UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
| ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended OctoberJuly 31, 20202021
| ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _______________ to _______________.
Commission file number: 333-222978000-56142
|
(Exact name of registrant as specified in its charter) |
|
Delaware |
| 82-1091922 | |
(State or other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification No.) | |
|
| ||
3027 US Highway 17 Fleming Island, FL | 32003 | ||
(Address of principal executive offices) |
|
| |
|
|
(321) 802-2474
Registrant’s telephone number, including area code
(Former name and address, if changed since last report) |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”filer,” “smaller reporting company,” and “smaller reporting“emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ |
Non-accelerated filer | ☐ | Smaller reporting company | ☒ |
(Do not check if smaller reporting company) | Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of December 15, 2020,August 31, 2021, the Company had 5,880,1638,602,530 shares of common stock, $0.0001 par value outstanding.
Transitional Small Business Disclosure Format Yes ☐ No ☒
OBITX, INC.Everything Blockchain, Inc.
TABLE OF CONTENTS
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| Consolidated Balance Sheets |
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| 6 |
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| 7 |
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| 8 |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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2 |
Table of Contents |
PART I – FINANCIAL INFORMATION
Interim Condensed Consolidated Financial Statements and Notes to Interim Financial Statements
General
The accompanying unaudited condensed consolidated interim financial statements have been prepared in accordance with the instructions to Form 10-Q. Therefore, they do not include all information and footnotes necessary for a complete presentation of financial position, results of operations, cash flows, and stockholders’ equity in conformity with generally accepted accounting principles. Except as disclosed herein, there has been no material change in the information disclosed in the notes to the financial statements included in the Company’s original S-1 filing and the annual audit for the year ended January 31, 2020.2021. In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have been included and all such adjustments are of a normal recurring nature. Operating results for the three and ninesix months ended OctoberJuly 31, 2020 is2021 are not necessarily indicative of the results that can be expected for the year ending January 31, 2021.2022.
Please see Risk Factors in the Company’s Annual Report on Form 10K filed with the Securities and Exchange Commission (the “SEC”) on June 5, 2020 (the “Annual Report”) concerning Covid-19 for further information.
3 |
Table of Contents |
Everything Blockchain, Inc. | ||||||||
Consolidated Balance Sheets (Amounts in thousands, except share and per share data) | ||||||||
ASSETS | ||||||||
| ||||||||
|
| As of |
| |||||
|
| July 31, |
|
| January 31, |
| ||
|
| 2021 |
|
| 2021 |
| ||
|
| (unaudited) |
| |||||
Current Assets |
|
|
|
|
|
| ||
Cash |
| $ | 819 |
|
| $ | 0 |
|
Accounts receivable, net |
|
| 30 |
|
|
| 0 |
|
Interest receivable |
|
| 0 |
|
|
| 90 |
|
Current cryptocurrencies, net |
|
| 3,412 |
|
|
| 123 |
|
Inventory |
|
| 4 |
|
|
| 0 |
|
Prepaid expenses |
|
| 3,136 |
|
|
| 1 |
|
Total current assets |
|
| 7,401 |
|
|
| 214 |
|
Property, plant and equipment, net |
|
| 6,112 |
|
|
| 0 |
|
Cryptocurrency, net |
|
| 0 |
|
|
| 98 |
|
Goodwill |
|
| 1,319 |
|
|
| 0 |
|
Intangible assets, net |
|
| 2,205 |
|
|
| 0 |
|
Loan receivable |
|
| 0 |
|
|
| 1,400 |
|
Total assets |
| $ | 17,037 |
|
| $ | 1,712 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
Current liabilities | ||||||||
Accounts payable and accrued expenses |
| $ | 231 |
|
| $ | 6 |
|
Accounts payable related party |
|
| 421 |
|
|
| 13 |
|
Current portion of long-term debt |
|
| 35 |
|
|
| 0 |
|
Reserve for legal settlements |
|
| 154 |
|
|
| 154 |
|
Deferred revenue |
|
| 151 |
|
|
| 0 |
|
Total current liabilities |
| $ | 992 |
|
| $ | 173 |
|
Long-term liabilities |
|
|
|
|
|
| 0 |
|
Debt |
|
| 553 |
|
|
| 0 |
|
Total long-term liabilities |
| $ | 553 |
|
|
| 0 |
|
Total Liabilities |
| $ | 1,545 |
|
| $ | 173 |
|
Stockholders' equity | ||||||||
Series A Preferred stock, $0.0001 par value: 1,000,000 shares authorized; 200,000 shares issued and outstanding as of July 31, 2021; 150,000 shares issued and outstanding as of January 31, 2021 |
|
| 0 |
|
|
| 0 |
|
Series B Preferred stock, $0.0001 par value: 1,000,000 shares authorized; 400,000 shares issued and outstanding as of July 31, 2021; 650,000 shares issued and outstanding as of January 31, 2021 |
|
| 0 |
|
|
| 0 |
|
Common stock, $0.0001 par value, 200,000,000 shares authorized; 8,475,792 and 5,974,125 shares issued and outstanding, as of July 31, 2021 and January 31, 2021, respectively. |
|
| 1 |
|
|
| 1 |
|
Treasury stock |
|
| (1,599 | ) |
|
| 0 |
|
Additional paid-in capital |
|
| 67,190 |
|
|
| 54,946 |
|
Accumulated deficit |
|
| (50,101 | ) |
|
| (53,408 | ) |
Total stockholders' equity |
| $ | 15,492 |
|
| $ | 1,539 |
|
Total liabilities and stockholders' equity |
| $ | 17,037 |
|
| $ | 1,712 |
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements. |
Table of Contents |
and SUBSIDIARIES
Consolidated Balance Sheets
|
| (unaudited) |
|
| (audited) |
| ||
|
| October 31, |
|
| January 31, |
| ||
|
| 2020 |
|
| 2020 |
| ||
ASSETS | ||||||||
Current assets |
|
|
|
|
|
| ||
Cash |
| $ | 65 |
|
| $ | - |
|
Inventory |
|
| 15 |
|
|
| - |
|
Prepaid expenses |
|
| 250 |
|
|
| - |
|
Current – cryptocurrencies |
|
| 40,083 |
|
|
| - |
|
Total current assets |
|
| 40,413 |
|
|
| - |
|
Noncurrent assets |
|
|
|
|
|
|
|
|
Notes receivable from related party |
|
| 1,400,000 |
|
|
| - |
|
Interest receivable from related party |
|
| 55,232 |
|
|
| - |
|
Noncurrent cryptocurrencies |
|
| 97,802 |
|
|
| - |
|
Total noncurrent assets |
|
| 1,553,034 |
|
|
|
|
|
Total assets |
| $ | 1,593,447 |
|
| $ | - |
|
|
|
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|
|
|
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|
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities |
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses |
| $ | 10,650 |
|
| $ | 48,940 |
|
Accounts payable related party |
|
| 36,334 |
|
|
| 254,495 |
|
Due to related party |
|
| 95,909 |
|
|
| 304,072 |
|
Reserve for settlements - related party |
|
| 154,307 |
|
|
| - |
|
Total current liabilities |
| $ | 297,200 |
|
| $ | 607,507 |
|
Total liabilities |
| $ | 297,200 |
|
| $ | 607,507 |
|
Stockholders’ equity |
|
|
|
|
|
|
|
|
Series A Preferred stock, $0.0001 par value; 1,000,000 shares authorized; 150,000 and 0 shares issued and outstanding, as of October 31, 2020 and January 31, 2020, respectively. |
|
| 15 |
|
|
| - |
|
Series B Preferred stock, $0.0001 par value; 1,000,000 shares authorized; 650,000 and 0 shares issued and outstanding, as of October 31, 2020 and January 31, 2020, respectively. |
|
| 65 |
|
|
| - |
|
Common stock, $0.0001 par value, voting; 200,000,000 shares authorized; 5,880,163 and 10,460,000 shares issued and outstanding, as of October 31, 2020 and January 31, 2020, respectively. |
|
| 588 |
|
|
| 1,046 |
|
Additional paid in capital |
|
| 54,810,898 |
|
|
| 3,500,892 |
|
Accumulated deficit |
|
| (53,515,319 | ) |
|
| (4,109,445 | ) |
Total stockholders’ equity |
| $ | 1,296,247 |
|
| $ | (607,507 | ) |
Total liabilities and stockholders’ equity |
| $ | 1,593,447 |
|
| $ | - |
|
See accompanying notes to unaudited consolidated financial statements.
Everything Blockchain, Inc. | ||||||||||||||||
Consolidated Statements of Operations (Amounts in thousands, except per share data) | ||||||||||||||||
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| ||||||
|
| For the three months ended |
|
| For the six months ended |
| ||||||||||
|
| July 31, |
|
| July 31, |
| ||||||||||
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||
|
| (unaudited) |
| |||||||||||||
Revenue from services |
| $ | 259 |
|
| $ | 0 |
|
| $ | 1,385 |
|
| $ | 0 |
|
Other revenue |
|
| 5,175 |
|
|
| 0 |
|
|
| 5,312 |
|
|
| 0 |
|
Total revenue |
|
| 5,434 |
|
|
| 0 |
|
|
| 6,697 |
|
|
| 0 |
|
Cost of sales |
|
| 2,746 |
|
|
| 0 |
|
|
| 2,746 |
|
|
| 0 |
|
Gross profit |
|
| 2,688 |
|
|
| 0 |
|
|
| 3,951 |
|
|
| 0 |
|
Selling, general, and administrative |
|
| 115 |
|
|
| 1,069 |
|
|
| 827 |
|
|
| 49,281 |
|
Depreciation and amortization |
|
| 23 |
|
|
| 0 |
|
|
| 23 |
|
|
| 0 |
|
Total operating expenses |
|
| 138 |
|
|
| 1,069 |
|
|
| 850 |
|
|
| 49,281 |
|
Operating income (loss) |
|
| 2,550 |
|
|
| (1,069 | ) |
|
| 3,101 |
|
|
| (49,281 | ) |
Other income (expense) |
|
| (8 | ) |
|
| (7 | ) |
|
| 206 |
|
|
| (13 | ) |
Net income (loss) |
| $ | 2,542 |
|
| $ | (1,076 | ) |
|
| 3,307 |
|
| $ | (49,294 | ) |
|
|
|
|
|
|
|
|
|
|
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|
|
|
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Basic and diluted income (loss) per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic income (loss) per share |
| $ | 0.38 |
|
| $ | (0.18 | ) |
| $ | 0.52 |
|
| $ | (6.31 | ) |
Diluted income (loss) per share |
| $ | 0.28 |
|
| $ | (0.18 | ) |
| $ | 0.39 |
|
| $ | (6.31 | ) |
Weighted average shares outstanding - basic |
|
| 6,649,188 |
|
|
| 5,881,902 |
|
|
| 6,325,407 |
|
|
| 7,806,248 |
|
Weighted average shares outstanding - diluted |
|
| 8,948,026 |
|
|
| 5,881,902 |
|
|
| 8,441,939 |
|
|
| 7,806,248 |
|
| ||||||||||||||||
See accompanying notes to consolidated financial statements. |
Table of Contents |
and SUBSIDIARIES
Consolidated Statements of Operations
(unaudited)
|
| For the three months ended |
|
| For the nine months ended |
| ||||||||||
|
| October 31, |
|
| October 31, |
| ||||||||||
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
| Restated |
|
|
|
|
| Restated |
| ||||
Revenue from services |
| $ | 61,918 |
|
| $ | - |
|
| $ | 61,918 |
|
| $ | - |
|
Total cost of sales |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Gross income |
| $ | 61,918 |
|
| $ | - |
|
| $ | 61,918 |
|
| $ | - |
|
Selling, general, and administrative |
|
| 520 |
|
|
| 460 |
|
|
| 49,201,218 |
|
|
| 22,949 |
|
Professional fees |
|
| 25,135 |
|
|
| - |
|
|
| 64,723 |
|
|
| 5,257 |
|
Rent |
|
| 1,176 |
|
|
| 3,007 |
|
|
| 1,960 |
|
|
| 3,421 |
|
Consultant fees |
|
| 647,339 |
|
|
| 42,000 |
|
|
| 681,339 |
|
|
| 126,000 |
|
Total operating expenses |
|
| 674,170 |
|
|
| 45,467 |
|
|
| 49,949,240 |
|
|
| 157,627 |
|
Net loss from operations |
|
| (612,252 | ) |
|
| (45,467 | ) |
|
| (49,887,322 | ) |
|
| (157,627 | ) |
Other income (expense) |
|
| 472,683 |
|
|
| - |
|
|
| 481,448 |
|
|
| - |
|
Gain on use of cryptocurrency assets |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Net (loss) before discontinued operations |
| $ | (139,569 | ) |
| $ | (45,467 | ) |
| $ | (49,405,874 | ) |
| $ | (157,627 | ) |
Income(expense) from discontinued operations |
| $ | - |
|
| $ | 4,698 |
|
| $ | - |
|
| $ | 13,195 |
|
Net (loss) |
| $ | (139,569 | ) |
| $ | (40,769 | ) |
| $ | (49,405,874 | ) |
| $ | (144,432 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted (loss) per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) per share from continuing operations |
| $ | (0.10 | ) |
| $ | (0.00 | ) |
| $ | (6.97 | ) |
| $ | (0.02 | ) |
Income (Loss) per share - discontinued |
| $ | (0.00 | ) |
| $ | (0.00 | ) |
| $ | (0.00 | ) |
| $ | (0.02 | ) |
Weighted average shares outstanding - basic |
|
| 5,872,554 |
|
| $ | 10,460,000 |
|
|
| 7,156,979 |
|
| $ | 10,460,000 |
|
See accompanying notes to unaudited consolidated financial statements.
