| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis
of Presentation The
accompanying consolidated financial statements have been prepared in conformity with accounting principals generally accepted in the
United States if America of (“US.GAAP”) as found in the Accounting Standards Codification (“ASC”), and the Accounting
Standards Update (“ASU”) of the Financial Accounting Standards Board (“FASB”) and are expressed in US Dollars.
The consolidated financial statements should be read in conjunction with the notes contained herein as part of the Company’s Annual
Report in its Form 10-K filing under the Securities Exchange Commission. Reclassification Certain
reclassifications have been made to prior periods to conform with current reporting. Basis
of Consolidation The
consolidated statements include the accounts of the Company and its subsidiaries. CurrencyWorks USA Inc. (formerly ICOx USA, Inc.) is
a wholly owned subsidiary. MotoClub and EnderbyWorks, LLC are majority-owned subsidiaries. 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. The
most significant estimates made by management in the preparation of the financial statements relate to the estimates used to calculate
the fair value of certain liabilities, the derivative liability, present value of note payable and note receivable, the valuation of
the investments and any impairment and the net book value of long-lived assets. Management bases its estimates on historical experience
and on other various assumptions that it believes 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. Actual results could
differ materially from such estimates under different assumptions and conditions. Cash
and Cash Equivalents Cash
and cash equivalents include short-term, highly liquid investments, such as cash on account with commercial banks, 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. 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 financial information is 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, 2022 and 2021, 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. MetaWorks
Platforms, Inc. (formerly
CurrencyWorks Inc.) Notes
to Consolidated Financial Statements December
31, 2022 and 2021 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, 2022 or 2021, and have not recognized interest and/or penalties in the
consolidated statement of operations for the years ended December 31, 2022 or 2021. We
are subject to taxation in the U.S. and the state of California. The Company’s tax returns for tax years from 2019 to recent filings
remain subject to potential examination by the tax authorities. 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. The carrying amount of accounts receivable represents
the maximum credit exposure on this balance. Accounts
receivable balances relate to the consulting services business and are reported at their net realizable value. From management’s
best estimate there is no Earnings
per Share The
Company computes earnings (loss) per share (“EPS”) in accordance with ASC 260, “Earnings per Share” which requires
presentation of both basic and diluted EPS on the face of the statement of operations. Basic EPS is computed by dividing net income (loss)
available to common shareholders by the weighted average number of shares outstanding during the period. Diluted EPS gives effect to
all dilutive potential common shares outstanding during the period. In computing diluted EPS, the average stock price for the period
is used in determining the number of shares assumed to be purchased from the exercise of warrants or stock options (Note 10 and Note
16 respectively). Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. On
December 31, 2022 the Company had no convertible debt outstanding, warrants exercisable to 19,807,614 9,513,555 shares
of common stock. On December 31, 2021 the Company had no convertible debt outstanding, warrants exercisable to 18,102,771
shares of common stock and stock options exercisable to 4,759,995 shares
of common stock. For both years the effect of exercisable options and warrants is anti-dilutive and they have been excluded from
dilutive EPS. Stock-Based
Compensation The
Company has adopted FASB guidance on stock-based compensation. Under ASC 718-10-30-2 Stock Compensation, all share-based payments to
employees, including grants of employee stock options, are to be recognized in the income statement based on their fair values. The fair
value of the options is calculated using the Black Scholes valuation model (Note 16). 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. Stock options granted to employees are expensed
over the vesting period of the options. The fair value of stock options is determined on the grant date. Forfeitures
of options are recognized as they occur. Compensation cost previously recognized is reversed on the date of forfeiture for any options
that are forfeited prior to the completion of the requisite service period or vesting period. Cancellation
