TransparentBusiness 10-Q 2022 Q2 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 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 June 30, 2022

OR

☐ 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: 000-56276

Unicoin Inc.

(Exact Name of Registrant as Specified in its Charter)

Delaware	47-4360035
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

228 Park Ave South 16065
New York, New York

(Address of principal executive offices)

Registrant’s telephone number, including area code: (212) 216-0001

TransparentBusiness, Inc.

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, $0.001 par value per share	None	None

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 every Interactive Data File required to be submitted 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 such files). Yes ☐   No ☒

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	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 October 28, 2022, there were 730,637,878 shares of the Registrant’s common stock outstanding.

Table of Contents

		Page
PART I.	FINANCIAL INFORMATION	1
Item 1.	Financial Statements	1
	Condensed Consolidated Balance Sheets (Unaudited)	1
	Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited)	2
	Condensed Consolidated Statement of Stockholders’ Equity (Deficit) (Unaudited)	3
	Condensed Consolidated Statements of Cash Flows (Unaudited)	4
	Notes to Condensed Consolidated Financial Statements (Unaudited)	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	37
Item 4.	Controls and Procedures	39
PART II.	OTHER INFORMATION	40
Item 1.	Legal Proceedings	40
Item 1A.	Risk Factors	40
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	40
Item 3.	Defaults Upon Senior Securities	41
Item 4.	Mine Safety Disclosures	41
Item 5.	Other Information	41
Item 6.	Exhibits	42
Signatures		43

i

CAUTIONARY NOTE ON FORWARD-LOOKING STATEMENTS

Some of the statements contained in this Quarterly Report on Form 10-Q of Unicoin Inc. (formerly known as TransparentBusiness, Inc. and hereinafter referred to as “Unicoin Inc.”, “we”, “our”, or the “Company”) discuss future expectations, contain projections of our plan of operation or financial condition or state other forward-looking information. In this Quarterly Report on Form 10-Q, forward-looking statements are generally identified by the words such as “anticipate”, “plan”, “believe”, “expect”, “estimate”, and the like. Forward-looking statements involve future risks and uncertainties, there are factors that could cause actual results or plans to differ materially from those expressed or implied. These statements are subject to known and unknown risks, uncertainties, and other factors that could cause the actual results to differ materially from those contemplated by the statements. The forward-looking information is based on various factors and is derived using numerous assumptions. A reader, whether investing in the Company’s securities or not, should not place undue reliance on these forward-looking statements, which apply only as of the date of this Quarterly Report on Form 10-Q. Important factors that may cause actual results to differ from projections include, for example:

● the success or failure of Management’s efforts to implement the Company’s plan of operation;

● the ability of the Company to fund its operating expenses;

● the ability of the Company to compete with other companies that have a similar plan of operation;

● the effect of changing economic conditions impacting our plan of operation; and

● the ability of the Company to meet the other risks as may be described in future filings with the SEC.

Readers are cautioned not to place undue reliance on the forward-looking statements contained herein, which speak only as of the date hereof. We believe the information contained in this Quarterly Report on Form 10-Q to be accurate as of the date hereof. Changes may occur after that date. We will not update that information except as required by law in the normal course of our public disclosure practices.

Additionally, the following discussion regarding our financial condition and results of operations should be read in conjunction with the condensed consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q.

ii

PART I-FINANCIAL INFORMATION

Item 1. Financial Statements.

TRANSPARENTBUSINESS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)

