THE CRYPTO COMPANY Forward-Looking Statements
This report contains forward-looking statements that involve risks and uncertainties. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology including, "could" "may", "will", "should", "expect", "plan", "anticipate", "believe", "estimate", "predict", "potential" and the negative of these terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially.
While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested in this Annual Report.
The following discussion should be read in conjunction with the consolidated financial statements and the related notes contained elsewhere in this Annual Report. In addition to historical information, the following discussion contains forward-looking statements based upon current expectations that are subject to risks and uncertainties. Actual results may differ substantially from those referred to herein due to a number of factors, including, but not limited to, risks generally described in this report.
We are engaged in the business of providing consulting services and education
for blockchain technology and for the building of technological infrastructure
and enterprise blockchain technology solutions. We currently generate revenues
and incur expenses solely through these consulting and education operations. We
have disposed of our entire ownership interest in
7 Recent Events COVID-19 Pandemic
On
COVID-19 and the
Results of Continuing Operations
Comparison of the fiscal years ended
Revenue and cost of services
For the year ended
Cost of services for the periods ended
General and administrative expenses and share-based compensation
For the year ended
Share-based compensation was
Other Income
Other income for the year ended
Liquidity and Capital Resources
Our consolidated financial statements are prepared using the accrual method of
accounting in accordance with
8 Operating Activities
We have incurred, and expect to continue to incur, significant expenses in the areas of professional fees and contracting services.
Net cash used in operating activities for the year ended
Investing Activities
Net cash used in investing activities for the year ended
Financing Activities
Net cash provided by financing activities for the year ended
Subsequent to
Critical Accounting Policies and Estimates
Stock-Based Compensation
In accordance with ASC No. 718, Compensation-Stock Compensation ("ASC 718"), the Company measures the compensation costs of stock-based compensation arrangements based on the grant date fair value of granted instruments and recognizes the costs in financial statements over the period during which employees are required to provide services. Stock-based compensation arrangements include stock options.
Equity instruments ("instruments") issued to non-employees are recorded on the basis of the fair value of the instruments, as required by ASC 718. ASC No. 505, Equity Based Payments to Non-Employees ("ASC 505"), defines the measurement date and recognition period for such instruments. In general, the measurement date is (a) when a performance commitment, as defined, is reached or (b) when the earlier of (i) the non-employee performance is complete and (ii) the instruments are vested. The compensation cost is remeasured at fair value at each reporting period when the award vests. As a result, stock option-based payments to non-employees can result in significant volatility in compensation expense.
The Company accounts for its stock-based compensation using the Black-Scholes model to estimate the fair value of stock option awards. Using this model, fair value is calculated based on assumptions with respect to the (i) expected volatility of the Company's common stock price, (ii) expected life of the award, which for options is the period of time over which employees and non-employees are expected to hold their options prior to exercise, and (iii) risk-free interest rate.
9 Fair Value Measurements
The Company recognizes and discloses the fair value of its assets and liabilities using a hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to valuations based upon unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to valuations based upon unobservable inputs that are significant to the valuation (Level 3 measurements). Each level of input has different levels of subjectivity and difficulty involved in determining fair value.
Level 1 Inputs are unadjusted, quoted prices for identical assets or liabilities
in active markets at the measurable date.
Level 2 Inputs, other than quoted prices included in Level 1 that are observable
for the asset or liability through corroboration with market data at the
measurement date.
Level 3 Unobservable inputs that reflect management's best estimate of what
participants would use in pricing the asset or liability at the
measurement date.
The carrying amounts of the Company's financial assets and liabilities, including cash, accounts payable, and accrued liabilities approximate fair value because of the short maturity of these instruments.
We test for the impairment of our goodwill and indefinite-lived assets at least annually and whenever events or circumstances occur indicating that a possible impairment has been incurred.
We perform our annual goodwill impairment test on the first day of our fourth quarter based on the income approach, also known as the discounted cash flow ("DCF") method, which utilizes the present value of future cash flows to estimate fair value. We also use the market approach, which utilizes market price data of companies engaged in the same or a similar line of business as that of our company, to estimate fair value. A reconciliation of the two methods is performed to assess the reasonableness of fair value of each of the reporting units.
The future cash flows used under the DCF method are derived from estimates of
future revenues, operating income, working capital requirements and capital
expenditures, which in turn reflect specific global, industry and market
conditions. The discount rate developed is based on data and factors relevant to
the economies in which the business operates and other risks associated with
those cash flows, including the potential variability in the amount and timing
of the cash flows. A terminal growth rate is applied to the final year of the
projected period and reflects our estimate of stable growth to perpetuity. We
then calculate the present value of the respective cash flows for each reporting
unit to arrive at the fair value using the income approach and then determine
the appropriate weighting between the fair value estimated using the income
approach and the fair value estimated using the market approach. Finally, we
compare the estimated fair value of our goodwill and indefinite-lived assets to
its respective carrying value in order to determine if the goodwill assigned to
each reporting unit is potentially impaired. In
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Significant assumptions used include management's estimates of future growth
rates, the amount and timing of future operating cash flows, capital
expenditures, discount rates, as well as market and industry conditions and
relevant comparable company multiples for the market approach. Assumptions
utilized are highly judgmental, especially given the role technology plays in
driving the demand for consulting services in the blockchain technology space.
Based on the analysis that we performed at
Revenue Recognition
The Company recognizes consulting revenue when the service is rendered, the fee for arrangement is fixed or determinable, and collectability is reasonably assured.
Income Taxes
Deferred tax assets and liabilities are recognized for expected future consequences of events that have been included in the financial statements or tax returns. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized. The provision for income taxes represents the tax payable for the period and the change during the period in deferred tax assets and liabilities.
When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits along with any associated interest and penalties that would be payable to the taxing authorities upon examination.
Off-Balance Sheet Transactions
We do not have any off-balance sheet transactions.
Trends, Events and Uncertainties
COVID-19 Pandemic
The COVID-19 pandemic and the
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The blockchain technology market is dynamic and unpredictable. Although we 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 above and elsewhere in this Annual Report on Form 10-K, we are not aware of any trends, events or uncertainties that are likely to have a material effect on our financial condition.
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