | | |
| 11,196 | |
Accumulated deficit | |
| (3,386 | ) | |
| (3,386 | ) | |
| (3,386 | ) |
Accumulated other comprehensive loss | |
| (221 | ) | |
| (221 | ) | |
| (221 | ) |
Total equity (deficit) | |
| 7,928 | | |
| 8,078 | | |
| 11,078 | |
Total capitalization | |
$ | 34,848 | | |
$ | 35,148 | | |
$ | 35,148 | |
(1) |
Pro forma as adjusted includes the full conversion of the Convertible
Debentures into 250,000,000 shares of common stock at the assumed conversion price of $0.012 per share for the 8% Convertible Debentures.
See Convertible Debentures in section Description of Capital Stock, page
100. |
(2) |
Pro forma cash and cash equivalents increased by $150,000 from the
repayment of the loan as part of this offering. |
(3) |
Pro forma as adjusted common stock at $0.001 par value increased by
$250,000 assuming the full conversion of the 8% Convertible Debentures at conversion price of $0.012 per share. |
(4) |
Pro forma as adjusted loans to employees for options exercised decreased
by $150,000 as a result of loan repayment from this offering. |
(5) |
Pro forma as adjusted additional paid in capital increased by $2,750,000
to account for the principal value of the 8% Convertible Debenture of $3,000,000 less $250,000 in common stock value, which was recorded
under common stock. |
Management’s
Discussion and Analysis OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of financial
condition and results of operations should be read in conjunction with our historical financial statements and the notes to those statements
that appear elsewhere in this prospectus. Certain statements in the discussion contain forward-looking statements based upon current
expectations that involve risks and uncertainties, such as plans, objectives, expectations, and intentions. You should read the sections
titled “Risk Factors” and “Special Note Regarding Forward-Looking Statements” for a discussion of important factors
that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained
in the following discussion and analysis.
Overview
Our mission is to connect the world’s cash
to the new global digital financial system. We believe that providing the world with access to crypto assets will help transform the
international financial order by providing the unbanked and billions of others in the world with a connection to a new global digital
financial system that is more accessible, efficient and transparent than the legacy financial system.
Athena ATMs and Athena Plus
In order to achieve our mission, we are focused
on developing, owning, and operating a global network of Athena-branded Bitcoin ATM machines, which are free standing kiosks that permit
customers to buy or sell crypto assets in exchange for cash (banknotes) issued by sovereign governments - often referred to as fiat currencies.
We utilize purchasing algorithms and other proprietary systems to manage crypto assets to ensure that we are able to meet consumer demand
for crypto assets.
We
have become one of the largest Bitcoin ATM operators in the United States and Latin America by installing ATMs in strategic locations
that maximize the ability to provide crypto assets to customers. These locations include convenience stores, shopping centers, and other
easily accessible locations in urban, suburban and rural locations. Our network presently includes Athena Bitcoin ATMs in 26 US states,
the U.S. territory of Puerto Rico and 4 countries in Latin America. See table below for our ATM breakdown by country and type, as of
September 30, 2023.
Country |
Number
of Athena Bitcoin ATMs
(as of September 30, 2023) |
Type
of Fiat Currency |
|
Total |
Two-Way |
|
United
States |
1,378 |
27 |
U.S.
Dollar |
El
Salvador |
14 |
14 |
U.S.
Dollar |
Argentina
|
12 |
12 |
Argentine
peso |
Mexico |
1 |
1 |
Mexican
peso |
Colombia
|
17
|
17
|
Colombian
peso |
Total |
1,422 |
71 |
|
We offer Bitcoin for sale at all of our ATM
machines. Bitcoin comprises approximately 49% of the total crypto market capitalization as of September 30, 2023. We also buy Bitcoin
at some of our ATM machines (also known as two-way ATMs). The cash withdrawal limit from our two-way ATMs is $2,000 per transaction.
We replenish or withdraw fiat currencies at our ATMs twice a week or depending on usage, using bonded security companies.
We operate Athena Plus for private clients and
trade customers of the Company. Customers typically interact with the Company on the phone for transaction sizes in dollar terms
greater than $10,000 and on some occasions, for crypto assets not included in our ATMs. Since 2019, we have been typically buying and
selling Bitcoin through Athena Plus, but we have also executed transactions in Ethereum, Litecoin, and in other less common crypto assets.
As of the date of this prospectus, we do not transact in any crypto assets except Bitcoin, Ethereum, Tether, Litecoin, and BCH with
our Athena Plus service. We will update this prospectus if we decide to transact in other crypto assets. Such a change would only
happen if there were significant customer demand for a specific crypto asset and that crypto asset was available to us through multiple
trading partners, crypto asset exchange and crypto asset brokers.
Due to the volatile nature of the crypto market,
which includes fluctuations in both crypto asset prices and volume of transactions, our operating results have and are expected to continue
to fluctuate partially based on the overall crypto market. We strive to reduce the impact of crypto asset fluctuations on our operating
results due to utilizing purchasing algorithms to ensure that the crypto assets are not held for more than two days prior to being
sold. However, there is a correlation, given the early stage of adoption of crypto assets, between volume of transactions and the price
of the crypto assets. Refer below for a log scale of Bitcoin from January 1, 2020 through September 30, 2023. This shows the fluctuations
of the price of Bitcoin over time on a logarithmic scale.
Bitcoin Price (Log Scale)
We believe that we are in the early stages of
the new digital financial order system and that as crypto asset use cases expand and there is more worldwide adoption, the fluctuations
in volume and price will decrease. Our focus is on prioritizing growth, especially in geographic areas where consumers are restricted
from accessing the global financial system.
The Company has been active in increasing its
geographic presence by expanding its Athena Bitcoin ATM Fleet. Refer below for a chart showing the increase of active Athena Bitcoin
ATMs from December 31, 2017 through September 30, 2023.
![](https://www.sec.gov/Archives/edgar/data/1095146/000168316824000275/image_004.jpg)
White-label Service
The Company, as part of its strategy to expand
globally, began working with the government of El Salvador in late June 2021 to support the implementation of its Bitcoin Law. We operate
ATMs on behalf of the El Salvadoran government. These ATMs are owned by the Company. This white-label service is comprised of installing
the machines for the customer and ensuring that the machines are operating in a way that they can be used by the El Salvadoran government
and their users. To achieve this, the Company is responsible for loading and unloading cash, setting up the network, performing repairs
and maintenance and other responsibilities to ensure that the machines are operating as intended. We charge a fixed monthly fee to operate
these ATMs, as well as an additional fixed price for specific services that are required. The fixed price covers Athena’s cost plus
a reasonable profit margin. The Company does not sell crypto assets directly to the users of the ATM. The government of El Salvador has
title to the private keys to the crypto assets. However, the Company acts as the custodian for the cash in the ATM machine as well as
cash that is in-transit.
In
2021 and 2022, we have installed a total of 200 Chivo Bitcoin ATMs in El Salvador, 10 Chivo Bitcoin ATMs at El Salvador consulates in
the U.S and 45 Chivo Bitcoin ATMs in other U.S. locations. As of September 30, 2023, we were operating 249 white label ATMs for
Chivo, Sociedad Anónima de Capital Variable, a wholly owned private company of the Government of El Salvador ("CHIVO")
in El Salvador and in the U.S.
Ancillary
The Company engages in services as part of its
mission to bring the new digital financial system to the world. This includes the sale of point-of-sale terminals (“POS Terminals”)
and developing and supporting crypto ecosystems. In 2021, the Company agreed to develop the Chivo Ecosystem to El Salvador. The Chivo
Ecosystem acts as the interface to El Salvador’s Bitcoin Digital Wallet for El Salvador and its users. The Company’s contract
to develop the Chivo Ecosystem ended December 31, 2021.
The Company, due to contingencies related to
not having title of the intellectual property in 2021 that serves as the foundation of the Chivo Ecosystem, did not recognize revenue
in 2021. The contingency was lifted in 2022 when the Company obtained the right to use the intellectual property. The Company recognized
revenue related to the development of the Chivo Ecosystem when the contingency was lifted. The Company anticipates no further revenue
related to the Chivo intellectual property and ecosystem.
Key Performance Indicators and
Non-GAAP Financial Measure and Trends
ATMs
Number of ATMs increased from 385 to 430 to
1,422 as of December 31, 2021, December 31, 2022, and September 30, 2023, respectively.
Transactions
Median ATM sale transaction size for all crypto
assets increased from $150 to $200, or 33% while the number of transactions increased from 10,402 to 31,041, or 198% during the three
months ended September 30, 2022 and September 30, 2023, respectively.
Median ATM sale transaction size for all crypto
assets increased from $140 to $160, or 14% while the number of transactions increased from 41,966 to 60,364, or 44% during the nine months
ended September 30, 2022 and September 30, 2023, respectively.
Median OTC transaction size for all crypto
assets increased from $20,000 to $100,000 or 400% while number of transactions decreased from 34 to 27, or 21% during the three months
ended September 30, 2022 and September 30, 2023, respectively.
Median OTC transaction size for all crypto
assets increased from $26,000 to $100,000, or 285% while the number of transactions decreased from 107 to 98, or 8% during the nine months
ended September 30, 2022 and September 30, 2023, respectively.
EBITDA
We use EBITDA as a non-GAAP financial measure.
We define EBITDA as net earnings attributable to Athena Bitcoin Global stockholders, adding back the following items: interest expense,
net and fees on borrowings; provision for income taxes; depreciation; and amortization. The Company believes that EBITDA is a more relevant
supplemental measure of performance than other GAAP performance measures. EBITDA as presented in this prospectus is a supplemental measure
of our performance that is neither required by, nor presented in accordance with, GAAP. Management presents the non-GAAP financial measure
of EBITDA in this prospectus because it considers this to be an important supplemental measure of performance. Management believes that
this non-GAAP financial measure provides additional insight for analysts and investors evaluating the Company's financial and operational
performance by providing a consistent basis of comparison across periods.
| |
Year Ended December
31 | |
| |
2022 | | |
2021 | | |
$ Change | |
| |
(in thousands) | |
| |
| | |
| | |
| |
Net income (loss) | |
$ | 4,139 | | |
$ | (3,644 | ) | |
$ | 7,783 | |
Adjusted to exclude the following; | |
| | | |
| | | |
| | |
Interest expense | |
| 668 | | |
| 661 | | |
| 7 | |
Fee on borrowings | |
| 113 | | |
| 341 | | |
| (228 | ) |
Income taxes | |
| 1,770 | | |
| 883 | | |
| 887 | |
Depreciation and amortization | |
| 1,659 | | |
| 582 | | |
| 1,077 | |
EBITDA | |
$ | 8,349 | | |
$ | (1,177 | ) | |
$ | 9,526 | |
| |
Nine Months Ended September 30 | |
| |
2023 | | |
2022 | | |
$ Change | |
| |
(in thousands) | |
| |
| | |
| | |
| |
Net income (loss) | |
$ | 8,191 | | |
$ | (1,611 | ) | |
$ | 9,802 | |
Adjusted to exclude the following; | |
| | | |
| | | |
| | |
Interest expense | |
| 330 | | |
| 526 | | |
| (196 | ) |
Fee on borrowings | |
| 543 | | |
| 67 | | |
| 476 | |
Income taxes | |
| 3,141 | | |
| 1,977 | | |
| 1,164 | |
Depreciation and amortization | |
| 1,556 | | |
| 1,133 | | |
| 423 | |
EBITDA | |
$ | 13,761 | | |
$ | 2,092 | | |
$ | 11,669 | |
Functional Cash Flows from Operations
The Company has financed operations primarily
with cash flow from the purchase and sale of crypto assets. Management utilizes a non-GAAP internal metric defined as functional cash
flow from operations in order to evaluate operational cash flow. Functional cash flow from operations is equal to cash flow from operations
(per GAAP statements) plus sale of crypto assets less purchase of crypto assets, both of which are included as investing activities in
the GAAP Consolidated Statement of Cash Flows. Given the active sales market for crypto assets, management believes that inclusion of
the purchase and sale of crypto assets provides a better metric for measuring cash flow from operations. Refer below for the calculation
of the functional cash flow for the nine months ended September 30, 2023 and twelve months ended December 31, 2022 and 2021.
| |
Nine Months Ended | | |
Year Ended | |
| |
September 30, | | |
December 31, | | |
December 31, | |
(in thousands) | |
2023 | | |
2022 | | |
2021 | |
| |
| | |
| | |
| |
GAAP cash flow from operations | |
$ | (10,070 | ) | |
$ | (5,559 | ) | |
$ | (4,145 | ) |
Plus: | |
| | | |
| | | |
| | |
Sale of crypto assets | |
| 116,352 | | |
| 61,868 | | |
| 78,972 | |
Purchase of crypto assets | |
| (96,307 | ) | |
| (53,403 | ) | |
| (74,973 | ) |
Functional cash flow from operations | |
$ | 9,975 | | |
$ | 2,906 | | |
$ | (146 | ) |
Impact of COVID-19
The significant global outbreak of COVID-19 has
resulted in a widespread health crisis that has adversely affected the economies and financial markets worldwide and has affected our
business in several ways. First, we have been unable to ship our ATMs freely between countries. Second, it has restricted the movement
of our employees and their ability to both collaborate in-person, and to do some field-service and installation work. In addition, the
continued spread of COVID-19 and the imposition of related public health measures have resulted in, and is expected to continue to result
in, increased volatility and uncertainty in the crypto-economy. We also rely on third party service providers to perform certain functions.
Any disruptions to a service providers’ business operations resulting from business restrictions, quarantines, or restrictions
on the ability of personnel to perform their jobs could have an adverse impact on our service providers’ ability to provide services
to us.
We are responding to the global outbreak of COVID-19
by taking steps to mitigate the potential risks to us posed by its spread and the impact of the restrictions put in place by governments
to protect the population. Our employees and service providers have transitioned to work-from-home.
Key Factors Affecting Our Performance
The performance of our business operations have
been and will continue to be affected by a number of factors, including;
|
· |
The price and volatility of crypto assets |
|
|
|
|
· |
Adoption of crypto assets as a medium of exchange by merchants and their trading partners |
|
|
|
|
· |
Adoption of crypto assets as a store of value by investors |
|
|
|
|
· |
The total number of Bitcoin ATMs could reach a saturation in the markets where the Company operates.
And the demand, as measured on a per Bitcoin ATM basis, would decrease. |
|
|
|
|
· |
Investments made by the Company, including in new technologies and strategic acquisitions |
|
|
|
|
· |
Ability to determine the transaction fee for ATM transactions |
|
|
|
|
· |
Product and service offerings, including potentially increasing its white-label service offerings. |
|
|
|
|
· |
Regulations in US and international market |
|
|
|
|
· |
Access to supply of new ATM machines from third-party manufacturers |
Components of Results of Operations
Revenue
Athena ATM
We generate the majority of our revenue from
the sale of Bitcoin through our network of ATM machines. The Company generated 62% and 77% of its revenue from ATM sales for the years
ended December 31, 2022, and 2021, respectively and 85% and 66% for the nine months ended September 30, 2023, and 2022, respectively.
The Company recognizes revenue at the point in time when the customer receives the crypto asset. The revenue recognized is the gross
transaction amount of crypto assets sold. Revenue is primarily correlated with transaction volume. As the Company continues to expand
its ATM fleet and as the world continues to adapt to the new global digital financial system, the Company expects to experience an increase
in transaction volume.
Athena Plus
We generate revenue from selling crypto assets
to institutional traders and organizations. These are typically done via the phone. The Company generated 22% and 19% of its revenue
from Athena Plus for the years ended December 31, 2022, and 2021, respectively and 12% and 25% for the nine months ended September
30, 2023, and 2022, respectively. The Company recognizes revenue at the point in time when the customers received the crypto asset.
The revenue recognized is the gross transaction amount of crypto assets sold. Revenue is primarily correlated with transaction volume.
White-label Service
We generate revenue by installing and operating
ATMs on behalf of third parties. Operating responsibilities include providing the ATMs, loading and unloading cash, setting up the network,
repairs and maintenance, and software upgrades, if necessary. The Company generated 7% and 3% of its revenue from white-label service
for the years ended December 31, 2022, and 2021, respectively and 3% and 9% for the nine months ended September 30, 2023, and
2022, respectively. We charge an installation fee and a monthly service fee to operate these machines. We also charge customers
an additional fixed price for certain services (e.g., relocating the ATMs). The Company does not sell crypto assets to these customers.
The Company recognizes the installation fee when installation is performed. The Company recognizes the monthly service fee over the term
of the service contract.
The Company permits the customer to terminate
the white-label service contract for specific ATMs as well as in total at any point during the contractual term for no penalty. As a
result, the contracts for each ATM are considered month to month.
Ancillary
The Company is actively engaged in looking into
other revenue streams that may aid our mission to connect the world with the new global digital financial system. We have engaged in
projects such developing software that may help customers manage their crypto assets as well as selling POS terminals to customers.
In 2021, the Company agreed to develop the Chivo
Ecosystem for El Salvador for $4.0 million. The Company completed the development of the Chivo Ecosystem in September 2021. The Company
received $3.5 million of the $4.0 million as of December 31, 2021. The Company did not have rights to the intellectual property (refer
to XPay Asset Acquisition section) that served as the foundation for the Chivo Ecosystem until December 2022. Due to this contingency,
the Company recorded the $3.5 million as unearned revenue as of December 31, 2021. In December 2022, the Company recognized the amount
received of $4.0 million as revenue when the Company obtained the rights to the intellectual property.
The Company also provided services to help support
the Chivo Ecosystem from September 2021 through December 31, 2021. Revenue recognized for the service contract was $584,000 for the year
ended December 31, 2021.
Through September 30, 2023, this ancillary
revenue, outside of the development and support of the Chivo Ecosystem as discussed above, has been sporadic and immaterial.
The Company generated 9% and 1% of its revenue
from these other revenue streams for the years ended December 31, 2022, and 2021, respectively and 0% for the nine months ended September
30, 2023 and 2022.
Cost of Revenue
Cost of revenues consists primarily of expenses
related to the acquisition of crypto assets. The acquired crypto asset is recorded at cost of acquisition, i.e., it is inclusive of any
surcharge or markdown. The Company commonly acquires crypto assets through third-party dealers and exchanges, as well as purchasing
crypto assets from customers through our two-way ATMs. The Company assigns the costs of crypto assets sold in its revenue transactions
on a first-in, first-out basis.
The crypto assets acquired are classified as indefinite-lived
intangible assets are initially measured at cost and are impaired when the quoted price of the crypto asset is less than the price associated
with the carrying value of that crypto asset. Impairment expense is reflected in cost of revenues in the consolidated statement of operations.
The Company through its proprietary knowledge rarely holds crypto assets for more than 2 days, reducing this risk.
Additionally, cost of revenues includes the cost
of installing the ATMs, the costs of operating the ATMs from which crypto assets are sold (including the associated rent expense, related
incentives, ATM cash losses, software licensing fees for the ATMs, depreciation, general liability insurance, and utilities), fees paid
to service the ATM machines and transport cash to the banks, and outsourced customer support staff for white-label services.
Operating Expenses
The Company's expenses consist of general and
administrative, sales and marketing, technology and development and other operating expenses.
General and Administrative
General and administrative expenses consist primarily
of salaries and wage expense, non-personnel costs, such as legal, accounting, and other professional fees. In addition, general and administrative
expenses include rent and travel costs, and all other supporting corporate expenses not allocated to other departments.
Sales and Marketing
Sales and marketing expenses generally consist
of costs of general marketing and promotional activities, advertising fees used to drive subscriber acquisition, commissions, the production
costs to create our advertisements and salaries, wages and contractor costs of marketing personnel.
Technology and Development
Technology and development costs are expenses
incurred to develop the Company’s other revenue streams, primarily software.
Theft of Bitcoin
On March 31, 2021, the Company experienced a
breach in its security that resulted in a two-hour sales outage and a loss of 29 Bitcoin with a purchase cost of $1,600,000 (approximate
market value $1,709,000 as of March 31, 2021). There has been no theft of crypto assets since March 31, 2021.
Other Operating Expenses
Other operating expenses consists of fees related
to immigration of employees and other employee transition expenses.
Fair Value Adjustment on Crypto Asset Borrowing
Derivatives
The Company in 2018 and 2019 entered into a borrowing
agreement with one of the Company’s principal shareholders to borrow bitcoin. The amount payable was in bitcoin, plus a borrowing
fee of 13.5%. This was paid back in 2022. This obligation is a derivative liability, with fluctuations to the liability recorded to the
statement of operations.
Fees on Crypto Asset Borrowings
Fees on crypto asset borrowings is the fair value
of fees payable, typically in the crypto asset borrowed, on the outstanding borrowings of crypto assets calculated as percentage of principal
outstanding and current price of the crypto asset in which it is payable.
Interest Expense
Interest expense, net consists of interest expense,
and includes amortization of debt discount and issuance costs.
Other (Income) Expense
This includes foreign currency transaction gain/loss
and penalties as applicable.
Provision for (Benefit from) Income Taxes
The Company was taxed as a partnership for U.S.
federal and state income tax purposes for tax years prior to 2020. There is no provision for income taxes for those years. The Company
accrues liabilities for uncertain tax positions that are not more likely than not to be sustained upon examination as of September
30, 2023, December 31, 2022, and 2021. Interest and penalties related to uncertain tax positions are recorded in accrued liabilities
in the accompanying consolidated balance sheets. The Company had no unrecognized tax benefits as of September 30, 2023, December
31, 2022, and 2021, that if recognized, would affect its annual effective tax rate.
Results of Operations
Comparison of the Three and Nine Months
Ended September 30, 2023 and 2022
The following table summarizes our results of operations
for the periods presented (in thousands):
| |
Three
Months Ended September
30 | | |
| | |
Nine
Months Ended September
30 | | |
| |
| |
2023 | | |
2022 | | |
$ Change | | |
2023 | | |
2022 | | |
$ Change | |
| |
(in thousands) | |
| |
| | |
| | |
| | |
| | |
| | |
| |
Net revenues | |
$ | 65,646 | | |
$ | 14,049 | | |
$ | 51,597 | | |
$ | 120,210 | | |
$ | 53,750 | | |
$ | 66,460 | |
Cost of revenues | |
| 55,813 | | |
| 11,423 | | |
| 44,390 | | |
| 103,833 | | |
| 46,794 | | |
| 57,039 | |
Gross profit | |
| 9,833 | | |
| 2,626 | | |
| 7,207 | | |
| 16,377 | | |
| 6,956 | | |
| 9,421 | |
Gross profit percentage | |
| 15% | | |
| 19% | | |
| | | |
| 14% | | |
| 13% | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Operating expenses: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Technology and development | |
| 132 | | |
| 156 | | |
| (24 | ) | |
| 402 | | |
| 579 | | |
| (177 | ) |
General and administrative | |
| 1,297 | | |
| 1,194 | | |
| 103 | | |
| 3,345 | | |
| 4,736 | | |
| (1,391 | ) |
Sales and marketing | |
| 41 | | |
| 128 | | |
| (87 | ) | |
| 240 | | |
| 480 | | |
| (240 | ) |
Other operating expense | |
| 10 | | |
| 10 | | |
| – | | |
| 51 | | |
| 24 | | |
| 27 | |
Total operating expenses | |
| 1,480 | | |
| 1,488 | | |
| (8 | ) | |
| 4,038 | | |
| 5,819 | | |
| (1,781 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Income (loss) from operations | |
| 8,353 | | |
| 1,138 | | |
| 7,215 | | |
| 12,339 | | |
| 1,137 | | |
| 11,202 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Interest expense | |
| 97 | | |
| 164 | | |
| (67 | ) | |
| 330 | | |
| 526 | | |
| (196 | ) |
Fees on virtual vault services | |
| 312 | | |
| – | | |
| 312 | | |
| 543 | | |
| 67 | | |
| 476 | |
Other expense | |
| 38 | | |
| 29 | | |
| 9 | | |
| 134 | | |
| 178 | | |
| (44 | ) |
Income (loss) before income taxes | |
| 7,906 | | |
| 945 | | |
| 6,961 | | |
| 11,332 | | |
| 366 | | |
| 10,966 | |
Income tax expense | |
| 1,976 | | |
| 807 | | |
| 1,169 | | |
| 3,141 | | |
| 1,977 | | |
| 1,164 | |
Net income (loss) | |
$ | 5,930 | | |
$ | 138 | | |
$ | 5,792 | | |
$ | 8,191 | | |
$ | (1,611 | ) | |
$ | 9,802 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Comprehensive income (loss) | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net income (loss) | |
$ | 5,930 | | |
$ | 138 | | |
$ | 5,792 | | |
$ | 8,191 | | |
$ | (1,611 | ) | |
$ | 9,802 | |
Foreign currency translation adjustment | |
| (14 | ) | |
| (15 | ) | |
| 1 | | |
| (46 | ) | |
| 8 | | |
| (54 | ) |
Comprehensive income (loss) | |
$ | 5,916 | | |
$ | 123 | | |
$ | 5,793 | | |
$ | 8,145 | | |
$ | (1,603 | ) | |
$ | 9,748 | |
Components of Results of Operations
Revenues
| |
Three Months Ended September
30 | | |
| | |
Nine
Months Ended September
30 | | |
| |
| |
2023 | | |
2022 | | |
% Change | | |
2023 | | |
2022 | | |
% Change | |
| |
(in thousands) | |
Revenue by Stream | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Athena ATM | |
$ | 61,671 | | |
$ | 9,623 | | |
| 541% | | |
$ | 102,088 | | |
$ | 35,612 | | |
| 187% | |
Athena Plus | |
| 2,679 | | |
| 1,833 | | |
| 46% | | |
| 14,264 | | |
| 13,398 | | |
| 6% | |
White-label | |
| 1,277 | | |
| 2,574 | | |
| (50% | ) | |
| 3,802 | | |
| 4,672 | | |
| (19% | ) |
Ancillary and other | |
| 19 | | |
| 19 | | |
| 0% | | |
| 56 | | |
| 68 | | |
| (18% | ) |
Total revenue | |
$ | 65,646 | | |
$ | 14,049 | | |
| 367% | | |
$ | 120,210 | | |
$ | 53,750 | | |
| 124% | |
Three and Nine Months Ended September
30, 2023 and 2022
Athena ATM Revenue
Athena ATM revenue increased $52,048,000
or 541% and $66,476,000 or 187% for the three and nine months ended September 30, 2023, respectively when compared to three and nine
months ended September 30, 2022. Median transaction size for all crypto assets increased from $150 to $200 or 33% and from $140 to $160
or 14% for the three months and nine months ended September 30, 2023, respectively. The number of transactions increased from 10,402
to 31,041 or 198% and increased from 41,966 to 60,364 or 44% for the three months and nine months ended September 30, 2023, respectively.
The increase in Athena ATM revenue was driven by the following factors:
|
· |
Number of ATMs increased from 227 as of September 30, 2022 to 1,422
as of September 30, 2023, which is an increase of 526%. This is the primary driver of the increase. |
|
|
|
|
· |
Quantity of Bitcoin sold during the nine months ended September
30, 2023, when compared to September 30, 2022, increased from 1,015 to 2,870, or 183%. Quantity of Bitcoin sold during the three
months ended September 30, 2023, when compared to September 30, 2022, increased from 390 to 1,664, or 327%. |
|
|
|
|
· |
The increase in ATMs was offset by a reduction in overall volume for
crypto assets in the global market during these periods. The total volume for Bitcoin for USD users for Coinbase during the nine months
ended September 30, 2022, was 5,128,555 compared to 3,869,588 for the nine months ended September 30, 2023. The total volume for Bitcoin
for USD customers for Coinbase during the three months ended September 30, 2022, was 2,123,777 compared to 870,728 for the three months
ended September 30, 2023. |
Athena Plus Revenue
Athena Plus revenue increased $846,000 or
46% and increased $866,000 or 6% for the three months and nine months ended September 30, 2023, respectively when compared to three and
nine months ended September 30, 2022. Median transaction size for all crypto assets increased from $20,000 to $100,000 or 400% and increased
from $26,000 to $100,000 or 285% for the three and nine months ended September 30, 2023 when compared to the three and nine months ended
September 30, 2022, respectively. The number of transactions decreased from 34 to 27 or 21% and decreased from 107 to 98 or 8% for the
three and nine months ended September 30, 2023 when compared to the three and nine months ended September 30, 2022, respectively.
Athena Plus revenue fluctuates based on demand
from institutional traders and organizations. Athena Plus experienced large orders during Q1 and Q3 2023 from institutional traders but
saw a reduction of orders during Q2 2023. Demand from these customers is sporadic and is dependent on specific trader needs, the macro-economic
climate and the global cryptocurrency market.
The table below shows Bitcoin sales for the Athena
Plus services.
Bitcoin Sales
(Athena Plus) |
|
Three
Months Ended
September 30 |
|
|
|
|
|
Nine
Months Ended
September 30 |
|
|
|
|
|
|
2023 |
|
|
2022 |
|
|
%
Change |
|
|
2023 |
|
|
2022 |
|
|
%
Change |
|
Quantity sold |
|
|
86 |
|
|
|
54 |
|
|
|
59% |
|
|
|
540 |
|
|
|
211 |
|
|
|
156% |
|
Average selling price |
|
$ |
28,862 |
|
|
$ |
21,615 |
|
|
|
34% |
|
|
$ |
26,686 |
|
|
$ |
32,839 |
|
|
|
(19% |
) |
% of Over-the-counter revenue |
|
|
99% |
|
|
|
100% |
|
|
|
|
|
|
|
97% |
|
|
|
65% |
|
|
|
|
|
White-Label Service
White-Label Service revenue decreased by 50%
and 19% and for the three and nine months ended September 30, 2023, respectively, when compared to three and nine months ended September
30, 2022. This decrease is due to significant non-recurring work provided in 2022 in order to configure the white-label ATMs with the
operating requirements of Chivo.
Ancillary
Ancillary revenue is immaterial for the three
and nine months ended September 30, 2023, and 2022. This revenue stream is not for recurring revenue and therefore is sporadic
in nature.
Cost of Revenues and Gross Profit
Three
and Nine Months Ended September 30, 2023 and 2022
Cost of revenues is comprised primarily of
the expenses related to the acquisition of crypto assets sold and the costs of operating the ATMs from which the crypto assets are sold.
For the three months ended September 30, 2023 and 2022, the cost related to the acquisition of crypto assets sold were $48,972,000 and $9,371,518,
respectively. For the nine months ended September 30, 2023, and 2022, the expenses related to the acquisition of crypto assets sold were
$91,858,609 and $40,725,666, respectively. The increase in cost related to acquisition of crypto assets sold was primarily a result of
the increased sales of crypto assets. For the three months ended September 30, 2023 and 2022, the costs of operating the ATMs were $6,822,281
and $1,962,698, respectively. For the nine months ended September 30, 2023 and 2022, the costs of operating the ATMs were $11,785,874
and $5,816,700, respectively. This was primarily driven by the increasing number of Athena Bitcoin ATMs in the periods presented, consisting
of 385 at December 31, 2021, 430 at December 31, 2022 and 1,422 at September 30, 2023.
Gross profit decreased from 19% for the three months ended September
30, 2022 to 15% for the three months ended September 30, 2023. The decrease in gross profit was due to the Company recognizing revenue
for services performed that were related to Chivo ATM functionality that were non-recurring in 2022. Gross profit increased from 13%
for the nine months ended September 30, 2022, to 14% for the nine months ended September 30, 2023, as the Company increased revenues
with the expansion of its US ATM network with a lower increase in cost of sales driven by little to no change to fixed costs that are
part of cost of sales.
Operating Expenses
Three and Nine Months Ended September
30, 2023 and 2022
Operating expenses decreased $8,000 for the
three months ended September 30, 2023 compared to the three months ended September 30, 2022. This was primarily attributable to the sales
and marketing. Sales and marketing costs decreased $87,000, technology and development decreased $24,000 and general and administrative
expense increased $103,000. Operating expenses decreased $1,781,000 or 31% for the nine months ended September 30, 2023 compared to nine
months ended September 30, 2022. This was primarily due to the general and administrative category. General and administrative cost decreased
$1,391,000, technology and development decreased $177,000, sales and marketing decreased $240,000 and other operating expense increased
$27,000. Refer below for detail related to the general and administrative category, which is the largest component of operating expenses
for both periods.
General and administrative
| |
Three Months Ended September
30 | | |
| | |
Nine
Months Ended September
30 | | |
| |
(in thousands) | |
2023 | | |
2022 | | |
% Change | | |
2023 | | |
2022 | | |
% Change | |
Salaries and benefits | |
$ | 709 | | |
$ | 760 | | |
| (7% | ) | |
$ | 1,811 | | |
$ | 2,799 | | |
| (35% | ) |
General and administrative | |
| 499 | | |
| 387 | | |
| 29% | | |
| 1,300 | | |
| 1,655 | | |
| (21% | ) |
Travel | |
| 44 | | |
| 40 | | |
| 10% | | |
| 135 | | |
| 193 | | |
| (30% | ) |
Rent | |
| 45 | | |
| 7 | | |
| 543% | | |
| 99 | | |
| 89 | | |
| 11% | |
| |
$ | 1,297 | | |
$ | 1,194 | | |
| 9% | | |
$ | 3,345 | | |
$ | 4,736 | | |
| (29% | ) |
The reduction in general and administrative
expense is driven by a reduction of salaries and benefits expense by 7% and 35% for the three months and nine months ended 2023 and 2022,
respectively, due to the Company reducing head count in the United States and utilizing more individuals located abroad to support operations.
Payroll expenses in the countries where headcount increased is lower than the United States.
Sales and marketing
| |
Three Months Ended September
30 | | |
| | |
Nine
Months Ended September
30 | | |
| |
(in thousands) | |
2023 | | |
2022 | | |
% Change | | |
2023 | | |
2022 | | |
% Change | |
Salaries and benefits | |
$ | 14 | | |
$ | 97 | | |
| (86% | ) | |
$ | 158 | | |
$ | 303 | | |
| (48% | ) |
Advertising | |
| 25 | | |
| 31 | | |
| (19% | ) | |
| 33 | | |
| 157 | | |
| (79% | ) |
Other selling and marketing | |
| 2 | | |
| – | | |
| 100% | | |
| 49 | | |
| 20 | | |
| 145% | |
| |
$ | 41 | | |
$ | 128 | | |
| (68% | ) | |
$ | 240 | | |
$ | 480 | | |
| (50% | ) |
The reduction in sales and marketing expense
is driven by a reduction of salaries and benefits expense by 86% and 48% for the three months and nine months ended 2023 and 2022, respectively,
due to the Company reducing head count in the United States and utilizing more individuals located abroad to support operations. Payroll
expenses in the countries where headcount increased is lower than the United States.
Interest and fees for virtual vault services
| |
Three
Months Ended
September
30 | | |
| | |
Nine
Months Ended September
30 | | |
| |
(in thousands) | |
2023 | | |
2022 | | |
% Change | | |
2023 | | |
2022 | | |
% Change | |
Interest expense | |
$ | 97 | | |
$ | 164 | | |
| (41% | ) | |
$ | 330 | | |
$ | 526 | | |
| (37% | ) |
Fees for virtual vault services | |
| 312 | | |
| – | | |
| 100% | | |
| 543 | | |
| 67 | | |
| 710% | |
Three and Nine Months Ended September
30, 2023 and 2022
Interest expense decreased $67,000 or 41%
for the three months ended September 30, 2023 and decreased $196,000 for the nine months ended September 30, 2023. Both decreases are
due to a reduction of average interest bearing debt during the period.
Virtual Vault is a term used in the
Armored Car and Cash Transport industry to define a service provided by armored car services for assets considered property of the bank
when the bank does not have a physical vault or location in a given state or location. The Fees for virtual vault services included in
our income statement are for a currency availability service provided to the Company by its bank for making funds held in a virtual vault
immediately available to the Company. Neither the term nor the service is related to virtual currency or crypto assets.
Fees
for virtual vault services increased $312,000 for the three months ended September 30, 2023 and increased $476,000 or 710% for the nine
months ended September 30, 2023 due mostly to higher ATM transaction volume and wider market network compared to the prior period. This
is supported by the increase in the number of ATMs and additional states entered.
Income Tax Expense (Benefit)
Three and Nine Months Ended September
30, 2023 and 2022
Income tax expense increased $1,169,000
and increased $1,164,000 for the three months and nine months ended September 30, 2023, respectively when compared to prior
respective period. Income tax expense, as a percentage of income before taxes, was 25% and 85% for the three months ended September
30, 2023 and 2022, respectively. Income tax expense, as a percentage of income before taxes, was 28% and 540% for the nine months ended
September 30, 2023 and 2022, respectively.
Interest expense as a percentage of income
before income taxes decreased due to the Company generating most of its taxable income in foreign operations with higher income tax rates
in 2022. Comparatively, in 2023 the Company generated most of its taxable income from its domestic operations which have lower income
tax rates.
Comparison of the Years Ended December 31, 2022 and 2021
The table below sets forth, for the periods presented, certain historical
financial information.
| |
Year Ended December 31 | |
| |
2022 | | |
2021 | | |
$ Change | | |
% Change | |
| |
(in thousands, except number of shares) | |
| |
| | |
| | |
| | |
| |
Net revenues | |
$ | 73,686 | | |
$ | 81,747 | | |
$ | (8,061 | ) | |
| (10% | ) |
Cost of revenues | |
| 59,643 | | |
| 76,178 | | |
| (16,535 | ) | |
| (22% | ) |
Gross profit | |
| 14,043 | | |
| 5,569 | | |
| 8,474 | | |
| 152% | |
Gross profit percentage | |
| 19% | | |
| 7% | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | |
Operating expenses: | |
| | | |
| | | |
| | | |
| | |
Technology and development | |
| 776 | | |
| 143 | | |
| 633 | | |
| 443% | |
General and administrative | |
| 5,784 | | |
| 4,153 | | |
| 1,631 | | |
| 39% | |
Sales and marketing | |
| 594 | | |
| 647 | | |
| (53 | ) | |
| (8% | ) |
Theft of bitcoin | |
| 0 | | |
| 1,600 | | |
| (1,600 | ) | |
| (100% | ) |
Other operating expenses | |
| 30 | | |
| 231 | | |
| (201 | ) | |
| (87% | ) |
Total operating expenses | |
| 7,184 | | |
| 6,774 | | |
| 410 | | |
| 6% | |
| |
| | | |
| | | |
| | | |
| | |
Income (loss) from operations | |
| 6,859 | | |
| (1,205 | ) | |
| 8,064 | | |
| 669% | |
| |
| | | |
| | | |
| | | |
| | |
Fair value adjustment on crypto asset borrowing derivatives | |
| – | | |
| 515 | | |
| (515 | ) | |
| (100% | ) |
Interest expense | |
| 668 | | |
| 661 | | |
| 7 | | |
| 1% | |
Fees on borrowings | |
| 113 | | |
| 341 | | |
| (228 | ) | |
| (67% | ) |
Other expense | |
| 169 | | |
| 39 | | |
| 130 | | |
| 333% | |
Income (loss) before income taxes | |
| 5,909 | | |
| (2,761 | ) | |
| 8,670 | | |
| 314% | |
Income tax expense | |
| 1,770 | | |
| 883 | | |
| 887 | | |
| 100% | |
Net income (loss) | |
$ | 4,139 | | |
$ | (3,644 | ) | |
$ | 7,783 | | |
| 214% | |
| |
| | | |
| | | |
| | | |
| | |
Comprehensive income (loss) | |
| | | |
| | | |
| | | |
| | |
Net income (loss) | |
$ | 4,139 | | |
$ | (3,644 | ) | |
$ | 7,783 | | |
| 214% | |
Foreign currency translation adjustment | |
| 1 | | |
| (60 | ) | |
| 61 | | |
| 102% | |
Comprehensive income (loss) | |
$ | 4,140 | | |
$ | (3,704 | | |
$ | 7,844 | | |
| 212% | |
Revenue
| |
Year Ended December 31 | |
| |
2022 | | |
2021 | | |
$ Change | | |
% Change | |
| |
(in thousands) | |
Revenue by stream | |
| | | |
| | | |
| | | |
| | |
Athena ATM | |
$ | 45,340 | | |
$ | 63,097 | | |
$ | (17,757 | ) | |
| (28% | ) |
Athena Plus | |
| 16,528 | | |
| 15,874 | | |
| 654 | | |
| 4% | |
White-label | |
| 5,291 | | |
| 2,083 | | |
| 3,208 | | |
| 154% | |
Ancillary | |
| 6,527 | | |
| 693 | | |
| 5,834 | | |
| 842% | |
Total Revenue | |
$ | 73,686 | | |
$ | 81,747 | | |
$ | (8,061 | ) | |
| (10% | ) |
Athena ATM Revenue
Athena ATM revenue decreased $17,757 or 28%.
Median transaction size for all crypto assets increased from $133 to $140, or 5% and number of ATMs decreased from 298 to 265, or 11%.
Revenue decreased due to a reduction in the number of transactions during this period. The number of transactions decreased from 96,132
to 53,005 or 45%. This was driven by the overall crypto market during these periods.
During 2021, the price of Bitcoin increased from
approximately $29,000 as of January 1, 2021 to approximately $48,000 as of December 31, 2021 or 66%. During 2022, the price of Bitcoin
decreased from approximately $48,000 to approximately $17,000. The decrease in Bitcoin price reduced demand for Bitcoin. See table below
from www.coinmarketcap.com.
![](https://www.sec.gov/Archives/edgar/data/1095146/000168316824000275/coinmarketcap.jpg)
Given the infancy of this new digital financial
system, fluctuations of the price of Bitcoin are expected. However, the Company believes that as worldwide adoption continues, these fluctuations
will decrease and the correlation between price and transactions will decrease.
Athena Plus
Athena Plus revenue increased 654,000 or 4%.
Median transaction size for all crypto assets decreased from $40,000 to $32,948 or 18% while number of transactions decreased from 209
to 181, or 13%. Athena Plus revenue is dependent on the demands of certain institutional traders, which remained consistent each period.
White-Label Service
White-Label Service revenue increased $3,208,000
or 154%. This increase is due to the Company entering into the White-Label service agreements with Chivo in August 2021, resulting in
fewer than five months of revenue compared to twelve months of revenue in 2022.
Ancillary
Ancillary revenue increased $5,834,000 or 842%.
This increase is due to the Company recognizing revenue related to the Chivo Ecosystem development project in December 2022. The Company
finished this project in 2021; however, given the contingency related to the license that was acquired from XPay, the Company was
unable to recognize the revenue until the contingency was lifted. Refer to the Critical Accounting Policies and Estimates section below
for more information regarding this transaction.
Cost of Revenues and Gross Profit
Cost of revenues is comprised primarily of the
expenses related to the acquisition of crypto assets sold and the costs of operating the ATMs from which the crypto assets are sold.
For the year ended December 31, 2022 and 2021, the costs related to the acquisition of crypto assets sold were $51,820,000 and $69,740,000,
respectively. Impairment of crypto assets held for the year ended December 31, 2022 and 2021 were $199,000 and $44,000 respectively.
The decrease in cost related to acquisition of crypto assets sold was primarily a result of the decreased transactions of crypto assets.
For the year ended December 31, 2022 and 2021, the costs of operating the ATMs were $7,462,000 and $5,385,000, respectively. The increase
in operating the ATMs was primarily driven by the 126% increase in ATMs installed from December 31, 2021 to December 31, 2022.
Gross profit increased $8,474,000 or 152% and
gross profit percentage increased from 7% to 19%, primarily due to the one-time recognition of revenue of $6,165,000 in December 2022
for the development of the Chivo Ecosystem.
Operating Expenses
Total operating expenses increased $410,000 or
6%, primarily due to business expansion and infrastructure investment within technology and development, general and administrative,
sales and marketing offset by a non-repeated theft of bitcoin expense of $1,600,000. Breakdown of general and administrative expenses
are shown below.
| |
Year Ended December 31 | |
(in thousands) | |
2022 | | |
2021 | | |
$ Change | | |
% Change | |
Salaries and benefits | |
$ | 3,412 | | |
$ | 1,398 | | |
$ | 2,014 | | |
| 144% | |
General and administrative expenses | |
| 2,021 | | |
| 2,350 | | |
| (329 | ) | |
| (14% | ) |
Travel | |
| 207 | | |
| 309 | | |
| (102 | ) | |
| (33% | ) |
Rent | |
| 144 | | |
| 96 | | |
| 48 | | |
| 50% | |
| |
$ | 5,784 | | |
$ | 4,153 | | |
$ | 1,631 | | |
| 39% | |
General and administrative expenses increased
$1,631,000 or 39%, due mostly to investment in personnel.
Breakdown of sales and marketing expenses are
shown below.
| |
Year Ended December 31 | |
(in thousands) | |
2022 | | |
2021 | | |
$ Change | | |
% Change | |
Advertising | |
$ | 123 | | |
$ | 365 | | |
$ | (242 | ) | |
| (66% | ) |
Salaries and benefits | |
| 410 | | |
| 258 | | |
| 152 | | |
| 59% | |
Other selling and marketing | |
| 61 | | |
| 24 | | |
| 37 | | |
| 154% | |
| |
$ | 594 | | |
$ | 647 | | |
$ | (53 | ) | |
| (8% | ) |
Sales and marketing expenses decreased of $53,000
or 8%, due to a decrease in branding and building the formal marketing and sale infrastructure offset by an investment in marketing and
sales personnel.
Fair Value Adjustment on Crypto Asset Borrowing
Derivatives
| |
Year Ended December 31 | |
(in thousands) | |
2022 | | |
2021 | | |
$ Change | | |
% Change | |
Fair value adjustment on crypto asset borrowing derivatives | |
$ | – | | |
$ | 515 | | |
$ | (515 | ) | |
| (100% | ) |
| |
| | | |
| | | |
| | | |
| | |
Fair value adjustment on crypto asset borrowing
derivatives decreased $515,000 or 100%, due to the full payment of the outstanding amount of Bitcoin borrowed (host contract) in 2021.
See Note 10 to our Audited Consolidated Financial Statements for the year ended December 31, 2022 and 2021.
Interest and Fees
| |
Year Ended December 31 | |
(in thousands) | |
2022 | | |
2021 | | |
$ Change | | |
% Change | |
Interest expense | |
$ | 668 | | |
$ | 661 | | |
$ | 7 | | |
| 1% | |
Fees on crypto asset borrowings | |
| – | | |
| 119 | | |
| (119 | ) | |
| (100% | ) |
Fees for virtual vault services | |
| 113 | | |
| 222 | | |
| (109 | ) | |
| (49% | ) |
Interest expense decreased $7,000 or 1% due to
no significant changes in interest-bearing debt.
Fees on crypto asset borrowings decreased $119,000
or 100%. The net decrease is due to the paydown of crypto asset borrowings in 2021.
Virtual Vault is a term used in the Armored
Car and Cash Transport industry to define a service provided by armored car services for assets considered property of the bank when
the bank does not have a physical vault or location in a given state or location. The Fees for virtual vault services included in our
income statement are for a currency availability service provided to the Company by its bank for making funds held in a virtual vault
immediately available to the Company. Neither the term nor the service is related to virtual currency or crypto assets.
Fees for virtual vault services decreased $109,000
or 49% primarily due to lower ATM transaction volume in 2022 when compared to 2021.
Income Tax Expense (Benefit)
Income tax expense increased $887,000, primarily
due to an increase in federal and state domestic taxes of $300,000 and an increase in foreign taxes of $455,000 in addition to an increase
in deferred tax liability of $132,000. The increase in income tax expense is due to an increase in both US and foreign based net income.
Liquidity and Capital Resources
As of September 30, 2023, we had current assets
of $15,226,000 and current liabilities of $15,103,000, including the current portion of related party note payable of $4,090,000 and
current portion of leased liabilities of $5,391,000, rendering a working capital of $123,000.
As of December 31, 2022, we had current assets
of $4,505,000 and current liabilities of $8,138,000 resulting in a deficit working capital of $3,633,000.
Our ATM business has two significant components
of working capital – holdings of crypto assets and cash holdings in the machines and in transit, i.e., once it has been removed
from the machines and it is the process of being counted and credited to our account with the appropriate banking institution.
We must buy our holdings in cash and do not get a credit from our counterparties. On average, we hold 2 days of anticipated sales
of Bitcoin and at this time do not transact in Ethereum, Litecoin or BCH at our machines. We strive to keep this period short to reduce
the effect of changes in crypto asset/U.S. dollar exchange rates on our business and to minimize our working capital. Our cash logistics
contractors restock or remove cash from our machines periodically, the frequency of this service determined by a host of operational
considerations like historical trend of sales, current levels of cash in the machines, route considerations, public holidays, and incremental
cost of each removal etc. We employ a data driven strategy based on factors we have learned over the years to reduce the amount of cash
deployed and as low as possible. It currently takes anywhere from 3 to 7 days from the time the cash is picked up from the machines to
be credited to our account. An increase in this period or amount impacts our ability to restock our holdings of crypto assets in a timely
manner to avoid a situation where there are insufficient amounts of crypto assets to fulfill customer orders.
The
Company, given how actively we manage our cash logistics, and how we prioritize and leverage cash pick up based on proprietary operating
algorithms and practices, is able to finance and perform its daily operating activities and manage liquidity, while also maintaining
the noted levels of cash in the ATM machines. For the nine months ending September 30, 2023, the average cash balance was $4,354
per machine in the United States. For the fiscal year ending December 31, 2022, the average cash balance was $4,236 per machine
in the United States. The Company generally has minimum cash of $2,500 in each dispenser in two-way ATM machines in order to have sufficient
cash to operate them. The remaining cash is withdrawn from the machine in order to fund the Company’s operations.
The employees of the Company regularly, at intervals
of 3-hours or less, monitor the balance of crypto assets owned and controlled by the Company. When employees of the Company, using their
professional discretion, believe that there are insufficient amounts of crypto assets owned and controlled by the Company, they initiate
the purchase of additional crypto assets. There have been periods of time, each less than 24-hours, where there have not been sufficient
amounts of crypto assets owned and controlled by the Company to execute future customer transactions. During those times, no customer
transactions are permitted. The employees of the Company use the working capital of the Company to purchase more crypto assets, during
times when banking transactions are permitted, and once those crypto assets are delivered to the Company and owned and controlled by
the Company, customer transactions are again permitted.
Our Athena Plus (phone sales) has a lower level
of capital required since we only function on days other market participants and banks and our trades are cash settled every day. The
Company does not separately hold crypto assets earmarked for ATM sales as opposed to phone sales and the Company holds approximately
2 days worth of crypto assets needed for transactions at its ATMs. We strive to minimize the amount of working capital
deployed for better financial results.
The Company has financed operations primarily
with cash flow from the purchase and sale of crypto assets. Management utilizes a non-GAAP internal metric defined as functional
cash flow from operations in order to evaluate operational cash flow. Functional cash flow from operations is equal to cash flow from
operations (per GAAP statements) plus sale of crypto assets less purchase of crypto assets, both of which are included as investing activities
in the GAAP Consolidated Statement of Cash Flows. Given the active sales market for crypto assets, management believes that inclusion
of the purchase and sale of crypto assets provides a better metric for measuring cash flow from operations. Refer below for the calculation
of the functional cash flow for the nine months ended September 30, 2023 and twelve months ended December 31, 2022 and 2021.
| |
Nine Months Ended | | |
Year Ended | |
| |
September 30, | | |
December 31, | | |
December 31, | |
(in thousands) | |
2023 | | |
2022 | | |
2021 | |
| |
| | |
| | |
| |
GAAP cash flow from operations | |
$ | (10,070 | ) | |
$ | (5,559 | ) | |
$ | (4,145 | ) |
Plus: | |
| | | |
| | | |
| | |
Sale of crypto assets | |
| 116,352 | | |
| 61,868 | | |
| 78,972 | |
Purchase of crypto assets | |
| (96,307 | ) | |
| (53,403 | ) | |
| (74,973 | ) |
Functional cash flow from operations | |
$ | 9,975 | | |
$ | 2,906 | | |
$ | (146 | ) |
Our financing needs are influenced by our level
of business operations and generally increase with higher levels of revenue. We strive to minimize the amount of financing requested
to assist with operating the business. During the nine months ended September 30, 2023 we received net proceeds from debt of $1,449,000
compared to prior year nine months ended September 30, 2022 repayment of debt of $523,000. During fiscal year ended December 31, 2022
we paid down debt of $1,202,000 compared to the year ended December 31, 2021 where we received net proceeds of 5,126,000.
Contractual Obligations and Commitments
Related Party
Loan Agreement with the Company’s Director
and Shareholders
In 2017, the Company entered into several subordinated
note agreements with shareholders of the Company’s common stock. The notes had a principal amount of $117,000 with maturity dates
in 2021 and 2022. Interest as defined in the notes is 12% per annum. As of September 30, 2023, the outstanding principal was $90,000.
This is due within the next twelve months.
On August 4, 2022, the Company completed a lending
transaction with Mike Komaransky, the Company’s principal shareholder and former director, whereby the Company borrowed $500,000
from Mr. Komaransky pursuant to the terms of a secured promissory note and security agreement. The promissory note has an interest rate
of 6% and the repayment of the principal amount and any accrued interest is secured by certain assets of the Company with respect to
which Mr. Komaransky holds first priority lien and security interest. The terms of the secured promissory note and the security agreement
were subsequently amended by the parties on January 17, 2023. Pursuant to the terms of the amended secured promissory note, the Company
agreed to make monthly payments of $50,000 until the maturity date of the secured promissory note, which was on August 31, 2023. As
of September 30, 2023, the outstanding principal was $0.
Loan from KGPLA
As of May 15, 2023, the Company entered into
a certain Senior Secured Loan Agreement, as amended (the “Loan Agreement”) and Senior Secured Revolving Credit Promissory
Note (the “Revolving Credit Note”) with KGPLA Holdings LLC (“KGPLA”), an entity in which Mike Komaransky, a former
director and principal shareholder of the Company has a controlling interest. The Revolving Credit Note allows the Company to borrow
up to $4,000,000 for the operations of its New Bitcoin ATM Machines, as defined in the Loan Agreement, with a maturity date of May 15,
2024. Fees for these borrowings are calculated based on a percentage of the gross daily receipts generated from these machines and are
recorded as part of Cost of Revenue in the Condensed Consolidated Income Statement. As of September 30, 2023 the outstanding principal
of the Revolving Credit Note was $4,000,000. In connection with the above loan transaction and issuance of Revolving Credit Note, the
Company granted KGPLA a first priority lien and security interest in and to all of the Company’s assets, except for property previously
pledged to Banco Hipotecario, and with respect to such assets, the Company granted the Lender a second priority lien. The principal of
$4,000,000 is due within the next twelve months.
KGPLA Convertible Debt
On January 31, 2020, the Company entered into
a convertible debenture agreement with KGPLA LLC, an entity in which Mike Komaransky, a former director and principal shareholder of
the Company has controlling interest. The convertible debenture provided for a principal amount of $3,000,000, with a maturity date of
January 31, 2025. Interest as defined by the agreement is 8% per annum. KGPLA, LLC has the option to convert the outstanding principal
and accrued interest balance into common stock of the Company at the lower of $0.012 per share or 20% discount to the next major financing
or change in control. The convertible debenture was amended and restated as of May 15, 2023 and became a secured, and not general unsecured,
obligation of the Company, on par with the notes issued pursuant to the Senior Secured Loan Agreement entered into as of the same date.
As of September 30, 2023 and December 31, 2022, the outstanding principal debenture amount of $3,000,000 was presented under related
party convertible debt in the Condensed Consolidated Balance Sheets.
Third-Party
Promissory Note
On August 1, 2018, the Company entered into a
promissory note with LoanMe, Inc. The promissory note provided for a principal amount of $100,000, with a final maturity date of August
1, 2028, with equal monthly installment payments of $2,000. Interest as defined in the promissory note is 24% per annum. As of September
30, 2023 and December 31, 2022 the outstanding principal was $75,000 and $80,000, respectively. The amount due in the next twelve
months is $24,000.
Loan from Banco Hipotecario
In September 2021, the Company’s El Salvador
subsidiary, Athena Holdings El Salvador, S.A. DE C.V. (“Athena El Salvador”) entered into a loan agreement with Banco Hipotecario
for the loan amount of $1,500,000. The loan has an interest rate of 7.5% and is secured by Athena El Salvador’s assets in El Salvador.
The maturity date is 36 months after the disbursement of the funds. The monthly payments on the loan in the equal amounts of $49,108,
begin two (2) months after the disbursement of the funds. As of September 30, 2023 and December 31, 2022, the outstanding principal was
$666,000 and $1,037,000, respectively. The amount due in the next twelve months is $589,000.
Loan from Capital Premium Financing
On December 10, 2022, the Company entered into
a financing agreement for $49,000 with Capital Premium Financing, Inc. to pay the insurance premium on its commercial liability insurance
with an annual percentage rate of 17.65% per annum repayable in nine monthly installments beginning February 1, 2023. As of September
30, 2023 and December 31, 2022, the outstanding principal was $6,000 and $49,000, respectively. This amount is due in the next twelve
months.
Convertible Debt
In December 2021, certain debenture holders exercised
their right and gave an irrevocable notice to convert $220,000 of the convertible debt for 2,200,000 shares. This amount is included
in Shares to be issued in the Consolidated Statement of Stockholders’ Deficit as of December 31, 2021. As of March 31, 2022 additional
debenture holders exercised their right and gave an irrevocable notice to convert $3,245,000 of the convertible debt. The Company issued
a total of 34,650,000 shares to convert the outstanding principal for the period ended March 31, 2022. The outstanding amount of
the convertible debt was $353,000 on September 30, 2023. This amount was repaid by December 31, 2023.
Operating Leases
The Company has entered into multiple operating
leases, primarily related to the renting of space for our ATM fleet. The Company has a total lease liability of $15,940,000, of which
$5,391,000 is due in the next twelve months.
Off Balance Sheet Arrangements
Our
contract with the government of El Salvador for the operation of the Chivo branded ATMs, specifically the Service Addendum 1 Section
11.2, which is included as Exhibit 10.27 to the registration statement which this prospectus is a part, obligates the Company to assume
the risk of loss for funds used in the operation of the Chivo branded ATMs while those funds are in transit. The Company has contracted
with licensed and insured cash logistics companies to securely transport such funds, including Proteccion de Valores, S.A. de C.V. (PROVAL,
Servicio Salvadoreño de Protección, S. A. de C. V.(SERSAPROSA) and Move On Security LLC. The amount of funds in transit
as of September 30, 2023, and December 31, 2022, were $740,000 and $278,000, respectively.
The Company is obligated to assume the risk of
loss for crypto assets that are in transit. However, crypto assets that are in transit are governed by the blockchain and are in transit
for a short duration (typically less than an hour). As a result, there are no funds in transit as of any reporting date.
Cash Flow
The following summarizes our cash flow for the
nine months ended September 30, 2023 and 2022:
| |
Nine Months Ended September 30 | |
| |
2023 | | |
2022 | | |
$ Change | | |
% Change | |
| |
(in thousands) | |
Net cash used in operating activities | |
$ | (10,070 | ) | |
$ | (5,111 | ) | |
$ | (4,959 | ) | |
| (97% | ) |
Net cash provided by investing activities | |
| 19,085 | | |
| 5,714 | | |
| 13,371 | | |
| 234% | |
Net cash provided by (used in) financing activities | |
| 1,449 | | |
| (523 | ) | |
| 1,972 | | |
| 377% | |
Net increase in cash and cash equivalents | |
| 10,464 | | |
| 80 | | |
| 10,384 | | |
| 12,980% | |
Cash and cash equivalents, beginning of period | |
| 3,208 | | |
| 4,845 | | |
| (1,637 | ) | |
| (34% | ) |
Cash and cash equivalents, end of period | |
$ | 13,672 | | |
$ | 4,925 | | |
$ | 8,747 | | |
| 178% | |
The following summarizes our cash flow for the year ended December
31, 2022 and 2021:
| |
Year Ended December 31 | |
| |
2022 | | |
2021 | | |
$ Change | | |
% Change | |
| |
(in thousands) | |
Net cash used in operating activities | |
$ | (5,559 | ) | |
$ | (4,145 | ) | |
$ | (1,414 | ) | |
| (34% | ) |
Net cash provided by investing activities | |
| 5,124 | | |
| 1,779 | | |
| 3,345 | | |
| 188% | |
Net cash provided by (used in) financing activities | |
| (1,202 | ) | |
| 5,126 | | |
| (6,328 | ) | |
| (123% | ) |
Net increase (decrease) in cash and cash equivalents | |
| (1,637 | ) | |
| 2,760 | | |
| (4,397 | ) | |
| (159% | ) |
Cash and cash equivalents, beginning of period | |
| 4,845 | | |
| 2,085 | | |
| 2,760 | | |
| 132% | |
Cash and cash equivalents, end of period | |
$ | 3,208 | | |
$ | 4,845 | | |
$ | (1,637 | ) | |
| (34% | ) |
Cash flow from operating activities
Operating activities used $10,070,000 in cash
for the nine months ended September 30, 2023, compared to $5,111,000 for the nine months ended September 30, 2022, representing an increase
in cash used of $4,959,000. The changes in sources of cash from operating activities for the nine months ended September 30, 2023, comprised
primarily of an increase from net income of $9,802,000, accounts payable of $8,088,000, customer advances of $1,955,000, crypto asset
payments for expenses of $1,420,000, deferred income tax of $1,000,000, and other advances of $750,000. This was offset by uses of cash
due to gain on sale of crypto assets of $16,256,000, prepaid expenses and other assets of $11,290,000, and accounts receivable of $665,000.
All other operating activity provided additional cash of $237,000.
Operating activities used $5,559,000 in cash for
the twelve months ended December 31, 2022, compared to a use of $4,145,000 for the twelve months ended December 31, 2021, representing
an increase in cash used of $1,414,000. The changes in sources of cash from operating activities for the twelve months ended December
31, 2022, are comprised primarily of net income of $7,783,000, depreciation and amortization of $1,077,000, crypto asset payments for
expenses of $1,128,000, accounts receivable of $2,952,000, other advances of $1,575,000 and prepaid expenses and other assets of $893,000.
The additional sources were offset by uses in cash comprised primarily of theft of bitcoin of $1,600,000, gain on sale of crypto assets
$606,000, fair value adjustment on crypto asset borrowing derivatives of $515,000, customer advances of $6,234,000, advances received
for revenue contract $3,500,000 and accounts payable and other liabilities of $4,639,000. All other operating activity provided cash of
$272,000.
Cash flow from investing activities
Our investing activities provided $19,085,000
in cash for the nine months ended September 30, 2023 which included a cash inflow of $116,352,000 from sale of crypto assets offset by
$96,307,000 of cash outflow on purchase of crypto assets and $960,000 for purchase of property and equipment. In the nine months ended
September 30, 2022, investing activities provided $5,714,000 which included a cash inflow of $49,010,000 from sale of crypto assets offset
by $42,693,000 of cash outflow on purchase of crypto assets and $603,000 towards purchase of property and equipment to expand our fleet
of ATMs.
Our investing activities provided $5,124,000
in cash for the year ended December 31, 2022 which included a cash inflow of $61,868,000 from sale of crypto assets offset by $53,403,000
of cash outflow on purchase of crypto assets, and $3,341,000 towards purchase of property and equipment. For the year ended December
31, 2021, investing activities provided $1,779,000 which included a cash inflow of $78,972,000 from sale of crypto assets offset by $74,973,000
of cash outflow on purchase of crypto assets, and $2,220,000 towards purchase of property and equipment to expand our fleet of ATMs.
Cash flow from financing activities
Our financing activities provided $1,449,000
in cash for the nine months ended September 30, 2023, primarily due to additional sourcing of debt compared to a use of cash of $523,000
for the nine months ended September 30, 2022 for the repayment of debt.
For the year ended December 31, 2022, net cash
used by financing activities was $1,202,000, primarily due to debt reduction. For the year ended December 31, 2021, net cash provided
by financing activities was $5,126,000, primarily due to the issuance of convertible debt for $4,985,000.
Critical Accounting Policies and Estimates
Our financial statements and accompanying notes
have been prepared in accordance with GAAP. The preparation of these financial statements requires management to make estimates, judgments,
and assumptions that affect reported amounts of assets, liabilities, revenues, and expenses. We continually evaluate the accounting policies
and estimates used to prepare the financial statements. The estimates are based on historical experience and assumptions believed to
be reasonable under current facts and circumstances. Actual amounts and results could differ from these estimates made by management.
Certain accounting policies that require significant management estimates and are deemed critical to our results of operations or financial
position. Our critical accounting estimates are more fully discussed in Note 2 to our unaudited and audited financial statements contained
herein.
Revenue Recognition
The Company derives its recurring revenues primarily
from three sources: (i) sale of crypto assets at Athena Bitcoin ATMs, (ii) customized investor trading services for the sale or purchase
of crypto assets through our Athena Plus OTC desk and (iii) white label operations in El Salvador. The Company also generates revenue
from ancillary items, such as sale of intellectual property and maintenance of software. The Company adopted ASC 606, Revenue Recognition
(“ASC 606”), effective January 1, 2019, using the modified retrospective method. Under ASC 606, Revenue Recognition, the
Company recognizes revenue at the point of sale or over time of the service period for these products or services to our customers, in
an amount that reflects the consideration the Company expects to be entitled to in exchange for those products or services. The Company
determines revenue recognition through the following five steps:
|
· |
Identification of the contract, or contracts, with a customer |
|
|
|
|
· |
Identification of the performance obligations in the contract |
|
|
|
|
· |
Determination of the transaction price |
|
|
|
|
· |
Allocation of the transaction price to the performance obligations
in the contract |
|
|
|
|
· |
Recognition of revenue when, or as, we satisfy a performance obligation. |
The Company recognizes revenue when performance
obligations identified under the terms of contracts with its customers are satisfied.
Judgment is required in determining whether we
are the principal or the agent in transactions between customers. We evaluate the presentation of revenue on a gross or net basis based
primarily on inventory risk (are we at risk for potentially fluctuations of the crypto asset price) and whether we control the crypto
asset provided before it is transferred to the customer or whether we act as an agent by arranging for others to provide the crypto asset
to the customer.
The Company enters into contracts that may include
multiple performance obligations. The Company identifies the promises in the contract and assigns them to their appropriate performance
obligation. These performance obligations may be part of a different revenue source and are listed separately below.
Athena Bitcoin ATM
The Company requires all users of the Athena
Bitcoin ATM to agree to ATM Terms & Service. The ATM Terms & Service stipulate the terms and conditions of the transaction. The
user, by inserting fiat currency and confirming that they agree to the transaction, is agreeing to the contract that governs the transaction.
This contract meets all of the criteria to be a revenue contract under ASC 606.
The Company has
a single performance obligation to provide a specific quantity of a crypto asset (exclusively Bitcoin after July 2023) to the
customer’s crypto wallet. We utilize a mark-up for crypto assets sold to the customer. Athena Bitcoin ATMs permit customers
to purchase as little as $1 of Bitcoin but customers typically choose between $100 and $1,000 per transaction. The
Company considers itself the principal in this arrangement, as it controls the crypto asset prior to delivering, incurs inventory risk
due to potential fluctuations in the market price of the crypto asset and has discretion in establishing the price of the crypto asset
sold in the Athena Bitcoin ATM machine. Therefore, it records the gross cash received from the customer as the transaction price for
the performance obligation.
Revenue is recognized at the point in time when
the crypto asset is delivered to the customer’s crypto wallet. Delivery to the customer’s crypto wallet is governed by the
crypto asset’s blockchain and typically takes less than an hour.
Athena Plus
The Company requires all users of Athena Plus
to agree to Athena Plus Terms & Service. The Athena Plus Terms & Service stipulate the terms and conditions of the transaction.
The user, by wiring fiat currencies to the Company’s bank account, is agreeing to the contract that governs the transaction. This
contract meets all of the criteria to be a contract under ASC 606.
The Company has a single performance obligation
to provide a specific quantity of a crypto asset to the customer’s crypto wallet. We utilize a mark-up for crypto assets sold to
the customer. The minimum transaction is $10,000 USD (or equivalent value of local currency). The Company considers itself the principal
in this arrangement, as it controls the crypto asset prior to delivering, incurs inventory risk due to potential fluctuations in the
market price of the crypto asset and has discretion in establishing the price of the crypto asset sold. Therefore, it records the gross
cash received from the customer as the transaction price for the performance obligation. The only exception for this are stable coins,
which are considered financial assets. As such, the Company, in accordance with ASC 860-20, will recognize revenue net (markup) for any
sale of stable coins.
Revenue is recognized at the point in time when
the crypto asset is delivered to the customer’s crypto wallet. Delivery to the customer’s crypto wallet is governed by the
crypto asset’s blockchain.
White-label Service
The Company entered into multiple contracts that
govern the white-label service with the El Salvadoran government for ATMs located in El Salvador and in the United States. These contracts
detail the obligations and rights of both parties, including pricing and meet all of the criteria of a revenue contract under ASC 606.
The contracts permit the customer to terminate the contract at any point or to adjust the number of ATMs that are in use without a substantive
penalty. This results in each ATM and each service month for the ATM being considered a separate revenue contract per ASC 606.
The Company makes multiple promises to the customer.
This includes installation as well as multiple promises for operating the ATMs on behalf of the customer. Installation is a separate
performance obligation. This is due to the customer benefitting from the installation, the customer’s ability to utilize a third-party
to perform the installation if desired, no significant modification or customization is part of the installation, no significant integration
of installation with operating the ATMs and installation does not affect the operating of the ATMs performance obligation (discussed
below). This results in installation services being capable of being distinct and distinct in the context of the contract.
Operating the ATMs include multiple promises,
including providing the Company owned ATMs, repairs and maintenance as necessary, loading and unloading cash and any other activities
that are required to ensure that the ATMs are operating. In 2022, the Company entered a separate contract that require the Company to
ensure that the ATMs provide ATM services at least 99% of the time. The Company evaluated these promises to operate the ATMs and determined
that the individual promises are not distinct in terms of the contract. While the promise that are in the contract may vary each day,
the tasks are activities to fulfill their service to operate the ATMs is a combined output that provides a continuous service to the
customer. Each increment of the promised service, which is each day, is distinct in accordance with ASC 606-10-25-19. This is due to
the customer benefitting from each increment of service on its own (it is capable of being distinct) and each increment of service is
separately identifiable because no day of service significantly modifies or customizes another day of the contract and no day of service
significantly affects either the entity's ability to fulfill another day of service or the benefit to the customer of another day of
service. Therefore, the days are substantially the same and have the same pattern of transfer. Therefore, this meets the criteria to
be considered part of a series and is combined into a single performance obligation for each contract.
Included in the operating the ATM performance
obligation is providing Company owned ATMs to the customer. The Company elected the expedient in ASC 842-10-15-42A, which permits the
combining the lease and non-lease components together if the lease component has the same timing and pattern of transfer as the non-lease
component and the lease component is an operating lease. Both of these conditions are met. Given that that the predominant obligation
is the non-lease component (servicing the ATM), the Company, in accordance with ASC 842-10-15-42B, will account for the performance obligation
under the terms of ASC 606.
The Company generally charges a fixed fee
for installation and a fixed fee each month for operating the ATMs The fixed fees collected are allocated to the performance obligations
based on an adjusted market assessment approach. The Company generally charges the customer for costs incurred to perform the service,
including repairs and cash logistics. The fees for the specific services are considered variable consideration. The Company is considered
the principal, as it controls any third-party good or service before it is transferred to the customer.
The prices for additional services and reimbursement
of costs do not meet the definition of a material right, as the services included have separate pricing are not considered an additional
good or service but part of the existing contract. These services are considered perfunctory, as they are necessary for the Company to
fulfill its performance obligation to operate the machines on behalf of the customer.
For operating the ATM, revenue is recognized
straight line over the requisite service period, which is typically one month, for operating the ATM. For installation, revenue is recognized
at the point in time when installation is complete. Variable fees related to reimbursement of costs are recognized in the month in which it has incurred the costs and earned
the revenue.
Ancillary - Development of Chivo Ecosystem
and Support
In 2021, the Company entered into a series of
contracts to develop the Chivo Ecosystem for El Salvador. The Chivo Ecosystem is comprised of the Bitcoin Chivo Wallet and the Chivo Website.
In order develop the Chivo Ecosystem, the Company provided a license to intellectual property. The license is nonexclusive, non-sublicensable
(except to representatives of the El Salvador government), royalty-free, fully paid-up, irrevocable, perpetual and a worldwide right.
There are no exclusivity terms and no commitments. The license to the intellectual property was subject to completion of the asset acquisition
of XPay (refer to next section). As of December 31, 2021, the Company had not completed the asset acquisition. This meets the definition
of a contingency and results in the Company not meeting the criterion ASC 606-10-25-1(a), as the Company cannot commit to performing their
obligation. The other elements of a revenue contract, including identification of their rights to the services to be transferred, payment
terms, commercial substance and collecting the consideration are all met. Due to the contingency, this results in the contracts not being
a revenue contract under ASC 606 until the contingency is lifted. All consideration received until the contingency is lifted is a liability.