Everything Blockchain, INC | ||||||||||||||||||||||||||||||||
Consolidated Statements of Stockholders’ Equity (Amounts in thousands except than share amount) | ||||||||||||||||||||||||||||||||
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| Additional |
|
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Accumulated |
|
| Total Stockholders' |
| ||||||||
|
| Preferred Stock |
|
| Common Stock |
|
| Treasury |
|
| Paid-in |
|
| Income |
|
| Equity |
| ||||||||||||||
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Stock |
|
| Capital |
|
| (Deficit) |
|
| (Deficit) |
| ||||||||
|
| (unaudited) |
| |||||||||||||||||||||||||||||
Balance – January 31, 2021 |
|
| 800,000 |
|
| $ | 0 |
|
|
| 5,974,125 |
|
| $ | 1 |
|
| $ | 0 |
|
| $ | 54,946 |
|
| $ | (53,408 | ) |
| $ | 1,539 |
|
Shares issued |
|
| - |
|
|
| 0 |
|
|
| 261,667 |
|
|
| 0 |
|
|
| 0 |
|
|
| 392 |
|
|
| 0 |
|
|
| 392 |
|
Shares issued for services |
|
| - |
|
|
| 0 |
|
|
| 390,000 |
|
|
| 0 |
|
|
| 0 |
|
|
| 1,752 |
|
|
| 0 |
|
|
| 1,752 |
|
Shares issued for acquisitions |
|
| - |
|
|
| 0 |
|
|
| 1,750,000 |
|
|
| 0 |
|
|
| 0 |
|
|
| 8,000 |
|
|
| 0 |
|
|
| 8,000 |
|
Warrant exercise |
|
| - |
|
|
| 0 |
|
|
| 100,000 |
|
|
| 0 |
|
|
| 0 |
|
|
| 100 |
|
|
| 0 |
|
|
| 100 |
|
Issuance of Series A Preferred for services |
|
| 50,000 |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| 0 |
|
|
| 2,000 |
|
|
| 0 |
|
|
| 2,000 |
|
Conversion of note receivable |
|
| (250,000 | ) |
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| (1,598 | ) |
|
| 0 |
|
|
| 0 |
|
|
| (1,598 | ) |
Net income |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 3,307 |
|
|
| 3,307 |
|
Balance – July 31, 2021 |
|
| 600,000 |
|
| $ | - |
|
|
| 8,475,792 |
|
| $ | 1 |
|
| $ | (1,598 | ) |
| $ | 67,190 |
|
| $ | (50,101 | ) |
| $ | 15,492 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance – January 31, 2020 |
|
| - |
|
| $ | 0 |
|
|
| 10,460 |
|
| $ | 1 |
|
| $ | 0 |
|
| $ | 3,501 |
|
| $ | (4,109 | ) |
| $ | (607 | ) |
Conversion of common to series B preferred |
|
| 500 |
|
|
| 0 |
|
|
| (5,000 | ) |
|
| (1 | ) |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| (1 | ) |
Conversion of accounts payable |
|
| - |
|
|
| 0 |
|
|
| 246 |
|
|
| 0 |
|
|
| 0 |
|
|
| 1,662 |
|
|
| 0 |
|
|
| 1,662 |
|
Issuance of Series A preferred |
|
| 150 |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| 0 |
|
|
| 40,138 |
|
|
| 0 |
|
|
| 40,138 |
|
Issuance of series B preferred |
|
| 150 |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| 0 |
|
|
| 6,548 |
|
|
| 0 |
|
|
| 6,548 |
|
Imputed Interest |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| 0 |
|
|
| 8 |
|
|
| 0 |
|
|
| 8 |
|
Interest receivable – related party |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| 0 |
|
|
| 28 |
|
|
| 0 |
|
|
| 28 |
|
Shares issued for services |
|
| - |
|
|
| 0 |
|
|
| 154 |
|
|
| 0 |
|
|
| 0 |
|
|
| 1,038 |
|
|
| 0 |
|
|
| 1,038 |
|
Sale of assets to related party |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| 0 |
|
|
| 1,900 |
|
|
| 0 |
|
|
| 1,900 |
|
Net loss |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| 0 |
|
|
|
|
|
|
| (49,294 | ) |
|
| (49,294 | ) |
Balance – July 31, 2020 |
|
| 800 |
|
| $ | 0 |
|
|
| 5,860 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 54,824 |
|
| $ | (53,403 | ) |
| $ | 1,421 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements. |
Table of Contents |
and SUBSIDIARIES
Consolidated Statements of Changes in Stockholders’ Equity for Nine Months Ended October 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total |
| |||||||
|
| Preferred Stock |
|
| Common Stock |
|
| Additional Paid-in |
|
| Accumulated Income |
|
| Stockholders’ Equity |
| |||||||||||||
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Capital |
|
| (Deficit) |
|
| (Deficit) |
| |||||||
Balance – January 31, 2020 |
|
| - |
|
| $ | - |
|
|
| 10,460,000 |
|
| $ | 1,046 |
|
| $ | 3,500,892 |
|
| $ | (4,109,445 | ) |
| $ | (607,507 | ) |
Conversion of common to series B preferred |
|
| 500,000 |
|
|
| 50 |
|
|
| (5,000,000 | ) |
|
| (500 | ) |
|
| 450 |
|
|
|
|
|
|
| - |
|
Conversion of accounts payable |
|
| - |
|
|
| - |
|
|
| 246,317 |
|
|
| 25 |
|
|
| 1,662,640 |
|
|
|
|
|
|
| 1,662,665 |
|
Issuance of Series A preferred |
|
| 150,000 |
|
|
| 15 |
|
|
| - |
|
|
| - |
|
|
| 40,137,773 |
|
|
|
|
|
|
| 40,137,788 |
|
Issuance of series B preferred |
|
| 150,000 |
|
|
| 15 |
|
|
| - |
|
|
| - |
|
|
| 6,548,173 |
|
|
|
|
|
|
| 6,548,188 |
|
Imputed Interest |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (52,705 | ) |
|
| - |
|
|
| (52,705 | ) |
Interest receivable - related party |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 55,232 |
|
|
|
|
|
|
| 55,232 |
|
Shares issued for service |
|
|
|
|
|
|
|
|
|
| 153,846 |
|
|
| 15 |
|
|
| 1,038,445 |
|
|
|
|
|
|
| 1,038,460 |
|
Sale of assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1,900,000 |
|
|
|
|
|
|
| 1,900,000 |
|
Warrant exercise |
|
|
|
|
|
|
|
|
|
| 20,000 |
|
|
| 2 |
|
|
| 19,998 |
|
|
|
|
|
|
| 20,000 |
|
Net loss |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
|
|
|
|
| (49,405,874 | ) |
|
| (49,405,874 | ) |
Balance – October 31, 2020 |
|
| 800,000 |
|
| $ | 80 |
|
|
| 5,880,163 |
|
| $ | 588 |
|
| $ | 54,810,898 |
|
| $ | (53,515,319 | ) |
| $ | 1,296,247 |
|
OBITX, INC
and SUBSIDIARIES
Consolidated Statements of Changes in Stockholders’ Equity for Nine Months Ended October 31, 2019
(Restated)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total |
| |||||||
|
| Preferred Stock |
|
| Common Stock |
|
| Additional Paid-in |
|
| Accumulated Income |
|
| Stockholders’ Equity |
| |||||||||||||
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Capital |
|
| (Deficit) |
|
| (Deficit) |
| |||||||
Balance – January 31, 2019 |
|
| 100,000 |
|
|
| 10 |
|
|
| 5,460,000 |
|
|
| 546 |
|
|
| 3,486,104 |
|
|
| (3,921,253 | ) |
|
| (434,593 | ) |
Conversion of preferred to common |
|
| (100,000 | ) |
|
| (10 | ) |
|
| 5,000,000 |
|
|
| 500 |
|
|
| (490 | ) |
|
| - |
|
|
| - |
|
Imputed Interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 11,427 |
|
|
|
|
|
|
| 11,427 |
|
Net loss |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (144,432 | ) |
|
| (144,432 | ) |
Balance – October 31, 2019 |
|
| - |
|
| $ | - |
|
|
| 10,460,000 |
|
| $ | 1,046 |
|
| $ | 3,497,041 |
|
| $ | (4,065,685 | ) |
| $ | (567,598 | ) |
See accompanying notes to unaudited consolidated financial statements.
Everything Blockchain, Inc. | ||||||||
Consolidated Statements of Cash Flows (Amounts in thousands) | ||||||||
|
|
|
|
| ||||
|
| For the Six Months Ended July 31, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
|
| (unaudited) |
| |||||
Cash flows from operating activities: |
|
|
|
|
|
| ||
Net (Loss) |
| $ | 3,307 |
|
| $ | (49,294 | ) |
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |
|
|
|
|
|
|
|
|
Stock based compensation |
|
| 0 |
|
|
| 49,191 |
|
Reverse of bad debt |
|
| (233 | ) |
|
| 0 |
|
Realized loss on investment in cryptocurrency, net |
|
| 85 |
|
|
| 0 |
|
Loss on cryptocurrency impairment |
|
| 16 |
|
|
| 0 |
|
Fair value adjustment to cryptocurrency |
|
| (2,435 | ) |
|
| 0 |
|
Amortization and depreciation |
|
| 23 |
|
|
| 0 |
|
Imputed interest |
|
| 0 |
|
|
| 8 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable, net |
|
| 4 |
|
|
| 0 |
|
Interest receivable |
|
| (32 | ) |
|
| 0 |
|
Inventory |
|
| (4 | ) |
|
| 0 |
|
Prepaid expenses |
|
| (26 | ) |
|
| 0 |
|
Intangible assets |
|
| (2 | ) |
|
| 0 |
|
Accounts payable to related party |
|
| 408 |
|
|
| 43 |
|
Accrued interest |
|
| 0 |
|
|
| 3 |
|
Accounts payable, accrued expenses and taxes payable |
|
| (241 | ) |
|
| 18 |
|
Deferred revenue |
|
| (93 | ) |
|
| 0 |
|
Net cash provided by (used in) operating activities |
|
| 777 |
|
|
| (31 | ) |
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
Acquisition of cryptocurrencies, net |
|
| (268 | ) |
|
| 0 |
|
Proceeds from sale of cryptocurrencies |
|
| 74 |
|
|
| 0 |
|
Acquisitions, net of cash received |
|
| (23 | ) |
|
| 0 |
|
Net cash used in investing activities |
|
| (217 | ) |
|
| 0 |
|
|
|
|
|
|
|
|
|
|
Cash Flows From Financing Activities: |
|
|
|
|
|
|
|
|
Borrowing from related party |
|
| 0 |
|
|
| 31 |
|
Payment to related party |
|
| (500 | ) |
|
| 0 |
|
Proceeds from debt |
|
| 266 |
|
|
| 0 |
|
Proceeds from issuance of stock, net |
|
| 493 |
|
|
| 0 |
|
Net cash provided by financing activities |
|
| 259 |
|
|
| 31 |
|
Net Change in Cash |
|
| 819 |
|
|
| 0 |
|
Cash at Beginning of Year |
|
| 0 |
|
|
| 0 |
|
Cash at End of Year |
| $ | 819 |
|
| $ | 0 |
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosure of Cash Flows Information: |
|
|
|
|
|
|
|
|
Cash paid for interest |
| $ | 3 |
|
| $ | 0 |
|
Cash paid for income taxes |
| $ | 0 |
|
| $ | 0 |
|
|
|
|
|
|
|
|
|
|
Non-cash Investing and Financing Activities: |
|
|
|
|
|
|
|
|
Loan of cryptocurrency |
| $ | 500 |
|
| $ | 0 |
|
Cryptocurrency received for payment under contract |
|
| 240 |
|
|
| 0 |
|
Fair value of assets in acquisitions |
|
| 9,433 |
|
|
| 0 |
|
Fair value of liabilities assumed in acquisitions |
|
| 791 |
|
|
| 0 |
|
Accounts receivable settlement for Render Payment |
|
| 233 |
|
|
| 0 |
|
Conversion of note receivable in exchange for common stock and preferred stock |
|
| 1,598 |
|
|
| 0 |
|
Issuance of stock for services |
|
| 1,110 |
|
|
| 0 |
|
Issuance of Series A Preferred for services |
|
| 2,000 |
|
|
| 0 |
|
Conversion of accounts payable to related party to common stock |
|
|
|
|
|
| 195 |
|
Sale of software to related party |
|
|
|
|
|
| 1,900 |
|
Interest receivable – related party |
|
|
|
|
|
| 28 |
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements. |
Table of Contents |
OBITX,Everything Blockchain, Inc.