of an award accompanied by the concurrent grant of (or offer to grant) a replacement award of other valuable consideration is accounted
for as a modification of the terms of the canceled award. The total compensation cost measured on the date of a cancellation and replacement
id the portion of the grant-date fair value of the original award for which the requisite service is expected to be rendered (or has
already been rendered) at that date plus the incremental cost resulting from the cancellation and replacement. A
cancelation of an award that is not accompanied by the concurrent grant of (or offer to grant) a replacement award of other valuable
consideration is accounted for as a repurchase for no consideration. Accordingly, any previously unrecognized compensation cost is recognized
on the cancellation date. MetaWorks
Platforms, Inc. (formerly
CurrencyWorks Inc.) Notes
to Consolidated Financial Statements December
31, 2022 and 2021 2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D) Fair
Value of Financial Instruments The
fair value is an exit price representing the amount that would be received to sell an asset or required to transfer a liability in an
orderly transaction between market participants. As such, fair value of a financial instrument is a market-based measurement that should
be determined based on assumptions that market participants would use in pricing an asset or a liability. A
three-tier fair value hierarchy is established as a basis for considering such assumptions and for inputs used in the valuation methodologies
in measuring fair value:
● Level
1: Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
● Level
2: Observable inputs that reflect quoted prices for identical assets or liabilities in markets that are not active; quoted prices
for similar assets or liabilities in active markets; inputs other than quoted prices that are observable for the assets or liabilities;
or inputs that are derived principally from or corroborated by observable market data by correlation or other means.
● Level
3: Unobservable inputs reflecting our own assumptions incorporated in valuation techniques used to determine fair value. These assumptions
are required to be consistent with market participants assumptions that are reasonably available. The
Company’s financial instruments consist of equity investments, note receivables, derivative liabilities and notes payable. When
determining fair value, whenever possible, the Company uses observable market data, and relies on unobservable inputs only when observable
market data is not available. As of December 31, 2022, and 2021, the Company did not have any level 1 or 2 financial instruments. On
December 31, 2022 and 2021 the company’s level 3 financial instruments were derivative liabilities for warrants issued and outstanding
that were not indexed to the Company’s stock, notes payable and notes receivable valued at their present values and equity investments
in other entities. The following table presents the Company’s assets and liabilities
that are measured at fair value on a non-recurring basis at December 31, 2022. SCHEDULE
OF ASSETS AND LIABILITIES MEASURED AT FAIR VALUE NON RECURRING
Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level2) Significant Unobservable Inputs (Level3)
Assets $ $ $
Notes
Receivable - - 1,250,000
Investments,
related party - - 627
Total - - 1,250,627
Liabilities
Notes
Payable - - 215,465
Total - - 215,465 The following table presents the Company’s assets and liabilities
that are measured at fair value on a non-recurring basis at December 31, 2021.
Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level2) Significant Unobservable Inputs (Level3)
Assets $ $ $
Notes
Receivable - - 1,250,000
Investments,
related party - - 480,780
Total - - 1,730,780
Liabilities
Derivative
Liabilities - - 474,595
Total - - 474,595 Derivative
Liabilities When
the Company issues warrants, it evaluates the proper balance sheet classification of the warrant to determine whether the warrant should
be classified as equity or as a derivative liability on the consolidated balance sheet. In accordance with ASC 815-40, Derivatives and
Hedging – Contracts in the Entity’s Own Equity (ASC 815-40), the Company classifies a warrant as equity if it is indexed
to the Company’s equity and several specific conditions for equity classification are met. A warrant is not considered indexed
to the Company’s equity in general when it contains certain types of exercise contingencies or adjustments to exercise price. If
a warrant is not indexed to the Company’s equity or it has net cash settlement that results in the warrants to be accounted for
under ASC 480, Distinguishing Liabilities from Equity, or ASC 815-40, it is classified as a derivative liability which is carried on
the consolidated balance sheet at fair value with any changes in its fair value recognized currently in the statement of operations.