The contingency was lifted in 2022 with the acquisition of the rights to utilize the license.
The development of the Chivo Ecosystem includes
multiple promises, including providing a license to the intellectual property, as well as specifications for the development of the Chivo
Ecosystem beyond just basic digital wallet functionality (e.g., ability to send crypto assets to different wallets). This includes the
requirement to create a website to track activity of the Chivo wallet and to integrate the wallet with the white-label ATMs, custodial
providers, SMS providers and KY/AML providers. The Company also entered into an agreement to provide software support and improvements
to the Chivo Ecosystem if necessary, through December 31, 2021.
The Company evaluated the promises and determined
that the promises to provide the license to the intellectual property and develop the Chivo Ecosystem should be combined into a single
performance obligation. The customer would be unable to benefit from the Chivo Ecosystem without the licensing agreement. The Company
provides a significant service of integrating the license with other services to develop the Chivo ecosystem. The development of the
Chivo Ecosystem represents the combined output for which the customer has contracted the Company for. Accordingly, Management concludes
the entity should combine each promise pertaining to the development of the Chivo Ecosystem with that of the License of IP and treat
it as a single performance obligation.
The Company also provides software maintenance
services from September 2021 through December 2021. The Company promises that it will support and improve the software as needed to maintain
the uninterrupted 24/7 operation of the Chivo Ecosystem after the completion of the development of the ecosystem. The software maintenance
services can be used and are available to be used without the use of any of the other promises, as it is contingent upon the completion
of the Chivo Ecosystem. As such, the Government of El Salvador (customer) can benefit from the software maintenance services on its own
and the software maintenance services are separately identifiable from the other promises. Accordingly, Management concludes that the
software maintenance services are a distinct performance obligation.
The transaction price is specifically outlined
in the contracts which includes two one-time payments of $2M each for the development of the Chivo Ecosystem and fixed monthly payments
for the software maintenance services. The prices in the contract reflect the standalone sales price of both performance obligations.
There is no variable consideration.
The Company recognizes the development of the
Chivo Ecosystem at a point in time. The customer is unable to benefit from the development of the Chivo ecosystem until its completion,
nor does it control the ecosystem until its completion. There is also no alternate use to the Company. As noted previously, development
of the Chivo Ecosystem was unable to be recognized until the contingency related to XPay was closed.
The Company recognizes software maintenance over
time, as the customer receives the benefits from this service as the Company provides it each month.
XPay Asset Acquisition
The Company entered into a non-binding Letter
of Intent in 2021 with Arley Lozano, a principal beneficial owner of XPay for the purchase and sale of certain assets of XPay; primarily
intellectual property assets, including the XPay Wallet (the precursor to the Chivo Wallet) and XPay POS software. This was evaluated
under ASC 805 and determined to meet the definition of an asset acquisition, if finalized. This is due to the fact that there was no
substantive process being acquired. No workforce was acquired and substantially all of the assets acquired were acquiring the intellectual
property specific to the XPay Wallet. We made advances of $780,000 in 2021 and an additional $815,000 in 2022.
The Company terminated the non-binding letter
of intent in December 2022. As part of the termination, the Company agreed to obtain the rights to utilize the software license in exchange
for the advances previously made. The cost of the software license was capitalized as software development on the consolidated balance
sheet in December 2022.
Crypto Asset Borrowings
The Company borrows crypto assets from related
parties. Such crypto assets borrowed by the Company are reported in crypto assets held on the Company’s consolidated balance sheets.
The borrowings are accounted for as hybrid instruments,
with a liability host contract that contains an embedded derivative based on the changes in the fair value of the underlying crypto asset.
The host contract is not accounted for as a debt instrument because it is not a financial liability, is carried at the fair value of
the assets acquired and reported in crypto asset borrowings in the consolidated balance sheets. The embedded derivative is accounted
for at fair value, with changes in fair value recognized in other non-operating expenses in the consolidated statements of operations.
We evaluate all of our loan contracts to determine if those contracts or embedded components of those contracts qualify as derivatives
to be separately accounted for under ASC 815, Derivatives and Hedging. The embedded derivatives are included in crypto asset borrowings
in the consolidated balance sheets.
Fair value of crypto assets is estimated by applying
fair value hierarchy in ASC 820. Given the volatile nature of crypto assets, there was uncertainty regarding the fair value of
the crypto assets at the due date of the borrowings. The Company utilized observable market inputs and market data (Level 2) at December
31, 2021. This was settled in 2022.
Expenses Paid in Crypto Assets
The Company enters into agreements with certain
vendors and service providers that provide us with the option to settle their invoices in crypto assets. The amount due is fixed and
is denominated in USD. There are no payment terms that include conversion options, variable settlement features, or alternative settlement
provisions contingent upon future events or market price fluctuations that could potentially give rise to embedded derivatives.
The Company considers the guidance in ASC 350,
ASC 606, ASC 610, and ASC 845 when it evaluates the derecognition of its crypto assets, typically Bitcoin, paid to vendors in lieu of
cash payments. In these transactions, we have been invoiced by a vendor and given the option to pay in USD or crypto assets, typically
Bitcoin. The amount of Bitcoin is determined by the market wide and easily determined price in accordance with the guidance of ASC 820,
Fair Value Measurement. The Company records as an expense the USD value of the invoice and then considers the above references
to determine the proper way to derecognize the intangible long-lived asset used as payment.
We consider the scoping exceptions for each of
those topics and conclude that that the scope of 610-20 most closely matched the facts of the transactions. ASC 610-20-15-2 states “nonfinancial
assets within the scope of this Subtopic include intangible assets,” which is how the company treats crypto assets.
We evaluated two possibilities to exclude these
transactions from the scope ASC 845. The relevant exceptions to the scope of that Topic are as follows:
|
1. |
The transfer of goods or services in a contract with
a customer within the scope of ASC Topic 606 in exchange for noncash consideration (ASC 845-10-15-4(j)) |
|
2. |
The transfer of a nonfinancial asset within the scope
of ASC Topic 610-20 in exchange for noncash consideration (ASC 845-10-15-4(k)) |
For these transactions, our usage of the crypto
asset is as a payment instrument to a vendor, therefore our interpretation of (1) above is for ASC 606 not to apply. We interpret (2)
above to apply when the Company pays a vendor (who is not a customer) with a crypto asset (nonfinancial asset) in lieu of paying that
same vendor with fiat currency (USD). Therefore, we account for the derecognition of the crypto assets in these transactions under the
guidance of ASC 610-20, Gains and Losses from the Derecognition of Nonfinancial Assets. This is the same guidance as in ASC 350-10-40-1,
Transfer or Sale of Intangible Assets.
ASC 610-20-15-2 explicitly states the scope to
include intangible assets. We treat crypto assets as intangible assets. We then apply the general principle of ASC 610-32-2 for recognizing
the gain or loss for the difference between the amount of goods or services we receive (fair market value, per ASC 820 Level 2) and the
cost of acquiring the crypto assets.
We record invoices from vendors in the appropriate
expense category, in the correct time period in which services were provided, in USD and for vendors who elect to be paid in crypto assets,
we transfer the crypto assets at market value at the time of transfer in line with ASC 820 – Fair Value Measurement. We
then recognize as a gain or loss, the difference between the cost of acquiring the crypto asset and its value at the time of transfer
to Cost of Revenues.
Income Taxes
We utilize the asset and liability method for
computing our income tax provision. Deferred tax assets and liabilities reflect the expected future consequences of temporary differences
between the financial reporting and tax bases of assets and liabilities as well as operating loss, capital loss, and tax credit carryforwards,
using enacted tax rates. Management makes estimates, assumptions, and judgments to determine our provision for income taxes, deferred
tax assets and liabilities, and any valuation allowance recorded against deferred tax assets. We assess the likelihood that our deferred
tax assets will be recovered from future taxable income and, to the extent we believe that recovery is not likely, we establish a valuation
allowance.
We recognize the tax benefit from an uncertain
tax position only if it is more likely than not the tax position will be sustained on examination by the taxing authorities, based on
the technical merits of the position. The tax benefits recognized from such positions are then measured based on the largest benefit
that has a greater than 50% likelihood of being realized upon settlement. Interest and penalties related to unrecognized tax benefits
are recognized within provision for income taxes.
For U.S. federal tax purposes, crypto asset transactions
are treated on the same tax principles as property transactions. We recognize a gain or loss when crypto assets are exchanged for other
property, in the amount of the difference between the fair market value of the property received and the tax basis of the exchanged crypto
assets. Receipts of crypto assets in exchange for goods or services are included in taxable income at the fair market value on the date
of receipt.
The
Business
Overview
Athena is focused on developing the connecting
the world’s cash to the new global digital financial system. We believe that providing the world with access to crypto assets will
help transform the international financial order by providing the unbanked and billions of others in the world, including small businesses,
with a connection to a new global digital financial system that is more accessible, efficient and transparent than the legacy financial
system.
We believe that it is critical that in order
for this ecosystem to be adopted by the world, that there must be operators that are receptive to the needs of the unbanked, the underbanked
and small businesses. While much of the worldwide focus is on investors of crypto assets, we believe in the functionality that crypto
assets can provide. The Company is focused primarily on the cash buyer of crypto assets who not only want bitcoin or other crypto assets
quickly for common expenditures but also those who want crypto assets transferred to their private wallet and not in the hands of a third-party.
We serve these customers with the highest level of customer care through a broad product selection, trained customer service staff, multi-lingual
support, and convenient ATM locations located in the United States, El Salvador, Argentina and Colombia.
We
started with our first ATM in St. Louis, Missouri in 2015 and our first ATM in South America in 2018. Now, we currently have a total
of 1,422 ATMs in five countries and operate 249 ATMs on behalf of the El Salvadoran government in order to achieve our Company’s
objectives to develop the new digital financial ecosystem. Since January 1, 2022 through September 30, 2023, we have generated $196,896,000
in revenue, the majority of which has come from the ATM sales. During this same time, the price of bitcoin has decreased from $47,690
to $26,970 on September 30, 2023. This reduction has not been linear, fluctuating from a high of $64,860 on November 11, 2021
to a low of $16,600 on December 30, 2022. Given the infancy of the new digital financial system, we expect that there will continue to
be variability in our results and the price of crypto assets. However, we are focused on the long-term and believe that our results will
continue to increase and improve as the ecosystem continues to develop.
Our primary product offerings are discussed more
below.
Background and Corporate History
The Company was incorporated in the state of
Nevada in 1991 under the name “GamePlan, Inc.” for the sole purpose of merging with Sunbeam Solar, Inc., a Utah corporation,
which merger occurred as of December 31, 1991 with GamePlan, Inc. as a sole surviving entity. The Company was involved in various businesses,
including, gaming and other consulting services, prior to becoming a company seeking acquisitions (a “shell company” as defined
in Rule 405 of the Securities Act). The Company was a reporting issuer under the Securities and Exchange Act of 1934 (the “Exchange
Act”) from 1999 until 2015 when it filed Form 15 pursuant to Rule 12g-4(a)(1) with the Commission.
On March 28, 2014, the Company entered into an
Agreement and Plan of Merger (the “Plan”) with VPartments; VPartments Acquisition Corp., a Georgia corporation that was formed
as a wholly-owned subsidiary of the Company (the “Merger Subsidiary”); and Mark D. Anderson, Sr., who was the beneficial
owner of approximately 60.1 percent of the issued and outstanding shares of common stock of VPartments. Under the terms of the Plan,
the parties agreed that at the closing, the Merger Subsidiary would merge with and into VPartments, with each 7.52034545757 then-outstanding
shares of VPartments common stock to be converted into the right to receive one share of the Company’s common stock. The Company
issued a total of 150,525,000 “restricted” shares of its common stock to the stockholders of VPartments Inc., causing such
stockholders to become the collective owners of approximately 90.8 percent of the Company’s issued and outstanding shares of common
stock. In connection with the change of control pursuant to the Plan, the Company’s then current officers and directors resigned,
and the new officers and directors were appointed. The Company (GamePlan, Inc.) had no operations and was seeking acquisitions from April,
2014 until January 30, 2020. The Company (GamePlan, Inc.) did not enter into any debt obligations during that period.
In July, 2018, Magellan Capital Partners, Inc.,
a Wyoming corporation, became a majority shareholder of the Company after purchase of 90,421,378 shares of common stock (approximately
55%) in a private transaction with a majority shareholder, Mark D. Anderson. Following the acquisition of control, Dempsey Mork, a beneficial
owner of Magellan Capital Partners, Inc., was appointed a sole officer and director of the Company, and subsequently elected as its sole
director in November, 2018 shareholders’ meeting. On December 6, 2018, Mr. Mork entered into an agreement with Robert Berry, a
former officer and director, to cancel all debts due to Mr. Berry from the Company in consideration for the issuance of the total of
90,421,000 shares of common stock of the Company to Mr. Berry and another shareholder.
On January 14, 2020, the Company entered into
a Share Exchange Agreement (the “Agreement”), by and among the Company, Athena Bitcoin, Inc., a Delaware corporation (“Athena
Bitcoin”) incorporated in 2015, and certain shareholders of Athena Bitcoin. The Agreement provides for the reorganization of Athena
Bitcoin, with and into the Company, resulting in Athena Bitcoin becoming a wholly-owned subsidiary of the Company (the “Share Exchange”).
GamePlan, Inc, had a total of 486,171,020 shares outstanding prior to the Share Exchange. The Agreement is for the exchange of 100% shares
of the outstanding common stock of Athena Bitcoin, for 3,593,644,680 shares of GamePlan, Inc. common stock (an exchange rate of 1,244.69
shares of common stock of GamePlan, Inc. for each share of Athena Bitcoin common stock). The exchange rate was determined by the Board
of Directors of Athena Bitcoin based on the arbitrary valuation of Athena Bitcoin by its Board of Directors and negotiations with the
principals of GamePlan, Inc. No independent valuation was obtained. The authorized capital stock of Athena Bitcoin immediately preceding
the closing of the Share Exchange consisted of (i) 3,000,000 shares of the Athena Bitcoin’s common stock, par value $0.001 per
share, authorized, of which: 2,887,175 shares were issued and outstanding immediately prior to the Share Exchange, which included the
following conversion events in connection with the Share Exchange: (i) 1,328,381 shares resulting from the conversion of certain Simple
Agreements for Future Tokens (“SAFT”) issued by Athena Bitcoin in 2018 pursuant to the SAFT provisions providing for the
conversion into Athena Bitcoin equity under certain conditions were exchanged for 1,653,425,404 shares of the Company’s common
stock at a conversion price of $4.09 (see also Note 1 to the Company’s audited financial statements for the fiscal years ended
December 2021 and 2022); (ii) 93,106 shares resulting from the exercise of certain outstanding warrants at an average exercise price
of $2.00 per share, issued by Athena Bitcoin were exchanged for 115,888,490 shares of the Company’s common stock (see also Note
1 to the Company’s audited financial statements for the fiscal years ended December 2021 and 2022); (iii) 126,646 shares resulting
from the exercise of stock options issued by Athena Bitcoin were exchanged for 157,635,309 shares of the Company’s common stock
(see also Note 1 to the Company’s audited financial statements for the fiscal years ended December 31, 2021 and 2022); and (iv)
336,692 shares resulting from the conversion of the Swingbridge Conversion and Release Agreement were exchanged for 419,078,082 shares
of the Company’s common stock (see also Note 1 to the Company’s audited financial statements for the fiscal years ended December
31, 2021 and 2022). The closing of the Share Exchange transaction occurred as of January 30, 2020. Following the closing date of the
transaction, there were 4,079,815,704 shares of the Company’s common stock outstanding. The Company had 5,000,000,000 shares of
common stock authorized as of the closing date of the Share Exchange transaction. Subsequently, in May, 2020, following the Company’s
Convertible Debenture financing (see Recent Financings below), the Company filed its amended and restated articles of incorporation authorizing
a total of 4,409,605,000 shares of common stock. In January 2023, the Company filed second amended and restated articles of incorporation
authorizing 10,000,000,000 shares of common stock and 5,000,000 shares of preferred stock, at $0.001 par value per share.
The Company approved the name change from “GamePlan,
Inc.” to “Athena Bitcoin Global” on March 10, 2021 by the unanimous consent of its Board of Directors and a majority
consent of its shareholders. The Company filed an amendment to its Articles of Incorporation with the Secretary of State of the state
of Nevada on April 6, 2021, with the effective date of April 15, 2021. The Company’s name change, and trading symbol change to
“ABIT” on OTC Pink Market were declared effective by FINRA on June 9, 2021. The Company’s Board of Directors and its
shareholders approved a 10-for-1 reverse stock split as of October 15, 2021.
The Company, Athena Bitcoin Global, is a Nevada
corporation which owns our 100% of our operating subsidiary, Athena Bitcoin, Inc., a Delaware corporation. Our domestic business operations
are conducted by Athena Bitcoin, Inc. We also have operating subsidiaries in the specific countries where we operate, or in the case
of Mexico, where we previously operated until 2019. Our wholly-owned subsidiaries located outside of the United States are: Athena Bitcoin
S. de R.L. de C.V., incorporated in Mexico; Athena Holdings Colombia SAS, incorporated in Colombia; Athena Holding Company S.R.L, incorporated
in Argentina; Athena Holdings of PR LLC, incorporated in Puerto Rico; and Athena Holdings El Salvador, S.A. de C.V., incorporated in
El Salvador.
Our corporate office is located at 800 NW 7th
Avenue, Miami, Florida 33136, and our telephone number is 312-690-4466. Our website is www.athenabitcoin.com. The information
on, or that can be accessed through, our website is not part of this prospectus and is not incorporated by reference herein.
Private Financings
of Athena Bitcoin Global
On June 22, 2021, the Company commenced its private
offering of up to $5,000,000 of 6% Convertible Debentures to accredited investors only. The maturity date on the 6% Convertible Debentures
is two years after the date of issuance. The investor has an option to convert the principal amount of the Debenture into shares of common
stock of the Company at a conversion price equal to the lesser of (i) $0.10 or (ii) 25% less than the twenty trading day (20-trading
day) volume weighted average price (“VWAP”) of the common stock-based on the closing prices per share reported by the OTC
Pink Market operated by the OTC Markets Group, Inc., for said twenty-day trading period, commencing ten-trading days prior to the date
of election to convert the Debenture and ending ten-trading days after such election is made and the notice of conversion has been submitted
to the Company. The investor is required to convert the Debenture if the Company’s common stock is admitted or listed for trading
on a national stock exchange or if certain corporate transactions occur, such as merger, sale or change of control of the Company. The
accrued interest on the 6% Convertible Debentures is paid quarterly and is not subject to conversion to common stock. The holders of
the Debentures are provided with the registration rights to register the shares of common stock the Debentures are convertible into,
in a registration statement to be filed by the Company on Form S-1 with the Commission. The Company sold a total of $4,985,000 of the
6% Convertible Debentures to 77 accredited investors. The proceeds of the private placement are to be used for working capital and operations
of the Company. The Company closed its private placement as of September 30, 2021. As of December 31, 2023, none of the 6% Convertible
Debentures were issued and outstanding. A total of $3,465,000 of the principal amount of 6% Convertible Debentures was converted to common
stock of the Company at a price of $0.10 per share, and $1,520,000 of the principal amount of the 6% Convertible Debenture was repaid
by the Company.
On January 31, 2020 immediately following the
closing of the Share Exchange transaction, the Company closed a private placement of its 8% Convertible Debentures in the total amount
of $3,125,000 (the “Convertible Debentures”). The closing of the private placement was subject to the closing of the Share
Exchange transaction by the Company. There were two purchasers of the Convertible Debentures: KGPLA, LLC, an entity in which a director
of the Company and the Company’s beneficial owner of 37% has ownership interest ($3,000,000 principal amount of Convertible Debenture)
and Swingbridge Crypto III, LLC ($125,000 principal amount of Convertible Debenture), an affiliate and former noteholder of the Company
– see Note 7 to the Financial Statements. The Convertible Debentures have a maturity date of January 31, 2025 and bear interest
at 8% per annum. The purchasers have an option to convert the outstanding principal and accrued interest amount of their respective Convertible
Debentures into shares of common stock of the Company at the lower of $0.012 per share or 20% discount to the next major financing or
change in control. Swingbridge Crypto III, LLC. converted its $125,000 Debenture into 10,416,666 shares of the Company’s common
stock in December, 2021. In connection with the Convertible Debentures private placement, the purchasers acquired certain registration
and voting rights (see also Description of Capital Stock.) The Convertible Debenture held by KGPLA, LLC was amended and restated as of
May 15, 2023 and became a secured, and not general unsecured, obligation of the Company (the “Amended and Restated Secured Convertible
Debenture”), on par with the notes issued pursuant to the Senior Secured Loan Agreement entered into as of the same date. As of
the date of this prospectus, the outstanding principal amount of the Amended and Restated Secured Convertible Debenture is $3,000,000.
The repayment of the Amended and Restated Secured Convertible Debenture is secured by all the assets of the Company, except for property
previously pledged to Banco Hipotecario, and with respect to such assets, the Company granted the Lender a second priority lien pursuant
to that certain Security Agreement dated as of the date thereof by the Company, KGPLA, LLC. and Athena Bitcoin, Inc. and Athena Holdings
El Salvador SA DE CV, the Company’s subsidiaries as guarantors.
Debt Obligations of Athena Bitcoin, Inc. and
the Company
Notes
In 2017, Athena Bitcoin, Inc. entered into
several subordinated note agreements with shareholders of its common stock. The notes had a principal amount of $117,000 with maturity
dates in 2021 and 2022. The notes have 12% interest per annum. As of December 31, 2021, and December 31, 2020, the outstanding principal
was $90,000 and $117,000 respectively. As of September 30, 2023, and December 31, 2022, the outstanding principal was $90,000.
On May 30, 2017, the Company entered into a senior
note agreement with Consolidated Trading Futures, LLC (“CTF”). The note provided for a principal amount of $1,490,000 of
the loan secured against the Company’s cash in machines and held by service providers with a maturity date of May 31, 2022. The
maturity date was subsequently extended to May 31, 2023 pursuant to the Loan Restructuring Agreement by and between the Company and CTF,
dated as of June 9, 2022 (the “Restructuring Agreement”). Under the terms of the Loan Restructuring Agreement, the Company
agreed to make a one-time payment in the amount of $200,000 and weekly payments in the amount of $25,000 towards the reduction of the
principal amount of the loan. Interest as defined in the note is 15% per annum. As of December 31, 2022 and December 31, 2021, the outstanding
principal was $1,490,000. In May, 2023 pursuant to the Loan Transaction Documents (as herein defined on page 71), a term loan
note was issued for the remaining amount of the above promissory note in the principal amount of $65,000 and including any unpaid interest.
The term loan note, including the principal balance and accrued interest due, was fully repaid as of May 19, 2023.
On August 1, 2018, Athena Bitcoin, Inc. entered
into a promissory note with LoanMe, Inc. The promissory note provided for a principal amount of $100,000, with a final maturity date
of August 1, 2028, with equal monthly installment payments of $2,205. The promissory note has 24% interest per annum. As of December
31, 2021, and December 31, 2020, the outstanding principal was $88,000 and $92,000, respectively. As of September 30, 2023, and December
31, 2022, the outstanding principal was $75,000 and $80,000, respectively.
Swingbridge Crypto
LLC Loans
On October 22, 2018, Athena Bitcoin, Inc. entered
into a loan agreement and a promissory note with Swingbridge Crypto I, LLC. The promissory note provided for an aggregate of $500,000
in principal with a maturity date of May 30, 2019. Interest as defined in the promissory note was simple interest equal to 8% per annum.
As of December 31, 2019, the outstanding principal was $500,000. The principal amount and accrued interest on the note were converted
into 153,817 shares of common stock of Athena Bitcoin, Inc. at a price of $4.09 per share. The conversion price was determined by the
negotiation of the parties with an implied valuation of Athena Bitcoin, Inc. of not less than $5 million, pursuant to the terms of the
loan agreement. Such shares of Athena Bitcoin, Inc. were then exchanged in the Share Exchange transaction (see above).
On May 21, 2019, the Company entered into a loan
agreement and a promissory note with Swingbridge Crypto II, LLC. The promissory note provided for an aggregate of $300,000 in principal
with a maturity date of August 21, 2019. Interest as defined in the promissory note was simple interest equal to 30% per annum. As of
December 31, 2019, the outstanding principal was $300,000. The principal amount and accrued interest on the note were converted into
40,389 shares of common stock of Athena Bitcoin, Inc. at a price of $9.24 per share. The conversion price was determined by the negotiation
of the parties with an implied valuation of Athena Bitcoin, Inc. of not less than $5 million, pursuant to the terms of the loan agreement.
Such shares of Athena Bitcoin, Inc. were then exchanged in the Share Exchange transaction (see above).
On July 26, 2019, the Company entered into a
loan agreement and a promissory note with Swingbridge Crypto III, LLC. The promissory note provided for an aggregate of $1,000,000 in
principal with a maturity date of July 26, 2020. Interest as defined in the promissory note was simple interest equal to 40% per annum.
As of December 31, 2019, the outstanding principal was $1,000,000. The principal amount and accrued interest on the note were converted
into 142,486 shares of common stock of Athena Bitcoin, Inc. at a price of $8.32 per share. The conversion price was determined by the
negotiation of the parties with an implied valuation of Athena Bitcoin, Inc. of not less than $5 million, pursuant to the terms of the
loan agreement. Such shares of Athena Bitcoin, Inc. were then exchanged in the Share Exchange transaction (see above).
In connection with the Share Exchange transaction
of the Company on January 30, 2020, and pursuant to the Swingbridge Conversion and Release Agreement, the 336,692 shares of common stock
resulting from the conversion of the above Swingbridge notes were exchanged for 419,078,082 shares of the Company’s common stock.
DV Chain LLC Loan
On November 21, 2019, Athena Bitcoin, Inc. entered
into a promissory note with DV Chain, LLC. The promissory note provided for a principal amount of $1,950,719 with a maturity date of
May 1, 2021. Interest as defined in the promissory note was 15% per annum. On August 16, 2020, the Company entered into an agreement
with DV Chain, LLC, whereby the Company repurchased 30,422,825 common shares held by DV Chain, LLC at a price of $0.00388 and agreed
to make accelerated payments of $25,000 per week on the promissory note until the maturity date of May 1, 2021. As of December 31, 2020,
and December 31, 2019, the outstanding principal was $1,350,000 and $1,950,719, respectively. As of March 31, 2021, the outstanding principal
was $585,000. The Company repaid the remaining principal balance and interest due on this loan on May 31, 2021.
SBA Loan
On April 15, 2020, the Company entered into a
forgivable loan agreement (SBA Loan) with Citizens National Bank of Greater St. Louis under the Coronavirus Aid Relief, and Economic
Security Act (CARES Act) administered by the U.S. Small Business Administration. The Company received total proceeds of $156,919 from
the SBA Loan. In accordance with the requirements of the CARES Act, the Company used the proceeds from the SBA Loan primarily for payroll
costs and retained the employment of full-time employees as required by the terms of the SBA Loan. The SBA Loan was scheduled to mature
on April 15, 2022 and has a 1.00% interest rate. In accordance with the CARES Act and the Paycheck Protection Program Flexibility Act,
the Company applied for Loan Forgiveness for the full outstanding principal balance of the SBA Loan, which was approved in 2020. Accordingly,
during the year ended December 31, 2020, the Company recorded $156,919 in other income for the forgiveness of the SBA Loan.
Loan from Banco Hipotecario
In September 2021, the Company’s El Salvador
subsidiary, Athena Holdings El Salvador, S.A. DE C.V. (“Athena El Salvador”) entered into a loan agreement with Banco Hipotecario
for the loan amount of $1,500,000. The loan has an interest rate of 7.5% and is secured by Athena El Salvador’s assets in El Salvador.
The maturity date is 36 months after the disbursement of the funds. The monthly payments on the loan in the equal amounts of $49,108,
begin two (2) months after the disbursement of the funds. As of September 30, 2023, and December 31, 2022, the outstanding principal
was $666,000 and $1,037,000, respectively. The Company intends to utilize loan proceeds to expand its fleet of Bitcoin ATMs and for other
general corporate purposes. See also Note 11 (“Debt”) to the unaudited financial statements for the nine months ended September
30, 2023.
Borrowing Agreements with the Company’s
Former-Director and Shareholder
The Company (together with its subsidiaries,
Athena Bitcoin, Inc., a Delaware corporation and Athena Holdings El Salvador Sa De CV, an El Salvador company) entered into that certain
secured loan transaction and related transactions pursuant to the terms of that certain Senior Secured Loan Agreement entered into by
and between the Company and KGPLA Holdings LLC, a Delaware limited liability company, beneficially owned and controlled by the Company’s
former director and 37% shareholder (the “Lender”) together with other agreements and documents entered into in connection
with the secured loan transaction (collectively, the “Loan Transaction Documents”), effective as of the Closing Date, as
herein defined below. The material terms of the Loan Transaction Documents include: (i) the Lender making a payment to the Company to
pay in full the Consolidated Futures Trading LLC loan pursuant to the term loan note in the amount of $65,000; (ii) the Lender, at the
request of the Company, making revolving credit loans in an aggregate principal amount not to exceed $4,000,000, or as otherwise adjusted
by Lender pursuant to that certain secured loan agreement, evidenced by a secured promissory note, the proceeds of which must be used
solely for the purchase of bitcoin or other digital currency for the Company’s Bitcoin ATM machines pursuant to the revolving credit
note in the principal sum of $4,000,000 (the “Senior Secured Revolving Credit Promissory Note”); and (iii) the Company granting
the Lender, as collateral security for payment and performance of its obligations under the secured loan agreement, a first priority
lien and security interest in and to all of the Company’s assets, except for property previously pledged to Banco Hipotecario,
and with respect to such assets, the Company granted the Lender a second priority lien pursuant to that certain Security Agreement dated
as of the date thereof (the “Security Agreement”). In connection with the execution of the Security Agreement, the Company
provided the Lender with special power of attorney exercisable upon the occurrence and continuance of the Event of Default, as defined
in the Security Agreement. Additionally, the Company’s subsidiaries executed unconditional guaranties of the performance of the
Company’s obligations under the Loan Transaction Documents. In connection with the secured loan transaction and as a condition
to loaning additional funds to the Company by the Lender under the Loan Transaction Documents, the Company amended and restated the 8%
convertible debenture in the principal amount of $3,000,000 issued to the Lender in January, 2020, such that it become a secured, and
not general unsecured, obligation of the Company, on par with the notes issued pursuant to the Loan Transaction Documents. The closing
of the secured loan transaction pursuant to the Loan Transaction Documents took place as of May 19, 2023 (the “Closing Date”).
On August
4, 2022, the Company completed a lending transaction with Mike Komaransky, the Company’s principal shareholder and former director,
whereby the Company borrowed $500,000 from Mr. Komaransky pursuant to the terms of a secured promissory note and security agreement.
The promissory note had an interest rate of 6% and the repayment of the principal amount and any accrued interest was secured by certain
assets of the Company with respect to which Mr. Komaransky holds first priority lien and security interest. The terms of the secured
promissory note and the security agreement were subsequently amended by the parties on January 17, 2023. Pursuant to the terms of the
amended secured promissory note, the Company agreed to make monthly payments of $50,000 until the maturity date of the secured promissory
note, which was on August 31, 2023. As of September 30, 2023 and December 31, 2022, the outstanding principal was, respectively, $0
and $400,000. The note was fully repaid, including any accrued interest as of August 31, 2023.
Equipment Financing
Agreement
On November 2, 2023, the Company entered into
an Equipment Financing Agreement (the “Financing Agreement”) with Taproot Acquisition Enterprises, LLC, a Delaware limited
company (the “Lender”) in which the Company agreed to purchase certain Bitcoin ATM machines (the “Equipment”)
from the Lender. The Company and the Lender have previously entered into an Equipment Sublease Agreement on April 13, 2023 (the “Sublease
Agreement”), whereby Lender as a lessee of cryptocurrency ATMs, subleased to the Company certain Bitcoin ATM machines listed in
the Sublease Agreement on the terms and conditions specified in the Sublease Agreement. The Financing Agreement amends and modifies the
Sublease Agreement into a purchase and financing agreement. Pursuant to the terms of the Financing Agreement, the Company paid to Lender
a down payment for the purchase of the Equipment. Upon receipt of the payment, Lender transferred to the Company, title to all of the
units identified in the Equipment and listed in the Financing Agreement. The Company is obligated to make additional payments for other
units identified in the Equipment schedules, to complete the transfer of the title to the Company on those additional units. The Financing
Agreement contains certain restrictive covenants and representations with which the Company must comply, such as maintaining required
financial ratios, providing financial statements and reports, and obtaining the Lender's consent for certain transactions. The Financing
Agreement also provides the Lender with certain remedies in the event of default by the Company, such as accelerating the payments, repossessing
the Equipment, or enforcing any of the available remedies against the Lender’s security interest in the units of the Equipment
to which the Company has title. As of the date of this filing, the Company was in compliance with all the covenants and representations
under the Financing Agreement. In conjunction with the Agreement, the Company amended the Senior Secured Loan Agreement with KGPLA Holdings
LLC (“KGPLA”) dated May 15, 2023, and amended as of June 6, 2023, July 27, 2023, on November 1, 2023 by entering into the
Third Amended Secured Loan Agreement with KGPLA (the “Third Amendment”). Third Amendment allows the Company to incur additional
debt and liens in connection with the purchase of the Equipment from the Lender, subject to certain conditions and limitations. Concurrent
with the execution of the Third Amendment, and as required by the terms of the Third Amendment, the Lender, the Company and KGPLA entered
into an intercreditor agreement pursuant to which KGPLA has been granted a security interest in and lien on the Equipment purchased by
the Company from the Lender, which is subordinate in all respects to the Lender’s security and interest in the Equipment to secure
the Company’s obligations under the Financing Agreement. The Financing Agreement will be terminated upon the completion of the
required payments for the Equipment listed in the Financing Agreement, on their respective applicable terms.
SAFT Investments
In 2018, Athena
Bitcoin issued a series of instruments called “Simple Agreements for Future Tokens” (“SAFTs”) in exchange for
investments in cash or crypto assets. The SAFTs entitle holders to receipt of tokens representing equity in the Athena Bitcoin. under
certain pre-defined circumstances. These include a qualified financing event in which the Company raises $15 million or more in a single
transaction, a “corporate transaction” (which definition includes a sale of all or substantially all of the Company’s
assets), or a dissolution. Athena Bitcoin may also elect to issue equity in lieu of tokens in settlement of the SAFTs. In January 2020,
Athena Bitcoin issued 1,653,425,404 shares of common stock for the full outstanding SAFT balance of $5,434,819 since the Share Exchange
transaction between GamePlan and Athena qualified as a corporate transaction, based upon the conversion price of $4.09 per share implied
by the valuation of the Company as of the date of SAFT determined in good faith by the Board of Directors of Athena Bitcoin and the capitalization
of Athena Bitcoin immediately prior to the “corporate transaction” (see also “Background and Corporate History”
above).
Athena Bitcoin ATM
The primary business activity of the Company
is the purchase and sale of Bitcoin through our Bitcoin ATMs —which are free standing kiosks that allow customers to exchange their
physical currency for crypto assets. Customers can buy and sell Bitcoin using Athena Bitcoin ATMs - either spending or receiving physical
currency (cash). We do not charge transaction fees but rather make a spread on the price of the Bitcoin. The typical Bitcoin ATM that
the Company uses is about 5-feet tall and features a large touchscreen for customer interaction. We offer Bitcoin for sale at all our
ATM machines. See below for a summary of transaction for the nine months ended September 30, 2023 and twelve months ended December
31, 2022.
Crypto Asset |
For
the Nine Months Ended
September
30, 2023 |
For
the Twelve Months Ended
December
31, 2022 |
Bitcoin |
59,134 |
42,731 |
Ethereum |
300 |
1,220 |
Litecoin |
861 |
3,868 |
Bitcoin
Cash (BCH) |
69 |
396 |
Total |
60,364 |
48,215 |
We also buy Bitcoin at some of our ATM machines
(also known as two-way ATMs), subject to sufficient cash in the ATM dispenser. The cash withdrawal limit from our two-way ATMs
is $2,000 per transaction. We replenish our ATMs with local fiat currencies about twice a week or depending on usage, using bonded security
companies.
Customers can purchase as little as $1 of Bitcoin,
but typically choose between $100 and $1,000 per transaction. The Company charges a fee per Bitcoin equal to the prevailing
price at U.S. crypto-based exchanges plus a markup. The Company’s revenue associated with ATM transactions are recognized when
the crypto asset is delivered to the customer.
Our Bitcoin ATMs do not contain any crypto assets
or keys to crypto assets. We sell crypto assets from cloud-based wallets in each country, enabling real-time supply of crypto assets
to our customers. We utilize purchasing algorithms and other proprietary systems to manage crypto assets to ensure that we are able to
meet consumer demand for crypto assets. The retail crypto asset space is crowded with large digital players including Coinbase, Square,
Gemini, and PayPal. The Company focuses on the cash buyer, who needs Bitcoin in the here and now. We also focus on the cash buyer
who wants the crypto assets in their private wallet and not in the hands of a third-party. We do not seek to hold excess quantity of
any crypto asset.
A perfect match between supply and demand can
never be achieved as demand is generally predictable but not exact, and there are often demand spikes due to Bitcoin price movements.
If we ever fail to fully anticipate a spike in demand or if our buying turned out to be short for any reason, our users may not be able
to purchase crypto assets from our Bitcoin ATMs. This is something we strive to minimize and manage such that we maintain a slight excess
of crypto holdings.
Our hot wallets are maintained by the staff of
the Company. Access is limited to as few persons as is necessary to maintain their proper functionality. At this time, the Company does
not maintain any balance of crypto asset in cold storage. The crypto assets the Company holds are available for immediate sale. We do
not have any insurance policies that cover the crypto assets held in our wallets.
We are a provider of Bitcoin through our Athena
Bitcoin ATMs in the United States and Latin America, integrating one-stop convenience with expert-level customer service. In the past
we had also provided Ethereum, Litecoin and BCH at our ATMs. We were one of the first companies to introduce Bitcoin ATMs into the United
States, Mexico, Colombia, Argentina, and El Salvador. We are committed to serving retail purchasers of crypto assets with the highest
level of customer care through a broad product selection, trained customer service staff, multi-lingual support, and convenient locations.
We seek to address the consumer who prefers to transact in cash for crypto assets such as Bitcoin, in addition to or in place of the
traditional means of access to the financial system. We have experienced a CAGR of 72% from December 31, 2017 through September
30, 2023.
See below for increase in active ATMs over time.
ATM by location are shown below as
of September 30, 2023.
As of September 30, 2023
Country |
Number of Athena Bitcoin ATMs
(as of September 30 2023) |
Type of Fiat Currency |
Total |
Two-Way |
United States |
1,378 |
27 |
U.S. Dollar |
El Salvador |
14 |
14 |
U.S. Dollar |
Argentina |
12 |
12 |
Argentine peso |
Mexico |
1 |
1 |
Mexican peso |
Colombia |
17 |
17 |
Colombian peso |
TOTAL |
1,422 |
71 |
|
Suppliers of our ATMs
As
of September 30, 2023, 265 of our Athena Bitcoin ATMs and their software systems, which include advanced security protections,
were sold to us by Genesis Coin, Inc. (“Genesis Coin”), a major supplier of Bitcoin ATMs. We supplement these protections
with our own added risk management methods. The Genesis Coin machines have a demonstrated track record for stability. We have worked
with the company for many years and were among its first customers, and we continue to be impressed with the Genesis Coin hardware and
software. To this date, our ATMs have accepted a negligible number of counterfeit bills.
As of September 30, 2023, for our white label service in El
Salvador, we are operating and managing a mix of ATMs supplied by Genesis Coin, and Bitaccess Inc.
Agreement with Genesis Coin, Inc.
We currently do not have a written contract for
purchase and sale of ATMs with Genesis Coin. We have been operating based on our working relationship and the terms of the original purchase
and sale contract with Genesis Coin, which we entered into on October 1, 2015. Although said contract was terminated when the equipment
described therein was delivered and paid for, we continue to honor bilaterally, the terms of said contract in our ongoing business relationship.
While the purchase price and delivery of each order of ATM machines is subject to negotiation and prevailing market conditions, we follow
the terms agreed to in the 2015 contract, which include the agreement that: the software license we receive is limited and non-exclusive
and/or sublicense; we pay to Genesis Coin or nominee a software license fee of one percent (1%) of the value of all transactions processed
by us (such fees are assessed in Bitcoin, deducted automatically and transferred automatically to Genesis Coin or nominee); the term
of license granted by Genesis Coin commences at delivery of equipment and continues as long as we retain legal right and title to operate
the ATMs purchased from Genesis Coin; and Genesis Coin provides us with the one year limited parts warranty for the ATM kiosks we purchase.
Rental Agreements for our ATMs
We pay rent to the establishments where we place
our ATMs. Our rental agreements are for one year, three years, five years, or less than one year with auto renewal and we are typically
free to move our ATMs from sites that are not meeting expectations, at minor cost. In addition to rent, we also pay for internet connection
costs and cash logistics (handling) costs.
On April 13, 2023, the Company signed an agreement
to acquire additional Bitcoin ATM machines in multiple locations in the US both in states in which it has an existing network of machines
and in new states including Colorado, Indiana, Massachusetts, New Jersey, Oklahoma, Arizona, Kentucky, Kansas and Tennessee with the
potential to acquire additional machines and locations as agreed by the parties. The agreement had a term of three years unless terminated
by either party subject to specified conditions and notification. Lease payments under the agreement were based on revenue generated
by the locations subject to a cap and allows the Company to buy out or purchase the Bitcoin ATM machines based on a formula that considers
original cost, depreciation and market value of each unit. The agreement was subsequently modified and amended with the equipment financing
agreement signed in November 2, 2023 (see page 85 of this prospectus).
Technical Support for our ATMs
Our ATMs can experience down-time due to internet
connection failures as well as technical problems. For technical problems like a frozen screen, our tech support team can typically reboot
the machine remotely or we contact our national network of technical support service providers to resolve the issue.
Global Cash Logistics
A significant operational aspect of our business
involves collecting physical fiat currencies from our Bitcoin ATM fleet and getting them safely deposited into our bank account. The
collection and deposit of the physical currencies received in our ATMs is a multi-step process. We do not directly handle the currency
operations. This function is contracted to bonded security companies that have armored vehicles and cash storage vaults in many locations
and includes multiple national and regional carriers such as Brinks International, Garda World, Thillens, Loomis, New
Century Armored Logistics (NCAL) and Move On Security LLC as well as Proteccion de Valores, S.A. de C.V. (PROVAL) and Servicio
Salvadoreño de Protección, S. A. de C. V.(SERSAPROSA) in El Salvador.
For logistic efficiency, it is impractical to
retrieve cash from one machine and go directly to a bank branch. Rather the cash from all our machines in a city is collected by contracted
armored vehicle companies on a periodic basis, and brought to their regional centers where it is counted, inventoried, and grouped with
cash coming from our ATMs in other cities.
We actively oversee this process in conjunction
with our cash logistics contractors to adjust for factors like three-day weekends and unanticipated surges. While we can manage the crypto
side of our business with real-time tracking, the current time period from retrieving cash from our ATMs to having the funds available
in our bank account is about eight (8) days. In our early years, the time period was close to twenty-one (21) days. This time period
directly impacts our working capital and our ability to buy more crypto assets; thus, we strive to keep it as short as possible.
Just as shortages of crypto assets can temporarily
prevent us from selling crypto assets to our customers, our ATMs running out of cash or becoming fully loaded with cash (and unable to
take more bills) can impede our users from completing certain transactions until our cash logistics contractors fix the issue at their
next visit to our ATMs. Our business has variable demand, and it is unavoidable that some machines will at times run out of cash or become
fully loaded with cash (and unable to take more bills) for a time period.
Athena Plus
![](https://www.sec.gov/Archives/edgar/data/1095146/000168316824000275/athena_plus.jpg)
Our Athena Plus service allows us to assist crypto
asset buyers and sellers who wish to use their bank accounts. This service caters to investors who are making larger purchases of Bitcoin
in exchange for wire transfers from their bank accounts. These customers are often looking for the same crypto assets that we sell at
our Athena Bitcoin ATMs but sometimes request a less traded crypto asset. In such cases where we do not have such a crypto asset in our
possession, we first acquire the crypto asset and then subsequently make the sale to the customer. We earn their business through education,
service, and quality execution of their transaction. Customers typically interact with the Company on the phone for transaction sizes
in dollar terms greater than $10,000 and on some occasions, for crypto assets not included in our ATMs.
This
business currently constitutes about 12% percent of our overall sales by revenue, with a median transaction size
of $100,000 in the nine months ended September 30, 2023. As the transaction
sizes are larger for this business area, our mark ups are smaller than transactions using our ATMs. As of the date of this prospectus,
we do not transact in any crypto assets except Bitcoin, Ethereum, Tether, Litecoin, and BCH. We will update this prospectus if we decide
to transact in other crypto assets. Such a change would only happen if there were significant customer demand for a specific crypto asset
and that crypto asset was available to us through multiple trading partners, crypto asset exchanges, and crypto asset brokers.
To serve our customers, we follow AML and KYC
guidelines appropriate for BSA compliance. The Company's operating unit, Athena Bitcoin, Inc., is FinCEN registered and undergoes an
annual Compliance and Financial audit to maintain good standing. We also comply with state regulations and reporting in each state where
it is required.
Expansion of Business Operations
in El Salvador (White-label and Chivo Ecosystem)
On June 8, 2021, the Bitcoin Law, proposed by
President of El Salvador, Nayib Bukele, was passed by the Legislative Assembly of El Salvador giving Bitcoin the status of legal tender
within El Salvador. Under this law, effective as of September 7, 2021, Salvadorans can pay taxes in Bitcoin and businesses will be obliged
to accept Bitcoin as payment for goods and services. The U.S. dollar will continue to circulate alongside Bitcoin as the national currency
and legally recognized tender. When Salvadorans convert their Bitcoin to dollars within the Chivo digital wallet, they do not receive
dollars in the digital wallet in the same sense as having a dollar balance with a chartered bank. Instead, they become holders of dollar
obligations as represented by a dollar balance within the Chivo digital wallet, which are only a claim to real dollars. At that point,
Salvadorans hold an asset backed by Chivo S.A. de C. V., which according to news reports is not a chartered bank, and the full faith
and credit of Mr. Bukele’s government. According to news reports, the government spent up to $120 million to supply $30 worth of
Bitcoin into each Chivo wallet, the country’s new official Bitcoin wallet application. That funding would cover the cost of providing
4 million citizens with Bitcoin in a country of 6.5 million. The government created a $150 million fund to support Bitcoin to U.S. dollar
conversions and began implementation of Chivo ATMs to give citizens access to paper-currency in exchange for their Bitcoin and U.S. dollar
balances held in their Chivo digital wallets.
El Salvador ranks third to last among its regional
peers in terms of banking access. Since approximately 70% of the adult population of El Salvador does not have access to the traditional
banking system, Bitcoin/digital wallets can serve as a savings instrument, promote financial inclusion and democratize access to electronic
payments. Currently, there are already 161 mobile subscriptions per 100 inhabitants in El Salvador, and it is likely easier to provide
financial services linked to cellphones than trying to open new bank accounts. Bitcoin legalization could lower the cost of paying and
receiving money. According to President Bukele, Bitcoin, which is easy to send across borders, will greatly reduce remittance fees. In
El Salvador, remittances accounted for more than 26.4% GDP in 2020. On a global basis, according to the World Bank’s Remittance
Prices Worldwide (March 2021), sending remittances costs an average of 6.38% of the amount sent, but can reach more than 10% for small
transactions. The high cost of remittances means that El Salvador loses more than 1% of GDP on remittances fees. The Chivo digital wallet
also allows Salvadorans in the U.S. to send money home without incurring remittance fees. Since the implementation of the Bitcoin Law,
many Bitcoin enthusiasts around the world have shown interest in moving to the country, where their Bitcoin trading profits would be
tax-exempt from capital gains and where tax rates are relatively low. El Salvador is offering permanent residency to anyone who invests
at least three Bitcoins (about $160,000) in the country. Legalization of Bitcoin could attract investment of both crypto asset investors
and miners, and could generate additional tourism.
Business Operations
Since June 2021, when the Bitcoin Law was enacted,
the Company has focused its resources and expanded its operations in El Salvador. The Company’s operating subsidiary in El Salvador
is Athena Holdings El Salvador, S.A. de C.V.; however, our agreements with the government of El Salvador discussed below, have also been
entered with Athena Bitcoin Global, a Nevada corporation and Athena Bitcoin, Inc., a Delaware corporation, our wholly-owned operating
subsidiary. We began discussions with the government of El Salvador in late June 2021, and successfully executed agreements with the
Department of Treasury (Ministerio de Hacienda) in August 2021. Under those agreements, the Company is responsible for several major
projects, which include the operation of 200 Chivo Bitcoin ATMs in El Salvador,10 Chivo Bitcoin ATMs at El Salvador consulates in the
U.S. (in the states of California, Florida, Georgia, Illinois, and Texas), 45 Chivo Bitcoin ATMs in other U.S. locations (including
de-installations,) and the delivery to the government of El Salvador 950 Chivo point-of-sale (“POS”) terminals for local
businesses in El Salvador to process transactions with Bitcoin.
For operating 200 Bitcoin ATMs the Company was
paid a one-time non-refundable installation fee and will recognize recurring monthly service fees for maintaining the machines. The Department
of Treasury of El Salvador paid the Company the agreed price per contract for each POS terminal delivered in 2021. We are also
charging a monthly fee to maintain Chivo Bitcoin ATMs in the U.S. for each consulate. The agreement terms vary by project from one year to three years with monthly or annual renewal terms. Currently, we do
not face any direct competition for the services we provide since we are operating under contract with El Salvador’s Treasury department.
Contracts with the Government of El Salvador
In the third quarter of 2021, the Company signed
several contracts with the Department of Treasury (Ministerio de Hacienda) of El Salvador (“El Salvador Contracts”) which
include installing and operating 200 Chivo Bitcoin ATMs in El Salvador, 10 Chivo Bitcoin ATMs at El Salvador consulates in the U.S.,
45 Chivo Bitcoin ATMs in other U.S. locations, and sales of 950 point-of-sale (POS) terminals for local businesses in El Salvador to
process transactions with Bitcoin. Additionally, the Company contracted to sell intellectual property in software, and develop and maintain
a Bitcoin platform designed to support a branded digital wallet, as specified in El Salvador Contracts. See also Note 3 to our financial
statements on pages F-18 and F-53.
From time to time, the Company receives money
from GOES to facilitate replenishment of cash in the ATMs that we provide and operate for them. As of September 30, 2023 and December
31, 2022, the cash received as advances from GOES was $201,000 and $1,107,000 respectively (see pages F-20 and F-54 of the unaudited
financial statements for the quarter ended September 30, 2023 and audited financial statement for the fiscal year ended December
31, 2022, respectively).
The Company completed contract negotiations with
Chivo, Sociedad Anónima de Capital Variable, a wholly owned private company of the Government of El Salvador (“CHIVO”)
in which both parties signed on October 5, 2022, a Master Services Agreement (MSA) and a Service Level Agreement (SLA) with an effective
date of July 1, 2022, replacing the existing Master Services Agreement, Contracts and Athena Service Addendums 1 and 2 with the Department
of Treasury of El Salvador. The services, performance obligations, pricing and terms continue the services, performance obligations, pricing
and terms outlined in the original Master Services Agreement, Contracts and Addendums through July 30, 2024, in line with the original
MSA, Contracts and Addendums. In conjunction with the new MSA and SLA, the Company and CHIVO completed a financial settlement agreement
secured by certain assets of the Company in El Salvador, to reconcile reporting, finalize balances owed between the parties and conclude
the original MSA, Contracts and Addendums between the Company and the Department of Treasury of El Salvador.
Termination of Letter of Intent with Vakano
Industries
In September 2021, the Company entered into a
non-binding Letter of Intent with Arley Lozano, a principal beneficial owner of Vakano Industries and XPay, both Colombian entities (collectively,
“XPay”), for the purchase and sale of certain assets of XPay, primarily intellectual property assets, including the XPay
Wallet (the precursor to the Chivo Wallet and the Chivo App), all software code and IT developments regarding Chivo Wallet and XPay POS
System software and other intellectual property (“XPay Assets”), to the Company. The total purchase price was comprised of
$3 million in cash and the issuance of 270 million of the Company’s shares of common stock (valued at $27 million at a $0.10 per
share valuation), however the parties did not agree on the final terms of the transaction. The definitive agreement for the purchase
and sale of XPay Assets has never been executed and the acquisition was never completed as contemplated in the letter of intent, however,
the Company paid certain advances in a total of $1,595,283 for those certain XPay Assets which were transferred to the Company. In December
2022, the Company terminated its Letter of Intent with XPay and any future negotiations. The Company agreed to the purchase of already
transferred XPay Assets in exchange for the advances previously made to the Company. XPay filed a legal action against the Company
in connection with the transfer of XPay Assets, see “Legal Proceedings” on page 99 of this prospectus.
Environmental Impact
El Salvador’s Bitcoin plan has put a spotlight
on the environmental impact of cryptocurrency with the World Bank flagging such potential adverse effects among its concerns. Mining
digital currency requires large amounts of energy, and the Bitcoin industry’s global CO2 emissions have risen to 60 million tons,
equal to the exhaust from about 9 million cars, according to Bank of America’s report in March 2021. President Bukele sought to
counter sustainability concerns by engaging state-owned geothermal electric company, LaGeo SA de CV to offer Bitcoin mining facilities
using renewable energy from the country’s volcanoes.
Marketing
Our marketing consists of:
|
· |
Trade shows, |
|
· |
Digital advertising on search engines, map sites, and industry-specific platforms, |
|
· |
Social media, and |
|
· |
SMS messaging. |
Athena also maintains country-specific websites
that include information about how to access our service offerings as well as country-specific disclosures. Total advertising costs amounted
to $33,000, $123,000 and $365,000 for the nine months ended September 30, 2023, twelve months ended December 31, 2022, and twelve
months ended December 31, 2021, respectively.
Technology Research and Intellectual Property
Development
Athena licenses most of its technology from third
party vendors including the software that runs on our ATM kiosks. Our intellectual property (“IP”) includes proprietary algorithms
that we have developed. Some effort is devoted to automating a majority of our crypto purchases in a manner that helps us match supply
with anticipated demand. In addition, we have invested in building automated systems for customer onboarding including the collection
of required KYC documentation as well as government transaction reporting.
Total
technology costs amounted to $1,612,000, $2,660,000 and $2,071,000 for the nine months ended September 30, 2023, twelve months
ended December 31, 2022, and twelve months ended December 31, 2021, respectively. Athena has not filed for protection of our algorithms
and maintains them as private and proprietary business information. The IP we use for the security of our ATMs and transaction integrity
is mostly provided by vendors, although we have added additional layers and extra private security measures that are unique to the Company.
Athena Bitcoin has registered both its name and
distinctive owl logo with the United States Patent and Trademark Office. As of September 30, 2023, the registration is in process
of renewal with serial number 90606452.
Competition
There are many different companies that enable
people and businesses to buy or sell Bitcoin and other crypto assets, including other operators of Bitcoin ATM networks, online services
and exchanges such as Coinbase and Gemini, and payment services such as Square and PayPal.
Our direct competition in the U.S. includes Bitcoin
Depot Inc. a public corporation with operations in the US and Canada, Coinflip, a private company with operations in the US, Canada and
Australia and other smaller bitcoin kiosk operators, as well as Coinstar, a major corporation that runs one of the largest kiosk networks
in the U.S. Coinstar is an existing operator of kiosks at major grocery chains that are used to exchange coinage for a variety of payment
instruments such as gift cards and in-store vouchers. In recent years, they have added the ability to use physical coins and cash bills
to buy Bitcoin on many of their kiosks, in partnership with Coinme. The other Bitcoin ATM network operators use machines similar to the
Company’s fleet of Bitcoin ATMs.
The financial performance of any Bitcoin ATM
network is influenced by several factors. We believe that site selection and branding have the biggest effect on per-ATM transaction
volumes. Bitcoin Depot is a public corporation whose operating performance can be measured. We are not aware of the operating performance
of other competitors as they are private companies and do not provide any public financial disclosures. From our years of experience
in this industry, we believe the Company’s Bitcoin ATMs perform at or above industry averages.
While there are many other Bitcoin ATM operators,
we believe the industry is nascent and that worldwide tens of thousands of attractive locations remain untouched. While we recognize
that there is a terminal limit to the number of Bitcoin ATMs that the U.S. market can support, we believe that that limit has not yet
been reached and is expanding as Bitcoin and other crypto assets gain more widespread use, especially in Latin America and other regions.
Per Grand View Research, the global crypto ATM market size was estimated at $116.7 million in 2022 and is expected to grow at a compound
annual growth rate (CAGR) of 62.5% from 2023 to 2030.
Below is a partial list of US Bitcoin ATM networks
that operate in the regions where the Company also operates:
Company
Name |
Units |
Website
|
Bitcoin Depot Inc. |
6,400 |
https://www.bitcoindepot.com |
Coinstar/Coinme |
5,607 |
https://www.coinstar.com/bitcoin |
Coinflip |
4,000 |
https://www.coinflip.com |
RockitCoin |
2,000 |
https://www.rockitcoin.com |
CoinHub |
1,400 |
https://www.coinhubatm.com |
LocalCoin |
399 |
https://localcoinatm.com/ |
Digital Mint |
269 |
https://www.digitalmint.io/ |
Cryptospace |
8 |
https://www.cryptospace.com |
Outside of the US and Canada, Europe is the second
most prominent region for BTM access, with 3.8% of the market share; Asia is third with 0.7%; Latin America falls fourth with 0.2%. (citation:
Bitrefill, 2022.)
Company Name |
Units |
Website |
24nonStop |
6,971 |
http://24nonstop.com.ua/ |
Bitcoin Romania and Zebrapay |
1,685 |
https://selfpay.ro/ |
Sweepay and Swiss Railways |
1,357 |
https://sweepay.ch/ |
CashTerminal |
612 |
http://www.cashterminal.eu/en |
Bitcoin Romania |
74 |
https://bitcoinromania.ro |
LoCoins |
27 |
https://locoins.io/ |
Bitnovo |
10 |
https://www.bitnovo.com |
Kurant |
228 |
https://www.kurant.net |
BitBase |
108 |
https://www.bitbase.es |
In the United States, we have a small percentage
of the total market, operating approximately 4.4% of ATMs according to one industry reporting service (https://coinatmradar.com). In
Latin America, we control a larger percentage of the total market, operating 21% of ATMs overall, and 89% in the countries where the
Company operates.
Apps like Robinhood, PayPal, and Cash App offer
customers a way to purchase crypto assets using their smartphones and funds from their bank accounts. These apps offer competitive pricing
relative to our ATMs; however, they do not accept physical currency and typically require users to connect their bank accounts. They
also typically do not allow users access to the private keys of the cryptocurrency, thus resulting in centralization that many users
do not want.
Full-service exchanges like Coinbase Pro, Gemini,
and Kraken allow traders to make investments in a wide variety of crypto assets. These exchanges cater to active traders and the most
highly price sensitive consumers. The Company often uses such services for purchasing its crypto assets. Users from this segment of the
overall market rarely overlaps with the Bitcoin ATM industry.
Competitive Advantages
We believe we enjoy several competitive advantages.
We believe our foremost advantage is our many years of business experience combined with our insight into optimizing many interrelated
factors and aspects of the crypto business. This winning combination ultimately drives our bottom-line profits.
Site selection is a substantial factor in overall
performance. Our site selection methodology is a trade secret of our business. Our methodology is not easily uncovered as we have ATMs
located in rural, urban, and suburban areas. We have learned and refined our site selection methodology over the years, and we believe
our expertise in this area constitutes a material competitive advantage.
We believe our operational efficiencies provide
us with another competitive advantage. It took six years of significant efforts and achievements to grow the Company from a start-up
with initial operating losses to steady profitability. This process to profitability included developing and implementing several proprietary
approaches to manage our operations efficiently with respect to all aspect of crypto transactions, risk management, and efficient cash
handling spanning five countries. Operational efficiency is in the same category of importance as site selection.
Unlike many competitors that focus on quickly
installing dozens or hundreds of ATMs, we prioritized getting to profitability on a global scale with a small base of ATMs that were
installed in strategic sites. We focused on developing and putting in place scalable systems and methods for managing a diverse global
operation. This gave us a foundation to not only provide us with profitable operations but also the foundation to continue to grow. As
a result of this, we were able to increase our total ATMs in service from 60 to 1,422 from 2017 to September 2023, respectively.
When comparing Bitcoin ATMs to other methods of transacting, the primary advantage of an ATM is its ability to complete a transaction
from accepting payment to delivering crypto assets quickly. The ATM will only accept physical fiat currency, which is an immediate and
permanent form of payment. This subsequently facilitates the immediate delivery of crypto assets; also, an immediate and permanent form
of transaction. Apps and services that rely on ACH or other bank mechanisms for the fiat leg of a transaction often cannot deliver the
crypto assets quickly because of the funding mechanism is neither immediate nor permanent.
We believe our branding gives us a competitive
advantage with many store owners. Large companies often have access to capital, but they have minimal to no experience in the crypto
industry. Companies that want to start a Bitcoin ATM network tomorrow can copy our offerings and hire top branding specialists, but what
they can’t do is create a brand that has roots to the early years of Bitcoin and Bitcoin ATMs. Many of these large companies are
treated with skepticism by many users of Bitcoin, as they represent centralized and institutionalized interests that many believe are
contrary to the goals of Bitcoin. The bright orange on our Athena Bitcoin ATMs is the same color as the orange in the original Bitcoin
logo, helping our brand stand out and represent the spirit and essence of Bitcoin and the entire crypto industry in any stores where
our ATMs are placed.
While the end result of a transaction on one
Bitcoin ATM versus another may be similar, we believe that many store owners and customers looking for a Bitcoin ATM will often prefer
an Athena Bitcoin ATM versus, for example, a multipurpose Coinstar machine that can handle your loose change and also sell you Bitcoin.
That is our opinion from anecdotal feedback we have received over the years. We believe our branding and brand authenticity have been
a contributing factor to getting good performing sites, and that it will continue to be a big contributor to our future growth.
Competitive Disadvantages
Our competitive disadvantages are that we do
not yet have the operational and financial resources that some of our competitors have, which results in having fewer resources to deploy
new ATMs, develop fewer new markets, and invest in technology that could extend our service offerings, as compared to some of our competitors.
We intend to raise capital several times in the coming years to vastly expand our network, but we remain focused on keeping true to our
core principles and will continue to focus on bottom line performance and maintain our standards of careful site selection. This could
result in slower sales growth than would otherwise be possible but will result in overall better financial performance.
Need for Government Approval of Principal Products and Services
Compliance with laws and regulations is a vital
part of our business. In the United States, there are several important federal laws and regulations aimed at preventing money-laundering
and terrorist financing that require specific record-keeping, filings, and other compliance procedures. In addition, there are laws and
regulations in state jurisdictions that also require permits, reporting, and other compliance and customer service procedures. Finally,
we are often contacted by federal, state, and local law enforcement agencies and subpoenaed for information on the activities of some
customers.
Federal Regulation
In the United States, the Department of the Treasury
through the Financial Crimes Enforcement Network (“FinCEN”) has primary authority over dealers in crypto assets. This was
established in 2013 when FinCEN released interpretive guidance to “clarify the applicability of the regulations implementing the
Bank Secrecy Act (“BSA”) to person creating, obtaining, distributing, exchanging, accepting, or transmitting virtual currencies”
(FIN-2013-G001). Since that time, all businesses that deal in crypto assets in the manner of the Company must register as a Money Service
Business (“MSB”) with FinCEN and comply with the requirements of the BSA, the Patriot Act, and other amendments and administrative
guidance issued by FinCEN and the Department of the Treasury.
We are subject to various anti-money laundering
and counter-terrorist financing laws, including the BSA in the United States, and similar laws and regulations abroad. In the United
States, as a money services business registered with FinCEN, the BSA requires us to among other things, develop, implement, and maintain
a risk-based anti-money laundering program, provide an anti-money laundering-related training program, report suspicious activities and
transactions to FinCEN, comply with certain reporting and recordkeeping requirements, and collect and maintain information about our
customers. In addition, the BSA requires us to comply with certain customer due diligence requirements as part of our anti-money laundering
obligations, including developing risk-based policies, procedures, and internal controls reasonably designed to verify a customer’s
identity. Many states and other countries impose similar and, in some cases, more stringent requirements related to anti-money laundering
and counter-terrorist financing. We have implemented a compliance program designed to prevent our platform from being used to facilitate
money laundering, terrorist financing, and other illicit activity in countries, or with persons or entities, included on designated lists
promulgated by Office of Foreign Assets Control (“OFAC”) and equivalent foreign authorities. Our compliance program includes
policies, procedures, reporting protocols, and internal controls, and is designed to address legal and regulatory requirements as well
as to assist us in managing risks associated with money laundering and terrorist financing. Anti-money laundering regulations are constantly
evolving and vary from jurisdiction-to-jurisdiction. We continuously monitor our compliance with anti-money laundering and counter-terrorist
financing regulations and industry standards and implement policies, procedures, and controls in light of the most current legal requirements.
Athena Bitcoin is registered with FinCEN and has
registration number 31000207507771. In addition, Athena Bitcoin has appointed Sam Nazzaro as its Chief Compliance Officer, written and
distributed a BSA Compliance Policy, and engages an outside review firm to perform an annual review of its Compliance Policy.
See also “Risk Factors”, page
15 of this prospectus.
State Regulation
Depending on the state where the Company places
a Bitcoin ATM, there are local laws and regulations with which the Company must comply to operate legally. These laws usually require
the Company to register with a state agency, provide a surety bond, and make regular reports about its activities in the state and its
financial health.
In some jurisdictions, the Company may be required
to obtain operating permits from the city or county. These typically involve the payment of registration fees.
On November 20, 2023, the California Department
of Financial Protection and Innovation (“DFPI”) issued an invitation for comments on a potential rulemaking relating to two
new California laws that will impose sweeping obligations on companies engaged in virtual currency activities in California and with
California residents. The first law, Assembly Bill 39, prohibits people from engaging in digital financial asset business activity –
or holding themselves out as being able to engage in digital financial asset business activity – without meeting certain criteria
and obtaining a license from the DFPI, including compliance obligations and stablecoin approvals among other guidelines. The second,
Senate Bill 401, imposes requirements on operators of digital financial asset transaction kiosks. The DFPI refers to the two bills collectively
as the Digital Financial Assets Law (“DFAL”). The DFAL begins taking effect on January 1, 2024, with covered persons required
to be licensed, or to have submitted a license application and be awaiting approval or denial of that application, on or before July
1, 2025.
Requirements applicable to digital financial
asset kiosks
The State Senate Bill 401 supplements
the DFAL by prohibiting an operator of a digital financial asset kiosk from accepting or dispensing more than $1,000 a day from or to
a customer through a kiosk. Further, this law requires operators to provide certain written disclosures to a customer before the digital
financial asset transaction takes place, including disclosure of terms and conditions of the transaction, whether the operator provides
a method to reverse or refund a transaction (including any warnings if such transaction is final and cannot be reversed), the amount of
the digital financial asset involved, and the amount of fees and other charges in US dollars, among other disclosures. The operators will
also be required to provide customers with detailed transaction disclosures, including the crypto amount, dollar amount, and fees charged
thus customers must receive receipts containing vital transaction details, including the information of the licensed exchange used to
calculate the price spread.
The law includes various customer protections
and prohibits an operator from charging fees that exceed the greater of $5.00 or 15% of the US dollar equivalent of the digital financial
assets involved in the transaction based on the market price of that same asset quoted by a licensed digital financial asset exchange.
Under the new law, operators must maintain an up-to-date list of kiosk locations.
There is no private right of action under
the DFAL except under a narrow exception related to a covered person’s obligation to hold digital financial assets on behalf of
California residents pursuant to the state Uniform Commercial Code.
Impact of DFAL on digital assets regulation
The enactment of the new laws is significant
as it pushes California to the forefront of the digital asset regulatory landscape with other states that have enacted similar requirements
and effectively ends the ability of companies to freely engage in digital asset activities in California without adhering to a state regulatory
framework. The new laws will require companies engaging in digital asset activities in California to evaluate whether their activities
bring them within the scope of these laws and be prepared to apply for any necessary licenses.
Moreover, in light of the acknowledgment
from Governor Newsom that certain aspects of the laws are ambiguous, as well as the legal complexity of engaging in digital assets activities
throughout the United States, we expect further refinement of the DFAL requirements as the DFPI introduces regulations or guidance to
supplement the law.
The Company tested its procedures in its kiosks in the state of
California and believes that they are fully compliant with the requirements of DFAL. See also “Risk
Factors” on page 15 of this prospectus.
Subpoenas and Other Law Enforcement Interactions
From time to time, the Company is subpoenaed
for its records and asked to testify in legal proceedings. These requests come from all branches of local, state, and federal law enforcement
agencies and are usually requests for information about our clients, their transactions, and other information that we have collected.
Our compliance team is charged with responding in a timely and accurate manner to these requests once the validity and legality of the
request has been determined.
Consumer Protection
The Federal Trade Commission (“FTC”),
the Consumer Financial Protection Bureau (“CFPB”), and other U.S. federal, state, and local and foreign regulatory agencies
regulate financial products, including money transfer services related to remittance or peer-to-peer transfers. These agencies, as well
as certain other governmental bodies, in particular state attorneys general, have broad consumer protection mandates and discretion in
enforcing consumer protection laws, including matters related to unfair or deceptive, and, in the case of the CFPB, abusive, acts or
practices (“UDAAPs”), and they promulgate, interpret, and enforce rules and regulations that affect our business. For example,
all persons offering or providing financial services or products to consumers in the United States, directly or indirectly, can be subject
to enforcement actions related to the prohibition of UDAAPs. The CFPB has enforcement authority to prevent an entity that offers or provides
consumer financial services or products or a service provider in the United States from committing or engaging in UDAAPs, including the
ability to engage in joint investigations with other agencies, issue subpoenas and civil investigative demands, conduct hearings and
adjudication proceedings, commence a civil action, grant relief (e.g., limit activities or functions; rescission of contracts), and refer
matters for criminal proceedings.
International Regulations
Outside of the United States, the countries where
the Company operates are members of an array of regional Anti-Money-Laundering (“AML”) treaty organizations. Specifically,
Argentina and Colombia are signatories to the Financial Action Task Force of Latin America (“GAFILAT”). Argentina is also
a member of Financial Action Task Force (“FATF”). El Salvador is a member of Caribbean Financial Action Task Force (“CFATF”).
The United States is a member of both FATF and Asia/Pacific Group on Money Laundering (“APG”). These relationships, both
overlapping and non-overlapping, result in legal interpretations, regulation, and enforcement that is heterogeneous. In each of these
jurisdictions, membership in one or more AML treaty organizations can influence the specific documentation, record keeping, and financial
limits placed on MSB, or dealers in crypto assets.
Employees
We strive to foster a productive and engaging
work environment. Our talent strategy is aligned with our business vision and platform strategy. We hire smart people with a passion
for crypto assets and the possibilities to empower our customers to achieve their financial and transactional goals.
As of September 30, 2023, we employed 11 people
within the United States, and through subsidiaries had 32 direct employees in foreign subsidiaries. We also engage temporary employees
and consultants. As of September 30, 2023, we had 33 direct employees and have engaged 2 independent contractors to support our El Salvador
operations. They are primarily responsible for customer support of the Bitcoin ATMs, the Chivo wallet and the Chivo POS terminals. In
Colombia Athena has 2 direct employees. We continue to search for additional personnel as we grow our operations in El Salvador.
Properties
We lease approximately 3,000 square feet of
space in Miami, Florida and have terminated prior leases in Chicago and El Salvador comprising 4,000 square feet and 2,000 square feet
of office space, respectively. Monthly lease payments for the Miami office are approximately $10,000. The Company has short-term storage,
office, and warehousing contracts in Illinois and Florida for approximately 1,750 square feet. We maintain international offices or co-working
facilities in Colombia and Argentina. We believe we will be able to obtain additional space on commercially reasonable terms.
Legal Proceedings
On September 8, 2022, Athena Bitcoin, Inc.
(“Athena” or the “Company”) received from the Office of the Commissioner of Financial Institutions (“OCFI”),
a “Final Resolution and Order to Cease and Desist” (“OC&D”), requiring to, among other matters, stop the
operations and marketing of the bitcoin automated teller machines (“BTMs”), that were operating in Puerto Rico. On September
12, 2022, Athena filed a Complaint for Declaratory Judgment and Permanent Injunction and a Petition for Preliminary Injunction before
the Courts of the Commonwealth, Superior Part requesting that the determination and effects of the OC&D be stayed until final resolution
of the case. On November 10, 2022, the Court dismissed the civil action with the interpretation that the controversy presented before
it was not ripe for resolution by the Court. The Company sought a reversal of such determination before the Court of Appeals of the Commonwealth
by a Motion Requesting a Stay of the determination and effects of the OC&D. On April 10, 2023 the Puerto Rico Court of Appeals issued
a judgment unfavorable to Athena’s appeal. Athena determined not to pursue further redress against the OC&D that was issued
by OCFI and with which it has been complying since September 2022. Athena implemented another option available under PR law that has
permitted resumption of operations of the BATMs in Puerto Rico. The Court of Appeals is yet to issue the Mandate returning the case to
the lower Court and to OCFI.