and SUBSIDIARIES
Consolidated Statements of Cash Flows
For the nine months ended October 31,
|
| 2020 |
|
| 2019 |
| ||
Cash flows from operating activities: |
|
|
| (Restated) |
| |||
Net (Loss) |
| $ | (49,405,874 | ) |
| $ | (144,432 | ) |
Adjustments to reconcile net loss to net |
|
|
|
|
|
|
|
|
Cash provided by (used in) operating activities: |
|
|
|
|
|
|
|
|
Stock based compensation |
|
| 49,204,508 |
|
|
| - |
|
Realized gain on investment in cryptocurrency, net |
|
| 143,564 |
|
|
|
|
|
Imputed interest |
|
| 10,886 |
|
|
| 11,427 |
|
Decrease (Increase) in: |
|
|
|
|
|
|
|
|
Accounts payable/receivable to related party, net |
|
| (22,845 | ) |
|
| - |
|
Accrued interest |
|
| 4,449 |
|
|
| (4,169 | ) |
Prepaid expenses and other current assets |
|
| (250 | ) |
|
| 149 |
|
Accounts payable |
|
| (18,290 | ) |
|
| 128,875 |
|
Interest receivable from related party, net |
|
| (55,232 | ) |
|
| - |
|
Reserve for settlement accounts |
|
| 154,307 |
|
|
| - |
|
Net cash used in operating activities |
| $ | 15,223 |
|
| $ | (8,150 | ) |
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Borrowing from (payment to) related party |
|
| (5,242 | ) |
|
| 8,150 |
|
Loss from issuance of stock, net |
|
| (9,916 | ) |
|
| - |
|
Net cash provided by financing activities |
| $ | (15,158 | ) |
| $ | 8,150 |
|
Net change in cash |
|
| 65 |
|
|
| - |
|
Cash at beginning of year |
|
| - |
|
|
| - |
|
Cash as of October 31, |
| $ | 65 |
|
| $ | - |
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosure of Cash Flows Information: |
|
|
|
|
|
|
|
|
Cash paid for interest |
| $ | 13 |
|
| $ | - |
|
Cash paid for income taxes |
| $ | - |
|
| $ | - |
|
|
|
|
|
|
|
|
|
|
Non-cash Investing and Financing Activities: |
|
|
|
|
|
|
|
|
Conversion of accounts payable to related party to common stock |
| $ | 195,316 |
|
| $ | - |
|
Conversion of preferred stock to common stock |
| $ | - |
|
| $ | 500 |
|
Issuance of preferred stock for inventory |
| $ | 15 |
|
| $ | - |
|
Conversion of AP with assets held for sale |
| $ | - |
|
| $ | 408,166 |
|
Sale of software to related party |
| $ | 1,900,000 |
|
| $ | - |
|
Repayment to related party via cryptocurrency |
| $ | 218,256 |
|
| $ | - |
|
See accompanying notes to unaudited consolidated financial statements.
Notes to Consolidated Financial Statements
(Unaudited)
Note 1. Organization and Basis of Presentation
The accompanying unaudited consolidated financial statements of OBITX,Everything Blockchain, Inc., (the and its consolidated subsidiaries (collectively, the “Company”, “we”, “our”), have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the rules of the Securities and Exchange Commission (“SEC”).
Basis of Presentation
The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries and have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”).SEC. All significant intercompany accounts and transactions have been eliminated.
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Haute Jobs, LLC, (“HAUTE”), Campaign Pigeon, LLC, (“CAMP”), and altCUBE, Inc., (“altCUBE”). altCUBE was closed on December 31, 2018. HAUTE and CAMP were closed in fiscal year ending January 31, 2020.
Description of Business
The Company was incorporated in the State of Delaware on March 30, 2017 originally under the name GigeTech, Inc. On October 31, 2017 the Company changed its name to OBITX, Inc., and updated its Articles of Incorporation through unanimous consent of its shareholder, MCIG. The Company is headquartered in Fleming Island, Florida.
The Company earnedCompany’s early model was to earn revenue through social media advertising, fees, and services. Under itsthis plan, the Company developed its white label software solution for MCIGBOTS under the 420 Cloud brandbrand. After multiple attempts to secure acceptance in support of the cannabis industry. Themarket, the Company discontinued this operation during the fiscal year ended January 31, 2020.
In April 2020 the Company divested and sold its white label software solution and changed direction of its business. The company is expanding its servicesCompany has become a developer, engineer, and solutionsconsultant in software development and internet advertising and promotion into the industry of blockchain technologies.
On December 10, 2018 OBITX, Inc became a publicly reporting company. The Company began trading under the stock symbol “OBTX” on March 24, 2020.
Subsidiaries of the Company
On April 26, 2021, in a settlement agreement with Render Payment, LLC (“Render”) owners, the Company became the sole owner of Render, in exchange for an outstanding accounts receivable the company impaired in 2019. The company had three subsidiariessettlement was considered a related party transaction and conducted as an arm’s length transaction approved by board members not associated with Render. As part of the transaction the Company recognized other income of $233,000 as fair market value of the assets obtained under the settlement. The Company received two vehicles with FMV of $49,000 each and the Render Payment Processing Software with an FMV of $135,000.
On June 30, 2021, the Company acquired all of the equity interests of Mercury, Inc. (“Mercury”), pursuant to a Purchase Agreement dated April 24, 2021. Upon the closing of the transaction (the “Mercury Acquisition”), Mercury became a wholly owned subsidiary of the Company. The Company has utilized Mercury, which have all been discontinued. We incorporated Haute Jobs, LLC onis located in Idaho, as its hosting solution since May 10, 20182020. The Company with Mercury will launch its mining operations in the statewestern United States. The Company will commence mining for Bitcoins, Ethereum, and other alternative cryptocurrencies. For information on the Mercury Acquisition refer to “Note 4. Mercury Acquisition”.
On June 21, 2021, the Company acquired all of Wyoming. We incorporated Campaign Pigeon,the equity interests of 832 Energy Technology Consultants, LLC on May 10, 2018(“832”), pursuant to a Purchase Agreement. Upon the closing of the transaction (the “832 Acquisition”), 832 became a wholly owned subsidiary of the Company. 832, which is located in Texas, has developed many innovations in the stateareas of Wyoming. We incorporated altCUBE, Inc.,distributed computing, artificial intelligence and blockchain. 832 was granted a full patent for its innovations in blockchain. For information on June 4, 2018 in the state of Wyoming. The subsidiaries were consolidated for832 Acquisition refer to “Note 5. 832 Acquisition”.
On July 31, 2021, the three and nine months ended October 31, 2019. NoneCompany acquired all of the subsidiaries conducted businessequity interests of Vengar Technologies LLC (“Vengar”), pursuant to a Purchase Agreement. Upon the closing of the transaction (the “Vengar Acquisition”), Vengar became a wholly owned subsidiary of the Company. Vengar, which is located in Florida, has developed a zero trust protection software that the three months and nine months ended October 31, 2020.Company plans to integrate into its blockchain solutions. For information on the Vengar Acquisition refer to “Note 6. Vengar Acquisition”.
Note 2. Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of the Company, the wholly owned subsidiaries of HAUTE, CAMP, and altCUBE.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and disclosures of contingent assets and liabilities atas of the date of the consolidated financial statements and reported amounts of revenues and expenses during the reporting period. Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. The most significant estimates include:and judgments relate to: revenue recognition; sales returns and other allowances; allowance for doubtful accounts; valuation of inventory; valuation and recoverability of long-lived assets; property and equipment; contingencies; and income taxes.
On a regular basis, management reviews its estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such reviews, and if deemed appropriate, those estimates are adjusted accordingly. Actual results could differ from those estimates.
8 |
Revenue Recognition Policies
We intend to earn revenue from the subscription, non-software related hosted services, term-based and perpetual licensing of software products, associated software maintenance and support plans, consulting services, training, and technical support.
On February 1, 2018, we adopted Topic 606, using the modified retrospective transition method applied to those contracts which were not completed as of February 1, 2018. Results for reporting periods beginning after February 1, 2018 are presented under Topic 606, while prior period amounts have not been adjusted and continue to be reported in accordance with our historic accounting. The impact of adopting the new revenue standard was not material to our financial statements and there was no adjustment to beginning retained earnings on February 1, 2018.
Under Topic 606, revenue is recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.
We determine revenue recognition through the following steps:
| |
| |
| |
| |
|
Concentration of Credit Risk and Significant Customers
Financial instruments which potentially subject the Company to a concentration of credit risk consist principally of temporary cash investments and accounts receivable. The Company places its temporary cash investments with financial institutions insured by the FDIC.
Concentrations of credit risk with respect to trade receivables and commodities are limited due to the Company’s diverse group of customers to whom the Company provides services to.customers. The Company establishes an allowance for doubtful accounts when events and circumstances regarding the collectability of its receivables or the selling of its commodities warrant based upon factors such as the credit risk of specific customers, historical trends, other information and past bad debt history. The outstanding balances are stated net of an allowance for doubtful accounts.
Revenues from one customer represent $1,000,000 and $0 of the Company's revenue for the six-month periods ended July 31, 2021 and 2020, respectively.
Our cash balances are maintained in accounts held by major banks and financial institutions located in the United States. The Company may occasionally maintain amounts on deposit with a financial institution that are in excess of the federally insured limit of $250,000. The risk is managed by maintaining all deposits in high-quality financial institutions. The Company had $0$0.6 million in excess of federally insured limits on OctoberJuly 31, 2020, and January 31, 2020.
For the nine months ended October 31, 2020 there was $0 in accounts receivable and $0 for the year ended January 31, 2020.2021.
Cash and Cash Equivalents
The Company includes in cash and cash equivalents all short-term, highly liquid investments that mature within three months of the date of purchase. Cash equivalents consist principally of investments in interest-bearing demand deposit accounts and liquidity funds with financial institutions and are stated at cost, which approximates fair value. For cash management purposes, the companyCompany concentrates its cash holdings in an account at Bank of America. The Company had $65 and $0 cash equivalents as of October 31, 2020, or January 31, 2020.Radius Bank.
Basic and Diluted Net Earnings (Loss) Per Share
The Company follows ASC Topic 260 – Earnings Per Share, and FASB 2015-06, Earnings Per Share to account for earnings per share. Basic earnings per share (“EPS”) calculations are determined by dividing net lossincome (loss) by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share calculations are determined by dividing net income (loss) by the weighted average number of common shares outstanding plus the dilutive effect, calculated using (i) the “treasury stock” method for warrants and dilutive common share equivalents outstanding. During periods when common(ii) the “if converted” method for the preferred stock equivalents, if any, are anti-dilutive they aretheir inclusion would not considered in the computation.
Commitments and Contingencies
The Company reports and accounts for its commitments and contingencies in accordance with ASC 440 – Commitments and ASC 450 – Contingencies. We recognize a loss on a contingency when it is probable a loss will incur and that the amount of the loss can be reasonably estimated. The Company recognized $0 as a loss on contingencies in the three and nine month ending October 31, 2020 and October 31, 2019.
have been anti-dilutive.
Note 3. Going Concern
The Company’sCompany's consolidated financial statements are prepared using generally accepted accounting principles,in accordance with GAAP, which contemplatecontemplates the realization of assets and liquidation of liabilities in the normal course of business. Because the business is new and has a limited history, no certainty of continuation can be stated. The accompanying financial statements for the three and ninesix months ended OctoberJuly 31, 2021 and 2020 and the year ended January 31, 2020, hashave been prepared to assume that we will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.
The Company has negative cash flow and there are no assurances the Company will generate a profit or obtain positive cash flow. The Company has sustained its solvency through the support of its related parties, which raise substantial doubt about its ability to continue as a going concern.
Management is taking steps to raise additional funds to address its operating and financial cash requirements to continue operations in the next twelve months. Management has devoted a significant amount of time to the raising of capital from additional debt and equity financing. However, the Company’s ability to continue as a going concern is dependent upon raising additional funds through debt and equity financing and generating revenue. There are no assurances the Company will receive the necessary funding or generate the revenue necessary to fund operations. The financial statements contain no adjustments for the outcome of this uncertainty.
Note 4. Mercury Acquisition
On June 30, 2021, the Company acquired all the equity interests of Mercury. This acquisition is consistent with the Company’s strategy of expanding its cryptocurrency business. The purchase price consisted of 450,000 shares of common stock valued at $1.3 million and $0.1 million of cash.
This business combination has been accounted for using the acquisition method of accounting, which requires, among other things, that assets acquired and liabilities assumed be recognized at their fair market values as of the acquisition date.
The purchase price recognized in our financial statements consisted of the following (amounts in thousands):
Cash |
| $ | 65 |
|
Common stock |
|
| 1,350 |
|
Total purchase price |
| $ | 1,415 |
|
9 |
Table of Contents |
The Company’s purchase price allocation is as follows (amounts in thousands):
Cash |
| $ | 74 |
|
Accounts receivable |
|
| 33 |
|
Property, plant & equipment |
|
| 740 |
|
Goodwill |
|
| 1,319 |
|
Accounts payable and accrued expenses |
|
| (426 | ) |
Deferred revenue |
|
| (3 | ) |
Notes payable |
|
| (322 | ) |
Total purchase price |
| $ | 1,415 |
|
The goodwill recorded reflects the value to the Company of Mercury’s mining operations.
The operations of Mercury are included in the consolidated statement of operations as of July 1, 2021. During the three and six months ended July 31, 2021, the Company recorded revenue of $0.1 million and net loss of $0 related to Mercury.
Note 5. 832 Acquisition
On June 21, 2021, the Company acquired all the equity interests of 832. This acquisition is consistent with the Company’s strategy of expanding its blockchain business. The purchase price consisted of 300,000 shares of common stock valued at $1.5 million.
