| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis
of Presentation The
consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles (“ GAAP Basis
of Consolidation The
consolidated financial statements include the accounts of the Company and its subsidiaries, CurrencyWorks USA Inc. (formerly ICOx USA,
Inc.), MotoClub, and its majority-owned subsidiary, EnderbyWorks, LLC. All intercompany transactions and balances have been eliminated. Use
of Estimates The
preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial
statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates
and these differences could be material. Cash
and Cash Equivalents Cash
and cash equivalents include short-term, highly liquid investments, such as certificates of deposit or money market funds that are readily
convertible to known amounts of cash and have original maturities of three months or less. All cash balances are held by major banking
institutions. The
carrying amounts of cash and cash equivalents, prepaid expenses, short-term loans receivable, trade payables and convertible notes payable
approximate their fair value due to the short-term maturity of such instruments. Contingent
Liabilities The
Company accounts for its contingent liabilities in accordance with ASC No. 450 “Contingencies”. A provision is recorded when
it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. With
respect to legal matters, provisions are reviewed and adjusted to reflect the impact of negotiations, estimated settlements, legal rulings,
advice of legal counsel and other information and events pertaining to a particular matter. As of December 31, 2021 and 2020, the Company
was not a party to any litigation that could have a material adverse effect on the Company’s business, financial position, results
of operations or cash flows. Income
Taxes The
Company follows the liability method of accounting for income taxes. Under this method, deferred income tax assets and liabilities are
recognized for the estimated tax consequences attributable to differences between the financial statement carrying values and their respective
income tax basis (temporary differences). The effect on deferred income tax assets and liabilities of a change in tax rates is recognized
in income in the period that includes the enactment date. CurrencyWorks
Inc. (formerly
ICOx Innovations Inc.) Notes
to Consolidated Financial Statements December
31, 2021 and 2020 2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D) FASB
Accounting Standards Codification Topic 740, Income Taxes (“ASC 740”), clarifies the accounting for uncertainty in income
taxes recognized in the financial statements. ASC 740 provides that a tax benefit from an uncertain tax position may be recognized when
it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation
processes, based on the technical merits of the position. Income tax positions must meet a more-likely-than-not recognition threshold
to be recognized. ASC 740 also provides guidance on measurement, derecognition, classification, interest and penalties, accounting in
interim periods, disclosure and transition. We have determined that the Company does not have uncertain tax positions on its tax returns
for the years 2020, 2018, and prior. Based on evaluation of the 2020 transactions and events, the Company does not have any material
uncertain tax positions that require measurement. Our
policy is to recognize interest and/or penalties related to income tax matters in income tax expense. We had no accrual for interest
or penalties on our consolidated balance sheets at December 31, 2021 or 2020, and have not recognized interest and/or penalties in the
consolidated statement of operations for the years ended December 31, 2021 or 2020. We
are subject to taxation in the U.S. and the state of California. All of our tax years are subject to examination by the U.S. and California
tax authorities due to the carry-forward of unutilized net operating losses. Collectability
of Accounts Receivable In
considering the collectability of accounts receivable, the Company takes into account the legal obligation for payment by the customer,
as well as the financial capacity of the customer to fund its obligation to the Company. Earnings
per Share The
Company computes earnings (loss) per share in accordance with ASC 105, “Earnings per Share” which requires presentation of
both basic and diluted earnings per share on the face of the statement of operations. Basic earnings (loss) per share is computed by
dividing net loss available to common stockholders by the weighted average number of outstanding common shares during the period. Diluted
earnings (loss) per share gives effect to all dilutive potential common shares outstanding during the period. At December 31, 2021, common
shares from the conversion of debt ( nil 8,301,666 12,019,929 3,500,000 Stock-Based
Compensation The
Company has adopted FASB guidance on stock-based compensation. Under FASB ASC 718-10-30-2, all share-based payments to employees, including
grants of employee stock options, to be recognized in the income statement based on their fair values. The fair value of the options
is calculated based off the Black Scholes valuation model (Note 14). The
Company has issued stock options to employees and non-employees. Stock options granted to non-employees for services or performance not
yet rendered would be expensed over the service period or until the goals had been reached. The fair value calculation valued as at the grant date. The stock options
granted to non-employees during the year ended December 31, 2021 were for services to be rendered and, as such, the expense will be amortized
over the service period. CurrencyWorks
Inc. (formerly
ICOx Innovations Inc.) Notes
to Consolidated Financial Statements December
31, 2021 and 2020 2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D) Fair
Value of Financial Instruments The
Company’s financial instruments consist of cash and cash equivalents, convertible notes, and payables. The carrying amount of cash
and cash equivalents and payables approximates fair value because of the short-term nature of these items. When
determining fair value, whenever possible, the Company use observable market data, and relies on unobservable inputs only when observable
market data is not available. As of December 31, 2021, and December 31, 2020, the Company did not have any level 1 or 2 financial instruments.