On October 9, 2023, Arley Lozano-Jaramillo
(“Lozano”), an individual, commenced proceedings against the Company by filing a complaint with the 11th Judicial
Circuit Court for Miami-Dade County, Florida which named Athena Bitcoin Global, a Nevada corporation as the defendant. Lozano, either
individually or through the entities controlled by him (XPay, Vakano Industries) entered into certain non-binding letters of intent on
July 13, 2021 and as of September 2021 (the second letter of intent was a draft and not signed by the parties) pursuant to which Lozano
was a seller of certain assets and technology related to XPay Wallet, intellectual property regarding the AthenaPay POS System, XPay
POS System and related technology (the “XPay Assets”) for the proposed purchase price of $3,000,000 and 270,000,000 shares
of common stock of the Company (valued at $0.10 per share). The acquisition of the XPay Assets was subject to the execution of a definitive
acquisition agreement. No such agreement was finalized nor entered into by the parties. The Company made payments to Lozano for a total
amount of approximately $1,600,000 and Lozano transferred the ownership of XPay Assets to the Company. Lozano alleges breach of contract,
promissory estoppel, unjust enrichment, fraud in the inducement and conversion. He asserts the claim for failure to compensate
Lozano pursuant to the terms of the purchase price provided in the non-binding letter of intent (and the unsigned draft letter of intent),
which includes remaining amount of the purchase price ($1,400,000) and 270,000,000 shares of the Company’s common stock. The plaintiff
did not offer any evidence of a signed and binding acquisition agreement. The claim also seeks an award for legal and other costs relating
to the proceeding.
The Company does not believe the allegations
made against it are valid and intends to vigorously defend against them. The range of potential loss related to the identified claim
is between $0 and $1.4 million and the issuance of 270,000,000 shares of common stock valued at $27 million, the amount of damages that
Lozano is seeking in the lawsuit. The additional costs mentioned in the claim are not able to be estimated at this time.
We are also party to various other legal proceedings
and claims in the ordinary course of our business. We believe these matters will not have a material adverse effect on our consolidated
financial position, results of operations or liquidity.
MARKET FOR COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
Market Information
Our common stock is quoted on the OTC Pink Market
operated by OTC Markets Group, Inc. under the symbol “ABIT”. Our common stock last traded at $0.11 on November 10, 2023.
The volume of shares of common stock traded was insignificant and therefore, does not represent a reliable indication of the fair market
value of these shares. The following table sets forth the high and low closing-bid quotations for our common stock as reported on the
OTC Pink Market for the periods indicated. These quotations reflect inter-dealer prices, without retail mark up, mark down or commission
and may not necessarily represent actual transactions. The OTC Markets Quotation System is a quotation service that display real-time
quotes, last-sale prices and volume information in over-the-counter equity securities. The market is limited for our stock and any prices
quoted may not be a reliable indication of the value of our shares of common stock.
For the year ended December 31, 2021 |
|
High |
|
|
Low |
|
First Quarter |
|
$ |
0.9000 |
|
|
$ |
0.4000 |
|
Second Quarter |
|
$ |
0.8600 |
|
|
$ |
0.5000 |
|
Third Quarter |
|
$ |
0.6000 |
|
|
$ |
0.4000 |
|
Fourth Quarter |
|
$ |
0.5000 |
|
|
$ |
0.4000 |
|
For the year ended December 31, 2022 |
|
High |
|
|
Low |
|
First Quarter |
|
$ |
0.5500 |
|
|
$ |
0.4200 |
|
Second Quarter |
|
$ |
0.6500 |
|
|
$ |
0.4800 |
|
Third Quarter |
|
$ |
0.7000 |
|
|
$ |
0.5200 |
|
Fourth Quarter |
|
$ |
0.8000 |
|
|
$ |
0.6000 |
|
For the year ending December 31, 2023 |
|
High |
|
|
Low |
|
First Quarter |
|
$ |
0.7500 |
|
|
$ |
0.5600 |
|
Second Quarter |
|
|
0.1500 |
|
|
|
0.0400 |
|
Third Quarter |
|
|
0.0800 |
|
|
|
0.0500 |
|
Holders of Record
As of September 30, 2023 and as of December
31, 2023, we had 4,094,459,545 shares of our common stock issued and outstanding held by 189 shareholders of record. The actual number
of holders of our common stock is greater than this number of record holders, and includes stockholders who are beneficial owners, but
whose shares are held in street name by brokers or held by other nominees.
Dividends
We have not paid, nor declared any cash dividends
since our inception and do not intend to declare or pay any such dividends in the foreseeable future as we intend to retain any earnings
for use in our business. Any future determination to pay dividends will be at the discretion of our board of directors, subject to limitations
imposed by state law.
Securities Authorized for Issuance Under Equity Compensation Plans
The Company’s Board of Directors and its
majority shareholders approved the 2021 Equity Compensation Plan (the “2021 Plan”) effective as of October 15, 2021. On February
28, 2023, in conjunction with a signed contractor service agreement, the Company issued a Restricted Stock Units Agreement for 2,000,000
shares of common stock under the 2021 Plan.
Description
of Capital Stock
The following description of our capital stock
is based upon our Second Amended and Restated Articles of Incorporation (the “Amended Articles”), our bylaws, as amended
and restated, and applicable provisions of law, in each case as currently in effect. The Company amended and restated its articles of
incorporation in January 2023 and filed Second Amended and Restated Articles of Incorporation. This discussion does not purport to be
complete and is qualified in its entirety by reference to our Amended Articles of Incorporation, and our bylaws, copies of which are
filed with the SEC as exhibits to the registration statement of which this prospectus is a part.
Authorized Capital Stock
We are authorized to issue 10,000,000,000 shares
of common stock, par value $0.001 per share, and 5,000,000,000 shares of preferred stock, par value $0.001 per share. As of the date
of this prospectus, there were 4,094,459,545 shares of common stock issued and outstanding and no preferred shares issued or outstanding.
The outstanding shares of stock have been duly authorized and are fully paid and non-assessable.
Common Stock
The holders of common stock are entitled to one
vote per share on all matters submitted to a vote of shareholders, including the election of directors. There is no cumulative voting
in the election of directors. The holders of common stock are entitled to any dividends that may be declared by the board of directors
out of funds legally available for payment. Holders of common stock have no preemptive rights and have no right to convert their common
stock into any other securities.
The holders of our common stock are entitled
to one vote per share on all matters submitted to a vote of stockholders, and our Amended Articles do not provide for cumulative voting
in the election of directors. The holders of our common stock receive ratably any dividends declared by our Board out of funds legally
available therefor. In the event of our liquidation, dissolution, or winding-up, the holders of our common stock will be entitled to
share ratably in all assets remaining after payment of or provision for any liabilities.
Preferred Stock
The Company has 5,000,000,000 shares of preferred
stock, $0.001 par value, authorized. Our Amended Articles of Incorporation provide that shares of preferred stock may be issued from
time to time in one or more series. Our board of directors will be authorized to fix the voting rights, if any, designations, powers,
preferences, the relative, participating, optional or other special rights and any qualifications, limitations and restrictions thereof,
applicable to the shares of each series. Our board of directors will be able to, without stockholder approval, issue preferred stock
with voting and other rights that could adversely affect the voting power and other rights of the holders of the common stock and could
have anti-takeover effects. The ability of our board of directors to issue preferred stock without stockholder approval could have the
effect of delaying, deferring or preventing a change of control of us or the removal of existing management. We have no preferred stock
outstanding at the date hereof. Although we do not currently intend to issue any shares of preferred stock, we cannot assure you that
we will not do so in the future. No shares of preferred stock are being issued or registered in this offering.
Warrants to
Purchase Common Shares
The Company does not have any authorized warrants
to purchase its common stock.
The only outstanding warrants are in the Company’s
wholly-owned subsidiary, Athena Bitcoin. In 2017, Athena Bitcoin issued warrants to purchase 202,350 shares of Athena Bitcoin’s
common stock for $14,005 for a right to purchase common shares in Athena Bitcoin, priced at $2.00 to $3.00 per share, at an average exercise
price of $2.49 per share. There was no activity related to these warrants in 2019 and the warrants to purchase 202,350 shares of Athena
common stock remained outstanding on December 31, 2019 and were classified as equity. In January 2020, warrants to purchase 102,350 shares
of Athena Bitcoin common stock at an average exercise price of $2.00 per share were exercised, some of them in a cashless manner, against
a lesser number of shares. As a result of the exercise of these warrants, the net issuance of Athena Bitcoin common stock was 93,106
shares (exchanged into 115,888,490 shares of the Company’s common stock on January 31, 2020). The unexercised warrants to purchase
100,000 shares of Athena Bitcoin common stock, at an exercise price of $3 per share, remain outstanding as of December 31, 2022. The
warrant will expire on May 30, 2025.
Anti-takeover Effects of Nevada Law
We may currently be subject to the provisions
of the Nevada Revised Statutes regarding the acquisition of controlling interest (the “Controlling Interest Law”). A corporation
is subject to the Controlling Interest Law if it has more than 200 stockholders of record, at least 100 of whom are residents of Nevada,
and if the corporation does business in Nevada, directly or through an affiliated corporation. The Controlling Interest Law may have
the effect of discouraging corporate takeovers. As of September 30, 2023, we had 25 stockholders of record who are residents of
Nevada.
The Controlling Interest Law focuses on the acquisition
of a “controlling interest,” which means the ownership of outstanding voting shares that would be sufficient, but for the
operation of law, to enable the acquiring person to exercise the following proportions of the voting power of the corporation in the
election of directors: (1) one-fifth or more but less than one-third; (2) one-third or more but less than a majority; or (3) a majority
or more. The ability to exercise this voting power may be direct or indirect, as well as individual or in association with others.
The effect of the Controlling Interest Law is
that an acquiring person, and those acting in association with such person, will obtain only such voting rights in the controlling interest
as are conferred by a resolution of (1) a majority of the stockholders of the corporation and, if applicable (2) a majority of each class
or series of outstanding shares of which the acquisition would adversely affect or alter a preference or relative or other right, approved
at a special or annual stockholders’ meeting. The Controlling Interest Law contemplates that voting rights will be considered only
once by the other stockholders. Thus, there is no authority to take away voting rights from the control shares of an acquiring person
once those rights have been approved in accordance with the Controlling Interest Law. However, if the stockholders do not grant voting
rights to the shares acquired by an acquiring person, those shares do not become permanent non-voting shares. The acquiring person is
free to sell the shares to others, and so long as the subsequent buyer or buyers of those shares themselves do not acquire a controlling
interest, those shares would not be governed by the Controlling Interest Law.
If control shares are accorded full voting rights
and the acquiring person has acquired control shares with a majority or more of the voting power, a stockholder of record, other than
the acquiring person, who did not vote in favor of approval of voting rights, is entitled to dissent to the acquisition and demand fair
value for such stockholder’s shares pursuant to applicable provisions of Chapter 92 of the Nevada Revised Statutes governing rights
and procedures for dissenting stockholders.
In addition to the Controlling Interest Law,
Nevada has a business combination law, which prohibits certain business combinations between Nevada publicly traded corporations and
any “interested stockholder” for two years after the interested stockholder first becomes an interested stockholder, unless
the board of directors of the corporation approved the combination before the person became an interested stockholder or the corporation’s
board of directors approves the transaction and at least 60% of the corporation’s disinterested stockholders approve the combination
at an annual or special meeting thereof. For purposes of Nevada law, an interested stockholder is any person who is: (a) the beneficial
owner, directly or indirectly, of 10% or more of the voting power of the outstanding voting shares of the corporation, or (b) an affiliate
or associate of the corporation and at any time within the previous two years was the beneficial owner, directly or indirectly, of 10%
or more of the voting power of the then-outstanding shares of the corporation. The definition of “combination” contained
in the statute is sufficiently broad to cover virtually any kind of transaction that would allow a potential acquirer to use the corporation’s
assets to finance the acquisition or otherwise to benefit its own interests rather than the interests of the corporation and its other
stockholders.
The effect of Nevada’s business combination
law is to potentially discourage parties interested in taking control of the Company from doing so if they cannot obtain the approval
of our Board or stockholders.
In addition, under Nevada law directors may be
removed only by the vote of stockholders representing not less than two-thirds of the voting power of the issued and outstanding stock
entitled to vote, which could also have an anti-takeover effect.
Dividends
We have not paid any cash dividends on our common
stock to date and do not intend to pay cash dividends. The payment of cash dividends in the future will be dependent upon our revenues
and earnings, if any, capital requirements and general financial condition. The payment of any cash dividends will be within the discretion
of our board of directors at such time. In addition, our board of directors is not currently contemplating and does not anticipate declaring
any stock dividends in the foreseeable future.
Convertible Debentures
6% Convertible Debentures
On June 22, 2021, the Company commenced its private
offering of up to $5,000,000 of 6% Convertible Debentures to accredited investors only. The maturity date on the 6% Convertible Debentures
is two years after the date of issuance. The investor has an option to convert the principal amount of the Debenture into shares of common
stock of the Company at a conversion price equal to the lesser of (i) $0.10 or (ii) 25% less than the twenty trading day (20-trading
day) volume weighted average price (“VWAP”) of the common stock-based on the closing prices per share reported on the OTC
Pink Market operated by the OTC Markets Group, Inc., for said twenty-day trading period, commencing ten-trading days prior to the date
of election to convert the Debenture and ending ten-trading days after such election is made and the notice of conversion has been submitted
to the Company. The accrued interest is not convertible and is payable quarterly. The investor is required to convert the Debenture if
the Company’s common stock is admitted for trading on a national stock exchange or if certain corporate transactions occur, such
as merger, sale or change of control of the Company. The holders of the Debentures are provided with the registration rights to register
the shares of common stock the Debentures are convertible into, in a registration statement to be filed by the Company on Form S-1 with
the SEC. The Company sold a total of $4,985,000 of the 6% Convertible Debentures to 77 accredited investors. The Company closed its
private placement in September, 2021. On March 31, 2022, the Company issued 34,650,000 shares of its common stock upon conversion of
$3,465,000 principal amount of the 6% Convertible Debentures. The Company repaid a total of $1,520,000 in the principal amount of the
Convertible Debentures in fiscal year 2023. As of the date of this prospectus, none of the Convertible Debentures remain outstanding.
8% Convertible Debentures
On January 31, 2020, we issued 8% Convertible
Debentures in the total principal amount of $3,125,000 to two (2) accredited investors pursuant to that certain securities purchase agreement
as of the same date, which has been amended in connection with the Company’s Loan Restructuring and Related Amendments Agreement
entered into as of July 12, 2021 (the “Restructuring Agreement”). The holders of the Convertible Debentures have the right
to convert their principal amount and any unpaid accrued interest into 260,416,667 shares of common stock-based on the conversion price
equal to dividing the total amount of principal and accrued interest, if any, of the Debenture by the lesser of $0.012 per share or at
a 20% discount to a next equity financing, subject to certain limitations requiring the consent of the lead investor. The holders of
the Convertible Debentures are also subject to the mandatory conversion (except for the lead investor whose consent is required) at the
next equity financing. Next equity financing has been defined in the securities purchase agreement between the respective holders and
the Company as the next sale (or series of related sales) by the Company of additional equity securities under an exemption from registration
available under the rules promulgated under the Securities Act, from which the Company receives gross proceeds of not less than US$3,000,000.00
(excluding, the aggregate principal amount of the Convertible Debentures) The maturity date for the Convertible Debentures is January
31, 2025. The holders of Convertible Debenture have certain registration rights as described below (the “Registration Rights”).
The holder of 8% Convertible Debenture in the principal amount of $125,000, Swingbridge Crypto III LLC, converted the principal amount
and accrued interest of its 8% Convertible Debenture into 10,416,666 shares of common stock in February 2022 at the conversion price
of $0.012 per share. The Convertible Debenture in the principal amount of $3,000,000 held by KGPLA, LLC was amended and restated as of
May 15, 2023 and became a secured, and not general unsecured, obligation of the Company (the “Amended and Restated Secured Convertible
Debenture”), on par with the notes issued pursuant to the Senior Secured Loan Agreement entered into as of the same date. As of
the date of this prospectus, the outstanding principal amount of the Amended and Restated Secured Convertible Debenture is $3,000,000.
The repayment of the Amended and Restated Secured Convertible Debenture is secured by all the assets of the Company, except for property
previously pledged to Banco Hipotecario, and with respect to such assets, the Company granted the Lender a second priority lien pursuant
to that certain Security Agreement dated as of the date thereof and entered into by and among the Company, as the grantor, KGPLA, LLC,
as the secured party and Athena Bitcoin, Inc. and Athena Holdings El Salvador SA DE CV, the Company’s subsidiaries, as guarantors.
Registration Rights
We are party to an Investors’ Rights Agreement
dated as of January 31, 2020 which was entered into in connection with the Company’s issuance of Convertible Debentures with lead
investor and certain key holders as defined in the Investors Rights Agreement, which grants them certain registration rights with respect
to our common stock. The registration of shares of our common stock pursuant to the exercise of registration rights described below would
enable holders to sell these shares without restriction under the Securities Act when the registration statement is declared effective.
We will pay all expenses related to any demand, piggyback, or Form S-3 registration described below, with the exception of underwriting
discounts and commissions.
Demand Registration Rights
At any time beginning 180 days after the effective
date of the registration statement of which this prospectus forms a part or five (5) years after the date of the Investors’ Rights
Agreement, the holders of 30% or more of at least 30% of the registrable securities then outstanding (or a lesser percent if the anticipated
aggregate offering price, net of underwriting discounts and commissions would exceed $15 million) may make a written request that we
register all or a portion of their shares, subject to certain specified exceptions. The holders of shares having registration rights
are entitled to written notice from the Company. We will prepare and file a registration statement as requested, unless, in the good
faith judgment of our Board, such registration would be seriously detrimental to the Company and its stockholders and filing should be
deferred. We may defer only once in any 12-month period, and such deferral shall not exceed 120 days after receipt of the request. In
addition, we are not obligated to effect more than two of these registrations within any 12-month period or if the holders’ proposed
registered securities may be immediately registered on Form S-3.
Piggyback Registration Rights
Subject to certain specified exceptions, if we
propose to register any of our securities under the Securities Act either for our own account or for the account of other stockholders,
the holders of shares having registration rights are entitled to written notice and certain “piggyback” registration rights
allowing them to include their shares in our registration statement. These registration rights are subject to specified conditions and
limitations, including the right of the underwriters, in their sole discretion, to limit the number of shares included in any such offering
under certain circumstances, but not below 30% of the total amount of securities included in such offering, unless (i) such offering
is the initial public offering or (ii) all other securities, other than our securities, are entirely excluded from the offering.
Form S-3 Registration Rights
At any time after we are qualified to file a
registration statement on Form S-3, and subject to limitations and conditions, the holders of 35% or more of the registrable securities
then outstanding are entitled to written notice of such registration and may make a written request that we prepare and file a registration
statement on Form S-3 under the Securities Act covering their shares, so long as the aggregate price to the public, net of the underwriters’
discounts and commissions, is at least $5,000,000. We will prepare and file the Form S-3 registration as requested, unless, in the good
faith judgment of our board of directors, such registration would be seriously detrimental to the Company and its stockholders and filing
should be deferred. We may defer only once in any 12-month period, and such deferral shall not exceed 90 days after receipt of the request.
In addition, we are not obligated to prepare or file any of these registration statements (i) within 180 days after the effective
date of a registration statement pursuant to demand or piggyback registration rights or (ii) if two of these registrations have
been completed within any 12-month period.
In accordance with the Investors’ Rights
Agreement, the Company delivered the required notice of a proposed filing in a timely manner, of the Company’s registration statement
on Form S-1 to the holders with the registration rights. The holders elected not to include in the registration statement any of the
common stock issuable upon the conversion of their respective Convertible Debentures.
Termination of Voting Agreements
The two largest individual shareholders have
entered into to a Voting Agreement as of January 31, 2020, in connection with the offering of the Convertible Debentures, pursuant to
which the lead investor (currently our largest shareholder, Mr. Komaransky) had a right to nominate three (3) directors and the key holder
(currently our CEO, director and second largest shareholder, Eric Gravengaard) had a right to nominate two (2) directors. The Voting
Agreement has been terminated as of November 4, 2022 by the parties, following the resignation of Mr. Gravengaard as the Company’s
CEO in August 2022.
Right of First Refusal and Co-Sale Agreement
In connection with the offering of the Convertible
Debentures, Eric Gravengaard, the Company’s, director and principal shareholder (the “Key Holder”), and investors
in the Convertible Debentures (the “Investors”), entered with the Company into a Right of First Refusal and Co-Sale Agreement
dated as of January 31, 2020 (the “RFR Agreement”), pursuant to which the Key Holder granted to the Company the right of
first refusal to purchase all or any portion of common stock that the Key Holder proposes to transfer, at the same price and terms as
offered to the proposed transferee. The right of first refusal is subject to certain notice requirements and applicable purchase terms.
The Key Holder also agreed to grant to the Investors, secondary refusal right to purchase all or any portion of the common stock proposed
to be transferred by the Key Holder that has not been purchased by the Company pursuant to the right of first refusal. The grant of the
secondary refusal right is subject to certain notice requirements and additional purchase terms as set forth in the RFR Agreement.
Shares Eligible for Future Sale - Rule 144
Under Rule 144, as currently in effect, once
we have been subject to the public company reporting requirements of the Exchange Act for at least 90 days, and we are current in our
Exchange Act reporting at the time of sale, a person (or persons whose shares are required to be aggregated) who is not deemed to have
been one of our “affiliates” for purposes of Rule 144 at any time during the 90 days preceding a sale and who has beneficially
owned restricted securities within the meaning of Rule 144 for at least six months, including the holding period of any prior owner other
than one of our “affiliates,” is entitled to sell those shares in the public market without complying with the manner of
sale, volume limitations, or notice provisions of Rule 144, but subject to compliance with the public information requirements of Rule
144. If such a person has beneficially owned the shares proposed to be sold for at least one year, including the holding period of any
prior owner other than one of our “affiliates,” then such person is entitled to sell such shares in the public market without
complying with any of the requirements of Rule 144.
In general, under Rule 144, as currently in effect,
once we have been subject to the public company reporting requirements of the Exchange Act for at least 90 days, our “affiliates,”
as defined in Rule 144, who have beneficially owned the shares proposed to be sold for at least six months, are entitled to sell in the
public market, within any three-month period, a number of those shares that does not exceed the greater of:
|
· |
1% of the number of shares of our common stock then outstanding, which
will equal shares immediately after the completion of this offering; or |
|
|
|
|
· |
the average weekly trading volume of our common stock on during the
four calendar weeks preceding the filing of a notice on Form 144 with respect to such sale. |
Such sales under Rule 144 by our “affiliates”
or persons selling shares on behalf of our “affiliates” are also subject to certain manner of sale provisions, notice requirements,
and requirements related to the availability of current public information about us.
Restrictions on the Reliance of Rule 144 by Shell Companies
or Former Shell Companies
Rule 144(i) "Unavailability to Securities of Issuers with No
or Nominal Operations and No or Nominal Non-Cash Assets" provides that Rule 144 is not available for the resale of securities initially
issued by an issuer that is a “shell company” as that term is defined in section 405 of the Securities Act. The Company has
previously been identified as a shell company until January 30, 2020 (see “Corporate History and
Other Information” on page 4). Rule 144 is not available for resale of securities issued by any shell companies (other
than business combination related shell companies) or any issuer that has been at any time previously a shell company. Rule 144(i) provides
an important exception to this prohibition, however, if the following conditions are met:
|
· |
The issuer of the securities that was formerly a shell company has
ceased to be a shell company; |
|
· |
The issuer of the securities is subject to the reporting requirements
of Section 13 or 15(d) of the Exchange Act; |
|
· |
The issuer of the securities has filed all Exchange Act reports and
material required to be filed, as applicable, during the preceding 12 months (or such shorter period that the issuer was required
to file such reports and materials), other than Current Reports on Form 8-K; and |
|
· |
At least one year has elapsed from the time that the issuer filed current
comprehensive disclosure with the SEC reflecting its status as an entity that is not a shell company. |
Transfer Agent
The transfer agent and registrar of our common
stock is Issuer Direct Corporation, located at One Glenwood Avenue, Suite 1001, Raleigh, NC, 27603.
Management
and Certain Security Holders
Directors and Executive Officers
The following table sets forth certain information
regarding our directors and executive officers as of the date of this prospectus.
Name |
Age |
Position(s) |
DATES HELD |
Executive Officers |
|
|
|
Matias Goldenhorn |
46 |
Chief Executive Officer, Director |
August, 2022 – present |
Tina Gregory |
64 |
Chief Financial Officer |
August, 2022 – present |
Carlos Carreno (7) |
62 |
Chief of Staff and Director |
January 2023 – present |
Eric Gravengaard (2) |
49 |
Chief Executive Officer |
January, 2020 – August 2022 |
Eric Gravengaard (2) |
49 |
Interim Chief Financial Officer |
May 2022 – August 2022 |
Edward Weinhaus (5) |
51 |
President and Director |
January 2020 – December 2022 |
|
|
|
|
Non-Employee Directors |
|
|
|
Eric Gravengaard |
49 |
Director |
January 2020 - present |
Antonio Valiente |
51 |
Director |
January, 2023 – present |
Huaxing Lu (3) |
35 |
Director |
March 2020 – January 2023 |
Esteban Suarez (4) |
43 |
Director |
March 2020 – January 2023 |
Michael Pruyn (6) |
38 |
Director |
May 2022 – June 2022 |
Michael Komaransky (1) |
44 |
Director |
March 2020 – May 2022 |
__________________
(1) | Mr.
Komaransky resigned as the Company’s director effective on May 6, 2022 and his resignation
was accepted by the Company’s Board of Directors. Mr. Komaransky’s decision to
resign from the Board of Directors was not a result of a disagreement with management regarding
the Company's operations, policies, practices or otherwise. |
(2) | Mr. Gravengaard resigned as the Company’s Chief Executive
Officer effective on August 4, 2022, and as Interim Chief Financial Officer as of August 24, 2022,
and his resignation was accepted by the Company’s Board of Directors. |
(3) | Mr. Lu resigned as the Company’s director effective on January
4, 2023 and his resignation was accepted by the Company’s Board of Directors. Mr. Lu’s
decision to resign from the Board of Directors was not a result of a disagreement with management
regarding the Company's operations, policies, practices or otherwise. |
(4) | Mr.
Suarez resigned as the Company’s director effective on January 10, 2023 and his resignation
was accepted by the Company’s Board of Directors. Mr. Suarez’ decision to resign
from the Board of Directors was not a result of a disagreement with management regarding
the Company's operations, policies, practices or otherwise. |
(5) | Mr. Weinhaus resigned as the Company’s President and director
effective on August 4, 2022, and his resignation was accepted by the Company’s Board of Directors.
Mr. Weinhaus’s decision to resign from the Board of Directors was not a result of a disagreement
with management regarding the Company's operations, policies, practices or otherwise. |
(6) | Mr.
Komaransky nominated Michael J. Pruyn to the Board of Directors, and Mr. Pruyn was appointed
as a member of the Board of Directors effective on May 6, 2022. Mr. Pruyn resigned as the
Company’s director effective on June 6, 2022, and his resignation was accepted by the
Company’s Board of Directors. Mr. Pruyn’s decision to resign from the Board of
Directors was not a result of a disagreement with management regarding the Company's operations,
policies, practices or otherwise. |
(7) | Mr. Carreno became the Company's Chief of Staff in August
2023. |
The following is a biographical summary of the
experience of our directors and executive officers. Each director of the Company serves for a term of one year or until the successor
is elected at the Company’s annual shareholders’ meeting and is qualified, subject to removal by the Company’s shareholders.
Each executive officer serves at the discretion of the board of directors and holds office until the officer’s successor is duly
elected and qualified, or until the officer’s earlier resignation or removal.
Matias Goldenhorn has been the CEO and
Director since August, 2022, He had previously served five years as the Company’s Director – Latin America prior to his appointment
as CEO and Director. Mr. Goldenhorn has over 20 years of management experience working with Fortune 500 companies including Walmart,
Starbucks, Microsoft and Yum Brands! with specializations in the development of Latin American and Caribbean markets. His entrepreneurial
success stems from his founding of Swift Trust a financial technology brand. Mr. Goldenhorn’s strengths include planning and implementing
growth strategies, development of multi-national footprint expansions and a record of business development strategies and executions
that reflect high yield, year-to-year growth. As a global business leader, he has managed teams near and far, reporting to both corporate
officers and regional country directors. He is fully bilingual and has attended business school between 1995 to 1999 at Pontifica Universidad
Católica Argentina ‘Santa Maria de los Buenos Aires’.
Eric Gravengaard had served as our CEO
and director from January 30, 2020 and as our Chief Financial Officer from January 31, 2020 until February 3, 2020 and again as our Interim
Chief Financial Officer from May 2022 until August 2022. Mr. Gravengaard continues to serve as a director. He is a co-founder of Athena
Bitcoin, Inc. and had served as its Chief Executive Officer from its inception in September, 2015 until August, 2022. Mr. Gravengaard
also holds a position of CIO of Red Leaf Advisors LLC, a Bitcoin investment company, since January 2016 in which he has a controlling
interest (see Note 20 to the audited Financial Statements). Mr. Gravengaard was formerly a trader at Zen Trading FX, a non-bank liquidity
provider trading G-10 and select EM currencies on multiple FX platforms. Previously, he was a Portfolio Manager at Rock Capital Markets,
a Director at Chicago Trading Company, and Director of Quantitative Strategies at Spot Trading, all in Chicago. Mr. Gravengaard earned
an M.B.A. from the University of Chicago Graduate School of Business, and an S.B. in Mechanical Engineering from the Massachusetts Institute
of Technology. We believe that Mr. Gravengaard’s background in the industry and leadership experience as a co-founder and CEO of
Athena Bitcoin qualify him to serve on the Board.
Carlos Carreno has been a Director
since January, 2023. Mr. Carreno has been appointed as the Company’s Chief of Staff in August 2023. Mr. Carreno served as the consultant
to the Company from March, 2023 until his appointment to the position of Chief of Staff of the Company. Mr. Carreno served from August
2021 until July 2022, as the Global Head of Financial Crime Compliance for Insigneo Financial Group in Miami, a global broker dealer,
developing framework, control structure and governance, and managing five legal entities in Latin America and in the United States. From
August 2017 until April 2021, Mr. Carreno was a Managing Director, Chief Compliance Officer, Director of regulatory compliance, Anti-Money-Laundering
compliance and governance for Latin America with a global bank of HSBC based out of Mexico City. Mr. Carreno has over 25 years of compliance,
risk management, governance and business development experience working with global banks and financial institutions, including IPB CitiBank,
Banco Atlantico International, SunTrust Bank, Barclays, Banco Industrial de Venezuela, and Kroll. He is bilingual and attended the University
of Central Florida. The Company believes that Mr. Carreno is highly qualified to serve on the Company’s Board because of his valuable
experience in corporate governance, business development, financial and global risk management and compliance.
Antonio Valiente has been a Director since
January 2023. Mr. Valiente started as Deputy General Counsel of Athena Bitcoin, Inc., the Company’s operating subsidiary, and is
currently managing the legal and regulatory requirements for the Company’s global operations together with the Chief Compliance
Officer of Athena Bitcoin, Inc., and is currently also a member of the board of directors of Athena Bitcoin, Inc. Mr. Valiente provides
his legal consulting services to the Company pursuant to the Independent Contractor Agreement with the Company dated as of January 1,
2023. Mr. Valiente has been an attorney for more than 25 years and has experience as a FINRA Arbitrator and attorney in private practice.
He has served as Chief Compliance Officer for Sun West Mortgage and has been Special Counsel for Monserrate, Simonet & Gierbolini
in Puerto Rico and has served as General Counsel for Wal-Mart Stores Inc. for its Puerto Rico subsidiary. He is bilingual and is a graduate
of Fordham University. He earned his JD from Inter American University School of Law. Mr. Valiente’s significant legal experience
and working relationship with the Company, was instrumental in his selection as a member of the Board.
Tina Gregory has served as the Company’s
Chief Financial Officer since August 24, 2022. Ms. Gregory has over 20 years of management experience working with companies from startup
through IPO and public listing. She has served as the CFO and as an advisor to businesses in crypto assets, blockchain and metaverse/Web
3.0, as well as in fintech, advanced technology, software, distribution and manufacturing companies. Ms. Gregory provided financial consulting
services to Escalon Services, a provider of essential business services with over 1,100 employees, from May 2013 until September 2023,
as CFO, Head of Financial Planning and Analysis and Head of CFOs, subsequently accepting a full time position as the Company’s
CFO. Ms. Gregory’s strengths include growth strategy, strategic financial planning, process and operations management. Ms. Gregory
graduated from the University of Illinois in Production and Operations Management and holds an MBA in Corporate Finance from Case Western
Reserve University.
Edward “Coach” Weinhaus has
served as our President and director since January 30, 2020 until August 4, 2022. Mr. Weinhaus is a co-founder of Athena Bitcoin and
served as a director since September, 2015. Mr. Weinhaus is also a manager of consultancy RelbanE, and a consultant to the Company since
2015. Mr. Weinhaus is an attorney, academic, and faculty lecturer at UCLA Anderson School. He was also an Assistant Professor (Adj.)
at University of Chicago Booth School of Business where he taught Booth’s first course in cryptocurrency and blockchain (and previously
had earned his M.B.A.). Mr. Weinhaus is the Managing Attorney of law firm LegalSolved and is a partner at the appellate law firm Ste.
Monique Appellors. He previously taught at Washington University’s Olin Business School and Pepperdine University’s Graziadio
Business School. Mr. Weinhaus holds JD and LLM degrees from Washington University School of Law in St. Louis, a B.Sc. from London School
of Economics and an M.Sc. in Digital Currency. We believe Mr. Weinhaus was qualified to serve on our board because of his experience
as the co-founder of the Athena Bitcoin and knowledge of Bitcoin and the blockchain industry.
Huaxing “Jason” Lu has been
a director of the Company since March 2020 until January 2023. Mr. Lu has been a managing director at Komodo Bay Capital since May, 2020.
Prior to joining Komodo Bay Capital, he was a trader at 4170 Trading from February, 2018 until May, 2020, where he started and ran the
cryptocurrency focused subsidiary, Grapefruit Trading. From March, 2017 until February, 2018, Mr. Lu worked in numerous other trading
roles at Old Mission Capital, and prior to 2017, at MSR Investments (2011-2017). Mr. Lu graduated from the University of Illinois Urbana-Champaign
in 2008 with a dual degree in Electrical Engineering and Economics. Mr. Lu’s significant experience building and overseeing successful
cryptocurrency businesses was instrumental in his selection as a member of the Board.
Esteban “Steve” Suarez has
been a director of the Company since March. 2020 until January 2023. Mr. Suarez has been the CEO of BlackStage Productions, an innovative
event planning firm since April, 2019 and the CEO of Ultimate Gamer, E-Sports medium, since January, 2017. From January, 2010 until January,
2019, Mr. Suarez founded and led a large event company, which held an annual fitness festival called Wodapalooza. From 2016 to 2018,
he was the President of Loud and Live, an entertainment company. Mr. Suarez created the Spanish language political website www.epolitico.com
that was later sold to a private equity firm in 2003. Mr. Suarez has an MBA from Florida International University. We believe that Mr.
Suarez was qualified to serve as a member of our Board because of the perspective and experience he brings from his successful entrepreneurial
endeavors.
Family Relationships
There are no family relationships among any of
our executive officers or directors.
Board Structure
Our business and affairs are managed under the
direction of our Board, which currently consists of four members. Each of our current directors will continue to serve until the election
and qualification of his or her successor, or his or her earlier death, resignation or removal. Board will stand for election at each
annual meeting of stockholders. Each director will hold office for a one-year term and until the election and qualification of his or
her successor. The authorized number of directors is set in our bylaws and can be determined from time to time solely by resolution of
the Board.
Our Board has designated Matias Goldenhorn, our
Chief Executive Officer, to serve as Chairman of the Board. Combining the roles of Chief Executive Officer and Chairman allows one person
to drive strategy and agenda setting at the board level while maintaining responsibility for executing on that strategy as Chief Executive
Officer. Although our Amended Articles and bylaws do not require that we combine the Chief Executive Officer and Chairman positions,
our Board believes that having the positions be combined is the appropriate leadership structure for us at this time. Our Board recognizes
that, depending on the circumstances, other leadership models, such as separating the roles of Chief Executive Officer and Chairman,
might be appropriate. Accordingly, our board of directors may periodically review its leadership structure. Our Board believes its administration
of its risk oversight function has not affected its leadership structure.
We face a number of risks, including those described
under the section titled “Risk Factors” included elsewhere in this prospectus. Our board of directors believes that risk
management is an important part of establishing, updating, and executing on the Company’s business strategy. Our Board, as a whole
and at the committee level, has oversight responsibility relating to risks that could affect the corporate strategy, business objectives,
compliance, operations and the financial condition and performance of the Company. Our Board focuses its oversight on the most significant
risks facing the Company and on its processes to identify, prioritize, assess, manage, and mitigate those risks. While our Board has
an oversight role, management is principally tasked with direct responsibility for management and assessment of risks and the implementation
of processes and controls to mitigate their effects on the Company. We have no independent directors as of the date of this prospectus.
Committees of the Board of Directors.
Due to the Company’s size, the Company
has not formally designated a nominating committee, an audit committee, a compensation committee or committees performing similar functions.
The Board currently acts as our audit committee.
Code of Conduct and Ethics
Our Board has adopted a Code of Ethics that applies
to all of our employees, including our Chief Executive Officer and Chief Financial Officer. The Code of Ethics provides written standards
that we believe are reasonably designed to deter wrongdoing and promote honest and ethical conduct, including the ethical handling of
actual or apparent conflicts of interest between personal and professional relationships, full, fair, accurate, timely and understandable
disclosure and compliance with laws, rules and regulations, including insider trading, corporate opportunities and whistleblowing or
the prompt reporting of illegal or unethical behavior. We will provide a copy, without charge, to anyone that requests a copy of our
Code of Ethics in writing by contacting us at our address provided in this prospectus.
Involvement in Certain Legal Proceedings
Except as otherwise disclosed below in paragraph
(a), none of our directors and executive officers has been involved in any of the following events during the past ten years:
|
(a) |
any petition under the federal bankruptcy laws or any state insolvency
laws filed by or against, or an appointment of a receiver, fiscal agent or similar officer by a court for the business or property
of such person, or any partnership in which such person was a general partner at or within two years before the time of such filing,
or any corporation or business association of which such person was an executive officer at or within two years before the time of
such filing. Mr. Goldenhorn filed for personal bankruptcy through the filing of a Chapter 7 bankruptcy petition in 2019 and the bankruptcy
was discharged in 2020. |
|
|
|
|
(b) |
any conviction in a criminal proceeding or being subject to a pending
criminal proceeding (excluding traffic violations and other minor offenses); |
|
|
|
|
(c) |
being subject to any order, judgment, or decree, not subsequently reversed,
suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining such person from, or otherwise
limiting, the following activities: (i) acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity
pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission,
or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as
an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or
engaging in or continuing any conduct or practice in connection with such activity; engaging in any type of business practice; or
(iii) engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation
of federal or state securities laws or federal commodities laws; |
|
(d) |
being the subject of any order, judgment or decree, not subsequently
reversed, suspended or vacated, of any federal or state authority barring, suspending or otherwise limiting for more than 60 days
the right of such person to engage in any activity described in paragraph (c)(i) above, or to be associated with persons engaged
in any such activity; |
|
|
|
|
(e) |
being found by a court of competent jurisdiction (in a civil action),
the Securities and Exchange Commission to have violated a federal or state securities or commodities law, and the judgment in such
civil action or finding by the Securities and Exchange Commission has not been reversed, suspended, or vacated; |
|
|
|
|
(f) |
being found by a court of competent jurisdiction in a civil action
or by the Commodity Futures Trading Commission to have violated any federal commodities law, and the judgment in such civil action
or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated; |
|
|
|
|
(g) |
being the subject of, or a party to, any federal or state judicial
or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation
of: (i) any federal or state securities or commodities law or regulation; or (ii) any law or regulation respecting financial institutions
or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution,
civil money penalty or temporary or permanent cease- and-desist order, or removal or prohibition order; or (iii) any law or regulation
prohibiting mail or wire fraud or fraud in connection with any business entity; or |
|
|
|
|
(h) |
being the subject of, or a party to, any sanction or order, not subsequently
reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Securities Exchange Act
of 1934), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act), or any equivalent exchange, association,
entity or organization that has disciplinary authority over its members or persons associated with a member. |
Director Compensation
Employee directors did not and do not receive
any compensation for their services as our directors. We will reimburse directors for their reasonable out-of-pocket expenses, including
travel, food, and lodging, incurred in attending meetings of our Board and/or its committees. We do not expect to compensate our employee
directors for their service on our board of directors in the future. Independent directors receive a quarterly stipend of $2,500 for
their services. We do not have currently any independent directors.
Indemnification Agreements
We have entered into indemnification agreements
with each of our directors. The indemnification agreements have been effective since the beginning of the term of each respective director
and require us to indemnify these individuals to the fullest extent permitted by Nevada law.
Conflicts of Interest and Policy Regarding
Transactions with Related Persons
We do not have a formal, written policy for the
review, approval or ratification of transactions between us and any director or executive officer, nominee for director, 5% stockholder
or member of the immediate family of any such person that are required to be disclosed under Item 404(a) of Regulation S-K. However,
our policy is that any activities, investments or associations of a director or officer that create, or would appear to create, a conflict
between the personal interests of such person and our interests must be reviewed by our Board of Directors and determined in accordance
with the applicable provisions of Nevada law, and specifically pursuant to Section 78.140 of Nevada Revised Statutes, which provides
restrictions on transactions involving interested directors or officers, including requirement of full disclosure of such interest to
the Board of Directors, abstention from voting on the matter involving conflict of interest and the determination of the fairness of
the transaction.
Equity Compensation Plans
In October 2021, the Company’s Board of
Directors and its majority shareholders approved the Company’s 2021 Equity Compensation Plan in the amount of 100 million shares
of the Company’s common stock. On February 28, 2023, in conjunction with a signed contractor service agreement, the Company issued
a Restricted Stock Units Agreement for 2,000,000 shares of common stock under the 2021 Plan.
Shareholder Communications
Shareholders who wish to communicate with the
Board may address their written correspondence to either the Board of Directors, or an individual director and mail it to the offices
of the Company at the address on the front page of this prospectus.
Executive
Compensation
The following table sets forth, for the fiscal
years of 2021 and 2022, information regarding each element of all compensation awarded to, earned by or paid to Matias Goldenhorn, our
Chief Executive Officer (since August 4, 2022), Tina Gregory, our Chief Financial Officer (since August 24, 2022), Eric Gravengaard,
our former Chief Executive Officer (until August 4, 2022), Edward Weinhaus, our former President (until August 4, 2022) and our former
Chief Financial Officer, Parikshat Suri (until May 6, 2022), our named executive officers (collectively, the “Named Executive Officers”
or “NEOs”). No other executive officers or directors received annual compensation in excess of $100,000 during the last two
fiscal years.
Summary Compensation Table
Name
and Principal Position |
|
Year
|
|
|
Salary
|
|
|
Bonus
|
|
|
Stock
|
|
|
Option
|
|
|
Non-Equity
|
|
|
Nonqualified
|
|
|
All
Other |
|
|
Total
|
|
|
|
|
|
|
($) |
|
|
($) |
|
|
($) |
|
|
($) |
|
|
($) |
|
|
($) |
|
|
($) |
|
|
($) |
|
Matias Goldenhorn (1) |
|
|
2022 |
|
|
|
81,111 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
81,111 |
|
Chief Executive Officer |
|
|
2021 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tina Gregory (2) |
|
|
2022 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
77,000 |
|
|
|
77,000 |
|
Chief Financial Officer |
|
|
2021 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eric Gravengaard (3) |
|
|
2022 |
|
|
|
150,962 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
9,500 |
|
|
|
160,462 |
|
Chief Executive Officer |
|
|
2021 |
|
|
|
250,000 |
|
|
|
50,000 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
300,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Edward Weinhaus (4) |
|
|
2022 |
|
|
|
125,000 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
21,000 |
|
|
|
146,000 |
|
President |
|
|
2021 |
|
|
|
28,646 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
115,051 |
|
|
|
143,697 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parikshat Suri (5) |
|
|
2021 |
|
|
|
229,167 |
|
|
|
50,000 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
60,460 |
|
|
|
339,627 |
|
Chief Financial Officer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
excludes the salary of $133,000 received by Mr. Goldenhorn
in fiscal year 2021 as the Director of Latin America for the Company; excludes the salary of $118,889 received by Mr. Goldenhorn
in fiscal year 2022 as the Director of Latin America (for the period from January 1, 2022 – August 4, 2022); excludes a bonus
in the amount of $300,000 awarded in fiscal year 2021 to Mr. Goldenhorn as the Director of Latin America for the Company, and paid
in fiscal year 2022; excludes award of 43,564,230 shares of common stock in fiscal year 2021 to Mr. Goldenhorn as the Director of
Latin America which have not been issued; excludes 15,000,000 shares awarded to Mr. Goldenhorn as equity compensation in fiscal year
2022 for his services as the CEO of the Company, which shares have not been issued as of the date of this prospectus. The 15,000,000
shares of common stock have not been included in this Summary Compensation Table because they have not been issued by the Company.
The compensation for Mr. Goldenhorn’s services as the Director of Latin America (including equity) is not included in this
Summary Compensation Table because such compensation was received prior to his appointment as the Company’s CEO. Mr. Goldenhorn
was not the Company’s executive officer prior to his appointment as the Company’s Chief Executive Officer in August of
2022. |
|
|
(2) |
$77,500 was paid to Ms. Gregory for her services as the
Company’s Chief Financial Officer (from August 24, 2022 – December 31, 2022) by Escalon Services which employed Ms. Gregory
as a financial consultant. Ms. Gregory as the Company’s Chief Financial Officer, became the Company’s employee as of
October 1, 2023 pursuant to the terms of the Offer Letter dated as of October 1, 2023. |
|
|
(3) |
includes $9,500
in fees for consulting services to the Company pursuant to the Independent Contractor Agreement by and between the Company and Mr.
Gravengaard, dated as of August 8, 2022. The consulting fees in the amount of $14,000 have not been included and remain unpaid by
the Company as of the date of this prospectus. Mr. Gravengaard does not currently provide any consulting services to the Company. |
|
|
(4) |
includes $21,000 in fees
for consulting services to the Company pursuant to the Independent Contractor Agreement by and between the Company and Control NEW
MLSS LLC, a company beneficially owned (99%) by Mr. Weinhaus, dated as of August 16, 2022 and terminated in August 2023. The consulting
fees in the amount of $6,000 have not been included and remain unpaid by the Company as of the date of this prospectus. |
|
|
(5) |
excludes $291,119 in accounting
and financial consulting fees paid during the period from March, 2020 to February, 2021 (prior to Mr. Suri’s appointment as
the Company’s CFO), to Radiant Consulting, LLC, an entity beneficially owned and controlled by Mr. Suri. The compensation for
Mr. Suri’s consulting services is not included in this Summary Compensation Table because it was received prior to his appointment
as the Company’s CFO. |
Outstanding Equity Awards at 2022 Fiscal-Year
End
The following table sets forth information regarding outstanding equity
awards at the end of December 31, 2022 for each of our NEOs.
|
|
Option Awards |
Stock Awards |
|
Name |
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable |
|
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable |
|
|
|
Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#) |
|
|
|
Option
Exercise
Price
($) |
|
|
|
Option
Expiration
Date |
|
|
Number
of
Shares
or Units
of Stock
That
Have
Not
Vested
(#) |
|
|
Market
Value
of
Shares
or
Units
of
Stock
That
Have
Not
Vested
($) |
|
|
|
Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested
(#) |
|
|
|
Equity
Incentive
Plan
Awards:
Market
or Payout
Value Of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested
($) |
|
|
|
0 |
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
0 |
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
Employment Contracts, Termination of Employment
We do not have employment contracts with our
officers, however, we have signed Offer Letter with our Chief Financial Officer effective as of October 1, 2023, which provides for an
annual salary of $250,000, sign up bonus of $10,000, a discretionary annual bonus potential of up to 80% of the base salary, health and
transit benefits, vacation time and participation in the Company’s equity compensation plan.
Consulting Agreements with Directors
The Company’s operating subsidiary, Athena
Bitcoin, Inc. entered into a Independent Contractor Agreement as of January 1, 2023, with Antonio Valiente, the Company’s director
for certain legal services, primarily related to, but not limited to, managing the legal and regulatory requirements for the Company’s
global operations as Athena Bitcoin’s Deputy General Counsel. Mr. Valiente receives a monthly compensation of $8,500 for 20 hours
of work per week. The Agreement can be terminated at any time by either party.
Carlos Carreno entered into a Consulting Agreement
with the Company as of March 15, 2023 to provide certain advisory and consulting compliance services with respect to the Company’s
business operations. Mr. Carreno was compensated based on an hourly fee of $200 per hour. The Agreement was terminated in July 2023
upon Mr. Carreno’s appointment as the Company’s Chief of Staff. There are currently no agreements between Mr. Carreno and
the Company.
Compensation of Directors
Our employee directors did not and do not receive
any compensation for their services as our directors. We will reimburse directors for their reasonable out-of-pocket expenses, including
travel, food, and lodging, incurred in attending meetings of our Board and/or its committees. We do not expect to compensate our employee
directors for their service on our board of directors in the future. Independent directors receive a quarterly stipend of $2,500. Mr.
Carreno received $5,000 in stipends as of September 30, 2023 for his services as an independent director prior to becoming a consultant
of the Company.
Eric Gravengaard agreed to be a personal guarantor
(as the Company’s more than 10% shareholder) in connection with the Company’s grant of certain business licenses. Mr. Gravengaard
received $10,000 (as of the date of this prospectus) for providing his personal guaranty. Mr. Gravengaard has not received any fees for
his services on the Board of Directors of the Company.
Outstanding Equity Awards as of December 31,
2022
As of December 31, 2022, there were no equity
awards issued and outstanding pursuant to the Company’s 2021 Equity Compensation Plan.
Prior to the Share Exchange transaction, as defined
elsewhere in this prospectus, the Company’s subsidiary had 2016 Stock Option Plan which was terminated in January 2020. See Note
14 to the Financial Statements.
Principal
Shareholders
The following table sets forth certain information
regarding the beneficial ownership of our capital stock outstanding as of the date of this prospectus by:
|
· |
each person, or group of affiliated persons, known by us to beneficially
own more than 5% of our shares of common stock; |
|
· |
each of our directors; |
|
· |
each of our named executive officers; and |
|
· |
all of our directors and named executive officers as a group. |
The percentage ownership information is based
on 4,094,459,545 shares of common stock outstanding as of December 31, 2023. Information with respect to beneficial ownership
has been furnished by each director, officer or beneficial owner of more than 5% of our common stock. We have determined beneficial ownership
in accordance with the rules of the SEC. These rules generally attribute beneficial ownership of securities to persons who possess sole
or shared voting power or investment power with respect to those securities. In addition, the rules attribute beneficial ownership of
securities as of a particular date to persons who hold options or warrants to purchase shares of common stock and that are exercisable
within 60 days of such date. These shares are deemed to be outstanding and beneficially owned by the person holding those options or
warrants for the purpose of computing the percentage ownership of that person, but they are not treated as outstanding for the purpose
of computing the percentage ownership of any other person. Unless otherwise indicated, the persons or entities identified in this table
have sole voting and investment power with respect to all shares shown as beneficially owned by them, subject to applicable community
property laws.
Except as otherwise noted below, the address
for each person or entity listed in the table is c/o Athena Bitcoin Global, 800 NW 7th Avenue, Miami, Florida 33136.
Name of Beneficial Owner |
|
Number of
shares
beneficially
owned (1) |
|
|
Percentage of
shares
beneficially
owned |
|
Directors and Named Executive Officers |
|
|
|
|
|
|
|
|
MATIAS GOLDENHORN |
|
|
4,356,423 |
|
|
|
0.1% |
|
TINA GREGORY |
|
|
– |
|
|
|
– |
|
ERIC GRAVENGAARD (2) (Resigned August 4, 2023) |
|
|
1,151,484,077 |
|
|
|
28.16% |
|
EDWARD WEINHAUS (3) (Resigned August 4, 2023) |
|
|
27,618,811 |
|
|
|
* |
|
PARIKSHAT SURI (Resigned May 4, 2022) |
|
|
– |
|
|
|
– |
|
Non-Employee Directors |
|
|
|
|
|
|
|
|
CARLOS CARRENO (Director as of January, 2023; Employee as of August 2022) |
|
|
– |
|
|
|
– |
|
ANTONIO VALIENTE (Director as of January, 2023) |
|
|
– |
|
|
|
– |
|
MICHAEL PRUYN (Resigned June 6, 2023) |
|
|
– |
|
|
|
– |
|
HUAXING LU (Resigned January 3, 2023) |
|
|
– |
|
|
|
– |
|
ESTEBAN SUAREZ (Resigned January 10, 2023) |
|
|
– |
|
|
|
– |
|
|
|
|
|
|
|
|
|
|
5% Stockholders |
|
|
|
|
|
|
– |
|
MICHAEL KOMARANSKY (4) |
|
|
1,771,141,192 |
|
|
|
40.82% |
|
Entities Affiliated with SWINGBRIDGE (5) |
|
|
429,494,749 |
|
|
|
10.50% |
|
All Named Executive Officers and Directors as a Group (6 persons) |
|
|
1,179,102,888 |
|
|
|
28.27% |
|
*Less than one percent
___________________
(1) |
Based on 4,094,459,545 shares of our common stock outstanding
as of September 30, 2023 and as of November 3, 2023. To calculate a stockholder’s percentage of beneficial ownership,
we include in the numerator and denominator the common stock outstanding and all shares of our common stock issuable to that person
in the event of the conversion of outstanding Convertible Debentures owned by that person which are convertible within 60 days of
the date of this prospectus. Convertible Debentures held by other stockholder(s) are disregarded in this calculation. Therefore,
the denominator used in calculating beneficial ownership among our stockholders may differ. Unless we have indicated otherwise, each
person named in the table has sole voting power and sole investment power for the shares listed opposite such person’s name. |
(2) |
Consists of: (i) 863,960,473 shares of common stock held of record by
Eric Gravengaard, as Trustee of the Eric L. Gravengaard Trust of 2011 and (ii) 287,523,604 shares of common stock held of record
by Eric Gravengaard and does not reflect the ongoing transfer of 287,523,604 shares of common stock from Mr. Gravengaard to Liberty
Digital Holdings, LLC. which has not been completed. |
(3) |
Consists of: (i) 8,948,426 shares of common stock held of record by
Edward Weinhaus; and (ii) 18,670,385 shares of common stock held of record by Liberty Digital Holdings, LLC, an entity beneficially
owned and controlled by Mr. Weinhaus. |
(4) |
Consists of: (i) 1,521,141,192 shares of common stock held of record
by Athena Equity LLC, an entity beneficially owned and controlled by Mr. Komaransky; and (ii) includes 250,000,000 shares of common
stock issuable upon the conversion of Convertible Debentures in the principal amount of $3,000,000 held of record by KGPLA, LLC,
an entity beneficially owned and controlled by Mr. Komaransky. The assumed conversion price is $0.012 per share. See Description
of Capital Stock, page 100. |
(5) |
Consists of: (i) 191,454,966 shares of common stock held of record by
Swingbridge Crypto I LLC; (ii) 50,271,880 shares of common stock held of record by Swingbridge Crypto II LLC; (iii) and 187,767,904
shares of common stock held of record by Swingbridge Crypto III LLC. Tom Kerestes is the manager and beneficial owner of Swingbridge
Crypto I LLC, Swingbridge Crypto II LLC and Swingbridge Crypto III LLC. |
Certain
Relationships and Related Party Transactions
Except as set forth below, there were no transactions
during nine months ended September 30, 2023 and our fiscal years ended December 31, 2022 and 2021, to which we were a party, including
transactions in which the amount involved in the transaction exceeds the lesser of $120,000 or 1% of the average of our total assets
at year-end for the last two completed fiscal years, and in which any of our directors, executive officers or, to our knowledge, beneficial
owners of more than 5% of our capital stock or any member of the immediate family of any of the foregoing persons had or will have a
direct or indirect material interest, other than equity and other compensation, termination, change in control and other arrangements,
which are described elsewhere in this registration statement. We are not otherwise a party to a current related party transaction, and
no transaction is currently proposed, in which the amount of the transaction exceeds the lesser of $140,000 or 1% of the average of our
total assets at year-end for the last two completed fiscal years and in which a related person had or will have a direct or indirect
material interest.
On January 31, 2020, the Company entered into
a convertible debenture agreement with KGPLA Holdings LLC, an entity in which Mike Komaransky, the Company’s former director and
principal shareholder, has ownership interest. The convertible debenture provided for a principal amount of $3,000,000, with a maturity
date of January 31, 2025. Interest as defined by the agreement is 8% per annum. KGPLA Holdings, LLC has the option to convert the outstanding
principal and accrued interest balance into common stock of the Company at the lower of $0.012 per share or 20% discount to the next
major financing or change in control. The convertible debenture was amended and restated as of May 15, 2023 and became a secured, and
not general unsecured, obligation of the Company, on par with the notes issued pursuant to the Senior Secured Loan Agreement entered
into as of the same date. As of September 30, 2023, December 31, 2022 and December 31, 2021, the outstanding principal debenture
amount of $3,000,000 was presented under related party convertible debt in the consolidated balance sheet.
On January 31, 2020, the Company entered into
a security purchase agreement for Convertible Debenture with Swingbridge Crypto III, LLC., a shareholder of the Company. The convertible
debenture provided for a principal amount of $125,000, with a maturity date of January 31, 2025. Interest as defined by the agreement
is 8% per annum. Swingbridge Crypto III LLC. has the option to convert the outstanding principal and accrued interest balance into common
stock of the Company at the lower of $0.012 per share or 20% discount to the next major financing or change in control. As of December
31, 2021 and 2020, the outstanding principal was $125,000. As of February 28, 2022, the principal amount and accrued interest was converted
to 10,416,666 shares of the Company’s common stock.
On August 22, 2018, the Company entered into
a loan agreement with Mike Komaransky, the Company’s former director and principal shareholder (“Bitcoin Agreement”).
Under this Bitcoin Agreement, the Company borrowed 30 bitcoin initially due on August 22, 2019. The borrowing fee as defined in the agreement,
is 13.5% of the outstanding principal. On July 12, 2021, Athena Bitcoin and the Company entered into Loan Restructuring and Related Amendments
Agreement (the “Restructuring Agreement”) with Mr. Komaransky and Eric Gravengaard, the Company’s former CEO, director
and principal shareholder, with respect to the Bitcoin Agreement and certain other agreements. As of the date of the Restructuring Agreement,
the Company had still a balance due of approximately 21.6 bitcoin. Pursuant to the terms of the Restructuring Agreement, the Company
entered into First Amendment of the Loan Agreement which amended the terms of the Bitcoin Agreement. The new amended terms included the
extension of the maturity date to May 31, 2022, mandatory weekly payments of $35,000 in Bitcoin and a grant of first priority security
interest in all property described in that certain security agreement entered into at the same time. In addition, the First Amendment
to the Loan Agreement provided for conversion of the note into U.S. dollars any time after June 30, 2021, if the market price of one
bitcoin equals to or exceeds $75,000.
In November 2018, the Company entered into another
agreement with the same former director and principal shareholder, Mike Komaransky. The agreement provides for up to four additional
borrowings at 50 bitcoin increments with an initial term of 90 days for each loan. Fees for these borrowings is the greater of 10% of
the outstanding principal or 0.4% of total ATM sales. The Company borrowed 50 bitcoins under this agreement in November 2018 and an additional
50 bitcoin in March 2019. The Company repaid these Bitcoin borrowings in the year ended December 31, 2021.
|
|
December 31, 2021 |
|
|
December 31, 2020 |
|
Bitcoin borrowed outstanding |
|
|
0 |
|
|
|
30 |
|
During the year ended December 31, 2021, the
Company paid $119,000 of borrowing fees in crypto assets, respectively. See also Note 5 on Page F-21 and Note 5 on Page F-54.
On August 4, 2022, the Company completed a lending
transaction with Mike Komaransky, the Company’s principal shareholder and former director, whereby the Company borrowed $500,000
from Mr. Komaransky pursuant to the terms of a secured promissory note and security agreement. The promissory note has an interest rate
of 6% and the repayment of the principal amount and any accrued interest is secured by certain assets of the Company with respect to
which Mr. Komaransky holds first priority lien and security interest. The terms of the secured promissory note and the security agreement
were subsequently amended by the parties on January 17, 2023. Pursuant to the terms of the amended secured promissory note, the Company
agreed to make monthly payments of $50,000 until the maturity date of the secured promissory note, which is on August 31, 2023. As of
September 30, 2023, and December 31, 2022, the outstanding principal was $0 and $400,000, respectively.
As of May 15, 2023, the Company entered into
a certain Senior Secured Loan Agreement, as amended (the “Loan Agreement”) and Senior Secured Revolving Credit Promissory
Note (the “Revolving Credit Note”) with KGPLA Holdings LLC (“KGPLA”), an entity in which Mike Komaransky, a former
director and principal shareholder of the Company has a controlling interest. The Revolving Credit Note allows the Company to borrow
up to $4,000,000 for the operations of its New Bitcoin ATM Machines, as defined in the Loan Agreement, with a maturity date of May 15,
2024. Fees for these borrowings are calculated based on a percentage of the gross daily receipts generated from these machines and are
recorded as part of Cost of Revenue in the Condensed Consolidated Income Statement. As of September 30, 2023 the outstanding principal
of the Revolving Credit Note was $4,000,000. In connection with the above loan transaction and issuance of Revolving Credit Note, the
Company granted KGPLA a first priority lien and security interest in and to all of the Company’s assets, except for property previously
pledged to Banco Hipotecario, and with respect to such assets, the Company granted the Lender a second priority lien. The principal of
$4,000,000 is due within the next twelve months.
The Company carries a payables balance to Red
Leaf Advisors, an entity in which Eric Gravengaard, our former CEO and current director, has controlling interest for previous purchases
of crypto assets. The outstanding balance due to Red Leaf Advisors was $407,000 as of September 30, 2023, December 31, 2022 and
December 31, 2021, and is recorded in accounts payable, related party in the Consolidated Balance Sheets.
During the period ended September 30, 2023
and December 31, 2022, the Company incurred cash logistics services of $1,360,000 and $718,000 and ATM conversion cost of $670,000 and
$0, respectively, to Swift Trust, LLC and subsequently Move On Security LLC. The current Chief Executive Officer and director of the
Company has a 100% interest in Swift Trust, LLC. He also has a 50% interest in Move On Security LLC. As of September 30, 2023 and December
31, 2022 the Company recorded payables to Move On Security LLC, presented as part of Accounts payable, related party in the Condensed
Consolidated Balance Sheets of $371,000 and $58,000, respectively.
Investors’ Rights Agreement
In January 2020, we entered into investors’
rights agreement (the “Investors’ Rights Agreement”) with certain holders of our 8% Convertible Debentures, including
KGPLA Holdings, LLC and Swingbridge Crypto III LLC, each holder of the registration rights under the Agreement is a holder of more than
5% of our capital stock. Mr. Komaransky, a beneficial owner of KGPLA Holdings LLC, is also a former member of our board of directors
(resigned in May 2022). These stockholders are entitled to rights with respect to the registration of their shares issuable upon the
conversion of Convertible Debentures following the effectiveness of the registration statement of which this prospectus forms a part.
For a description of these registration rights, see the section titled “Description of Capital Stock—Registration Rights.”
Indemnification Agreements
We have entered into indemnification agreements
with each of our current directors. The indemnification agreements, our Amended Articles, and our restated bylaws, require us to indemnify
our directors to the fullest extent not prohibited by Nevada law. Subject to certain limitations, our restated bylaws also require us
to advance expenses incurred by our directors and officers. See also “Description of Capital Stock”
on page 100.
Right of First Refusal and Co-Sale Agreement
In January 2020, we entered into a Right of First
Refusal and Co-Sale Agreement with Eric Gravengaard, the Company’s officer, director and principal shareholder and investors in
the Convertible Debentures (the “Investors”) pursuant to which Mr. Gravengaard granted to the Company the right of first
refusal to purchase all or any portion of common stock that he proposes to transfer, at the same price and terms as offered to the proposed
transferee. Mr. Gravengaard also agreed to grant to the Investors, secondary refusal right to purchase all or any portion of the common
stock proposed to be transferred by him that has not been purchased by the Company pursuant to the right of first refusal. See also “Description
of Capital Stock” on page 100.
Use of Proceeds
We will not receive any proceeds from the sale
of Common Stock by the selling security holders. All net proceeds from the sale of our Common Stock will go to the selling security holders
as described below in the sections entitled “Selling Shareholders” and “Plan of Distribution.” We have agreed
to bear the expenses relating to the registration of the Common Stock for the selling security holders.
DIVIDEND POLICY
We have never declared or paid any cash dividends
on our capital stock. We intend to retain future earnings, if any, to finance the operation and expansion of our business and do not
anticipate paying any cash dividends in the foreseeable future. Any future determination related to our dividend policy will be made
at the discretion of our board of directors after considering our financial condition, results of operations, capital requirements, business
prospects and other factors our board of directors deems relevant.
Determination
of Offering Price
The prices at which the shares of common stock
covered by this prospectus may be sold will be determined by the prevailing public market price for shares of common stock, by negotiations
between the selling security holders and buyers of our common stock in private transactions or as otherwise described in the “Plan
of Distribution.”
The offering price of the shares of our common
stock does not necessarily bear any relationship to market value, our book value, assets, past operating results, financial condition,
or any other established criteria of value.
Our common stock is currently quoted on OTC Pink
Market. We will be filing with OTC Markets Group, Inc. to obtain quotation on the OTCQB. There is no assurance that our common stock
will trade at any certain market price, as prices for the common stock in any public market, which may develop, will be determined in
the marketplace, and may be influence by many factors, including the depth and liquidity of that market.
Dilution
Not applicable. The Shares registered under this
registration statement are not being offered for purchase from the Company. The shares are being registered on behalf of the Selling
Shareholders.
Selling ShareHolders
The Selling Shareholders named in this prospectus
are offering 444,583,937 shares of common stock including: (i) 409,933,937 shares of common stock that were issued by us to the Selling
Shareholders in the Share Exchange transaction or were purchased by the Selling Shareholders in private transactions, and (ii) up to
34,650,000 shares of common stock issued upon conversion of the principal amount of our outstanding 6% Convertible Debentures Due 2023
(the ”Convertible Debentures”) which were issued in connection with a private placement financing in 2021 (the “Private
Placement”). We are registering the resale of the shares of common stock underlying the Convertible Debentures that were converted
into the Company’s common stock, as required by the Purchase Agreement, as defined in this prospectus, that we entered into with
the Selling Shareholders as of June 22, 2021, which provided said Selling Shareholders with certain registration rights with respect
to the common stock issuable upon conversion of the Convertible Debentures. A total of $3,465,000 of the principal amount of the Convertible
Debentures was converted into the Company’s common stock, and $1,520,000 of the principal amount of the Convertible Debentures
was repaid in full. We will not receive any proceeds from the sale of shares being sold by Selling Shareholders.
The Selling Shareholders of 409,933,937 shares
of common stock include our affiliates and certain other stockholders with “restricted securities” (as defined in Rule 144
under the Securities Act) and their pledgees, donees, transferees, assignees, or other successors-in-interest who, because of their status
as affiliates pursuant to Rule 144 or because they acquired their shares of common stock an affiliate or from us as of January 30, 2020
pursuant to the Share Exchange Agreement, as defined in this prospectus, would be unable to sell their securities pursuant to Rule 144
until we have been subject to the reporting requirements of Section 13 or Section 15(d) of the Exchange Act for an indefinite period
since such shares were issued by the Company when it was a “shell company” as defined in the Securities Act, and certain
shareholders of the Company who received their shares of common stock in the Company prior to the Share Exchange with Athena Bitcoin,
including their pledgees, donees, transferees, assignees, or other successors-in-interest (also, see Sales of Unregistered Securities).
The shares being offered hereby are being registered to permit public secondary trading,
and the Selling Shareholders may offer all or part of the shares for resale from time to time, however, they are under no obligation
to sell all or any portion of such shares nor are the Selling Shareholders obligated to sell any shares immediately upon effectiveness
of this prospectus. The Selling Shareholders and their pledgees, donees, transferees, assignees, or other successors-in-interest may
elect to sell their shares common stock covered by this prospectus, as and to the extent they may determine. As such, we will have no
input if and when any Selling Shareholders may elect to sell their shares of common stock or the prices at which any such sales may occur.
We cannot provide an estimate of the number of our securities that the Selling Stockholders will hold in the future. See the section
titled “Plan of Distribution.”
The amount of shares of common stock of each
Selling Shareholder registered pursuant to this prospectus has been arbitrarily determined by the Company, and is not subject to any
pre-existing agreement(s). The Selling Shareholders have furnished all information with respect to share ownership.
The Selling Shareholders have not, nor have they
within the past three years had, any position, office, or other material relationship with us, other than as disclosed in this prospectus.