This business combination has been accounted for using the acquisition method of accounting, which requires, among other things, that assets acquired and liabilities assumed be recognized at their fair market values as of the acquisition date.
The purchase price recognized in our financial statements consisted of the following (amounts in thousands):
Common stock |
| $ | 1,542 |
|
Total purchase price |
| $ | 1,542 |
|
The Company’s preliminary purchase price allocation is as follows (amounts in thousands):
Cash |
| $ | 20 |
|
Intangible assets |
|
| 1,542 |
|
Accounts payable and accrued expenses |
|
| (20 | ) |
Total preliminary purchase price |
| $ | 1,542 |
|
Intangible assets consist of blockchain source code.
The final purchase price and the allocation thereof will not be known until the valuation of intangible assets is completed.
The operations of 832 are included in the consolidated statement of operations as of June 21, 2021. During the three and six months ended July 31, 2021, the Company recorded revenue of $0.1 million and net income of $0 related to 832.
Note 6. Vengar Acquisition
On July 31, 2021, the Company acquired all the equity interests of Vengar. This acquisition is consistent with the Company’s strategy of expanding its blockchain business. The purchase price consisted of 1,000,000 shares of common stock valued at $5.7 million and $0.1 million of cash.
This business combination has been accounted for using the acquisition method of accounting, which requires, among other things, that assets acquired and liabilities assumed be recognized at their fair market values as of the acquisition date.
The purchase price recognized in our financial statements consisted of the following (amounts in thousands):
Cash |
| $ | 50 |
|
Common stock |
|
| 5,750 |
|
Total purchase price |
| $ | 5,800 |
|
10 |
Table of Contents |
The Company’s preliminary purchase price allocation is as follows (amounts in thousands):
Cash |
| $ | 27 |
|
Property, plant & equipment |
|
| 5,285 |
|
Intangible assets |
|
| 527 |
|
Accounts payable and accrued expenses |
|
| (39 | ) |
Total preliminary purchase price |
| $ | 5,800 |
|
Intangible assets consist of patents.
The final purchase price and the allocation thereof will not be known until the valuation of intangible assets is completed.
The operations of Vengar will not be included in the consolidated statement of operations until August 1, 2021.
Note 7. Revenue
Under Topic 606, revenue is recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.
We determine revenue recognition through the following steps:
· | Identification of the contract, or contracts, with a customer, | |
· | Identification of the performance obligations in the contract, | |
· | Determination of the transaction price, | |
· | Allocation of the transaction price to the performance obligations in the contract; and, | |
· | Recognition of revenue when, or as, we satisfy a performance obligation. |
There was no revenue for the three and six months ended July 31, 2020. The following table presents revenue of the Company disaggregated by revenue source (in thousands):
Revenue | ||||||||
|
|
|
| |||||
Net revenue |
| For the Three Months Ended July 31, 2021 |
|
| For the Six Months Ended July 31, 2021 |
| ||
Transactional revenue |
|
|
|
|
|
| ||
Consulting and services revenue |
| $ | 215 |
|
| $ | 1,255 |
|
Total transaction revenue |
|
| 215 |
|
|
| 1,255 |
|
Subscription and services revenue |
|
|
|
|
|
|
|
|
Staking revenue |
|
| 44 |
|
|
| 130 |
|
Total subscription and services revenue |
|
| 44 |
|
|
| 130 |
|
Total net revenue |
|
| 259 |
|
|
| 1,385 |
|
Other revenue |
|
|
|
|
|
|
|
|
Fair value adjustment to cryptocurrency |
|
| 2,247 |
|
|
| 2,358 |
|
Crypto asset sales revenue |
|
| 2,907 |
|
|
| 2,907 |
|
Interest income |
|
| 21 |
|
|
| 47 |
|
Total other revenue |
|
| 5,175 |
|
|
| 5,312 |
|
Total revenue |
| $ | 5,434 |
|
| $ | 6,697 |
|
Transaction revenue
The Company charges a fee for its services at the transactional level. Currently the Company is engaged in developing, engineering, and designing blockchain projects, to include platforms and cryptocurrencies for customers. We typically treat all revenue generated from third parties for services as transaction revenue.
11 |
Table of Contents |
Subscription and service revenue
Subscription and service revenue primarily consist of staking revenue. The Company participates in networks with proof-of-stake consensus algorithms, through creating or validating blocks on the network. In exchange for participating in the consensus mechanism of these networks, the Company earns rewards in the form of the native token of the network. Each block creation or validation is a performance obligation. Revenue is recognized at the point when the block creation or validation is complete, and the rewards are available for transfer. Revenue is measured based on the number of tokens received and the fair value of the token at the date of recognition.
Other revenues
The Company includes interest income as a part of revenue when generated from non-cash equivalents as other revenue within net revenue. Interest earned on cash and cash equivalents is included in corporate interest income, within other income.
Other revenue also includes the sale of crypto assets. The Company records the total value of the sale in other revenue and the cost of the crypto assets in cost of sales within the consolidated statements of operations.
86% of the revenue generated by the Company has come from customer in the European theatre.
Note 8. Notes
On March 17, 2021 the Company entered into a loan agreement for $500,000 with Epic Industry Corp (“Epic”), a wholly owned company of Michael Hawkins, the Company’s CFO. The loan was financed with $500,000 of GUSD cryptocurrency tokens, a stable coin. The interest rate is 3% per annum. The Company paid off the loan during the quarter ended July 31, 2021.
Note 9. Related Party Transactions
The Company entered a Line of Credit with BOTS, Inc., (formerly known as MCIG, Inc.), for up to $500,000 in funding on November 1, 2016. The Line of Credit terminated on April 30, 2019. It was given at a 0% interest rate and is payable upon termination date with the option to convert the agreement into equity at a 15% discount to the then current market rate. The Line of Credit was reinstated and increased to $1,000,000 on January 1, 2018 and expired January 1, 2020. On August 30, 2020July 6, 2021, the Company entered into a settlement agreement with BOTS, and paidInc. Under the debtsettlement agreement, BOTS agreed to return 250,000 shares of Series B Preferred stock to the treasury of the Company, in fullexchange for the assignment of the $1.4 million promissory note owed by First Bitcoin Capital Corp to the Company, along with 27,000,000 BIT tokens. Total payment ofall interest owed to date on the promissory note. In addition, the Company transferred 20,726,120 BIT tokens equated to $223,479 (seeBOTS. This was a related party transaction and was conducted at arm’s length. (See Note 10 - Cryptocurrency Assets). As of October 31, 2020, and January 31, 2020, the amount outstanding on the Line of Credit owed to BOTS was $0 and $218,257, respectively. The imputed interest of this line of credit for the three and nine months (as adjusted for payoff) ended October 31, 2020 was $2,546 and $10,185, respectively.– Stockholder’s Equity)
On June 14, 2018During the Company entered a Line of Credit with APO Holdings, LLC for up to $100,000 at any one time. The Line of Credit may be cancelled at any time by either party providing 30 days written notice of cancellation. It was given at a 0.6% monthly interest rate (7.2% annualized interest rate) and may be paid at any time with no definitive payoff date. As of Octoberquarter ended July 31, 2020, and January 31, 2020 the outstanding balance owed on the line of credit was $95,909 and $85,815, respectively. The accrued interest for the nine months ended October 31, 2020 and the year ended January 31, 2020 was $12,865 and $8,412 respectively. The interest expense for the three months and nine months ended October 31, 2020 was $1,495 and $4,451, respectively.
On April 17, 20202021, the Company issued 50,000 shares of Series A Preferred Stock to Epic Industry Corp and 100,000 shares of Series A Preferred Stock to Overwatch Partners, Inc for par value ($0.0001) for a total receipt of $15 paid by Epic Industry Corp. The Agreement was originally between the Company and Epic Industry Corp. The 100,000 shares of Series A Preferred was issued to Overwatch Partners at the discretion of Michael Hawkins, the sole owner of Epic Industry Corp. The Company’s CEO is 50% owner of Overwatch Partners. The issuance represents 33% of the Company’s stock on a fully diluted basis and 68% of voting control of the Company.Epic. (See Note 510 – Stockholder’s Equity – Preferred Stock). The Company valued the stock under ASC 820 utilizing the Option Pricing Method to value conversion rights, and the Market Approach to value the voting control. The issuance of stock’s recorded value was $40,137,788.
On April 17, 2020 the Company issued 150,000 shares of Series B Preferred Stock to Paul Rosenberg in exchange for 60 cryptocurrency ATM machines, which the Company believes has no retail or book value. The issuance represents 7% of the Company’s stock on a fully diluted basis. (See Note 5 – Stockholder’s Equity – Preferred Stock). The Company valued the stock under ASC 820 utilizing the Option Pricing Method to value conversion rights, and the Market Approach to value the voting control. The issuance of stock’s recorded value was $6,548,188.Equity)
During the ninethree months ending OctoberApril 30, 2021 and year ended January 31, 20202021 Overwatch Partners paid multiple different expenses on behalf of the Company, which the Company treats as an accountsaccount payable to related party. The total amount owed by the Company to Overwatch Partners as of OctoberJuly 31, 20202021 was $36,334.$11,717. The imputed interest of this outstanding balanceamount owed for the threeyear ended January 31, 2021 was $12,862.
On April 12, 2021 Epic exercised the warrant it had and nine monthspurchased 100,000 shares of common stock in exchange for $100,000. (See Note 10 – Stockholders’ Equity)
During the quarter ended October 31,April 30, 2021, the Company issued seven warrants to its officers and directors for the purchase of up to a total of 1,100,000 common shares of stock at $2.21 per share. (See Note 15 – Warrants)
On March 17, 2021 the Company borrowed $500,000 from Epic. (See Note 8 – Notes)
On April 29, 2020 was $460 and $701 respectively.the Company converted 5,000,000 shares of common stock owned by BOTS, Inc., into 500,000 shares of Series B Preferred stock. (see Note 10 – Stockholders’ Equity)
On April 22, 2020 the Company converted $104,988$104,987 outstanding accounts payable to Paul Rosenberg into 130,128 shares of common stock of the company at $0.75 per share. (See Note 5. Stockholder’s10 – Stockholders’ Equity)
On April 29,17, 2020 the Company converted 5,000,000issued 50,000 shares of common stock owned by MCIG,Series A Preferred Stock to Epic and 100,000 shares of Series A Preferred Stock to Overwatch Partners, Inc., into 500,000 (See Note 10 – Stockholders’ Equity)
On April 17, 2020 the Company issued 150,000 shares of Series B Preferred stock. MCIG is restricted from converting the Series B Preferred stock into common stock for a period of 24 months from the conversion. There was no gain or loss on conversion dueStock to conversion terms (seePaul Rosenberg. (See Note 5).10 – Stockholders’ Equity)
12 |
|
Table of Contents |
Note 5.10. Stockholders’ Equity
Common Stock
As of OctoberJuly 31, 20202021 and January 31, 2020,2021, the Company had 200,000,000200 million common shares authorized, with 5,880,1638,475,792 and 10,460,0005,974,125 common shares at a par value of $0.0001 issued and outstanding, respectively.
On July 31, 2021 the Company issued 1,000,000 shares of common stock as part of the Vengar Acquisition.
On June 30, 2021 the Company issued 300,000 shares of common stock to Chris Carter for as part of his employment contract for a three year period. The shares shall be fully earned upon completion of his three-year contract.
On June 24, 2021 the Company issued 5,000 shares of common stock each to Sophie Grinevald and Bill Regan who will provide financial and accounting services to the Company for a probationary period of three months.
On June 21, 2021 the Company issued 300,000 shares of common stock as part of the 832 Acquisition.
On June 30, 2021 the Company issued 450,000 shares of common stock as part of the Mercury Acquisition.
On May 23, 2021 the Company entered into an Investor Relations agreement with RedChip Companies. The term of the agreement is for one year. The Company will pay $12,500 per month plus issue 75,000 shares of common stock.
On May 23, 2021 the Company issued 5,000 shares of common stock to Sara Moline who will provide services as an executive assistant for the Company for a probationary period of three months.
On April 12, 2021 Epic exercised the warrant it had and purchased 100,000 shares of common stock in exchange for $100,000. Epic elected to issue the shares in the name of Timothy R Schucker and Anastasia Hawkins JTWROS, the daughter and son-in-law of Michael Hawkins.
On April 22, 2020 the Company converted the following accounts payable into shares of common stock at the rate of $0.75 per share. Based upon the stock price of $6.75 on April 22, 2020 the Company recorded the following stock-based compensation as part of the accounts payable conversion action:action ($ in thousands):
Name |
| AP Balance |
|
| Shares Issued |
|
| FMV |
|
| Stock Based Compensation |
| ||||
Paul Rosenberg |
| $ | 104,988 |
|
|
| 130,128 |
|
| $ | 878,364 |
|
| $ | 773,377 |
|
Brandy Craig |
| 68,995 |
|
|
| 88,455 |
|
| 597,071 |
|
| 528,076 |
| |||
Law Offices of Carl G Hawkins |
| 6,333 |
|
|
| 8,504 |
|
| 57,402 |
|
| 51,069 |
| |||
Thomas G Amon |
| 15,000 |
|
|
| 19,230 |
|
| 129,803 |
|
| 114,803 |
| |||
Total |
| $ | 195,316 |
|
|
| 246,317 |
|
| $ | 1,662,640 |
|
| $ | 1,467,325 |
|
Name |
| AP Balance |
|
| Shares Issued |
|
| FMV |
|
| Stock Based Compensation |
| ||||
Paul Rosenberg |
| $ | 105 |
|
|
| 130,128 |
|
| $ | 878 |
|
| $ | 773 |
|
Brandy Craig |
| $ | 69 |
|
|
| 88,455 |
|
| $ | 597 |
|
| $ | 528 |
|
Law Offices of Carl G Hawkins |
| $ | 6 |
|
|
| 8,504 |
|
| $ | 57 |
|
| $ | 51 |
|
Thomas G Amon |
| $ | 15 |
|
|
| 19,230 |
|
| $ | 130 |
|
| $ | 115 |
|
Total |
| $ | 195 |
|
|
| 246,317 |
|
| $ | 1,662 |
|
| $ | 1,467 |
|
On April 17, 2020 the Company issued 153,846 shares of common stock to Andrus Nomm in settlement of any potential liabilities the Company had due to the termination of his employment agreement. The common stock was booked as stock-based compensation in the amount of $1,038,446.