Please see note 8 for additional information on level 3 fair value of financial instruments. Recent
Accounting Pronouncements In
August 2020, the FASB issued ASU No. 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging
Contracts in Entity s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity s Own Equity Digital
Currency Valuation Digital
currencies consist of cryptocurrency denominated assets and are included in current assets. Digital currencies are carried at their fair
market value determined by an average spot rate of the most liquid digital currency exchanges. On an interim basis, we recognize decreases
in the value of the assets caused by market declines. Subsequent increases in the value of these assets through market price recoveries
during the same fiscal year are recognized in the later interim period, but may not exceed the total previously recognized decreases
in value during the same year. Such unrealized gains or losses resulting from changes the value of the digital currency are recorded
in Other Income, net in the consolidated statements of operations. Gains and losses realized upon sale of digital currencies are also
recorded in Other Income, net in the consolidated statement of operations. CurrencyWorks
Inc. (formerly
ICOx Innovations Inc.) Notes
to Consolidated Financial Statements December
31, 2021 and 2020 2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D) Fair
market value is determined by taking the average spot rate from the most liquid digital currency exchanges. Digital currencies are measured
using level one fair values, determined by taking the rate from market currency exchanges. Digital currency prices are affected by various
forces including global supply and demand, interest rates, exchange rates, inflation or deflation and the global political and economic
conditions. The Company may not be able to liquidate its inventory of digital currency at its desired price if required. A decline in
the market prices for digital currencies could negatively impact the Company’s future operations. The digital currency market is
still a new market and is highly volatile; historical prices are not necessarily indicative of future value; a significant change in
the market prices for digital currencies would have a significant impact on the Company’s earnings and financial position. The
Company did not hold any digital currency at December 31, 2021 and December 31, 2020. Revenue
Recognition Revenue
is recognized in accordance with FASB ASC Topic 606, Revenue Recognition. The Company recognizes revenue when persuasive evidence of
an arrangement exists, the related services are rendered or delivery has occurred. The
Company generates revenues from two main sources, NFT sales and professional services consulting agreements. These arrangements are generally
recognized upon the sale of the NFT through live auctions and online sales or as consulting revenues on a contingent fee basis. There
is no prepayment or retainer required prior to performing services and the entire fees is earned on a contingent basis. The Company also
provides monthly post-business launch support services. The recurring monthly post-business launch support services are recognized as
revenue each month that the subscription is maintained. The Company’s subsidiaries generate revenue from the sale of NFTs that
are auctioned or sold directly. NFT revenue is not recognized until it has been sold. The
Company enters into arrangements for which revenues are contingent upon achieving a pre-determined deliverable or future outcome. Any
contingent revenue for these arrangements is not recognized until the contingency is resolved and collectability is reasonably assured. Differences
between the timing of billings and the recognition of revenue are recognized as either unbilled revenue (a component of accounts receivable)
or deferred revenue on the consolidated balance sheet. Revenues recognized for services performed but not yet billed to clients are recorded
as unbilled revenue. Reimbursable
expenses, including those relating to travel, other out-of-pocket expenses and any third-party costs, are included as a component of
revenues. Typically, an equivalent amount of reimbursable expenses are included in total direct client service costs. Taxes collected
from customers and remitted to governmental authorities are presented in the statement of operations on a net basis. Costs
to obtain contracts are capitalized and amortized over the course of the revenue cycle. Service
costs The
Company’s policy is to defer direct service costs that relate to the earning of contingent fee revenue. These deferred costs are
expensed when the contingent fee revenue is recognized or when the earning the contingent fee revenue is in doubt. When there are
multiple obligations in an agreement or contract, the service costs are recognized based on when it has met the performance obligation
and recognized inline with revenues. CurrencyWorks
Inc. (formerly
ICOx Innovations Inc.) Notes
to Consolidated Financial Statements December
31, 2021 and 2020 |
