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 CoinTracking GmbH and also
divested substantially all of our cryptocurrency assets owned by our former
cryptocurrency investment segment, which has ceased operations.
On March 11, 2020, the World Health Organization ("WHO") declared the COVID-19
outbreak to be a global pandemic. In addition to the devastating effects on
human life, the pandemic is having a negative ripple effect on the global
economy, leading to disruptions and volatility in the global financial markets,
causing global supply chain disruptions and contributing to shortages in the
labor market. Most U.S. states and many countries at times have issued policies
intended to stop or slow the further spread of the disease.
COVID-19 and the U.S.'s response to the pandemic have contributed to economic
volatility. There are no comparable events that provide guidance as to the
effect the COVID-19 pandemic may have, and, as a result, the ultimate effect of
the pandemic is highly uncertain and subject to change. We do not yet know the
full extent of the effects on the economy, the markets we serve, our business or
Results of Continuing Operations
Comparison of the fiscal years ended December 31, 2021 and December 31, 2020
Revenue and cost of services
For the year ended December 31, 2021, revenues relating to consulting services
were $434,552, compared to $14,400 for the year ended December 31, 2020. The
increase in revenue is attributable to the acquisition of BTA. The operations of
BTA became consolidated with Company operations on April 8, 2021.
Cost of services for the periods ended December 31, 2021 and December 31, 2020
were $273,796 and $-0- respectively. The increase is attributable to the
acquisition of BTA and is comprised of payroll expense.
General and administrative expenses and share-based compensation
For the year ended December 31, 2021, our general and administrative expenses
were $1,471,226 an increase of 96.1% compared to $749,930 for the year ended
December 31, 2020. General and administrative expenses consist primarily of
costs relating to professional services, payroll and payroll-related expenses
for the Company excluding payroll at BTA, and depreciation and amortization
expenses. Professional services included in general and administrative expenses
consist primarily of contracting fees, consulting fees, accounting fees, and
legal costs. The increase for the year ended December 31, 2021 reflects
increased costs associated with being a public company including outside
consulting, legal, and accounting costs, and costs incurred to effect the BTA
acquisition and other business development efforts.
Share-based compensation was $736,144 for the year ended December 31, 2021, a
decrease of 100% compared to $2,321,673 for the year ended December 31, 2020.
Share-based compensation decreased due to discretionary option issuances in 2020
as compared to no issuances in 2021.
Other income for the year ended December 31, 2021 was 1,293,483 compared to
$239,486 during the same period in 2020. The increase is other income is
primarily attributable to the recovery of token investments that had been
previously written off amounting to to $1,164,662 during the year ended December
Liquidity and Capital Resources
Our 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 December 31, 2021, we
had cash on hand of $75,699. Our loss before provision for income taxes from
continuing operations was $785,630 for the year ended December 31, 2021. Our
working capital was negative $2,216,422 as of December 31, 2021.
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 December 31, 2021 was
$152,241 compared to net cash used of $302,812 for the year ended December 31,
2020. The decrease of was primarily due to improved profitability in 2021, net
of non- cash share based compensation.
Net cash used in investing activities for the year ended December 31, 2021 was
$786,1515 compared to net cash provided $209,935 for the year ended December 31,
2020. The difference is primarily attributable to the purchase by the Company of
BTA in 2021 amounting to $786,1515 in cash used, as well as 208,964 in gain from
the sale of cryptocurrency in 2020 compared to -0- in the 2021 period.
Net cash provided by financing activities for the year ended December 31, 2021
was $987,765, compared to $117,592 for the year ended December 31, 202019. The
increase of $870,173 was primarily the result of an increase of proceeds from
common stock issuance of $825,000 in 2021.
Subsequent to December 31, 2021, we raised approximately $1,307,000 in cash
proceeds from various transactions described in Notes to the Financial
Statements- Note 8 Subsequent Events
Critical Accounting Policies and Estimates
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
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
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
Level 3 Unobservable inputs that reflect management's best estimate of what
participants would use in pricing the asset or liability at the
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.
Goodwill and Indefinite-lived intangible Assets
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
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 January 2017, the Financial
Accounting Standards Board ("FASB") issued ASU 2017-04, "Intangibles-Goodwill
and Other (Topic 350): Simplifying the Accounting for Goodwill Impairment",
which eliminated Step 2 from the goodwill impairment test. If the fair value of
the asset exceeds its carrying value, goodwill is not impaired and no further
testing is required. If the fair value of the asset is less than the carrying
value, an impairment charge is recognized for the amount by which the carrying
amount exceeds the asset's fair value; however, the loss recognized should not
exceed the total amount of goodwill allocated to that asset.
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 December 31, 2021, we determined that
there was no impairment of our goodwill or intangible assets.
The Company recognizes consulting revenue when the service is rendered, the fee
for arrangement is fixed or determinable, and collectability is reasonably
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
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
The COVID-19 pandemic and the U.S.'s response to the pandemic are having an
adverse effect on the global economy, leading to disruptions and volatility in
the global financial markets. Most U.S. states and many countries have issued
policies intended to stop or slow the further spread of the disease. There are
no comparable events that provide guidance as to the effect the COVID-19
pandemic may have, and, as a result, the ultimate effect of the pandemic is
highly uncertain and subject to change. We do not yet know the full extent of
the effects on the economy, the markets we serve, our business or our
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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