On September 1, 2020 the Law Offices of Carl G. Hawkins elected to exercise 20,000 common shares under its warrant at the price of $1.00 per share. The payment was offset by accounts payable.
Preferred Stock
Series A Preferred
As of OctoberJuly 31, 20202021 and January 31, 2020,2021, the companyCompany had 1,000,0001 million Series A Preferred shares, par value $0.0001, authorized, with 150,000200,000 and 0150,000 Series A Preferred shares issued and outstanding, respectively. The Series A Preferred stock converts into common stock after 2 years since its issuance. The conversion rate for every 1 share of Series A Preferred stock is 50 shares of common stock. The Series A Preferred stock votes 1,000 shares of common stock for every 1 share. Each share of Series A Preferred stock votes 1,000 shares of common stock, has no redemption rights, receives no dividends, and has preference in dissolution over Common Stock.
During the nine months ending Octoberquarter ended July 31, 2021, the Company issued 50,000 shares of Series A Preferred Stock to Epic. The issuance was done as a prepayment for services to generate sales for the Company. The shares are earned as sales generated by Epic achieve certain sales targets.
During the quarter ended April 30, 2020 the Company sold 150,000 shares of Series A Preferred Stock to Epic Industry Corp at par value for a total payment of $15. Epic, Industry Corp, through its sole shareholder directed the Company to issue 100,000 shares of Series A Preferred stock to Overwatch Partners, Inc., with the remaining 50,000 shares to Epic Industry Corp.Epic. The Company recorded the transaction at FMV of $40,137,788$41,068,419 with the difference assigned as stock-based compensation. The Company valued the stock under ASC 820 utilizing the Option Pricing Method to value conversion rights, and the Market Approach to value the voting control.
Table of Contents |
Series B Preferred
As of OctoberJuly 31, 20202021 and January 31, 2020,2021, the companyCompany had 1,000,0001 million Series B Preferred shares, par value $0.0001, authorized, with 650,000400,000 and 0650,000 Series B Preferred shares issued and outstanding, respectively. The conversion rate for every 1 share of Series B Preferred stock is 10 shares of common stock. Each share of Series B Preferred stock votes 50 shares of common stock, has no redemption rights, receives no dividends, and has preference in dissolution over Common Stock and Series A Preferred.
On July 6, 2021, the Company entered into a settlement agreement with BOTS, Inc. Under the settlement agreement, BOTS agreed to return 250,000 shares of Series B Preferred stock to the treasury of the Company, in exchange for the assignment of the $1.4 million promissory note owed by First Bitcoin Capital Corp to the Company, along with all interest owed to date on the promissory note. In addition, the Company transferred 20,726,120 BIT tokens to BOTS. This was a related party transaction and was conducted at arm’s length.
During the nine months ending October 31,quarter ended April 30, 2020 the Company issued 150,000 shares of Series B Preferred stock to Paul Rosenberg in exchange for 60 cryptocurrency ATM machines. Par value of $15 was recorded as inventory with the FMV of $6,548,188$6,629,300 minus the par value being recorded as stock-based compensation. The Company valued the stock under ASC 820 utilizing the Option Pricing Method to value conversion rights, and the Market Approach to value the voting control.
On April 29, 2020 the Company converted 5,000,000 shares of common stock owned by BOTS, Inc., (formerly known as MCIG, Inc.) converted 5,000,000 of its common shares into 500,000 shares of Series B Preferred stock. The conversion was according to the terms ofBOTS is restricted from converting the Series B Preferred stock and as such thereinto common stock for a period of 24 months from the conversion. There was no gain or loss on conversion due to conversion terms. During the transaction.quarter ending July 31, 2021 BOTS may not convertreturned to the treasury of the Company 250,000 shares of Series B Preferred stock in exchange for certain assets held by the Company (see Note 16). In addition, BOTS exchanged 125,000 shares intoof Series B Preferred stock with Epic Industry Corp and Paul Rosenberg in exchange for 50 million shares of BOTS stock held by Epic Industry Corp and Paul Rosenberg, for a total of 100 million BOTS common shares until 24 months have expired from the transaction.shares.
Note 6.11. Basic Income per Share
Basic Income Per Share - The computation of basic and diluted lossincome (loss) per common share is based on the weighted average number of shares outstanding during each period.
|
| For the three months ended |
|
| For the nine months ended |
| ||||||||||
|
| October 31, |
|
| October 31, |
| ||||||||||
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||
Basic and diluted (loss) per share: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Income (Loss) per share from continuing operations |
| $ | (0.10 | ) |
| $ | (0.00 | ) |
| $ | (6.97 | ) |
| $ | (0.02 | ) |
Income (Loss) per share - discontinued |
| $ | (0.00 | ) |
| $ | (0.01 | ) |
| $ | (0.00 | ) |
| $ | (0.02 | ) |
Weighted average shares outstanding - basic |
|
| 5,872,554 |
|
|
| 10,460,000 |
|
|
| 7,156,979 |
|
|
| 10,460,000 |
|
The computation of basic income per share for the three and six months ended July 31, 2021 was $0.38 and $0.52 per share, respectively. The loss per common share is based onfor the weighted average number of shares outstanding during the period.three and six months ended July 31, 2020 was $(0.18) and $(6.31) per share, respectively.
Note 7.12. Discontinued Operations
On January 31,April 20, 2020, the companyCompany impaired the 420Cloud software, which was made effective on January 31, 2018. The Company recognized the following revenue (expense) from its$800 in expenses in discontinued operations for ninethe three and six months ended October 31:
|
| 2020 |
|
| 2019 |
| ||
|
|
|
|
|
|
| ||
Other income (loss) |
| $ | - |
|
| $ | 8,497 |
|
Total income (expense) from discontinued operations |
| $ | - |
|
| $ | 8,497 |
|
July 31, 2020.
Note 8.13. Commitments and Contingencies
The Company reports and accounts for its commitments and contingencies in accordance with ASC 440 – Commitments and ASC 450 – Contingencies. We recognize a loss on a contingency when it is probable a loss will incur and that the amount of the loss can be reasonably estimated. The Company recognized $0 as a loss on contingencies in the three and six months ended July 31, 2021 and 2020.
Note 14. Legal Proceedings
The Company may be subject to legal proceedings and claims arising from contracts or other matters from time to time in the ordinary course of business. Management is not aware of any pending or threatened litigation where the ultimate disposition or resolution could have a material adverse effect on the Company’s financial position, results of operations or liquidity.
Note 15. Warrants
On July 31, 2021 the Company issued warrants to two officers of the Company (Toney Jennings and Brandon Hart) for the purchase of up to a total of 400,000 shares of common stock at $5.05 per share. Each warrant holder was authorized to purchase up to 200,000 shares of common stock. Under the vesting schedule 50,000 shares are vested upon signing and 50,000 per year for three consecutive years. The warrants expire on July 30, 2026 at 5:00 PM Eastern Standard Time.
14 |
Table of Contents |
On June 21, 2021 the Company issued a warrant to one officer of the Company (Cedric Harris) for the purchase of up to a total of 200,000shares of common stock at $5.25 per share. Under the vesting schedule 50,000 shares are vested upon signing and 50,000 per year for three consecutive years. The warrants expire on June 20, 2026 at 5:00 PM Eastern Standard Time.
On March 11, 2021 the Company issued warrants to three officers of the Company (Robert Adams, Eric Jaffe, and Michael Hawkins) for the purchase of up to a total consolidated 600,000 shares of common stock at $2.21 per share. Each warrant holder was authorized to purchase up to 200,000 shares of common stock. Under the vesting schedule 50,000 shares are vested upon signing and 50,000 per year for three consecutive years. The warrants expire on January 31, 2026 at 5:00 PM Eastern Standard Time.
On February 1, 2021 the Company issued warrants to four directors of the Company (Mark Gilroy, Michael Hawkins, Paul Rosenberg, and Robert Adams) for the purchase of up to a total consolidated 500,000 shares of common stock at $2.21 per share. Each warrant holder was authorized to purchase up to 125,000 shares of common stock. Under the vesting schedule 50,000 shares are vested upon signing and 25,000 per year for three consecutive years. The warrants expire on January 31, 2026 at 5:00 PM Eastern Standard Time.
On November 1, 2017 the Company issued 7 warrants to officers, directors, and investors for the purchase of up to 3,000,000 shares of common stock at $1.00 per share. The warrants expire on November 1, 2022 at 5:00 PM Eastern Standard Time. The warrants contain participation rights to any registration statement filed by the Company. The Holder shall not be entitledIn April 2020 the Company cancelled one warrant that authorized the purchase of up to exercise their Warrant when the number250,000 shares of shares exercised by the Warrant Holder would cause the Holder to exceed 4.99% of the total outstanding common stock. Warrants have been exercised four times for a total of 175,000 shares of common stock for $175,000, which was paid $135,000 in cash and $40,000 as a reduction to accounts payable.
A summary of warrant activity for three and ninesix months ended OctoberJuly 31, 20202021 is as follows:
|
|
|
|
| Weighted |
| ||
|
|
|
|
| Average |
| ||
|
|
|
|
| Conversion |
| ||
|
| Shares |
|
| Price |
| ||
|
|
|
|
|
|
| ||
Warrants outstanding at January 31, 2020 |
|
| 3,000,000 |
|
| $ | 1.00 |
|
|
|
|
|
|
|
|
|
|
Exercised |
|
| 20,000 |
|
| $ | 1.00 |
|
Granted |
|
| - |
|
| $ | 1.00 |
|
Cancelled |
|
| 250,000 |
|
| $ | 1.00 |
|
Warrants outstanding at July 31, 2020 |
|
| 2,730,000 |
|
| $ | 1.00 |
|
|
|
|
| Weighted |
| |||
|
|
|
| Average |
| |||
|
|
|
| Conversion |
| |||
|
| Shares |
|
| Price |
| ||
|
|
|
|
|
|
| ||
Warrants outstanding at January 31, 2021 |
|
| 2,675,000 |
|
| $ | 1.00 |
|
|
|
|
|
|
|
|
|
|
Exercised |
|
| (100,000 | ) |
|
| 1.00 |
|
Granted |
|
| 1,700,000 |
|
|
| 3.24 |
|
Warrants outstanding at July 31, 2021 |
|
| 4,275,000 |
|
| $ | 1.89 |
|
Note 9.16: Sale of Assets to Related Party
On May 13, 2020 the Company sold its 420 Cloud Software to First Bitcoin Capital, Inc., for the purchase price of $1,900,000.$1.9 million. The $1,900,000$1.9 million was paid through the transfer of $500,000$0.5 million in BIT cryptocurrency and a $1,400,000$1.4 million convertible promissory note. The Company received 122,968,776.18 BIT tokens at the price of $0.004066098 per token. The convertible promissory note has a simple interest fee of 9% per year and may be converted into First Bitcoin Capital Corp stock at a 10% discount to market or in additional BIT cryptocurrency tokens. The Note has no expiration date. The convertible note receivable is currently convertible into stock that is thinly traded on the OTC Markets and since it was related party the credit is to equity. On July 6, 2021, the $1.4 million convertible promissory note was exchanged as part of the settlement agreement with BOTS, Inc. (See Note 9 – Related Party Transactions)
Note 10.17. Cryptocurrency Assets
During the three months ended October 31, 2020 the Company started transacting business with cryptocurrency assets. The Company records the assetcryptocurrency assets as an Intangible Assetintangible asset with Infinite Life.infinite life. We classify cryptocurrency that have a market value and substantial liquidity as Current Intangible Assets. Cryptocurrencycurrent intangible assets, which we value at fair market value in accordance with Statement No. 157. Cryptocurrencies that do not trade on a market or have limited liquidity asare classified as Non-current Intangible Assets.non-current intangible assets and are recorded on a cost basis. The following chart shows our cryptocurrency assets held for the threeas of July 31, 2021 and nine months ended OctoberJanuary 31, 2020:2021:
OBITX Cryptocurrency Holdings |
| |||||||||||
Current Assets |
| |||||||||||
Coin Symbol |
| Quantity |
|
| Cost Basis |
|
| FMV |
| |||
HEX |
|
| 15,681,861 |
|
|
| 40,083 |
|
|
| 143,630 |
|
Total for period ending 10/31/20 |
|
|
| 40,083 |
|
|
| 143,630 |
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Current Assets | ||||||||||||
Coin Symbol |
| Quantity |
|
| Cost Basis |
|
| FMV |
| |||
PRES |
|
| 2,000,000 |
|
|
| 14,917 |
|
|
| 19,675 |
|
BIT |
|
| 20,720,420 |
|
|
| 82,885 |
|
|
| 235,260 |
|
Total for period ending 10/31/20 |
|
|
| 97,802 |
|
|
| 254,935 |
|
15 |
Table of Contents |
Cryptocurrency Holdings | ||||||||
Current Assets (in thousands) | ||||||||
|
| As of |
|
| As of |
| ||
|
| July 31, 2021 |
|
| January 31, 2021 |
| ||
Coin Symbol |
| FMV |
|
| FMV |
| ||
BTC |
| $ | 298 |
|
| $ | 0 |
|
ETH |
|
| 1 |
|
|
| 0 |
|
GUSD |
|
| 1 |
|
|
| 0 |
|
HEX |
|
| 3,112 |
|
|
| 123 |
|
|
| $ | 3,412 |
|
| $ | 123 |
|
|
|
|
|
|
|
|
|
|
Non-Current Assets (in thousands) | ||||||||
|
| As of |
|
| As of |
| ||
|
| July 31, 2021 |
|
| January 31, 2021 |
| ||
Coin Symbol |
| Cost Basis |
|
| Cost Basis |
| ||
PRES |
| $ | 0 |
|
| $ | 15 |
|
BIT |
|
| 0 |
|
|
| 83 |
|
|
| $ | 0 |
|
| $ | 98 |
|
Note 18. Reclassifications
During the three monthsquarter ended OctoberJuly 31, 20202021, the Company expended the following cryptocurrency. We recognizedreclassified some components of its revenue for the amountand other income. Some of the transaction abovereclassifications impacted the cost basis in which we had a definitive agreement. Additionally, in accordance with IRS policies and standards for transacting with cryptocurrencies, we allocated the pricepresentation of the cryptocurrency on the date the transaction occurred. Where the transferred amount exceeded the cost basis, we recognized revenue and when the cost basis was below the cost basis we recorded a reduction to revenue.