	June 30,			December 31,
	2022			2021
ASSETS
Cash and cash equivalents	$	1,844,286		$	1,872,529
Accounts receivable, net
Trade receivables payable in cash		2,328,028			2,221,639
Unicorn Hunters non-cash receivables (Note 4)		8,420,000			4,281,000
Prepaid expenses and other current assets		1,566,620			214,633
Indemnification asset		4,389,727			4,389,727
TOTAL CURRENT ASSETS		18,548,661			12,979,528
Property and equipment, net		54,583			5,322
Goodwill		3,865,695			3,865,695
Intangible assets, net		4,262,649			3,634,679
TOTAL ASSETS	$	26,731,588		$	20,485,224
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Accounts payable	$	1,762,693		$	1,920,087
Income tax payable		90			90
Accrued expenses		2,322,736			2,374,258
Accrued payroll liabilities		637,369			417,300
Deferred revenue		104,790			51,030
ITSQuest tax liability		4,389,727			4,389,727
Short-term debt		919,000			1,216,000
Other current liabilities		464,012			898,298
TOTAL CURRENT LIABILITIES		10,600,417			11,266,790
Deferred income tax liability, net		1,097,049			1,097,049
Unicoin Rights financing obligation (Note 8)		27,348,575			-
TOTAL LIABILITIES		39,046,041			12,363,839
STOCKHOLDERS’ EQUITY (DEFICIT)
Common stock, $0.001 par value; 1,000,000,000 authorized; 772,742,352 and 767,525,220 issued; 734,069,873 and 732,251,471 outstanding, net of treasury stock at June 30, 2022 and December 31 2021, respectively		772,742			767,525
Treasury stock, at cost; 38,672,479 and 35,273,749 shares at June 30, 2022 and December 31, 2021, respectively		(3,054,185	)		(2,714,312	)
Additional paid-in capital		72,777,431			71,041,101
Accumulated deficit		(80,590,620	)		(59,946,592	)
TOTAL TRANSPARENTBUSINESS STOCKHOLDERS’ EQUITY (DEFICIT)		(10,094,632	)		9,147,722
Noncontrolling interest		(2,219,821	)		(1,026,337	)
TOTAL STOCKHOLDERS’ EQUITY (DEFICIT)		(12,314,453	)		8,121,385
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)	$	26,731,588		$	20,485,224

See accompanying notes to the unaudited condensed consolidated financial statements

1

TRANSPARENTBUSINESS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(UNAUDITED)

	Three months ended June 30,						Six months ended June 30,
	2022			2021			2022			2021
REVENUES	$	4,860,714		$	3,900,032		$	13,592,784		$	6,950,463
COST OF REVENUES		9,074,444			7,942,606			12,669,369			10,205,209
GROSS PROFIT (LOSS)		(4,213,730	)		(4,042,574	)		923,415			(3,254,746	)
OPERATING COSTS AND EXPENSES
General and administrative		4,670,846			4,847,114			8,070,650			8,792,819
Sales and marketing		12,458,119			2,764,345			14,206,122			9,617,300
Research and development		126,703			165,227			249,401			293,376
TOTAL OPERATING COSTS AND EXPENSES		17,255,668			7,776,686			22,526,173			18,703,495
LOSS FROM OPERATIONS		(21,469,398	)		(11,819,260	)		(21,602,758	)		(21,958,241	)
Interest income (expense), net		(57,386	)		4,239			(118,845	)		17,847
Other expense, net		(586	)		(870	)		(616	)		(1,287	)
LOSS BEFORE INCOME TAXES		(21,527,370	)		(11,815,891	)		(21,722,219	)		(21,941,681	)
Income tax benefit (expense)		65,309			(7,996	)		(115,293	)		(8,920	)
NET LOSS AND COMPREHENSIVE LOSS	$	(21,462,061	)	$	(11,823,887	)	$	(21,837,512	)	$	(21,950,601	)
Less: net loss attributable to the noncontrolling interest		(2,173,258	)		(1,778,748	)		(1,193,484	)		(2,534,457	)
NET LOSS ATTRIBUTABLE TO TRANSPARENTBUSINESS	$	(19,288,803	)	$	(10,045,139	)	$	(20,644,028	)	$	(19,416,144	)
Net loss per share attributable to TransparentBusiness, basic and diluted	$	(0.03	)	$	(0.01	)	$	(0.03	)	$	(0.03	)
Weighted average common shares outstanding used to compute basic and diluted loss per share		734,018,271			726,375,940			733,516,974			726,742,756

See accompanying notes to the unaudited condensed consolidated financial statements

2

TRANSPARENTBUSINESS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(UNAUDITED)