See the sections titled “Management” and “Certain Relationships and Related Party Transactions” for further information regarding the Selling Shareholders.
| |
| | |
| | |
Beneficial Ownership of Common Stock After the Offering | |
Name of Selling Shareholder | |
Number of Shares of Common Stock Prior to the Offering
(1) | | |
Common Stock Saleable Pursuant to This Prospectus | | |
Number of Shares | | |
Percent of Class (2) | |
Executive Officers | |
| | | |
| | | |
| | | |
| | |
ERIC GRAVENGAARD (3) | |
| 1,151,484,077 | | |
| 14,279,100 | | |
| 1,137,204,977 | | |
| 27.81% | |
EDWARD WEINHAUS (4) | |
| 27,618,811 | | |
| 3,151,300 | | |
| 24,467,511 | | |
| * | |
5% Stockholders | |
| | | |
| | | |
| | | |
| | |
MICHAEL KOMARANSKY | |
| 1,521,141,192 | | |
| 76,057,000 | | |
| 1,445,084,192 | | |
| 35.34% | |
Entities Affiliated with SWINGBRIDGE | |
| 429,494,749 | | |
| 21,474,737 | | |
| 408,020,012 | | |
| 9.98% | |
Other Selling Stockholders | |
| | | |
| | | |
| | | |
| | |
JONATHAN MORK (5) | |
| 177,751,020 | | |
| 134,557,600 | | |
| 43,193,420 | | |
| 1.06% | |
MAGELLAN CAPITAL PARTNERS INC | |
| 152,200,353 | | |
| 130,725,200 | | |
| 21,475,153 | | |
| * | |
JEREMY MORK | |
| 16,021,050 | | |
| 13,760,500 | | |
| 2,260,550 | | |
| * | |
LINDSAY GARRISON | |
| 85,883,774 | | |
| 4,294,000 | | |
| 81,589,774 | | |
| 2.00% | |
TODD KLEIN | |
| 30,422,821 | | |
| 1,521,100 | | |
| 28,901,721 | | |
| * | |
LAUREN DELUCA | |
| 15,211,410 | | |
| 770,500 | | |
| 14,440,910 | | |
| * | |
RYAN SULLIVAN | |
| 15,211,410 | | |
| 770,500 | | |
| 14,440,910 | | |
| * | |
SHC VENTURES LLC | |
| 15,211,410 | | |
| 770,500 | | |
| 14,440,910 | | |
| * | |
RICHARD DOERMER | |
| 14,547,890 | | |
| 737,300 | | |
| 13,810,590 | | |
| * | |
DAN SCHWARTZ | |
| 13,338,897 | | |
| 676,800 | | |
| 12,662,097 | | |
| * | |
BEN ROSS | |
| 5,335,558 | | |
| 266,700 | | |
| 5,068,858 | | |
| * | |
NICOLE LOITERSTEIN | |
| 5,335,558 | | |
| 266,700 | | |
| 5,068,858 | | |
| * | |
KIRKLAND & ELLIS LLP | |
| 3,650,745 | | |
| 182,500 | | |
| 3,468,245 | | |
| * | |
Current and Former Employees & Contractors | |
| | | |
| | | |
| | | |
| | |
ATHENA BLOCKCHAIN, INC. | |
| 12,944,801 | | |
| 1,941,700 | | |
| 11,003,101 | | |
| * | |
GILBERT VALENTINE | |
| 169,098,926 | | |
| 1,690,900 | | |
| 167,408,026 | | |
| 4.09% | |
ERIC MATSON | |
| 5,103,239 | | |
| 765,400 | | |
| 4,337,839 | | |
| * | |
MATIAS GOLDENHÖRN | |
| 4,356,423 | | |
| 653,400 | | |
| 3,703,023 | | |
| * | |
BRIAN SCHWARTZ | |
| 12,446,924 | | |
| 124,400 | | |
| 12,322,524 | | |
| * | |
DANTE GALEZZI | |
| 622,346 | | |
| 93,300 | | |
| 529,046 | | |
| * | |
CHAD DAVIS | |
| 622,346 | | |
| 93,300 | | |
| 529,046 | | |
| * | |
MICHAEL LEON | |
| 622,346 | | |
| 93,300 | | |
| 529,046 | | |
| * | |
PATRICK PATTON | |
| 248,938 | | |
| 37,300 | | |
| 211,638 | | |
| * | |
JOHN BERGQUIST | |
| 186,704 | | |
| 28,000 | | |
| 158,704 | | |
| * | |
ADAM SAITER | |
| 2,074,902 | | |
| 20,700 | | |
| 2,054,202 | | |
| * | |
BILL ULIVIERI | |
| 124,469 | | |
| 18,600 | | |
| 105,869 | | |
| * | |
JENNY BALLIET | |
| 124,469 | | |
| 18,600 | | |
| 105,869 | | |
| * | |
HERNAN ALVIDE | |
| 124,469 | | |
| 18,600 | | |
| 105,869 | | |
| * | |
KATRYN DICKOVER | |
| 124,469 | | |
| 18,600 | | |
| 105,869 | | |
| * | |
VANESSA FLORES | |
| 124,469 | | |
| 18,600 | | |
| 105,869 | | |
| * | |
MARTIN MELIENDREZ | |
| 124,469 | | |
| 18,600 | | |
| 105,869 | | |
| * | |
MARTIN WESOLOWSKI | |
| 124,469 | | |
| 18,600 | | |
| 105,869 | | |
| * | |
SUB TOTAL | |
| | | |
| 409,933,937 | | |
| | | |
| | |
Purchasers of the 6% Convertible Debenture | |
| | |
| | |
| | |
| |
2S HOLDINGS LLC | |
| 375,000.00 | | |
| 375,000.00 | | |
| – | | |
| – | |
ANTHONY TEMESVARY | |
| 200,000.00 | | |
| 200,000.00 | | |
| – | | |
| – | |
APRIL GIVEN | |
| 250,000.00 | | |
| 250,000.00 | | |
| – | | |
| – | |
BRANDON S REIF | |
| 250,000.00 | | |
| 250,000.00 | | |
| – | | |
| – | |
BRYAN BLOOM | |
| 250,000.00 | | |
| 250,000.00 | | |
| – | | |
| – | |
CAUFFIEL INVESTMENTS LLC | |
| 300,000.00 | | |
| 300,000.00 | | |
| – | | |
| – | |
CHARLES J WILDES IV | |
| 250,000.00 | | |
| 250,000.00 | | |
| – | | |
| – | |
CHRISTOPHER FAHY | |
| 100,000.00 | | |
| 100,000.00 | | |
| – | | |
| – | |
CORT BARRETT | |
| 300,000.00 | | |
| 300,000.00 | | |
| – | | |
| – | |
CRAIG HERKIMER | |
| 500,000.00 | | |
| 500,000.00 | | |
| – | | |
| – | |
DANIEL KING | |
| 125,000.00 | | |
| 125,000.00 | | |
| – | | |
| – | |
DANIEL J TUREK | |
| 100,000.00 | | |
| 100,000.00 | | |
| – | | |
| – | |
DANIEL WINOGRAD | |
| 100,000.00 | | |
| 100,000.00 | | |
| – | | |
| – | |
DAVID PERL | |
| 250,000.00 | | |
| 250,000.00 | | |
| – | | |
| – | |
EDWARD CRIMMINS | |
| 250,000.00 | | |
| 250,000.00 | | |
| – | | |
| – | |
ET FAMILY CORP | |
| 250,000.00 | | |
| 250,000.00 | | |
| – | | |
| – | |
FP AUSTRALIA LLC | |
| 1,000,000.00 | | |
| 1,000,000.00 | | |
| – | | |
| – | |
IAN SAMUEL | |
| 100,000.00 | | |
| 100,000.00 | | |
| – | | |
| – | |
IVANKOVICH FAMILY TRUST | |
| 100,000.00 | | |
| 100,000.00 | | |
| – | | |
| – | |
JAMES STEVEN GRANAT | |
| 500,000.00 | | |
| 500,000.00 | | |
| – | | |
| – | |
JAMES LYDIARD MEAD | |
| 350,000.00 | | |
| 350,000.00 | | |
| – | | |
| – | |
JARED MACKOUL | |
| 250,000.00 | | |
| 250,000.00 | | |
| – | | |
| – | |
JASON BURSTEIN | |
| 200,000.00 | | |
| 200,000.00 | | |
| – | | |
| – | |
JEFFREY STEVEN EVERSON | |
| 500,000.00 | | |
| 500,000.00 | | |
| – | | |
| – | |
JEFFREY CURTIS GOOCH | |
| 250,000.00 | | |
| 250,000.00 | | |
| – | | |
| – | |
JEROME KLINT | |
| 250,000.00 | | |
| 250,000.00 | | |
| – | | |
| – | |
JOHN CAUFFIEL | |
| 500,000.00 | | |
| 500,000.00 | | |
| – | | |
| – | |
JOHN CRICK | |
| 750,000.00 | | |
| 750,000.00 | | |
| – | | |
| – | |
JOHN HENRY SUPERSON | |
| 500,000.00 | | |
| 500,000.00 | | |
| – | | |
| – | |
JOHN WILLIAM WHITAKER, JR. AND HEIDI LELAND WHITAKER, CO-TRUSTEES OF THE JOHN WILLIAM WHITAKER, JR.
TRUST DATED SEPTEMBER 24, 2009. | |
| 250,000.00 | | |
| 250,000.00 | | |
| – | | |
| – | |
JOHN-MARC BERTHOUD | |
| 200,000.00 | | |
| 200,000.00 | | |
| – | | |
| – | |
JONATHAN STEVEN BURSTEIN | |
| 200,000.00 | | |
| 200,000.00 | | |
| – | | |
| – | |
JONATHAN A CARSON | |
| 500,000.00 | | |
| 500,000.00 | | |
| – | | |
| – | |
JONATHAN LAMENSDORF | |
| 1,000,000.00 | | |
| 1,000,000.00 | | |
| – | | |
| – | |
JORDAN POSELL | |
| 100,000.00 | | |
| 100,000.00 | | |
| – | | |
| – | |
KYLE CETRULO | |
| 100,000.00 | | |
| 100,000.00 | | |
| – | | |
| – | |
LAWRENCE SPIELDENNER | |
| 2,500,000.00 | | |
| 2,500,000.00 | | |
| – | | |
| – | |
LIMPHAM LLC | |
| 250,000.00 | | |
| 250,000.00 | | |
| – | | |
| – | |
NICKY GATHRITE | |
| 250,000.00 | | |
| 250,000.00 | | |
| – | | |
| – | |
MATHEW THACKER | |
| 250,000.00 | | |
| 250,000.00 | | |
| – | | |
| – | |
MBL MANAGEMENT LLC | |
| 250,000.00 | | |
| 250,000.00 | | |
| – | | |
| – | |
MERCER STREET GLOBAL OPPORTUNITY FUND, LLC | |
| 3,500,000.00 | | |
| 3,500,000.00 | | |
| – | | |
| – | |
MICHAEL LEON | |
| 100,000.00 | | |
| 100,000.00 | | |
| – | | |
| – | |
MICHAEL O'GRADY | |
| 500,000.00 | | |
| 500,000.00 | | |
| – | | |
| – | |
ORGANIC GROWTH CAPITAL CORP | |
| 350,000.00 | | |
| 350,000.00 | | |
| – | | |
| – | |
PALINDROME MASTER FUND LP | |
| 336,195.00 | | |
| 336,195.00 | | |
| – | | |
| – | |
PAUL J KUSAK | |
| 1,000,000.00 | | |
| 1,000,000.00 | | |
| – | | |
| – | |
TIMOTHY IZZO | |
| 150,000.00 | | |
| 150,000.00 | | |
| – | | |
| – | |
QUANTUM PARTNERS LP | |
| 4,313,805.00 | | |
| 4,313,805.00 | | |
| – | | |
| – | |
RKVP LLC | |
| 2,600,000.00 | | |
| 2,600,000.00 | | |
| – | | |
| – | |
RODOLFO I FLORES | |
| 500,000.00 | | |
| 500,000.00 | | |
| – | | |
| – | |
RYAN C MYERS AND KELSEY L MYERS | |
| 500,000.00 | | |
| 500,000.00 | | |
| – | | |
| – | |
RYAN MYERS | |
| 1,000,000.00 | | |
| 1,000,000.00 | | |
| – | | |
| – | |
STEVEN HELLER | |
| 750,000.00 | | |
| 750,000.00 | | |
| – | | |
| – | |
STEVEN ROSS PETERSON | |
| 100,000.00 | | |
| 100,000.00 | | |
| – | | |
| – | |
TARA S MAJEED | |
| 250,000.00 | | |
| 250,000.00 | | |
| – | | |
| – | |
TODD KLEIN | |
| 2,500,000.00 | | |
| 2,500,000.00 | | |
| – | | |
| – | |
TOI FUND LP | |
| 1,000,000.00 | | |
| 1,000,000.00 | | |
| – | | |
| – | |
WILLIAM STEWART JONES | |
| 50,000.00 | | |
| 50,000.00 | | |
| – | | |
| – | |
ZACH BROYER | |
| 200,000.00 | | |
| 200,000.00 | | |
| – | | |
| – | |
SUB TOTAL | |
| | | |
| 34,650,000 | | |
| | | |
| | |
* Represents less than 1%
(1) |
Based on 4,094,459,545 shares of common stock outstanding
as of September 30, 2023 and December 31, 2023. This registration statement covers a maximum of 444,583,937 shares. Assumes
that each shareholder will sell all the shares registered in this prospectus. |
(2) |
This is on a non-diluted basis and reflects only the percentage of
the issued and outstanding shares. |
(3) |
Does not reflect the ongoing transfer of 287,523,604 shares of common
stock from Mr. Gravengaard to Liberty Digital Holdings, LLC which as not been completed. |
(4) |
Consists of: (i) 8,948,426 shares of common stock held of record by Edward Weinhaus; and (ii) 18,670,385
shares of common stock held of record by Liberty Digital Holdings, LLC, an entity beneficially owned and controlled by Mr. Weinhaus.
Mr. Weinhaus, the Company’s former President and director, has a beneficial interest in the return on the investment in the
Company’s 6% Convertible Debentures made by JJE Management LLC, which is a general partner of TOI Fund L.P. (the “Fund”).
Mr. Weinhaus became a minority member of JJE Management LLC in March, 2021 when he provided legal services to said entity. Mr. Weinhaus
is not an officer or managing member of JJE Management LLC and had no decision-making authority regarding JJE Management LLC’s
investment in the Company’s 6% Convertible Debentures. Should the Convertible Debenture earn only interest, then Mr. Weinhaus
will earn 4% of such accrued interest. Should the Convertible Debenture convert to common stock and earn a higher return, Mr. Weinhaus
could earn a maximum of 8% of the profits of the Fund’s investment in the Convertible Debenture. |
(5) |
Consists of: (i) 152,199,975 shares of common stock held of record
by Jonathan Mork; and (ii) 25,551,045 shares of common stock held of record by Millennium Group Inc. |
(6) |
Consists of: (i) 1,000,000 shares of common stock held of record by Ryan Myers; (ii) 2,600,000 shares
of common stock held of record by RKVP LLC, an entity beneficially owned and controlled by Mr. Myers; and (iii) 500,000 shares of
common stock held of record by Ryan Myers and Kelsey Myers. |
To our knowledge, none of the Selling Shareholders
is a registered broker-dealer or an affiliate of a broker-dealer.
Plan of Distribution
This prospectus relates to the resale of an aggregate
of 444,583,937 shares of our common stock, par value $0.001 per share.
The Selling Shareholders may, from time to time,
sell any or all of the shares of our common stock covered by this prospectus at a fixed price of $[●] per share, representing the
average of the high and low prices as reported on the OTC Markets on [●], 2024. If and when our common stock is regularly
quoted on the over-the-counter bulletin board (“OTCBB”), or the OTCQX, or the OTCQB or listed on any national securities
exchange or automated interdealer quotation system, the Selling Shareholders may sell all or a portion of their respective shares of
common stock covered by this prospectus from time to time at prevailing market prices at the time of sale, at varying prices or at negotiated
prices. A selling shareholder may use any one or more of the following methods when selling securities:
|
· |
ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers; |
|
|
|
|
· |
block trades in which the broker-dealer will attempt to sell the shares as agent but may position
and resell a portion of the block as principal to facilitate the transaction; |
|
|
|
|
· |
purchases by a broker-dealer as principal and resale by the broker-dealer for its account; |
|
|
|
|
· |
an exchange distribution in accordance with the rules of the applicable exchange; |
|
|
|
|
· |
privately negotiated transactions; |
|
|
|
|
· |
in transactions through broker-dealers that agree with the selling stockholder to sell a specified
number of such securities at a stipulated price per security; |
|
|
|
|
· |
through the writing or settlement of options or other hedging transactions, whether through an options
exchange or otherwise; |
|
|
|
|
· |
a combination of any such methods of sale; or |
|
|
|
|
· |
any other method permitted pursuant to applicable law. |
The Selling Shareholders may also sell securities
under Rule 144 under the Securities Act of 1933, if available, rather than under this prospectus.
Broker-dealers engaged by the Selling Shareholders
may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the Selling Shareholders
(or, if any broker-dealer acts as agent for the purchaser of securities, from the purchaser) in amounts to be negotiated, but, except
as may be set forth in a supplement to this prospectus, in the case of an agency transaction, not in excess of a customary brokerage
commission in compliance with FINRA Rule 2440; and in the case of a principal transaction a markup or mark down in compliance with FINRA
IM-2440.
In connection with the sale of the securities
or interests therein, the Selling Shareholders may enter into hedging transactions with broker-dealers or other financial institutions,
which may in turn engage in short sales of the securities in the course of hedging the positions they assume. The Selling Shareholders
may also sell securities short and deliver these securities to close out such short positions, or loan or pledge the securities to broker-dealers
that in turn may sell these securities. The Selling Shareholders may also enter into option or other transactions with broker-dealers
or other financial institutions or create one or more derivative securities that require the delivery to such broker-dealer or other
financial institution of securities offered by this prospectus, which securities such broker-dealer or other financial institution may
resell pursuant to this prospectus (however, in such case, we must file a prospectus supplement or an amendment to this registration
statement under applicable provisions of the Securities Act amending it to include such successors in interest as Selling Shareholders
under this prospectus).
The Selling Shareholders might not sell any,
or all, of the shares of our common stock offered pursuant to this prospectus. In addition, we cannot assure you that the Selling Shareholders
will not transfer the shares of our common stock by other means not described in this prospectus.
The Selling Shareholders and any brokers, dealers,
agents or underwriters that participate with the Selling Shareholders in the distribution of our common stock pursuant to this prospectus
may be deemed to be “underwriters” within the meaning of the Securities Act in connection with such sales. In this case,
any commissions received by these broker-dealers, agents or underwriters and any profit on the resale of our common stock purchased by
them may be deemed to be underwriting commissions or discounts under the Securities Act. In addition, any profits realized by the Selling
Shareholders may be deemed to be underwriting commissions. If the Selling Shareholders and any brokers, dealers, agents or underwriters
that participate with the Selling Shareholders in the distribution of our common stock pursuant to this prospectus are deemed to be an
underwriter, the Selling Shareholders and such other participants in the distribution may be subject to certain statutory liabilities
and would be subject to the prospectus delivery requirements of the Securities Act in connection with sales of shares of our common stock.
The resale securities will be sold only through
registered or licensed brokers or dealers if required under applicable state securities laws. In addition, in certain states, the resale
securities covered hereby may not be sold unless they have been registered or qualified for sale in the applicable state or an exemption
from the registration or qualification requirement is available and is complied with.
Under applicable rules and regulations under
the Securities Exchange Act of 1934, any person engaged in the distribution of the resale securities may not simultaneously engage in
market making activities with respect to the common stock for the applicable restricted period, as defined in Regulation M, prior to
the commencement of the distribution. In addition, the selling stockholder will be subject to applicable provisions of the Securities
Exchange Act of 1934 and the rules and regulations thereunder, including Regulation M, which may limit the timing of purchases and sales
of securities of the common stock by the Selling Shareholders or any other person. We will make copies of this prospectus available to
the Selling Shareholders and will inform them of the need to deliver a copy of this prospectus to each purchaser at or prior to the time
of the sale (including by compliance with Rule 172 under the Securities Act).
Legal Matters
Unless otherwise indicated, Law Office of Iwona
J. Alami, Newport Beach, California, will pass upon the validity of the shares of our common stock to be sold in this offering.
EXPERTS
The consolidated financial statements of Athena
Bitcoin Global (issued under its previous name GamePlan, Inc.) and subsidiaries as of September 30, 2023 and the consolidated financial
statements of Athena Bitcoin Global (issued under its previous name GamePlan, Inc.) and subsidiaries as of December 31, 2022 and for
the year ended December 31, 2021, included in this prospectus and elsewhere in the registration statement have been reviewed (September
30, 2023) and audited (December 31, 2022 and December 31, 2021) by BF Borgers CPA PC, an independent registered public accounting
firm, as stated in their report. Such financial statements have been so included in reliance upon the report of such firm given upon
their authority as experts in accounting and auditing.
DISCLOSURE OF COMMISSION’S
POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Our directors and officers are indemnified as
provided by Nevada law, our Second Amended and Restated Articles of Incorporation, and our bylaws. We have agreed to indemnify each of
our directors and certain officers against certain liabilities, including liabilities under the Securities Act. Insofar as indemnification
for liabilities arising under the Securities Act may be permitted to our directors, officers and controlling persons pursuant to the
provisions described above, or otherwise, we have been advised that in the opinion of the SEC, such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such
liabilities (other than our payment of expenses incurred or paid by our director, officer or controlling person in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being
registered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act
and will be governed by the final adjudication of such issue.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a Registration Statement
on Form S-1 under the Securities Act, and the rules and regulations promulgated thereunder, with respect to the common stock offered
hereby. This Prospectus, which constitutes a part of the Registration Statement, does not contain all of the information set forth in
the Registration Statement and the exhibits thereto. While we have summarized the material terms of all agreements and exhibits included
in the scope of this Registration Statement, for further information regarding the terms and conditions of any exhibit, reference is
made to such exhibits. Upon effectiveness of this Prospectus, we will be subject to the reporting and other requirements of Section 15(d)
of the Securities Exchange Act of 1934 and will file periodic reports with the Securities and Exchange Commission, including a Form 10-K
for the year ended December 31, 2021 and periodic reports on Form 10-Q during that period. We will make available to our shareholders
annual reports containing financial statements audited by our independent auditors and our quarterly reports containing unaudited financial
statements for each of the first three quarters of each year; however, we will not send the annual report to our shareholders unless
requested by an individual shareholder.
For further information with respect to us and
the common stock, reference is hereby made to the Registration Statement and the exhibits thereto, which may be inspected and copied
at the principal office of the SEC, 100 F Street NE, Washington, D.C. 20549, and copies of all or any part thereof may be obtained at
prescribed rates from the Commission’s Public Reference Section at such addresses. Also, the SEC maintains a website at http://www.sec.gov
that contains reports, proxy and information statements and other information regarding registrants that file electronically with the
SEC. To request such materials, please contact Matias Goldenhorn, our Chief Executive Officer.
CONSOLIDATED
FINANCIAL STATEMENTS
Athena Bitcoin Global
Condensed Consolidated Financial Statements (Unaudited)
For the three and nine months ended September
30, 2023 and September 30, 2022
Contents
Financial Statements (Unaudited)
Athena Bitcoin Global
For the twelve months ended December 31, 2022
and 2021
Athena Bitcoin Global
Condensed Consolidated Balance
Sheets (Unaudited)
| |
September 30, | | |
December 31, | |
| |
2023 | | |
2022 | |
| |
(in thousands) | |
Assets | |
| | |
| |
Current assets: | |
| | | |
| | |
Cash and cash equivalents | |
$ | 13,168 | | |
$ | 2,101 | |
Restricted cash held for customers | |
| 504 | | |
| 1,107 | |
Accounts receivable | |
| 327 | | |
| 109 | |
Prepaid expenses and other current assets | |
| 1,227 | | |
| 1,188 | |
Total current assets | |
| 15,226 | | |
| 4,505 | |
| |
| | | |
| | |
Crypto assets held | |
| 303 | | |
| 365 | |
Property and equipment, net | |
| 5,296 | | |
| 5,839 | |
Right of use asset – operating lease | |
| 15,940 | | |
| 2,751 | |
Other noncurrent assets | |
| 18 | | |
| 50 | |
Total assets | |
$ | 36,783 | | |
$ | 13,510 | |
| |
| | | |
| | |
Liabilities and stockholders’ equity (deficit) | |
| | | |
| | |
Current liabilities: | |
| | | |
| | |
Accounts payable and accrued expenses | |
$ | 1,451 | | |
$ | 1,531 | |
Accounts payable, related party | |
| 777 | | |
| 465 | |
Liability for cash held for customers | |
| 504 | | |
| 1,107 | |
Operating lease liabilities, current portion | |
| 5,391 | | |
| 786 | |
Income tax payable | |
| 1,421 | | |
| 694 | |
Deferred tax liabilities | |
| 295 | | |
| 28 | |
Long-term debt, current portion | |
| 494 | | |
| 507 | |
Short-term debt | |
| 5 | | |
| 614 | |
Note payable, related party | |
| 4,090 | | |
| 490 | |
Convertible debt | |
| 353 | | |
| 1,520 | |
Other current liabilities | |
| 322 | | |
| 396 | |
Total current liabilities | |
$ | 15,103 | | |
$ | 8,138 | |
See accompanying notes.
Athena Bitcoin Global
Condensed Consolidated Balance Sheets (Unaudited)
| |
September 30, | | |
December 31, | |
| |
2023 | | |
2022 | |
| |
(in thousands, except number of shares) | |
Long-term liabilities: | |
| | | |
| | |
Long-term debt | |
$ | 203 | | |
$ | 610 | |
Operating lease liabilities, net of current portion | |
| 10,549 | | |
| 1,965 | |
Convertible debt, related party | |
| 3,000 | | |
| 3,000 | |
Total liabilities | |
| 28,855 | | |
| 13,713 | |
| |
| | | |
| | |
Commitments and contingencies (Note 14) | |
| | | |
| | |
| |
| | | |
| | |
Stockholders’ equity (deficit): | |
| | | |
| | |
Preferred stock, $0.001 par value 5,000,000,000 shares authorized; no shares issued and outstanding as of September 30, 2023 and December 31, 2022 | |
| – | | |
| – | |
Common stock, $0.001 par value 10,000,000,000 shares authorized; 4,094,459,545 shares issued and outstanding as of September 30, 2023 and $0.001 par value 4,409,605,000 shares authorized; 4,094,459,545 shares issued and outstanding as of December 31, 2022 | |
| 4,095 | | |
| 4,095 | |
Loans to employees for options exercised | |
| (1,006 | ) | |
| (993 | ) |
Net common stock | |
| 3,089 | | |
| 3,102 | |
Additional paid in capital | |
| 8,446 | | |
| 8,446 | |
Accumulated deficit | |
| (3,386 | ) | |
| (11,576 | ) |
Accumulated other comprehensive loss | |
| (221 | ) | |
| (175 | ) |
Total stockholders’ equity (deficit) | |
| 7,928 | | |
| (203 | ) |
Total liabilities and stockholders’ equity (deficit) | |
$ | 36,783 | | |
$ | 13,510 | |
See accompanying notes.
Athena Bitcoin Global
Condensed Consolidated Statement
of Operations and Comprehensive Income (Loss) – (Unaudited)
| |
For the three months ended | | |
For the nine months ended | |
| |
September 30,
2023 | | |
September 30,
2022 | | |
September 30,
2023 | | |
September 30,
2022 | |
| |
(in thousands, except number of shares) | |
Revenues | |
$ | 65,646 | | |
$ | 14,049 | | |
$ | 120,210 | | |
$ | 53,750 | |
Cost of revenues | |
| 55,813 | | |
| 11,423 | | |
| 103,833 | | |
| 46,794 | |
Gross profit | |
| 9,833 | | |
| 2,626 | | |
| 16,377 | | |
| 6,956 | |
| |
| | | |
| | | |
| | | |
| | |
Operating expenses: | |
| | | |
| | | |
| | | |
| | |
Technology and development | |
| 132 | | |
| 156 | | |
| 402 | | |
| 579 | |
General and administrative | |
| 1,297 | | |
| 1,194 | | |
| 3,345 | | |
| 4,736 | |
Sales and marketing | |
| 41 | | |
| 128 | | |
| 240 | | |
| 480 | |
Other operating expense | |
| 10 | | |
| 10 | | |
| 51 | | |
| 24 | |
Total operating expenses | |
| 1,480 | | |
| 1,488 | | |
| 4,038 | | |
| 5,819 | |
| |
| | | |
| | | |
| | | |
| | |
Income from operations | |
| 8,353 | | |
| 1,138 | | |
| 12,339 | | |
| 1,137 | |
| |
| | | |
| | | |
| | | |
| | |
Interest expense | |
| 97 | | |
| 164 | | |
| 330 | | |
| 526 | |
Fees on virtual vault services | |
| 312 | | |
| – | | |
| 543 | | |
| 67 | |
Other expense | |
| 38 | | |
| 29 | | |
| 134 | | |
| 178 | |
Income before income taxes | |
| 7,906 | | |
| 945 | | |
| 11,332 | | |
| 366 | |
Income tax expense | |
| 1,976 | | |
| 807 | | |
| 3,141 | | |
| 1,977 | |
Net income (loss) | |
$ | 5,930 | | |
$ | 138 | | |
$ | 8,191 | | |
$ | (1,611 | ) |
Basic (loss) earnings per share | |
$ | 0.00145 | | |
$ | (0.00003 | ) | |
$ | 0.00200 | | |
$ | (0.00039 | ) |
Diluted (loss) earnings per share | |
$ | 0.00134 | | |
$ | (0.00005 | ) | |
$ | 0.00188 | | |
$ | (0.00039 | ) |
Weighted average shares outstanding - Basic | |
| 4,094,459,545 | | |
| 4,083,081,524 | | |
| 4,094,459,545 | | |
| 4,083,081,524 | |
Weighted average shares outstanding - Diluted | |
| 4,484,128,545 | | |
| 4,348,281,525 | | |
| 4,484,128,545 | | |
| 4,083,081,524 | |
| |
| | | |
| | | |
| | | |
| | |
Comprehensive income (loss) | |
| | | |
| | | |
| | | |
| | |
Net income (loss) | |
$ | 5,930 | | |
$ | 138 | | |
$ | 8,191 | | |
$ | (1,611 | ) |
Foreign currency translation adjustment | |
| (14 | ) | |
| (15 | ) | |
| (46 | ) | |
| 8 | |
Comprehensive income (loss) | |
$ | 5,916 | | |
$ | 123 | | |
$ | 8,145 | | |
$ | (1,603 | ) |
See accompanying notes.
Athena Bitcoin Global
Condensed Consolidated Statement
of Cash Flows (Unaudited)
| |
For the nine months ended | |
| |
September 30, 2023 | | |
September 30, 2022 | |
| |
(in thousands) | |
Operating activities | |
| | | |
| | |
Net income (loss) | |
$ | 8,191 | | |
$ | (1,611 | ) |
| |
| | | |
| | |
Adjustments to reconcile net income (loss) to net cash used in operating activities: | |
| | | |
| | |
Depreciation and amortization | |
| 1,556 | | |
| 1,133 | |
Impairment of crypto assets held | |
| 9 | | |
| 205 | |
Realized loss on crypto assets | |
| 14 | | |
| 4 | |
Crypto asset payments for expenses | |
| 3,680 | | |
| 2,260 | |
Deferred income tax | |
| 295 | | |
| (705 | ) |
Gain on sale of crypto assets | |
| (24,493 | ) | |
| (8,237 | ) |
Changes in operating assets and liabilities: | |
| | | |
| | |
Accounts receivable | |
| (218 | ) | |
| 447 | |
Other advances | |
| – | | |
| (750 | ) |
Prepaid expenses and other assets | |
| (13,196 | ) | |
| (1,906 | ) |
Customer advances | |
| (739 | ) | |
| (2,694 | ) |
Accounts payable and other liabilities | |
| 14,831 | | |
| 6,743 | |
Net cash used in operating activities | |
| (10,070 | ) | |
| (5,111 | ) |
| |
| | | |
| | |
Investing activities | |
| | | |
| | |
Purchase of property and equipment | |
| (960 | ) | |
| (603 | ) |
Purchase of crypto assets | |
| (96,307 | ) | |
| (42,693 | ) |
Sale of crypto assets | |
| 116,352 | | |
| 49,010 | |
Net cash provided by investing activities | |
| 19,085 | | |
| 5,714 | |
| |
| | | |
| | |
Financing activities | |
| | | |
| | |
Proceeds (repayment) of debt, net | |
| 1,449 | | |
| (523 | ) |
Net cash provided (used) by financing activities | |
| 1,449 | | |
| (523 | ) |
| |
| | | |
| | |
Net increase in cash and cash equivalents | |
| 10,464 | | |
| 80 | |
Cash, cash equivalents and restricted cash, beginning of period | |
| 3,208 | | |
| 4,845 | |
Cash, cash equivalents and restricted cash, end of period | |
$ | 13,672 | | |
$ | 4,925 | |
| |
| | | |
| | |
Cash, cash equivalents, and restricted cash consisted of the following: | |
| | | |
| | |
Cash and cash equivalents | |
$ | 13,168 | | |
$ | 3,949 | |
Restricted cash held for customers | |
| 504 | | |
| 976 | |
Total cash, cash equivalents and restricted cash | |
$ | 13,672 | | |
$ | 4,925 | |
| |
| | | |
| | |
Supplemental disclosure of cash flow information: | |
| | | |
| | |
Cash paid for interest | |
$ | 325 | | |
$ | 539 | |
Cash paid for taxes | |
$ | 1,570 | | |
$ | 33 | |
| |
| | | |
| | |
Supplemental schedule of non-cash financing activities: | |
| | | |
| | |
Leased assets obtained in exchange for operating lease liabilities | |
$ | 2,545 | | |
$ | 699 | |
Conversion of debt for common shares | |
$ | – | | |
$ | 3,590 | |
Crypto assets used to buy property and equipment | |
$ | 29 | | |
$ | 121 | |
Crypto asset used for accounts payable | |
$ | 814 | | |
$ | – | |
See accompanying notes.
Athena Bitcoin Global
Consolidated Statement of
Stockholders’ Equity (Deficit) - (Unaudited)
| |
Common Stock | | |
Receivables From Employees For Stock | | |
Additional Paid-in | | |
Accumulated | | |
Accumulated Other Comprehensive | | |
| |
| |
Shares | | |
Amount | | |
Options | | |
Capital | | |
Deficit | | |
Loss | | |
Total | |
| |
(in thousands, except number of shares) | |
Three months ended September 30,
2022 | |
| |
July 1, 2022 | |
| 4,094,459,545 | | |
$ | 4,095 | | |
$ | (984 | ) | |
$ | 8,446 | | |
$ | (17,465 | ) | |
$ | (154 | ) | |
$ | (6,062 | ) |
Net loss | |
| – | | |
| – | | |
| – | | |
| – | | |
| 138 | | |
| – | | |
| 138 | |
Foreign currency translation adjustment | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| (15 | ) | |
| (15 | ) |
Accrued interest on employee loans | |
| – | | |
| – | | |
| (4 | ) | |
| – | | |
| – | | |
| – | | |
| (4 | ) |
Balance, September 30, 2022 | |
| 4,094,459,545 | | |
$ | 4,095 | | |
$ | (988 | ) | |
$ | 8,446 | | |
$ | (17,327 | ) | |
$ | (169 | ) | |
$ | (5,943 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Three months ended September 30,
2023 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
July 1, 2023 | |
| 4,094,459,545 | | |
$ | 4,095 | | |
$ | (1,001 | ) | |
$ | 8,446 | | |
$ | (9,316 | ) | |
$ | (207 | ) | |
$ | (2,017 | ) |
Net income | |
| – | | |
| – | | |
| – | | |
| – | | |
| 5,930 | | |
| – | | |
| 5,930 | |
Foreign currency translation adjustment | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| (14 | ) | |
| (14 | ) |
Accrued interest on employee loans | |
| – | | |
| – | | |
| (5 | ) | |
| – | | |
| – | | |
| – | | |
| (5 | ) |
Balance, September 30, 2023 | |
| 4,094,459,545 | | |
$ | 4,095 | | |
$ | (1,006 | ) | |
$ | 8,446 | | |
$ | (3,386 | ) | |
$ | (221 | ) | |
$ | 7,928 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Nine months ended September 30,
2022 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
January 1, 2022 | |
| 4,049,392,879 | | |
$ | 4,050 | | |
$ | (977 | ) | |
$ | 5,246 | | |
$ | (15,716 | ) | |
$ | (177 | ) | |
$ | (7,574 | ) |
Net loss | |
| – | | |
| – | | |
| – | | |
| – | | |
| (1,611 | ) | |
| – | | |
| (1,611 | ) |
Foreign currency translation adjustment | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| 8 | | |
| 8 | |
Debt conversions | |
| 45,066,666 | | |
| 45 | | |
| – | | |
| 3,200 | | |
| – | | |
| – | | |
| 3,245 | |
Accrued interest on employee loans | |
| – | | |
| – | | |
| (11 | ) | |
| – | | |
| – | | |
| – | | |
| (11 | ) |
Balance, September 30, 2022 | |
| 4,094,459,545 | | |
$ | 4,095 | | |
$ | (988 | ) | |
$ | 8,446 | | |
$ | (17,327 | ) | |
$ | (169 | ) | |
$ | (5,943 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Nine months ended September 30,
2023 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
January 1, 2023 | |
| 4,094,459,545 | | |
$ | 4,095 | | |
$ | (993 | ) | |
$ | 8,446 | | |
$ | (11,576 | ) | |
$ | (175 | ) | |
$ | (203 | ) |
Net income | |
| – | | |
| – | | |
| – | | |
| – | | |
| 8,190 | | |
| – | | |
| 8,190 | |
Foreign currency translation adjustment | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| (46 | ) | |
| (46 | ) |
Accrued interest on employee loans | |
| – | | |
| – | | |
| (13 | ) | |
| – | | |
| – | | |
| – | | |
| (13 | ) |
Balance, September 30, 2023 | |
| 4,094,459,545 | | |
$ | 4,095 | | |
$ | (1,006 | ) | |
$ | 8,446 | | |
$ | (3,386 | ) | |
$ | (221 | ) | |
$ | 7,928 | |
See accompanying notes.
Athena Bitcoin Global
Notes to Unaudited Condensed
Consolidated Financial Statements
1. Nature of Business and Summary
of Significant Accounting Policies
Nature of Business
Athena Bitcoin Global (f.k.a. GamePlan, Inc.),
a Nevada corporation, and its wholly owned subsidiary, Athena Bitcoin, Inc., a Delaware corporation (together referred to as “Athena
Global” or “the Company”) is a provider of various crypto asset transaction platforms, including the operation of automated
teller machines (ATMs) and personalized services (Athena Plus) for the purpose of selling and buying crypto assets, white-label operations
and payment services. The Company’s network of Athena Bitcoin ATMs is presently active in twenty-six states and the territory of
Puerto Rico in the United States, and 4 countries in Central and South America. The Company places its machines in convenience stores,
shopping centers, and other easily accessible locations.
The Company has changed its name to Athena Bitcoin
Global from GamePlan, Inc. in a filing with the Secretary of State of the State of Nevada effective as of April 15, 2021.
Athena Bitcoin Global was a “shell company”
(as such term is defined in Rule 12b-2 under the Exchange Act) immediately before the completion of the transactions described below.
Athena Bitcoin Global was incorporated in the state of Nevada in 1991 under the name “GamePlan, Inc.” for the sole purpose
of merging with Sunbeam Solar, Inc., a Utah corporation, which merger occurred as of December 31, 1991. The Articles of Merger were filed
in the state of Nevada pursuant to which the Company was the surviving entity following the merger. The Company was involved in various
businesses, including, gaming and other consulting services, prior to becoming a company seeking acquisitions. The Company filed form
10-SB with the Securities and Exchange Commission in September 1999 thus becoming a reporting company under section 12(g) of the Securities
and Exchange Act of 1934. The Company subsequently filed Form 15 in March 2015, terminating its reporting status.
On January 14, 2020, Athena Bitcoin Global (f.k.a.
GamePlan, Inc.) entered into a Share Exchange Agreement (the “Agreement”), by and among the Company, Athena Bitcoin, Inc.,
a Delaware S corporation (“Athena”) founded in 2015, and certain shareholders of Athena Bitcoin, Inc. The Agreement provides
for the reorganization of Athena Bitcoin, Inc., with and into Athena Bitcoin Global (f.k.a. GamePlan, Inc.), resulting in Athena Bitcoin,
Inc. becoming a wholly owned subsidiary of Athena Bitcoin Global. The agreement is for the exchange of 100% shares of the outstanding
Common Stock of Athena Bitcoin, Inc., for 3,593,644,680 shares of Athena Bitcoin Global common stock (an exchange rate of 1,244.69 shares
of Athena Bitcoin Global stock for each share of Athena Bitcoin, Inc. stock). The closing of the transaction occurred as of January 30,
2020.
In accordance with ASC 805-10-55-12, because
the former shareholders of Athena Bitcoin, Inc. acquired the majority (88%) of the voting rights of the Company and control of the Company’s
board of directors and senior management of Athena Bitcoin, Inc. became management of the combined entity, the Company determined that
the Share Exchange was a reverse acquisition.
As the Share Exchange is considered a reverse
acquisition, in accordance with ASC 805-40-45-2, for financial statement purposes Athena Bitcoin, Inc. is considered the accounting acquiror.
Accordingly, the historical financial statements prior to the Share Exchange are those of Athena Bitcoin, Inc., except that the historical
equity of Athena Bitcoin Global has been retroactively restated to reflect the number of shares received in the business combination
at the exchange rate of 1,244.69 shares of Athena Bitcoin Global common stock for each share of Athena Bitcoin, Inc. common stock. The
historical common stock carrying amount has been adjusted to reflect the revised par value of the outstanding stock and the corresponding
offset was reflected in the additional paid-in capital. All share and per share information included in these financial statements have
been adjusted to reflect the 1,244.69 to 1 share conversion.
In 2018, the Company issued a
series of instruments called “Simple Agreements for Future Tokens” (SAFTs) in exchange for investments in cash or crypto
assets. The SAFTs entitled holders to receipt of tokens representing equity in the Company under certain pre-defined circumstances. These
include a qualified financing event in which the Company raised $15 million or more in a single transaction, a “corporate transaction”
(sale of all or substantially all of the Company’s assets), or a dissolution. In connection with the Share Exchange, the SAFT Notes
were converted into 1,653,425,404 shares of Athena Bitcoin, Inc. (which were then exchanged for Athena Bitcoin Global common stock).
Additionally, warrants to purchase 115,888,490 shares of Athena Bitcoin, Inc.’s common stock were exercised for proceeds of $69,000.
These shares were then exchanged for Athena Bitcoin Global common stock). Additionally, Swingbridge notes were converted into 419,078,082
shares of Athena Bitcoin, Inc’s. common stock (which was then exchanged for Athena Bitcoin Global common stock). Lastly, 157,635,309
shares of Athena Bitcoin, Inc. were issued upon exercise of stock options (which was then exchanged for Athena Bitcoin Global common
stock).”
Athena Bitcoin Global
Notes to Unaudited Condensed Consolidated Financial
Statements
There were 4,079,815,704 shares of Athena Bitcoin
Global’s common stock outstanding following the closing date of the transaction. Athena Bitcoin Global subsequently purchased and
cancelled 30,442,825 shares.
There were two debt conversions in 2022 of 45,066,666
shares.
Athena Bitcoin Global has 4,094,459,545 shares
issued and outstanding as of September 30, 2023 and December 31, 2022, respectively and authorized capital of 10,000,000,000 and 4,409,605,000
shares as of September 30, 2023 and December 31, 2022, respectively.
Principles of Consolidation
The accompanying consolidated financial statements
include the accounts of Athena Bitcoin Global, Athena Bitcoin, Inc. and its wholly owned subsidiaries, Athena Bitcoin S. de R.L. de C.V.,
incorporated in Mexico; Athena Holdings Colombia SAS, incorporated in Colombia; Athena Holding Company S.R.L, incorporated in Argentina;
Athena Holdings of PR LLC, incorporated in Puerto Rico; Athena Holdings El Salvador, S.A. de C.V., incorporated in El Salvador; and Athena
Business Holdings Panama S.A. incorporated in Panama. All intercompany account balances and transactions have been eliminated in consolidation.
Going Concern
The Company has an accumulated deficit of $3,386,000
and cash used in operations of $10,070,000 as of and for the nine months September 30, 2023. These conditions and events create
an uncertainty about the ability of the Company to continue as a going concern for the next 12 months. The Company has not been able to
generate sufficient cash from operating activities to fund its ongoing operations and current liabilities. There is no guarantee that
the Company will be able to generate enough revenue and/or raise capital to support its operations. The financial statements do not include
any adjustments that might be necessary should the Company be unable to continue as a going concern. The ultimate impact of these matters
to the Company and its consolidated financial condition is presently unknown.
A summary of the Company’s significant
accounting policies is as follows:
Basis of Presentation
The accompanying consolidated financial statements
have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States
of America (U.S. GAAP).
Athena Bitcoin Global
Notes to Unaudited Condensed Consolidated Financial
Statements
Use of Estimates
The preparation of the condensed consolidated
financial statements requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated
financial statements and the accompanying notes. Actual results could differ from those estimates. Significant estimates and assumptions
made by management are used for, but not limited to, the useful lives of property and equipment and impairment assessment for long-lived
assets. These estimates are based on historical data and experience, as well as various other factors that management believes to be
reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities
that are not readily apparent from other sources.
Revenue Recognition
Revenue Recognition
The Company derives its recurring revenues primarily
from three sources: (i) sale of crypto assets at Athena Bitcoin ATMs, (ii) customized investor trading services for the sale or purchase
of crypto assets through our Athena Plus OTC desk and (iii) white label operations in El Salvador. The Company also generates revenue
from ancillary items, such as sale of intellectual property and maintenance of software. The Company adopted ASC 606, Revenue Recognition
(“ASC 606”), effective January 1, 2019, using the modified retrospective method. Under ASC 606, Revenue Recognition, the
Company recognizes revenue at the point of sale or over time of the service period for these products or services to our customers, in
an amount that reflects the consideration the Company expects to be entitled to in exchange for those products or services. The Company
determines revenue recognition through the following five steps:
|
· |
Identification of the contract, or contracts, with a customer |
|
· |
Identification of the performance obligations in the contract |
|
· |
Determination of the transaction price |
|
· |
Allocation of the transaction price to the performance obligations
in the contract |
|
· |
Recognition of revenue when, or as, we satisfy a performance obligation. |
The Company recognizes revenue when performance
obligations identified under the terms of contracts with its customers are satisfied.
Judgment is required in determining whether we
are the principal or the agent in transactions between customers. We evaluate the presentation of revenue on a gross or net basis based
primarily on inventory risk (are we at risk for potentially fluctuations of the crypto asset price) and whether we control the crypto
asset provided before it is transferred to the customer or whether we act as an agent by arranging for others to provide the crypto asset
to the customer.
The Company enters into contracts that may include
multiple performance obligations. The Company identifies the promises in the contract and assigns them to their appropriate performance
obligation. These performance obligations may be part of a different revenue source and are listed separately below.
Athena Bitcoin Global
Notes to Unaudited Condensed Consolidated Financial
Statements
Athena Bitcoin ATM
The Company requires all users of the Athena
Bitcoin ATM to agree to ATM Terms & Service. The ATM Terms & Service stipulate the terms and conditions of the transaction. The
user, by inserting fiat currency and confirming that they agree to the transaction, is agreeing to the contract that governs the transaction.
This contract meets all of the criteria to be a revenue contract under ASC 606.
The Company has
a single performance obligation to provide a specific quantity of a crypto asset to the customer’s crypto wallet. We utilize a
mark-up for crypto assets sold to the customer. Athena Bitcoin ATMs permit customers to purchase as little as $1 of Bitcoin but
customers typically choose between $100 and $1,000 per transaction. The Company considers itself the principal
in this arrangement, as it controls the crypto asset prior to delivering, incurs inventory risk due to potential fluctuations in the
market price of the crypto asset and has discretion in establishing the price of the crypto asset sold in the Athena Bitcoin ATM machine.
Therefore, it records the gross cash received from the customer as the transaction price for the performance obligation.
Revenue is recognized at the point in time when
the crypto asset is delivered to the customer’s crypto wallet. Delivery to the customer’s crypto wallet is governed by the
crypto asset’s blockchain and typically less than an hour.
Athena Plus
The Company requires all users of Athena Plus
to agree to Athena Plus Terms & Service. The Athena Plus Terms & Service stipulate the terms and conditions of the transaction.
The user, by wiring fiat currencies to the Company’s bank account, is agreeing to the contract that governs the transaction. This
contract meets all of the criteria to be a contract under ASC 606.
The Company has a single performance obligation
to provide a specific quantity of a crypto asset to the customer’s crypto wallet. We utilize a mark-up for crypto assets sold to
the customer. The minimum transaction is $10,000 USD (or equivalent value of local currency). The Company considers itself the principal
in this arrangement, as it controls the crypto asset prior to delivering, incurs inventory risk due to potential fluctuations in the
market price of the crypto asset and has discretion in establishing the price of the crypto asset sold. Therefore, it records the gross
cash received from the customer as the transaction price for the performance obligation. The only exception for this are stable coins,
which are considered financial assets. As such, the Company, in accordance with ASC 860-20, will recognize revenue net (markup) for any
sale of stable coins.
Revenue is recognized at the point in time when
the crypto asset is delivered to the customer’s crypto wallet. Delivery to the customer’s crypto wallet is governed by the
crypto asset’s blockchain.
White-label Service
The Company entered into multiple contracts that
govern the white-label service with the El Salvadoran government for ATMs located in El Salvador and in the United States. These contracts
detail the obligations and rights of both parties, including pricing and meet all of the criteria of a revenue contract under ASC 606.
The contracts permit the customer to terminate the contract at any point or to adjust the number of ATMs that are in use without a substantive
penalty. This results in each ATM and each service month for the ATM being considered a separate revenue contract per ASC 606.
The Company makes multiple promises to the customer.
This includes installation as well as multiple promises for operating the ATMs on behalf of the customer. Installation is a separate
performance obligation. This is due to the customer benefitting from the installation, the customer’s ability to utilize a third-party
to perform the installation if desired, no significant modification or customization is part of the installation, no significant integration
of installation with operating the ATMs and installation does not affect the operating of the ATMs performance obligation (discussed
below). This results in installation services being capable of being distinct and distinct in the context of the contract.
Athena Bitcoin Global
Notes to Unaudited Condensed Consolidated Financial
Statements
The Company is responsible under the White Label
service for operating the ATMs on behalf of the customer over the month. The promises that are in the contract may vary each day, for
instance performing cash logistics services, testing or repairing the machines. However, these services are highly integrated to provide
a combined output (operating ATMs for the customer). These are not services that the Company offers separately and by providing them together,
it ensures a cohesive and effective approach to operating the ATMs for the customer. This integrated approach is critical to the value
that the Company is offering the customer. As such, given the interrelated nature of the service, this results in a single performance
obligation, in accordance with ASC 606-10-25-21(a).
This single performance obligation meets the definition
of continuous service obligation due to the Company continuously managing operations of their ATM. There is no defined number of services
that are provided each month. The Company is required to provide the same service each month to operate the ATMs, pricing resets each
month and customer does not make separate purchase decisions. Each fulfilment activity may have separate pricing but the approval for
these services is considered perfunctory, as these activities are all necessary to ensure that the ATMs operate in accordance with the
terms of the service agreement.
The Company evaluated if this meets the definition
of a series. Each increment of the promised service to operate the machines (i.e. each day) is distinct in accordance with paragraph 606-10-25-19.
This is because the customer can benefit from each increment of service on its own (it is capable of being distinct) and each increment
of service is separately identifiable because no day of service significantly modifies or customizes another and no day of service significantly
affects either the entity's ability to fulfill another day of service or the benefit to the customer of another day of service. Therefore,
the days are substantially the same and have the same pattern of transfer. Therefore, this meets the criteria to be considered part of
a series.
One of the promises included in operating the
ATM performance obligation is providing Company owned ATMs to the customer. The Company elected the expedient in ASC 842-10-15-42A, which
permits the combining the lease and non-lease components together if the lease component has the same timing and pattern of transfer as
the non-lease component and the lease component is an operating lease. Both of these conditions are met. Given that that the predominant
obligation is the non-lease component (servicing the ATM), the Company, in accordance with ASC 842-10-15-42B, will account for the performance
obligation under the terms of ASC 606.
The Company generally charges a fixed fee for
installation and a fixed fee each month for operating the ATMs. The fixed fees collected are allocated to the performance obligations
based on an adjusted market assessment approach.
The Company charges the customer for services necessary
to operate the ATMs, including repairs and cash logistics. The fees are included in the contract. The fees meet the definition of variable
consideration, as it is dependent on the specific service performed, which is not known before each service term. The Company applies
the variable consideration allocation exception, as noted in ASC 606-10-32-39(b). This is met due to the variable payment being specific
to the Company transferring a specific service and the allocation is consistent with the allocation objective in ASC 606-10-32-28. As
such, the Company recognizes the variable transaction fee when they perform the specific service to which it relates.
The Company is considered the principal, as it
controls any third-party good or service before it is transferred to the customer.
The prices for additional services and reimbursement
of costs do not meet the definition of a material right, as the services included have separate pricing are not considered an additional
good or service but part of the existing contract. These services are considered perfunctory, as they are necessary for the Company to
fulfill its performance obligation to operate the machines on behalf of the customer.
For operating the ATM, revenue is recognized straight line over the
requisite service period, which is typically one month, for operating the ATM. For installation, revenue is recognized at the point in
time when installation is complete. The variable transaction fees are recognized in the month in which it has earned the fee.
Athena Bitcoin Global
Notes to Unaudited Condensed Consolidated Financial
Statements
Cost of Revenues
Cost of revenues consists primarily of expenses
related to the acquisition of crypto assets (including the costs to purchase crypto assets from users in our ATMs and from third-party
traders and exchanges). The Company assigns the costs of crypto assets sold in its revenue transactions on a first-in, first-out basis.
Additionally, cost of revenues includes
the costs of operating the ATMs from which some of the crypto assets are sold (including the associated rent expense, related incentives,
ATM cash losses, software licensing fees for the ATMs, depreciation, insurance, and utilities), crypto asset impairment and fees paid
to service the ATM machines and transport cash to the banks.
Cash and Cash Equivalents
The Company considers all highly liquid investments
purchased with an original maturity of three months or less to be cash equivalents.
The Company maintains cash balances at various
financial institutions. Accounts at these institutions are secured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000
per institution. The Company has deposits in excess of the FDIC-insured limit. The Company has not experienced any losses in such accounts
and believes that it is not exposed to significant credit risk due to the financial position of the depository institutions or investment
vehicles in which those deposits are held. The Company has significant cash in ATM machines.
Restricted Cash Held for Customers
Restricted cash held for customers consists of
money on hand received from white-label customers for replenishment of ATMs.
Accounts Receivable
Accounts receivable is stated at the amount the
Company expects to collect. In 2021 the Company adopted ASC 326, Financial Instruments - Credit Losses. This methodology is referred
to as the current expected credit loss (CECL) method and replaces the previous incurred loss methodology. The measurement of CECL applies
to all financial assets measured at amortized cost, including receivables for revenue. The company recognized no allowance for credit
losses for September 30, 2023 and December 31, 2022 respectively utilizing the CECL methodology.
Leases
The Company determines if an arrangement is a
lease at inception. The Company classifies its arrangements for ATM retail spaces as an operating leases. The Company does not have any
significant arrangements where it is the lessor. The Company elected to separate lease and non-lease components for arrangements where
the Company is a lessee. Leases with an initial lease term of 12 months or less are not recorded on the balance sheet. Operating lease
expense is recognized on a straight-line basis over the lease term.
Operating lease assets and operating lease liabilities
are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. For purposes
of calculating operating lease obligations under the standard, the Company's lease terms may include options to extend or terminate the
lease when it is reasonably certain that the Company will exercise such option. The Company's leases do not contain material residual
value guarantees or material restrictive covenants. The discount rate used to measure a lease obligation should be the rate implicit
in the lease; however, the Company’s operating leases generally do not provide an implicit rate. Accordingly, the Company uses
its incremental borrowing rate at lease commencement to determine the present value of lease payments. The incremental borrowing rate
is an entity-specific rate which represents the rate of interest a lessee would pay to borrow on a collateralized basis over a similar
term with similar payments. Right-of-use (“ROU”) assets represent the Company’s right to use an underlying asset for
the lease term and lease liabilities represent the obligation to make lease payments arising from the lease.
The operating lease asset also includes any initial
direct costs and lease payments made prior to lease commencement and excludes lease incentives incurred.
Athena Bitcoin Global
Notes to Unaudited Condensed Consolidated Financial
Statements
Concentration of Credit Risk
The Company’s revenues, other than white-label
services below, are generated primarily from ATM sales to customers located in the United States and Latin America. As the Company collects
all amounts from these customers and holds $0 in accounts receivable from its ATM or over the counter customers, there is no credit risk
associated with customer concentration for these customers.
The Company has revenues from white-label services
in El Salvador and ancillary sales to customers where it provides services on customary credit terms, typically Net 30 or Net 60. As
of September 30, 2023 and December 31, 2022, one customer, Ministerio de Hacienda (Department of Treasury) of El Salvador represents almost
the entirety of our total accounts receivable balance.
No single customer is responsible for over 10%
of revenue.
Property and Equipment
Property and equipment are stated at cost, net
of accumulated depreciation. Equipment is depreciated over the estimated useful lives of the assets. Leasehold improvements are depreciated
over the shorter of the estimated useful lives of improvements or the term of the related lease. Repairs and maintenance costs are expensed
as incurred.
Following are the estimated useful lives by type:
Computer equipment |
Three years |
ATM equipment |
Three years |
Office equipment |
Six years |
Capitalized software |
Five years |
Capitalized software consists of costs related
to the design, coding, testing and documentation of software, as well as salaries and compensation costs for employees, fees paid to
third-party consultants who are directly involved in development efforts, and costs incurred for upgrades and enhancements to add functionality
of the software. Other costs that do not meet the capitalization criteria are expensed as incurred. The criteria for capitalization include
the completion of the preliminary project stage, demonstration of feasibility of the project and the ability to reliably estimate future
economic benefits. Capitalized software is subject to periodic impairment tests to ensure that the carrying value of the asset is not
overstated. If an impairment is identified, the carrying value of the capitalized software will be reduced to its recoverable amount.
Impairment of Long-Lived Assets
The Company reviews its long-lived assets for
impairment in accordance with FASB ASC 350-30-30-1 whenever events or changes in circumstances have indicated that an asset may not be
recoverable. Management has determined that no impairment of long-lived assets existed as of September 30, 2023 and September 30, 2022
except for impairment of crypto assets held, as discussed below.
Athena
Bitcoin Global
Notes to Unaudited Condensed Consolidated Financial
Statements
Crypto Assets Held
Crypto assets are considered indefinite-lived
intangible assets under ASC 350, Intangibles—Goodwill and are initially measured at cost and are not amortized. As intangible
assets, the crypto assets held are initially recorded at cost and tested for impairment at the end of the month. Impairment exists when
the carrying amount exceeds its fair value, which is measured using the quoted price of the crypto asset at the time its fair value is
being measured in its principal market. The Company identifies publicly available crypto pricing through Coinmarketcap.com which is an
aggregation of crypto prices amongst the most commonly used crypto exchanges. These markets are accessible to the Company in each
of its markets in which it operates in, therefore coinmarketcap.com is concluded to depict the prices that reflect the Company’s
principal market. Impairment is performed for fractional units of the crypto assets.
The Company assigns cost to transactions on a
first-in, first-out basis. Gains on such assets are not recorded or recognized until their final disposition. The impairment of crypto
assets held are recorded as cost of revenues. For the nine months ended September 30, 2023 and September 30, 2022, the Company had impairment
charges related to crypto assets held of $9,000 and $205,000, respectively, which are included in the cost of revenues on the Condensed
Consolidated Statement of Operations and Comprehensive Income. For the three months ended September 30, 2023 and September 30, 2022, the
Company had impairment charges related to crypto assets held of $9,000 and $6,000, respectively, which are included in the cost of revenues
on the Condensed Consolidated Statement of Operations and Comprehensive Income (Loss).
Expenses Paid in Crypto Assets
The Company enters into agreements with certain
vendors and service providers that provide us with the option to settle their invoices in crypto assets. The amount due is fixed and
is denominated in USD. There are no payment terms that include conversion options, variable settlement features, or alternative settlement
provisions contingent upon future events or market price fluctuations that could potentially give rise to embedded derivatives.
The Company considers the guidance in ASC 350,
ASC 606, ASC 610, and ASC 845 when it evaluates the derecognition of its crypto assets paid to vendors in lieu of cash payments. In these
transactions, we have been invoiced by a vendor and given the option to pay in USD or crypto assets, typically Bitcoin. The amount of
Bitcoin is determined by the market wide and easily determined price in accordance with the guidance of ASC 820, Fair Value Measurement.
The Company records as an expense the USD value of the invoice and then considers the above references to determine the proper way to
derecognize the intangible long-lived asset used as payment.
We consider the scoping exceptions for each of
those topics and conclude that that the scope of 610-20 most closely matched the facts of the transactions. ASC 610-20-15-2 states “nonfinancial
assets within the scope of this Subtopic include intangible assets,” which is how the company treats crypto assets.
We evaluated two possibilities to exclude these
transactions from the scope ASC 845. The relevant exceptions to the scope of that Topic are as follows:
|
1. |
The transfer of goods or services in a contract with a customer within
the scope of ASC Topic 606 in exchange for noncash consideration (ASC 845-10-15-4(j)) |
|
2. |
The transfer of a nonfinancial asset within the scope of ASC Topic
610-20 in exchange for noncash consideration (ASC 845-10-15-4(k)) |
For these transactions, our usage of the crypto
asset is as a payment instrument to a vendor, therefore our interpretation of (1) above is for ASC 606 not to apply. We interpret (2)
above to apply when the Company pays a vendor (who is not a customer) with a crypto asset (nonfinancial asset) in lieu of paying that
same vendor with fiat currency (USD). Therefore, we account for the derecognition of the crypto assets, in these transactions, under
the guidance of ASC 610-20, Gains and Losses from the Derecognition of Nonfinancial Assets. This is the same guidance as in ASC
350-10-40-1, Transfer or Sale of Intangible Assets.
Athena Bitcoin Global
Notes to Unaudited Condensed Consolidated Financial
Statements
ASC 610-20-15-2 explicitly states the scope to
include intangible assets. We treat crypto assets as intangible assets. We then apply the general principle of ASC 610-32-2 for recognizing
the gain or loss for the difference between the amount of goods or services we receive (fair market value, per ASC 820 Level 2) and the
cost of acquiring the crypto asset.
We record invoices from vendors in the appropriate
expense category, in the correct time period in which services were provided, in USD and for vendors who elect to be paid in crypto assets,
we transfer the crypto assets at market value at the time of transfer in line with ASC 820 – Fair Value Measurement. We then
recognize as a gain or loss, the difference between the current carrying value of the crypto asset, less impairment and its value at the
time of transfer to cost of revenues in the Condensed Consolidated Statement of Operations and Comprehensive Income (Loss).
For the nine months ended September 30, 2023 and
September 30, 2022, the Company had losses related to the derecognition of crypto assets of $14,000 and $27,000 respectively. For the
three months ended September 30, 2023 and September 30, 2022, the Company had losses (gains) related to the derecognition of crypto assets
held of $15,000 and ($4,000), respectively.
Crypto Asset and Liability Held for Customers
Crypto liability held for customers represents
the Company’s obligation to safeguard certain customers’ crypto assets in digital wallets on the Company’s platform
from a prior service offering. The Company safeguards crypto assets for customers in digital wallets and portions of cryptographic keys
necessary to access crypto assets on the Company’s platform. The Company safeguards these assets and/or keys and is obligated to
safeguard them from loss, theft, or other misuse. The Company records customer crypto assets as well as corresponding customer crypto
liabilities, in accordance with recently adopted guidance, SAB 121. The Company adopted SAB 121 as of January 1, 2021.
The Company maintains a record of all customer
assets in segregated digital wallets held by the Company as well as the private keys to the crypto assets, which are maintained on behalf
of customers. For crypto assets where the Company does not maintain a private key or the ability to recover a customer’s private
key, these balances are not recorded, as there is no related safeguarding obligation in accordance with SAB 121.
The Company records the assets and liabilities,
on the initial recognition and at each reporting date, at the fair value of the crypto assets which it safeguards for its customers. The
Company has committed to securely store all crypto assets and cryptographic keys (or portions thereof) it holds on behalf of customers,
and the value of these assets have been recorded as customer crypto liabilities and corresponding customer crypto assets. As such, the
Company may be liable to its customers for losses arising from theft or loss of private keys. The Company has no reason to believe it
will incur any expense associated with such potential liability because it has established security around private key management to minimize
the risk of theft or loss. The Company holds the customer crypto assets on a 1:1 basis. Any loss or theft would impact the measurement
of the customer crypto assets. During the nine months ended September 30, 2023 and 2022, no losses have been incurred in connection with
customer crypto assets.
As of September 30, 2023 and December 31, 2022,
customer crypto assets and customer crypto liabilities safeguarded was $45,000 and $59,000,
respectively.
Athena Bitcoin Global
Notes to Unaudited Condensed Consolidated Financial
Statements
Foreign Currency
The functional currency of our wholly owned subsidiaries
is the currency of the primary economic environment in which the Company operates. Our foreign subsidiaries that utilize foreign currency
as their functional currency translate such currency into U.S. dollars using (i) the exchange rate on the balance sheet dates for assets
and liabilities, (ii) the average exchange rates prevailing during the period for revenues and expenses, and (iii) historical exchange
rates for equity. Translation adjustments are included in comprehensive income in our Condensed Consolidated Statements of Operations
and Comprehensive Income (Loss).
Assets and liabilities of a subsidiary that are
denominated in currencies other than the Company’s functional currency are re-measured into the functional currency. Transaction
gains and losses related to exchange rate fluctuations on transactions denominated in a currency other than the functional currency of
an entity are recorded within the Company’s Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) as
a component of other expense (income).
Stock-Based Compensation Expense
The Company accounts for stock-based compensation
according to the provisions of ASC 718, Stock Compensation, which requires the measurement and recognition of compensation expense
for all stock-based awards made to employees and directors, including employee stock options and non-vested stock awards, based on the
fair values on the dates they are granted. The Company records the fair value of awards expected to vest as compensation expense on a
straight-line basis over the requisite service periods of the awards, which is generally the vesting period.
The Company uses the Black-Scholes option pricing
model for determining the estimated fair value for stock-based awards. The Black-Scholes option pricing model requires the use of highly
subjective and complex assumptions, which determine the fair value of stock-based awards, including the options expected term, expected
volatility of the underlying stock, risk-free rate, and expected dividends. The expected volatility is based on the average historical
volatility of certain comparable publicly traded companies within the Company’s industry. The expected term assumptions are based
on the simplified method, due to insufficient historical exercise data and the limited period of time that the Company’s equity
securities have been available for issuance. The risk-free interest rates are based on the U.S. Treasury yield in effect at the time
of grant. The Company does not expect to pay dividends on common stock in the foreseeable future; therefore, it estimated the dividend
yield to be 0%.
Technology and Development
Technology and development include
non-capitalized costs incurred in operating, maintaining the Company’s network, website hosting, and technology infrastructure.
Treasury Stock
Treasury stock purchases are accounted for under
the cost method, whereby the entire cost of the acquired stock is recorded as treasury stock. Upon retirement of treasury shares, amounts
in excess of par are value are charged to accumulated deficit.
Cash loans through a non-recourse note for the
purpose of exercising options are considered to be a repurchase of shares previously held by the grantee and are treated like Treasury
Stock.
Athena Bitcoin Global
Notes to Unaudited Condensed Consolidated Financial
Statements
Warrants to Purchase Common Shares
The Company accounts for warrants as either equity-classified
or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance
in the ASC 480 and ASC 815, Derivatives and Hedging (“ASC 815”). Management’s assessment considers whether the warrants
are freestanding financial instruments pursuant to ASC 480, whether they meet the definition of a liability pursuant to ASC 480, and
whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed
to the Company’s own common stock and whether the warrant holders could potentially require “net cash settlement” in
a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires
the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period-end date while
the warrants are outstanding.
For issued or modified warrants that meet all
of the criteria for equity classification, they are recorded as a component of additional paid-in capital at the time of issuance. For
issued or modified warrants that do not meet all the criteria for equity classification, they are recorded at their initial fair value
on the date of issuance and subject to remeasurement each balance sheet date with changes in the estimated fair value of the warrants
to be recognized as a non-cash gain or loss in the statement of operations.
Income Taxes
Income taxes are accounted for under an asset
and liability approach. This process involves calculating the temporary and permanent differences between the carrying amounts of the
assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The temporary differences result
in deferred tax assets and liabilities, which would be recorded on the Balance Sheet in accordance with ASC 740, which established financial
accounting and reporting standards for the effect of income taxes. The likelihood that its deferred tax assets will be recovered from
future taxable income must be assessed and, to the extent that recovery is not likely, a valuation allowance is established. Changes
in the valuation allowance in a period are recorded through the income tax provision in the condensed consolidated Statements of Operations.
The Company adopted ASC 740-10-30 on January
1, 2020. ASC 740-10 clarifies the accounting for uncertainty in income taxes recognized in an entity’s condensed consolidated financial
statements and prescribes a recognition threshold and measurement attributes for financial statement disclosure of tax positions taken
or expected to be taken on a tax return. Under ASC 740-10, the impact of an uncertain income tax position on the income tax return must
be recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. An uncertain
income tax position will not be recognized if it has less than a 50% likelihood of being sustained. Additionally, ASC 740-10 provides
guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. As a result
of the implementation of ASC 740-10, the Company does not have a liability for unrecognized income tax benefits.
Segment Reporting
Operating segments are defined as components
of an entity for which separate financial information is available and that is regularly reviewed by the Chief Operating Decision Maker
(the “CODM”) in deciding how to allocate resources to an individual segment and in assessing performance. The Company’s
Chief Executive Officer is the Company’s CODM. The CODM reviews financial information presented on a global condensed consolidated
basis for purposes of making operating decisions, allocating resources, and evaluating financial performance. While the Company does
have revenue from multiple products and geographies, no measures of profitability by product or geography are available, so discrete
financial information is not available for each such component. As such, the Company has determined that it operates as one operating
segment and one reportable segment.
Earnings (Loss) per share
Basic Earnings (loss) per share is calculated
by dividing net income (loss) by the number of weighted average common shares outstanding for the applicable period. Diluted Earnings
(loss) per share is calculated by dividing net income (loss) available to common stockholders by the weighted average shares outstanding.
Potentially dilutive shares, which are based on the weighted average shares of common stock underlying outstanding stock-based awards,
warrants and convertible senior notes using the treasury stock method or the if-converted method, as applicable, are included when calculating
diluted net income per share of common stock attributable to common stockholders when their effect is dilutive.
Athena Bitcoin Global
Notes to Unaudited
Condensed Consolidated Financial Statements
Recently Adopted Accounting Pronouncements
On March 31, 2022, the SEC issued Staff Accounting
Bulletin No. 121 (“SAB 121”). SAB 121 sets out interpretive guidance from the staff of the SEC regarding the accounting for
obligations to safeguard crypto assets that an entity holds for its platform users. The guidance requires an entity to recognize a liability
for the obligation to safeguard the users’ assets, and recognize an associated asset for the crypto assets held for users. Both
the liability and asset should be measured initially and subsequently at the fair value of the crypto assets being safeguarded. The guidance
also requires additional disclosures related to the nature and amount of crypto assets that the entity is responsible for holding for
its platform users, with separate disclosure for each significant crypto asset, and the vulnerabilities the entity has due to any concentration
in such activities. The guidance in SAB 121 is effective for interim or annual periods ending after June 15, 2022, with retrospective
application as of the beginning of the fiscal year to which the interim or annual period relates. For financial statements, the SAB 121
requires companies to include clear disclosure of the nature and amount of crypto-assets a company is responsible for holding for its
platform users, with separate disclosure for each material crypto-asset, and the vulnerabilities of a business as a result of any concentration
in those activities. Because crypto-asset protection liabilities and corresponding assets are measured at the fair value of the crypto-assets
held for users of its platform, the Company is required to include information about fair value measurements.
The Company has adopted this guidance for the
presentation of its financial statements for the period ending September 30, 2023. There was no material effect in adopting this guidance.
2. Fair Value Measurements
ASC 820, Fair Value Measurement, establishes
a three-level valuation hierarchy for disclosure of fair value measurements. Under the FASB’s authoritative guidance on fair value
measurements, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. In determining fair value, the Company uses various methods, including the market,
income and cost approaches. Based on these approaches, the Company often utilizes certain assumptions that market participants would
use in pricing the asset or liability, including assumptions about risk and or the risks inherent in the inputs to the valuation technique.
These inputs can be readily observable, market corroborated or generally unobservable inputs. The Company utilizes valuation techniques
that maximize the use of observable inputs and minimize the use of unobservable inputs. Based on the observability of the inputs used
in the valuation techniques, the Company is required to provide the following information according to the fair value hierarchy. The
fair value hierarchy ranks the quality and reliability of the information used to determine fair values. Financial assets and liabilities
carried at fair value will be classified and disclosed in one of the following three categories:
|
Level 1: |
Quoted prices for identical assets and liabilities traded
in active exchange markets, such as the New York Stock Exchange. |
|
Level 2: |
Observable inputs other than Level 1, including quoted prices
for similar assets or liabilities, quoted prices in less active markets, or other observable inputs that can be corroborated by observable
market data. Level 2 also includes derivative contracts whose value is determined using a pricing model with observable market
inputs or can be derived principally from or corroborated by observable market data. |
|
Level 3: |
Unobservable inputs supported by little or no market activity for financial
instruments whose value is determined using pricing models, discounted cash flow methodologies or similar techniques, as well as
instruments for which the determination of fair value requires significant management judgment or estimation; also includes observable
inputs for nonbinding single-dealer quotes not corroborated by observable market data. |
The Company has various processes and controls
in place to ensure that fair value is reasonably estimated. A model validation policy governs the use and control of valuation models
used to estimate fair value. This policy requires review and approval of models, and periodic re-assessments of models to ensure that
they are continuing to perform as designed. The Company performs due diligence procedures over third-party pricing service providers
in order to support their use in the valuation process. Where market information is not available to support internal valuations, independent
reviews of the valuations are performed, and any material exposures are escalated through a management review process.
Athena Bitcoin Global
Notes to Unaudited Condensed Consolidated Financial
Statements
While the Company believes its valuation methods
are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair
value of certain financial instruments could result in a different estimate of fair value at the reporting date. To the extent that the
valuation method is based on models or inputs that are less observable or unobservable in the market, the determination of fair value
requires more judgment. The degree of judgment exercised in determining fair value is greatest for the financial instruments categorized
in Level 3.
In certain cases, the inputs used to measure
fair value may fall into different levels of the fair value hierarchy. In such cases, the financial instrument’s level within the
fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment
of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific
to the financial instrument.
Non-Financial Assets and Liabilities Measured
at Fair Value on a Nonrecurring Basis
Certain assets and liabilities are measured at
fair value on a nonrecurring basis (such as goodwill, property and equipment, and crypto assets held); that is, the assets and liabilities
are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (e.g., when there
is evidence of impairment).