OBITX Cryptocurrency Holdings | ||||||||||||||||
From/TO |
| Quantity (BIT) |
|
| Cost Basis |
|
| Fair Value |
|
| Revenue |
| ||||
Overwatch |
|
| 700,000 |
|
| $ | (2,111 | ) |
| $ | 5,921 |
|
| $ | 3,811 |
|
Overwatch |
|
| 43,038,800 |
|
|
| (175,000 | ) |
|
| 364,065 |
|
|
| 189,065 |
|
Paul Rosenberg |
|
| 30,742,000 |
|
|
| (125,000 | ) |
|
| 254,452 |
|
|
| 129,452 |
|
Andrus Nomm |
|
| 2,766,780 |
|
|
| (11,250 | ) |
|
| 22,901 |
|
|
| 11,651 |
|
BOTS |
|
| 27,000,000 |
|
|
| (109,785 | ) |
|
| 223,479 |
|
|
| 113,694 |
|
Total for period ending 10/31/20 |
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 447,673 |
|
Note 11. Non-GAAP Accounting and GAAP Reconciliation – Net Income and EBITDA
The Company reports all financial information required in accordance with generally accepted accounting principles (GAAP). The Company believes, however, that evaluating its ongoing operating results will be enhanced if it also discloses certain non-GAAP information because it is useful to understand OBITX’s performance that many investors believe may obscure OBITX’s ongoing operational results.
For example, OBITX uses non-GAAP netother income (Adjusted Net Income), which excludes stock-based compensation, amortization of acquired intangible assets, impairment of intangible assets, costs from acquisitions, restructurings and other infrequently occurring items, non-cash deferred tax provision and litigation and related settlement costs. OBITX uses EBITDA and Adjusted Net Income, which adjusts net income (loss) for amortization of intangible assets, impairment of intangible assets, stock-based compensation, costs related to acquisitions, restructuring and other infrequently occurring items, settlement of litigation, gains or losses on dispositions, pro forma adjustments to exclude lines of business that have been acquired during the periods presented, current cash tax provision, depreciation, and interest expense (income), net.
The company believes that excluding certain costs from Adjusted Net Income and EBITDA provides a meaningful indication to investors of the expected on-going operating performance of the company. Whenever OBITX uses such historical non-GAAP financial measures, it provides a reconciliation of historical non-GAAP financial measures to the most closely applicable GAAP financial measure. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these historical non-GAAP financial measures to their most directly comparable GAAP financial measure.
The following tables reflect the non-GAAP Consolidated Statements of Operations for the three and nine months ended October 31, 2020 and 2019, respectively.
|
| For the three months ended |
|
| For the nine months ended |
| ||||||||||
|
| October 31, |
|
| October 31, |
| ||||||||||
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Revenue from services |
| $ | 701,709 |
|
| $ | - |
|
| $ | 2,629,325 |
|
| $ | - |
|
Total cost of sales |
|
| 447,672 |
|
|
| - |
|
|
| 447,672 |
|
|
| - |
|
Gross income |
| $ | 254,037 |
|
| $ | - |
|
| $ | 2,181,653 |
|
| $ | - |
|
Selling, general, and administrative |
|
| 520 |
|
|
| 460 |
|
|
| (3,290 | ) |
|
| 1,847 |
|
Professional fees |
|
| 25,135 |
|
|
| - |
|
|
| 64,723 |
|
|
| 5,257 |
|
Rent |
|
| 1,176 |
|
|
| 3,007 |
|
|
| 1,960 |
|
|
| 3,421 |
|
Consultant fees |
|
| 45,360 |
|
|
| 42,000 |
|
|
| 79,360 |
|
|
| 126,000 |
|
Total operating expenses |
|
| 72,191 |
|
|
| 45,467 |
|
|
| 142,753 |
|
|
| 136,525 |
|
Net loss from operations |
|
| 181,846 |
|
|
| (45,467 | ) |
|
| 2,038,900 |
|
|
| (136,525 | ) |
Other income (expense) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Gain on use of cryptocurrency assets |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Net (loss) before discontinued operations |
| $ | 181,846 |
|
| $ | (45,467 | ) |
| $ | 2,038,900 |
|
| $ | (136,525 | ) |
Income (expense) from discontinued operations |
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
Net (loss) |
| $ | 181,846 |
|
| $ | (45,467 | ) |
| $ | 2,038,900 |
|
| $ | (136,525 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted (loss) per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) per share from continuing operations |
| $ | 0.03 |
|
| $ | (0.00 | ) |
| $ | 0.30 |
|
| $ | (0.02 | ) |
Income (Loss) per share - discontinued |
| $ | (0.00 | ) |
| $ | (0.00 | ) |
| $ | (0.00 | ) |
| $ | (0.02 | ) |
Weighted average shares outstanding - basic |
|
| 5,863,644 |
|
| $ | 10,460,000 |
|
|
| 6,889,892 |
|
| $ | 8,811,648 |
|
The following table is a reconciliation of the EBITDA and Adjusted Net Income (non-GAAP measures) to the Net Income with the GAAP Consolidated Statements of Operation for the three and nine months ended October 31, 2020 and 2019, respectively.
Adjusted Net Income Reconciliation |
| |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
| For the three months ended |
|
| For the nine months ended |
| ||||||||||
|
| October 31, |
|
| October 31, |
| ||||||||||
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
CONSOLIDATED STATEMENT OF OPERATIONS: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net Income (Loss) |
| $ | (139,569 | ) |
| $ | (40,769 | ) |
| $ | (49,406,676 | ) |
| $ | (144,432 | ) |
Interest |
|
| 2,605 |
|
|
| - |
|
|
| 21,458 |
|
|
| 21,102 |
|
Depreciation and amortization |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
EBITDA |
| $ | (136,964 | ) |
| $ | (40,769 | ) |
| $ | (49,385,218 | ) |
| $ | (123,330 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock based compensation |
|
| - |
|
|
| - |
|
|
| 49,204,508 |
|
|
| - |
|
Cryptocurrency gains (IFRS guidelines) |
|
| 164,503 |
|
|
| - |
|
|
| 164,503 |
|
|
| - |
|
Gains not in ordinary course of business |
|
| - |
|
|
| - |
|
|
| 1,900,000 |
|
|
| - |
|
Adjustments for settlement reserves |
|
| 154,307 |
|
|
| - |
|
|
| 154,307 |
|
|
| - |
|
Adjustment for discontinued operations |
|
| - |
|
|
| (4,698 | ) |
|
| 800 |
|
|
| (13,195 | ) |
Adjusted net income |
| $ | 181,846 |
|
| $ | (45,467 | ) |
| $ | 2,038,900 |
|
| $ | (136,525 | ) |
Note 12. Commitments and Contingencies
The Company reports and accounts for its commitments and contingencies in accordance with ASC 440 – Commitments and ASC 450 – Contingencies. We recognize a loss on a contingency when it is probable a loss will incur and that the amount of the loss can be reasonably estimated. The Company recognized $0 as a loss on contingencies in the three and nine months ending October 31, 2020 and October 31, 2019.
Note 13. Explanation of Our Restatement
The Company is filing a restatement of its three and nine month Statements of Operations for the period ending October 31, 2019, which was filed with the Securities and Exchange Commission (“SEC”) on March 24, 2020 (the “Original Report”). The financial statements containedpreviously reported in our Quarterly Report on Form 10-Q for the period ended October 31, 2019 require restatement in orderApril 30, 2021. There were no adjustments to correct the presentation of amortizationcombined total revenue and other income generated just a reclassification of the software as a costtype of good that had been previously impaired. In addition, certain other expenses were adjusted accordingly with a realization ofrevenue or income from discontinued operations added.generated. The changes in our consolidated Statements of Operations are summarized, below.
|
| For the three months ended |
|
| For the nine months ended |
| ||||||||||||||||||
|
| October 31, 2019 |
|
| October 31, 2019 |
| ||||||||||||||||||
|
| Original |
|
| Change |
|
| Restated |
|
| Original |
|
| Change |
|
| Restated |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Depreciation expense |
| $ | (121,159 | ) |
| $ | 121,159 |
|
| $ | - |
|
| $ | (363,477 | ) |
| $ | 363,477 |
|
| $ | - |
|
Total cost of sales |
|
| (121,159 | ) |
|
| 121,159 |
|
|
| - |
|
|
| (363,477 | ) |
|
| 363,477 |
|
|
| - |
|
Gross loss |
| $ | (121,159 | ) |
| $ | 121,159 |
|
| $ | - |
|
| $ | (363,477 | ) |
| $ | 363,477 |
|
| $ | - |
|
Selling, general, and administrative |
|
| 711 |
|
|
| (251 | ) |
|
| 460 |
|
|
| 5,272 |
|
|
| 17,677 |
|
|
| 22,949 |
|
Professional fees |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 5,256 |
|
|
| 1 |
|
|
| 5,257 |
|
Rent |
|
| - |
|
|
| 3,007 |
|
|
| 3,007 |
|
|
| - |
|
|
| 3,421 |
|
|
| 3,421 |
|
Consultant fees |
|
| 42,000 |
|
|
| - |
|
|
| 42,000 |
|
|
| 126,000 |
|
|
| - |
|
|
| 126,000 |
|
Bad debt expense |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 4,500 |
|
|
| (4,500 | ) |
|
| - |
|
Amortization & depreciation expense |
|
| 646 |
|
|
| (646 | ) |
|
| - |
|
|
| 1,938 |
|
|
| (1,938 | ) |
|
| - |
|
Total operating expenses |
| $ | 43,457 |
|
| $ | 2,010 |
|
| $ | 45,467 |
|
| $ | 142,966 |
|
| $ | 14,661 |
|
| $ | 157,627 |
|
Net loss from operations |
| $ | (164,516 | ) |
| $ | 119,049 |
|
| $ | (45,467 | ) |
| $ | (506,443 | ) |
| $ | 348,816 |
|
| $ | (157,627 | ) |
Other income (expense) |
|
| (1 | ) |
|
| 1 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Net income (loss) before discontinued operations |
| $ | (164,517 | ) |
| $ | 119,050 |
|
| $ | (45,467 | ) |
| $ | (506,443 | ) |
| $ | 348,816 |
|
| $ | (157,627 | ) |
Income from discontinued operations |
|
| - |
|
|
| 4,698 |
|
|
| 4,698 |
|
|
| - |
|
|
| 13,195 |
|
|
| 13,195 |
|
Net loss |
| $ | (164,517 | ) |
| $ | 119,050 |
|
| $ | (40,769 | ) |
| $ | (506,443 | ) |
| $ | 362,011 |
|
| $ | (144,432 | ) |
|
| As previously presented April 30, 2021 |
|
| Revised April 30, 2021 |
|
| Reclassification |
| |||
Revenue |
| $ | 1,081 |
|
|
| 1,127 |
|
|
| 46 |
|
Other Revenue |
|
| 72 |
|
|
| 136 |
|
|
| 64 |
|
Total |
| $ | 1,153 |
|
| $ | 1,263 |
|
| $ | 110 |
|
Other income |
|
| 110 |
|
|
| - |
|
|
| (110 | ) |
Total |
| $ | 1,263 |
|
| $ | 1,263 |
|
| $ | - |
|
Note 14.19. Subsequent EventEvents
On December 5, 2020August 9, 2021, Eric Jaffe exercised his warrants of 50,000 shares at the exercise price of $2.12 per share on a cashless basis, resulting in the issuance of 42,246 shares of common stock.
