Forward-Looking Statements

This quarterly report contains forward-looking statements. Forward-looking statements are projections of events, revenues, income, future economic performance or management's plans and objectives for future operations. In some cases, forward-looking statements can be identified by the use of terminology such as "may", "should", "expect", "plan", "anticipate", "believe", "estimate", "predict", "potential" or "continues" or the negative of these terms or other comparable terminology. Examples of forward-looking statements made in this quarterly report include or may include, among others, statements about:





  ? our proposed plan of operations;
  ? our financial and operating objectives and strategies to achieve them;
  ? the costs and timing of our services;
  ? our use of available funds;
  ? our capital and funding requirements; and
  ? our other financial or operating performances.

The material assumptions supporting these forward-looking statements include, among other things:





  ? our future growth potential, results of operations, future prospects and
    opportunities;
  ? execution of our business strategy;
  ? there being no material variations in current regulatory environments;
  ? our operating expenses, including general and administrative expenses;
  ? our ability to obtain any necessary financing on acceptable terms;
  ? timing and amount of capital expenditures;
  ? retention of skilled personnel;
  ? continuation of current tax and regulatory regimes; and
  ? general economic and financial market conditions.

Although management considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect.





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These forward-looking statements are only predictions and involve known and unknown risks, uncertainties and other factors, including:





  ? inability to efficiently manage our operations;
  ? general economic and business conditions;
  ? our negative operating cash flow;
  ? our ability to obtain additional financing;
  ? increases in capital and operating costs;
  ? general cryptocurrency risks;
  ? technological changes and developments in the blockchain and cryptocurrencies;
  ? risks relating to regulatory changes or actions;
  ? competition for blockchain platforms and technologies; and
  ? other risk factors discussed in our annual report on Form 10-K filed on March
    31, 2021,

any of which may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Further, although we have attempted to identify factors that could cause actual results, levels of activity, performance or achievements to differ materially from those described in forward-looking statements, there may be other factors that cause results, levels of activity, performance or achievements not to be as anticipated, estimated or intended.

While these forward-looking statements and any assumptions upon which they are based are made in good faith and reflect management's current judgment regarding the direction of our business, actual results may vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested herein. Accordingly, readers should not place undue reliance on forward-looking statements. Except as required by applicable law, including the securities laws of the United States and Canada, we do not intend to update any of the forward-looking statements to conform these statements to actual results. All forward-looking statements in this quarterly report are qualified by this cautionary statement.

All financial information contained herein is shown in United States dollars unless otherwise stated. Our financial statements are prepared in accordance with United States generally accepted accounting principles. Unless otherwise stated, "$" refers to United States dollars.

In this quarterly report, unless otherwise specified, all references to "shares" refer to shares of common stock in the capital of our company.

As used in this quarterly report, the terms "we", "us", "the Company", "our" and "CurrencyWorks" mean CurrencyWorks Inc. and its wholly-owned subsidiaries, CurrencyWorks USA Inc. (formerly ICOx USA, Inc.), and sBetOne, Inc., unless otherwise specified.





Overview

Our business is a services and development business that provides a turnkey set of services for companies to develop and integrate blockchain and cryptocurrency technologies into their business operations. We anticipate that we will enable companies to focus on their core competencies while providing the necessary resources and expertise to execute a strategy that will enable companies to integrate new blockchain plus cryptocurrency technologies into their business operations. Our plan is to be compensated on a fee-for-services model, technology licensing model and reoccurring transactions revenue model. We may accept tokens, coins or equity in payment for our services, to the extent permitted under applicable law.





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On December 29, 2017, we entered into a business services agreement with RYDE Holding Inc. ("Ryde"), formerly WENN Digital Inc., on March 19, 2018, we entered into the amendment no. 1 to business services agreement dated as of March 15, 2018 with Ryde, and, on July 9, 2018, we entered into the amendment no. 2 to business services agreement dated as of July 9, 2018 with Ryde. On October 29, 2018, we entered into the amendment no. 3 to business services agreement dated as of October 29, 2018 with Ryde. Pursuant to the business services agreement, we agreed to provide Ryde with the services in connection with Ryde's development of an image rights management and protection platform using blockchain technology, including (i) the business development and technical services, (ii) the business launch services and (iii) the post-business launch support services.

Ryde has entered into a licensing partnership agreement with Eastman Kodak Company, which announced the launch of the KODAKOne blockchain platform and KODAKCoin ICO. We are providing the services relating to the KODAKOne blockchain platform and the KODAKCoin ICO pursuant to a business services agreement dated December 29, 2017, as amended as of March 15, 2018, July 9, 2018 and October 29, 2018 with Ryde.

On October 19, 2018, we, through our wholly-owned subsidiary, ICOx USA, entered into a master services agreement with BitRail, LLC ("BitRail") to develop a blockchain-based payment processing application allowing the purchase and sale of cryptocurrencies.

On February 1, 2019, we, through our wholly-owned subsidiary, ICOx USA, entered into a master services agreement dated effective January 21, 2019 with FreedomCoin, LLC to develop a stable coin cryptocurrency named FreedomCoin to be used as a currency for purchasing goods and services.

On November 19, 2018, we incorporated a new Delaware subsidiary, GN Innovations, Inc., to provide blockchain technology opportunities to the sports and entertainment industry by working with large and well-established brands. Effective December 5, 2018, we changed the name of this subsidiary to "GN1, Inc." and effective February 6, 2019, we changed the name of this subsidiary to "sBetOne, Inc.".