	Common Stock				Additional Paid-In			Treasury Stock						Accumulated			Transparent Business Stockholders’ Equity			Transparent Business Noncontrolling			Total Stockholders’ Equity
	Shares		Amount		Capital			Shares			Amount			Deficit			(Deficit)			Interest			(Deficit)
Balance as of December 31, 2020		751,489,686	$	751,489	$	35,595,322			(26,379,012	)	$	(1,114,312	)	$	(20,981,710	)	$	14,250,789		$	3,679,513		$	17,930,302
Issuance of common stock		24,333		24		12,976			-			-			-			13,000			-			13,000
Stock-based compensation expense		-		-		97,775			-			-			-			97,775			-			97,775
Exercise of stock options and warrants		800,000		800		(720	)		-			-			-			80			-			80
Common stock issued for services		1,320,740		1,321		(37,544	)		-			-			-			(36,223	)		-			(36,223	)
Net loss		-		-		-			-			-			(9,371,005	)		(9,371,005	)		(755,709	)		(10,126,714	)
Balance as of March 31, 2021		753,634,759	$	753,634	$	35,667,809			(26,379,012	)	$	(1,114,312	)	$	(30,352,715	)	$	4,954,416		$	2,923,804		$	7,878,220
Issuance of common stock		8,995,117		8,995		17,755,563			-			-			-			17,764,558			-			17,764,558
Stock-based compensation expense		-		-		90,938			-			-			-			90,938			-			90,938
Repurchase of common stock (Note 15)		-		-		-			(1,500,000	)		(285,000	)		-			(285,000	)		-			(285,000	)
Exercise of stock options and warrants		108,330		108		(98	)		-			-			-			10			-			10
Common stock issued for services		32,246		32		(65,205	)		-			-			-			(65,173	)		-			(65,173	)
Noncontrolling interest (Note 4)		-		-		-			-			-			-			-			2,500			2,500
Net loss		-		-		-			-			-			(10,045,139	)		(10,045,139	)		(1,778,748	)		(11,823,887	)
Balance as of June 30, 2021		762,770,452		762,769		53,449,007			(27,879,012	)		(1,399,312	)		(40,397,854	)		12,414,610			1,147,556			13,562,166
Balance as of December 31, 2021		767,525,220	$	767,525	$	71,041,101			(35,273,749	)	$	(2,714,312	)	$	(59,946,592	)	$	9,147,722		$	(1,026,337	)	$	8,121,385
Issuance of common stock		398,596		399		1,359,469			-			-			-			1,359,868			-			1,359,868
Stock-based compensation expense		-		-		66,114			-			-			-			66,114			-			66,114
Repurchase of common stock		-		-		-			(3,398,730	)		(339,873	)		-			(339,873	)		-			(339,873	)
Exercise of stock options and warrants		4,478,730		4,479		1,524			-			-			-			6,003			-			6,003
Common stock issued for services		273,702		273		197,348			-			-			-			197,621			-			197,621
Non-cash dividend (Note 9)		-		-		(68,510	)		-			-			-			(68,510	)		-			(68,510	)
Net loss		-		-		-			-			-			(1,355,225	)		(1,355,225	)		979,774			(375,451	)
Balance as of March 31, 2022		772,676,248	$	772,676	$	72,597,046			(38,672,479	)	$	(3,054,185	)	$	(61,301,817	)	$	9,013,720		$	(46,563	)	$	8,967,157
Issuance of common stock		66,104		66		133,935			-			-			-			134,001			-			134,001
Stock-based compensation expense		-		-		50,990			-			-			-			50,990			-			50,990
Non-cash dividend (Note 9)		-		-		(4,540	)		-			-			-			(4,540	)		-			(4,540	)
Net loss		-		-		-			-			-			(19,288,803	)		(19,288,803	)		(2,173,258	)		(21,462,061	)
Balance as of June 30, 2022		772,742,352		772,742		72,777,431			(38,672,479	)		(3,054,185	)		(80,590,620	)		(10,094,632	)		(2,219,821	)		(12,314,453	)

See accompanying notes to the unaudited condensed consolidated financial statements

