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;
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? our ability to obtain any necessary financing on acceptable terms;
? timing and amount of capital expenditures;
? retention of skilled personnel;
? continuation of current tax and regulatory regimes; and
? general economic and financial market conditions.
Although management considers these assumptions to be reasonable based on
information currently available to it, they may prove to be incorrect.
These forward-looking statements are only predictions and involve known and
unknown risks, uncertainties and other factors, including:
? inability to efficiently manage our operations;
? general economic and business conditions;
? our negative operating cash flow;
? our ability to obtain additional financing;
? 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
26, 2019,
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.), Cathio, 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.".
On November 28, 2018, we incorporated a new Delaware subsidiary, Cathio, Inc.,
to provide blockchain technology opportunities to the Catholic community.
Results of Operations
Three Months Ended June 30, 2020 Compared to the Three Months Ended June 30,
2019
Revenue
We had no revenues for the three months ended June 30, 2020. Revenues of
$250,000 for consulting services were recognized for the three months ended June
30, 2019.
Operating Expenses
We incurred general and administrative expenses of $209,776 and $532,811 for the
three months ended June 30, 2020 and 2019, respectively, representing a decrease
of $323,035 between the two periods. These expenses consisted primarily of
consulting fees, professional fees, and other general and administrative costs.
The decrease in consulting fees between the two periods from $119,279 in 2019 to
$0 in 2020 was due to the decrease in compensation for our president, chief
financial officer, chief operating officer, a related party consultant, and a
director. Professional fees increased from $36,177 in 2019 to $51,616 in 2020.
The decrease in other general and administrative costs decreased from $375,334
in 2019 to $93,082 in 2020 due to decreased travel costs, rent, advertising and
marketing costs, compliance fees, and stock-based compensation.
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Other Income (Expense)
Other income includes $16,500 of repayment of a loan receivable compared to
$16,500 received from interest revenue of $18,699 for the same period last year,
the change in derivative liability of $42,182 for Q2 2020 and $0 in Q2 2019.
Other expenses include interest expense on convertible notes payable of $37,907
for the three months ended June 30, 2020 compared to $27,226 for the same period
last year.
Net Loss from Operations
We incurred net losses from operations of $210,783 and $374,712 for the three
months ended June 30, 2020 and 2019, respectively, representing a decrease of
$163,929, primarily attributable to the factors discussed above under the
headings "Revenue" and "Operating Expenses".
Six Months Ended June 30, 2020 Compared to the Six Months Ended June 30, 2019
Revenue
We had no revenue for the six months ended June 30, 2020 and $250,000 for
consulting services were recognized for the six months ended June 30, 2019.
Operating Expenses
We incurred general and administrative expenses of $381,204 and $1,533,158 for
the six months ended June 30, 2020 and 2019, respectively, representing a
decrease of $1,126,954 between the two periods. These expenses consisted
primarily of consulting fees, pre-licensing fees, professional fees, and other
general and administrative costs. The decrease in consulting fees between the
two periods from $609,933 in 2019 to $109,427 in 2020 was due to the decrease in
compensation for our president, chief operating officer, and Board of Directors.
Pre-licensing fees decreased from $250,000 in 2019 to $0 in 2020. Professional
fees decreased from $104,725 in 2019 to $60,995 in 2020 due to lower legal
services as 2019 saw the Company spending on the evaluation of potential
business opportunities and regulatory compliance. The decrease in other general
and administrative costs decreased from $991,622 in 2019 to $209,673 in 2020 due
to decreased travel costs, advertising and marketing costs, compliance fees, and
stock-based compensation. Service costs decreased from $57,023 in 2019 to
$25,950 in 2020 as many of the costs for the client being recognized are now
being charged to them as per the amended agreement.
Consulting fees of $101,027 in the second quarter of 2020 relate in part to
$15,000 paid to our Board of Directors, $30,000 paid for accounting services and
other smaller costs.
The pre-licensing fees stem from an agreement between the Company and a
potential client.
Other Income (Expense)
Other income includes $291,000 of recovered receivables received in Q1 from Ryde
Holdings, changes in the derivative liability of $42,182 for Q2 2020 and $0 in
Q2 2019. Other expenses include interest expense on convertible notes payable of
$76,648 for the six months ended June 30, 2020 compared to $41,760 for the same
period last year.
Net Loss from Operations
We incurred net loss from operations of $355,254 and $1,515,181 for the six
months ended June 30, 2020 and 2019, respectively, representing a net change of
$1,159,927, primarily attributable to the factors discussed above under the
heading "Operating Expenses".
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Liquidity and Capital Resources
Working Capital
As at As at
June 30, 2020 December 31, 2019
Current Assets $ 159,845 $ 42,886
Current Liabilities 1,569,897 1,844,693
Working Deficit $ (1,410,052 ) $ (1,801,807 )
Current Assets
Current assets were $159,845 as at June 30, 2020 and $42,886 at December 31,
2019. The increase in current assets as at June 30, 2020 was due to loans from
Ryde Holdings received partially offset by the increase in cash spent on
operating expenses.
Current Liabilities
Current liabilities as at June 30, 2020 were attributable to $151,866 in
accounts payable and accrued expenses, $62,466 in current portion of accrued
interest on convertible notes payable, current portion of convertible notes of
$898,825, and $456,740 current portion of loans payable to related party
compared to $306,115 in accounts payable and accrued expenses, $104,913 in
current portion of accrued interest on convertible notes payable, current
portion of convertible notes of $898,825, and $534,840 current portion of loans
payable to related party as at December 31, 2019.
Cash Flow
Six months ended Six months ended
June 30, 2020 June 30, 2019
Net cash provided by (used in) operating activities $ (175,771 ) $ (1,738,188 )
Net cash provided by investing activities
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Net cash provided by financing activities 293,948 868,714
Net changes in cash and cash equivalents $ 118,177 $ (869,064 )
Operating Activities
Net cash used in operating activities was $175,771 for the six-month period
ended June 30, 2020, as compared to net cash used of $1,738,188 for the
six-month period ended June 30, 2019, a decrease of $1,562,417. The decrease in
net cash used in operating activities was primarily due to amended contracts
decreasing consulting fees and by decreases in accounts payables and accrued
liabilities of $128,874 offset by an increase in accrued interest on notes
payable.
Investing Activities
There was no investing activities for the six-month period ended June 30, 2020
and for the six-month period ended June 30, 2019 investing activities provided
$410.
Financing Activities
Financing activities provided cash of $293,948 through a private placement for
the six months ended June 30, 2020 and financing activities of $868,714 for the
six months ended June 30, 2019. In 2019, sBetOne issued $575,000 of convertible
debentures, and net proceeds of $293,714 were raised in a private placement.
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Cash Requirements
Our estimated general and administrative expenses, operating expenses, and
service costs for the next 12 months are $780,000 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 $9,400,658 as at June 30, 2020 (December
31, 2019: $9,310,776). 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 years ended December 31, 2019
and 2018, 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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CURRENCYWORKS INC. 