On September 13, 2021 the Law Offices of Carl G Hawkins elected to exercise a portionexercised their warrant acquiring 40,000 shares at the strike price of his warrant where 20,000$1.00 per share through the conversion of the accounts payable owed by the Company for services provided. The shares of common stock were issued for the reduction of $20,000 in debt. Concurrently, Epic Industry Corp elected to exercise a portion of its warrant where 35,000 shares of common stock was issued for the reduction of $35,000 in accounts payable to related party.
On December 5, 2020 APO Holdings, LLC converted its outstanding debt in the amountname of $97,404.16 at $2.50 per share for a total of 38,962 common shares.Carl G Hawkins.
Table of Contents |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion and analysis of our financial condition, results of operations and cash flows in conjunction with our consolidated financial statements and the related notes presented in this report and in our Annual Report.
FORWARD-LOOKING STATEMENTS
Certain statements in this section contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All statements contained in this report and not clearly historical in nature are forward-looking, and the words “may,” “will,” “should,” “could,” “would,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “projects,” “predicts,” “intends,” “potential,” and similar expressions (as well as other words or expressions referencing future events, conditions or circumstances) generally are intended to identify forward-looking statements. Any statements in this report that are not historical facts are forward-looking statements. Actual results may differ materially from those discussed from time to time in the Company’s Securities and Exchange CommissionCompany's SEC filings. The Company undertakes no obligation to update or revise any forward-looking statement for events or circumstances after the date on which such statement is made except as required by law.
EXECUTIVE OVERVIEW
The executive overview of the MD&A highlights selected information and does not contain all of the information that is important to readers of this Quarterly Report on Form 10Q.
Our strong results for the three and six months ended July 31, 2021 reflect the strength of the crypto price cycle we entered in Q4 2020. We saw many crypto assets reach all time high prices, high levels of volatility, and increased interest across the entire blockchain. Crypto market capitalization reached nearly $2 trillion at the end of the second quarter compared to $1 trillion at the end of last quarter of the last fiscal year. We were well positioned to take advantage of this market trend.
Our involvement is certain development projects since revamping our operations in April 2020 has provided substantial amounts of cryptocurrencies at entry point levels during initial roll out of new platforms and products. Accepting these payments in cryptocurrencies has opened the doors to staking and interest earning at unprecedented rates within the markets which has compounded our growth. While we accept certain and inherent risks associated with the volatility of the current blockchain markets, our involvement with clients birthing new products limits our risks to time, effort, and energy risks which shields us from the blockchain markets rise and falls. While we are not immune to the variances within the market, our basis of entry is often low and as such can withstand the day-to-day valuations of the market.
Despite our strong results, the rapid expansion of blockchain also creates challenges for us. Competition is increasing as new market entrants join the blockchain every month. Our competitors are supporting certain crypto assets that are experiencing large trading volume and growth in market capitalization that we do not currently participate in, as well as offering new products and services that we are developing and/or do not offer. We welcome these challenges as they indicate that the market we serve is growing rapidly, but we also have to continue to move quickly to address them, and that inspires us towards action and growth.
HISTORY AND BACKGROUND
We were incorporated in the State of Delaware on March 30, 2017, originally under the name GigeTech, Inc. Company Name
On October 31, 2017,May 23, 2021, the Company changed its name tofrom OBITX, Inc., and updated its Articles of Incorporation through unanimous consent of its shareholder, MCIG. to Everything Blockchain, Inc.
The Company is headquartered in Fleming Island, Florida.
Change of Control
On April 17, 2020 shares of Series A Preferred stock were issued to two parties effecting the Company’s change of control.
Business Model
The Company’s original businessearly model was to provide computer relatedearn revenue through social media advertising, fees, and services. The Company’sUnder this plan, the Company developed and acquired Internet publishing and broadcasting and web search portals. We published and generate textual, audio, and/or video content onits white label software solution for BOTS under the Internet, and operate websites that use a search engine420 Cloud brand. After multiple attempts to generate and maintain extensive databases of internet addresses and content. Thesecure acceptance in the market, the Company discontinued this line of operations on April 17,operation during the fiscal year ended January 31, 2020.
TheIn April 2020 the Company is engaged in the businessdivested and sold its white label software solution and changed direction of digital cryptocurrency and blockchain development and consulting.
its business. The Company has incurred significant losses since inceptionbecome a developer, engineer, and as of October 31, 2020 has a working capital deficit. The Company’s consolidated financial statements have been prepared on a going concern basis, which assumes the Company will be able to realize its assets and discharge its liabilitiesconsultant in the normal courseindustry of business. The Company’s ability to continue as a going concern is dependent on being able to raise the necessary funding to continue operations, through the exercise of warrants, issuance of shares to the public, debt financings, joint arrangements and other contractual arrangements, or being able to operate profitably in the future. These consolidated financial statements do not reflect the adjustments or reclassifications which would be necessary if the Company were unable to continue its operations in the normal course of business.blockchain technologies.
17 |
Table of Contents |
GENERAL OVERVIEW
OBITX is engaged in the business of consulting and developing blockchain technologies. We believe that our services and future products will provide our consumers with an approach to blockchain implementation uniquely designed for them. We provide consulting services in various approaches to cryptocurrencies and blockchain technologies.
Our current website can be found at www.obitx.com, which is not incorporated as part of this Form 10Q. In addition, we have acquired the domain www.everythingblockchain.io which is not incorporated as part of this Form 10Q, nor currently operational.10Q.
Corporate InformationEMPLOYEES AND CONSULTANTS
Our principal executive office is located at 3027 US Highway 17, Fleming Island, Florida 32003 and our telephone number is (321) 802-2474. Our fiscal year end is January 31 of each calendar year.
INDUSTRY OVERVIEW
A Blockchain is a decentralized and distributed digital ledger that is used to record transactions across many computers so that the record cannot be altered retroactively without the alteration of all subsequent blocks and the collusion of the network. The blockchain system has been designed to use nodes agreement to order transactions and prevent fraud so that records cannot be altered retroactively. The network orders transaction by putting them together into groups called blocks, each block contains a definite amount of transactions and a link to the previous block. Bitcoin, which is the name of the best-known cryptocurrency, is the one for which blockchain technology was invented. Blockchain is, quite simply, a digital, decentralized ledger that keeps a record of all transactions that take place across a peer-to-peer network.
Bitcoins are not the only type of Digital Assets founded on math-based algorithms and cryptographic security, although it is considered the most prominent as of the date of the filing of this Registration Statement. Over 2,000 other Digital Assets, (commonly referred to as “altcoins”, “tokens”, “protocol tokens”, or “digital assets”), have been developed since the Bitcoin Network’s inception, including Ethereum, Ripple, Litecoin, Dash, and HEX.
Blockchain Technologies
Cryptocurrencies
Cryptocurrency is an encrypted decentralized digital currency transferred between peers and confirmed in a public ledger via a process known as mining. As of October 31, 2020, there are over 2,000 digital currencies in existence.
Blockchain Value
Cryptocurrencies are Digital Asset that is not a fiat currency (i.e., a currency that is backed by a central bank or a national, supra-national or quasi-national organization) and is not backed by hard assets or other credit. As a result, the value of cryptocurrencies is determined by the value that various market participants place on them through their transactions.
Exchange Valuation
Due to the peer-to-peer framework of cryptocurrencies, transferors and recipients of cryptocurrencies are able to determine the value of the cryptocurrency transferred by mutual agreement or barter with respect to their transactions. As a result, the most common means of determining the value of a cryptocurrency is by surveying one or more Exchanges where the cryptocurrency is publicly bought, sold and traded.
Uses of Cryptocurrencies
Global Cryptocurrency Market
Global trade in cryptocurrencies consists of individual end-user-to-end-user transactions, together with facilitated exchange-based trading. There is currently no reliable data on the total number or demographic composition of users on the global exchanges.
Goods and Services
Cryptocurrencies can be used to purchase goods and services, either online or at physical locations, although reliable data is not readily available about the retail and commercial market penetration of the various cryptocurrencies. To date, the rate of consumer adoption and use of cryptocurrencies for paying merchants has trailed the broad expansion of retail and commercial acceptance of cryptocurrency. Other markets, such as credit card companies and certain financial institutions are not accepting such digital assets. It is likely that there will be a strong correlation between the continued expansion of the Cryptocurrency Network and its retail and commercial market penetration.
Anonymity and Illicit Use
The Blockchain Network was not designed to ensure the anonymity of users, despite a common misperception to the contrary. All transactions are logged on the Blockchain and any individual or government can trace the flow of cryptocurrencies from one address to another. Off-Blockchain transactions occurring off the Network are not recorded and do not represent actual transactions or the transfer of cryptocurrencies from one digital wallet address to another, though information regarding participants in an Off-Blockchain transaction may be recorded by the parties facilitating such Off-Blockchain transactions. Digital wallet addresses are randomized sequences of 27-34 alphanumeric characters that, standing alone, do not provide sufficient information to identify users; however, various methods may be used to connect an address to a particular user’s identity, including, among other things, simple Internet searching, electronic surveillance and statistical network analysis and data mining. Anonymity is also reduced to the extent that certain Exchanges and other service providers collect users’ personal information, because such Exchanges and service providers may be required to produce users’ information in order to comply with legal requirements. In many cases, a user’s own activity on the Blockchain Network or on Internet forums may reveal information about the user’s identity.
Users may take certain precautions to enhance the likelihood that they and their transactions will remain anonymous. For instance, a user may send its cryptocurrencies to different addresses multiple times to make tracking the cryptocurrencies through the Blockchain more difficult or, more simply, engage a so-called “mixing” or “tumbling” service to switch its cryptocurrencies with those of other users. However, these precautions do not guarantee anonymity and are illegal to the extent that they constitute money laundering or otherwise violate the law.
As with any other asset or medium of exchange, cryptocurrencies can be used to purchase illegal goods or fund illicit activities. The use of cryptocurrencies for illicit purposes, however, is not promoted byJuly 31, 2021, the Blockchain Network or the user community asCompany has 24 employees. There are currently 9 consultants who fulfill a whole. Furthermore, we do not believe our advertising, marketing, and consulting services has exposure to such uses because the services we provide are curated by our management and team.
DESCRIPTION OF SUBSIDIARIES
There were three subsidiaries that were incorporated into the financials of OBITX for fiscal year 2020. All three subsidiaries were closed and the operations discontinued in the fiscal year ended January 31, 2020. We have incorporated them in this Form 10Q for historical referencemajority of the period ending April 30, 2019. These three subsidiaries include altCUBE, Inc., which was incorporated on June 4, 2018 insales and marketing aspects of the state of Wyoming. altCUBE, Inc. was created to provide services in the arena of promoting individual advertising solutions and enabling access to the financial crypto global market, providing modern, efficient, clean and intuitive user interface. The second was Campaign Pigeon, LLC, which was incorporated on May 10, 2018 in the state of Wyoming. Campaign Pigeon, LLC was created to provide services in the arena of online marketing and generating advertising. The third subsidiary was Haute Jobs, LLC, which was incorporated on May 10, 2018 in the state of Wyoming. Haute Jobs, LLC was created to provide services in the arena of job marketing and matching services, to perform an as an employment center.business operations.
Available Information
All reports of the Company filed with the SEC are available free of charge through the SEC’s Web site at www.sec.gov. In addition, the public may read and copy materials filed by the Company at the SEC’s Public Reference Room located at 100 F Street, N.E., Washington, D.C. 20549. The public may also obtain additional information on the operation of the Public Reference Room by calling the Commission at 1-800-SEC-0330.
Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States.GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. On an ongoing basis, we evaluate our estimates, including those related to uncollectible receivables, inventory valuation, deferred compensation and contingencies.
We base our estimates on historical performance and on various other assumptions that we believe to be reasonable under the circumstances. These estimates allow us to make judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.
We believe the following accounting policies are our critical accounting policies because they are important to the portrayal of our financial condition and results of operations and they require critical management judgments and estimates about matters that may be uncertain. If actual results or events differ materially from those contemplated by us in making these estimates, our reported financial condition and results of operations for future periods could be materially affected. No material change has occurred to our critical accounting policies and estimates from the information provided in the Annual Report.
Results of Operations
Results of Operations for the three months ended October 31, 2020 and 2019
Our operating results for the three and six months ended OctoberJuly 31, 2021 and 2020 and 2019 isare summarized as follows:follows (in thousands):
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| October 31, |
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| 2020 |
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| 2019 |
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Sales |
| $ | 61,918 |
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| $ | - |
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Total Cost of Sales |
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| - |
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| - |
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Gross (loss) |
| $ | 61,918 |
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| - |
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Total operating expenses |
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| 674,170 |
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| 45,467 |
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Net (loss) from operations |
| $ | (612,252 | ) |
| $ | (45,467 | ) |
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| For the Three Months Ended July 31, |
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| 2021 |
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| 2020 |
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| 2021 |
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| 2020 |
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Revenue |
| $ | 5,434 |
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| $ | - |
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| $ | 6,698 |
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| $ | - |
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Cost of sales |
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| 2,746 |
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| - |
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| 2,746 |
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| - |
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Gross profit |
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| 2,688 |
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| - |
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| 3,951 |
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| - |
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Total operating expenses |
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| 138 |
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| 1,069 |
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| 850 |
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| 49,281 |
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Operating income (loss) |
| $ | 2,550 |
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| $ | (1,069 | ) |
| $ | 3,101 |
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| $ | (49,281 | ) |
Results of Operations for the three and six months ended July 31, 2021 and 2020
Revenue
The company recognized $61,918We generated $5.4 million in revenue from operations for the three months ended October 31, 2020 as compared to $0 revenue for the three months ended October 31,2019. TheJuly 31, 2021 as compared to no revenue was generated for consulting services provided to two clients.