3

TRANSPARENTBUSINESS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

	Six Months Ended June 30,
	2022			2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(21,837,512	)	$	(21,950,601	)
Adjustments to reconcile net loss to cash used in operating activities:
Stock-based compensation expense		117,427			123,540
Operating expenses paid with Unicoin Rights		7,933,025			-
Noncash consideration from customers of Unicorns, Inc.		(4,139,000	)		-
Impairment of digital assets		617,173			-
Depreciation and amortization expense		178,866			177,367
Changes in operating assets and liabilities:
Trade receivables payable in cash		(106,389	)		(826,078	)
Receivables from affiliates		-			950
Prepaid expenses		(824,531	)		(2,204,518	)
Other assets		(527,456	)		134,202
Accounts payable		(157,394	)		1,078,963
Accrued expenses and payroll liabilities		89,846			4,318,978
Deferred revenue		53,760			(2,183	)
Other liabilities		(434,286	)		450,699
Net cash used in operating activities		(19,036,471	)		(18,698,681	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Repayment of related party promissory note		-			200,000
Purchase of property and equipment		(50,759	)		(2,995	)
Net cash provided by (used in) investing activities		(50,759	)		197,005
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of private placement unsecured notes		48,000			349,846
Payment of short-term debt		(345,000	)		-
Proceeds from sales of Unicoin Rights		18,218,967			-
Proceeds from sales of common stock		1,470,890			17,747,558
Repurchase of common stock		(339,873	)		-
Proceeds from exercise of stock options and warrants		6,003			90
Net cash provided by financing activities		19,058,987			18,097,494
NET DECREASE IN CASH AND CASH EQUIVALENTS	$	(28,243	)	$	(404,182	)
CASH AND CASH EQUIVALENTS—Beginning of period		1,872,529			9,961,817
CASH AND CASH EQUIVALENTS—End of period	$	1,844,286		$	9,557,635
NONCASH INVESTING AND FINANCING ACTIVITIES:
Market value of digital assets received as proceeds from sales of common stock (Notes 5 and 9)	$	22,980		$	30,000
Market value of digital assets received as proceeds from sales of Unicoin Rights (Notes 5 and 8)		1,399,530			-
Common stock received in payment of related party promissory note (1,500,000 shares) (Note 15)		-			285,000
Non-cash dividend of Unicoin Rights (730,503,862 rights) (Notes 8 and 9)		73,050			-

See accompanying notes to the unaudited condensed consolidated financial statements.

4

TransparentBusiness, Inc. AND SUBSIDIARIES

NOTES TO CONDENSED Consolidated FINANCIAL STATEMENTS (UNAUDITED)

AS OF JUNE 30, 2022 AND DECEMBER 31, 2021 AND

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND 2021

NOTE 1 – ORGANIZATION AND OPERATIONS

Description of Business

TransparentBusiness, Inc. (“TransparentBusiness” or the “Company”) was incorporated in the state of Delaware on June 22, 2015. The SaaS (Software-as-a-Service) platform was developed in 2008 by KMGi Group, the predecessor to TransparentBusiness. The platform is designed to increase remote workers’ productivity, protect client budgets from overbilling, allow coordination and monitoring of their remote workforces and provide real-time information on the cost and status of all tasks and projects. The Company markets its services throughout the United States of America.

In addition to its original SaaS business the Company wholly owns two TaaS (Talent-as-a-Service) companies and platforms, SheWorks! and Yandiki, and holds a 51% majority ownership interests in ITSQuest, Inc, (“ITSQuest”) a regional staffing agency. SheWorks! is a talent exchange focused on connecting women seeking freelance or employment opportunities with companies looking for freelancers or employees to fill their needs. Yandiki is also a talent exchange and platform that connects freelance talent with companies looking for leaner, more transparent ways of conducting remote contractual work. ITSQuest, Inc is a regional staffing agency with twelve locations throughout New Mexico and Texas. Customers of ITSQuest are primarily governmental agencies. 

As more fully discussed in Note 4 – Unicorns Acquisition, in April 2021 the Company acquired a 66.67% interest in Unicorns, Inc. (“Unicorns” or “Unicorn Hunters”). Unicorns produces a reality television/streaming show called Unicorn Hunters that showcases private companies seeking to obtain publicity for their private offerings by appearing on the show and attempting to raise capital by advertising their exempt offerings to a wide audience. As discussed in Note 4, the Company consolidated Unicorns prior to the acquisition because it was a Variable Interest Entity (“VIE”) under common control.

Going Concern

These consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) assuming the Company will continue as a going concern. The going concern assumption contemplates the realization of assets and satisfaction of liabilities in the normal course of business.

The Company has incurred net losses of ($21,838) thousand and ($21,951) thousand and used cash in operating activities of ($19,036) thousand and ($18,699) thousand for the six months ended June 30, 2022 and 2021 and has an accumulated deficit of ($80,591) thousand and ($59,947) thousand as of June 30, 2022 and December 31, 2021, respectively, and expects to incur future additional losses. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The Company’s long-term success is dependent upon its ability to successfully raise additional capital, market its existing services, increase revenues, and, ultimately, to achieve profitable operations.

The Company is evaluating strategies to obtain the required additional funding for future operations. These strategies may include, but are not limited to, obtaining equity financing, issuing debt, or entering other financing arrangements, and restructuring of operations to grow revenues and decrease expenses. However, in view of uncertainties in U.S. and global financial markets, the Company may be unable to access further equity or debt financing when needed. As such, there can be no assurance that the Company will be able to obtain additional liquidity when needed or under acceptable terms, if at all.