3. Revenue
The table below presents revenue of the Company
disaggregated by revenue source for the following periods.
| |
For the three months ended | | |
For the nine months ended | |
| |
September 30, 2023 | | |
September 30, 2022 | | |
September 30, 2023 | | |
September 30, 2022 | |
| |
(in thousands) | |
Athena ATMs | |
$ | 61,671 | | |
$ | 9,623 | | |
$ | 102,088 | | |
$ | 35,612 | |
Athena plus | |
| 2,679 | | |
| 1,833 | | |
| 14,264 | | |
| 13,398 | |
White-label | |
| 1,277 | | |
| 2,574 | | |
| 3,802 | | |
| 4,672 | |
Ancillary and other | |
| 19 | | |
| 19 | | |
| 56 | | |
| 68 | |
| |
$ | 65,646 | | |
$ | 14,049 | | |
$ | 120,210 | | |
$ | 53,750 | |
Athena Bitcoin Global
Notes to Unaudited Condensed Consolidated Financial
Statements
Revenue disaggregated by geography based on sales
location for the period below are as follows.
| |
For the three months ended | | |
For the nine months ended | |
| |
September 30, 2023 | | |
September 30, 2022 | | |
September 30, 2023 | | |
September 30, 2022 | |
| |
(in thousands) | |
Revenue | |
| | |
| | |
| | |
| |
United States | |
$ | 63,233 | | |
$ | 12,999 | | |
$ | 114,804 | | |
$ | 46,448 | |
El Salvador | |
| 2,332 | | |
| 957 | | |
| 5,143 | | |
| 7,040 | |
International | |
| 81 | | |
| 93 | | |
| 263 | | |
| 262 | |
| |
$ | 65,646 | | |
$ | 14,049 | | |
$ | 120,210 | | |
$ | 53,750 | |
Contracts with government of El Salvador
In the third quarter of 2021, the Company installed
and began operating 200 white-labeled Bitcoin ATMs in El Salvador, 10 white-labeled Bitcoin ATMs at El Salvador consulates in the U.S.,
45 white-labeled Bitcoin ATMs in other U.S. locations and sold 950 point-of-sale (POS) terminals for local businesses in El Salvador
to process transactions with Bitcoin to Ministerio de Hacienda (Department of Treasury) of El Salvador (“GOES”). Additionally,
we contracted to sell intellectual property in software, develop, and maintain a Bitcoin platform designed to support a GOES branded
digital wallet.
From time to time, the Company receives money
from GOES to facilitate replenishment of cash in the ATMs that we provide and operate for them. As of September 30, 2023 and December
31, 2022, the cash received as advances from GOES was $201,000 and $1,107,000, respectively, presented as part of Restricted cashheld
for customers on the Condensed Consolidated Balance Sheet. A corresponding liability to repay GOES for the advances is reflected within
Liability for cash held for customers on the Condensed Consolidated Balance Sheet.
On October 5, 2022, the Company completed contract
negotiations with Chivo, Sociedad Anónima de Capital Variable, a wholly owned private company of the Government of El Salvador
("CHIVO") in which both parties signed a Master Services Agreement (MSA) and a Service Level Agreement (SLA) replacing the
existing Master Services Agreement, Contracts and Athena Service Addendums 1 and 2 with the Department of Treasury of El Salvador with
an effective date of July 1, 2022. The services, performance obligations, pricing and terms continue the services, performance obligations,
pricing and terms outlined in the original Master Services Agreement, Contracts and Addendums through July 30, 2024, in line with the
original MSA, Contracts and Addendums. In conjunction with the new MSA and SLA, the Company and CHIVO completed a financial settlement
agreement secured by certain assets to reconcile reporting, finalize balances owed between the parties and conclude the original MSA,
Contracts and Addendums between the Company and the Department of Treasury of El Salvador.
Athena Bitcoin Global
Notes to Unaudited Condensed Consolidated Financial
Statements
4. Accounts Receivable
Accounts receivable, net of allowance consist
of the following as of September 30, 2023 and December 31, 2022:
| |
September 30, 2023 | | |
December 31, 2022 | |
| |
(in thousands) | |
White-label fee receivable | |
$ | 276 | | |
$ | 85 | |
Others | |
| 51 | | |
| 24 | |
| |
$ | 327 | | |
$ | 109 | |
5. Crypto Assets Held
The Company held the following crypto assets as of September 30, 2023 and
December 31, 2022.
| |
September 30, 2023 | | |
December 31, 2022 | |
| |
Qty (1) | | |
Average Rate | | |
Amount (thousands) | | |
Qty (1) | | |
Average Rate | | |
Amount (thousands) | |
| |
| | |
| | |
| | |
| | |
| | |
| |
Bitcoin | |
| 11 | | |
$ | 25,673 | | |
$ | 282 | | |
| 16 | | |
$ | 18,069 | | |
$ | 290 | |
Litecoin | |
| – | | |
| – | | |
| – | | |
| 125 | | |
| 66 | | |
| 8 | |
Ethereum | |
| – | | |
| – | | |
| – | | |
| 17 | | |
| 1,130 | | |
| 19 | |
Bitcoin cash | |
| – | | |
| – | | |
| – | | |
| 26 | | |
| 97 | | |
| 2 | |
Tether | |
| 21,495 | | |
| 1 | | |
| 21 | | |
| 45,502 | | |
| 1 | | |
| 46 | |
| |
| | | |
| | | |
$ | 303 | | |
| | | |
| | | |
$ | 365 | |
(1) Rounded off to the nearest whole number
Athena Bitcoin Global
Notes to Unaudited Condensed Consolidated Financial
Statements
The table below shows the roll-forward of quantity and costs (in thousands
of dollars) of various crypto assets traded by the Company.
| |
Bitcoin | | |
All Others (2) | |
| |
Qty | | |
Cost | | |
Cost | |
| |
| | |
| | |
| |
Nine months ended | |
| | | |
| | | |
| | |
January 1, 2022 | |
| 17 | | |
$ | 796 | | |
$ | 46 | |
Purchases | |
| 1,306 | | |
| 37,158 | | |
| 5,535 | |
Cost of sales | |
| (1,225 | ) | |
| (35,069 | ) | |
| (5,208 | ) |
Crypto assets used for expenses | |
| (78 | ) | |
| (2,264 | ) | |
| – | |
Crypto assets used for capital expenditure | |
| (3 | ) | |
| (121 | ) | |
| – | |
Impairment | |
| – | | |
| (125 | ) | |
| (80 | ) |
Change in bitcoin held on behalf of certain customers (3) | |
| (4 | ) | |
| (124 | ) | |
| – | |
September 30, 2022 (1) | |
| 13 | | |
$ | 251 | | |
$ | 293 | |
| |
| | | |
| | | |
| | |
Three months ended | |
| | | |
| | | |
| | |
July 1, 2022 | |
| 24 | | |
$ | 477 | | |
$ | 261 | |
Purchases | |
| 471 | | |
| 8,329 | | |
| 1,097 | |
Cost of sales | |
| (447 | ) | |
| (7,815 | ) | |
| (1,060 | ) |
Crypto assets used for expenses | |
| (35 | ) | |
| (734 | ) | |
| 0 | |
Crypto assets used for capital expenditure | |
| | | |
| | | |
| | |
Impairment | |
| | | |
| (1 | ) | |
| (5 | ) |
Change
in bitcoin held on behalf of certain customers (3) | |
| – | | |
| (5 | ) | |
| – | |
September 30, 2022 (1) | |
| 13 | | |
$ | 251 | | |
$ | 293 | |
| |
| | | |
| | | |
| | |
Nine months ended | |
| | | |
| | | |
| | |
January 1, 2023 | |
| 16 | | |
$ | 290 | | |
$ | 75 | |
Purchases | |
| 3,837 | | |
| 93,504 | | |
| 2,803 | |
Cost of sales | |
| (3,674 | ) | |
| (89,816 | ) | |
| (2,043 | ) |
Crypto assets used for expenses | |
| (166 | ) | |
| (3,680 | ) | |
| – | |
Crypto assets used for capital expenditure | |
| (1 | ) | |
| (29 | ) | |
| – | |
Crypto assets used for other payments | |
| – | | |
| – | | |
| (814 | ) |
Change
in bitcoin held on behalf of certain customers (3) | |
| (1 | ) | |
| 13 | | |
| – | |
September 30, 2023 (1) | |
| 11 | | |
$ | 282 | | |
$ | 21 | |
| |
| | |
| | |
| |
Three months ended | |
| | |
| | |
| |
July 1, 2023 | |
| 12 | | |
$ | 375 | | |
$ | 23 | |
Purchases | |
| 1,964 | | |
| 50,993 | | |
| 167 | |
Cost of sales | |
| (1,847 | ) | |
| (48,878 | ) | |
| (94 | ) |
Crypto assets used for expenses | |
| (118 | ) | |
| (2,257 | ) | |
| (0 | ) |
Crypto assets used for capital expenditure | |
| | | |
| | | |
| | |
Impairment | |
| | | |
| | | |
| (75 | ) |
Change in bitcoin held on behalf of certain customers (3) | |
| – | | |
| 49 | | |
| – | |
September 30, 2023 (1) | |
| 11 | | |
$ | 282 | | |
$ | 21 | |
(1) Rounded off to the nearest whole number
(2) All others include Bitcoin Cash,
Bitcoin SV, Ethereum, Litecoin, and Tether
(3) Change in Bitcoin held related
to discontinued operations
Athena Bitcoin Global
Notes to Unaudited Condensed Consolidated Financial
Statements
6. Property and Equipment
Property and equipment consist of the following
as of September 30, 2023 and December 31, 2022:
| |
September 30, 2023 | | |
December 31, 2022 | |
| |
(in thousands) | |
ATM equipment | |
$ | 5,894 | | |
$ | 4,923 | |
Capitalized software | |
| 3,816 | | |
| 3,811 | |
Computer equipment | |
| 114 | | |
| 111 | |
Office equipment | |
| 25 | | |
| 22 | |
| |
| 9,849 | | |
| 8,867 | |
Less accumulated depreciation and amortization | |
| 4,553 | | |
| 3,028 | |
| |
$ | 5,296 | | |
$ | 5,839 | |
Depreciation expense for the three months ended
September 30, 2023 and 2022 was $360,000 and $341,000 respectively. Depreciation expense for the nine months ended September 30, 2023
and 2022 was $1,023,000 and $1,022,000 respectively. Amortization expense for the three months ended September 30, 2023 and 2022 was $168,000
and $0 respectively. Amortization expense for the nine months ended September 30, 2023 and 2022 was $502,000 and $0 respectively.
The Company entered into a non-binding Letter
of Intent with Arley Lozano, a principal beneficial owner of Vakano Industries and XPay, both Colombian entities (collectively, “XPay”),
for the purchase and sale of certain assets of XPay, primarily intellectual property assets, including the XPay Wallet (the precursor
to the Chivo Wallet) and XPay POS software, to the Company. In September 2021, Lozano and the Company entered into a letter of intent
to acquire assets of XPay which include certain technologies, ATMs, point-of-sale terminals in El Salvador, X-Pay POS system and other
assets. The Company never entered into final agreements contemplated in the letter of intent.
On December 21, 2022, the Company sent formal
notice to XPay canceling the non-binding letter of intent for the proposed transaction between the parties and confirming that the $1,595,000
paid to date and presented in previous periods under other advances in the Condensed Consolidated Balance Sheets represented payment in
full for certain software, code and technology developments. The cost of the software is included in capitalized software as of September
30, 2023 and December 31, 2022. and is being amortized over five years.
The table below presents property and equipment, net by geography.
| |
September 30, 2023 | | |
December 31, 2022 | |
| |
(in thousands) | |
United States | |
$ | 4,078 | | |
$ | 4,167 | |
El Salvador | |
| 1,218 | | |
| 1,672 | |
| |
$ | 5,296 | | |
$ | 5,839 | |
7. Operating Leases
Lease liabilities as of consist of the following:
| |
September 30, 2023 | | |
December 31, 2022 | |
| |
(in thousands) | |
Current portion of lease liabilities | |
$ | 5,391 | | |
$ | 786 | |
Long term lease liabilities, net of current portion | |
| 10,549 | | |
| 1,965 | |
Total lease liabilities | |
$ | 15,940 | | |
$ | 2,751 | |
Athena Bitcoin Global
Notes to Unaudited Condensed Consolidated Financial
Statements
The Company classifies its facilities as right
of use arrangements for ATM retail spaces under operating leases. The Company does not have any significant arrangements where it is the
lessor. The Company does not separate lease and non-lease components for arrangements where the Company is a lessee. Leases with an initial
lease term of 12 months or less are not recorded on the balance sheet. The Company determines if an arrangement contains a lease at inception.
Operating lease expense is recognized on a straight-line basis over the lease term.
Operating lease assets and operating lease liabilities
are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. For purposes
of calculating operating lease obligations under the standard, the Company's lease terms may include options to extend or terminate the
lease when it is reasonably certain that the Company will exercise such option. The Company's leases do not contain material residual
value guarantees or material restrictive covenants. The discount rate used to measure a lease obligation should be the rate implicit
in the lease; however, the Company’s operating leases generally do not provide an implicit rate. Accordingly, the Company uses
its incremental borrowing rate at lease commencement to determine the present value of lease payments. The incremental borrowing rate
is an entity-specific rate which represents the rate of interest a lessee would pay to borrow on a collateralized basis over a similar
term with similar payments. Right-of-use (“ROU”) assets represent the Company’s right to use an underlying asset for
the lease term and lease liabilities represent the obligation to make lease payments arising from the lease.
The operating lease asset also includes any initial
direct costs and lease payments made prior to lease commencement and excludes lease incentives incurred.
8. Prepaid Expenses and Other Assets
Prepaid expenses and other current assets consist of the following
as of September 30, 2023 and December 31, 2022:
| |
September 30, 2023 | | |
December 31, 2022 | |
| |
(in thousands) | |
Prepaid expenses and other current assets: | |
| | | |
| | |
Prepaid expenses | |
$ | 240 | | |
$ | 358 | |
Prepaid foreign taxes | |
| 137 | | |
| 124 | |
Supplier advances | |
| 821 | | |
| 680 | |
Others | |
| 29 | | |
| 26 | |
| |
$ | 1,227 | | |
$ | 1,188 | |
Athena Bitcoin Global
Notes to Unaudited Condensed Consolidated Financial
Statements
9. Accounts Payable, Accrued Expenses and
Other Liabilities
Accounts payable and accrued expenses, and other
current liabilities consist of the following as of September 30, 2023 and December 31, 2022:
| |
September 30, 2023 | | |
December 31, 2022 | |
| |
(in thousands) | |
Accounts payable and accrued expenses: | |
| | | |
| | |
Accounts payable | |
$ | 1,203 | | |
$ | 1,401 | |
Accrued expenses | |
| 173 | | |
| 45 | |
Interest payable | |
| 75 | | |
| 85 | |
| |
$ | 1,451 | | |
$ | 1,531 | |
Other current liabilities: | |
| | | |
| | |
Payroll liabilities | |
$ | 66 | | |
$ | 39 | |
Foreign local taxes payable | |
| 216 | | |
| 184 | |
Uncertain tax position | |
| – | | |
| 106 | |
Other payable | |
| 40 | | |
| 67 | |
| |
$ | 322 | | |
$ | 396 | |
10. Debt
Related Party
In 2017, the Company entered into several subordinated
note agreements with shareholders of the Company’s common stock. The notes had a principal amount of $117,000 with maturity dates
in 2021 and 2022. Interest as defined in the notes is 12% per annum. As of September 30, 2023, and December 31, 2022, the outstanding
principal was $90,000.
On August 4, 2022, the Company completed a lending
transaction with Mike Komaransky, the Company’s principal shareholder and former director, whereby the Company borrowed $500,000
from Mr. Komaransky pursuant to the terms of a secured promissory note and security agreement. The promissory note has an interest rate
of 6% and the repayment of the principal amount and any accrued interest is secured by certain assets of the Company with respect to which
Mr. Komaransky holds first priority lien and security interest. The terms of the secured promissory note and the security agreement were
subsequently amended by the parties on January 17, 2023. Pursuant to the terms of the amended secured promissory note, the Company agreed
to make monthly payments of $50,000 until the maturity date of the secured promissory note, which is on August 31, 2023. As of September
30, 2023, and December 31, 2022, the outstanding principal was $0 and $400,000, respectively.
As of May 15, 2023, the Company entered into a
certain Senior Secured Loan Agreement, as amended (the “Loan Agreement”) and Senior Secured Revolving Credit Promissory Note
(the “Revolving Credit Note”) with KGPLA Holdings LLC (“KGPLA”), an entity in which Mike Komaransky, a former
director and principal shareholder of the Company has a controlling interest. The Revolving Credit Note allows the Company to borrow up
to $4,000,000 for the operations of its New Bitcoin ATM Machines, as defined in the Loan Agreement, with a maturity date of May 15, 2024.
Fees for these borrowings are calculated based on a percentage of the gross daily receipts generated from these machines and are recorded
as part of Cost of Revenue in the Condensed Consolidated Income Statement. As of September 30, 2023 the outstanding principal of the Revolving
Credit Note was $4,000,000. In connection with the above loan transaction and issuance of Revolving Credit Note, the Company granted KGPLA
a first priority lien and security interest in and to all of the Company’s assets, except for property previously pledged to Banco
Hipotecario, and with respect to such assets, the Company granted the Lender a second priority lien.
Remainder of 2023 | |
$ | 90 | |
2024 | |
| 4,000 | |
Total related party debt payments | |
$ | 4,090 | |
Athena Bitcoin Global
Notes to Unaudited Condensed Consolidated Financial
Statements
Third Party
On May 30, 2017, the Company entered into a senior
note agreement with Consolidated Trading Futures, LLC. The note provided for a principal amount of $1,490,000 secured against the Company’s
cash in machines and held by service providers. Interest as defined in the note as 15% per annum with a maturity date of May 31, 2022.
During the second quarter of 2022, the maturity date was extended to May 31, 2023 pursuant to a joint agreement. The Company agreed to
make a one-time payment in the amount of $200,000 and weekly payments in the amount of $25,000 towards the reduction of the principal
amount of the loan. As of September 30, 2023, and December 31, 2022, the outstanding principal was $0 and $565,000, respectively.
On August 1, 2018, the Company entered into a
promissory note with LoanMe, Inc. The promissory note provided for a principal amount of $100,000, with a final maturity date of August
1, 2028, with equal monthly installment payments of $2,000. Interest as defined in the promissory note is 24% per annum. As of September
30, 2023, and December 31, 2022, the outstanding principal was $75,000 and $80,000, respectively.
On September 22, 2021, the Company entered into
a borrowing arrangement with Banco Hipotecario secured against the Company’s assets in El Salvador. The promissory note provided
for a principal amount of $1,500,000, with a final maturity date of 36 months after disbursal with equal monthly installment payments
of $49,108 with a moratorium of 2 months. Interest as defined in the loan arrangement is 7.5% per annum. As of September 30, 2023, and
December 31, 2022, the outstanding principal was $666,000 and $1,037,000, respectively.
On December 10, 2022, the Company entered into
a financing agreement for $49,000 with Capital Premium Financing, Inc. to pay the insurance premium on its commercial liability insurance
with an annual percentage rate of 17.65% per annum repayable in nine monthly installments beginning February 1, 2023. As of September
30, 2023, and December 31, 2022, the outstanding principal was $6,000 and $49,000, respectively.
For third-party Debt, the principal payments due
as of September 30, 2023 are as follows (in thousands):
Remainder of 2023 | |
$ | 136 | |
2024 | |
| 548 | |
2025 | |
| 12 | |
2026 | |
| 16 | |
2027 | |
| 20 | |
Thereafter | |
| 15 | |
Total third-party debt payments | |
$ | 747 | |
Deferred financing costs are amortized using
the effective interest method.
Deferred financing for the three and nine months ended September 30,
2023 was $19,000 and $31,000 and $100 and $900 for the for the three and nine months ended September 30, 2022. Deferred financing costs
had a carrying value of $45,000 on September 30, 2023 and $0 at December 31, 2022. These discounts are recorded as a reduction of debt
on the Condensed Consolidated Balance Sheets.
11. Convertible debt
Related Party
On January 31, 2020, the Company entered into
a convertible debenture agreement with KGPLA LLC, an entity in which Mike Komaransky, a former director and principal shareholder of the
Company has controlling interest. The convertible debenture provided for a principal amount of $3,000,000, with a maturity date of January
31, 2025. Interest as defined by the agreement is 8% per annum. KGPLA, LLC has the option to convert the outstanding principal and accrued
interest balance into common stock of the Company at the lower of $0.012 per share or 20% discount to the next major financing or change
in control. The convertible debenture was amended and restated as of May 15, 2023 and became a secured, and not general unsecured, obligation
of the Company, on par with the notes issued pursuant to the Senior Secured Loan Agreement entered into as of the same date. As of September
30, 2023 and December 31, 2022, the outstanding principal debenture amount of $3,000,000 was presented under convertible debt, related
party in the Condensed Consolidated Balance Sheets.
Athena Bitcoin Global
Notes to Unaudited Condensed Consolidated Financial
Statements
Third Party
On January 31, 2020, the Company entered into
a convertible debenture agreement with Swingbridge Crypto III, LLC. The convertible debenture provided for a principal amount of $125,000,
with a maturity date of January 31, 2025. Interest as defined by the agreement is 8% per annum. On August 26, 2021, Swingbridge Crypto
III, LLC gave notice to convert the outstanding principal of $125,000 as per the terms of the debentures since the Company secured major
financing consequent to issuance of 6% Convertible Debentures as described below. This amount is included in Shares to be issued in the
Condensed Consolidated Statement of Stockholders’ Deficit as at December 31, 2021. The Company issued 10,416,666 shares to convert
the outstanding principal on February 18, 2022. This debt conversion is included in the increase of common stock in the Condensed Consolidated
Statement of Stockholders’ Equity (Deficit) for the nine months ended September 30, 2022.
On June 22, 2021 the Company authorized the issuance
and sale of up to $5,000,000 in aggregate principal amount of Convertible Debentures. The convertible debentures (i) are unsecured, (ii)
bear interest at the rate of 6% per annum, and (iii) are due two years from the date of issuance. The convertible debentures are convertible
at any time at the option of the investor into shares of the Company’s common stock that is determined by dividing the amount to
be converted by the lesser of (i) $0.10 per share or (ii) 25% less than the twenty trading day (20-trading day) volume weighted average
price (“VWAP”) of the common stock-based on the trades reported by the OTC Pink Market operated by the OTC Markets Group,
Inc. As of December 31, 2021, the Company received an amount of $4,985,000 toward subscription against this issue.
On March 31, 2022 additional debenture holders
exercised their right and gave an irrevocable notice to convert $3,245,000 of the convertible debt. The Company issued a total of 34,650,000 shares to convert the outstanding principal for the nine months ended September 30, 2022. The outstanding amount of the convertible debt
is $353,000 and $1,520,000 as of September 30, 2023 and December 31, 2022, respectively.
Maturities on the Company’s convertible
debt are as follows:
Remainder of 2023 | |
$ | 353 | |
2024 | |
| – | |
2025 | |
| 3,000 | |
Total convertible debt payments | |
$ | 3,353 | |
12. Fair Value Measurements
The following table sets forth by level, within the fair value hierarchy,
the Company’s assets and liabilities measured and recorded at fair value on a recurring basis (in thousands):
| |
Level 1 | | |
Level 2 | | |
Level 3 | | |
Total | | |
Level 1 | | |
Level 2 | | |
Level 3 | | |
Total | |
Assets | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Cash and cash equivalents | |
$ | 13,168 | | |
$ | – | | |
$ | – | | |
$ | 13,168 | | |
$ | 2,101 | | |
$ | – | | |
$ | – | | |
$ | 2,101 | |
Restricted cash – cash held for customers | |
| 504 | | |
| – | | |
| – | | |
| 504 | | |
| 1,107 | | |
| – | | |
| – | | |
| 1,107 | |
Crypto assets held | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| 59 | | |
| – | | |
| 59 | |
| |
$ | 13,672 | | |
$ | – | | |
$ | – | | |
$ | 13,672 | | |
$ | 3,208 | | |
$ | 59 | | |
$ | – | | |
$ | 3,267 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Liabilities | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Other current liabilities | |
$ | – | | |
$ | – | | |
$ | – | | |
$ | – | | |
$ | – | | |
$ | 59 | | |
$ | – | | |
$ | 59 | |
| |
$ | – | | |
$ | – | | |
$ | – | | |
$ | – | | |
$ | – | | |
$ | 59 | | |
$ | – | | |
$ | 59 | |
The Company did not make any transfers between the levels of the fair
value hierarchy during the period ended September 30, 2023 and year ended December 31, 2022.
Non-recurring Assets and Liabilities Measured and Recorded at Fair
Value
The Company’s non-financial assets, such
as goodwill, intangible assets, property and equipment, and crypto assets held are adjusted to fair value when an impairment charge is
recognized. Such fair value measurements are based predominately on Level 3 inputs. Fair value of crypto assets held are predominantly
based on Level 2 inputs.
Athena Bitcoin Global
Notes to Unaudited
Condensed Consolidated Financial Statements
13. Stock-Based Compensation
Stock Option Plan
The Company previously had a 2016 Equity Incentive
Plan (the 2016 Plan) which was terminated in January 2020. As of September 30, 2023 and December 31, 2022, there were no options outstanding
under the plan.
The Company’s Board of Directors and majority
shareholders approved the 2021 Equity Compensation Plan (the 2021 Plan) effective October 15, 2021. On February 28, 2023, in conjunction
with a signed contractor service agreement, the Company issued a Restricted Stock Units Agreement for 2,000,000 shares of common stock
under the 2021 Plan.
14. Commitments and Contingencies
The Company, from time to time, might have claims
against it incidental to the Company’s business including but not limited to tax demands and penalties. While the outcome of any
of these matters cannot be predicted with certainty, management does not believe that the outcome will have a material adverse effect
on the accompanying Condensed Consolidated Financial Statements.
15. General and Administrative
Expenses
General and administrative expenses consisted
of the following.
| |
For the three months ended | | |
For the nine months ended | |
| |
September 30, 2023 | | |
September 30, 2022 | | |
September 30, 2023 | | |
September 30, 2022 | |
| |
(in thousands) | |
Salaries and benefits | |
$ | 709 | | |
$ | 760 | | |
$ | 1,811 | | |
$ | 2,799 | |
General and administrative expenses | |
| 499 | | |
| 387 | | |
| 1,300 | | |
| 1,655 | |
Travel | |
| 44 | | |
| 40 | | |
| 135 | | |
| 193 | |
Rent | |
| 45 | | |
| 7 | | |
| 99 | | |
| 89 | |
| |
$ | 1,297 | | |
$ | 1,194 | | |
$ | 3,345 | | |
$ | 4,736 | |
16. Sales and Marketing
Sales and marketing expenses consisted of the
following.
| |
For the three months ended | | |
For the nine months ended | |
| |
September 30, 2023 | | |
September 30, 2022 | | |
September 30, 2023 | | |
September 30, 2022 | |
| |
(in thousands) | |
Salaries and benefits | |
$ | 14 | | |
$ | 97 | | |
$ | 158 | | |
$ | 303 | |
Advertising | |
| 25 | | |
| 31 | | |
| 33 | | |
| 157 | |
Other selling and marketing | |
| 2 | | |
| – | | |
| 49 | | |
| 20 | |
| |
$ | 41 | | |
$ | 128 | | |
$ | 240 | | |
$ | 480 | |
Athena Bitcoin Global
Notes to Unaudited Condensed Consolidated Financial
Statements
17. Employee Loans
In January 2020, the Company allowed its employees
with vested stock options to exercise with the use of a non-recourse loan agreement. These loan agreements have a maturity date of 48
months from the date of exercise and carries an interest rate of 1.69%. As of September 30, 2023, and December 31, 2022, the outstanding
balance due from employees was $1,006,000 and $993,000, respectively.
18. Warrants
In 2017 Athena Bitcoin, Inc. issued warrants to
purchase 202,350 shares of Athena Bitcoin, Inc.’s common stock for $14,005. The warrants provide for a right to purchase common
stock in Athena Bitcoin, Inc., priced at $2.00 to $3.00 per share, at an average exercise price of $2.49 per share. The warrants were
classified as equity. In January 2020, warrants to purchase 102,350 shares of Athena Bitcoin, Inc. common stock at an average exercise
price of $2.00 per share were exercised.
The unexercised warrants to purchase 100,000 shares
of Athena Bitcoin, Inc. common stock, at an exercise price of $3 per share, remain outstanding as of September 30, 2023 and December 31,
2022. The warrants will expire on May 30, 2025.
19. Related Party
Aside from the transactions discussed in other
notes to these financial statements, the Company continues to carry a payables balance to Red Leaf Opportunities Fund LP, an entity in
which the Chief Executive Officer has a controlling interest in the General Partner, Red Leaf Advisors LLC, for previous purchases of
crypto assets. The outstanding balance due to Red Leaf Opportunities Fund LP as of September 30, 2023 and December 31, 2022 was $407,000,
and is recorded in accounts payable, related party in the Condensed Consolidated Balance Sheets.
During the period ended September 30, 2023 and
December 31, 2022 Company incurred cash logistics services of $1,360,000 and $718,000 and ATM conversion cost of $670,000 and $0, respectively,
to Swift Trust, LLC and subsequently Move On Security LLC. The current Chief Executive Officer and director of the Company has a controlling
interest in Swift Trust, LLC. He is a non-controlling partner of Move On Security LLC. The Company recorded payables to Move On Security
LLC, presented as part of accounts payable, related party in the Condensed Consolidated Balance Sheets of $371,000 and $58,000 as of September
30, 2023 and December 31, 2022, respectively.
20. Fees on Virtual Vault Services
Virtual Vault is a term used in the Armored
Car and Cash Transport industry to define a service provided by armored car services for assets considered property of the bank when the
bank does not have a physical vault or location in a given state or location. The Fees for virtual vault services included in our income
statement are for a currency availability service provided to the Company by its bank for making funds held in a virtual vault immediately
available to the Company. Neither the term nor the service is related to virtual currency or crypto assets.
Fees on virtual vault services for the three months ended September
30, 2023 and September 30, 2022 was $312,000 and $0, respectively, and for the nine months ended September 30, 2023 and September 30,
2022 was $543,000 and $67,000, respectively.
Athena Bitcoin Global
Notes to Unaudited Condensed Consolidated Financial
Statements
21. Income Taxes
The Company’s effective tax rate (“ETR”)
for the three months ended September 30, 2023 and 2022 was 25.02% and 85.00%, respectively. The Company’s effective tax rate (“ETR”)
for the nine months ended September 30, 2023 and 2022 was 27.72% and 541.00%, respectively. The ETR of 25.02% for the three months ended
September 30, 2022 and 27.72% for the nine months ended September 30, 2023 was higher than the U.S. statutory rate of 21.0% due to due
to the valuation allowance on domestic and foreign deferred tax assets, and foreign withholding taxes.
22. Net Earnings (Loss) Per
Share
The computation of net loss per
share is as follows:
| |
For the three months ended | | |
For the six months ended | |
| |
September 30, 2023 | | |
September 30, 2022 | | |
September 30, 2023 | | |
September 30, 2022 | |
| |
(in thousands, except per share amounts) | |
Basic net loss per share: | |
| | |
| | |
| | |
| |
Numerator | |
| | |
| | |
| | |
| |
Net income (loss) | |
$ | 5,930 | | |
$ | (138 | ) | |
$ | 8,191 | | |
$ | (1,611 | ) |
Denominator | |
| | | |
| | | |
| | | |
| | |
Weighted-average shares of common stock
used to compute net loss per share attributable to common stockholders, basic | |
| 4,094,459,545 | | |
| 4,083,081,524 | | |
| 4,094,459,545 | | |
| 4,083,081,524 | |
Net income (loss) per share attributable
to common stockholders, basic | |
$ | 0.00145 | | |
$ | 0.00003 | | |
$ | 0.00200 | | |
$ | (0.00039 | ) |
Diluted net loss per share: | |
| | | |
| | | |
| | | |
| | |
Numerator | |
| | | |
| | | |
| | | |
| | |
Net income (loss), basic | |
$ | 5,930 | | |
$ | 138 | | |
$ | 8,191 | | |
$ | (1,611 | ) |
Add: Interest expense on convertible debt | |
| 72 | | |
| 92 | | |
| 236 | | |
$ | – | |
Net income (loss), diluted | |
$ | 6,002 | | |
$ | 230 | | |
$ | 8,427 | | |
$ | (1,611 | ) |
Denominator | |
| | | |
| | | |
| | | |
| | |
Weighted-average shares of common stock used to compute net
loss per share attributable to common stockholders, basic | |
| 4,094,459,545 | | |
| 4,083,081,524 | | |
| 4,094,459,545 | | |
| 4,083,081,524 | |
Weighted-average effect of potentially dilutive securities:
convertible debt | |
| 265,200,000 | | |
| 265,200,000 | | |
| 265,200,000 | | |
| – | |
Unexercised warrants | |
| 124,469,000 | | |
| 124,469,000 | | |
| 124,469,000 | | |
| – | |
Weighted-average shares of common stock
used to compute net loss per share attributable to common stockholders, diluted | |
| 4,484,128,545 | | |
| 4,472,750,525 | | |
| 4,484,128,545 | | |
| 4,083,081,524 | |
Net loss per share attributable to common
stockholders, diluted | |
$ | 0.00134 | | |
$ | (0.00005 | ) | |
$ | 0.00188 | | |
$ | (0.00039 | ) |
Potential common
shares related to the Company’s convertible debt of 265,200,000 and unexercised warrants of 124,469,000 for the nine months ended
September 30, 2022 were excluded in the calculation of diluted shares outstanding as the effect would have been anti-dilutive.
Athena Bitcoin Global
Notes to Unaudited Condensed Consolidated Financial
Statements
23. Legal Proceedings
On September 8, 2022, Athena Bitcoin, Inc. (“Athena”
or the “Company”) received from the Office of the Commissioner of Financial Institutions (“OCFI”), a “Final
Resolution and Order to Cease and Desist” (“OC&D”), requiring to, among other matters, stop the operations and
marketing of the bitcoin automated teller machines (“BTMs”), that were operating in Puerto Rico. On September 12, 2022, Athena
filed a Complaint for Declaratory Judgment and Permanent Injunction, accompanied by a Petition for Preliminary Injunction before the
Courts of the Commonwealth, Superior Part requesting that the determination and effects of the OC&D be stayed until final resolution
of the case. On November 10, 2022, the Court dismissed the civil action with the interpretation that the controversy presented before
it was not ripe for resolution by the Court. The Company will seek to have this determination reconsidered by the Superior Part. If the
Superior Part affirms its previous determination, Athena plans to seek a reversal of such determination before the Court of Appeals of
the Commonwealth accompanied by a Motion Requesting a Stay of the determination and effects of the OC&D.
On April 10, 2023 the Puerto Rico Court of Appeals
issued a judgment unfavorable to Athena’s appeal. Athena has determined it will not pursue further redress against the Order to
Cease and Desist that was issued by the Office of the Commissioner of Financial Institutions and with which it has been complying since
September 2022. Athena has considered and implemented another option available under PR law that has permitted resumption of operations
of the Bitcoin ATMs in Puerto Rico.
Revenue from operations in Puerto Rico for the
nine months ended September 30, 2023 and for the year ended December 31, 2022 were 0% and 3% of total revenue respectively.
24. Off-Balance Sheet
Arrangements
In the normal course of business,
the Company’s contract with the government of El Salvador for the operation of the Chivo branded ATMs obligates the Company to assume
the risk of loss for funds used in the operation of the Chivo branded ATMs while those funds are in transit. The Company has contracted
with licensed and insured cash logistics companies to securely transport these funds. The logistics companies’ insurance covers
in full the value of the funds in transit however, in the event of a loss or destruction of the funds in transit, the Company could encounter
a timing delay between insurance payment for lost funds and the date of actual loss. The amount of funds in transit varies based on multiple
factors including but not limited to economic activity, seasonality, holiday and bank closure calendars. The amount of funds in transit
as of September 30, 2023, and December 31, 2022, were $741,000 and $278,000, respectively.
25. Subsequent Events
The Company has evaluated subsequent events after
the balance sheet date of September 30, 2023 through November 14, 2023 the date on which these Unaudited Condensed Consolidated Financial
Statements were available to be issued.
Equipment Financing Agreement
On November 2, 2023, the Company entered into
an Equipment Financing Agreement (the "Financing Agreement") with Taproot Acquisition Enterprises, LLC, a Delaware limited
company (the "Lender") in which the Company agreed to purchase certain Bitcoin ATM machines (the “Equipment”) from
the Lender. The Company and the Lender have previously entered into an Equipment Sublease Agreement on April 13, 2023 (the “Sublease
Agreement”), whereby Lender as a lessee of cryptocurrency ATMs, subleased to the Company certain Bitcoin ATM machines listed in
the Sublease Agreement on the terms and conditions specified in the Sublease Agreement. The Financing Agreement amends and modifies the
Sublease Agreement into a purchase and financing agreement. The Company is obligated to make additional payments for other units identified
in the Equipment schedules, to complete the transfer of the title to the Company on those additional units. The Financing Agreement contains
certain restrictive covenants and representations with which the Company must comply, such as maintaining required financial ratios,
providing financial statements and reports, and obtaining the Lender's consent for certain transactions. The Financing Agreement also
provides the Lender with certain remedies in the event of default by the Company, such as accelerating the payments, repossessing the
Equipment, or enforcing any of the available remedies against the Lender’s security interest in the units of the Equipment to which
the Company has title. As of the date of this filing, the Company was in compliance with all the covenants and representations under
the Financing Agreement. In conjunction with the Agreement, the Company amended the Senior Secured Loan Agreement with KGPLA Holdings
LLC (“KGPLA”) dated May 15, 2023, and amended as of June 6, 2023, July 27, 2023, on November 1, 2023 by entering into the
Third Amended Secured Loan Agreement with KGPLA (the “Third Amendment”). Third Amendment allows the Company to incur additional
debt and liens in connection with the purchase of the Equipment from the Lender, subject to certain conditions and limitations. Concurrent
with the execution of the Third Amendment, and as required by the terms of the Third Amendment, the Lender, the Company and KGPLA entered
into an intercreditor agreement pursuant to which KGPLA has been granted a security interest in and lien on the Equipment purchased by
the Company from the Lender, which is subordinate in all respects to the Lender’s security and interest in the Equipment to secure
the Company’s obligations under the Financing Agreement. The Financing Agreement will be terminated upon the completion of the
required payments for the Equipment listed in the Financing Agreement, on their respective applicable terms.
Report of Independent
Registered Public Accounting Firm
To the shareholders and the board of directors
of Athena Bitcoin Global
Opinion on the Financial Statements
We have audited the accompanying consolidated
balance sheets of Athena Bitcoin Global (the "Company") as of December 31, 2022 and 2021, the related statements of operations,
stockholders' equity (deficit), and cash flows for the years then ended, and the related notes (collectively referred to as the "financial
statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company
as of December 31, 2022 and 2021, and the results of its operations and its cash flows for the years then ended, in conformity with accounting
principles generally accepted in the United States.
Substantial Doubt about the Company’s
Ability to Continue as a Going Concern
The accompanying financial statements have been
prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company’s
significant operating losses raise substantial doubt about its ability to continue as a going concern. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit. We
are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the
standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged
to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding
of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s
internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess
the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond
to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial
statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as
evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
/s/ BF Borgers CPA PC
BF Borgers CPA PC (PCAOB ID 5041)
We have served as the Company's auditor since
2020
Lakewood, CO
March 30, 2023
Athena Bitcoin Global
Consolidated Balance Sheets
| |
December 31, | | |
December 31, | |
| |
2022 | | |
2021 | |
| |
(in thousands) | |
Assets | |
| | |
| |
Current assets: | |
| | | |
| | |
Cash and cash equivalents | |
$ | 2,101 | | |
$ | 1,174 | |
Restricted cash held for customers | |
| 1,107 | | |
| 3,671 | |
Accounts receivable | |
| 109 | | |
| 1,531 | |
Other advances | |
| – | | |
| 845 | |
Prepaid expenses and other current assets | |
| 1,188 | | |
| 727 | |
Total current assets | |
| 4,505 | | |
| 7,948 | |
| |
| | | |
| | |
Crypto assets held | |
| 365 | | |
| 842 | |
Property and equipment, net | |
| 5,839 | | |
| 3,808 | |
Right of use asset – operating lease | |
| 2,751 | | |
| 2,318 | |
Other noncurrent assets | |
| 50 | | |
| 85 | |
Total assets | |
$ | 13,510 | | |
$ | 15,001 | |
| |
| | | |
| | |
Liabilities and stockholders’ deficit | |
| | | |
| | |
Current liabilities: | |
| | | |
| | |
Accounts payable and accrued expenses | |
$ | 1,531 | | |
$ | 1,044 | |
Accounts payable, related party | |
| 465 | | |
| 407 | |
Liability for cash held for customers | |
| 1,107 | | |
| 3,671 | |
Advances for revenue contract | |
| – | | |
| 3,500 | |
Operating lease liabilities, current portion | |
| 786 | | |
| 624 | |
Income tax payable | |
| 694 | | |
| 14 | |
Deferred tax liabilities | |
| 28 | | |
| – | |
Long-term debt, current portion | |
| 507 | | |
| 1,959 | |
Short-term debt | |
| 614 | | |
| 75 | |
Related party note payable, current portion | |
| 490 | | |
| 90 | |
Convertible debt | |
| 1,520 | | |
| – | |
Other current liabilities | |
| 396 | | |
| 615 | |
Total current liabilities | |
| 8,138 | | |
| 11,999 | |
See accompanying notes.
Athena Bitcoin Global
Consolidated Balance Sheets
| |
December 31, | | |
December 31, | |
| |
2022 | | |
2021 | |
| |
(in thousands, except number of shares) | |
Long-term liabilities: | |
| | | |
| | |
Long-term debt | |
$ | 610 | | |
$ | 1,117 | |
Operating lease liabilities, net of current portion | |
| 1,965 | | |
| 1,694 | |
Convertible debt, related party | |
| 3,000 | | |
| 3,000 | |
Convertible debt | |
| – | | |
| 4,675 | |
Total liabilities | |
$ | 13,713 | | |
$ | 22,575 | |
Commitments and contingencies (Note 15) | |
| | | |
| | |
| |
| | | |
| | |
Stockholders’ deficit: | |
| | | |
| | |
Common stock, $0.001 par value 4,409,605,000 shares authorized; 4,094,459,545
and 4,049,392,879 shares issued and outstanding as of December 31, 2022 and December 31, 2021, respectively | |
$ | 4,095 | | |
$ | 4,050 | |
Loans to employees for options exercised | |
| (993 | ) | |
| (977 | ) |
Net common stock | |
| 3,102 | | |
| 3,073 | |
Additional paid in capital | |
| 8,446 | | |
| 5,246 | |
Accumulated deficit | |
| (11,576 | ) | |
| (15,716 | ) |
Accumulated other comprehensive loss | |
| (175 | ) | |
| (177 | ) |
Total stockholders’ deficit | |
| (203 | ) | |
| (7,574 | ) |
Total liabilities and stockholders’ deficit | |
$ | 13,510 | | |
$ | 15,001 | |
See accompanying notes.
Athena Bitcoin Global
Consolidated Statement of
Operations and Comprehensive Income (Loss)
| |
For the year ended | |
| |
December
31, 2022 | | |
December
31, 2021 | |
| |
(in thousands, except number of shares) | |
Revenues | |
$ | 73,686 | | |
$ | 81,747 | |
Cost of revenues | |
| 59,843 | | |
| 76,178 | |
Gross profit | |
| 14,043 | | |
| 5,569 | |
| |
| | | |
| | |
Operating expenses: | |
| | | |
| | |
Technology and development | |
| 776 | | |
| 143 | |
General and administrative | |
| 5,784 | | |
| 4,153 | |
Sales and marketing | |
| 594 | | |
| 647 | |
Theft of bitcoin | |
| – | | |
| 1,600 | |
Other operating expense | |
| 30 | | |
| 231 | |
Total operating expenses | |
| 7,184 | | |
| 6,774 | |
| |
| | | |
| | |
Income (loss) from operations | |
| 6,859 | | |
| (1,205 | ) |
| |
| | | |
| | |
Fair value adjustment on crypto asset borrowing derivatives | |
| – | | |
| 515 | |
Interest expense | |
| 668 | | |
| 661 | |
Fees on borrowings | |
| 113 | | |
| 341 | |
Other expense | |
| 169 | | |
| 39 | |
Income (loss) before income taxes | |
| 5,909 | | |
| (2,761 | ) |
Income tax expense | |
| 1,770 | | |
| 883 | |
Net income (loss) | |
$ | 4,139 | | |
$ | (3,644 | ) |
Basic (loss) earnings per share | |
$ | 0.00101 | | |
$ | (0.00090 | ) |
Diluted (loss) earnings per share | |
$ | 0.00101 | | |
$ | (0.00090 | ) |
Weighted average shares outstanding - Basic | |
| 4,086,018,632 | | |
| 4,049,392,879 | |
Weighted average shares outstanding - Diluted | |
| 4,475,687,633 | | |
| 4,049,392,879 | |
| |
| | | |
| | |
Comprehensive loss | |
| | | |
| | |
Net income (loss) | |
$ | 4,139 | | |
$ | (3,644 | ) |
Foreign currency translation adjustment | |
| 1 | | |
| (60 | ) |
Comprehensive income (loss) | |
$ | 4,140 | | |
$ | (3,704 | ) |
See accompanying notes.
Athena Bitcoin Global
Consolidated Statement of
Cash Flows
| |
For the year ended | |
| |
December 31, 2022 | | |
December 31, 2021 | |
| |
(in thousands) | |
Operating activities | |
| | | |
| | |
Net income (loss) | |
$ | 4,139 | | |
$ | (3,644 | ) |
| |
| | | |
| | |
Adjustments to reconcile net income (loss) to net cash used in operating activities: | |
| | | |
| | |
Depreciation and amortization | |
| 1,659 | | |
| 582 | |
Impairment of crypto assets held | |
| 199 | | |
| 44 | |
Bad debt expense | |
| – | | |
| 15 | |
Crypto asset payments for expenses | |
| 3,176 | | |
| 2,048 | |
Theft of bitcoin | |
| – | | |
| 1,600 | |
Deferred income tax | |
| 28 | | |
| (104 | ) |
Gain on sale of crypto assets | |
| (9,927 | ) | |
| (9,321 | ) |
Fair value adjustment on crypto asset borrowing derivatives | |
| – | | |
| 515 | |
Changes in operating assets and liabilities: | |
| | | |
| | |
Accounts receivable | |
| 1,421 | | |
| (1,531 | ) |
Other advances | |
| 845 | | |
| (730 | |
Prepaid expenses and other assets | |
| (382 | ) | |
| (1,275 | ) |
Customer advances | |
| (2,563 | ) | |
| 3,671 | |
Advances received for revenue contract | |
| – | | |
| 3,500 | |
Accounts payable and other liabilities | |
| (4,154 | ) | |
| 485 | |
Net cash used in operating activities | |
| (5,559 | ) | |
| (4,145 | ) |
| |
| | | |
| | |
Investing activities | |
| | | |
| | |
Purchase of property and equipment | |
| (3,341 | ) | |
| (2,220 | ) |
Purchase of crypto assets | |
| (53,403 | ) | |
| (74,973 | ) |
Sale of crypto assets | |
| 61,868 | | |
| 78,972 | |
Net cash provided by investing activities | |
| 5,124 | | |
| 1,779 | |
| |
| | | |
| | |
Financing activities | |
| | | |
| | |
Issuance of convertible debt | |
| – | | |
| 4,985 | |
Proceeds (repayment) of debt | |
| (1,202 | ) | |
| 141 | |
Net cash provided by financing activities | |
| (1,202 | ) | |
| 5,126 | |
Net increase (decrease) in cash and cash equivalents | |
| (1,637 | ) | |
| 2,760 | |
Cash, cash equivalents and restricted cash, beginning of period | |
| 4,845 | | |
| 2,085 | |
Cash, cash equivalents and restricted cash, end of period | |
$ | 3,208 | | |
$ | 4,845 | |
See accompanying notes.
Athena Bitcoin Global
Consolidated Statement of Cash Flows (Continued)
| |
For the year ended | |
| |
December 31, 2022 | | |
December 31, 2021 | |
Cash, cash equivalents, and restricted cash consisted of the following: | |
| | |
| |
Cash and cash equivalents | |
$ | 2,101 | | |
$ | 1,174 | |
Restricted cash held for customers | |
| 1,107 | | |
| 3,671 | |
Total cash, cash equivalents and restricted cash | |
$ | 3,208 | | |
$ | 4,845 | |
| |
| | | |
| | |
Supplemental disclosure of cash flow information: | |
| | | |
| | |
Cash paid for interest | |
$ | 586 | | |
$ | 593 | |
Cash paid for taxes | |
$ | 104 | | |
$ | 438 | |
| |
| | | |
| | |
Supplemental schedule of non-cash investing and financing activities | |
| | | |
| | |
Conversion of debt for common shares | |
$ | 3,590 | | |
$ | – | |
Leased assets obtained in exchange for operating lease liabilities | |
$ | 753 | | |
$ | 960 | |
Crypto assets used to buy property and equipment | |
$ | 121 | | |
$ | 476 | |
Crypto assets used for other advances | |
$ | – | | |
$ | 115 | |
Crypto asset borrowing repaid | |
$ | – | | |
$ | 1,396 | |
See accompanying notes.
Athena Bitcoin Global
Consolidated Statement of
Stockholders’ Deficit
| |
Common Stock | | |
Receivables From Employees For Stock | | |
Additional Paid-in | | |
Accumulated | | |
Accumulated Other Comprehensive | | |
| |
| |
Shares | | |
Amount | | |
Options | | |
Capital | | |
Deficit | | |
Loss | | |
Total | |
| |
(in thousands, except number of shares) | |
Balance, December 31, 2020 | |
| 4,049,392,879 | | |
$ | 4,050 | | |
$ | (961 | ) | |
$ | 6,037 | | |
$ | (12,281 | ) | |
$ | (117 | ) | |
$ | (3,272 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net loss | |
| – | | |
| – | | |
| – | | |
| – | | |
| (3,644 | ) | |
| – | | |
| (3,644 | ) |
Adjustments for prior periods from adopting ASU 2020-06 | |
| – | | |
| – | | |
| – | | |
| (1,136 | ) | |
| 209 | | |
| – | | |
| (927 | ) |
Foreign currency translation adjustment | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| (60 | ) | |
| (60 | ) |
Shares to be issued | |
| – | | |
| – | | |
| – | | |
| 345 | | |
| – | | |
| – | | |
| 345 | |
Accrued interest on employee loans | |
| – | | |
| – | | |
| (16 | ) | |
| – | | |
| – | | |
| – | | |
| (16 | ) |
Balance, December 31, 2021 | |
| 4,049,392,879 | | |
$ | 4,050 | | |
| (977 | ) | |
$ | 5,246 | | |
$ | (15,716 | ) | |
$ | (177 | ) | |
$ | (7,574 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net income | |
| – | | |
| – | | |
| – | | |
| – | | |
| 4,140 | | |
| – | | |
| 4,140 | |
Debt conversion | |
| 45,066,666 | | |
| 45 | | |
| – | | |
| 3,200 | | |
| – | | |
| – | | |
| 3,245 | |
Foreign currency translation adjustment | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| 2 | | |
| 2 | |
Accrued interest on employee loans | |
| – | | |
| – | | |
| (16 | ) | |
| – | | |
| – | | |
| – | | |
| (16 | ) |
Balance, December 31, 2022 | |
| 4,094,459,545 | | |
$ | 4,095 | | |
| (993 | | |
$ | 8,446 | | |
$ | (11,576 | ) | |
$ | (175 | ) | |
$ | (203 | ) |
See accompanying notes.
Athena
Bitcoin Global
Notes to Consolidated Financial
Statements
For the twelve months ended December 31, 2022
and 2021
1. Nature of Business and Summary
of Significant Accounting Policies
Nature of Business
Athena Bitcoin Global (f.k.a. GamePlan, Inc.),
a Nevada corporation, and its wholly owned subsidiary, Athena Bitcoin, Inc., a Delaware corporation (together referred to as “Athena
Global” or “the Company”) is a provider of various crypto asset trading platforms, including the operation of automated
teller machines (ATMs) for purposes of selling and buying crypto assets, personalized investor services, and the operation of online
peer to peer exchanges. The Company’s network of Athena Bitcoin ATMs is presently active in twelve states and the territory of
Puerto Rico in the United States, and 4 countries in Central and South America. The Company strategically places its machines in convenience
stores, shopping centers, and other easily accessible locations
The Company has changed its name to Athena Bitcoin
Global from GamePlan, Inc. in a filing with the Secretary of State of the State of Nevada effective as of April 15, 2021.
Athena Bitcoin Global was a “shell company”
(as such term is defined in Rule 12b-2 under the Exchange Act) immediately before the completion of the transactions described below.
Athena Bitcoin Global was incorporated in the state of Nevada in 1991 under the name “GamePlan, Inc.” for the sole purpose
of merging with Sunbeam Solar, Inc., a Utah corporation, which merger occurred as of December 31, 1991. The Articles of Merger were filed
in the state of Nevada pursuant to which the Company was the surviving entity following the merger. The Company was involved in various
businesses, including, gaming and other consulting services, prior to becoming a company seeking acquisitions. The Company filed form
10-SB with the Securities and Exchange Commission in September 1999 thus becoming a reporting company under section 12(g) of the Securities
and Exchange Act of 1934. The Company subsequently filed Form 15 in March 2015, terminating its reporting status.
On January 14, 2020, Athena Bitcoin Global (f.k.a.
GamePlan, Inc.) entered into a Share Exchange Agreement (the “Agreement”), by and among the Company, Athena Bitcoin, Inc.,
a Delaware S corporation (“Athena”) founded in 2015, and certain shareholders of Athena Bitcoin, Inc. The Agreement provides
for the reorganization of Athena Bitcoin, Inc., with and into Athena Bitcoin Global (f.k.a. GamePlan, Inc.), resulting in Athena Bitcoin,
Inc. becoming a wholly owned subsidiary of Athena Bitcoin Global. The agreement is for the exchange of 100% shares of the outstanding
Common Stock of Athena Bitcoin, Inc., for 3,593,644,680 shares of Athena Bitcoin Global common stock (an exchange rate of 1,244.69 shares
of Athena Bitcoin Global stock for each share of Athena Bitcoin, Inc. stock). The closing of the transaction occurred as of January 30,
2020.
In accordance with ASC 805-10-55-12, because
the former shareholders of Athena Bitcoin, Inc. acquired the majority (88%) of the voting rights of the Company and control of the Company’s
board of directors and senior management of Athena Bitcoin, Inc. became management of the combined entity, the Company determined that
the Share Exchange was a reverse acquisition.
As the Share Exchange is considered a reverse
acquisition, in accordance with ASC 805-40-45-2, for financial statement purposes Athena Bitcoin, Inc. is considered the accounting acquiror.
Accordingly, the historical financial statements prior to the Share Exchange are those of Athena Bitcoin, Inc., except that the historical
equity of Athena Bitcoin Global has been retroactively restated to reflect the number of shares received in the business combination
at the exchange rate of 1,244.69 shares of Athena Bitcoin Global common stock for each share of Athena Bitcoin, Inc. common stock. The
historical common stock carrying amount has been adjusted to reflect the revised par value of the outstanding stock and the corresponding
offset was reflected in the additional paid-in capital. All share and per share information included in these financial statements have
been adjusted to reflect the 1,244.69 to 1 share conversion.
Athena Bitcoin Global
Notes to Consolidated Financial Statements
For the twelve months ended December 31, 2022
and 2021
In 2018, the Company issued a
series of instruments called “Simple Agreements for Future Tokens” (SAFTs) in exchange for investments in cash or crypto
assets. The SAFTs entitled holders to receipt of tokens representing equity in the Company under certain pre-defined circumstances. These
include a qualified financing event in which the Company raised $15 million or more in a single transaction, a “corporate transaction”
(sale of all or substantially all of the Company’s assets), or a dissolution. In connection with the Share Exchange, the SAFT Notes
were converted into 1,653,425,404 shares of Athena Bitcoin, Inc. (which were then exchanged for Athena Bitcoin Global common stock).
Additionally, warrants to purchase 115,888,490 shares of Athena Bitcoin, Inc.’s common stock were exercised for proceeds of $69,000.
These shares were then exchanged for Athena Bitcoin Global common stock). Additionally, Swingbridge notes were converted into 419,078,082
shares of Athena Bitcoin, Inc’s. common stock (which was then exchanged for Athena Bitcoin Global common stock). Lastly, 157,635,309
shares of Athena Bitcoin, Inc. were issued upon exercise of stock options (which was then exchanged for Athena Bitcoin Global common
stock).”
There were 4,079,815,704 shares of Athena Bitcoin
Global’s common stock outstanding following the closing date of the transaction. Athena Bitcoin Global subsequently purchases and
cancelled 30,442,825 shares.
There were two debt conversions in 2022 of 45,066,666
shares. Refer to Note 12.
Athena Bitcoin Global has 4,094,459,545 shares
issued and outstanding, and authorized capital of 4,409,605,000 shares as of December 31, 2022.
Principles of Consolidation
The accompanying consolidated financial statements
include the accounts of Athena Bitcoin Global, Athena Bitcoin, Inc. and its wholly owned subsidiaries, Athena Bitcoin S. de R.L. de C.V.,
incorporated in Mexico; Athena Holdings Colombia SAS, incorporated in Colombia; Athena Holding Company S.R.L, incorporated in Argentina;
Athena Holdings of PR LLC, incorporated in Puerto Rico; and Athena Holdings El Salvador, S.A. de C.V., incorporated in El Salvador. All
intercompany account balances and transactions have been eliminated in consolidation.
Going Concern
The Company has an accumulated deficit of $11,576,000
and negative working capital of $3,633,000 as of December 31, 2022. These conditions and events create substantial doubt about the ability
of the Company to continue as a going concern for the next 12 months. The Company has not been able to generate sufficient cash from
operating activities to fund its ongoing operations and current liabilities. There is no guarantee that the Company will be able to generate
enough revenue and/or raise capital to support its operations. The financial statements do not include any adjustments that might be
necessary should the Company be unable to continue as a going concern. The ultimate impact of these matters to the Company and its consolidated
financial condition is presently unknown.
A summary of the Company’s significant
accounting policies is as follows:
Basis of Presentation
The accompanying consolidated financial statements
have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States
of America (U.S. GAAP).
Use of Estimates
The preparation of the consolidated financial
statements requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements
and the accompanying notes. Actual results could differ from those estimates. Significant estimates and assumptions made by management
are used for, but not limited to, the useful lives of property and equipment; valuation of derivatives and impairment assessment for
long-lived assets. These estimates are based on historical data and experience, as well as various other factors that management believes
to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets
and liabilities that are not readily apparent from other sources.
Revenue Recognition
Revenue Recognition
The Company derives its recurring revenues primarily
from three sources: (i) sale of crypto assets at Athena Bitcoin ATMs, (ii) customized investor trading services for the sale or purchase
of crypto assets through our Athena Plus OTC desk and (iii) white label operations in El Salvador. The Company also generates revenue
from ancillary items, such as sale of intellectual property and maintenance of software. The Company adopted ASC 606, Revenue Recognition
(“ASC 606”), effective January 1, 2019, using the modified retrospective method. Under ASC 606, Revenue Recognition, the
Company recognizes revenue at the point of sale or over time of the service period for these products or services to our customers, in
an amount that reflects the consideration the Company expects to be entitled to in exchange for those products or services. The Company
determines revenue recognition through the following five steps:
|
· |
Identification of the contract, or contracts, with a customer |
|
· |
Identification of the performance obligations in the contract |
|
· |
Determination of the transaction price |
|
· |
Allocation of the transaction price to the performance obligations
in the contract |
|
· |
Recognition of revenue when, or as, we satisfy a performance obligation. |
Athena Bitcoin Global
Notes to Consolidated Financial Statements
For the twelve months ended December 31, 2022
and 2021
The Company recognizes revenue when performance
obligations identified under the terms of contracts with its customers are satisfied.
Judgment is required in determining whether we
are the principal or the agent in transactions between customers. We evaluate the presentation of revenue on a gross or net basis based
primarily on inventory risk (are we at risk for potentially fluctuations of the crypto asset price) and whether we control the crypto
asset provided before it is transferred to the customer or whether we act as an agent by arranging for others to provide the crypto asset
to the customer.
The Company enters into contracts that may include
multiple performance obligations. The Company identifies the promises in the contract and assigns them to their appropriate performance
obligation. These performance obligations may be part of a different revenue source and are listed separately below.
Athena Bitcoin ATM
The Company requires all users of the Athena
Bitcoin ATM to agree to ATM Terms & Service. The ATM Terms & Service stipulate the terms and conditions of the transaction. The
user, by inserting fiat currency and confirming that they agree to the transaction, is agreeing to the contract that governs the transaction.
This contract meets all of the criteria to be a revenue contract under ASC 606.
The Company has
a single performance obligation to provide a specific quantity of a crypto asset to the customer’s crypto wallet. We utilize a
mark-up for crypto assets sold to the customer. Athena Bitcoin ATMs permit customers to purchase as little as $1 of Bitcoin but
customers typically choose between $100 and $1,000 per transaction. The Company considers itself the principal
in this arrangement, as it controls the crypto asset prior to delivering, incurs inventory risk due to potential fluctuations in the
market price of the crypto asset and has discretion in establishing the price of the crypto asset sold in the Athena Bitcoin ATM machine.
Therefore, it records the gross cash received from the customer as the transaction price for the performance obligation.
Revenue is recognized at the point in time when
the crypto asset is delivered to the customer’s crypto wallet. Delivery to the customer’s crypto wallet is governed by the
crypto asset’s blockchain and typically less than an hour.
Athena Plus
The Company requires all users of Athena Plus
to agree to Athena Plus Terms & Service. The Athena Plus Terms & Service stipulate the terms and conditions of the transaction.
The user, by wiring fiat currencies to the Company’s bank account, is agreeing to the contract that governs the transaction. This
contract meets all of the criteria to be a contract under ASC 606.
The Company has a single performance obligation
to provide a specific quantity of a crypto asset to the customer’s crypto wallet. We utilize a mark-up for crypto assets sold to
the customer. The minimum transaction is $10,000 USD (or equivalent value of local currency). The Company considers itself the principal
in this arrangement, as it controls the crypto asset prior to delivering, incurs inventory risk due to potential fluctuations in the
market price of the crypto asset and has discretion in establishing the price of the crypto asset sold. Therefore, it records the gross
cash received from the customer as the transaction price for the performance obligation. The only exception for this are stable coins,
which are considered financial assets. As such, the Company, in accordance with ASC 860-20, will recognize revenue net (markup) for any
sale of stable coins.
Revenue is recognized at the point in time when
the crypto asset is delivered to the customer’s crypto wallet. Delivery to the customer’s crypto wallet is governed by the
crypto asset’s blockchain.
Athena Bitcoin Global
Notes to Consolidated Financial Statements
For the twelve months ended December 31, 2022
and 2021
White-label Service
The Company entered into multiple contracts that
govern the white-label service with the El Salvadoran government for ATMs located in El Salvador and in the United States. These contracts
detail the obligations and rights of both parties, including pricing and meet all of the criteria of a revenue contract under ASC 606.
The contracts permit the customer to terminate the contract at any point or to adjust the number of ATMs that are in use without a substantive
penalty. This results in each ATM and each service month for the ATM being considered a separate revenue contract per ASC 606.
The Company makes multiple promises to the customer.
This includes installation as well as multiple promises for operating the ATMs on behalf of the customer. Installation is a separate performance
obligation. This is due to the customer benefitting from the installation, the customer’s ability to utilize a third-party to perform
the installation if desired, no significant modification or customization is part of the installation, no significant integration of installation
with operating the ATMs and installation does not affect the operating of the ATMs performance obligation (discussed below). This results
in installation services being capable of being distinct and distinct in the context of the contract.
The Company is responsible under the White Label
service for operating the ATMs on behalf of the customer over the month. The promises that are in the contract may vary each day, for
instance performing cash logistics services, testing or repairing the machines. However, these services are highly integrated to provide
a combined output (operating ATMs for the customer). These are not services that the Company offers separately and by providing them together,
it ensures a cohesive and effective approach to operating the ATMs for the customer. This integrated approach is critical to the value
that the Company is offering the customer. As such, given the interrelated nature of the service, this results in a single performance
obligation, in accordance with ASC 606-10-25-21(a).
This single performance obligation meets the definition
of continuous service obligation due to the Company continuously managing operations of their ATM. There is no defined number of services
that are provided each month. The Company is required to provide the same service each month to operate the ATMs, pricing resets each
month and customer does not make separate purchase decisions. Each fulfilment activity may have separate pricing but the approval for
these services is considered perfunctory, as these activities are all necessary to ensure that the ATMs operate in accordance with the
terms of the service agreement.
The Company evaluated if this meets the definition
of a series. Each increment of the promised service to operate the machines (i.e. each day) is distinct in accordance with paragraph 606-10-25-19.
This is because the customer can benefit from each increment of service on its own (it is capable of being distinct) and each increment
of service is separately identifiable because no day of service significantly modifies or customizes another and no day of service significantly
affects either the entity's ability to fulfill another day of service or the benefit to the customer of another day of service. Therefore,
the days are substantially the same and have the same pattern of transfer. Therefore, this meets the criteria to be considered part of
a series.
One of the promises included in operating the
ATM performance obligation is providing Company owned ATMs to the customer. The Company elected the expedient in ASC 842-10-15-42A, which
permits the combining the lease and non-lease components together if the lease component has the same timing and pattern of transfer as
the non-lease component and the lease component is an operating lease. Both of these conditions are met. Given that that the predominant
obligation is the non-lease component (servicing the ATM), the Company, in accordance with ASC 842-10-15-42B, will account for the performance
obligation under the terms of ASC 606.
The Company generally charges a fixed fee for
installation and a fixed fee each month for operating the ATMs. a The fixed fees collected are allocated to the performance obligations
based on an adjusted market assessment approach.
The Company charges the customer for services necessary
to operate the ATMs, including repairs and cash logistics. The fees are included in the contract. The fees meet the definition of variable
consideration, as it is dependent on the specific service performed, which is not known before each service term. The Company applies
the variable consideration allocation exception, as noted in ASC 606-10-32-39(b). This is met due to the variable payment being specific
to the Company transferring a specific service and the allocation is consistent with the allocation objective in ASC 606-10-32-28. As
such, the Company recognizes the variable transaction fee when they perform the specific service to which it relates.
Athena Bitcoin Global
Notes to Consolidated Financial Statements
For the twelve months ended December 31, 2022
and 2021
The Company is considered the principal, as it
controls any third-party good or service before it is transferred to the customer.
The prices for additional services and reimbursement
of costs do not meet the definition of a material right, as the services included have separate pricing are not considered an additional
good or service but part of the existing contract. These services are considered perfunctory, as they are necessary for the Company to
fulfill its performance obligation to operate the machines on behalf of the customer.
For operating the ATM, revenue is recognized straight
line over the requisite service period, which is typically one month, for operating the ATM. For installation, revenue is recognized at
the point in time when installation is complete. The variable transaction fees are recognized in the month in which it has earned the
fee.
Development of Chivo Ecosystem and Support
In 2021, the Company entered into a series of
contracts to develop the Chivo Ecosystem for El Salvador. The Chivo Ecosystem is comprised of the Bitcoin Chivo Wallet and the Chivo
Website. In order develop the Chivo Ecosystem, the Company provided a license to intellectual property. The license is nonexclusive,
non-sublicensable (except to representatives of the El Salvador government), royalty-free, fully paid-up, irrevocable, perpetual and
a worldwide right. There are no exclusivity terms and no commitments. The license to the intellectual property was subject to completion
of the asset acquisition of XPay (refer to next section). As of December 31, 2021, the Company had not completed the asset acquisition.
This meets the definition of a contingency and results in the Company not meeting the criterion in ASC 606-10-25-1(a), as the Company
cannot commit to performing their obligation. The other elements of a revenue contract, including identification of their rights to the
services to be transferred, payment terms, commercial substance and collecting the consideration are all met. Due to the contingency,
this results in the contracts not being a revenue contract under ASC 606 until the contingency is lifted. All consideration received
until the contingency is lifted is a liability. The contingency was lifted in 2022 with the acquisition of the rights to utilize the
license.
The development of the Chivo Ecosystem includes
multiple promises, including providing a license to the intellectual property, as well as specifications for the development of the Chivo
Ecosystem beyond just basic digital wallet functionality (e.g., ability to send crypto assets to different wallets). This includes the
requirement to create a website to track activity of the Chivo wallet and to integrate the wallet with the white-label ATMs, custodial
providers, SMS providers and KY/AML providers. The Company also entered into an agreement to provide software support and improvements
to the Chivo Ecosystem if necessary, through December 31, 2021.
The Company evaluated the promises and determined
that the promises to provide the license to the intellectual property and develop the Chivo Ecosystem should be combined into a single
performance obligation. The customer would be unable to benefit from the Chivo Ecosystem without the licensing agreement. The Company
provides a significant service of integrating the license with other services to develop the Chivo ecosystem. The development of the
Chivo Ecosystem represents the combined output for which the customer has contracted the Company for. Accordingly, Management concludes
the entity should combine each promise pertaining to the development of the Chivo Ecosystem with that of the License of IP and treat
it as a single performance obligation.
Athena Bitcoin Global
Notes to Consolidated Financial Statements
For the twelve months ended December 31, 2022
and 2021
The Company also provides software maintenance
services from September 2021 through December 2021. The Company promises that it will support and improve the software as needed to maintain
the uninterrupted 27/7 operation of the Chivo Ecosystem after the completion of the development of the ecosystem. The software maintenance
services can be used and are available to be used without the use of any of the other promises, as it is contingent upon the completion
of the Chivo Ecosystem. As such, the Government of El Salvador (customer) can benefit from the software maintenance services on its own
and the software maintenance services are separately identifiable from the other promises. Accordingly, Management concludes that the
software maintenance services are a distinct performance obligation.
The transaction price is specifically outlined
in the contracts which includes two one-time payments of $2M each for the development of the Chivo Ecosystem and fixed monthly payments
for the software maintenance services. The prices in the contract reflect the standalone sales price of both performance obligations.
There is no variable consideration.
The Company recognizes the development of the
Chivo Ecosystem at a point in time. The customer is unable to benefit from the development of the Chivo ecosystem until its completion,
nor does it control the ecosystem until its completion. There is also no alternate use to the Company. As noted previously, development
of the Chivo Ecosystem is unable to be recognized until the contingency related to XPay is lifted.
The Company recognizes software maintenance over
time, as the customer receives the benefits from this service as the Company provides it each month.
Cost of Revenues
Cost of revenues consists primarily of expenses
related to the acquisition of crypto assets (including the costs to purchase crypto assets). The Company assigns the costs of crypto
assets sold in its revenue transactions on a first-in, first-out basis.
Additionally, cost of revenues includes
the costs of operating the ATMs from which some of the crypto assets are sold (including the associated rent expense, related incentives,
ATM cash losses, software licensing fees for the ATMs, depreciation, insurance, and utilities), crypto asset impairment and fees paid
to service the ATM machines and transport cash to the banks.
Cash and Cash Equivalents
For purposes of the consolidated statements of
cash flows, the Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash
equivalents.
The Company maintains cash balances at various
financial institutions. Accounts at these institutions are secured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000.
The Company has deposits in excess of the FDIC-insured limit. The Company has not experienced any losses in such accounts and believes
that it is not exposed to significant credit risk due to the financial position of the depository institutions or investment vehicles
in which those deposits are held. The Company has significant cash in ATM machines.
Athena Bitcoin Global
Notes to Consolidated Financial Statements
For the twelve months ended December 31, 2022
and 2021
Restricted Cash Held for Customers
Restricted cash held for customers consists of
money on hand received from white-label customers for replenishment of ATMs.
Accounts Receivable
Accounts receivable is stated at the amount the
Company expects to collect. In 2021 the Company adopted ASC 326 Financial Instruments - Credit Losses. This methodology is referred to
as the current expected credit loss (CECL) method and replaces the previous incurred loss methodology. The measurement of CECL applies
to all financial assets measured at amortized cost, including receivables for revenue. The company recognized no allowance for credit
losses for December 31, 2022 and 2021 respectively utilizing the CECL methodology.
The Company determines if an arrangement is a
lease at inception. The Company classifies its arrangements for ATM retail spaces as an operating leases. The Company does not have any
significant arrangements where it is the lessor. The Company elected to separate lease and non-lease components for arrangements where
the Company is a lessee. Leases with an initial lease term of 12 months or less are not recorded on the balance sheet. Operating lease
expense is recognized on a straight-line basis over the lease term.
Operating lease assets and operating lease liabilities
are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. For purposes
of calculating operating lease obligations under the standard, the Company's lease terms may include options to extend or terminate the
lease when it is reasonably certain that the Company will exercise such option. The Company's leases do not contain material residual
value guarantees or material restrictive covenants. The discount rate used to measure a lease obligation should be the rate implicit
in the lease; however, the Company’s operating leases generally do not provide an implicit rate. Accordingly, the Company uses
its incremental borrowing rate at lease commencement to determine the present value of lease payments. The incremental borrowing rate
is an entity-specific rate which represents the rate of interest a lessee would pay to borrow on a collateralized basis over a similar
term with similar payments. Right-of-use (“ROU”) assets represent the Company’s right to use an underlying asset for
the lease term and lease liabilities represent the obligation to make lease payments arising from the lease.