Results of Operations

Three Months Ended March 31, 2021 Compared to the Three Months Ended March 31, 2020





Revenue

We had no revenue for the three months ended March 31, 2021 and 2020.





Operating Expenses

We incurred general and administrative expenses of $1,548,742 and $171,428 for the three months ended March 31, 2021 and 2020, respectively, representing an increase of $1,377,314 between the two periods. These expenses consisted primarily of stock-based compensation expense for issuance of options, consulting fees, pre-licensing fees, professional fees, and other general and administrative costs. The increase in stock-based compensation of $777,284 is due to the issuance of options to the directors of the Company. The increase in consulting fees between the two periods from $564,148 in 2021 from $46,160 in 2020 was mainly due to the issuance of options for a consultant with stock-based compensation expense of $354,817 as well as an increase in compensation for our president, chief operating officer, and Board of Directors. Professional fees increased from $9,379 in 2020 to $55,872 in 2021 due to increased legal services as 2021 saw the Company raised equity in Q1.





Other Income (Expense)

Other income includes $16,500 of recovered receivables received in Q1 2021 from Ryde Holdings. Other expenses include interest expense on convertible notes payable of $45,959 for the three months ended March 31, 2021 compared to $37,919 for the same period last year.





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Net Loss from Operations

We incurred net loss from operations of $1,548,742 and losses of $144,471 for the three months ended March 31, 2021 and 2020, respectively, representing a net change of $408,273, primarily attributable to the factors discussed above under the heading "Operating Expenses".

Liquidity and Capital Resources





Working Capital



                               As at            As at
                             March 31,      December 31,
                               2021             2020
Current Assets              $ 4,671,047     $     142,024
Current Liabilities           2,011,932         1,798,560
Working Capital/(Deficit)   $ 2,659,115     $  (1,656,536 )




Current Assets

Current assets were $4,671,047 as at March 31, 2021 and $142,024 at December 31, 2020. The increase in current assets as at March 31, 2021 is mainly due to share issuance, warrant, and option exercises in Q1 2021.





Current Liabilities

Current liabilities of $2,011,932 as at March 31, 2021 were attributable to $290,480 in accounts payable and accrued expenses, $15,014 in accounts payable and accrued expenses, related party, $267,894 in current portion of accrued interest on convertible notes payable, current portion loans payable of $526,380, current portion of convertible notes of $825,000 and current portion of interest on loans payable of $87,164 compared to $280,426 in accounts payable and accrued expenses, $125,940 in current portion of accrued interest on convertible notes payable, current portion of convertible notes of $924,825, and $467,369 current portion of loans payable to related party as at December 31, 2020.





Cash Flow



                                                       Three months
                                                          ended           Three months ended
                                                      March 31, 2021        March 31, 2020
Net cash provided by (used in) operating activities   $     (605,662 )   $             (1,351 )
Net cash provided by financing activities                  4,894,825                   10,000
Net changes in cash and cash equivalents              $    4,289,163     $              8,649




Operating Activities

Net cash used in operating activities was $605,662 for the three-month period ended March 31, 2021, as compared to net cash used of $1,351 for the three-month period ended March 31, 2020, an increase of $604,311. The increase in net cash used in operating activities was primarily due to prepayments of consulting agreements signed of $327,360 as well as amendments to consulting agreements.





Investing Activities

There was no investing activities for the three-month period ended March 31, 2021 and for the three-month period ended March 31, 2020.





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Financing Activities

Financing activities provided cash of $4,894,825 for the three months ended March 31, 2021 and $10,000 for the three months ended March 31, 2020. This is mainly due to share issuances of $4,577,115, warrant exercises of $443,018 and options exercises of $32,500 for the quarter ended March 31, 2021 less repayment of loans payable of $156,598.

Investing Activities Subsequent to March 31, 2021

Effective as of May 5, 2021, we loaned $400,000 to Fogdog Energy Solutions Inc. pursuant to convertible promissory note. The note bears interest at a rate of 4% per annum and comes due on May 5, 2022. The note may not be prepaid without the written consent of our company. Our chief financial officer, secretary and treasurer, Swapan Kakumanu, is a director, chief financial officer and a shareholder of Fogdog.





Cash Requirements

Our estimated general and administrative expenses, operating expenses, and service costs for the next 12 months are $12,000,000 and are based on our current expenditures given the current market conditions.

We will require additional cash resources to meet our planned capital expenditures and working capital requirements for the next 12 months. We expect to derive such cash through the sale of equity or debt securities or by obtaining a credit facility. The sale of additional equity securities will result in dilution to our stockholders. The incurrence of indebtedness will result in debt service obligations, could cause additional dilution to our stockholders, and could require us to agree to financial covenants that could restrict our operations or modify our plans to source a new business opportunity. Financing may not be available in amounts or on terms acceptable to us, if at all. Failure to raise additional funds could cause our company to fail.





Going Concern

Our unaudited condensed consolidated financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. We have not yet established a source of revenues sufficient to cover our operating costs and to allow us to continue as a going concern. We have incurred losses since inception resulting in an accumulated deficit of $58,187,379 as at March 31, 2021 (December 31, 2020: $13,323,375). Our ability to operate as a going concern is dependent on obtaining adequate capital to fund operating losses until we become profitable.

In its report on our financial statements for the periods ended March 31, 2021 and 2020, our independent registered public accounting firm included an explanatory paragraph regarding substantial doubt about our ability to continue as a going concern. Our unaudited condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

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