As of December 31, 2022 and 2021, the Company had warrants that were classified as liabilities and warrants that were classified
as equity. Some
of the warrants issued by the Company have strike prices denominated in Canadian dollars (“CAD”). The Company’s functional
currency is USD. In accordance with ASC 815 and EITF Issue No. 07-5, when the strike price of warrants is denominated in a currency other
than an entity’s functional currency, the warrants would not be considered indexed to the entity’s own stock and would consequently
be evaluated for a derivative liability under the conditions that the strike price is indexed to a foreign currency. The derivative liability
associated with these warrants was valued on the date of issuance and is revalued at each reporting period. Digital
assets The
Company applies accounting for digital assets in accordance with the AICPA Practice Aid “Accounting for and Auditing of
Digital Assets”, the guide is dated as of June 30, 2022, and the SEC issued Staff Accounting Bulletin No. 121, which is
effective for periods after June 15, 2022, which are the current nonauthoritative guidance for accounting for digital assets under
U.S. generally accepted accounting principles (GAAP). The AICPA Practice Aid is non-authoritative guidance that represents the views
of the Digital Assets Working Group and AICPA staff. There is currently no official pronouncement or authoritative guidance on
accounting for digital assets and digital asset transactions. Accordingly digital assets that lack physical substance meet the
definition of intangible assets and would generally be accounted for under FASB ASC 350, Intangibles — Goodwill and Other. The
obligation to safeguard those assets is recorded as a liability at the fair value. The Company holds no digital assets on December
31, 2022, and 2021. Though its business is in the development of digital asset platforms and the creation of non-fungible tokens,
digital asset balances are not regularly used to conduct transactions or held during the year. MetaWorks
Platforms, Inc. (formerly
CurrencyWorks Inc.) Notes
to Consolidated Financial Statements December
31, 2022 and 2021 2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D) Revenue
recognition The
Company recognizes revenue under ASC 606, Revenue from Contracts with Customers. The core principle of the new revenue standard is
that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects
the consideration to which the company expects to be entitled in exchange for those goods or services. The following five steps are
applied to achieve that core principle: Step
1: Identify the contract with the customer Step
2: Identify the performance obligations in the contract Step
3: Determine the transaction price Step
4: Allocate the transaction price to the performance obligations in the contract Step
5: Recognize revenue when the Company satisfies a performance obligation The
transaction price is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods
or services to a customer. The consideration promised in a contract with a customer may include fixed amounts, variable amounts, or both. When
determining the transaction price, the Company also considers the effects of all of the following: ● Variable consideration ●
Constraining estimates of variable consideration ●
The existence of a significant financing component in the contract ●
Noncash consideration ●
Consideration payable to a customer The
Company generates revenues from three main sources, NFT sales, consulting services, and movie distribution. Consulting
Services Consulting
Service revenue is derived from providing professional knowledge and skills for creation of digital assets platforms and advisory services
to third-party customers. The contract and performance obligations are created based on the needs of the customer and the abilities of
the Company to provide the required services. The allocation of the transaction price to the individual performance obligations in the
contract may be specified by task or by phase depending on the work being done. Revenue is recognized upon completion of the performance
obligations. Revenues from ongoing services are recognized ratably over the related period. Revenue is recognized for the creation of
software and web-based platforms upon completion and delivery. NFT
Revenue NFT
revenue is derived from the sale of NFTs. These NFTs are created by the Company’s subsidiaries and are sold through an online sales
platform or through an auction. Revenue is recognized when the Company transfers the ownership of the NFT to the customer. Movie
Distribution Revenue Movie
distribution revenue is derived from the use of the Company’s intangible asset (Note 7). Revenues earned to date are from
nonrefundable minimum guaranteed payments and, were recognized on the date distribution rights were granted to the purchaser.
Future revenues may be recognized from revenue generated by the purchaser or by additional distribution sales. Funds
received for unearned revenue are recognized as deferred revenue on the consolidated balance sheet and are recognized as revenue upon
completion of milestones or specified tasks. 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 MetaWorks
Platforms, Inc. (formerly
CurrencyWorks Inc.) Notes
to Consolidated Financial Statements December
31, 2022 and 2021 |