The operating lease asset also includes any initial
direct costs and lease payments made prior to lease commencement and excludes lease incentives incurred.
Concentration of Credit Risk
The Company’s revenues, other than white-label
services below, are generated primarily from ATM sales to customers located in the United States and Latin America. As the Company collects
all amounts from these customers and holds $0 in accounts receivable from its ATM or over the counter customers, there is no credit risk
associated with customer concentration for these customers.
The Company has revenues from white-label services
in El Salvador and ancillary sales to customers where it provides services on customary credit terms, typically Net 30 or Net 60. As
of December 31, 2022 and 2021, one customer, Ministerio de Hacienda (Department of Treasury) of El Salvador represents almost the entirety
of our total accounts receivable balance.
No single customer is responsible for over 10%
of revenue for the years ended December 31, 2022 and 2021.
Athena
Bitcoin Global
Notes to Consolidated Financial Statements
For the twelve months ended December 31, 2022
and 2021
Property and Equipment
Property and Equipment are stated at cost, net
of accumulated depreciation. Equipment is depreciated over the estimated useful lives of the assets. Leasehold improvements are depreciated
over the shorter of the estimated useful lives of improvements or the term of the related lease. Repairs and maintenance costs are expensed
as incurred.
Following are the estimated useful lives:
Computer equipment |
Three years |
ATM equipment |
Three years |
Office equipment |
Six years |
Capitalized Software |
Five years |
Capitalized software consists of costs related
to the design, coding, testing and documentation of software, as well as salaries and compensation costs for employees, fees paid to
third-party consultants who are directly involved in development efforts, and costs incurred for upgrades and enhancements to add functionality
of the software. Other costs that do not meet the capitalization criteria are expensed as incurred. The criteria for capitalization include
the completion of the preliminary project stage, demonstration of feasibility of the project and the ability to reliably estimate future
economic benefits. Capitalized software is subject to periodic impairment tests to ensure that the carrying value of the asset is not
overstated. If an impairment is identified, the carrying value of the capitalized software will be reduced to its recoverable amount.
Impairment of Long-Lived Assets
The Company reviews its long-lived assets for
impairment in accordance with FASB ASC 350-30-30-1 whenever events or changes in circumstances have indicated that an asset may not be
recoverable. Management has determined that no impairment of long-lived assets existed as of December 31, 2022 and 2021 except for impairment
of crypto assets held, as discussed below.
Crypto Assets Held
Crypto assets are considered
indefinite-lived intangible assets under ASC 350, Intangibles—Goodwill and are initially measured at cost and are not
amortized. As intangible assets, the crypto assets held are initially recorded at cost and tested for impairment at the end of the
month. Impairment exists when the carrying amount exceeds its fair value, which is measured using the quoted price of the
crypto asset at the time its fair value is being measured in its principal market. The Company identifies publicly available crypto
pricing through Coinmarketcap.com, which is an aggregation of crypto prices amongst the most commonly used crypto exchanges. These
markets are accessible to the Company in each of its markets in which it operates in, therefore coinmarketcap.com is concluded to
depict the prices that reflect the Company’s principal market. Impairment is performed for fractional units of the crypto
assets.
Expenses Paid in Crypto Assets
The Company enters into agreements with certain
vendors and service providers that provide us with the option to settle their invoices in crypto assets. The amount due is fixed and
is denominated in USD. There are no payment terms that include conversion options, variable settlement features, or alternative settlement
provisions contingent upon future events or market price fluctuations that could potentially give rise to embedded derivatives.
We consider the scoping exceptions for each of
those topics and conclude that that the scope of 610-20 most closely matched the facts of the transactions. ASC 610-20-15-2 states “nonfinancial
assets within the scope of this Subtopic include intangible assets,” which is how the company treats crypto assets.
Athena Bitcoin Global
Notes to Consolidated Financial Statements
For the twelve months ended December 31, 2022
and 2021
We evaluated two possibilities to exclude these
transactions from the scope ASC 845. The relevant exceptions to the scope of that Topic are as follows:
|
1. |
The transfer of goods or services in a contract with a customer within
the scope of ASC Topic 606 in exchange for noncash consideration (ASC 845-10-15-4(j)) |
|
2. |
The transfer of a nonfinancial asset within the scope of ASC Topic
610-20 in exchange for noncash consideration (ASC 845-10-15-4(k)) |
For these transactions, our usage of the crypto
asset is as a payment instrument to a vendor, therefore our interpretation of (1) above is for ASC 606 not to apply. We interpret (2)
above to apply when the Company pays a vendor (who is not a customer) with a crypto asset (nonfinancial asset) in lieu of paying that
same vendor with fiat currency (USD). Therefore, we account for the derecognition of the crypto asset, in these transactions, under the
guidance of ASC 610-20, Gains and Losses from the Derecognition of Nonfinancial Assets. This is the same guidance as in ASC 350-10-40-1,
Transfer or Sale of Intangible Assets.
ASC 610-20-15-2 explicitly states the scope to
include intangible assets. We treat crypto assets as intangible assets. We then apply the general principle of ASC 610-32-2 for recognizing
the gain or loss for the difference between the amount of goods or services we receive (fair market value, per ASC 820 Level 2) and the
cost of acquiring the crypto asset.
We record invoices from vendors in the appropriate expense category,
in the correct time period in which services were provided, in USD and for vendors who elect to be paid in crypto assets, we transfer
the crypto assets at market value at the time of transfer in line with ASC 820 – Fair Value Measurement. We recognize as
a gain or loss, the difference between the current carrying value of the crypto asset, less impairment and its value at the time of transfer
to cost of revenues on the Consolidated Statement of Operations and Comprehensive Income (Loss).
For the year ended December 31, 2022 and December
31, 2021, the Company had losses related to the derecognition of crypto assets of $32,000 and $524,000, respectively.
Crypto Asset and Liability Held for Customers
Crypto
liability held for customers represent the Company’s obligation to safeguard certain customers’ crypto assets in digital
wallets on the Company’s platform from a prior service offering. The Company safeguards crypto assets for customers in digital
wallets and portions of cryptographic keys necessary to access crypto assets on the Company’s platform. The Company safeguards
these assets and/or keys and is obligated to safeguard them from loss, theft, or other misuse. The Company records customer crypto assets
as well as corresponding customer crypto liabilities, in accordance with recently adopted guidance, SAB 121. The Company adopted SAB
121 as of January 1, 2021.
The Company maintains a record of all customer
assets in segregated digital wallets held by the Company as well as the private keys to the crypto assets, which are maintained on behalf
of customers. For crypto assets where the Company does not maintain a private key or the ability to recover a customer’s private
key, these balances are not recorded, as there is no related safeguarding obligation in accordance with SAB 121.
Athena Bitcoin Global
Notes to Consolidated Financial Statements
For the twelve months ended December 31, 2022
and 2021
The Company records the assets and liabilities,
on the initial recognition and at each reporting date, at the fair value of the crypto assets which it safeguards for its customers. The
Company has committed to securely store all crypto assets and cryptographic keys (or portions thereof) it holds on behalf of customers,
and the value of these assets have been recorded as customer crypto liabilities and corresponding customer crypto assets. As such, the
Company may be liable to its customers for losses arising from theft or loss of private keys. The Company has no reason to believe it
will incur any expense associated with such potential liability because it has established security around private key management to minimize
the risk of theft or loss. The Company holds the customer crypto assets on a 1:1 basis. Any loss or theft would impact the measurement
of the customer crypto assets. During the year ended December 31, 2022 and 2021, no losses have been incurred in connection with customer
crypto assets.
As of December 31, 2022 and December 31, 2021,
customer crypto assets and customer crypto liabilities safeguarded was $59,000 and $258,000, respectively.
Crypto Asset Borrowings
The Company enters into agreements with counterparties
to borrow digital intangible assets. The Company recognizes the digital intangible assets borrowed at fair value on the date the asset
is received and records a corresponding liability measured at fair value on the date the crypto assets are received. The digital intangible
assets received from borrowing transactions are accounted for as indefinite lived intangible assets under ASC 350 and are included within
Related party crypto asset borrowings on the accompanying consolidated balance sheet. The loans are accounted for as hybrid instruments,
with a liability host contract that contains an embedded derivative based on the changes in the fair value of the underlying crypto asset.
The host contract is not accounted for as a debt instrument because it is not a financial liability and is carried at the fair value
of the assets acquired and reported in crypto asset borrowings in the consolidated balance sheets.
The term of these borrowings can either be for
a fixed term of less than one year or can be open- ended and repayable at the option of the Company or the lender. These borrowings bear
a fee payable by the Company to the lender, which is based on a percentage of the amount borrowed and is denominated in the related crypto
asset borrowed. The borrowing fee is recognized on an accrual basis and is included in non-operating expenses as fees on borrowings in
the consolidated statements of operations and comprehensive income.
Embedded Derivative related to Obligation to Return Crypto Assets
Derivative contracts derive their value from
underlying asset prices, other inputs or a combination of these factors. As a result of the Company entering into transactions to borrow
(digital intangible assets) crypto assets, an embedded derivative is recognized relating to the differences between the fair value of
the amount borrowed, which is recognized on the borrowing effective date, and the fair value of the amount that will ultimately be repaid,
based on changes in the spot price of the crypto asset over the term of the borrowing. This embedded derivative is accounted for as a
forward contract to exchange at maturity the fixed amount of the crypto asset to be repaid. The embedded feature is evaluated as a derivative
that is not clearly and closely related to the host contract and therefore, is separately recognized at fair value with unrealized changes
in fair value recognized on the consolidated statement of operations under fair value adjustment on crypto asset borrowing derivatives
in the consolidated statements of operations and comprehensive income. Further, the Company estimates the fair value of the derivative
liability based on the closing price on an exchange and considers the fair value hierarchy of the derivative liability as level 2 under
ASC 820.
Athena Bitcoin Global
Notes to Consolidated Financial Statements
For the twelve months ended December 31, 2022
and 2021
Foreign Currency
The functional currency of our wholly owned subsidiaries
is the currency of the primary economic environment in which the Company operates. Our foreign subsidiaries that utilize foreign currency
as their functional currency translate such currency into U.S. dollars using (i) the exchange rate on the balance sheet dates for assets
and liabilities, (ii) the average exchange rates prevailing during the period for revenues and expenses, and (iii) historical exchange
rates for equity. Translation adjustments are included in comprehensive income in our Consolidated Statements of Operations and Comprehensive
Income (Loss).
Assets and liabilities of a subsidiary that are
denominated in currencies other than the Company’s functional currency are re-measured into the functional currency. Transaction
gains and losses related to exchange rate fluctuations on transactions denominated in a currency other than the functional currency of
an entity are recorded within the Company’s Consolidated Statements of Operations and Comprehensive Income (Loss) as a component
of other expense (income).
Stock-Based Compensation Expense
The Company accounts for stock-based compensation
according to the provisions of ASC 718, Stock Compensation, which requires the measurement and recognition of compensation expense
for all stock-based awards made to employees and directors, including employee stock options and non-vested stock awards, based on the
fair values on the dates they are granted. The Company records the fair value of awards expected to vest as compensation expense on a
straight-line basis over the requisite service periods of the awards, which is generally the vesting period.
The Company uses the Black-Scholes option pricing
model for determining the estimated fair value for stock-based awards. The Black-Scholes option pricing model requires the use of highly
subjective and complex assumptions, which determine the fair value of stock-based awards, including the options expected term, expected
volatility of the underlying stock, risk-free rate, and expected dividends. The expected volatility is based on the average historical
volatility of certain comparable publicly traded companies within the Company’s industry. The expected term assumptions are based
on the simplified method, due to insufficient historical exercise data and the limited period of time that the Company’s equity
securities have been available for issuance. The risk-free interest rates are based on the U.S. Treasury yield in effect at the time
of grant. The Company does not expect to pay dividends on common stock in the foreseeable future; therefore, it estimated the dividend
yield to be 0%.
Technology and Development
Technology and development include
non-capitalized costs incurred in operating, maintaining the Company’s network, website hosting, and technology infrastructure.
Treasury Stock
Treasury stock purchases are accounted for under
the cost method, whereby the entire cost of the acquired stock is recorded as treasury stock. Upon retirement of treasury shares, amounts
in excess of par are value are charged to accumulated deficit.
Cash loans through a non-recourse note for the
purpose of exercising options are considered to be a repurchase of shares previously held by the grantee and are treated like Treasury
Stock.
Warrants to Purchase Common Shares
The Company accounts for warrants as either equity-classified
or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance
in the ASC 480 and ASC 815, Derivatives and Hedging (“ASC 815”). Management’s assessment considers whether the warrants
are freestanding financial instruments pursuant to ASC 480, whether they meet the definition of a liability pursuant to ASC 480, and
whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed
to the Company’s own common stock and whether the warrant holders could potentially require “net cash settlement” in
a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires
the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period-end date while
the warrants are outstanding.
For issued or modified warrants that meet all
of the criteria for equity classification, they are recorded as a component of additional paid-in capital at the time of issuance. For
issued or modified warrants that do not meet all the criteria for equity classification, they are recorded at their initial fair value
on the date of issuance and subject to remeasurement each balance sheet date with changes in the estimated fair value of the warrants
to be recognized as a non-cash gain or loss in the statement of operations.
Athena Bitcoin Global
Notes to Consolidated Financial Statements
For the twelve months ended December 31, 2022
and 2021
Income Taxes
Income taxes are accounted for under an asset
and liability approach. This process involves calculating the temporary and permanent differences between the carrying amounts of the
assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The temporary differences result
in deferred tax assets and liabilities, which would be recorded on the Balance Sheet in accordance with ASC 740, which established financial
accounting and reporting standards for the effect of income taxes. The likelihood that its deferred tax assets will be recovered from
future taxable income must be assessed and, to the extent that recovery is not likely, a valuation allowance is established. Changes
in the valuation allowance in a period are recorded through the income tax provision in the consolidated Statements of Operations.
The Company adopted ASC 740-10-30 on January
1, 2020. ASC 740-10 clarifies the accounting for uncertainty in income taxes recognized in an entity’s consolidated financial statements
and prescribes a recognition threshold and measurement attributes for financial statement disclosure of tax positions taken or expected
to be taken on a tax return. Under ASC 740-10, the impact of an uncertain income tax position on the income tax return must be recognized
at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. An uncertain income tax
position will not be recognized if it has less than a 50% likelihood of being sustained. Additionally, ASC 740-10 provides guidance on
de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. As a result of the
implementation of ASC 740-10, the Company does not have a liability for unrecognized income tax benefits.
Segment Reporting
Operating segments are defined as components
of an entity for which separate financial information is available and that is regularly reviewed by the Chief Operating Decision Maker
(the “CODM”) in deciding how to allocate resources to an individual segment and in assessing performance. The Company’s
Chief Executive Officer is the Company’s CODM. The CODM reviews financial information presented on a global consolidated basis
for purposes of making operating decisions, allocating resources, and evaluating financial performance. While the Company does have revenue
from multiple products and geographies, no measures of profitability by product or geography are available, so discrete financial information
is not available for each such component. As such, the Company has determined that it operates as one operating segment and one reportable
segment.
Earnings (Loss) per Share
Basic income (loss) per share is calculated by
dividing net loss by the number of weighted average common shares outstanding for the applicable period. Diluted income (loss) per share
is calculated by dividing net loss available to common shareholders by the weighted average shares outstanding. Potentially dilutive
shares, which are based on the weighted average shares of common stock underlying outstanding stock-based awards, warrants and convertible
senior notes using the treasury stock method or the if-converted method, as applicable, are included when calculating diluted net income
per share of common stock attributable to common stockholders when their effect is dilutive.
Recently Adopted Accounting Pronouncements
On March 31, 2022, the SEC issued Staff Accounting
Bulletin No. 121 (“SAB 121”). SAB 121 sets out interpretive guidance from the staff of the SEC regarding the accounting for
obligations to safeguard crypto assets that an entity holds for its platform users. The guidance requires an entity to recognize a liability
for the obligation to safeguard the users’ assets, and recognize an associated asset for the crypto assets held for users. Both
the liability and asset should be measured initially and subsequently at the fair value of the crypto assets being safeguarded. The guidance
also requires additional disclosures related to the nature and amount of crypto assets that the entity is responsible for holding for
its platform users, with separate disclosure for each significant crypto asset, and the vulnerabilities the entity has due to any concentration
in such activities. The guidance in SAB 121 is effective for interim or annual periods ending after June 15, 2022, with retrospective
application as of the beginning of the fiscal year to which the interim or annual period relates. For financial statements, the SAB 121
requires companies to include clear disclosure of the nature and amount of crypto-assets a company is responsible for holding for its
platform users, with separate disclosure for each material crypto-asset, and the vulnerabilities of a business as a result of any concentration
in those activities. Because crypto-asset protection liabilities and corresponding assets are measured at the fair value of the crypto-assets
held for users of its platform, the Company is required to include information about fair value measurements.
Athena Bitcoin Global
Notes to Consolidated Financial Statements
For the twelve months ended December 31, 2022
and 2021
If the Company engages in such business in the
future, then it would make the required disclosures noted in SAB 121, including disclosures regarding the party holding cryptographic
key information, internal record keeping and responsibility for safeguarding the assets from loss or flight, disclosures describing the
types of additional losses and liabilities that may arise, discussion of the legal ownership analysis of crypto-assets and disclosure
of the potential impact that destruction, loss, theft, compromise or unavailability of cryptographic key information would have on ongoing
business, financial condition, results of operations and cash flows of the business. The Company will continue to review requirements
and expects to continue to comply with SAB 121 accounting, reporting and disclosure guidelines in its required filings.
2. Fair Value Measurements
ASC 820, Fair Value Measurement, establishes
a three-level valuation hierarchy for disclosure of fair value measurements. Under the FASB’s authoritative guidance on fair value
measurements, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. In determining fair value, the Company uses various methods, including the market,
income and cost approaches. Based on these approaches, the Company often utilizes certain assumptions that market participants would
use in pricing the asset or liability, including assumptions about risk and or the risks inherent in the inputs to the valuation technique.
These inputs can be readily observable, market corroborated or generally unobservable inputs. The Company utilizes valuation techniques
that maximize the use of observable inputs and minimize the use of unobservable inputs. Based on the observability of the inputs used
in the valuation techniques, the Company is required to provide the following information according to the fair value hierarchy. The
fair value hierarchy ranks the quality and reliability of the information used to determine fair values. Financial assets and liabilities
carried at fair value will be classified and disclosed in one of the following three categories:
|
Level 1: |
Quoted prices for identical assets and liabilities traded
in active exchange markets, such as the New York Stock Exchange. |
|
Level 2: |
Observable inputs other than Level 1, including quoted prices
for similar assets or liabilities, quoted prices in less active markets, or other observable inputs that can be corroborated by observable
market data. Level 2 also includes derivative contracts whose value is determined using a pricing model with observable market
inputs or can be derived principally from or corroborated by observable market data. |
|
Level 3: |
Unobservable inputs supported by little or no market activity for financial
instruments whose value is determined using pricing models, discounted cash flow methodologies or similar techniques, as well as
instruments for which the determination of fair value requires significant management judgment or estimation; also includes observable
inputs for nonbinding single-dealer quotes not corroborated by observable market data. |
The Company has various processes and controls
in place to ensure that fair value is reasonably estimated. A model validation policy governs the use and control of valuation models
used to estimate fair value. This policy requires review and approval of models, and periodic re-assessments of models to ensure that
they are continuing to perform as designed. The Company performs due diligence procedures over third-party pricing service providers
in order to support their use in the valuation process. Where market information is not available to support internal valuations, independent
reviews of the valuations are performed, and any material exposures are escalated through a management review process.
While the Company believes its valuation methods
are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair
value of certain financial instruments could result in a different estimate of fair value at the reporting date. To the extent that the
valuation method is based on models or inputs that are less observable or unobservable in the market, the determination of fair value
requires more judgment. The degree of judgment exercised in determining fair value is greatest for the financial instruments categorized
in Level 3.
In certain cases, the inputs used to measure
fair value may fall into different levels of the fair value hierarchy. In such cases, the financial instrument’s level within the
fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment
of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific
to the financial instrument.
During the year ended December 31, 2022, there
were no changes to the Company’s valuation techniques that had, or are expected to have, a material impact on its consolidated
financial position or results of operations.
Athena Bitcoin Global
Notes to Consolidated Financial Statements
For the twelve months ended December 31, 2022
and 2021
The Company did not make any transfers between
the levels of the fair value hierarchy during the years ended December 31, 2022, and 2021.
Non-Financial Assets and Liabilities Measured
at Fair Value on a Nonrecurring Basis
Certain assets and liabilities are measured at
fair value on a nonrecurring basis (such as goodwill, property and equipment, and crypto assets held); that is, the assets and liabilities
are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (e.g., when there
is evidence of impairment).
3. Revenue
The table below presents revenue of the Company
disaggregated by revenue source for the following periods.
| |
For the twelve months ended | |
| |
December 31, 2022 | | |
December 31, 2021 | |
Revenue by source | |
(in thousands) | |
Athena bitcoin ATM | |
$ | 45,340 | | |
$ | 63,097 | |
Athena plus | |
| 16,528 | | |
| 15,874 | |
White-label | |
| 5,291 | | |
| 2,083 | |
Ancillary and other | |
| 6,527 | | |
| 693 | |
| |
$ | 73,686 | | |
$ | 81,747 | |
Revenue disaggregated by geography based on sales
location for the period below are as follows.
| |
For the year ended | |
| |
December 31, 2022 | | |
December 31, 2021 | |
| |
(in thousands) | |
Revenue by country | |
| | | |
| | |
United States | |
$ | 55,796 | | |
$ | 78,624 | |
El Salvador | |
| 17,562 | | |
| 2,538 | |
International | |
| 328 | | |
| 585 | |
| |
$ | 73,686 | | |
$ | 81,747 | |
Contracts with Government of El Salvador
In the third quarter of 2021, the Company installed
and began operating 200 white-labeled Bitcoin ATMs in El Salvador, 10 white-labeled Bitcoin ATMs at El Salvador consulates in the U.S.,
45 white-labeled Bitcoin ATMs in other U.S. locations and sold 950 point-of-sale (POS) terminals for local businesses in El Salvador
to process transactions with Bitcoin to Ministerio de Hacienda (Department of Treasury) of El Salvador (“GOES”). Additionally,
we developed the Chivo Ecosystem for GOES. The Chivo Ecosystem acts as the interface to El Salvador’s Bitcoin Digital Wallet and
Website for El Salvador and its users. As of December 31, 2022 and December 31, 2021, advances for revenue contracts of $0 and $3,500,000,
respectively are reported in current liabilities, represents amounts invoiced for intellectual property in software pending transfer
of control to GOES, which was completed in December 2022.
Athena Bitcoin Global
Notes to Consolidated Financial Statements
For the twelve months ended December 31, 2022
and 2021
From time to time, the Company receives money
from GOES to facilitate replenishment of cash in the ATMs that we provide and operate for them. As of December 31, 2022 and 2021, the
cash received as advances from GOES was $1,107,000 and $3,647,000 respectively, and was presented as part of Liability for cash held
for customers on the Consolidated Balance Sheet with a related Restricted cash held for customers recorded as current assets.
On October 5, 2022, the Company completed contract
negotiations with Chivo, Sociedad Anónima de Capital Variable, a wholly owned private company of the Government of EL Salvador
(“CHIVO”) in which both parties signed a Master Services Agreement (MSA) and a Service Level Agreement (SLA) replacing the
existing Master Services Agreement, Contracts, and Athena Service Addendums 1 and 2 with the Department of Treasury of El Salvador with
an effective date of July 1, 2022. The services, performance obligations, pricing and terms continue the services, performance obligations,
pricing and terms outlined in the original Masters Services Agreement, Contracts and Addendums through July 30, 2024, in line with the
original MSA, Contacts, and Addendums. In conjunction with the new MSA and SLA, the Company and CHIVO completed a financial settlement
agreement secured by certain assets to reconcile reporting, finalize balances owed between the parties and conclude the original MSA,
Contracts, and Addendums between the Company and the Department of Treasury of El Salvador.
4. Accounts Receivable
Accounts receivable, net of allowance consist
of the following as of December 31, 2022 and December 31, 2021:
| |
December 31, 2022 | | |
December 31, 2021 | |
| |
(in thousands) | |
White-label fee receivable | |
$ | 85 | | |
$ | 979 | |
Ancillary fee receivable | |
| – | | |
| 496 | |
Others | |
| 24 | | |
| 56 | |
| |
$ | 109 | | |
$ | 1,531 | |
5. Crypto Assets Held
The Company held the following crypto assets as of December 31, 2022
and December 31, 2021.
| |
December 31, 2022 | | |
December 31, 2021 | |
| |
Qty (1) | | |
Average Rate | | |
Amount (thousands) | | |
Qty (1) | | |
Average Rate | | |
Amount (thousands) | |
| |
| | |
| | |
| | |
| | |
| | |
| |
Bitcoin | |
| 16 | | |
$ | 18,069 | | |
$ | 290 | | |
| 17 | | |
$ | 46,327 | | |
$ | 796 | |
Litecoin | |
| 125 | | |
| 66 | | |
| 8 | | |
| 192 | | |
| 147 | | |
| 28 | |
Ethereum | |
| 16 | | |
| 1,130 | | |
| 19 | | |
| 5 | | |
| 3,002 | | |
| 15 | |
Bitcoin cash | |
| 26 | | |
| 97 | | |
| 23 | | |
| 6 | | |
| 431 | | |
| 3 | |
Tether | |
| 45,502 | | |
| 1 | | |
| 46 | | |
| – | | |
| – | | |
| – | |
| |
| | | |
| | | |
$ | 365 | | |
| | | |
| | | |
$ | 842 | |
(1) Rounded off to the nearest whole number
Athena Bitcoin Global
Notes to Consolidated Financial Statements
For the twelve months ended December 31, 2022
and 2021
The table below shows the roll-forward of quantity and costs (in thousands
of dollars) of various crypto assets traded by the Company.
| |
Bitcoin | | |
All Others (2) | |
| |
Qty | | |
Cost | | |
Cost | |
Twelve months ended | |
| | |
| | |
| |
January 1, 2021 | |
| 44 | | |
| 1,299 | | |
| 44 | |
Purchases | |
| 1,551 | | |
| 72,457 | | |
| 2,516 | |
Cost of sales | |
| (1,464 | ) | |
| (67,230 | ) | |
| (2,510 | ) |
Theft(3) | |
| (29 | ) | |
| (1,600 | ) | |
| – | |
Crypto assets used for expenses | |
| (35 | ) | |
| (2,048 | ) | |
| – | |
Crypto assets used for other advances | |
| (2 | ) | |
| (115 | ) | |
| – | |
Crypto assets used for capital expenditures | |
| (12 | ) | |
| (476 | ) | |
| – | |
Crypto assets borrowings repaid | |
| (31 | ) | |
| (1,396 | ) | |
| – | |
Fees on bitcoin borrowings paid | |
| (3 | ) | |
| (130 | ) | |
| – | |
Impairment | |
| – | | |
| (40 | ) | |
| (4 | ) |
Change in bitcoin held on behalf of certain customers | |
| (2 | ) | |
| 75 | | |
| – | |
December 31, 2021 (1) | |
| 17 | | |
| 796 | | |
| 46 | |
| |
| | | |
| | | |
| | |
January 1, 2022 | |
| 17 | | |
| 796 | | |
| 46 | |
Purchases | |
| 2,018 | | |
| 47,198 | | |
| 6,205 | |
Cost of sales | |
| (1,897 | ) | |
| (44,432 | ) | |
| (5,817 | ) |
Crypto assets used for expenses | |
| (115 | ) | |
| (2,891 | ) | |
| (285 | ) |
Crypto assets used for capital expenditure | |
| (3 | ) | |
| (121 | ) | |
| – | |
Impairment | |
| – | | |
| (125 | ) | |
| (74 | ) |
Change in bitcoin held on behalf of certain customers | |
| (4 | ) | |
| (135 | ) | |
| – | |
December 31, 2022 (1) | |
| 16 | | |
| 290 | | |
| 75 | |
(2) All others include Bitcoin Cash,
Bitcoin SV, Ethereum, Litecoin, Monero, and Tether.
(3) On March 31, 2021, the Company
experienced a breach in its security that resulting in a two-hour sales outage and a loss of 29 Bitcoin with purchase costs of $1,600,000
(approximate market value $1,709,000). The associated loss is recorded as theft of bitcoin in the Consolidated Statements of Operations
and Comprehensive Income (Loss).
6. Property and Equipment
Property and equipment consist of the following
as of December 31, 2022 and December 31, 2021:
| |
December 31, 2022 | | |
December 31, 2021 | |
| |
(in thousands) | |
ATM equipment | |
$ | 4,923 | | |
$ | 4,219 | |
Computer equipment | |
| 111 | | |
| 118 | |
Office equipment | |
| 22 | | |
| 27 | |
Capitalized software | |
| 3,811 | | |
| 905 | |
| |
| 8,867 | | |
| 5,269 | |
Less accumulated depreciation and amortization | |
| 3,028 | | |
| 1,461 | |
| |
$ | 5,839 | | |
$ | 3,808 | |
Depreciation expense for the twelve months ended
December 31, 2022 and 2021 was $1,398,000 and $574,000 respectively. Amortization expense for the twelve months ended December 31, 2022
and 2021 was $169,000 and $0 respectively.
Athena Bitcoin Global
Notes to Consolidated Financial Statements
For the twelve months ended December 31, 2022
and 2021
The table below presents property and equipment
by geography.
| |
December 31, 2022 | | |
December 31, 2021 | |
| |
(in thousands) | |
United States | |
$ | 4,167 | | |
$ | 2,058 | |
El Salvador | |
| 1,672 | | |
| 1,748 | |
International | |
| – | | |
| 2 | |
| |
$ | 5,839 | | |
$ | 3,808 | |
7. Operating Leases
Lease liabilities as of consist of the following:
| |
December 31, 2022 | | |
December 31, 2021 | |
| |
(in thousands) | |
| |
| | |
| |
Current portion of lease liabilities | |
$ | 786 | | |
$ | 624 | |
Long term lease liabilities, net of current portion | |
| 1,965 | | |
| 1,694 | |
Total lease liabilities | |
$ | 2,751 | | |
$ | 2,318 | |
Other information related to leases was as follows:
| |
December 31, 2022 | | |
December 31, 2021 | |
| |
(in thousands) | |
| |
| | |
| |
Weighted-average remaining lease term (in years) | |
| 3.59 | | |
| 3.86 | |
Weighted-average discount rate | |
| 15% | | |
| 15% | |
The discount rates used in measuring the lease
liabilities was based on the Company’s hypothetical incremental borrowing rate, as the rate implicit in the leases were not readily
determinable.
The components of lease expense were as follows:
| |
December 31, 2022 | | |
December 31, 2021 | |
| |
(in thousands) | |
Lease Cost | |
| | | |
| | |
Operating lease cost | |
$ | 1,475 | | |
$ | 1,126 | |
Variable lease cost | |
| – | | |
| – | |
Total lease cost | |
$ | 1,475 | | |
$ | 1,126 | |
As of December 31, 2022, the Company's leases
have remaining lease terms of up to 5.6 years, some of which include optional renewals or terminations, which are considered in the Company’s
assessments when such options are reasonably certain to be exercised. Any variable payments related to the lease will be recorded as
lease expense when and as incurred.
Athena Bitcoin Global
Notes to Consolidated Financial Statements
For the twelve months ended December 31, 2022
and 2021
Maturities of operating lease liabilities as of December
31, 2022, are shown below:
2023 | |
$ | 1,067 | |
2024 | |
| 901 | |
2025 | |
| 764 | |
2026 | |
| 407 | |
2027 and thereafter | |
| 96 | |
Total lease payments | |
| 3,235 | |
Less: Imputed interest | |
| (484 | ) |
Present value of lease liabilities | |
$ | 2,751 | |
Total operating lease payments reflected in operating
cash flows were $1,520,000 and $1,210,000 for the year ended December 31, 2022 and 2021, respectively.
8. Prepaid Expenses and Other Assets
Prepaid expenses and other current assets consist
of the following as of December 31, 2022 and December 31, 2021:
| |
December 31, 2022 | | |
December 31, 2021 | |
| |
(in thousands) | |
Prepaid expenses and other current assets | |
| | | |
| | |
Prepaid expense | |
$ | 358 | | |
$ | 369 | |
Prepaid foreign taxes | |
| 124 | | |
| 116 | |
Supplier advances | |
| 680 | | |
| 210 | |
Others | |
| 26 | | |
| 32 | |
| |
$ | 1,188 | | |
$ | 727 | |
9. Accounts Payable, Accrued Expenses and
Other Liabilities
Accounts payable and accrued expenses, and other
current liabilities consist of the following as of December 31, 2022 and December 31, 2021:
| |
December 31, 2022 | | |
December 31, 2021 | |
| |
(in thousands) | |
Accounts payable and accrued expenses | |
| | | |
| | |
Accounts payable | |
$ | 1,401 | | |
$ | 619 | |
Accrued expenses | |
| 45 | | |
| 291 | |
Interest payable | |
| 85 | | |
| 134 | |
| |
$ | 1,531 | | |
$ | 1,044 | |
| |
| | | |
| | |
Other current liabilities | |
| | | |
| | |
Payroll liabilities | |
| 39 | | |
| 51 | |
Funds owed to customers | |
| 59 | | |
| 256 | |
Foreign local taxes payable | |
| 184 | | |
| 123 | |
Uncertain tax position | |
| 106 | | |
| 173 | |
Other payable | |
| 8 | | |
| 12 | |
| |
$ | 396 | | |
$ | 615 | |
Athena Bitcoin Global
Notes to Consolidated Financial Statements
For the twelve months ended December 31, 2022
and 2021
10. Derivatives
On August 22, 2018, the Company entered into
a borrowing agreement with one of the Company’s directors and principal shareholder, Mr. Mike Komaransky, for restocking bitcoin
and increasing working capital. Under this agreement, the Company borrowed 30 Bitcoin, at fair value, initially due on August 22, 2019.
The borrowing fee as defined in the agreement, is 13.5% of the outstanding principal and was payable in bitcoin.
On July 12, 2021, the Company signed a borrowing
restructuring agreement for the remaining outstanding bitcoin balance as of that date. Under the agreement Mr. Komaransky agreed to extend
the maturity for the entire amount of loan to May 31, 2022. Further, the company agreed to pay accelerated weekly payments of $35,000
in equivalent Bitcoin. During 2021, the Company made all required payments as well as additional repayments. As of December 31, 2021
the borrowings have been repaid and no obligation remain.
The table below presents the roll-forward of
the bitcoin borrowings.
| |
December 31, 2022 | | |
December 31, 2021 | |
| |
Bitcoin (No) | | |
Fair value (USD) | | |
Bitcoin (No) | | |
Fair value (USD) | |
| |
(in thousands) | |
Bitcoin borrowings: | |
| | | |
| | | |
| | | |
| | |
Beginning fair value balance bitcoins borrowings | |
| – | | |
$ | – | | |
| 30 | | |
$ | 881 | |
New borrowings | |
| – | | |
| – | | |
| – | | |
| – | |
Repayments | |
| – | | |
| – | | |
| (30 | ) | |
| (1,396 | ) |
Fair value adjustment on crypto asset borrowing
derivatives | |
| – | | |
| – | | |
| – | | |
| 515 | |
Ending fair value balance bitcoins borrowings | |
| – | | |
$ | – | | |
| – | | |
$ | – | |
| |
| | | |
| | | |
| | | |
| | |
Ending fair value consists of: | |
| | | |
| | | |
| | | |
| | |
Carrying value of outstanding host contract | |
| – | | |
$ | – | | |
| – | | |
$ | – | |
Fair value of the embedded derivative liability | |
| – | | |
| – | | |
| – | | |
| – | |
Total | |
| – | | |
$ | – | | |
| – | | |
$ | – | |
11. Debt
Related Party
In 2017, the Company entered into several subordinated
note agreements with shareholders of the Company’s common stock. The notes had a principal amount of $117,000 with maturity dates
in 2021 and 2022. Interest as defined in the notes is 12% per annum. As of December 31, 2022, and December 31, 2021, the outstanding
principal was $90,000 and is due in the next twelve months.
On August 4, 2022, the Company completed a lending
transaction with Mike Komaransky, the Company’s principal shareholder and former director, whereby the Company borrowed $500,000
from Mr. Komaransky pursuant to the terms of a secured promissory note and security agreement. The promissory note has an interest rate
of 6% and the repayment of the principal amount and any accrued interest is secured by certain assets of the Company with respect to
which Mr. Komaransky holds first priority lien and security interest. The terms of the secured promissory note and the security agreement
were subsequently amended by the parties on January 17, 2023. Pursuant to the terms of the amended secured promissory note, the Company
agreed to make monthly payments of $50,000 until the maturity date of the secured promissory note, which is on August 31, 2023. As of
December 31, 2022, the outstanding principal was $400,000.
Third-Party
On May 30, 2017, the Company entered into a senior
note agreement with Consolidated Trading Futures, LLC. The note provided for a principal amount of $1,490,000 secured against the Company’s
cash in machines and held by service providers. Interest as defined in the note as 15% per annum with a maturity date of May 31, 2022.
As of both December 31, 2022, and December 31, 2021, the outstanding principal was $565,000 and $1,490,000, respectively.
Athena Bitcoin Global
Notes to Consolidated Financial Statements
For the twelve months ended December 31, 2022
and 2021
On August 1, 2018, the Company entered into a
promissory note with LoanMe, Inc. The promissory note provided for a principal amount of $100,000, with a final maturity date of August
1, 2028, with equal monthly installment payments of $2,000. Interest as defined in the promissory note is 24% per annum. As of December
31, 2022, and December 31, 2021, the outstanding principal was $80,000 and $88,000, respectively.
On September 22, 2021, the Company entered into
a borrowing arrangement with Banco Hipotecario secured against the Company’s assets in El Salvador. The promissory note provided
for a principal amount of $1,500,000, with a final maturity date of 36 months after disbursal with equal monthly installment payments
of $49,108 with a moratorium of 2 months. Interest as defined in the loan arrangement is 7.5% per annum. As of December 31, 2022, and
December 31, 2021, the outstanding principal was $1,037,000 and $1,500,000.
On December 10, 2022, the Company entered into
a financing agreement for $49,000 with Capital Premium Financing, Inc. to pay the insurance premium on its commercial liability insurance
with an annual percentage rate of 17.65% per annum repayable in nine monthly installments beginning February 1, 2023. As of December
31, 2022 and December 31, 2021, the outstanding principal was $49,000 and $75,000, respectively.
For third-party debt, the principal payments
due as of December 31, 2022 are as follows (in thousands):
2023 | |
$ | 1,183 | |
2024 | |
| 548 | |
2025 | |
| 12 | |
2026 | |
| 16 | |
2027 | |
| 20 | |
Thereafter | |
| 14 | |
| |
$ | 1,793 | |
Deferred financing costs are amortized using
the effective interest method. Deferred financing for the twelve months ended December 31, 2022 and 2021 was $2,000 and $8,000 respectively.
Deferred financing costs had a carrying value of $0 at December 31, 2022 and $2,000 at December 31, 2021. These discounts are recorded
as a reduction of debt on the consolidated balance sheets.
12. Convertible Debt
On January 1, 2021, the Company early adopted
ASU 2020-06 using the modified retrospective method. The adoption resulted in an increase of $890,000 and $37,000 to convertible debt,
related party and convertible debt respectively, to reflect the full principal amount of the Convertible Notes outstanding, net of issuance
costs.
Related Party
On January 31, 2020, the Company entered into
a convertible debenture agreement with KGPLA LLC, an entity in which Mike Komaransky, a former director and principal shareholder of
the Company has controlling interest. The convertible debenture provided for a principal amount of $3,000,000, with a maturity date of
January 31, 2025. Interest as defined by the agreement is 8% per annum. KGPLA, LLC has the option to convert the outstanding principal
and accrued interest balance into common stock of the Company at the lower of $0.012 per share or 20% discount to the next major financing
or change in control. As of December 31, 2022 and December 31, 2021, the outstanding principal debenture amount is $3,000,000.
Third-Party
On January 31, 2020, the Company entered into
a convertible debenture agreement with Swingbridge Crypto III, LLC. The convertible debenture provided for a principal amount of $125,000,
with a maturity date of January 31, 2025. Interest as defined by the agreement is 8% per annum. On August 26, 2021, Swingbridge Crypto
III, LLC gave notice to convert the outstanding principal of $125,000 as per the terms of the debentures since the Company secured major
financing consequent to issuance of 6% Convertible Debentures as described below. This amount is included in shares to be issued in the
Consolidated Statement of Stockholders’ Deficit as at December 31, 2021. The Company issued 10,416,666 shares to convert the outstanding
principal on February 18, 2022.
On June 22, 2021 the Company authorized the issuance
and sale of up to $5,000,000 in aggregate principal amount of Convertible Debentures. The convertible promissory notes (i) are unsecured,
(ii) bear interest at the rate of 6% per annum, and (iii) are due two years from the date of issuance. The convertible promissory notes
are convertible at any time at the option of the investor into shares of the Company’s common stock that is determined by dividing
the amount to be converted by the lesser of (i) $0.10 per share or (ii) 25% less than the twenty trading day (20-trading day) volume
weighted average price (“VWAP”) of the Common Stock-based on the trades reported by the OTC Pink Market operated by the OTC
Markets Group, Inc.
Athena Bitcoin Global
Notes to Consolidated Financial Statements
For the twelve months ended December 31, 2022
and 2021
As of December 31, 2021, the Company received
an amount of $4,985,000 toward subscription against this issue. In December 2021, certain debenture holders exercised their right and
gave an irrevocable notice to convert $220,000 of the convertible debt for 2,200,000 shares. This amount is included in shares to be
issued in the Consolidated Statement of Stockholders’ Deficit as at December 31, 2021. On March 31, 2021, additional debenture
holders exercised their right and gave irrevocable notice to convert $3,245,000 of the convertible debt. The Company issued a total of
34,650,000 shares to convert the outstanding principal for the year ended December 31, 2022. The outstanding amount of the convertible
debt is $1,520,000 as of December 31, 2022 and $4,765,000 as of December 31, 2021.
13. Fair Value Measurements
The following table sets forth by level, within the fair value hierarchy,
the Company’s assets and liabilities measured and recorded at fair value on a recurring basis (in thousands):
| |
December 31, 2022 | | |
December 31, 2021 | |
| |
Level 1 | | |
Level 2 | | |
Level 3 | | |
Total | | |
Level 1 | | |
Level 2 | | |
Level 3 | | |
Total | |
Assets | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
Cash and cash equivalents | |
$ | 2,101 | | |
$ | – | | |
$ | – | | |
$ | 2,101 | | |
$ | 1,174 | | |
$ | – | | |
$ | – | | |
$ | 1,174 | |
Restricted cash – cash held for customers | |
| 1,107 | | |
| – | | |
| – | | |
| 1,107 | | |
| 3,671 | | |
| – | | |
| – | | |
| 3,671 | |
Crypto assets held | |
| – | | |
| 59 | | |
| – | | |
| 59 | | |
| – | | |
| 842 | | |
| – | | |
| 842 | |
| |
$ | 3,208 | | |
$ | 59 | | |
$ | – | | |
$ | 3,267 | | |
$ | 4,845 | | |
$ | 842 | | |
$ | – | | |
$ | 5,687 | |
Liabilities | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Crypto asset borrowings | |
| – | | |
| 59 | | |
| – | | |
| 59 | | |
| – | | |
| – | | |
| – | | |
| – | |
| |
$ | – | | |
$ | 59 | | |
$ | – | | |
$ | 59 | | |
$ | – | | |
$ | – | | |
$ | – | | |
$ | – | |
The Company did not make any transfers between the levels of the fair
value hierarchy during the years ended December 31, 2022 and December 31, 2021.
Non-recurring Assets and Liabilities Measured and Recorded at Fair
Value
The Company’s non-financial assets, such
as goodwill, intangible assets, property and equipment, and crypto assets held are adjusted to fair value when an impairment charge is
recognized. Such fair value measurements are based predominately on Level 3 inputs. Fair value of crypto assets held are predominantly
based on Level 2 inputs.
14. Stock-Based Compensation
Stock Option Plan
The Company previously had a 2016 Equity Incentive Plan (the 2016
Plan) which was terminated in January 2020. As of December 31, 2022 and 2021, there were not options outstanding under the plan.
Athena Bitcoin Global
Notes to Consolidated Financial Statements
For the twelve months ended December 31, 2022
and 2021
15. Commitments and Contingencies
The Company, from time to time, might have claims
against it incidental to the Company’s business including but not limited to tax demands and penalties. While the outcome of any
of these matters cannot be predicted with certainty, management does not believe that the outcome will have a material adverse effect
on the accompanying consolidated financial statements.
The Company entered into
a non-binding Letter of Intent with Arley Lozano, a principal beneficial owner of Vakano Industries and XPay, both Colombian entities
(collectively, “XPay”), for the purchase and sale of certain assets of XPay, primarily intellectual property assets, including
the XPay Wallet (the precursor to the Chivo Wallet) and XPay POS software, to the Company. In September, 2021, Lozano and the Company
entered into a letter of intent to acquire assets of XPay which include certain technologies, ATMs, point-of-sale terminals in El Salvador,
X-Pay POS system and other assets.
On December 21, 2022, the
Company sent formal notice to XPay canceling the non-binding letter of intent for the proposed transaction between the parties and confirming
that the $1,595,000 paid to date and presented in previous quarters under other advances in the accompanying Consolidated Balance Sheets
represented payment in full for certain software, code and technology developments. The software is included in capitalized software under
Property and Equipment, net and is being amortized over five years.
16. General and Administrative
Expenses
General and administrative expenses consisted
of the following.
| |
December 31, 2022 | | |
December 31, 2021 | |
| |
(in thousands) | |
Salaries and benefits | |
$ | 3,412 | | |
$ | 1,398 | |
General and administrative expenses | |
| 2,021 | | |
| 2,350 | |
Travel | |
| 207 | | |
| 309 | |
Rent | |
| 144 | | |
| 96 | |
| |
$ | 5,784 | | |
$ | 4,153 | |
17. Sales and Marketing
Sales and marketing expenses consisted of the
following.
| |
December 31, 2022 | | |
December 31, 2021 | |
| |
(in thousands) | |
Salaries and benefits | |
$ | 410 | | |
$ | 258 | |
Advertising | |
| 123 | | |
| 365 | |
Other selling and marketing | |
| 61 | | |
| 24 | |
| |
$ | 594 | | |
$ | 647 | |
Athena Bitcoin Global
Notes to Consolidated Financial Statements
For the twelve months ended December 31, 2022
and 2021
18. Employee Loans
In January 2020, the Company allowed its employees
with vested stock options to exercise with the use of a non-recourse loan agreement. These loan agreements have a maturity date of 48
months from the date of exercise and carries an interest rate of 1.69%. As of December 31, 2022 and 2021, the outstanding balance due
from employees was $993,00 and $977,000, respectively.
19. Warrants
In 2017 Athena Bitcoin, Inc., the wholly owned
subsidiary of the Company, issued warrants to purchase 202,350 shares of Athena Bitcoin, Inc.’s common stock for $14,005. The warrants
provide for a right to purchase common shares in Athena Bitcoin, Inc., priced at $2.00 to $3.00 per share, at an average exercise price
of $2.49 per share. In January 2020, warrants to purchase 102,350 shares of Athena Bitcoin, Inc. common stock at an average exercise
price of $2.00 per share were exercised. No warrants were exercised during the years ended December 31, 2022 and 2021.
Warrants to purchase 100,000 shares of Athena
Bitcoin, Inc. common stock, at an exercise price of $3 per share, remain outstanding as of December 31, 2022. The warrant will expire
on May 30, 2025.
20. Related Party
Aside from the transactions discussed in other notes to these financial
statements, the Company continues to carry a payables balance to Red Leaf Opportunities Fund LP, an entity in which a current director
and the former Chief Executive Officer has a controlling interest through the General Partner, Red Leaf Advisors LLC, for previous purchases
of crypto assets. The outstanding balance due to Red Leaf Opportunities Fund LP as of December 31, 2022 and December 31, 2021 was $407,000,
and is recorded in accounts payable, related party in the Consolidated Balance Sheets.
During the year ended December 31, 2022, the Company incurred cash
logistics services of $718,000 to Swift Trust, LLC and subsequently Move On Security LLC. The current Chief Executive Officer and director
of the Company has a controlling interest in Swift Trust, LLC. He is a non-controlling partner of Move On Security LLC. As of December
31, 2022, the Company recorded a payable, presented as part of Accounts payable, related party in the Consolidated Balance Sheets of
$58,000 to Move On Security LLC. There is no payable as of December 31, 2021.
21. Fees on Borrowings
Fees on borrowings consisted of the following
expense:
| |
December 31, 2022 | | |
December 31, 2021 | |
| |
(in thousands) | |
Fees on crypto borrowings | |
$ | – | | |
$ | 119 | |
Fees for virtual vault services | |
| 113 | | |
| 222 | |
| |
$ | 113 | | |
$ | 341 | |
Vault is a term used in the Armored Car
and Cash Transport industry to define a service provided by armored car services for assets considered property of the bank when the
bank does not have a physical vault or location in a given state or location. The Fees for virtual vault services included in our income
statement are for a currency availability service provided to the Company by its bank for making funds held in a virtual vault immediately
available to the Company. Neither the term nor the service is related to virtual currency or crypto assets.
Athena Bitcoin Global
Notes to Consolidated Financial Statements
For the twelve months ended December 31, 2022
and 2021
22. Income Taxes
Income before income taxes was
attributable to the following regions:
| |
December 31, 2022 | | |
December 31, 2021 | |
| |
(in thousands) | |
Domestic | |
$ | 4,816 | | |
$ | (1,391 | ) |
Foreign | |
| 1,093 | | |
| (1,370 | ) |
| |
$ | 5,909 | | |
$ | (2,761 | ) |
Provision for (benefit from) income
taxes consisted of the following:
| |
December 31, 2022 | | |
December 31, 2021 | |
| |
(in thousands) | |
Current: | |
| | |
| |
Statutory federal tax on income | |
$ | 1,046 | | |
$ | 961 | |
State income tax, net of federal benefit | |
| 189 | | |
| (26 | ) |
Foreign | |
| 507 | | |
| 52 | |
Total current | |
| 1,742 | | |
| 987 | |
Deferred: | |
| | | |
| | |
Statutory federal tax on income | |
$ | 36 | | |
$ | (119 | ) |
State income tax, net of federal benefit | |
| (8 | ) | |
| 15 | |
Total deferred tax liability (asset) | |
| 28 | | |
| (104 | ) |
Total provision for income taxes | |
$ | 1,770 | | |
$ | 883 | |
A reconciliation of the statutory
income tax rates and the effective tax rate are as follows:
| |
December 31, 2022 | | |
December 31, 2021 | |
| |
(in thousands) | |
| |
| |
Statutory U.S. federal rate | |
| 21.0% | | |
| 21.0% | |
Income tax on jurisdiction other than statutory | |
| 1.7 | | |
| 1.5 | |
State income tax, net of federal benefit | |
| 2.7 | | |
| 5.8 | |
Foreign withholding taxes | |
| 14.4 | | |
| 0.0 | |
Valuation allowance | |
| (15.1 | ) | |
| (58.3 | ) |
Uncertain tax positions | |
| (1.1 | ) | |
| (6.3 | ) |
Prior year true-ups (state and federal) | |
| 2.3 | | |
| 5.2 | |
Other | |
| 4.1 | | |
| (0.9 | ) |
| |
| 30.0% | | |
| (32.0 | )% |
The Company’s effective tax rate (“ETR”) for the
year ended December 31, 2022 and 2021 was 30.00% and (32.00%), respectively. The ETR for the year ended December 31, 2022 of 30.00% was
higher than the U.S. statutory rate of 21.0%. This was due (i) primarily to foreign income tax expense (ii) income tax effect of local
statutory rates, (iii) valuation allowance on domestic and foreign deferred tax assets, (iv) non-deductible interest expense on convertible
debt and (v) non-deductible costs in El Salvador.
Athena Bitcoin Global
Notes to Consolidated Financial Statements
For the twelve months ended December 31, 2022
and 2021
The tax effects of the temporary
differences and carryforwards that give rise to deferred tax assets and deferred tax liabilities consist of:
| |
December 31, 2022 | | |
December 31, 2021 | |
| |
(in thousands) | |
Deferred tax asset: | |
| | | |
| | |
Foreign tax credit | |
$ | 564 | | |
$ | 700 | |
Net operating loss carryforward | |
| 44 | | |
| 941 | |
Lease liability | |
| 684 | | |
| 60 | |
Interest carryforward | |
| – | | |
| 162 | |
Other | |
| – | | |
| 3 | |
Gross deferred tax assets | |
| 1,292 | | |
| 1,866 | |
| |
| | | |
| | |
Deferred tax liability: | |
| | | |
| | |
Depreciation and amortization | |
| (433 | ) | |
| (196 | ) |
Right of use asset | |
| (684 | ) | |
| (60 | ) |
Gross deferred tax liability | |
| (1,117 | ) | |
| (256 | ) |
| |
| | | |
| | |
Less: valuation allowance | |
| (202 | ) | |
| (1,610 | ) |
| |
| | | |
| | |
Total deferred assets and liability | |
$ | (27 | ) | |
$ | – | |
The Company has determined that its
right-of-use assets are true tax leases and has appropriately accounted for the related income tax benefits.
A valuation
allowance of $202,000 and $1,610,000 was recorded against the Company’s net deferred tax asset balance as of December 31, 2022
and December 31, 2021, respectively. As of each reporting date, management considers new evidence, both positive and negative, that could
affect its view of the future realization of deferred tax assets. On the basis of this evaluation, portion of the deferred tax asset
in 2022 and liability is more likely not to be realized. The valuation allowance included allowances primarily related to U.S. Federal
net operating loss carryforwards and foreign tax credits. As of December 31, 2022 and 2021, the Company has $0 and $2,123,000, respectively
of federal loss carryforwards available to offset federal taxable income, and $850,000 and $1,734,000, respectively of state loss carryforwards
available to offset future state taxable income. As of December 31, 2022 and 2021, the Company also has carryforwards available for credits
from taxes paid in foreign jurisdictions of $564,000 and $700,000, respectively. The Company also had foreign net operating loss carryforwards
of $21,000 and $442,000 as of December 31, 2022 and 2021, respectively, which were provided a full valuation allowance.
Activity related to the Company’s
uncertain tax positions consisted of the following:
| |
December 31, 2022 | | |
December 31, 2021 | |
| |
(in thousands) | |
| |
| | |
| |
Balance, beginning of year | |
$ | 173 | | |
$ | – | |
Increase to tax positions taken during the current year | |
| – | | |
| 75 | |
Decrease to tax positions taken during the prior year | |
| (67 | ) | |
| 98 | |
Balance, end of year | |
$ | 106 | | |
$ | 173 | |
Athena Bitcoin Global
Notes to Consolidated Financial Statements
For the twelve months ended December 31, 2022
and 2021
The increase
in tax positions taken during the current and prior year relate to positions taken on the Company’s convertible debt instruments.
The Company is otherwise currently unaware of any uncertain tax positions that could result in significant additional payments, accruals,
or other material deviation in this estimate over the next twelve months.
Major tax jurisdictions
are the United States and Illinois. All of the tax years will remain open three and four years for examination by the Federal and state
tax authorities, respectively, from the date of utilization of the net operating loss. There are no tax audits pending.
23. Net Earnings (Loss) Per
Share
The computation of net earnings
(loss) per share is as follows:
| |
December 31, 2022 | | |
December 31, 2021 | |
| |
(in thousands, except per share amounts) |
| |
| | |
| |
Basic net earnings (loss) per share: | |
| | | |
| | |
Numerator | |
| | | |
| | |
Net income (loss) | |
$ | 4,139 | | |
$ | (3,644 | ) |
Denominator | |
| | | |
| | |
Weighted-average shares of common stock
used to compute net earnings (loss) per share attributable to common stockholders, basic | |
| 4,086,018,632 | | |
| 4,049,392,879 | |
Net earnings (loss) per share attributable
to common stockholders, basic | |
$ | 0.00101 | | |
$ | (0.00090 | ) |
| |
| | | |
| | |
Diluted net earnings (loss) per share: | |
| | | |
| | |
Numerator | |
| | | |
| | |
Net income (loss), basic | |
| 4,139 | | |
| (3,644 | ) |
Add: Interest expense on convertible debt | |
| 363 | | |
| – | |
Net income (loss), diluted | |
$ | 4,502 | | |
$ | (3,644 | ) |
Denominator | |
| | | |
| | |
Weighted-average shares of common stock used to compute net
earnings (loss) per share attributable to common stockholders, basic | |
| 4,086,018,632 | | |
| – | |
Weighted-average effect of potentially dilutive securities:
convertible debt | |
| 265,200,001 | | |
| – | |
Unexercised warrants | |
| 124,469,000 | | |
| – | |
Weighted-average shares of common stock
used to compute net earnings (loss) per share attributable to common stockholders, diluted | |
| 4,475,687,633 | | |
| 4,049,392,879 | |
Net earnings (loss) per share attributable
to common stockholders, diluted | |
$ | 0.00101 | | |
$ | (0.00090 | ) |
Potential common shares related to
the Company’s convertible debt of 278,544,886 and unexercised warrants of 124,469,000 for the year ended in December 31, 2021 were
excluded in the calculation of diluted shares outstanding as the effect would have been anti-dilutive.
24. Legal Proceedings
On September 8, 2022, Athena Bitcoin, Inc. (“Athena”
or the “Company”) received from the Office of the Commissioner of Financial Institutions (“OCFI”), a “Final
Resolution and Order to Cease and Desist” (“OC&D”), requiring to, among other matters, stop the operations and
marketing of the bitcoin automated teller machines (“BTMs”), that were operating in Puerto Rico. On September 12, 2022, Athena
filed a Complaint for Declaratory Judgment and Permanent Injunction, accompanied by a Petition for Preliminary Injunction before the
Courts of the Commonwealth, Superior Part requesting that the determination and effects of the OC&D be stayed until final resolution
of the case. On November 10, 2022, the Court dismissed the civil action with the interpretation that the controversy presented before
it was not ripe for resolution by the Court. The Company will seek to have this determination reconsidered by the Superior Part. If the
Superior Part affirms its previous determination, Athena plans to seek a reversal of such determination before the Court of Appeals of
the Commonwealth accompanied by a Motion Requesting a Stay of the determination and effects of the OC&D.
Athena Bitcoin Global
Notes to Consolidated Financial Statements
For the twelve months ended December 31, 2022
and 2021
Athena is also vigorously defending itself in
the administrative proceedings before the OCFI of the OC&D and will seek remedies before the Court of Appeals of the Commonwealth
of Puerto Rico when the final determination is issued by the OC&D.
Revenue from operations in Puerto Rico for the
years ended December 31, 2022 and 2021 were less than 3% and 5% of total revenue, respectively.
25. Off-Balance Sheet Arrangements
In the normal course of business, the Company’s
contract with the government of El Salvador for the operation of the Chivo branded ATMs obligates the Company to assume the risk of loss
for funds used in the operation of the Chivo branded ATMs while those funds are in transit. The Company has contracted with licensed
and insured cash logistics companies to securely transport these funds. The logistics companies’ insurance covers in full the value
of the funds in transit however, in the event of a loss or destruction of the funds in transit, the Company could encounter a timing
delay between insurance payment for lost funds and the date of actual loss. The amount of funds in transit varies based on multiple factors
including but not limited to economic activity, seasonality, holiday and bank closure calendars. The amount of funds in transit as of
December 31, 2022, and December 31, 2021, were $278,000 and $797,000, respectively.
26. Subsequent Events
The Company has evaluated subsequent events after
the balance sheet date of December 31, 2022 through September 30, 2023 the date on which these Consolidated Financial Statements were available
to be issued.
On November 4, 2022, the Company’s board
of directors and its majority shareholders approved the Company’s restated and Amended Articles of Incorporation (the “Restated
Articles”) which were filed with the State of Nevada on January 11, 2023. The Restated Articles provide for the authorized capital
consisting of 10,000,000,000 common shares at .001 par value per share and 5,000,000,000 preferred shares at .001 par value per share.
The impact of the addition of preferred shares had no impact on the Company’s financial results for the periods reported.
On February 16, 2023, the Company signed a Service
Agreement for the operation of its ATMs currently situated in retail locations in Puerto Rico with PowerCoin, LLC (“PowerCoin.”)
Terms of agreement enable the Company to locate, maintain and service its ATMs with PowerCoin managing transaction processing, cash logistics,
and compliance services.
PART II- INFORMATION NOT
REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
The following table sets forth the costs and
expenses payable by the Company in connection with the issuance and distribution of the securities being registered hereunder. All amounts
are estimates except the SEC registration fee.
SEC registration fees |
|
$ |
113,374.44 |
|
Printing expenses |
|
$ |
|
|
Accounting fees and expenses |
|
$ |
|
|
Legal fees and expenses |
|
$ |
150,000.00 |
|
Miscellaneous |
|
$ |
|
|
Total |
|
$ |
263,374.44 |
|
Item 14. Indemnification of Directors and
Officers.
We are a Nevada corporation, and accordingly,
we are subject to the corporate laws under the Nevada Revised Statutes. Article Ten of our Amended and Restated Articles of Incorporation,
Article V of our by-laws and the Nevada Revised Business Statutes, contain indemnification provisions.
Our Amended and Restated Articles of Incorporation
provides that we will indemnify, in accordance with our by-laws and to the fullest extent permitted by the Nevada Revised Statutes or
any other applicable laws, any person who was or is a party or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, including an action by or in the right of the corporation, by reason of such person acting as a director
or officer of the corporation or any of its subsidiaries against any liability or expense actually and reasonably incurred by such person.
We will be required to indemnify an officer or director in connection with an action, suit or proceedings initiated by such person only
if (i) such action, suit or proceeding was authorized by the Board and (ii) the indemnification does not relate to any liability arising
under Section 16(b) of the Exchange Act, as amended, or rules or regulations promulgated thereunder. Such indemnification is not exclusive
of any other right to indemnification provided by law or otherwise. Indemnification shall include payment by us of expenses in defending
an action or proceeding in advance of final disposition of such action or proceeding upon receipt of an undertaking by the person indemnified
to repay such payment if it’s ultimately determined that such person is not entitled to indemnification.
All members of our Board of Directors are additionally
subject to the protections offered by the Indemnification Agreement by and between the Company and each of the directors. We do not carry
director and officer liability insurance policy that covers certain liabilities of directors and officers of our corporation arising
out of claims based on acts or omissions in their capacities as directors or officers.
Insofar as indemnification for liabilities arising
under the Securities Act may be permitted to our directors, officers and controlling persons pursuant to the foregoing provisions, or
otherwise, we have been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. Please read “Item 17. Undertakings” for more information on the SEC’s position
regarding such indemnification provisions.
Insofar as indemnification for liabilities arising
under the Securities Act may be permitted to directors, officers or persons controlling us pursuant to the foregoing provisions, we have
been informed that, in the opinion of the SEC, this indemnification is against public policy as expressed in the Securities Act and is
therefore unenforceable.
Item 15. Recent Sales of Unregistered
Securities.
On June 22, 2021, the Company commenced its private
offering of up to $5,000,000 of 6% Convertible Debentures to accredited investors only as that term is defined in Rule 501 of Regulation
D promulgated under the Securities Act. The maturity date on the 6% Convertible Debentures is two years after the date of issuance. The
investor has an option to convert the principal amount of the Debenture into shares of common stock of the Company at a certain conversion
– see Description of Capital Stock, page 100. The Company sold a total of $4,985,000 of the 6% Convertible
Debentures to 77 accredited investors. The proceeds of the private placement are for working capital and operations of the Company. The
Company closed the private placement in September, 2021. Neither 6% Convertible Debentures nor the shares of common stock convertible
upon the conversion of the Convertible Debentures, have been registered under the Securities Act, and have been issued in reliance upon
an exemption from registration provided by Section 4(a)(2) and 4(a)(5) under the Securities Act and Regulation D promulgated thereunder
and bear a Rule 144 restrictive legend.
Effective as of January 30, 2020, GamePlan, Inc.,
a Nevada corporation entered into a share exchange agreement dated as of January 14, 2020 (the “Share Exchange Agreement”)
with Athena Bitcoin, Inc., a Delaware corporation and certain Athena Bitcoin shareholders. In accordance with the terms and provisions
of the Share Exchange Agreement, the Company acquired Athena Bitcoin in exchange for 3,593.644.680 newly issued “restricted”
shares of common voting stock of the Company to the Athena Bitcoin shareholders on a pro rata basis for the purpose of effecting a tax-free
reorganization pursuant to sections 351, 354 and 368(a)(1)(B) of the Internal Revenue Code of 1986, as amended. Pursuant to the terms
of the Share Exchange Agreement, each 1 share of common stock of Athena Bitcoin has been exchanged for 1,244.69 shares of the Company’s
common stock. The shares of common stock issued to the Athena Bitcoin shareholders in connection with the Share Exchange (3,593.644.680)
were issued with a Rule 144 restrictive legend. The shares issued in the Share Exchange were not registered under the Securities Act,
in reliance upon an exemption from registration provided by Section 4(a)(2) and/or 4(a)(5) under the Securities Act and Regulation D
promulgated thereunder.
On January 31, 2020 immediately following the
closing of the Share Exchange transaction, the Company closed a private placement of its 8% Convertible Debentures in the total amount
of $3,125,000 (the “Convertible Debentures”). The closing of the private placement was subject to the closing of the Share
Exchange transaction by the Company which occurred on January 30, 2020. There were two purchasers of the Convertible Debentures: KGPLA,
LLC, an entity in which a director of the Company and the Company’s beneficial owner of 41% has ownership interest ($3,000,000
principal amount of Convertible Debenture) and Swingbridge Crypto III, LLC ($125,000 principal amount of Convertible Debenture), an affiliate
of the Company – see Note 12 to the Financial Statements. Both purchasers were accredited investors as that term is defined in
Rule 501 of Regulation D promulgated under the Securities Act. The Convertible Debentures have a maturity date of January 31, 2025 and
bear interest at 8% per annum. The purchasers have an option to convert the outstanding principal and accrued interest amount of their
respective Convertible Debentures into shares of common stock of the Company at the lower of $0.012 per share or 20% discount to the
next major financing or change in control. Based upon the conversion ratio, the Convertible Debentures can be converted to up to 260,416,667
shares of common stock. In connection with the Convertible Debentures private placement, the purchasers acquired certain registration
and voting rights – see Description of Securities and Management sections. Neither Convertible Debenture nor the shares of common
stock convertible upon the conversion of the Convertible Debentures, have been registered under the Securities Act, and have been issued
in reliance upon an exemption from registration provided by Section 4(a)(2) and 4(a)(5) under the Securities Act and Regulation D promulgated
thereunder and bear a Rule 144 restrictive legend.
On December 24, 2018, the Company issued 45,210,500
shares of common stock to Robert Berry and 45,210,500 shares of common stock to Jon Jenkins, former officers and directors of the Company
pursuant to the agreement for cancellation of debt owed to Mr. Berry valued at $1,500,000, with Dempsey Mork, the Company’s officer,
director and majority shareholder. On the same date, Mr. Mork was issued 230,000,000 shares of common stock of the Company for payment
of state corporate fees, transfer agent and other outstanding fees of the Company and his services rendered to the Company, in the name
of Magellan Capital Partners, which is an entity controlled by Mr. Mork. All shares issued pursuant to the above transactions were not
registered under the Securities Act, in reliance upon an exemption from registration provided by Section 4(a)(2) and/or 4(a)(5) under
the Securities Act and Regulation D promulgated thereunder and had a Rule 144 restrictive legend.
The sales of the above securities were deemed
to be exempt from registration under the Securities Act in reliance upon Section 4(a)(2) and/or Section 4(a)(5) of the Securities Act
and Regulation D promulgated thereunder, as transactions by an issuer not involving any public offering. The recipients of the securities
in each of these transactions represented their intentions to acquire the securities for investment only and not with a view to or for
sale in connection with any distribution thereof, and appropriate legends were placed upon the stock certificates issued in these transactions.
None of the foregoing transactions involved any underwriters, underwriting discounts or commissions or any public offering, and the registrant
believes each transaction was exempt from the registration requirements of the Securities Act as stated above.
All recipients of the foregoing transactions
either received adequate information about the registrant or had access, through their relationships with the registrant, to such information.
Furthermore, the registrant affixed appropriate legends to the share certificates and instruments issued in each foregoing transaction
setting forth that the securities had not been registered and the applicable restrictions on transfer.
Item 16. Exhibits and Financial Statement Schedules.