Cost of Goods Sold
The company recognized no cost for services provided for the three months ending October 31, 2020 and 2019.
Gross Profit/Loss
The company recognized $61,918 in gross profit from operations for the three months ended OctoberJuly 31, 20202020. Revenue generated for the quarter ended July 31, 2021 primarily consisted of $0.2 million from consulting services, $2.2 million from fair value adjustment to the cryptocurrencies, and $2.9 million from cryptocurrency sales.
We generated $6.7 million in revenue for the six months ended July 31, 2021 as compared to $0 grossno revenue for the six months ended July 31, 2020. Revenue generated for the six months ended July 31, 2021 primarily consisted of $1.3 million from consulting services, $0.1 million from staking, $2.3 million from fair value adjustment to the cryptocurrencies, and $3.0 million from cryptocurrency sales.
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Cost of Sales
Cost of sales for the three months ended July 31, 2021 was $2.7 million as compared to no cost of sales for the three months ended July 31, 2020. Cost of sales for the three months ended July 31, 2021 primarily consisted of cost of cryptocurrency of $0.6 million and $2.1 million in labor cost and commissions.
Cost of sales for the six months ended July 31, 2021 was $2.7 million as compared to no cost of sales for the six months ended July 31, 2020. Cost of sales for the six months ended July 31, 2021 primarily consisted of cost of cryptocurrency of of $0.6 million and $2.1 million in labor cost and commissions.
Gross Profit
Gross profit for the three months ended October 31,2019.July 31, 2021 was $2.6 million as compared to $0 for the three months ended July 31, 2020.
Gross profit for the six months ended July 31, 2021 was $3.8 million as compared to $0 for the six months ended July 31, 2020.
Operating Expenses
Our operatingOperating expenses increased by $628,703 to $674,170 for the three months ended October 31, 2020, from $45,467 for the three months ended October 31, 2019.
In the three months ended October 31, 2020 professional fees were $25,135 increasing from $0 in the three months ended October 31, 2019. Our consultant fees increased by $605,339 from $42,000 for the quarter ending October 31, 2019 to $647,339 for the quarter ending October 31, 2020. Ourconsist primarily of selling, general and administrative costs were increased by $60 to $520 for the quarter ending October 31, 2020 from $460 for the quarter ending October 31, 2019.
Ourexpenses and amortization and depreciation expense. Selling, general and administrative expenses consist ofinclude personnel costs, consultant fees, bank charges, telephone expenses, meals and entertainments,entertainment, computer and internet expenses, postage and delivery, office supplies, stock issuance as compensation,professional fees, reporting fees, and other expenses. Our professional fees include legal, accounting, and reportingmiscellaneous fees.
Net Income/Loss
Our net loss of $139,569operating expenses decreased by $1.0 million to $0.1 million for the three months ended OctoberJuly 31, 2020 consisted primarily of the consulting expense and offset by other income. With consulting expenses $647,339, we increased our overall cost of operations by $628,7032021, from $45,467 in professional fees, consultant fees, and selling, general and administrative cost$1.1 million for the quarter ending Octoberthree months ended July 31, 2019 to $674,1702020. The primary reason for the quarter ending Octoberdecrease was due to stock-based compensation of $1.0 million, which was recorded for the three months ended July 31, 2020.
Results of Operations for the nine months ended October 31, 2020 and 2019
Our operating results for the nine months ended October 31, 2020 and 2019 is summarized as follows:
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| For the nine months ended |
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| October 31, |
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| 2020 |
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| 2019 |
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Sales |
| $ | 61,918 |
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| $ | - |
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Total Cost of Sales |
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| - |
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| - |
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Gross (loss) |
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| 61,918 |
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| - |
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Total operating expenses |
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| 49,949,240 |
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| 157,627 |
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Net (loss) from operations |
| $ | (49,887,322 | ) |
| $ | (157,627 | ) |
Revenue
The company recognized $61,918 in revenue from operations for the nine months ended October 31, 2020 as compared to $0 revenue for the nine months ended October 31,2019. The revenue was generated for consulting services provided to two clients.
Cost of Goods Sold
The company recognized no cost for services provided for the nine months ending October 31, 2020 and 2019.
Gross Profit/Loss
The company recognized $61,918 in gross profit from operations for the nine months ended October 31, 2020 as compared to $0 gross profit for the nine months ended October 31,2019.
Operating Expenses
Our operating expenses increaseddecreased by $49,791,613$48.5 million to $49,949,240$0.8 million for the ninesix months ended OctoberJuly 31, 2020,2021, from $157,627$49.3 million for the ninesix months ended OctoberJuly 31, 2019.
In2020. The primary reason for the ninedecrease was due to stock-based compensation of $49.2 million, which was recorded for the six months ended OctoberJuly 31, 2020 professional fees were $64,723 increasing from $5,257 in the nine months ended October 31, 2019. Our consultant fees increased by $555,339 from $126,000 for the nine months ending October 31, 2019 to $681,339 for the nine months ending October 31, 2020. Our selling, general and administrative costs were increased by $49,178,269 to $49,201,218 for the nine months ending October 31, 2020 from $22,949 for the nine months ending October 31, 2019.
Our general and administrative expenses consist of bank charges, telephone expenses, meals and entertainments, computer and internet expenses, postage and delivery, stock issuances as compensation, office supplies and other expenses. Our professional fees include legal, accounting, and reporting fees.
Net Income/LossOperating Income (Loss)
Our operating income increased by $3.6 million to a net profit of $2.5 million for the three months ended July 31, 2021 as compared to a net loss of $49,405,874$1.1 million for the ninethree months ended OctoberJuly 31, 2020 which consisted primarily of2020. The primary reasons for the increase in operating income was due to the increase in revenue and decrease in stock-based compensation expense. Withas discussed above.
Our operating income increased by $52.3 million to a net profit of $3.0 million for the exceptionsix months ended July 31, 2021 as compared to a net loss of $49.3 million for the $49,204,508six months ended July 31, 2020. The primary reasons for the increase in operating income was due to the increase in revenue and decrease in stock-based compensation expense, we increased our net loss by $49,261,442 to $49,405,874 for the nine months ending October 31, 2020 from $157,627 for the nine months ending October 31, 2019.
Discontinued Operations
We recorded a loss of $0 and $13,195 from discontinued operations for the nine months ended October 31, 2020 and 2019. We recorded an increase of $13,195 from discontinued operations for the nine months ended October 31, 2019.as discussed above.
Liquidity and Capital Resources
Introduction
During the ninesix months ended OctoberJuly 31, 20202021 we gained $65$0.8 million in cash. Our cash on hand as OctoberJuly 31, 20202021 was $65.
Cash Requirements
We had cash available of $65 as of October 31, 2020.$0.8 million. Based on our revenues, cash on hand and current monthly burn rate, we must rely on financing and the use of cryptocurrencies to fund currentCompany can sustain its operations on a daily basis.going forward.
Sources and Uses of Cash
OperationsOperating Activities
We generated $15,223 inNet cash provided by operating activities was $0.8 million for the ninesix months ended OctoberJuly 31, 2020, as compared2021. We had net income of $3.3 million, which included fair value adjustment to using $8,150cryptocurrencies of $2.4 million.
Net cash provided by operating activities was $0 for the ninesix months ended OctoberJuly 31, 2019.2020. We had net loss of $49.3 million, which included stock-based compensation of $49.2 million.
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Investing Activities
Net cash used in investing activities was $0.2 million for the six months ended July 31, 2021, compared to $0 for the same period in the prior year. During the six months ended July 31, 2021, we purchased $0.3 million of cryptocurrencies and sold $0.1 million of cryptocurrencies.
Financing Activities
Net cash provided by operations consisted primarilyfinancing activities was $0.3 million for the six months ended July 31, 2021, compared to $0 for the same period in the prior year. During the six months ended July 31, 2021, we had proceeds from issuance of common stock of $0.5 million and borrowings of debt of $0.3 million. During the net loss of $49,405,874 offset by non-cash expenses of $49,204,508 in stock-based compensation, $10,886 in imputed interest, and $143,564 realized gain on investment in cryptocurrencies. Additionally, changes in assets and liabilities consisted of increases of $22,845 in accounts payablesix months ended July 31, 2021, we paid off debt to related parties, $18,290 in accounts payable, $250 in prepaid expenses, $55,232 in interest receivable from a related party and $4,449 in accrued interest with an offset of $154,307 in reserves for potential legal settlements.
Financing
We had net cash used in financing activities of $15,158 for the nine months ending October 31, 2020 as compared to a gain of $8,150 for the nine months ending October 31, 2019.
$0.5 million.
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 that we consider material.
Going Concern
Our financial statements are prepared using generally accepted accounting principles,in accordance with GAAP, which contemplatecontemplates the realization of assets and liquidation of liabilities in the normal course of business. Because the business is relatively new and has a short history and relatively few sales, no certainty of continuation can be stated. The accompanying financial statements for the three and ninesix months ended OctoberJuly 31, 2021 and 2020 have been prepared assuming that we will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.
Currently the company has a negative working capital as there have been a significant loss. The large accumulated deficit raises substantial doubt about its ability to continue as a going concern.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
We are a smaller reporting company and therefore, we are not required to provide information required by this Item of Form 10-Q.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms. Disclosure controls and procedures are also designed to ensure that such information is accumulated and communicated to management, including the principal executive officer and principal financial officer, to allow timely decisions regarding required disclosures.
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We carried out an evaluation, under the supervision and with the participation of management, including our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of JulyJanuary 31, 2020.2021. In designing and evaluating the disclosure controls and procedures, management recognizes that there are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures.
Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their desired control objectives. Additionally, in evaluating and implementing possible controls and procedures, management is required to apply its reasonable judgment. Based on the evaluation described above, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this report because we did not document our Sarbanes-Oxley Act Section 404 internal controls and procedures.
As funds become available to us, we expect to implement additional measures to improve disclosure controls and procedures such as implementing and documenting our internal controls procedures.
Changes in internal controls over financial reporting
There have been no changes in our internal control over financial reporting during the nine monthsquarter ended OctoberJuly 31, 20202021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Limitations on the Effectiveness of Controls
A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The Company’s management, including its Principal Executive Officer and its Principal Financial Officer, do not expect that the Company’s disclosure controls will prevent or detect all errors and all fraud. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with associated policies or procedures. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
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The Company is not involved in any legal proceedings which management believes will have a material effect upon the financial condition of the Company, nor are any such material legal proceedings anticipated.
As a smaller reporting company, we are not required to provide the information required by this Item.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
NoneDuring the quarter ended July 31, 2021, the Company issued 50,000 shares of Series A Preferred Stock to Epic.
On July 31, 2021 the Company issued 1,000,000 shares of common stock as part of the Vengar Acquisition.
On June 30, 2021 the Company issued 300,000 shares of common stock to Chris Carter for as part of his employment contract for a three-year period. The shares shall be fully earned upon completion of his three-year contract.
On June 17, 2021 the Company issued 5,000 shares of common stock each to Sophie Grinevald and Bill Regan for services provided.
On June 21, 2021 the Company issued 300,000 shares of common stock as part of the 832 Acquisition.
On June 30, 2021 the Company issued 450,000 shares of common stock as part of the Mercury Acquisition.
On May 23, 2021 the Company issued 75,000 shares of common stock to RedChip Companies, Inc.
On May 19, 2021 the Company issued 5,000 shares of common stock to Sarah Moline for services provided.
On April 12, 2021 Epic exercised the warrant it has and purchased 100,000 shares of common stock in exchange for $100,000. Epic Industry Corp elected to issue the shares in the name of Timothy R Schucker and Anastasia Hawkins JTWROS, the daughter and son-in-law of Michael Hawkins.
On April 22, 2020 the Company converted the following accounts payable into shares of common stock at the rate of $0.75 per share.
Name | Shares Issued | |||
Paul Rosenberg | 130,128 | |||
Brandy Craig | 88,455 | |||
Law Offices of Carl G Hawkins | 8,504 | |||
Thomas G Amon | 19,230 | |||
Total | 246,317 |
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During the quarter ending April 30, 2020 the Company sold 150,000 shares of Series A Preferred Stock to Epic at par value for a total payment of $15. Epic, through its sole shareholder directed the Company to issue 100,000 shares of Series A Preferred stock to Overwatch Partners, Inc., with the remaining 50,000 shares to Epic.
During the quarter ending April 30, 2020 the Company issued 150,000 shares of Series B Preferred stock to Paul Rosenberg in exchange for 60 cryptocurrency ATM machines.
On April 29, 2020 the Company converted 5,000,000 shares of common stock owned by BOTS, Inc., into 500,000 shares of Series B Preferred stock.
Item 3. Defaults Upon Senior Securities
There have been no events that are required to be reported under this Item.
Item 4. Mine Safety Disclosures
There have been no events that are required to be reported under this Item.
There have been no events that are required to be reported under this Item.
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* Furnished herewith.
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Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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Dated: September 14, 2021 |
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| /s/ Michael Hawkins |
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| By: | Michael Hawkins | |
Its: | Chief Financial Officer (Principal Financial Officer) |
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