The consolidated financial statements do not include any adjustments to the carrying amounts and classification of assets, liabilities, and reported expenses that may be necessary if the Company were unable to continue as a going concern.

5

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) and include the accounts of TransparentBusiness, Inc., its wholly owned subsidiaries, SheWorks! and Yandiki, as well as ITSQuest and Unicorns. These entities are consolidated in accordance with Accounting Standards Codification (“ASC”) 810, Consolidations (“ASC 810”). All significant intercompany accounts and transactions have been eliminated in consolidation. For ITSQuest which is 51% owned, the minority interest is reflected in the consolidated financial statements as non-controlling interest (“NCI”). As more fully discussed in Note 4 – Unicorns Acquisition, Unicorns was consolidated prior to it being acquired in April 2021 because it is a VIE under common control. The Unicorns NCI was 100% prior to the April acquisition and 33.33% subsequent to the April 2021 acquisition.

Certain information and note disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. Accordingly, these unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes for the years ended December 31, 2021 and 2020. The unaudited condensed consolidated balance sheet as of December 31, 2021, included herein, was derived from the audited consolidated balance sheet of the Company as of that date.

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions in the consolidated financial statements and accompanying notes. Significant estimates and assumptions made by the Company include: the valuation of Unicoins, valuation of non-cash consideration received from Unicorns customers, including accounts receivable and private company investments, and the associated revenue recognition; valuation of investments in private companies; valuation of Company’s common stock as a private company, valuation of the NCI in ITSQuest; valuation of the ITSQuest contingent divestiture; determination of the fair value of assets acquired and liabilities assumed in the business combination with ITSQuest; determination of the useful lives assigned to intangible assets; determination of the fair value of the ITSQuest indemnification asset and related tax liability; assessments for potential impairment of goodwill and intangible assets including digital assets; assessments of the recoverability of accounts receivable and determination of the fair value of certain stock awards issued. The Company bases these estimates on historical experience and on various other assumptions that management believes to be reasonable, the result of which forms the basis for making judgements about the carrying values of assets and liabilities. Actual results could differ materially from those estimates.

Risks and Uncertainties

The Company is subject to a number of risks that are similar to those which other companies of similar size in its industry are facing, including, but not limited to, the need for additional capital (or financing) to fund operations, competition from substitute products and services from larger companies, protection of proprietary technology, dependence on key customers, dependence on key individuals, and risks associated with changes in information technology.

In January 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus (“COVID-19”) and the risks to the international community. In March 2020, WHO classified the COVID-19 outbreak as a pandemic based on the rapid increase in exposure globally. The outbreak of the COVID-19 pandemic has affected the United States and global economies and may affect the Company’s operations and those of third parties on which the Company relies. While the potential economic impact brought by, and the duration of, the COVID-19 pandemic is difficult to assess or predict, the impact of the COVID-19 pandemic on the global financial markets may reduce the Company’s ability to access capital, which could negatively impact the Company’s short-term and long-term liquidity. The ultimate impact of the COVID-19 pandemic is uncertain and subject to change. As of the date of this report, the Company’s efforts to respond to the challenges presented by the conditions described above have allowed the Company to minimize the impacts of these challenges to its business.

6

Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash and cash equivalents and accounts receivables. The Company’s cash and cash equivalents are held in accounts with major financial institutions, and, at times, exceed federally insured limits. In addition, as more fully described above, the Company has non-cash receivables consisting of options and warrants to purchase common stock in small private companies. The Company also holds digital assets which are more fully described above and in Note 5. Digital asset market values are subject to significant fluctuations based on supply and demand for such digital assets and other factors. The Company’s digital assets are included in the consolidated balance sheets as intangible assets.

During the three months ended June 30, 2022 two customers accounted for 14% and 11% of the Company’s total revenue. These customers accounted for 5% and 6% of total customer receivables, as of June 30, 2022. During the three months ended June 30, 2021 two customers accounted for 11% and 16% of the Company’s total revenue. These customers accounted for 2% and 5% of total customer receivables as of December 31, 2021, respectively. During the six months ended June 30, 2022 two customers accounted for 29% and 10% of the Company’s total revenue. These customers accounted for 36% and 6% of total customer receivables, as of June 30, 2022. During the six months ended June 30, 2021 two customers accounted for 15% and 13% of the Company’s total revenue. These customers accounted for 2% and 5% of total customer receivables as of December 31, 2021, respectively.