Exhibit
Number |
|
|
Description
of Exhibit |
2.1 |
|
|
Articles of Merger of GamePlan, Inc., as filed on December
31, 1991 |
2.2 |
(1) |
|
Agreement
and Plan of Merger between VPartments, GamePlan, Inc. and VPartments Stockholders filed on April 3, 2014 |
2.3 |
(1) |
|
Share
Exchange Agreement dated January 14, 2020 by and among GamePlan, Inc., Athena Bitcoin, Inc. and certain of its shareholders |
3.1 |
|
|
Articles of Incorporation for GamePlan Inc. a Nevada
corporation, as filed on December 26, 1991 |
3.2 |
|
|
Articles of Amendment to the Articles of Incorporation
filed on December 30, 1993 |
3.3 |
(1) |
|
Amendment
to the Articles of Incorporation of GamePlan, Inc. filed on January 22, 2020 |
3.4 |
(1) |
|
Amended
and Restated Articles of Incorporation of GamePlan, Inc. filed on May 13, 2020 |
3.5 |
(1) |
|
Amendment
to the Articles of Incorporation of GamePlan, Inc. filed on April 6, 2021 |
3.6 |
(8) |
|
Second Amended and Restated Articles of Incorporation filed on January 11, 2023 |
3.7 |
|
|
By-laws, as adopted on December 26, 1991. |
3.8 |
(1) |
|
Bylaws
of GamePlan, Inc., adopted as of January 19, 2020. |
3.9 |
(1) |
|
Amended
and Restated Bylaws of GamePlan, Inc., adopted as of January 31, 2020 |
3.10 |
(1) |
|
Amended
and Restated Bylaws of GamePlan, Inc., adopted as of July 29, 2020. |
3.11 |
(8) |
|
Amended and Restated Bylaws adopted as of November 4, 2022 |
4.1 |
(5) |
|
Form
of common stock certificate of the registrant. |
4.2 |
(1) |
|
Warrant
(Consolidated Trading Futures, LLC), May 30, 2017 |
4.3 |
(1) |
|
Form
of Convertible Debenture |
4.4 |
(1) |
|
Form
of Right of First Refusal and Co-Sale Agreement |
4.5 |
(1) |
|
Form
of Investors’ Rights Agreement |
4.6 |
(8) |
|
Form of Amended and Restated Convertible Debenture dated as of May 15, 2023 |
4.7 |
(8) |
|
Restricted Stock Unit Agreement with Shaun Overton dated February 28, 2023 |
5.1** |
|
|
Opinion of Legal Counsel |
10.1 |
|
|
Promissory Note between GamePlan, Inc. and Robert G. Berry filed on April 2, 2001 |
10.2 |
|
|
Option
Agreement between the Company and Robert G. Berry filed on April 3, 2014 |
10.3 |
(1) |
|
Securities
Purchase Agreement dated January 31, 2020 |
10.4 |
(1) |
|
Indemnification
Agreement between the Company and Edward A. Weinhaus dated as of March 10, 2020 |
10.5 |
(1) |
|
Indemnification
Agreement between the Company and Mike Komaransky dated as of March 10, 2020 |
10.6 |
(1) |
|
Indemnification
Agreement between the Company and Huaxing Lu dated as of March 10, 2020 |
10.7 |
(1) |
|
Indemnification
Agreement between the Company and Esteban Suarez dated as of March 10, 2020 |
10.8 |
(1) |
|
Indemnification
Agreement between the Company and Eric Gravengaard dated as of March 10, 2020 |
10.9 |
(8) |
|
Indemnification Agreement between the Company and Matias Goldenhorn dated as of August 5, 2022 |
10.10* |
|
|
Indemnification Agreement between the Company and Carlos Carreno dated as of January 11, 2024 |
10.11* |
|
|
Indemnification Agreement between the Company and Antonio Valiente dated as of January 9, 2023 |
10.12 |
(1) |
|
Voting
Agreement dated as of January 31, 2020 |
10.13 |
(1) |
|
Simple
Agreement for Future Tokens (Form) |
10.14 |
(1) |
|
Amendment
to Simple Agreement for Future Tokens, dated January 30,2020 |
10.15 |
(5) |
|
Offer
Letter by and between GamePlan, Inc. and Rick Suri, dated as of February 18, 2021 |
10.16 |
(1) |
|
Secured
Convertible Promissory Note (Swingbridge), dated July 26, 2019 |
10.17 |
(1) |
|
Loan
and Security Agreement (Swingbridge), dated July 26, 2019 |
10.18 |
(1) |
|
Secured
Promissory Note with DV Chain, LLC, dated March 1, 2020 |
10.19 |
(1) |
|
Athena
Bitcoin, Inc. 2016 Equity Incentive Plan |
10.20 |
(4) |
|
Athena
Bitcoin Global 2021 Equity Compensation Plan |
10.21 |
(2) |
|
Securities
Purchase Agreement dated January 31, 2020 |
10.22 |
(2) |
|
Loan
Structuring and Related Amendments Agreement |
10.23 |
(2) |
|
First
Amendment to Loan Agreement and Michael Komaransky dated August 22, 2018 |
10.24 |
(2) |
|
First
Amendment to Securities Purchase Agreement dated January 31, 2020 |
10.25 |
(2) |
|
First
Amendment to Voting Agreement dated January 31, 2020 |
10.26 |
(2) |
|
Security
Agreement with Michael Komaransky |
10.27† |
(6) |
|
Master
Services Agreement with Treasury of El Salvador dated August 20, 2021 |
10.28† |
(6) |
|
Contract
No 51/2021 with Treasury of El Salvador |
10.29† |
(6) |
|
Contract
No 56/2021 with Treasury of El Salvador |
10.30 |
(5) |
|
Promissory
Note from Banco Hipotecario dated December 15, 2021 |
10.31† |
(7) |
|
Athena
Service Addendum 1 and 2 |
10.32† |
(3) |
|
Genesis
Coin, Inc. Purchase and Sale Agreement dated October 1, 2015 |
10.33 |
(3) |
|
Genesis
Coin, Inc. oral agreement with Athena Bitcoin, Inc. |
10.34 |
(5) |
|
Letter
of Intent with XPay dated July 13, 2021 |
10.35 |
(4) |
|
Cryptocurrency
Purchase & Sale Agreement with Galaxy Digital Trading Cayman LLC, dated January 23, 2021 |
10.36 |
(4) |
|
Oral
Contract by and between AdvisoryFX LLC and Athena Bitcoin |
10.37 |
(6) |
|
ATM
Terms of Service |
10.38 |
(6) |
|
Athena
Crypto Exchange FAQ and Terms of Service |
10.39 |
(8) |
|
Independent Contractor Agreement with Antonio Valiente dated January 1, 2022 |
10.40 |
(8) |
|
Consulting Agreement with Carlos Carreno dated March 15, 2023 |
10.41† |
(8) |
|
Equipment Sublease Agreement dated April 13, 2023 |
10.42† |
(8) |
|
Equipment Financing Agreement dated November 2, 2023 |
10.43* |
|
|
Special Power of Attorney dated as of May 18, 2023 |
10.44* |
|
|
Schedule to UCC Financing Statement dated as of May 18, 2023 |
10.45* |
|
|
Schedule to UCC Financing Statement dated as of May 18, 2023
|
10.46‡** |
|
|
Financial Settlement Agreement dated as of October
5, 2022 |
10.47† |
(8) |
|
Master Services Agreement executed as of October 5, 2022 and effective as of July 1, 2022 |
10.48† |
(8) |
|
Service Level Agreement executed as of October 5, 2022 and effective as of July 1, 2022 |
10.49 |
(8) |
|
Security Agreement dated August 4, 2022 |
10.50 |
(8) |
|
First Amendment to Security Agreement dated January 17, 2023 |
10.51 |
(8) |
|
Secured Promissory Note dated August 4, 2022 |
10.52 |
(8) |
|
First Amendment to Secured Promissory Note dated January 17, 2023 |
10.53 |
(8) |
|
Senior Secured Revolving Credit Promissory Note dated May 15, 2023 |
10.54 |
(8) |
|
Senior Secured Loan Agreement dated May 15, 2023 |
10.55 |
(8) |
|
First Amendment to Senior Secured Loan Agreement dated June 6, 2023 |
10.56 |
(8) |
|
Second Amendment to Senior Secured Loan Agreement dated July 27, 2023 |
10.57 |
(8) |
|
Third Amendment to Senior Secured Loan Agreement dated October 16, 2023 |
10.58 |
(8) |
|
Security Agreement dated May 15, 2023 |
10.59 |
(8) |
|
Intercreditor Letter Agreement dated as of November 1, 2023 |
10.60 |
(8) |
|
Termination Agreement dated November 4, 2022 |
10.61 |
(8) |
|
Term Loan Note dated May 15, 2023 |
10.62 |
(8) |
|
Unconditional Guaranty dated as of May 15, 2023 |
10.63 |
(8) |
|
Payoff
Letter with Consolidated Futures Trading, LLC dated May 15, 2023 |
10.64* |
|
|
Chief Financial Officer Offer Letter dated as of October 1, 2023 |
10.65* |
|
|
Currency-In-Transit Control Agreement with Brinks, U.S. dated as of May 15, 2023 |
10.66* |
|
|
Currency-In-Transit Control Agreement with Garda CL SOUTHWEST INC., dated as of May 1, 2023 |
10.67* |
|
|
Currency-In-Transit Control Agreement with Thillens Inc., dated as of May 15, 2023 |
10.68* |
|
|
Currency-In-Transit Control Agreement with Move on Security LLC, dated as of May 15, 2023 |
14.1 |
(6) |
|
Code
of Ethics |
21.1 |
(8) |
|
List of subsidiaries |
23.1* |
|
|
Consent of BF Borgers CPS PC |
107 |
(5) |
|
Calculation of Filing Fees |
____________________
* |
Filed herewith |
** |
To be filed by amendment |
(1) |
Incorporated by reference to Form DRS filed May 5, 2021 |
(2) |
Incorporated by reference to Form DRS/A filed August 16, 2021 |
(3) |
Incorporated by reference to Form DRS/A filed December 3, 2021 |
(4) |
Incorporated by reference to Form S-1 filed February 10, 2022 |
(5) |
Incorporated by reference to Form S-1/A filed March 17, 2022 |
(6) |
Incorporated by reference to Form S-1/A filed May 16, 2022 |
(7) |
Incorporated by reference to Form S-1/A filed June 24, 2022 |
(8) |
Incorporated by reference to Form S-1/A filed November 13, 2023 |
† |
Portions of this exhibit have been omitted pursuant to Item 601(b)(10)(iv) of Regulation S-K |
‡ |
Confidential treatment to be requested pursuant to Item 601(b)(10)(iv) of Regulation S-K and 17 C.F.R. §§230.406 and 230.83 |
(b) |
Financial Statement Schedule |
All schedules have been omitted because the required
information is included in the consolidated financial statements or the note thereto or is not applicable or required.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
|
(1) |
To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement: |
|
|
(i) |
To include any prospectus required by section 10(a)(3) of the Securities
Act; |
|
|
|
|
|
|
(ii) |
To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which
was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more
than 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the
effective registration statement; |
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(iii) |
To include any material information with respect to the plan of distribution
not previously disclosed in the registration statement or any material change to such information in the registration statement; |
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That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. |
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(3) |
To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of the offering. |
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(4) |
That, for the purpose of determining liability under the Securities
Act of 1933 to any purchaser, if the registrant is subject to Rule 430C, each prospectus filed pursuant to Rule 424(b) as part of
a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses
filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first
used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the
registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or
prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first
use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration
statement or made in any such document immediately prior to such date of first use. |
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(5) |
That, for the purpose of determining liability of the registrant under
the Securities Act to any purchaser in the initial distribution of the securities, the undersigned registrant undertakes that in
a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting
method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the
following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such
securities to such purchaser: |
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(i) |
Any preliminary prospectus or prospectus of the undersigned registrant
relating to the offering required to be filed pursuant to Rule 424; |
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(ii) |
Any free writing prospectus relating to the offering prepared by or
on behalf of the undersigned registrant or used or referred to by the undersigned registrant; |
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(iii) |
The portion of any other free writing prospectus relating to the offering
containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant;
and |
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(iv) |
Any other communication that is an offer in the offering made by the
undersigned registrant to the purchaser. |
Insofar as indemnification for liabilities arising
under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other
than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with
the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes
that:
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(1) |
For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained
in a form of prospectus filed by the registrant pursuant to Rule 424(b) (1) or (4) or 497(h) under the Securities Act shall be deemed
to be part of this registration statement as of the time it was declared effective. |
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(2) |
For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering
thereof. |
SIGNATURES
Pursuant to the requirements of the Securities
Act of 1933, as amended, the registrant has duly caused this Registration Statement on Form S-1 to be signed on its behalf by the
undersigned, thereunto duly authorized in Chicago, State of Illinois, on the 12th day of January, 2024.
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ATHENA BITCOIN GLOBAL |
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By: |
/s/ Matias Goldenhorn |
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Matias Goldenhorn |
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Chief Executive Officer and Director (Principal Executive Officer |
KNOW ALL PERSONS BY THESE PRESENTS, that each
person whose individual signature appears below hereby authorizes and appoints Eric Gravengaard his or her true and lawful attorney-in-fact,
with full power of substitution and resubstitution for him or her and in his or her name, place and stead, in any and all capacities
to sign any and all amendments including pre and post effective amendments to this registration statement on Form S-1, any subsequent
registration statement for the same offering which may be filed pursuant to Rule 462(b) under the Securities Act of 1933, as amended,
and pre or post-effective amendments thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, hereby ratifying and confirming all that said attorney-in-fact or his or her substitute,
each acting alone, may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities
Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities held and on the dates
indicated.
Signature |
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Date |
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/s/ Matias Goldenhorn |
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Chief Executive Officer and Director |
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January 12, 2024
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Matias Goldenhorn |
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(Principal Executive Officer & Principal Financial and Accounting Officer) |
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/s/ Tina Gregory |
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Chief Financial Officer |
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January 12, 2024
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Tina Gregory |
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(Principal Financial and Accounting Officer) |
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/s/ Carlos Carreno |
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Director |
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January 12, 2024 |
Carlos Carreno |
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/s/ Antonio Valiente |
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Director |
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January 12, 2024 |
Antonio Valiente |
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Exhibit 10.10
INDEMNIFICATION
AGREEMENT
THIS INDEMNIFICATION AGREEMENT
(this “Agreement”) is made and entered into as of January 11, 2024 (the “Effective Date”) by and between,
on the one hand, Athena Bitcoin Global, a Nevada corporation (“Athena Bitcoin”), jointly and severally with its wholly-owned
subsidiary, Athena Bitcoin, Inc., a Delaware corporation (“Athena”) (collectively, the “Company”),
and the undersigned individual (“Indemnitee”). The Company and Indemnitee are sometimes hereinafter referred to individually
as a “Party” and, collectively, as the “Parties”.
RECITALS
WHEREAS, highly competent
persons have become more reluctant to serve companies as managers, officers and/or directors, or in other capacities, unless they are
provided with adequate protection through insurance or adequate indemnification against inordinate risks of claims and actions against
them arising out of their service to and activities on behalf of the company.
WHEREAS, the boards of directors
of both of Athena Bitcoin and Athena (collectively, the “Board”) have determined that, in order to attract and retain
qualified individuals, the Company will attempt to maintain on an ongoing basis, at its sole expense, liability insurance to protect persons
serving the Company and its subsidiaries from certain liabilities. Although the furnishing of such insurance has been a customary and
widespread practice among U.S.-based companies and other business enterprises, the Company believes that, given current market conditions
and trends, such insurance may be available to it in the future only at higher premiums and with more exclusions. At the same time, managers,
directors, officers, and other persons in service to companies or business enterprises are being increasingly subjected to expensive and
time-consuming litigation relating to, among other things, matters that traditionally would have been brought only against the Company
or business enterprise itself. The operative governing documents and agreements of both Athena Bitcoin and Athena (collectively, the “Governance
Documents”) expressly provide that the indemnification provisions set forth therein are not exclusive, and thereby contemplate
that contracts may be entered into between the Company and members of the Board, officers and other persons with respect to indemnification.
WHEREAS, the uncertainties
relating to such insurance and to indemnification have increased the difficulty of attracting and retaining such persons.
WHEREAS, the Board has determined
that the increased difficulty in attracting and retaining such persons is detrimental to the best interests of the Company's shareholders
and that the Company should act to assure such persons that there will be increased certainty of such protection in the future.
WHEREAS, it is reasonable,
prudent and necessary for the Company contractually to obligate itself to indemnify, and to advance expenses on behalf of, such persons
to the fullest extent permitted by applicable law so that they will serve or continue to serve the Company free from undue concern that
they will not be so indemnified.
WHEREAS, this Agreement is
a supplement to and in furtherance of the Governance Documents and any resolutions adopted pursuant thereto, and shall not be deemed a
substitute therefor, nor to diminish or abrogate any rights of Indemnitee thereunder.
WHEREAS, Indemnitee does not
regard the protection available under the Governance Documents and insurance as adequate in the present circumstances and may not be willing
to serve as an officer or director without adequate protection, and the Company desires Indemnitee to serve in such capacity. Indemnitee
is willing to serve, continue to serve and to take on additional service for or on behalf of the Company on the condition that Indemnitee
be so indemnified.
NOW, THEREFORE, in consideration
of Indemnitee’s agreement to serve as a manager, officer and/or director from and after the Effective Date, the Parties agree as
follows:
1.
Indemnity of Indemnitee. The Company (jointly and several, as Athena Bitcoin and Athena, for all purposes of this Agreement
and under applicable law) hereby agrees to hold harmless and indemnify Indemnitee to the fullest extent permitted by law, as such may
be amended from time to time. In furtherance of the foregoing indemnification, and without limiting the generality thereof.
(a)
Indemnitee shall be entitled to the rights of indemnification provided in this Section l(a) if, by reason of Indemnitee’s
Corporate Status (as hereinafter defined), the Indemnitee is, or is threatened to be made, a party to or participant in any Proceeding
(as hereinafter defined) other than a Proceeding by or in the right of the Company. Pursuant to this Section 1(a), Indemnitee shall be
indemnified against all Expenses (as hereinafter defined), judgments, penalties, fines and amounts paid in settlement actually and reasonably
incurred by Indemnitee, or on Indemnitee’s behalf, in connection with such Proceeding or any claim, issue or matter therein, if
the Indemnitee acted in good faith and in a manner the Indemnitee reasonably believed to be in or not opposed to the best interests of
the Company, and with respect to any criminal Proceeding, had no reasonable cause to believe the Indemnitee’s conduct was unlawful.
(b)
Indemnitee shall be entitled to the rights of indemnification provided in this Section 1(b) if, by reason of Indemnitee’s
Corporate Status, the Indemnitee is, or is threatened to be made, a party to or participant in any Proceeding brought by or in the right
of the Company. Pursuant to this Section 1(b), Indemnitee shall be indemnified against all Expenses actually and reasonably incurred by
the Indemnitee, or on the Indemnitee’s behalf, in connection with such Proceeding if the Indemnitee acted in good faith and in a
manner the Indemnitee reasonably believed to be in or not opposed to the best interests of the Company; provided, however,
if applicable law so provides, no indemnification against such Expenses shall be made in respect of any claim, issue or matter in such
Proceeding as to which Indemnitee shall have been adjudged to be liable to the Company unless and to the extent that the Court of Chancery
of the State of Delaware shall determine that such indemnification may be made.
(c)
Notwithstanding any other provision of this Agreement, to the extent that Indemnitee is, by reason of Indemnitee’s Corporate
Status, a party to and is successful, on the merits or otherwise, in any Proceeding, Indemnitee shall be indemnified to the maximum extent
permitted by law, as such may be amended from time to time, against all Expenses actually and reasonably incurred by Indemnitee or on
Indemnitee’s behalf in connection therewith. If Indemnitee is not wholly successful in such Proceeding but is successful, on the
merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Company shall indemnify Indemnitee
against all Expenses actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection with each successfully
resolved claim, issue or matter. For purposes of this Section 1(c) and without limitation, the termination of any claim, issue or matter
in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.
(d)
If (i) Indemnitee is or was affiliated with one or more venture capital, family office or other funds that has invested in the
Company (an “Appointing Member”), and (ii) the Appointing Member is, or is threatened to be made, a party to or a participant
in any Proceeding relating to or arising by reason of Appointing Member's position as a direct or indirect economic interest holder of,
or lender to, the Company, or Appointing Member's appointment of or affiliation with Indemnitee or any other director, including, without
limitation, any alleged misappropriation of a Company asset or corporate opportunity, any claim of misappropriation or infringement of
intellectual property relating to the Company, any alleged false or misleading statement or omission made by the Company (or on its behalf)
or its employees or agents, or any allegation of inappropriate control or influence over the Company or its Board members, officers, equity
holders or debt holders, then the Appointing Member will be entitled to indemnification hereunder for Expenses to the same extent as Indemnitee,
and the terms of this Agreement as they relate to procedures for indemnification of Indemnitee and advancement of Expenses shall apply
to any such indemnification of Appointing Member.
2.
Additional Indemnity. In addition to, and without regard to any limitations on, the indemnification provided for in
Section 1, the Company shall and hereby does indemnify and hold harmless Indemnitee against all Expenses, judgments, penalties, fines
and amounts paid in settlement actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf if, by reason of Indemnitee’s
Corporate Status, Indemnitee is, or is threatened to be made, a party to or participant in any Proceeding (including a Proceeding by or
in the right of the Company), including, without limitation, all liability arising out of the negligence or active or passive wrongdoing
of Indemnitee. The only limitation that shall exist upon the Company’s obligations pursuant to this Agreement shall be that the
Company shall not be obligated to make any payment to Indemnitee that is finally determined (under the procedures, and subject to the
presumptions, set forth in Sections 6 and 7) to be unlawful.
3.
Contribution.
(a)
Whether or not the indemnification provided in Sections 1 and 2 is available, in respect of any threatened, pending or completed
action, suit or proceeding in which the Company is jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding),
the Company shall pay, in the first instance, the entire amount of any judgment or settlement of such action, suit or proceeding without
requiring Indemnitee to contribute to such payment and the Company hereby waives and relinquishes any right of contribution it may have
against Indemnitee. The Company shall not enter into any settlement of any action, suit or proceeding in which the Company is jointly
liable with Indemnitee (or would be if joined in such action, suit or proceeding) unless such settlement provides for a full and final
release of all claims asserted against Indemnitee.
(b)
Without diminishing or impairing the obligations of the Company set forth in Section 3(a), if, for any reason, Indemnitee shall
elect or be required to pay all or any portion of any judgment or settlement in any threatened, pending or completed action, suit or proceeding
in which the Company is jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding), the Company shall contribute
to the amount of Expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred and paid or payable by Indemnitee
in proportion to the relative benefits received by the Company and all officers, directors or employees of the Company, other than Indemnitee,
who are jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding), on the one hand, and Indemnitee, on
the other hand, from the transaction or events from which such action, suit or proceeding arose; provided, however, that
the proportion determined on the basis of relative benefit may, to the extent necessary to conform to law, be further adjusted by reference
to the relative fault of the Company and all officers, directors or employees of the Company other than Indemnitee who are jointly liable
with Indemnitee (or would be if joined in such action, suit or proceeding), on the one hand, and Indemnitee, on the other hand, in connection
with the transaction or events that resulted in such expenses, judgments, fines or settlement amounts, as well as any other equitable
considerations which applicable law may require to be considered. The relative fault of the Company and all managers, officers, directors
or employees of the Company, other than Indemnitee, who are jointly liable with Indemnitee (or would be if joined in such action, suit
or proceeding), on the one hand, and Indemnitee, on the other hand, shall be determined by reference to, among other things, the degree
to which their actions were motivated by intent to gain personal profit or advantage, the degree to which their liability is primary or
secondary and the degree to which their conduct is active or passive.
(c)
The Company hereby agrees to indemnify and hold Indemnitee fully harmless from any claims of contribution which may be brought
by managers, officers, directors or employees of the Company, other than Indemnitee, who may be jointly liable with Indemnitee.
(d)
To the fullest extent permissible under applicable law, if the indemnification provided for in this Agreement is unavailable to
Indemnitee for any reason whatsoever, the Company, in lieu of indemnifying Indemnitee, shall contribute to the amount incurred by Indemnitee,
whether for judgments, fines, penalties, excise taxes, amounts paid or to be paid in settlement and/or for Expenses, in connection with
any claim relating to an indemnifiable event under this Agreement, in such proportion as is deemed fair and reasonable in light of all
of the circumstances of such Proceeding in order to reflect: (i) the relative benefits received by the Company and Indemnitee as a result
of the event(s) and/or transaction(s) giving cause to such Proceeding; and/or (ii) the relative fault of the Company (and its managers,
directors, officers, employees and agents) and Indemnitee in connection with such event(s) and/or transaction(s).
4.
Indemnification for Expenses of a Witness. Notwithstanding any other provision of this Agreement, to the extent that
Indemnitee is, by reason of Indemnitee’s Corporate Status, a witness, or is made (or asked) to respond to discovery requests, in
any Proceeding to which Indemnitee is not a party, Indemnitee shall be indemnified against all Expenses actually and reasonably incurred
by Indemnitee or on Indemnitee’s behalf in connection therewith.
5.
Advancement of Expenses. Notwithstanding any other provision of this Agreement, the Company shall advance all Expenses
incurred by or on behalf of Indemnitee in connection with any Proceeding by reason of Indemnitee’s Corporate Status within thirty
(30) days after the receipt by the Company of a statement or statements from Indemnitee requesting such advance or advances from time
to time, whether prior to or after final disposition of such Proceeding. Such statement or statements shall reasonably evidence the Expenses
incurred by Indemnitee and shall include or be preceded or accompanied by a written undertaking by or on behalf of Indemnitee to repay
any Expenses advanced if it shall ultimately be determined that Indemnitee is not entitled to be indemnified against such Expenses. Any
advances and undertakings to repay pursuant to this Section 5 shall be unsecured and interest free.
6.
Procedures and Presumptions for Determination of Entitlement to Indemnification. It is the intent of this Agreement
to secure for Indemnitee rights of indemnity that are as favorable as may be permitted under applicable law and public policy of the State
of Delaware. Accordingly, the Parties agree that the following procedures and presumptions shall apply in the event of any question as
to whether Indemnitee is entitled to indemnification under this Agreement:
(a)
To obtain indemnification under this Agreement, Indemnitee shall submit to the Chief Executive Officer of the Company a written
request, including therein or therewith such documentation and information as is reasonably available to Indemnitee and is reasonably
necessary to determine whether and to what extent Indemnitee is entitled to indemnification. The Chief Executive Officer of the Company
shall, promptly upon receipt of such a request for indemnification, advise the Board in writing that Indemnitee has requested indemnification,
or if it is the Chief Executive Officer seeking indemnification hereunder, then advise the Board in writing directly. Notwithstanding
the foregoing, any failure of Indemnitee to provide such a request to the Company, or to provide such a request in a timely fashion, shall
not relieve the Company of any liability that it may have to Indemnitee unless, and to the extent that, such failure actually and materially
prejudices the interests of the Company.
(b)
Upon written request by Indemnitee for indemnification pursuant to the first sentence of Section 6(a), a determination with respect
to Indemnitee’s entitlement thereto shall be made in the specific case by one of the following four (4) methods, which shall be
at the election of the Board: (1) by a majority vote of the disinterested directors, even though less than a quorum; (2) by a committee
of disinterested directors designated by a majority vote of the disinterested directors, even though less than a quorum; (3) if there
are no disinterested directors or if the disinterested directors so direct, by independent legal counsel in a written opinion to the Board,
a copy of which shall be delivered to the Indemnitee; or (4) if so directed by the Board, by the members of the Company. For purposes
hereof, disinterested directors are those members of the Board who are not parties to the action, suit or proceeding in respect of which
indemnification is sought by Indemnitee.
(c)
If the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 6(b), the Independent
Counsel shall be selected as provided in this Section 6(c). The Independent Counsel shall be selected by the Board. Indemnitee may, within
ten (10) days after such written notice of selection shall have been given, deliver to the Company a written objection to such selection;
provided, however, that such objection may be asserted only on the ground that the Independent Counsel so selected does not meet the requirements
of Independent Counsel as defined in Section 13, and the objection shall set forth with particularity the factual basis of such assertion.
Absent a proper and timely objection, the person so selected shall act as Independent Counsel. If a written objection is made and substantiated,
the Independent Counsel selected may not serve as Independent Counsel unless and until such objection is withdrawn or a court has determined
that such objection is without merit. If, within twenty (20) days after submission by Indemnitee of a written request for indemnification
pursuant to Section 6(a), no Independent Counsel shall have been selected and not objected to, either the Company or Indemnitee may petition
the Court of Chancery of the State of Delaware or other court of competent jurisdiction for resolution of any objection which shall have
been made by the Indemnitee to the Company’s selection of Independent Counsel and/or for the appointment as Independent Counsel
of a person selected by the court or by such other person as the court shall designate, and the person with respect to whom all objections
are so resolved or the person so appointed shall act as Independent Counsel under Section 6(b). The Company shall pay any and all reasonable
fees and expenses of Independent Counsel incurred by such Independent Counsel in connection with acting pursuant to Section 6(b), and
the Company shall pay all reasonable fees and expenses incident to the procedures of this Section 6(c), regardless of the manner in which
such Independent Counsel was selected or appointed.
(d)
In making a determination with respect to entitlement to indemnification hereunder, the person or persons or entity making such
determination shall presume that Indemnitee is entitled to indemnification under this Agreement. Anyone seeking to overcome this presumption
shall have the burden of proof and the burden of persuasion by clear and convincing evidence. Neither the failure of the Company (including
by its directors or independent legal counsel) to have made a determination prior to the commencement of any action pursuant to this Agreement
that indemnification is proper in the circumstances because Indemnitee has met the applicable standard of conduct, nor an actual determination
by the Company (including by its directors or independent legal counsel) that Indemnitee has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that Indemnitee has not met the applicable standard of conduct.
(e)
Indemnitee shall be deemed to have acted in good faith if Indemnitee’s action is based on the records or books of account
of the Enterprise (as hereinafter defined), including financial statements, or on information supplied to Indemnitee by the officers of
the Enterprise in the course of their duties, or on the advice of legal counsel for the Enterprise or on information or records given
or reports made to the Enterprise by an independent certified public accountant or by an appraiser or other expert selected with reasonable
care by the Enterprise. In addition, the knowledge and/or actions, or failure to act, of any director, officer, agent or employee of the
Enterprise shall not be imputed to Indemnitee for purposes of determining the right to indemnification under this Agreement. Whether or
not the foregoing provisions of this Section 6(e) are satisfied, it shall in any event be presumed that Indemnitee has at all times
acted in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the Company. Anyone
seeking to overcome this presumption shall have the burden of proof and the burden of persuasion by clear and convincing evidence.
(f)
If the person, persons or entity empowered or selected under Section 6 to determine whether Indemnitee is entitled to indemnification
shall not have made a determination within sixty (60) days after receipt by the Company of the request therefor, the requisite determination
of entitlement to indemnification shall be deemed to have been made and Indemnitee shall be entitled to such indemnification absent (i)
a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s statement not
materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification under applicable
law; provided, however, that such 60-day period may be extended for a reasonable time, not to exceed an additional thirty
(30) days, if the person, persons or entity making such determination with respect to entitlement to indemnification in good faith requires
such additional time to obtain or evaluate documentation and/or information relating thereto; and provided, further, that
the foregoing provisions of this Section 6(g) shall not apply if the determination of entitlement to indemnification is to be made by
the members of the Company pursuant to Section 6(b) and if (A) within fifteen (15) days after receipt by the Company of the request for
such determination, the Board or the Disinterested Directors, if appropriate, resolve to submit such determination to the members of the
Company for their consideration at an annual meeting thereof to be held within seventy-five (75) days after such receipt and such determination
is made thereat, or (B) a special meeting of the members of the Company is called within fifteen (15) days after such receipt for the
purpose of making such determination, such meeting is held for such purpose within sixty (60) days after having been so called and such
determination is made thereat.
(g)
Indemnitee shall cooperate with the person, persons or entity making such determination with respect to Indemnitee’s entitlement
to indemnification, including providing to such person, persons or entity upon reasonable advance request any documentation or information
which is not privileged or otherwise protected from disclosure and which is reasonably available to Indemnitee and reasonably necessary
to such determination. Any Independent Counsel, director or member of the Company shall act reasonably and in good faith in making a determination
regarding the Indemnitee’s entitlement to indemnification under this Agreement. Any costs or expenses (including attorneys’
fees and disbursements) incurred by Indemnitee in so cooperating with the person, persons or entity making such determination shall be
borne by the Company (irrespective of the determination as to Indemnitee’s entitlement to indemnification) and the Company hereby
indemnifies and agrees to hold Indemnitee harmless therefrom.
(h)
The Company acknowledges that a settlement or other disposition short of final judgment may be successful if it permits a party
to avoid expense, delay, distraction, disruption and uncertainty. In the event that any action, claim or proceeding to which Indemnitee
is a party is resolved in any manner other than by adverse judgment against Indemnitee (including, without limitation, settlement of such
action, claim or proceeding with or without payment of money or other consideration) it shall be presumed that Indemnitee has been successful
on the merits or otherwise in such action, suit or proceeding. Anyone seeking to overcome this presumption shall have the burden of proof
and the burden of persuasion by clear and convincing evidence.
(i)
The termination of any Proceeding or of any claim, issue or matter therein, by judgment, order, settlement or conviction, or upon
a plea of nolo contendere or its equivalent, shall not (except as otherwise expressly provided in this Agreement) of itself adversely
affect the right of Indemnitee to indemnification or create a presumption that Indemnitee did not act in good faith and in a manner which
Indemnitee reasonably believed to be in or not opposed to the best interests of the Company or, with respect to any criminal Proceeding,
that Indemnitee had reasonable cause to believe that Indemnitee’s conduct was unlawful.
7.
Remedies of Indemnitee.
(a)
In the event that (i) a determination is made pursuant to Section 6 that Indemnitee is not entitled to indemnification under this
Agreement, (ii) advancement of Expenses is not timely made pursuant to Section 5, (iii) no determination of entitlement to indemnification
is made pursuant to Section 6(b) within ninety (90) days after receipt by the Company of the request for indemnification, (iv) payment
of indemnification is not made pursuant to this Agreement within ten (10) days after receipt by the Company of a written request therefor,
or (v) payment of indemnification is not made within ten (10) days after a determination has been made that Indemnitee is entitled to
indemnification or such determination is deemed to have been made pursuant to Section 6, Indemnitee shall be entitled to an adjudication
in an appropriate court of the State of Delaware, or in any other court of competent jurisdiction, of Indemnitee’s entitlement to
such indemnification. Indemnitee shall commence such proceeding seeking an adjudication within one hundred and eighty (180) days following
the date on which Indemnitee first has the right to commence such proceeding pursuant to this Section 7(a). The Company shall not oppose
Indemnitee’s right to seek any such adjudication.
(b)
In the event that a determination shall have been made pursuant to Section 6(b) that Indemnitee is not entitled to indemnification,
any judicial proceeding commenced pursuant to this Section 7 shall be conducted in all respects as a de novo trial on the merits, and
Indemnitee shall not be prejudiced by reason of the adverse determination under Section 6(b).
(c)
If a determination shall have been made pursuant to Section 6(b) that Indemnitee is entitled to indemnification, the Company shall
be bound by such determination in any judicial proceeding commenced pursuant to this Section 7, absent (i) a misstatement by Indemnitee
of a material fact, or an omission of a material fact necessary to make Indemnitee’s misstatement not materially misleading in connection
with the application for indemnification, or (ii) a prohibition of such indemnification under applicable law.
(d)
In the event that Indemnitee, pursuant to this Section 7, seeks a judicial adjudication of Indemnitee’s rights under, or
to recover damages for breach of, this Agreement, or to recover under any directors’ and officers’ liability insurance policies
maintained by the Company, the Company shall pay on Indemnitee’s behalf, in advance, any and all expenses (of the types described
in the definition of Expenses in Section 13) actually and reasonably incurred by Indemnitee in such judicial adjudication, regardless
of whether Indemnitee ultimately is determined to be entitled to such indemnification, advancement of expenses or insurance recovery.
(e)
The Company shall be precluded from asserting in any judicial proceeding commenced pursuant to this Section 7 that the procedures
and presumptions of this Agreement are not valid, binding and enforceable and shall stipulate in any such court that the Company is bound
by all the provisions of this Agreement. The Company shall indemnify Indemnitee against any and all Expenses and, if requested by Indemnitee,
shall (within ten (10) days after receipt by the Company of a written request therefore) advance, to the extent not prohibited by law,
such expenses to Indemnitee, which are incurred by Indemnitee in connection with any action brought by Indemnitee for indemnification
or advance of Expenses from the Company under this Agreement or under any directors' and officers' liability insurance policies maintained
by the Company, regardless of whether Indemnitee ultimately is determined to be entitled to such indemnification, advancement of Expenses
or insurance recovery, as the case may be.
(f)
Notwithstanding anything in this Agreement to the contrary, no determination as to entitlement to indemnification under this Agreement
shall be required to be made prior to the final disposition of the Proceeding.
8.
Non-Exclusivity; Survival of Rights; Insurance; Primacy of Indemnification; Subrogation.
(a)
The rights of indemnification as provided by this Agreement shall not be deemed exclusive of any other rights to which Indemnitee
may at any time be entitled under applicable law, the Governance Documents, any other agreement, an approval of the members of the Company,
a resolution of the Board, or otherwise. No amendment, alteration or repeal of this Agreement or of any provision hereof shall limit or
restrict any right of Indemnitee under this Agreement in respect of any action taken or omitted by such Indemnitee in Indemnitee’s
Corporate Status prior to such amendment, alteration or repeal. To the extent that a change in the applicable law, whether by statute
or judicial decision, permits greater indemnification than would be afforded currently under applicable law, the Governance Documents
and this Agreement, it is the intent of the Parties that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by
such change. No right or remedy herein conferred is intended to be exclusive of any other right or remedy, and every other right and remedy
shall be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or
otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment
of any other right or remedy.
(b)
To the extent that the Company maintains an insurance policy or policies providing liability insurance for directors, officers,
employees, or agents or fiduciaries of the Company or of any other company, partnership, joint venture, trust, employee benefit plan or
other enterprise that such person serves at the request of the Company, Indemnitee shall be covered by such policy or policies in accordance
with its or their terms to the maximum extent of the coverage available for any director, officer, employee, agent or fiduciary under
such policy or policies. If, at the time of the receipt of a notice of a claim pursuant to the terms hereof, the Company has directors'
and officers' liability insurance in effect, the Company shall give prompt notice of the commencement of such proceeding to the insurers
in accordance with the procedures set forth in the respective policies. The Company shall thereafter take all necessary or desirable action
to cause such insurers to pay, on behalf of the Indemnitee, all amounts payable as a result of such proceeding in accordance with the
terms of such policies.
(c)
The Company hereby agrees: (i) that it is the indemnitor of first resort (i.e., its obligations to Indemnitee are primary);
and (ii) that it shall be required to advance the full amount of expenses incurred by Indemnitee and shall be liable for the full amount
of all Expenses, judgments, penalties, fines and amounts paid in settlement to the extent legally permitted and as required by the terms
of this Agreement and the Governance Documents (or any other agreement between the Company and Indemnitee).
(d)
Except as provided in Section 8(c), in the event of any payment under this Agreement, the Company shall be subrogated to the
extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all papers required and take all action necessary
to secure such rights, including execution of such documents as are necessary to enable the Company to bring suit to enforce such rights.
(e)
Except as provided in Section 8(c), the Company shall not be liable under this Agreement to make any payment of amounts otherwise
indemnifiable hereunder if and to the extent that Indemnitee has otherwise actually received such payment under any insurance policy,
contract, agreement or otherwise.
(f)
Except as provided in Section 8(c), the Company's obligation to indemnify or advance Expenses hereunder to Indemnitee who
is or was serving at the request of the Company as a manager, director, officer, employee or agent of any other company, partnership,
joint venture, trust, employee benefit plan or other enterprise shall be reduced by any amount Indemnitee has actually received as indemnification
or advancement of expenses from such other company, partnership, joint venture, trust, employee benefit plan or other enterprise.
9.
Exception to Right of Indemnification. Notwithstanding any provision in this Agreement, the Company shall not be obligated
under this Agreement to make any indemnity in connection with any claim made against Indemnitee:
(a)
for which payment has actually been made to or on behalf of Indemnitee under any insurance policy or other indemnity provision,
except with respect to any excess beyond the amount paid under any insurance policy or other indemnity provision, provided, that the foregoing
shall not affect the rights of Indemnitee as set forth in Section 8(c); or
(b)
for an accounting of profits made from the purchase and sale (or sale and purchase) by Indemnitee of securities of the Company
within the meaning of Section 16(b) of the Securities Exchange Act of 1934, as amended, or similar provisions of state statutory law or
common law; or
(c)
in connection with any Proceeding (or any part of any Proceeding) initiated by Indemnitee, including any Proceeding (or any part
of any Proceeding) initiated by Indemnitee against the Company or its directors, officers, employees or other indemnitees, unless (i)
the Board authorized the Proceeding (or any part of any Proceeding) prior to its initiation or (ii) the Company provides the indemnification,
in its sole discretion, pursuant to the powers vested in the Company under applicable law.
10.
Duration of Agreement. All agreements and obligations of the Company contained herein shall continue during the period
Indemnitee is a manager, officer or director of the Company (or is or was serving at the request of the Company as a director, officer,
employee or agent of another company, partnership, joint venture, trust or other enterprise), and shall continue for the applicable statute
of limitations period(s) related to any claims brought after the term of service, even if claim has not yet been paid, and shall continue
thereafter so long as Indemnitee shall be subject to any Proceeding (or any proceeding commenced under Section 7) by reason of Indemnitee’s
Corporate Status, whether or not Indemnitee is acting or serving in any such capacity at the time any liability or expense is incurred
for which indemnification can be provided under this Agreement. This Agreement shall be binding upon and inure to the benefit of and be
enforceable by the Parties and their respective successors (including any direct or indirect successor by purchase, merger, consolidation
or otherwise to all or substantially all of the business or assets of the Company), assigns, spouses, heirs, executors and personal and
legal representatives.
11.
Security. To the extent requested by Indemnitee and approved by the Board, the Company may at any time and from time
to time provide security to Indemnitee for the Company’s obligations hereunder through an irrevocable bank line of credit, funded
trust or other collateral. Any such security, once provided to Indemnitee, may not be revoked or released without the prior written consent
of the Indemnitee.
12.
Enforcement.
(a)
The Company expressly confirms and agrees that it has entered into this Agreement and assumes the obligations imposed on it hereby
in order to induce Indemnitee to serve as an officer or director of the Company, and the Company acknowledges that Indemnitee is relying
upon this Agreement in serving as an officer or director of the Company.
(b)
This Agreement constitutes the entire agreement between the Parties with respect to the subject matter hereof and supersedes all
prior agreements and understandings, oral, written and implied, between the Parties with respect to the subject matter hereof.
(c)
The Company shall not seek from a court, or agree to, a "bar order" which would have the effect of prohibiting or limiting
the Indemnitee's rights to receive advancement of expenses under this Agreement.
13.
Definitions. For purposes of this Agreement:
(a)
“Corporate Status” describes the status of a person who is or was a manager, director, officer, employee, agent
or fiduciary of the Company or of any other company, partnership, joint venture, trust, employee benefit plan or other enterprise that
such person is or was serving at the express written request of the Company.
(b)
“Disinterested Director” means a director of the Company who is not and was not a party to the Proceeding in
respect of which indemnification is sought by Indemnitee.
(c)
“Enterprise” shall mean the Company and any other company, partnership, joint venture, trust, employee benefit
plan or other enterprise that Indemnitee is or was serving at the express written request of the Company as a director, officer, employee,
agent or fiduciary.
(d)
“Expenses” shall include all reasonable attorneys’ fees, retainers, court costs, transcript costs, fees
of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service
fees and all other disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to
prosecute or defend, investigating, participating, or being or preparing to be a witness in a Proceeding, or responding to, or objecting
to, a request to provide discovery in any Proceeding. Expenses also shall include Expenses incurred in connection with any appeal resulting
from any Proceeding and any federal, state, local or foreign taxes imposed on the Indemnitee as a result of the actual or deemed receipt
of any payments under this Agreement and any federal, state, local or foreign taxes imposed on the Indemnitee as a result of the actual
or deemed receipt of any payments under this Agreement, including without limitation the premium, security for, and other costs relating
to any cost bond, supersede as bond, or other appeal bond or its equivalent. Expenses, however, shall not include amounts paid in settlement
by Indemnitee or the amount of judgments or fines against Indemnitee.
(e)
“Independent Counsel” means a law firm, or a member of a law firm, that is experienced in matters of company
law and neither presently is, nor in the past five (5) years has been, retained to represent: (i) the Company or Indemnitee in any matter
material to either such Party (other than with respect to matters concerning Indemnitee under this Agreement, or of other indemnitees
under similar indemnification agreements), or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder.
Notwithstanding the foregoing, the term “Independent Counsel” shall not include any person who, under the applicable standards
of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action
to determine Indemnitee’s rights under this Agreement. The Company agrees to pay the reasonable fees of the Independent Counsel
referred to above and to fully indemnify such counsel against any and all Expenses, claims, liabilities and damages arising out of or
relating to this Agreement or its engagement pursuant hereto.
(f)
“Proceeding” includes any threatened, pending or completed action, suit, arbitration, alternate dispute resolution
mechanism, investigation, inquiry, administrative hearing or any other actual, threatened or completed proceeding, whether brought by
or in the right of the Company or otherwise and whether civil, criminal, administrative or investigative, in which Indemnitee was, is
or will be involved as a party or otherwise, by reason of Indemnitee’s Corporate Status, by reason of any action taken by Indemnitee
or of any inaction on Indemnitee’s part while acting in Indemnitee’s Corporate Status; in each case whether or not Indemnitee
is acting or serving in any such capacity at the time any liability or expense is incurred for which indemnification can be provided under
this Agreement; including one pending on or before the date of this Agreement, but excluding one initiated by an Indemnitee pursuant to
Section 7 to enforce Indemnitee’s rights under this Agreement.
14.
Severability. The invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability
of any other provision. Further, the invalidity or unenforceability of any provision hereof as to either Indemnitee or Appointing Member
shall in no way affect the validity or enforceability of any provision hereof as to the other. Without limiting the generality of the
foregoing, this Agreement is intended to confer upon Indemnitee indemnification rights to the fullest extent permitted by applicable laws.
In the event any provision hereof conflicts with any applicable law, such provision shall be deemed modified, consistent with the aforementioned
intent, to the extent necessary to resolve such conflict.
15.
Modification and Waiver. No supplement, modification, termination or amendment of this Agreement shall be binding unless
executed in writing by both of the Parties. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a
waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver.
16.
Notice By Indemnitee. Indemnitee agrees promptly to notify the Company in writing upon being served with or otherwise
receiving any summons, citation, subpoena, complaint, indictment, information or other document relating to any Proceeding or matter which
may be subject to indemnification covered hereunder. The failure to so notify the Company shall not relieve the Company of any obligation
which it may have to Indemnitee under this Agreement or otherwise unless and only to the extent that such failure or delay materially
prejudices the Company.
17.
Notices. All notices and other communications given or made pursuant to this Agreement shall be in writing and shall
be deemed effectively given: (a) upon personal delivery to the Party to be notified; (b) when sent by confirmed electronic mail or facsimile
if sent during normal business hours of the recipient, and if not so confirmed, then on the next business day; (c) five (5) days after
having been sent by registered or certified mail, return receipt requested, postage prepaid; or (d) one (1) day after deposit with a nationally
recognized overnight courier, specifying next day delivery, with written verification of receipt. All communications shall be sent:
If to Indemnitee, at the address provided
by Indemnitee in the Company’s records.
If to the Company, at:
Athena Bitcoin Global
E-mail: matias@athenabitcoin.com
Attn: Matias Goldenhorn, CEO
or to such other address as
may have been furnished to Indemnitee by the Company or to the Company by Indemnitee, as the case may be.
18.
Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which together shall constitute one and the same instrument. Counterparts may be delivered
via facsimile, electronic mail (including .pdf or any electronic signature complying with the U.S. federal ESIGN Act of 2000, e.g., www.docusign.com)
or other transmission method and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and
effective for all purposes.
19.
Construction. The headings of the paragraphs of this Agreement are inserted for convenience only and shall not be deemed
to constitute part of this Agreement or to affect the construction thereof. References to “sections” are references to sections
of this Agreement unless otherwise specifically stated.
20.
Governing Law and Consent to Jurisdiction. This Agreement and the legal relations among the Parties shall be
governed by, and construed and enforced in accordance with, the laws of the State of Delaware, without regard to any conflict of laws
rules. The Company and Indemnitee hereby irrevocably and unconditionally: (i) agree that any action or proceeding arising out of or in
connection with this Agreement shall be brought only in the federal and state courts in and for Miami-Dade County, Florida, located in
Miami, Florida (the “Florida Court”), and not in any other state or federal court in the United States of America or
any court in any other country; (ii) consent to submit to the exclusive jurisdiction of the Florida Court for purposes of any action or
proceeding arising out of or in connection with this Agreement; (iv) waive any objection to the laying of venue of any such action or
proceeding in the Florida Court; and (v) waive, and agree not to plead or to make, any claim that any such action or proceeding brought
in the Florida Court has been brought in an improper or inconvenient forum.
[Signature Page Follows]
[Signature page to Indemnification
Agreement]
IN WITNESS WHEREOF, the Parties
have executed this Indemnification Agreement on and as of the Effective Date.
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COMPANY: |
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Athena Bitcoin Global, a Nevada corporation |
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By: |
/s/ Matias Goldenhorn |
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Name: Matias Goldenhorn |
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Title: CEO |
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Athena Bitcoin, Inc., a Delaware corporation
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By: |
/s/ Matias Goldenhorn |
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Name: Matias Goldenhorn |
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Title: CEO |
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INDEMNITEE: |
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/s/ Carlos Carreno |
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Name: Carlos Carreno |
Exhibit 10.11
INDEMNIFICATION
AGREEMENT
THIS INDEMNIFICATION AGREEMENT
(this “Agreement”) is made and entered into as of January 9, 2023 (the “Effective Date”) by and between,
on the one hand, Athena Bitcoin Global, a Nevada corporation (“Athena Bitcoin”), jointly and severally with its wholly-owned
subsidiary, Athena Bitcoin, Inc., a Delaware corporation (“Athena”) (collectively, the “Company”),
and the undersigned individual (“Indemnitee”). The Company and Indemnitee are sometimes hereinafter referred to individually
as a “Party” and, collectively, as the “Parties”.
RECITALS
WHEREAS, highly competent
persons have become more reluctant to serve companies as managers, officers and/or directors, or in other capacities, unless they are
provided with adequate protection through insurance or adequate indemnification against inordinate risks of claims and actions against
them arising out of their service to and activities on behalf of the company.
WHEREAS, the boards of directors
of both of Athena Bitcoin and Athena (collectively, the “Board”) have determined that, in order to attract and retain
qualified individuals, the Company will attempt to maintain on an ongoing basis, at its sole expense, liability insurance to protect persons
serving the Company and its subsidiaries from certain liabilities. Although the furnishing of such insurance has been a customary and
widespread practice among U.S.-based companies and other business enterprises, the Company believes that, given current market conditions
and trends, such insurance may be available to it in the future only at higher premiums and with more exclusions. At the same time, managers,
directors, officers, and other persons in service to companies or business enterprises are being increasingly subjected to expensive and
time-consuming litigation relating to, among other things, matters that traditionally would have been brought only against the Company
or business enterprise itself. The operative governing documents and agreements of both Athena Bitcoin and Athena (collectively, the “Governance
Documents”) expressly provide that the indemnification provisions set forth therein are not exclusive, and thereby contemplate
that contracts may be entered into between the Company and members of the Board, officers and other persons with respect to indemnification.
WHEREAS, the uncertainties
relating to such insurance and to indemnification have increased the difficulty of attracting and retaining such persons.
WHEREAS, the Board has determined
that the increased difficulty in attracting and retaining such persons is detrimental to the best interests of the Company's shareholders
and that the Company should act to assure such persons that there will be increased certainty of such protection in the future.
WHEREAS, it is reasonable,
prudent and necessary for the Company contractually to obligate itself to indemnify, and to advance expenses on behalf of, such persons
to the fullest extent permitted by applicable law so that they will serve or continue to serve the Company free from undue concern that
they will not be so indemnified.
WHEREAS, this Agreement is
a supplement to and in furtherance of the Governance Documents and any resolutions adopted pursuant thereto, and shall not be deemed a
substitute therefor, nor to diminish or abrogate any rights of Indemnitee thereunder.
WHEREAS, Indemnitee does not
regard the protection available under the Governance Documents and insurance as adequate in the present circumstances and may not be willing
to serve as an officer or director without adequate protection, and the Company desires Indemnitee to serve in such capacity. Indemnitee
is willing to serve, continue to serve and to take on additional service for or on behalf of the Company on the condition that Indemnitee
be so indemnified.
NOW, THEREFORE, in consideration
of Indemnitee’s agreement to serve as a manager, officer and/or director from and after the Effective Date, the Parties agree as
follows:
1.
Indemnity of Indemnitee. The Company (jointly and several, as Athena Bitcoin and Athena, for all purposes of this Agreement
and under applicable law) hereby agrees to hold harmless and indemnify Indemnitee to the fullest extent permitted by law, as such may
be amended from time to time. In furtherance of the foregoing indemnification, and without limiting the generality thereof.
(a)
Indemnitee shall be entitled to the rights of indemnification provided in this Section l(a) if, by reason of Indemnitee’s
Corporate Status (as hereinafter defined), the Indemnitee is, or is threatened to be made, a party to or participant in any Proceeding
(as hereinafter defined) other than a Proceeding by or in the right of the Company. Pursuant to this Section 1(a), Indemnitee shall be
indemnified against all Expenses (as hereinafter defined), judgments, penalties, fines and amounts paid in settlement actually and reasonably
incurred by Indemnitee, or on Indemnitee’s behalf, in connection with such Proceeding or any claim, issue or matter therein, if
the Indemnitee acted in good faith and in a manner the Indemnitee reasonably believed to be in or not opposed to the best interests of
the Company, and with respect to any criminal Proceeding, had no reasonable cause to believe the Indemnitee’s conduct was unlawful.
(b)
Indemnitee shall be entitled to the rights of indemnification provided in this Section 1(b) if, by reason of Indemnitee’s
Corporate Status, the Indemnitee is, or is threatened to be made, a party to or participant in any Proceeding brought by or in the right
of the Company. Pursuant to this Section 1(b), Indemnitee shall be indemnified against all Expenses actually and reasonably incurred by
the Indemnitee, or on the Indemnitee’s behalf, in connection with such Proceeding if the Indemnitee acted in good faith and in a
manner the Indemnitee reasonably believed to be in or not opposed to the best interests of the Company; provided, however,
if applicable law so provides, no indemnification against such Expenses shall be made in respect of any claim, issue or matter in such
Proceeding as to which Indemnitee shall have been adjudged to be liable to the Company unless and to the extent that the Court of Chancery
of the State of Delaware shall determine that such indemnification may be made.
(c)
Notwithstanding any other provision of this Agreement, to the extent that Indemnitee is, by reason of Indemnitee’s Corporate
Status, a party to and is successful, on the merits or otherwise, in any Proceeding, Indemnitee shall be indemnified to the maximum extent
permitted by law, as such may be amended from time to time, against all Expenses actually and reasonably incurred by Indemnitee or on
Indemnitee’s behalf in connection therewith. If Indemnitee is not wholly successful in such Proceeding but is successful, on the
merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Company shall indemnify Indemnitee
against all Expenses actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection with each successfully
resolved claim, issue or matter. For purposes of this Section 1(c) and without limitation, the termination of any claim, issue or matter
in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.
(d)
If (i) Indemnitee is or was affiliated with one or more venture capital, family office or other funds that has invested in the
Company (an “Appointing Member”), and (ii) the Appointing Member is, or is threatened to be made, a party to or a participant
in any Proceeding relating to or arising by reason of Appointing Member's position as a direct or indirect economic interest holder of,
or lender to, the Company, or Appointing Member's appointment of or affiliation with Indemnitee or any other director, including, without
limitation, any alleged misappropriation of a Company asset or corporate opportunity, any claim of misappropriation or infringement of
intellectual property relating to the Company, any alleged false or misleading statement or omission made by the Company (or on its behalf)
or its employees or agents, or any allegation of inappropriate control or influence over the Company or its Board members, officers, equity
holders or debt holders, then the Appointing Member will be entitled to indemnification hereunder for Expenses to the same extent as Indemnitee,
and the terms of this Agreement as they relate to procedures for indemnification of Indemnitee and advancement of Expenses shall apply
to any such indemnification of Appointing Member.
2.
Additional Indemnity. In addition to, and without regard to any limitations on, the indemnification provided for in
Section 1, the Company shall and hereby does indemnify and hold harmless Indemnitee against all Expenses, judgments, penalties, fines
and amounts paid in settlement actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf if, by reason of Indemnitee’s
Corporate Status, Indemnitee is, or is threatened to be made, a party to or participant in any Proceeding (including a Proceeding by or
in the right of the Company), including, without limitation, all liability arising out of the negligence or active or passive wrongdoing
of Indemnitee. The only limitation that shall exist upon the Company’s obligations pursuant to this Agreement shall be that the
Company shall not be obligated to make any payment to Indemnitee that is finally determined (under the procedures, and subject to the
presumptions, set forth in Sections 6 and 7) to be unlawful.
3.
Contribution.
(a)
Whether or not the indemnification provided in Sections 1 and 2 is available, in respect of any threatened, pending or completed
action, suit or proceeding in which the Company is jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding),
the Company shall pay, in the first instance, the entire amount of any judgment or settlement of such action, suit or proceeding without
requiring Indemnitee to contribute to such payment and the Company hereby waives and relinquishes any right of contribution it may have
against Indemnitee. The Company shall not enter into any settlement of any action, suit or proceeding in which the Company is jointly
liable with Indemnitee (or would be if joined in such action, suit or proceeding) unless such settlement provides for a full and final
release of all claims asserted against Indemnitee.
(b)
Without diminishing or impairing the obligations of the Company set forth in Section 3(a), if, for any reason, Indemnitee shall
elect or be required to pay all or any portion of any judgment or settlement in any threatened, pending or completed action, suit or proceeding
in which the Company is jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding), the Company shall contribute
to the amount of Expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred and paid or payable by Indemnitee
in proportion to the relative benefits received by the Company and all officers, directors or employees of the Company, other than Indemnitee,
who are jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding), on the one hand, and Indemnitee, on
the other hand, from the transaction or events from which such action, suit or proceeding arose; provided, however, that
the proportion determined on the basis of relative benefit may, to the extent necessary to conform to law, be further adjusted by reference
to the relative fault of the Company and all officers, directors or employees of the Company other than Indemnitee who are jointly liable
with Indemnitee (or would be if joined in such action, suit or proceeding), on the one hand, and Indemnitee, on the other hand, in connection
with the transaction or events that resulted in such expenses, judgments, fines or settlement amounts, as well as any other equitable
considerations which applicable law may require to be considered. The relative fault of the Company and all managers, officers, directors
or employees of the Company, other than Indemnitee, who are jointly liable with Indemnitee (or would be if joined in such action, suit
or proceeding), on the one hand, and Indemnitee, on the other hand, shall be determined by reference to, among other things, the degree
to which their actions were motivated by intent to gain personal profit or advantage, the degree to which their liability is primary or
secondary and the degree to which their conduct is active or passive.
(c)
The Company hereby agrees to indemnify and hold Indemnitee fully harmless from any claims of contribution which may be brought
by managers, officers, directors or employees of the Company, other than Indemnitee, who may be jointly liable with Indemnitee.
(d)
To the fullest extent permissible under applicable law, if the indemnification provided for in this Agreement is unavailable to
Indemnitee for any reason whatsoever, the Company, in lieu of indemnifying Indemnitee, shall contribute to the amount incurred by Indemnitee,
whether for judgments, fines, penalties, excise taxes, amounts paid or to be paid in settlement and/or for Expenses, in connection with
any claim relating to an indemnifiable event under this Agreement, in such proportion as is deemed fair and reasonable in light of all
of the circumstances of such Proceeding in order to reflect: (i) the relative benefits received by the Company and Indemnitee as a result
of the event(s) and/or transaction(s) giving cause to such Proceeding; and/or (ii) the relative fault of the Company (and its managers,
directors, officers, employees and agents) and Indemnitee in connection with such event(s) and/or transaction(s).
4.
Indemnification for Expenses of a Witness. Notwithstanding any other provision of this Agreement, to the extent that
Indemnitee is, by reason of Indemnitee’s Corporate Status, a witness, or is made (or asked) to respond to discovery requests, in
any Proceeding to which Indemnitee is not a party, Indemnitee shall be indemnified against all Expenses actually and reasonably incurred
by Indemnitee or on Indemnitee’s behalf in connection therewith.
5.
Advancement of Expenses. Notwithstanding any other provision of this Agreement, the Company shall advance all Expenses
incurred by or on behalf of Indemnitee in connection with any Proceeding by reason of Indemnitee’s Corporate Status within thirty
(30) days after the receipt by the Company of a statement or statements from Indemnitee requesting such advance or advances from time
to time, whether prior to or after final disposition of such Proceeding. Such statement or statements shall reasonably evidence the Expenses
incurred by Indemnitee and shall include or be preceded or accompanied by a written undertaking by or on behalf of Indemnitee to repay
any Expenses advanced if it shall ultimately be determined that Indemnitee is not entitled to be indemnified against such Expenses. Any
advances and undertakings to repay pursuant to this Section 5 shall be unsecured and interest free.
6.
Procedures and Presumptions for Determination of Entitlement to Indemnification. It is the intent of this Agreement
to secure for Indemnitee rights of indemnity that are as favorable as may be permitted under applicable law and public policy of the State
of Delaware. Accordingly, the Parties agree that the following procedures and presumptions shall apply in the event of any question as
to whether Indemnitee is entitled to indemnification under this Agreement:
(a)
To obtain indemnification under this Agreement, Indemnitee shall submit to the Chief Executive Officer of the Company a written
request, including therein or therewith such documentation and information as is reasonably available to Indemnitee and is reasonably
necessary to determine whether and to what extent Indemnitee is entitled to indemnification. The Chief Executive Officer of the Company
shall, promptly upon receipt of such a request for indemnification, advise the Board in writing that Indemnitee has requested indemnification,
or if it is the Chief Executive Officer seeking indemnification hereunder, then advise the Board in writing directly. Notwithstanding
the foregoing, any failure of Indemnitee to provide such a request to the Company, or to provide such a request in a timely fashion, shall
not relieve the Company of any liability that it may have to Indemnitee unless, and to the extent that, such failure actually and materially
prejudices the interests of the Company.
(b)
Upon written request by Indemnitee for indemnification pursuant to the first sentence of Section 6(a), a determination with respect
to Indemnitee’s entitlement thereto shall be made in the specific case by one of the following four (4) methods, which shall be
at the election of the Board: (1) by a majority vote of the disinterested directors, even though less than a quorum; (2) by a committee
of disinterested directors designated by a majority vote of the disinterested directors, even though less than a quorum; (3) if there
are no disinterested directors or if the disinterested directors so direct, by independent legal counsel in a written opinion to the Board,
a copy of which shall be delivered to the Indemnitee; or (4) if so directed by the Board, by the members of the Company. For purposes
hereof, disinterested directors are those members of the Board who are not parties to the action, suit or proceeding in respect of which
indemnification is sought by Indemnitee.
(c)
If the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 6(b), the Independent
Counsel shall be selected as provided in this Section 6(c). The Independent Counsel shall be selected by the Board. Indemnitee may, within
ten (10) days after such written notice of selection shall have been given, deliver to the Company a written objection to such selection;
provided, however, that such objection may be asserted only on the ground that the Independent Counsel so selected does not meet the requirements
of Independent Counsel as defined in Section 13, and the objection shall set forth with particularity the factual basis of such assertion.
Absent a proper and timely objection, the person so selected shall act as Independent Counsel. If a written objection is made and substantiated,
the Independent Counsel selected may not serve as Independent Counsel unless and until such objection is withdrawn or a court has determined
that such objection is without merit. If, within twenty (20) days after submission by Indemnitee of a written request for indemnification
pursuant to Section 6(a), no Independent Counsel shall have been selected and not objected to, either the Company or Indemnitee may petition
the Court of Chancery of the State of Delaware or other court of competent jurisdiction for resolution of any objection which shall have
been made by the Indemnitee to the Company’s selection of Independent Counsel and/or for the appointment as Independent Counsel
of a person selected by the court or by such other person as the court shall designate, and the person with respect to whom all objections
are so resolved or the person so appointed shall act as Independent Counsel under Section 6(b). The Company shall pay any and all reasonable
fees and expenses of Independent Counsel incurred by such Independent Counsel in connection with acting pursuant to Section 6(b), and
the Company shall pay all reasonable fees and expenses incident to the procedures of this Section 6(c), regardless of the manner in which
such Independent Counsel was selected or appointed.
(d)
In making a determination with respect to entitlement to indemnification hereunder, the person or persons or entity making such
determination shall presume that Indemnitee is entitled to indemnification under this Agreement. Anyone seeking to overcome this presumption
shall have the burden of proof and the burden of persuasion by clear and convincing evidence. Neither the failure of the Company (including
by its directors or independent legal counsel) to have made a determination prior to the commencement of any action pursuant to this Agreement
that indemnification is proper in the circumstances because Indemnitee has met the applicable standard of conduct, nor an actual determination
by the Company (including by its directors or independent legal counsel) that Indemnitee has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that Indemnitee has not met the applicable standard of conduct.
(e)
Indemnitee shall be deemed to have acted in good faith if Indemnitee’s action is based on the records or books of account
of the Enterprise (as hereinafter defined), including financial statements, or on information supplied to Indemnitee by the officers of
the Enterprise in the course of their duties, or on the advice of legal counsel for the Enterprise or on information or records given
or reports made to the Enterprise by an independent certified public accountant or by an appraiser or other expert selected with reasonable
care by the Enterprise. In addition, the knowledge and/or actions, or failure to act, of any director, officer, agent or employee of the
Enterprise shall not be imputed to Indemnitee for purposes of determining the right to indemnification under this Agreement. Whether or
not the foregoing provisions of this Section 6(e) are satisfied, it shall in any event be presumed that Indemnitee has at all times
acted in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the Company. Anyone
seeking to overcome this presumption shall have the burden of proof and the burden of persuasion by clear and convincing evidence.
(f)
If the person, persons or entity empowered or selected under Section 6 to determine whether Indemnitee is entitled to indemnification
shall not have made a determination within sixty (60) days after receipt by the Company of the request therefor, the requisite determination
of entitlement to indemnification shall be deemed to have been made and Indemnitee shall be entitled to such indemnification absent (i)
a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s statement not
materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification under applicable
law; provided, however, that such 60-day period may be extended for a reasonable time, not to exceed an additional thirty
(30) days, if the person, persons or entity making such determination with respect to entitlement to indemnification in good faith requires
such additional time to obtain or evaluate documentation and/or information relating thereto; and provided, further, that
the foregoing provisions of this Section 6(g) shall not apply if the determination of entitlement to indemnification is to be made by
the members of the Company pursuant to Section 6(b) and if (A) within fifteen (15) days after receipt by the Company of the request for
such determination, the Board or the Disinterested Directors, if appropriate, resolve to submit such determination to the members of the
Company for their consideration at an annual meeting thereof to be held within seventy-five (75) days after such receipt and such determination
is made thereat, or (B) a special meeting of the members of the Company is called within fifteen (15) days after such receipt for the
purpose of making such determination, such meeting is held for such purpose within sixty (60) days after having been so called and such
determination is made thereat.
(g)
Indemnitee shall cooperate with the person, persons or entity making such determination with respect to Indemnitee’s entitlement
to indemnification, including providing to such person, persons or entity upon reasonable advance request any documentation or information
which is not privileged or otherwise protected from disclosure and which is reasonably available to Indemnitee and reasonably necessary
to such determination. Any Independent Counsel, director or member of the Company shall act reasonably and in good faith in making a determination
regarding the Indemnitee’s entitlement to indemnification under this Agreement. Any costs or expenses (including attorneys’
fees and disbursements) incurred by Indemnitee in so cooperating with the person, persons or entity making such determination shall be
borne by the Company (irrespective of the determination as to Indemnitee’s entitlement to indemnification) and the Company hereby
indemnifies and agrees to hold Indemnitee harmless therefrom.
(h)
The Company acknowledges that a settlement or other disposition short of final judgment may be successful if it permits a party
to avoid expense, delay, distraction, disruption and uncertainty. In the event that any action, claim or proceeding to which Indemnitee
is a party is resolved in any manner other than by adverse judgment against Indemnitee (including, without limitation, settlement of such
action, claim or proceeding with or without payment of money or other consideration) it shall be presumed that Indemnitee has been successful
on the merits or otherwise in such action, suit or proceeding. Anyone seeking to overcome this presumption shall have the burden of proof
and the burden of persuasion by clear and convincing evidence.
(i)
The termination of any Proceeding or of any claim, issue or matter therein, by judgment, order, settlement or conviction, or upon
a plea of nolo contendere or its equivalent, shall not (except as otherwise expressly provided in this Agreement) of itself adversely
affect the right of Indemnitee to indemnification or create a presumption that Indemnitee did not act in good faith and in a manner which
Indemnitee reasonably believed to be in or not opposed to the best interests of the Company or, with respect to any criminal Proceeding,
that Indemnitee had reasonable cause to believe that Indemnitee’s conduct was unlawful.
7.
Remedies of Indemnitee.
(a)
In the event that (i) a determination is made pursuant to Section 6 that Indemnitee is not entitled to indemnification under this
Agreement, (ii) advancement of Expenses is not timely made pursuant to Section 5, (iii) no determination of entitlement to indemnification
is made pursuant to Section 6(b) within ninety (90) days after receipt by the Company of the request for indemnification, (iv) payment
of indemnification is not made pursuant to this Agreement within ten (10) days after receipt by the Company of a written request therefor,
or (v) payment of indemnification is not made within ten (10) days after a determination has been made that Indemnitee is entitled to
indemnification or such determination is deemed to have been made pursuant to Section 6, Indemnitee shall be entitled to an adjudication
in an appropriate court of the State of Delaware, or in any other court of competent jurisdiction, of Indemnitee’s entitlement to
such indemnification. Indemnitee shall commence such proceeding seeking an adjudication within one hundred and eighty (180) days following
the date on which Indemnitee first has the right to commence such proceeding pursuant to this Section 7(a). The Company shall not oppose
Indemnitee’s right to seek any such adjudication.
(b)
In the event that a determination shall have been made pursuant to Section 6(b) that Indemnitee is not entitled to indemnification,
any judicial proceeding commenced pursuant to this Section 7 shall be conducted in all respects as a de novo trial on the merits, and
Indemnitee shall not be prejudiced by reason of the adverse determination under Section 6(b).
(c)
If a determination shall have been made pursuant to Section 6(b) that Indemnitee is entitled to indemnification, the Company shall
be bound by such determination in any judicial proceeding commenced pursuant to this Section 7, absent (i) a misstatement by Indemnitee
of a material fact, or an omission of a material fact necessary to make Indemnitee’s misstatement not materially misleading in connection
with the application for indemnification, or (ii) a prohibition of such indemnification under applicable law.
(d)
In the event that Indemnitee, pursuant to this Section 7, seeks a judicial adjudication of Indemnitee’s rights under, or
to recover damages for breach of, this Agreement, or to recover under any directors’ and officers’ liability insurance policies
maintained by the Company, the Company shall pay on Indemnitee’s behalf, in advance, any and all expenses (of the types described
in the definition of Expenses in Section 13) actually and reasonably incurred by Indemnitee in such judicial adjudication, regardless
of whether Indemnitee ultimately is determined to be entitled to such indemnification, advancement of expenses or insurance recovery.
(e)
The Company shall be precluded from asserting in any judicial proceeding commenced pursuant to this Section 7 that the procedures
and presumptions of this Agreement are not valid, binding and enforceable and shall stipulate in any such court that the Company is bound
by all the provisions of this Agreement. The Company shall indemnify Indemnitee against any and all Expenses and, if requested by Indemnitee,
shall (within ten (10) days after receipt by the Company of a written request therefore) advance, to the extent not prohibited by law,
such expenses to Indemnitee, which are incurred by Indemnitee in connection with any action brought by Indemnitee for indemnification
or advance of Expenses from the Company under this Agreement or under any directors' and officers' liability insurance policies maintained
by the Company, regardless of whether Indemnitee ultimately is determined to be entitled to such indemnification, advancement of Expenses
or insurance recovery, as the case may be.
(f)
Notwithstanding anything in this Agreement to the contrary, no determination as to entitlement to indemnification under this Agreement
shall be required to be made prior to the final disposition of the Proceeding.
8.
Non-Exclusivity; Survival of Rights; Insurance; Primacy of Indemnification; Subrogation.
(a)
The rights of indemnification as provided by this Agreement shall not be deemed exclusive of any other rights to which Indemnitee
may at any time be entitled under applicable law, the Governance Documents, any other agreement, an approval of the members of the Company,
a resolution of the Board, or otherwise. No amendment, alteration or repeal of this Agreement or of any provision hereof shall limit or
restrict any right of Indemnitee under this Agreement in respect of any action taken or omitted by such Indemnitee in Indemnitee’s
Corporate Status prior to such amendment, alteration or repeal. To the extent that a change in the applicable law, whether by statute
or judicial decision, permits greater indemnification than would be afforded currently under applicable law, the Governance Documents
and this Agreement, it is the intent of the Parties that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by
such change. No right or remedy herein conferred is intended to be exclusive of any other right or remedy, and every other right and remedy
shall be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or
otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment
of any other right or remedy.
(b)
To the extent that the Company maintains an insurance policy or policies providing liability insurance for directors, officers,
employees, or agents or fiduciaries of the Company or of any other company, partnership, joint venture, trust, employee benefit plan or
other enterprise that such person serves at the request of the Company, Indemnitee shall be covered by such policy or policies in accordance
with its or their terms to the maximum extent of the coverage available for any director, officer, employee, agent or fiduciary under
such policy or policies. If, at the time of the receipt of a notice of a claim pursuant to the terms hereof, the Company has directors'
and officers' liability insurance in effect, the Company shall give prompt notice of the commencement of such proceeding to the insurers
in accordance with the procedures set forth in the respective policies. The Company shall thereafter take all necessary or desirable action
to cause such insurers to pay, on behalf of the Indemnitee, all amounts payable as a result of such proceeding in accordance with the
terms of such policies.
(c)
The Company hereby agrees: (i) that it is the indemnitor of first resort (i.e., its obligations to Indemnitee are primary);
and (ii) that it shall be required to advance the full amount of expenses incurred by Indemnitee and shall be liable for the full amount
of all Expenses, judgments, penalties, fines and amounts paid in settlement to the extent legally permitted and as required by the terms
of this Agreement and the Governance Documents (or any other agreement between the Company and Indemnitee).
(d)
Except as provided in Section 8(c), in the event of any payment under this Agreement, the Company shall be subrogated to the
extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all papers required and take all action necessary
to secure such rights, including execution of such documents as are necessary to enable the Company to bring suit to enforce such rights.
(e)
Except as provided in Section 8(c), the Company shall not be liable under this Agreement to make any payment of amounts otherwise
indemnifiable hereunder if and to the extent that Indemnitee has otherwise actually received such payment under any insurance policy,
contract, agreement or otherwise.
(f)
Except as provided in Section 8(c), the Company's obligation to indemnify or advance Expenses hereunder to Indemnitee who
is or was serving at the request of the Company as a manager, director, officer, employee or agent of any other company, partnership,
joint venture, trust, employee benefit plan or other enterprise shall be reduced by any amount Indemnitee has actually received as indemnification
or advancement of expenses from such other company, partnership, joint venture, trust, employee benefit plan or other enterprise.
9.
Exception to Right of Indemnification. Notwithstanding any provision in this Agreement, the Company shall not be obligated
under this Agreement to make any indemnity in connection with any claim made against Indemnitee:
(a)
for which payment has actually been made to or on behalf of Indemnitee under any insurance policy or other indemnity provision,
except with respect to any excess beyond the amount paid under any insurance policy or other indemnity provision, provided, that the foregoing
shall not affect the rights of Indemnitee as set forth in Section 8(c); or
(b)
for an accounting of profits made from the purchase and sale (or sale and purchase) by Indemnitee of securities of the Company
within the meaning of Section 16(b) of the Securities Exchange Act of 1934, as amended, or similar provisions of state statutory law or
common law; or
(c)
in connection with any Proceeding (or any part of any Proceeding) initiated by Indemnitee, including any Proceeding (or any part
of any Proceeding) initiated by Indemnitee against the Company or its directors, officers, employees or other indemnitees, unless (i)
the Board authorized the Proceeding (or any part of any Proceeding) prior to its initiation or (ii) the Company provides the indemnification,
in its sole discretion, pursuant to the powers vested in the Company under applicable law.
