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CRYPTO CO Management's Discussion and Analysis of Financial Condition and Results of Operations. (form 10-Q)

06/29/2020 | 02:32pm EDT

You should read the following discussion of our financial condition and results of operations in conjunction with the consolidated financial statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q ("Quarterly Report") and with our audited consolidated financial statements, including the notes thereto, and Management's Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 (the "2019 Annual Report"), as filed with the U.S. Securities and Exchange Commission ("SEC"). In addition to historical consolidated financial information, the following discussion and analysis contain forward-looking statements that reflect our plans, estimates, and beliefs and involve risks and uncertainties. The words "may," "could," "should," "estimate," "project," "forecast," "intend," "expect," "anticipate," "believe," "target," "plan" and similar expressions are intended to identify forward-looking statements. Our actual results could differ materially from those anticipated in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Quarterly Report, as well as risks referenced in our other filings with the SEC, including Part I, Item 1A. "Risk Factors" of the 2019 Annual Report.

Overview of Our Business

We are engaged in the business of providing consulting services and education for distributed ledger technologies ("blockchain"), for the building of technological infrastructure and enterprise blockchain technology solutions. We currently generate revenues and incur expenses solely through these consulting operations. We have disposed of our entire ownership interest in CoinTracking GmbH and also divested substantially all of our cryptocurrency assets owned by our former cryptocurrency investment segment, which has ceased operations.

Comparison of the three months ended March 31, 2020, and the three months March 31, 2019


Revenues for the three months ended March 31, 2020, and March 31, 2019, were $2,500 and $3,975, respectively. Revenues consisted of fees received for blockchain training, consulting, and software development, primarily for a single customer.

General and administrative expenses and share-based compensation

For the three months ended March 31, 2020, our general and administrative expenses were $112,092, a decrease of 68.3% compared to $353,618 for the period ended March 31, 2019. General and administrative expenses consist primarily of costs relating to professional services, payroll, and payroll-related expenses, and depreciation and amortization expenses. Professional services included in general and administrative expenses consist primarily of contracting fees, consulting fees, and accounting fees. Management has significantly reduced all expenses for the three months ended March 31, 2020, in particular, payroll and payroll-related expenses and contracting and consulting fees until it can generate significant revenues from its consulting businesses.

Liquidity, Going Concern and Capital Resources

The Company's consolidated financial statements are prepared using the accrual method of accounting in accordance with United States ("U.S.") generally accepted accounting principles ("GAAP") and have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities in the normal course of business. The Company has incurred significant losses and experienced negative cash flows since inception. As of March 31, 2020, the Company had cash of $5,728, compared to $1,611 as of December 31, 2019. In addition, the Company's net loss was $136,344 for the three months ended March 31, 2020. The Company's working capital was negative $2,063,447 as of March 31, 2020. During 2019, the Company liquidated a majority of its investments in cryptocurrency. As of March 31, 2020, the accumulated deficit amounted to $30,401,514. As a result of the Company's history of losses and financial condition, there is substantial doubt about the ability of the Company to continue as a going concern.

The ability to continue as a going concern is dependent upon us generating profitable operations in the future and/or obtaining the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they come due. Management is evaluating different strategies to obtain financing to fund our expenses and achieve a level of revenue adequate to support our current cost structure. Financing strategies may include but are not limited to, private placements of capital stock, debt borrowings, partnerships, and/or collaborations. There can be no assurance that any of these future-funding efforts will be successful, that we will be able to replace the revenues lost as a result of the sale of CoinTracking GmbH in early 2019, or that we will achieve our projected level of revenues in 2020 and beyond. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty.

The following table summarizes the primary sources and uses of cash for the
periods presented below:

                                               Three months ended
                                                    March 31,
                                              2020           2019

Net cash used in operating activities $ (18,384 ) $ (521.222 ) Net cash used in investing activities

               -       1,000,000
Net cash provided by financing activities      22,500               -

Net decrease in cash and cash equivalents $ 4,116 $ 478,778

Operating Activities

Net cash used in operating activities was $18,384 for the three months ended March 31, 2020, compared to $521,222 for the three months ended March 31, 2019. The decrease in net cash used in operating activities was primarily due to a decline in our net loss to $136,344 for the three months ended March 31, 2020, compared to $336,638 for the three months ended March 31, 2019. Partially offsetting this decrease was a reduction in non-cash stock compensation expense of $0 for the three months ended March 31, 2020, compared to an expense of $58,792 for the prior-year period.


Investing Activities

Net cash from investing activities for the three months ended March 31, 2020, was $0, compared to $1,000,000 for the three months ended March 31, 2019. The prior-year period included the sale of CoinTracking GmbH for $2,200,000, net of acquired cash of $1,000,000.

Financing Activities

Net cash from financing activities for the three months ended March 31, 2020, was $22,500, compared to $0 for the three months ended March 31, 2019.

Trends, Events, and Uncertainties

The blockchain technology market is dynamic and unpredictable. Although we will undertake compliance efforts, including efforts with commercially reasonable diligence, there can be no assurance that there will not be a new or unforeseen law, regulation or risk factor which will materially impact our ability to continue our business as currently operated or raise additional capital to foster our continued growth.

We cannot assure you that our consulting business will develop as planned, that we will ever earn revenues sufficient to support our operations, or that we will ever be profitable. Furthermore, since we have no committed source of financing, we cannot assure you that we will be able to raise money as and when we need it to continue our operations. If we cannot raise funds as and when we need them, we may be required to severely curtail, or even to cease our operations.

Other than as discussed elsewhere in this Quarterly Report and our 2019 Annual Report, we are not aware of any trends, events, or uncertainties that are likely to have a material effect on our financial condition.

Critical Accounting Policies and Estimates

The preparation of our consolidated financial statements requires us to make estimates that affect the reported amounts of assets, liabilities, revenue and expenses, and the related disclosure of contingent liabilities. We base our judgments on our historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making estimates about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We have no material changes to our Critical Accounting Policies and Estimates disclosure as filed in our 2019 Annual Report.

Recent Accounting Pronouncements

See Note 3 to the consolidated financial statements for a discussion of recent accounting pronouncements.

Off-Balance Sheet Transactions

We do not have any off-balance sheet transactions.

© Edgar Online, source Glimpses

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