10.
Duration of Agreement. All agreements and obligations of the Company contained herein shall continue during the period
Indemnitee is a manager, officer or director of the Company (or is or was serving at the request of the Company as a director, officer,
employee or agent of another company, partnership, joint venture, trust or other enterprise), and shall continue for the applicable statute
of limitations period(s) related to any claims brought after the term of service, even if claim has not yet been paid, and shall continue
thereafter so long as Indemnitee shall be subject to any Proceeding (or any proceeding commenced under Section 7) by reason of Indemnitee’s
Corporate Status, whether or not Indemnitee is acting or serving in any such capacity at the time any liability or expense is incurred
for which indemnification can be provided under this Agreement. This Agreement shall be binding upon and inure to the benefit of and be
enforceable by the Parties and their respective successors (including any direct or indirect successor by purchase, merger, consolidation
or otherwise to all or substantially all of the business or assets of the Company), assigns, spouses, heirs, executors and personal and
legal representatives.
11.
Security. To the extent requested by Indemnitee and approved by the Board, the Company may at any time and from time
to time provide security to Indemnitee for the Company’s obligations hereunder through an irrevocable bank line of credit, funded
trust or other collateral. Any such security, once provided to Indemnitee, may not be revoked or released without the prior written consent
of the Indemnitee.
12.
Enforcement.
(a)
The Company expressly confirms and agrees that it has entered into this Agreement and assumes the obligations imposed on it hereby
in order to induce Indemnitee to serve as an officer or director of the Company, and the Company acknowledges that Indemnitee is relying
upon this Agreement in serving as an officer or director of the Company.
(b)
This Agreement constitutes the entire agreement between the Parties with respect to the subject matter hereof and supersedes all
prior agreements and understandings, oral, written and implied, between the Parties with respect to the subject matter hereof.
(c)
The Company shall not seek from a court, or agree to, a "bar order" which would have the effect of prohibiting or limiting
the Indemnitee's rights to receive advancement of expenses under this Agreement.
13.
Definitions. For purposes of this Agreement:
(a)
“Corporate Status” describes the status of a person who is or was a manager, director, officer, employee, agent
or fiduciary of the Company or of any other company, partnership, joint venture, trust, employee benefit plan or other enterprise that
such person is or was serving at the express written request of the Company.
(b)
“Disinterested Director” means a director of the Company who is not and was not a party to the Proceeding in
respect of which indemnification is sought by Indemnitee.
(c)
“Enterprise” shall mean the Company and any other company, partnership, joint venture, trust, employee benefit
plan or other enterprise that Indemnitee is or was serving at the express written request of the Company as a director, officer, employee,
agent or fiduciary.
(d)
“Expenses” shall include all reasonable attorneys’ fees, retainers, court costs, transcript costs, fees
of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service
fees and all other disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to
prosecute or defend, investigating, participating, or being or preparing to be a witness in a Proceeding, or responding to, or objecting
to, a request to provide discovery in any Proceeding. Expenses also shall include Expenses incurred in connection with any appeal resulting
from any Proceeding and any federal, state, local or foreign taxes imposed on the Indemnitee as a result of the actual or deemed receipt
of any payments under this Agreement and any federal, state, local or foreign taxes imposed on the Indemnitee as a result of the actual
or deemed receipt of any payments under this Agreement, including without limitation the premium, security for, and other costs relating
to any cost bond, supersede as bond, or other appeal bond or its equivalent. Expenses, however, shall not include amounts paid in settlement
by Indemnitee or the amount of judgments or fines against Indemnitee.
(e)
“Independent Counsel” means a law firm, or a member of a law firm, that is experienced in matters of company
law and neither presently is, nor in the past five (5) years has been, retained to represent: (i) the Company or Indemnitee in any matter
material to either such Party (other than with respect to matters concerning Indemnitee under this Agreement, or of other indemnitees
under similar indemnification agreements), or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder.
Notwithstanding the foregoing, the term “Independent Counsel” shall not include any person who, under the applicable standards
of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action
to determine Indemnitee’s rights under this Agreement. The Company agrees to pay the reasonable fees of the Independent Counsel
referred to above and to fully indemnify such counsel against any and all Expenses, claims, liabilities and damages arising out of or
relating to this Agreement or its engagement pursuant hereto.
(f)
“Proceeding” includes any threatened, pending or completed action, suit, arbitration, alternate dispute resolution
mechanism, investigation, inquiry, administrative hearing or any other actual, threatened or completed proceeding, whether brought by
or in the right of the Company or otherwise and whether civil, criminal, administrative or investigative, in which Indemnitee was, is
or will be involved as a party or otherwise, by reason of Indemnitee’s Corporate Status, by reason of any action taken by Indemnitee
or of any inaction on Indemnitee’s part while acting in Indemnitee’s Corporate Status; in each case whether or not Indemnitee
is acting or serving in any such capacity at the time any liability or expense is incurred for which indemnification can be provided under
this Agreement; including one pending on or before the date of this Agreement, but excluding one initiated by an Indemnitee pursuant to
Section 7 to enforce Indemnitee’s rights under this Agreement.
14.
Severability. The invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability
of any other provision. Further, the invalidity or unenforceability of any provision hereof as to either Indemnitee or Appointing Member
shall in no way affect the validity or enforceability of any provision hereof as to the other. Without limiting the generality of the
foregoing, this Agreement is intended to confer upon Indemnitee indemnification rights to the fullest extent permitted by applicable laws.
In the event any provision hereof conflicts with any applicable law, such provision shall be deemed modified, consistent with the aforementioned
intent, to the extent necessary to resolve such conflict.
15.
Modification and Waiver. No supplement, modification, termination or amendment of this Agreement shall be binding unless
executed in writing by both of the Parties. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a
waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver.
16.
Notice By Indemnitee. Indemnitee agrees promptly to notify the Company in writing upon being served with or otherwise
receiving any summons, citation, subpoena, complaint, indictment, information or other document relating to any Proceeding or matter which
may be subject to indemnification covered hereunder. The failure to so notify the Company shall not relieve the Company of any obligation
which it may have to Indemnitee under this Agreement or otherwise unless and only to the extent that such failure or delay materially
prejudices the Company.
17.
Notices. All notices and other communications given or made pursuant to this Agreement shall be in writing and shall
be deemed effectively given: (a) upon personal delivery to the Party to be notified; (b) when sent by confirmed electronic mail or facsimile
if sent during normal business hours of the recipient, and if not so confirmed, then on the next business day; (c) five (5) days after
having been sent by registered or certified mail, return receipt requested, postage prepaid; or (d) one (1) day after deposit with a nationally
recognized overnight courier, specifying next day delivery, with written verification of receipt. All communications shall be sent:
If to Indemnitee, at the address provided
by Indemnitee in the Company’s records.
If to the Company, at:
Athena Bitcoin Global
E-mail: matias@athenabitcoin.com
Attn: Matias Goldenhorn, CEO
or to such other address as
may have been furnished to Indemnitee by the Company or to the Company by Indemnitee, as the case may be.
18.
Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which together shall constitute one and the same instrument. Counterparts may be delivered
via facsimile, electronic mail (including .pdf or any electronic signature complying with the U.S. federal ESIGN Act of 2000, e.g., www.docusign.com)
or other transmission method and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and
effective for all purposes.
19.
Construction. The headings of the paragraphs of this Agreement are inserted for convenience only and shall not be deemed
to constitute part of this Agreement or to affect the construction thereof. References to “sections” are references to sections
of this Agreement unless otherwise specifically stated.
20.
Governing Law and Consent to Jurisdiction. This Agreement and the legal relations among the Parties shall be
governed by, and construed and enforced in accordance with, the laws of the State of Delaware, without regard to any conflict of laws
rules. The Company and Indemnitee hereby irrevocably and unconditionally: (i) agree that any action or proceeding arising out of or in
connection with this Agreement shall be brought only in the federal and state courts in and for Miami-Dade County, Florida, located in
Miami, Florida (the “Florida Court”), and not in any other state or federal court in the United States of America or
any court in any other country; (ii) consent to submit to the exclusive jurisdiction of the Florida Court for purposes of any action or
proceeding arising out of or in connection with this Agreement; (iv) waive any objection to the laying of venue of any such action or
proceeding in the Florida Court; and (v) waive, and agree not to plead or to make, any claim that any such action or proceeding brought
in the Florida Court has been brought in an improper or inconvenient forum.
[Signature Page Follows]
[Signature page to Indemnification
Agreement]
IN WITNESS WHEREOF, the Parties
have executed this Indemnification Agreement on and as of the Effective Date.
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COMPANY: |
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Athena Bitcoin Global, a Nevada corporation |
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By: |
/s/ Matias Goldenhorn |
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Name: Matias Goldenhorn |
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Title: CEO |
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Athena Bitcoin, Inc., a Delaware corporation
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By: |
/s/ Matias Goldenhorn |
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Name: Matias Goldenhorn |
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Title: CEO |
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INDEMNITEE: |
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/s/ Antonio Valiente |
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Name: Antonio Valiente |
Exhibit 10.43
SPECIAL POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS,
that Athena Bitcoin Global, a Nevada corporation (the “Borrower”), does hereby appoint and constitutes, severally,
KGPLA Holdings LLC, a Delaware limited liability company (the “Secured Party”), and each of its officers and authorized
representatives and agents, its true and lawful attorney and agent (collectively with the Secured Party, the “Agent”)
with full power of substation and with full power of authority to perform the following acts on behalf of the Borrower, such appointment
being irrevocable as of the date hereof, and exercisable in upon the occurrence and continuance of an Event of Default:
| 1. | To possess Money of the Borrower, irrespective of its form or location, including,
without limitation, in Money machines of the Borrower, in transit with Money carriers or otherwise; and |
| | |
| 2. | To execute and deliver any and all agreements, documents, instruments of assignment,
letters of direction, or other papers which the Agent, in its discretion, deems necessary or advisable for the purpose of taking physical
possession of, assigning, selling, trading, exchanging, or otherwise disposing of all right, title and interest of the Borrower in and
to any Money of the Borrower, including in respect of any Money machines of the Borrower and with any Money carriers contracted by the
Borrower. |
This Power of Attorney is
made pursuant to that certain Security Agreement dated of even date herewith by and among the Borrower, the Guarantors, and the Lender
(the “Security Agreement”) and is subject to the terms and provisions thereof, and of that certain Senior Secured Loan
Agreement by and among the Borrower, the Guarantors and the Lender (the “Loan Agreement”). Capitalized terms used but
not otherwise defined herein have the meanings ascribed to them in that certain Security Agreement and the Loan Agreement, as the case
may be.
This Power of Attorney, being
coupled with an interest, is irrevocable until all Obligations, as such term is defined in the Loan Agreement, and all Secured Obligations,
as that term is defined in the Security Agreement, are paid in full, and the Security Agreement is terminated in writing by the Agent.
IN WITNESS WHEREOF, this
Power of Attorney is executed and delivered as of May 18 , 2023, by:
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ATHENA BITCOIN GLOBAL |
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By: /s/ Matias Goldenhorn |
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Name: Matias Goldenhorn |
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Title: CEO |
ACKNOWLEDGMENT
STATE OF FLORIDA
MIAMI-DADE COUNTY
The foregoing instrument was acknowledged before
me by means of physical presence or online notarization, this 18 day of May , 2023, by Matias Goldenhorn as CEO of Athena
Bitcoin Global, who is personally known to me or produced Florida Driver License as identification. I declare under penalty of
perjury that the person whose name is ascribed to this instrument appears to be of sound mind and under no duress, fraud, or undue influence.
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/s/ Carlos Acosta |
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Notary Public, State of Florida |
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(Stamp Name, Commission # and Expiration below) |
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![](https://www.sec.gov/Archives/edgar/data/1095146/000168316824000275/image_006.jpg) |
Exhibit 10.44
SCHEDULE
1 TO UCC FINANCING STATEMENT
Debtors: |
Athena Bitcoin Global |
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Athena Bitcoin, Inc. |
|
Athena
Holdings El Salvador SA de CV
|
|
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Secured Party: |
KGPLA Holdings LLC |
Collateral
Description:
All assets of each Debtor, including without limitation,
each Debtor’s right, title and interest in and to the following, wherever located, whether now existing or hereafter from time to
time arising or acquired:
(a)
all fixtures and personal property of every kind and nature including all accounts (including health-care-insurance receivables),
goods (including inventory and equipment), documents (including, if applicable, electronic documents), instruments, promissory notes,
chattel paper (whether tangible or electronic), letters of credit, letter-of-credit rights (whether or not the letter of credit is evidenced
by a writing), securities and all other investment property, any and all commercial tort claims, general intangibles (including all payment
intangibles), money, deposit accounts, and any other contract rights or rights to the payment of money, and intellectual property rights;
and
(b)
all proceeds and products of each of the foregoing, all books and records relating to the foregoing, all supporting obligations
related thereto, and all accessions of and to, substitutions and replacements for, and rents, profits and products of, each of the foregoing,
and any and all proceeds of any insurance, indemnity, warranty or guaranty payable to any Debtor from time to time with respect to any
of the foregoing.
Exhibit 10.45
SCHEDULE
1 TO UCC FINANCING STATEMENT
Debtor: |
Athena Bitcoin, Inc. |
|
|
|
|
Secured Party: |
KGPLA Holdings LLC |
Collateral
Description:
All assets of Debtor, including
without limitation, Debtor’s right, title and interest in and to the following, wherever located, whether now existing or hereafter
from time to time arising or acquired:
(a)
all fixtures and personal property of every kind and nature including all accounts (including health-care-insurance receivables),
goods (including inventory and equipment), documents (including, if applicable, electronic documents), instruments, promissory notes,
chattel paper (whether tangible or electronic), letters of credit, letter-of-credit rights (whether or not the letter of credit is evidenced
by a writing), securities and all other investment property, any and all commercial tort claims, general intangibles (including all payment
intangibles), money, deposit accounts, and any other contract rights or rights to the payment of money, and intellectual property rights;
and
(b)
all proceeds and products of each of the foregoing, all books and records relating to the foregoing, all supporting obligations
related thereto, and all accessions of and to, substitutions and replacements for, and rents, profits and products of, each of the foregoing,
and any and all proceeds of any insurance, indemnity, warranty or guaranty payable to Debtor from time to time with respect to any of
the foregoing.
Exhibit 10.64
October 1st, 2023
Valentina Gregory
Concord, CA
Dear Tina,
We know you have what it takes to accompany us
on our journey to bring bitcoin ATM and related Fintech services to the world and it is my pleasure to extend you an offer to join our
leadership team as Chief Financial Officer (CFO). This position will report to the Chief Executive Officer. Your tentative start date
is October 1st, 2023.
Regarding your compensation, regular pay dates
are semi-monthly, on the 15th and last day of each month. The details of your compensation are as follows:
| • | Full-time, exempt, salaried position - fully remote |
| • | Sign in bonus of $10,000 |
| • | $250,000 annual base salary |
| • | Discretionary yearly bonus potential of up to 80% of your base
salary. |
| • | Health and dental insurance benefits - eligibility effective
the first of the month following your date of hire. Employee premiums are currently paid for by the company at 100%, |
| • | Flexible Personal Time Off- average employee usage is 3 weeks
per year, |
| • | Eligibility for Incentive for ABIT Stock Options at senior leadership
level on the common stock of Athena Bitcoin Global when and if such an equity incentive plan is offered and duly authorized, |
Bonus Eligibility: You will be eligible to receive a target discretionary yearly bonus, based on the Company's
performance and your individual performance. Whether Athena awards bonuses for any given year, the allocation of the bonuses for Company
and individual performance, and the amounts of such bonuses, if awarded, will be in the sole discretion of the Company as determined by
its Board of Directors (the "Board"). If the Board approves payment of bonuses for any given year, the bonus amounts generally
will be determined and paid within the first pay period of the year based on the prior year's performance. You must be employed on the
date the bonus is scheduled to be paid in order to receive the bonus payment. If your employment terminates for any reason prior to the
payment of the bonus, then you will not have earned the bonus and will not receive any portion of it.
Please note that this employment offer is contingent
on your satisfactory completion of all onboarding documents and agreements (including but not limited to non-compete, NDA, Non
Trading, among others) as well as completing and passing all reference, background, education, and employment screens, checks and processes.
By signing below, you are certifying that you have
not entered into any agreements with your previous employer that would in any way restrict the activities required to perform your job
with Athena. In addition, please note that if you possess any confidential or proprietary information regarding your previous employer,
we insist that you do not disclose or use such information in connection with your Athena employment.
Athena Bitcoin Global |
Athena Bitcoin. Inc. |
![](https://www.sec.gov/Archives/edgar/data/1095146/000168316824000275/image_001.jpg)
Should you choose to accept this offer, please
understand that your employment is at-will, meaning that you have the right to end your employment with us at any time, for any reason
or no reason, with or without cause or advance notice - and, of course, Athena has that same right. In addition, please note that, from
time to time, Athena may need to change your assignments, positions, and compensation levels to meet changing business needs and conditions.
Upon acceptance of this offer, you will receive your new hire paperwork
via your email address.
We look forward to the potential of you joining
the leadership team at Athena and we'll be behind you each step of the way. Please contact me if you have any questions.
Sincerely,
Matias Goldenhorn
Chief Executive Officer
I, Tina Gregory, have read and understood the
provisions of this offer of employment, and I accept the above conditional job offer. I understand that my employment with Athena Bitcoin
is considered at will, meaning that either the company or I may terminate this employment relationship at any time with or without cause
or notice.
Signature: /s/ Matias Goldenhorn |
Date: 10/4/2023 |
|
|
Signature: /s/ Tina Gregory |
Date: 10/4/2023 |
Athena Bitcoin Global |
Athena Bitcoin. Inc. |
Exhibit 10.65
CURRENCY-IN-TRANSIT
Control Agreement
THIS CURRENCY-IN-TRANSIT CONTROL
AGREEMENT (as amended, amended and restated, supplemented or otherwise modified from time to time, this “Agreement”),
dated as of September 1, 2023 (the “Effective Date”), by and among Athena Bitcoin Inc, a Nevada corporation (the “Grantor”),
KGPLA Holdings LLC, a Delaware limited liability company (the “Secured Party”) and Brinks U.S., a Division of Brink’s,
Incorporated (the “Custodian”), is delivered pursuant to Section 4(k) of that certain Security Agreement (as amended,
amended and restated, supplemented or otherwise modified from time to time, the “Security Agreement”), dated of May
15, 2023 by and between Grantor, the other parties
listed therein, and the Secured Party. This Agreement is entered into by the parties hereto for the purpose of perfecting the security
interests of the Secured Party granted by the Grantor in the Currency-in-Transit described below. All references herein to the “UCC”
means the Uniform Commercial Code as in effect from time to time in the State of Delaware. Capitalized terms used but not defined herein
have the meanings assigned to such terms in the Security Agreement.
1.
Definitions. For purposes of this Agreement, the following terms not otherwise defined herein have the following
meanings:
(a)
“Account Expenses” has the meaning assigned to such term in Section 15.
(b)
“Currency-in-Transit” has the meaning assigned to such term in Section 2(a).
(c)
“Notice of Sole Control” has the meaning assigned to such term in Section 9(a).
2.
Representations; Covenants. The Custodian hereby confirms and agrees that:
(a)
The Custodian provides to the Grantor certain services (the “Custodial Services”) in connection with the custody,
safekeeping, transport, and deposit of U.S. paper currency in the ordinary course of the Custodian’s business (such U.S. paper currency,
the “Currency-in-Transit”) pursuant to the Kiosk Services Agreement attached hereto as Schedule 1. The Grantor is the
Custodian’s customer with respect to the Currency-in-Transit.
(b)
This Agreement is the valid and legally binding obligation of the Depository Bank.
(c)
The Custodian has not entered into any currently effective agreement with any person relating to any Currency-in-Transit under
which the Custodian may be obligated to comply with instructions originated by a person other than the Grantor or the Secured Party. Until
the termination of this Agreement, the Custodian will not enter into any agreement with any person relating to any Currency-in-Transit
under which the Custodian may be obligated to comply with instructions originated by a person other than the Grantor or the Secured Party.
3.
Control. Subject to all applicable laws, rules, and regulations,
including, but not limited to those issued by the Financial Crimes Enforcement Network (“FinCen”), the Custodian shall
comply with instructions originated by the Secured Party in accordance with this Agreement with respect to the “Currency-in-Transit”
without the further consent of the Grantor or any person acting or purporting to act for the Grantor, including directing disposition
of the Currency-in-Transit except to the extent that those instructions conflict with the proviso in Section 4(b). Subject to all applicable
laws, rules, and regulations, including, but not limited to those issued by FinCen, the Custodian shall also comply with instructions
originated by the Grantor or its authorized representatives directing the disposition of the Currency-in-Transit until such time as the
Secured Party delivers a Notice of Sole Control pursuant to Section 9(a) to the Custodian, except to the extent that those instructions
conflict with the proviso in Section 4(b). Subject to all applicable laws, rules, and regulations, including, but not limited to those
issued by FinCen, the Custodian shall comply with, and is fully entitled to rely upon, any instruction from the Secured Party with respect
to the “Currency-in-Transit”, even if such instruction is contrary to any instruction that the Grantor may give or may have
given to the Custodian, except that the Custodian is not required to comply with any instruction to the extent that those instructions
conflict with the proviso in Section 4(b).
4.
Subordination of Lien; Waiver of Set-Off.
(a)
The Custodian hereby agrees that any security interest in, lien on, or encumbrance, claim or (except as provided in the proviso
to Section 4(b)) right of set-off against, any Currency-in-Transit will be subordinate to the security interest of the Secured Party in
the Currency-in-Transit.
(b)
The Custodian agrees not to exercise any present or future right of recoupment or set-off against any of the Currency-in-Transit
or to assert against any of the Currency-in-Transit any present or future security interest or any other lien or claim (including claim
for penalties) that the Custodian may at any time have against or in any of the Currency-in-Transit or any funds therein; provided,
however, that the Custodian may set off all amounts due the Custodian in respect of its fees and expenses for the Custodial Services related
to the Currency-in-Transit as set forth in that certain underlying services agreement by and between Grantor and Custodian (the “Services
Agreement”).
5.
Custodian’s Responsibility.
(a)
The Custodian will not be liable to the Secured Party for complying with instructions from the Grantor concerning the Currency-in-Transit
that are received by the Custodian before the Custodian receives a Notice of Sole Control.
(b)
The Custodian will not be liable to the Grantor or the Secured Party for complying with a Notice of Sole Control or with instructions
originated by the Secured Party concerning any of the Currency-in-Transit, even if the Grantor notifies the Custodian that the Secured
Party is not legally entitled to issue such Notice of Sole Control or instructions, unless the Custodian takes the actions after it is
served with an injunction, restraining order, or other legal process enjoining it from doing so, issued by a court of competent jurisdiction,
and had a reasonable opportunity to act on the injunction, restraining order or other legal process.
(c)
This Agreement does not create any obligation of the Custodian except for those expressly set forth in this Agreement. In particular,
the Custodian need not investigate whether the Secured Party is entitled under the Secured Party’s agreements with the Grantor to
give instructions concerning any Currency-in-Transit or a Notice of Sole Control. The Custodian may rely on notices and communications
it believes to have been given by the appropriate party.
6.
Choice of Law; Waiver of Jury Trial.
(a)
This Agreement is governed by the laws of the State of Delaware.
Regardless of any provision in any other agreement, for purposes of UCC §9-304(b)(1), Florida will
be deemed to be the Custodian’s jurisdiction and the Currency-in-Transit is governed by the laws of the State of Florida.
The Custodian and the Grantor may not change the law governing any Currency-in-Transit without the Secured Party’s prior written
consent.
(b)
TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH PARTY WAIVES ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, CLAIM OR PROCEEDING (INCLUDING
ANY COUNTERCLAIM) OF ANY TYPE ARISING OUT OF OR DIRECTLY OR INDIRECTLY RELATING TO THIS AGREEMENT.
7.
Conflict with Other Agreements. As of the Effective Date,
there are no other agreements entered into between the Custodian and the Grantor with respect to the Currency-in-Transit, other than the
Services Agreement. The Custodian and the Grantor will not enter into any other agreement with respect to the Currency-in-Transit while
this Agreement is in effect. The Custodian and the Grantor have not and will not enter into any other agreement with respect to control
of the Currency-in-Transit or purporting to limit or condition the obligation of the Custodian to comply with any orders or instructions
with respect to the Currency-in-Transit as set forth in Section 3 without the prior written consent of the Secured Party acting in its
sole discretion. In the event of any conflict with respect to control over the Currency-in-Transit between this Agreement (or any portion
hereof) and any other agreement now existing or hereafter entered into, the terms of this Agreement will prevail.
8.
Notice of Adverse Claims. Except for the claims and interests
of the Secured Party and of the Grantor in the Currency-in-Transit, the Custodian on the Effective Date does not know of any claim to,
security interest in, lien on, or encumbrance against the Currency-in-Transit and does not know of any claim that any person or entity
other than the Secured Party has been given control (within the meaning of UCC §9-104) of the Currency-in-Transit. If the Custodian
becomes aware that any person or entity is asserting any lien, encumbrance, security interest or adverse claim (including any writ, garnishment,
judgment, warrant of attachment, execution or similar process or any claim of control) against any funds in the Currency-in-Transit or
any portion thereof, the Custodian shall promptly notify the Secured Party and the Grantor thereof.
9.
Maintenance of Currency-in-Transit. In addition to the
obligations of the Custodian in Section 3, the Custodian agrees to provide the Custodial Services subject to the following terms:
(a)
If at any time the Secured Party delivers to the Custodian a notice instructing the Custodian to terminate Grantor’s access
to any Currency-in-Transit (a “Notice of Sole Control”), the Custodian agrees that, after receipt of such notice, it
will take all instructions with respect to such Currency-in-Transit solely from the Secured Party, terminate all instructions and orders
originated by the Grantor with respect to such Currency-in-Transit, and cease taking instructions from the Grantor, including, without
limitation, instructions for distribution or transfer of the Currency-in-Transit.
(b)
If the Secured Party requests, the Custodian will provide the Secured Party, whether by internet access or otherwise, with a copy
of each periodic statement or similar record relating to each Currency-in-Transit ordinarily furnished by the Custodian to the Grantor.
The Grantor authorizes the Custodian to provide the Secured Party, whether by internet access or otherwise, any other information concerning
any Currency-in-Transit that the Custodian may agree to provide to the Secured Party at the Secured Party’s request.
10.
Binding Effect. The terms of this Agreement will become effective when it has been executed by the Grantor, the Secured
Party and the Custodian, and thereafter will be binding upon, and will inure to the benefit of, the parties hereto and their respective
successors and permitted transferees until termination as set forth in Section 12.
11.
Notices. Any notice, request or other communication required or permitted to be given under this Agreement must be
in writing and deemed to have been properly given when delivered in person, or when sent by facsimile or other electronic means and electronic
confirmation of error free receipt is received or two days after being sent by certified or registered United States mail, return receipt
requested, postage prepaid, addressed to the party at the address set forth below.
Grantor:
Athena Bitcoin Global
Attn: Matias Goldenhorn,
CEO (matias@athenabitcoin.com)
__________
__________
and with a copy (which
will not constitute notice) to:
Attn: Iwona Alami, Esq.
(iwona@alamilawgroup.com)
Law Office of Iwona J. Alami
Custodian:
Brink’s U.S.,
a Division of Brink’s, Incorporated
Attn: Beth Marley (jobeth.marley@brinksinc.com)
555 Dividend Drive
Coppell, TX 75019
and with a copy (which
will not constitute notice) to:
Attn: Legal Department
555 Dividend Drive
Coppell, TX 75019
Secured Party:
KGPLA HOLDINGS LLC
Attn: Jason Lu, Manager
(jason@komodobay.com)
__________
__________
and with a copy (which
will not constitute notice) to:
Attn: Scott R. Jablonski,
Esq. (sjablonski@bergersingerman.com)
Berger Singerman LLP
; or at any other address specified by such Party
in writing from time to time at least 5 days’ prior to the sending or transmission of the subject notice.
12.
Termination. Except as otherwise provided in this Section 12, this Agreement and the obligations of the Custodian
hereunder will continue in effect until the security interests of the Secured Party in the Currency-in-Transit have been terminated pursuant
to the terms of the Security Agreement and the Secured Party has notified the Custodian of such termination in writing. This Agreement
may be terminated by:
(a)
the Secured Party at any time by written notice to the other parties; or
(b)
the Grantor, by written notice signed by the Grantor and the Secured Party, delivered to the Custodian not less than 30 days prior
to the effective termination date.
13.
Neither the Grantor nor the Custodian will terminate the Services Agreement prior to termination of this Agreement, without the
prior written consent of the Secured Party, except in the case of (i) the Grantor’s breach of this Agreement that remains uncured
for more than thirty (30) days; (ii) the Grantor’s and/or the Secured Party’s breach of the Services Agreement, and/or (iii)
the Secured Party’s breach of this Agreement. Upon the occurrence of a breach under (ii) or (iii) above, the Custodian shall have
the immediate right to terminate the Services Agreement.
14.
Survival. Section 6 will survive termination of this Agreement.
15.
Fees and Expenses. Unless and until a Notice of Sole Control has been issued by the Secured Party, the Custodian
agrees to look solely to the Grantor for payment of any and all fees, costs, charges and expenses incurred or otherwise relating to the
Currency-in-Transit and Custodial Services (collectively, the “Account Expenses”), and the Grantor agrees to pay such
Account Expenses to the Custodian on demand therefor. The Grantor acknowledges and agrees that it is solely liable to the Custodian for
all Account Expenses unless and until a Notice of Sole Control has been issued. After a Notice of Sole Control has been issued, the Secured
Party is liable for all Account Expenses going forward, and the Custodian agrees to look solely to the Secured Party for payment of all
Account Expenses. Nothing herein shall prevent the Custodian from exercising its right to setoff as set forth in the Services Agreement.
16.
Severability. If any term or provision set forth in this Agreement is held to be invalid or unenforceable by a court
of competent jurisdiction, the remainder of this Agreement, other than those provisions held invalid or unenforceable, will be construed
in all respects as if such invalid or unenforceable term or provision were omitted.
17.
Amendment; Construction. No amendment to this Agreement will be binding on any party unless it is in writing and
signed by all of the parties. Any provision of this Agreement benefiting a party may be waived only by a writing signed by that party.
References to Sections and Schedules herein are references to the sections and schedules of this Agreement, unless otherwise expressly
stated.
18.
Counterparts. This Agreement may be executed in counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument. Counterparts may be delivered via facsimile, electronic mail or other transmission
method, and may bear signatures affixed through .pdf or other software including without limitation any electronic signature platform
complying with the U.S. federal ESIGN Act of 2000 (e.g., www.docusign.com); any counterpart so delivered will be deemed to have been duly
and validly executed and delivered and will be valid and effective for all purposes.
[Signature Pages
Follows]
[Signature Page to Currency-in-Transit Control
Agreement]
IN
WITNESS WHEREOF, the parties hereto have executed this Agreement effective as of the Effective Date.
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GRANTOR: |
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ATHENA BITCOIN GLOBAL |
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By: /s/ Matias Goldenhorn
Name: Matias Goldenhorn
Title: CEO |
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CUSTODIAN:
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BRINK’S U.S., a Division of Brink’s, Incorporated |
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By: /s/ John Marsolek
Name: John Marsolek
Title: VP |
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SECURED PARTY:
KGPLA HOLDINGS LLC |
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By: /s/ Jason Lu
Name: Jason Lu
Title: Manager
|
SCHEDULE 1
KIOSK SERVICES AGREEMENT
[***]
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS EXHIBIT
BECAUSE IT IS BOTH (I) NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED. THE REDACTED TERMS HAVE BEEN MARKED
WITH THREE ASTERISKS [***]
FUEL SURCHARGE EXHIBIT
[***]
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS EXHIBIT
BECAUSE IT IS BOTH (I) NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED. THE REDACTED TERMS HAVE BEEN MARKED
WITH THREE ASTERISKS [***]
Exhibit 10.66
CURRENCY-IN-TRANSIT
CONTROL AGREEMENT
THIS
CURRENCY-IN-TRANSIT CONTROL AGREEMENT (as amended, amended and restated, supplemented or otherwise modified from time to time, this “Agreement”),
dated as of May [1], 2023 (the “Effective Date”), by and among Athena Bitcoin Global, a Nevada corporation (the “Grantor”),
KGPLA Holdings LLC, a Delaware limited liability company (the “Secured Party”) and Garda CL SOUTHWEST INC. (the “Custodian”),
is delivered pursuant to Section 4(k) of that certain Security Agreement (as amended, amended and restated, supplemented or otherwise
modified from time to time, the “Security Agreement”), dated of even date herewith by and between Grantor, the other
parties listed therein, and the Secured Party. This Agreement is entered into by the parties hereto for the purpose of perfecting the
security interests of the Secured Party granted by the Grantor in the Currency-in-Transit described below. All references herein to the
“UCC” means the Uniform Commercial Code as in effect from time to time in the State of Florida. Capitalized terms
used but not defined herein have the meanings assigned to such terms in the Security Agreement.
1. Definitions.
For purposes of this Agreement, the following terms not otherwise defined herein have the following meanings:
(a) “Account
Expenses” has the meaning assigned to such term in Section 15.
(b) “Currency-in-Transit”
has the meaning assigned to such term in Section 2(a).
(c)
“Notice of Sole Control” has the meaning assigned to such term in Section 9(a).
2. Representations;
Covenants. The Custodian hereby confirms and agrees that:
(a) The
Custodian provides to the Grantor certain services (the “Custodial Services”) in connection with the custody, safekeeping,
transport, and deposit of U.S. paper currency in the ordinary course of the Custodian’s business (such U.S. paper currency, the “Currency-in-Transit”).
The Grantor is the Custodian’s customer with respect to the Currency-in-Transit.
(b) This
Agreement is the valid and legally binding obligation of the Custodian.
(c) The
Custodian has not entered into any currently effective agreement with any person relating to any Currency-in-Transit under which the
Custodian may be obligated to comply with instructions originated by a person other than the Grantor or the Secured Party.
3.
Control. Subject to all applicable laws, rules, and regulations, including, but not limited to those issued by the Financial Crimes
Enforcement Network (“FinCen”), the Custodian shall comply with instructions originated by the Secured Party
with respect to the Currency in Transit without the further consent of the Grantor or any person acting or purporting to act for the
Grantor, including directing disposition of the Currency-in-Transit except to the extent that those instructions conflict with the proviso
in Section 4(b), which expressly includes the obligation to follow any instruction from the Secure Party to terminate all instructions
and orders originated by the Grantor to the Custodian and to cease from taking instructions from the Grantor in respect thereof including,
without limitation, regarding the distribution or transfer of any funds in such Currency-in-Transit. Subject to all applicable laws,
rules, and regulations, including, but not limited to those issued by FinCen, the Custodian shall also comply with instructions originated
by the Grantor or its authorized representatives directing the disposition of the Currency-in-Transit. Subject to all applicable laws,
rules, and regulations, including, but not limited to those issued by FinCen, the Custodian shall comply with, and is fully entitled
to rely upon, any instruction from the Secured Party, even if such instruction is contrary to any instruction that the Grantor may give
or may have given to the Custodian, except that the Custodian is not required to comply with any instruction to the extent that those
instructions conflict with the proviso in Section 4(b).
4. Subordination
of Lien; Waiver of Set-Off.
(a) The
Custodian hereby agrees that any security interest in, lien on, or encumbrance, claim or (except as provided in the proviso to Section
4(b)) right of set-off against, any Currency-in-Transit or any funds therein it now has or subsequently obtains will be subordinate to
the security interest of the Secured Party in the Currency-in-Transit.
(b)
The Custodian agrees not to exercise any present or future right of recoupment or set- off against any of the Currency-in-Transit or
to assert against any of the Currency-in-Transit any present or future security interest or any other lien or claim (including claim
for penalties) that the Custodian may at any time have against or in any of the Currency-in-Transit; provided, however, that the
Custodian may set off all amounts due the Custodian in respect of its fees and expenses for the Custodial Services related to the Currency-in-Transit
as set forth in that certain underlying services agreement by and between Grantor and Custodian (the “Services Agreement”).
5. Custodian’s
Responsibility.
(a) The
Custodian will not be liable to the Secured Party for complying with instructions from the Grantor concerning the Currency-in-Transit.
(b) The
Custodian will not be liable to the Grantor or the Secured Party for complying with instructions originated by the Secured Party concerning
any of the Currency-in-Transit, even if the Grantor notifies the Custodian that the Secured Party is not legally entitled to issue such
Notice of Sole Control or instructions, unless the Custodian takes the actions after it is served with an injunction, restraining order,
or other legal process enjoining it from doing so, issued by a court of competent jurisdiction, and had a reasonable opportunity to act
on the injunction, restraining order or other legal process.
(c) This
Agreement does not create any obligation of the Custodian except for those expressly set forth in this Agreement. In particular, the
Custodian need not investigate whether the Secured Party is entitled under the Secured Party’s agreements with the Grantor to give instructions
concerning any Currency-in-Transit or a Notice of Sole Control. The Custodian may rely on notices and communications it believes to have
been given by the appropriate party.
6. Choice
of Law; Waiver of Jury Trial.
(a) This
Agreement is governed by the laws of the State of Florida. Regardless of any provision in any other agreement, for purposes of UCC §9-304(b)(l),
Florida will be deemed to be the Custodian’s jurisdiction and the Currency-in-Transit is governed by the laws of the State of Florida.
The Custodian and the Grantor may not change the law governing any Currency-in-Transit without the Secured Party’s prior written consent.
(b) TO THE
EXTENT PERMITTED BY APPLICABLE LAW, EACH PARTY WAIVES ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, CLAIM OR PROCEEDING (INCLUDING ANY COUNTERCLAIM)
OF ANY TYPE ARISING OUT OF OR DIRECTLY OR INDIRECTLY RELATING TO THIS AGREEMENT.
7.
Conflict with Other Agreements. As of the Effective Date, there are no other agreements entered into between the Custodian
and the Grantor with respect to any Currency-in-Transit, other than the Services Agreement. The Custodian and the Grantor will not enter
into any other agreement with respect to any Currency-in-Transit. The Custodian and the Grantor have not and will not enter into any
other agreement with respect to control of any of the Currency-in-Transit or purporting to limit or condition the obligation of the Custodian
to comply with any orders or instructions with respect to any Currency-in-Transit as set forth in Section 3 without the prior written
consent of the Secured Party acting in its sole discretion. In the event of any conflict with respect to control over any Currency-in-Transit
between this Agreement (or any portion hereof) and any other agreement now existing or hereafter entered into, the terms of this Agreement
will prevail.
8. Notice
of Adverse Claims. Except for the claims and interests of the Secured Party and of the Grantor in the Currency-in-Transit, the Custodian
on the Effective Date does not know of any claim to, security interest in, lien on, or encumbrance against, any Currency-in-Transit or
any funds credited thereto and does not know of any claim that any person or entity other than the Secured Party has been given control
(within the meaning of UCC §9-104) of any Currency-in-Transit or any such funds.
9. Records
of Currency in Transit. If the Secured Party requests in writing, the Custodian will provide the Secured Party whether by internet
link or otherwise with a copy of each periodic statement or other similar record in the form kept by the Custodian relating to each Currency
in Transit which the Custodian ordinarily furnishes to the Grantor, if any, and the Grantor hereby expressly authorizes the Custodian
to provide for the same to the Secured Party.
10. Binding
Effect. The terms of this Agreement will become effective when it has been executed by the Grantor, the Secured Party and the Custodian,
and thereafter will be binding upon, and will inure to the benefit of, the parties hereto and their respective successors and permitted
transferees until termination as set forth in Section 12.
11. Notices.
Any notice, request or other communication required or permitted to be given under this Agreement must be in writing and deemed to have
been properly given when delivered in person, or when sent by facsimile or other electronic means and electronic confirmation of error
free receipt is received or two days after being sent by certified or registered United States mail, return receipt requested, postage
prepaid, addressed to the party at the address set forth below.
Grantor:
Athena Bitcoin
Global
Attn: Matias
Goldenhom, CEO (matias@athenabitcoin.com)
1332
N Halstead St, Ste 401
Chicago,
IL 60642
and with
a copy (which will notconstitute notice) to:
Attn: lwona Alami, Esq. (iwona@alamilawgroup.com)
Law Office of lwona J.
Alami
Custodian:
Garda CL
SOUTHWEST INC.
Attn:
___________ (____________)
_____________________________
_____________________________
Secured
Party:
KGPLA HOLDINGS
LLC
Attn: Jason
Lu, Manager Gason@komodobay.com)
10830 SW 69th Ave
Pinecrest,
FL 33156
and with
a copy (which will notconstitute notice) to:
Attn: Scott
R. Jablonski, Esq.(sjablonski@bergersingerman.com)
Berger Singerman LLP
; or at
any other address specified by such Party in writing from time to time at least 5 days’ prior to the sending or transmission of the subject
notice.
12. Termination.
Except as otherwise provided in this Section 12, this Agreement and the
obligations of the Custodian hereunder will continue in effect until the security interests of the Secured Party in the Currency-in-Transit
and any and all funds therein have been terminated pursuant to the terms of the Security Agreement and the Secured Party has notified
the Custodian of such termination in writing. This Agreement may be terminated by:
(a) the
Secured Party at any time by written notice to the other parties; or
(b) the
Grantor, by written notice signed by the Grantor and the Secured Party, delivered to the Custodian not less than 30 days prior to the
effective termination date.
13. Neither
the Grantor nor the Custodian will terminate the Services Agreement prior to termination of this Agreement, without the prior written
consent of the Secured Party, except in the case of (i) the Grantor’s breach of this Agreement that remains uncured for more than thirty
(30) days; (ii) the Grantor’s and/or the Secured Party’s breach of the Services Agreement, and/or (iii) the Secured Party’s breach of
this Agreement. Upon the occurrence of a breach under (ii) or (iii) above, the Custodian shall have the immediate right to terminate
the Services Agreement.
14. Survival.
Section 6 and Section 7 will survive termination of this Agreement.
15. Fees
and Expenses. Unless and until a Notice of Sole Control has been issued by the Secured Party, the Custodian agrees to look solely
to the Grantor for payment of any and all fees, costs, charges and expenses incurred or otherwise relating to the Currency-in-Transit
and Custodial Services (collectively, the “Account Expenses”), and the Grantor agrees to pay such Account Expenses to
the Custodian on demand therefor. The Grantor acknowledges and agrees that it is solely liable to the Custodian for all Account Expenses
unless and until a Notice of Sole Control has been issued. After a Notice of Sole Control has been issued, the Secured Party is liable
for all Account Expenses going forward, and the Custodian agrees to look solely to the Secured Party for payment of all Account Expenses.
Nothing herein shall prevent the Custodian from exercising its right to setoff as set forth in the Services Agreement or this Agreement.
16. Severability.
If any term or provision set forth in this Agreement is held to be invalid or unenforceable by a court of competent jurisdiction, the
remainder of this Agreement, other than those provisions held invalid or unenforceable, will be construed in all respects as if such
invalid or unenforceable term or provision were omitted.
17. Amendment;
Construction. No amendment to this Agreement will be binding on any party unless it is in writing and signed by all of the parties.
Any provision of this Agreement benefiting a party may be waived only by a writing signed by that party. References to Sections and Schedules
herein are references to the sections and schedules of this Agreement, unless otherwise expressly stated.
18.
Counterparts. This Agreement may be executed in counterparts, each of which will be deemed an original, but all of which together
will constitute one and the same instrument. Counterparts may be delivered via facsimile, electronic mail or other transmission method,
and may bear signatures affixed through .pdf or other software including without limitation any electronic signature platform complying
with the U.S. federal ESIGN Act of 2000 (e.g., www.docusign.com); any counterpart so delivered will be deemed to have been duly and validly
executed and delivered and will be valid and effective for all purposes.
{SIGNATURE
PAGES FOLLOWS]
[Signature
Page to Currency-in-Transit Control Agreement]
IN
WITNESS WHEREOF, the parties hereto have executed this Agreement effective as of the Effective Date.
GRANTOR
ATHENA
BITCOIN GLOBAL
By:
/s/ Matias Goldenhom
Name: Matias
Goldenhom
Title: CEO
CUSTODIAN:
GARDA
CL SOUTHWEST INC.
By:
/s/ Jennifer Frankel
Name: Jennifer Frankel
Title:
SVP, Finance
SECURED
PARTY:
KGPLA HOLDINGS LLC
By:
/s/ Jason Lu
Name:
Jason Lu
Title: Manager
Exhibit
10.67
CURRENCY-IN-TRANSIT
CONTROL AGREEMENT
THIS CURRENCY-IN-TRANSIT
CONTROL AGREEMENT (as amended, amended and restated, supplemented or otherwise modified from time to time, this “Agreement”),
dated as of May [_], 2023 (the “Effective Date”), by and among Athena Bitcoin Global, a Nevada corporation (the “Grantor”),
KGPLA Holdings LLC, a Delaware limited liability company (the “Secured Party”) and Thillens, Inc., an Illinois corporation
(the “Custodian”), is delivered pursuant to Section 4(k) of that certain Security Agreement (as amended, amended and
restated, supplemented or otherwise modified from time to time, the “Security Agreement”), dated of even date herewith
by and between Grantor, the other parties listed therein, and the Secured Party. This Agreement is entered into by the parties hereto
for the purpose of perfecting the security interests of the Secured Party granted by the Grantor in the Currency-in-Transit described
below. All references herein to the “UCC” means the Uniform Commercial Code as in effect from time to time in the
State of Florida. Capitalized terms used but not defined herein have the meanings assigned to such terms in the Security Agreement.
1. Definitions.
For purposes of this Agreement, the following terms not otherwise defined herein have the following meanings:
(a) “Account
Expenses” has the meaning assigned to such term in Section 14.
(b) “Currency-in-Transit”
has the meaning assigned to such term in Section 2(a).
(c) “Notice
of Sole Control” has the meaning assigned to such term in Section 9(a).
2. Representations;
Covenants. The Custodian hereby confirms and agrees that:
(a) The
Custodian provides to the Grantor certain services (the “Custodial Services”) in connection with the custody, safekeeping,
transport, and deposit of U.S. paper currency owned by Grantor in the ordinary course of the Custodian’s business (such U.S. paper
currency, the “Currency-in-Transit”). The Grantor is the Custodian’s customer with respect to the Currency-in-
Transit.
(b)
This Agreement is the valid and legally binding obligation of the Depository Bank.
(c) The
Custodian has not entered into any currently effective agreement with any person relating to any Currency-in-Transit under which the
Custodian may be obligated to comply with instructions originated by a person other than the Grantor or the Secured Party. Until the
termination of this Agreement, the Custodian will not enter into any agreement with any person relating to any Currency-in-Transit under
which the Custodian may be obligated to comply with instructions originated by a person other than the Grantor or the Secured Party.
3. Control.
In the event that the Custodian receives a Notice of Sole Control, the Custodian shall comply with instructions originated by the Secured
Party, and actually received by the Custodian, in accordance with this Agreement without the further consent of the Grantor or any person
acting or purporting to act for the Grantor, including directing disposition of the Currency-in-Transit. The Custodian shall also comply
with instructions originated by the Grantor or its authorized representatives directing the disposition of the Currency-in-Transit until
such time as the Secured Party delivers, and the Custodian receives, a Notice of Sole Control pursuant to Section 9(a) of this Agreement
to the Custodian. After the Custodian receives a Notice of Sole Control, the Custodian shall comply with, and is fully entitled to rely
upon, any instruction from the Secured Party, even if such instruction is contrary to any instruction that the Grantor may give or may
have given to the Custodian or results in the dishonoring of items presented for payment from a Currency-in-Transit.
4. Subordination
of Lien; Waiver of Set-Off.
(a) The
Custodian hereby agrees that any security interest in, lien on, or encumbrance, claim or (except as provided in the proviso to Section
4(b)) right of set-off against, any Currency-in-Transit or any funds therein it now has or subsequently obtains will be subordinate to
the security interest of the Secured Party in the Currency-in-Transit and the funds therein or credited thereto.
(b) The
Custodian agrees not to exercise any present or future right of recoupment or set-off against any of the Currency-in-Transit or to assert
against any of the Currency-in-Transit any present or future security interest or any other lien or claim (including claim for penalties)
that the Custodian may at any time have against or in any of the Currency-in-Transit or any funds therein; provided, however,
the Secured Party expressly acknowledges and agrees that the Custodian may set off against any Currency-In-Transit all amounts due the
Custodian from the Grantor in connection with the Custodial Services (including amounts for services performed by Custodian but not yet
billed to Grantor), including, without limitation, the Account Expenses (as defined in Paragraph 14 of this Agreement), related to the
Currency-in-Transit as set forth in that certain underlying services agreement by and between Grantor and Custodian (the “Services
Agreement”).
5. Custodian’s
Responsibility.
(a) The
Custodian will not be liable to the Secured Party for complying with instructions from the Grantor concerning the Currency-in-Transit
that are received by the Custodian before the Custodian receives a Notice of Sole Control.
(b) The
Custodian will not be liable to the Grantor or the Secured Party for complying with a Notice of Sole Control or with instructions originated
by the Secured Party concerning any of the Currency-in-Transit, even if the Grantor notifies the Custodian that the Secured Party is
not legally entitled to issue such Notice of Sole Control or instructions, unless the Custodian takes the actions after it is served
with an injunction, restraining order, or other legal process enjoining it from doing so, issued by a court of competent jurisdiction,
and had a reasonable opportunity to act on the injunction, restraining order or other legal process.
(c) This
Agreement does not create any obligations of the Custodian except for those expressly set forth in this Agreement. In particular, the
Custodian need not investigate whether the Secured Party is entitled under the Secured Party’s agreements with the Grantor to give
instructions concerning any Currency-in-Transit or a Notice of Sole Control. The Custodian may rely on notices and communications it
believes to have been given by the appropriate party.
6. Choice
of Law; Waiver of Jury Trial.
(a) This
Agreement is governed by the laws of the State of Delaware. Regardless of any provision in any other agreement, for purposes of UCC §9-304(b)(1),
Delaware will be deemed to be the Custodian’s jurisdiction and the Currency-in-Transit is governed by the laws of the State of
Delaware. The Custodian and the Grantor may not change the law governing any Currency-in-Transit without the Secured Party’s prior
written consent.
(b) TO THE
EXTENT PERMITTED BY APPLICABLE LAW, EACH PARTY WAIVES ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, CLAIM OR PROCEEDING (INCLUDING ANY COUNTERCLAIM)
OF ANY TYPE ARISING OUT OF OR DIRECTLY OR INDIRECTLY RELATING TO THIS AGREEMENT.
7. Conflict
with Other Agreements. As of the Effective Date, there are no other agreements entered into between the Custodian and the Grantor
with respect to any Currency-in-Transit or any funds credited thereto, other than the Services Agreement. The Custodian and the Grantor
will not enter into any other agreement with respect to any Currency-in-Transit. The Custodian and the Grantor have not and will not
enter into any other agreement with respect to control of any of the Currency-in-Transit or purporting to limit or condition the obligation
of the Custodian to comply with any orders or instructions with respect to any Currency-in-Transit as set forth in Section 3 without
the prior written consent of the Secured Party acting in its sole discretion. In the event of any conflict with respect to control over
any Currency-in-Transit between this Agreement (or any portion hereof) and any other agreement now existing or hereafter entered into,
the terms of this Agreement will prevail.
8. Notice
of Adverse Claims. Except for the claims and interests of the Secured Party and of the Grantor in the Currency-in-Transit, the Custodian
on the Effective Date does not know of any claim to, security interest in, lien on, or encumbrance against, any Currency-in-Transit or
any funds credited thereto and does not know of any claim that any person or entity other than the Secured Party has been given control
(within the meaning of UCC §9-104) of any Currency-in-Transit or any such funds. If the Custodian obtains actual notice that any
person or entity is asserting any lien, encumbrance, security interest or adverse claim (including any writ, garnishment, judgment, warrant
of attachment, execution or similar process or any claim of control) against any funds in any Currency-in-Transit, the Custodian shall
promptly notify the Secured Party and the Grantor thereof.
9. Maintenance
of Currency-in-Transit. In addition to the obligations of the Custodian in Section 3 of this Agreement, the Custodian agrees to provide
the Custodial Services subject to the following terms:
(a) If at
any time the Secured Party delivers to the Custodian a notice instructing the Custodian to terminate Grantor’s access to any Currency-in-Transit
(a “Notice of Sole Control”), the Custodian agrees that, after receipt of such notice, subject to subsection (c) of
this Paragraph, it will take all instructions with respect to such Currency-in-Transit solely from the Secured Party, terminate all instructions
and orders originated by the Grantor with respect to such Currency-in-Transit or any funds therein, and cease taking instructions from
the Grantor, including, without limitation, instructions for distribution or transfer of any funds in such Currency-in-Transit.
(b) After
the Custodian receives a Notice of Sole Control, if the Secured Party requests, then, within a reasonable period of time, the Custodian
will provide the Secured Party, whether by internet access or otherwise, upon a reasonable request by the Secured Party, with a copy
of each periodic statement or similar record relating to each Currency-in-Transit ordinarily furnished by the Custodian to the Grantor.
After the Custodian receives a Notice of Sole Control, the Grantor authorizes the Custodian to provide the Secured Party, whether by
internet access or otherwise, any other information concerning any Currency-in-Transit that the Custodian may agree to provide to the
Secured Party at the Secured Party’s reasonable request.
(c) Notwithstanding
anything in this Agreement or the Services Agreement to the contrary, if the Custodian receives a Notice of Sole Control from the Secured
Party, then the Custodian shall have the right, but not the obligation, to terminate the Services Agreement, to set off against any Currency-in-Transit
all amounts due to the Custodian from Grantor under the Services Agreement, and to recover from either the Grantor or the Secured Party
any amounts due the Custodian under the Services Agreement that cannot be covered by the then in possession Currency in Transit.
10. Binding
Effect. The terms of this Agreement will become effective when it has been executed by the Grantor, the Secured Party and the Custodian,
and thereafter will be binding upon, and will inure to the benefit of, the parties hereto and their respective successors and permitted
transferees.
11. Notices.
Any notice, request or other communication required or permitted to be given under this Agreement must be in writing and deemed to have
been properly given when delivered in person, or when sent by e-mail or other electronic means and electronic confirmation of error free
receipt is received or two days after being sent by certified or registered United States mail, return receipt requested, postage prepaid,
addressed to the party at the address set forth below; or at any other address specified by such Party in writing from time to time at
least 5 days’ prior to the sending or transmission of the subject notice.
Grantor:
Athena
Bitcoin Global
Attn:
Matias Goldenhorn, CEO (matias@athenabitcoin.com)
_____________________________
_____________________________
and with
a copy (which will not constitute notice) to:
Attn: Iwona Alami, Esq. (iwona@alamilawgroup.com)
Alami Law Group
Custodian:
THILLENS,
INC.
Attn:
___________ (____________)
_____________________________
_____________________________
Secured
Party:
KGPLA
HOLDINGS LLC
Attn: Jason
Lu, Manager (jason@komodobay.com)
_____________________________
_____________________________
and with
a copy (which will not constitute notice) to:
Attn: Scott
R. Jablonski, Esq. (sjablonski@bergersingerman.com)
Berger Singerman LLP
12. Termination.
Except as otherwise provided in this Section 12, this Agreement and the obligations of the Custodian hereunder will continue in effect
until the security interests of the Secured Party in the Currency-in-Transit and any and all funds therein have been terminated pursuant
to the terms of the Security Agreement and the Secured Party has notified the Custodian of such termination in writing. This Agreement
may be terminated by:
(a) the
Secured Party at any time by written notice to the other parties; or
(b) the
Grantor, by written notice signed by the Grantor and the Secured Party, delivered to the Custodian not less than 30 days prior to the
effective termination date.
13. Survival.
Section 5, Section 6 and Section 7 will survive termination of this Agreement.
14. Fees
and Expenses. Unless and until a Notice of Sole Control has been issued by the Secured Party, the Custodian agrees to look solely
to the Grantor for payment of all amounts due to the Custodian under the Services Agreement, including, but not limited to, any and all
fees, costs, charges and expenses incurred or otherwise relating to the Currency-in-Transit and Custodial Services (collectively, the
“Account Expenses”), and the Grantor agrees to pay such Account Expenses to the Custodian on demand therefor. The
Grantor acknowledges and agrees that it is solely liable to the Custodian for all Account Expenses unless and until a Notice of Sole
Control has been issued. After a Notice of Sole Control has been issued, the Secured Party acknowledges and agrees that it shall be liable
for all amounts due the Custodian under the Services Agreement (regardless of whether such amounts became due before or after the Custodian’s
receipt of a Notice of Sole Control), including, but not limited to the Account Expenses, and the Secured Party acknowledges and agrees
that it shall immediately pay the Custodian upon demand by Custodian all such amounts due Custodian.
15. Severability.
If any term or provision set forth in this Agreement is held to be invalid or unenforceable by a court of competent jurisdiction, the
remainder of this Agreement, other than those provisions held invalid or unenforceable, will be construed in all respects as if such
invalid or unenforceable term or provision were omitted.
16. Amendment;
Construction. No amendment to this Agreement will be binding on any party unless it is in writing and signed by all of the parties.
Any provision of this Agreement benefiting a party may be waived only by a writing signed by that party. References to Sections and Schedules
herein are references to the sections and schedules of this Agreement, unless otherwise expressly stated.
17. Counterparts.
This Agreement may be executed in counterparts, each of which will be deemed an original, but all of which together will constitute one
and the same instrument. Counterparts may be delivered via facsimile, electronic mail or other transmission method, and may bear signatures
affixed through .pdf or other software including without limitation any electronic signature platform complying with the U.S. federal
ESIGN Act of 2000 (e.g., www.docusign.com); any counterpart so delivered will be deemed to have been duly and validly executed and delivered
and will be valid and effective for all purposes.
[SIGNATURE
PAGES FOLLOWS]
[Signature Page to Currency-in-Transit
Control Agreement]
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement effective as of the Effective Date.
GRANTOR
ATHENA
BITCOIN GLOBAL
By:
/s/ Matias Goldenhorn
Name:
Matias Goldenhorn
Title: CEO
CUSTODIAN:
THILLENS,
INC.
By:
/s/ Tommy Finnegan
Name:
Tommy Finnegan
Title:
Vice President
SECURED
PARTY:
KGPLA HOLDINGS LLC
By:
/s/ Jason Lu
Name:
Jason Lu
Title:Manager
Exhibit 10.68
CURRENCY-IN-TRANSIT
CONTROL AGREEMENT
THIS CURRENCY-IN-TRANSIT
CONTROL AGREEMENT (as amended, amended and restated, supplemented or otherwise modified from time to time, this “Agreement”),
dated as of May [_], 2023 (the “Effective Date”), by and among Athena Bitcoin Global, a Nevada corporation (the “Grantor”),
KGPLA Holdings LLC, a Delaware limited liability company (the “Secured Party”) and Move on Security LLC, a Florida
limited liability company (the “Custodian”), is delivered pursuant to Section 4(k) of that certain Security Agreement
(as amended, amended and restated, supplemented or otherwise modified from time to time, the “Security Agreement”),
dated of even date herewith by and between Grantor, the other parties listed therein, and the Secured Party. This Agreement is entered
into by the parties hereto for the purpose of perfecting the security interests of the Secured Party granted by the Grantor in the Currency-in-Transit
described below. All references herein to the “UCC” means the Uniform Commercial Code as in effect from time to time
in the State of Florida. Capitalized terms used but not defined herein have the meanings assigned to such terms in the Security Agreement.
1. Definitions.
For purposes of this Agreement, the following terms not otherwise defined herein have the following meanings:
(a) “Account
Expenses” has the meaning assigned to such term in Section 15.
(b) “Currency-in-Transit”
has the meaning assigned to such term in Section 2(a).
(c) “Notice
of Sole Control” has the meaning assigned to such term in Section 9(a).
2. Representations;
Covenants. The Custodian hereby confirms and agrees that:
(a) The
Custodian provides to the Grantor certain services (the “Custodial Services”) in connection with the custody, safekeeping,
transport, and deposit of U.S. paper currency in the ordinary course of the Custodian’s business (such U.S. paper currency, the
“Currency-in-Transit”). The Grantor is the Custodian’s customer with respect to the Currency- in-Transit.
(b) This
Agreement is the valid and legally binding obligation of the Depository Bank.
(c) The
Custodian has not entered into any currently effective agreement with any person relating to any Currency-in-Transit under which the
Custodian may be obligated to comply with instructions originated by a person other than the Grantor or the Secured Party. Until the
termination of this Agreement, the Custodian will not enter into any agreement with any person relating to any Currency-in-Transit under
which the Custodian may be obligated to comply with instructions originated by a person other than the Grantor or the Secured Party.
3. Control.
Subject to all applicable laws, rules, and regulations, including, but not limited to those issued by the Financial Crimes Enforcement
Network (“FinCen”), the Custodian shall comply with instructions originated by the Secured Party in accordance with
this Agreement without the further consent of the Grantor or any person acting or purporting to act for the Grantor, including directing
disposition of the Currency-in-Transit except to the extent that those instructions conflict with the proviso in Section 4(b). Subject
to all applicable laws, rules, and regulations, including, but not limited to those issued by FinCen, the Custodian shall also comply
with instructions originated by the Grantor or its authorized representatives directing the disposition of the Currency-in-Transit until
such time as the Secured Party delivers a Notice of Sole Control pursuant to Section 9(a) to the Custodian, except to the extent that
those instructions conflict with the proviso in Section 4(b). Subject to all applicable laws, rules, and regulations, including, but
not limited to those issued by FinCen, the Custodian shall comply with, and is fully entitled to rely upon, any instruction from the
Secured Party, even if such instruction is contrary to any instruction that the Grantor may give or may have given to the Custodian or
results in the dishonoring of items presented for payment from a Currency- in-Transit, except that the Custodian is not required to comply
with any instruction to the extent that those instructions conflict with the proviso in Section 4(b).
4. Subordination
of Lien; Waiver of Set-Off.
(a) The
Custodian hereby agrees that any security interest in, lien on, or encumbrance, claim or (except as provided in the proviso to Section
4(b)) right of set-off against, any Currency-in-Transit or any funds therein it now has or subsequently obtains will be subordinate to
the security interest of the Secured Party in the Currency-in-Transit and the funds therein or credited thereto.
(b) The
Custodian agrees not to exercise any present or future right of recoupment or set-off against any of the Currency-in-Transit or to assert
against any of the Currency-in-Transit any present or future security interest or any other lien or claim (including claim for penalties)
that the Custodian may at any time have against or in any of the Currency- in-Transit or any funds therein; provided, however,
that the Custodian may set off all amounts due the Custodian in respect of its fees and expenses for the Custodial Services related to
the Currency-in-Transit as set forth in that certain underlying services agreement by and between Grantor and Custodian (the “Services
Agreement”).
5. Custodian’s
Responsibility.
(a) The
Custodian will not be liable to the Secured Party for complying with instructions from the Grantor concerning the Currency-in-Transit
that are received by the Custodian before the Custodian receives a Notice of Sole Control.
(b) The
Custodian will not be liable to the Grantor or the Secured Party for complying with a Notice of Sole Control or with instructions originated
by the Secured Party concerning any of the Currency-in-Transit, even if the Grantor notifies the Custodian that the Secured Party is
not legally entitled to issue such Notice of Sole Control or instructions, unless the Custodian takes the actions after it is served
with an injunction, restraining order, or other legal process enjoining it from doing so, issued by a court of competent jurisdiction,
and had a reasonable opportunity to act on the injunction, restraining order or other legal process.
(c) This
Agreement does not create any obligation of the Custodian except for those expressly set forth in this Agreement. In particular, the
Custodian need not investigate whether the Secured Party is entitled under the Secured Party’s agreements with the Grantor to give
instructions concerning any Currency-in-Transit or a Notice of Sole Control. The Custodian may rely on notices and communications it
believes to have been given by the appropriate party.
6. Choice
of Law; Waiver of Jury Trial.
(a) This
Agreement is governed by the laws of the State of [Florida]. Regardless of any provision in any other agreement, for purposes of UCC
§9-304(b)(1), [Florida] will be deemed to be the Custodian’s jurisdiction and the Currency-in-Transit is governed by the laws
of the State of [Florida]. The Custodian and the Grantor may not change the law governing any Currency-in-Transit without the Secured
Party’s prior written consent.
(b) TO
THE EXTENT PERMITTED BY APPLICABLE LAW, EACH PARTY WAIVES ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, CLAIM OR PROCEEDING (INCLUDING ANY
COUNTERCLAIM) OF ANY TYPE ARISING OUT OF OR DIRECTLY OR INDIRECTLY RELATING TO THIS AGREEMENT.
7. Conflict
with Other Agreements. As of the Effective Date, there are no other agreements entered into between
the Custodian and the Grantor with respect to any Currency- in-Transit or any funds credited thereto, other than the Services Agreement.
The Custodian and the Grantor will not enter into any other agreement with respect to any Currency-in-Transit. The Custodian and the
Grantor have not and will not enter into any other agreement with respect to control of any of the Currency-in-Transit or purporting
to limit or condition the obligation of the Custodian to comply with any orders or instructions with respect to any Currency-in-Transit
as set forth in Section 3 without the prior written consent of the Secured Party acting in its sole discretion. In the event of any conflict
with respect to control over any Currency-in-Transit between this Agreement (or any portion hereof) and any other agreement now existing
or hereafter entered into, the terms of this Agreement will prevail.
8. Notice
of Adverse Claims. Except for the claims and interests of the Secured Party and of the Grantor in the
Currency-in-Transit, the Custodian on the Effective Date does not know of any claim to, security interest in, lien on, or encumbrance
against, any Currency-in- Transit or any funds credited thereto and does not know of any claim that any person or entity other than the
Secured Party has been given control (within the meaning of UCC §9-104) of any Currency-in-Transit or any such funds. If the Custodian
becomes aware that any person or entity is asserting any lien, encumbrance, security interest or adverse claim (including any writ, garnishment,
judgment, warrant of attachment, execution or similar process or any claim of control) against any funds in any Currency-in-Transit,
the Custodian shall promptly notify the Secured Party and the Grantor thereof.
9. Maintenance
of Currency-in-Transit. In addition to the obligations of the Custodian in Section 3, the Custodian
agrees to provide the Custodial Services subject to the following terms:
(a) If
at any time the Secured Party delivers to the Custodian a notice instructing the Custodian to terminate Grantor’s access to any
Currency-in-Transit (a “Notice of Sole Control”), the Custodian agrees that, after receipt of such notice, it will
take all instructions with respect to such Currency-in-Transit solely from the Secured Party, terminate all instructions and orders originated
by the Grantor with respect to such Currency-in-Transit or any funds therein, and cease taking instructions from the Grantor, including,
without limitation, instructions for distribution or transfer of any funds in such Currency-in-Transit.
(b) If
the Secured Party requests, the Custodian will provide the Secured Party, whether by internet access or otherwise, with a copy of each
periodic statement or similar record relating to each Currency-in-Transit ordinarily furnished by the Custodian to the Grantor. The Grantor
authorizes the Custodian to provide the Secured Party, whether by internet access or otherwise, any other information concerning any
Currency-in-Transit that the Custodian may agree to provide to the Secured Party at the Secured Party’s request.
10. Binding
Effect. The terms of this Agreement will become effective when it has been executed by the Grantor,
the Secured Party and the Custodian, and thereafter will be binding upon, and will inure to the benefit of, the parties hereto and their
respective successors and permitted transferees until termination as set forth in Section 12.
11. Notices.
Any notice, request or other communication required or permitted to be given under this Agreement must be in writing and deemed to have
been properly given when delivered in person, or when sent by facsimile or other electronic means and electronic confirmation of error
free receipt is received or two days after being sent by certified or registered United States mail, return receipt requested, postage
prepaid, addressed to the party at the address set forth below.
Grantor:
Athena
Bitcoin Global
Attn:
Matias Goldenhorn, CEO (matias@athenabitcoin.com)
____________________________
____________________________
and with
a copy (which will not constitute notice) to:
Attn: Iwona Alami, Esq. (iwona@alamilawgroup.com)
Alami Law
Group
Custodian:
Move
on Security LLC
Attn: Kevin
Mizraji, Manager (info@moveonsecurity.com)
____________________________
____________________________
Secured
Party:
KGPLA
HOLDINGS LLC
Attn: Jason
Lu, Manager (jason@komodobay.com)
____________________________
____________________________
and with
a copy (which will not constitute notice) to:
Attn: Scott
R. Jablonski, Esq. (sjablonski@bergersingerman.com)
Berger Singerman LLP
; or at
any other address specified by such Party in writing from time to time at least 5 days’ prior to the sending or transmission of
the subject notice.
12. Termination.
Except as otherwise provided in this Section 12, this Agreement and the obligations of the Custodian hereunder will continue in effect
until the security interests of the Secured Party in the Currency-in-Transit and any and all funds therein have been terminated pursuant
to the terms of the Security Agreement and the Secured Party has notified the Custodian of such termination in writing. This Agreement
may be terminated by:
(a) the
Secured Party at any time by written notice to the other parties; or
(b) the
Grantor, by written notice signed by the Grantor and the Secured Party, delivered to the Custodian not less than 30 days prior to the
effective termination date.
13. Neither
the Grantor nor the Custodian will terminate the Services Agreement prior to termination of this Agreement, without the prior written
consent of the Secured Party, except in the case of (i) the Grantor’s breach of this Agreement that remains uncured for more than
thirty (30) days; (ii) the Grantor’s and/or the Secured Party’s breach of the Services Agreement, and/or (iii) the Secured
Party’s breach of this Agreement. Upon the occurrence of a breach under (ii) or (iii) above, the Custodian shall have the immediate
right to terminate the Services Agreement.
14. Survival.
Section 6 and Section 7 will survive termination of this Agreement.
15. Fees
and Expenses. Unless and until a Notice of Sole Control has been issued by the Secured Party, the Custodian
agrees to look solely to the Grantor for payment of any and all fees, costs, charges and expenses incurred or otherwise relating to the
Currency-in-Transit and Custodial Services (collectively, the “Account Expenses”), and the Grantor agrees to pay such
Account Expenses to the Custodian on demand therefor. The Grantor acknowledges and agrees that it is solely liable to the Custodian for
all Account Expenses unless and until a Notice of Sole Control has been issued. After a Notice of Sole Control has been issued, the Secured
Party is liable for all Account Expenses going forward, and the Custodian agrees to look solely to the Secured Party for payment of all
Account Expenses. Nothing herein shall prevent the Custodian from exercising its right to setoff as set forth in the Services Agreement.
16. Severability.
If any term or provision set forth in this Agreement is held to be invalid or unenforceable by a court of competent jurisdiction, the
remainder of this Agreement, other than those provisions held invalid or unenforceable, will be construed in all respects as if such
invalid or unenforceable term or provision were omitted.
17. Amendment;
Construction. No amendment to this Agreement will be binding on any party unless it is in writing and
signed by all of the parties. Any provision of this Agreement benefiting a party may be waived only by a writing signed by that party.
References to Sections and Schedules herein are references to the sections and schedules of this Agreement, unless otherwise expressly
stated.
18. Counterparts.
This Agreement may be executed in counterparts, each of which will be deemed an original, but all of which together will constitute one
and the same instrument. Counterparts may be delivered via facsimile, electronic mail or other transmission method, and may bear signatures
affixed through .pdf or other software including without limitation any electronic signature platform complying with the U.S. federal
ESIGN Act of 2000 (e.g., www.docusign.com); any counterpart so delivered will be deemed to have been duly and validly executed and delivered
and will be valid and effective for all purposes.
[SIGNATURE
PAGES FOLLOWS]
[Signature
Page to Currency-in-Transit Control Agreement]
IN WITNESS
WHEREOF, the parties hereto have executed this Agreement effective as of the Effective Date.
GRANTOR
ATHENA
BITCOIN GLOBAL
By:
/s/ Matias Goldenhorn
Name:
Matias Goldenhorn
Title: CEO
CUSTODIAN:
MOVE ON SECURITY LLC
By:
/s/ Kevin Mizraji
Name: Kevin
Mizraji
Title: Manager
SECURED
PARTY:
KGPLA HOLDINGS LLC
By:
/s/ Jason Lu
Name:
Jason Lu
Title:Manager
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
We hereby consent to the incorporation in this
Registration Statement on Form S-1, Amendment 5 of our report dated March 30, 2023, relating to the financial statements of Athena Bitcoin
Global for the years ended December 31, 2022 and 2021 and to all references to our firm included in this Registration Statement.
![](https://www.sec.gov/Archives/edgar/data/1095146/000168316824000275/image_005.jpg)
Certified Public Accountants
Lakewood, CO
January 11, 2024
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