The Share Exchange Agreement we entered into in order to acquire a majority stake in ITSQuest contains a contingent divestiture provision whereby if TransparentBusiness does not engage in a public offering of its securities at a price of at least $10 per share on or before December 31, 2022, then TransparentBusiness will be required to divest itself of the acquired ITSQuest equity by returning the same to the founders of ITSQuest, and such founders shall be entitled to retain the shares of TransparentBusiness received pursuant to the Exchange Agreement. Such an event would cause the loss of ITSQuest-associated revenue to TransparentBusiness while resulting in us having issued equity to the ITSQuest founders for only nominal consideration.

Significant Accounting Policies

There have been no material changes to the Company’s significant accounting policies that were disclosed in its audited consolidated financial statements for the years ended December 31, 2021 and 2020. However, the Company has expanded the description of its accounting policy for Unicorn Hunters Revenue and Non-Cash Receivables and Accounting for Investments in Private Companies in Note 4 - Unicorns Acquisition.

Lease Accounting

As more fully discussed in the Company’s audited financial statements for the years ended December 31, 2021 and 2020, in February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). Under ASU 2016-02, entities are required to recognize assets and liabilities for the rights and obligations created by leases on the entity’s consolidated balance sheets for both finance and operating leases. Topic 842 is effective for the Company beginning January 1, 2022 in connection with the issuance of its annual financial statements for the year ended December 31, 2022 and for interim periods beginning with its quarterly financial statements for the three months ended March 31, 2023. Because the standard is effective January 1, 2022, but is not required to be reflected in quarterly financial statements until the first quarter of 2023, the comparative financial statements for the first quarter of 2022 to be included with the financial statements for the first quarter of 2023 may differ from these financial statements as a result of recognition of assets and liabilities for the rights and obligations created by the Company’s leases.

Revenue Recognition

Revenue Sources

The Company primarily derives its revenues from three revenue streams:

1. Subscription Revenue (Software-as-a-Service or “SaaS”) – which are comprised of subscription license fees from customers accessing the Company’s all-in-one cloud-based solution to manage remote workers (“software platform”).

2. Staffing Revenue (Talent-as-a-Service or “TaaS”) – whereby enterprise customers are connected to individuals who are able to assist them in projects.

3. Unicorns Revenue – which generally consists of the fair value of stock options or warrants received as consideration from companies presenting on the Unicorn Hunters show.

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Refer to Note 6 – Segment Information for disaggregated revenue information.

Deferred revenue

The Company had deferred revenue of $104.8 thousand and $51.0 thousand as of June 30, 2022 and December 2021, respectively. The amount of revenue recognized in the first half of fiscal 2022 and 2021, that was included in deferred revenue at the beginning of the periods, was $19.6 thousand and $2.2 thousand, respectively.

Reclassification of Operating Costs and Expenses:

During the three months ended June 30, 2022, the Company reclassified certain operating costs and expenses within the consolidated statements of operations and comprehensive loss. Prior-period amounts were revised to conform with the current presentation. These changes have no impact on the Company’s previously reported consolidated net loss, loss per share, total operating expenses, financial position, or cash flows. The reclassifications result from refinement of the Company’s approach to allocation of operating costs and expenses based on departments. This refined methodology resulted in a reduction of general and administrative expense and increases in sales and marketing expense and research and development.

The classification of Operating Cost and Expenses included in the Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and six months ended June 30, 2022 and June 30, 2021 conforms to the refined methodology described above. However, since the reclassification affects amounts included in the consolidated statements of operations and comprehensive loss for the three months ended March 31, 2022 and 2021 respectively, which were previously reported in Form 10-12GA filed on August 13, 2022, the impact of those changes is presented below:

Schedule of operating costs and expenses
	Three Months Ended March 31, 2022							Three Months Ended March 31, 2021
	As Previously Reported		Adjustments			Reclassified		As Previously Reported		Adjustments			Reclassified
Operating Costs and Expenses:
General and administrative		3,820,788		(420,984	)		3,399,804		3,494,813		450,892			3,945,705
Sales and marketing		1,449,717		298,286			1,748,003		7,312,996		(460,041	)		6,852,955
Research and development		-		122,698			122,698		119,000		9,149			128,149
Total Operating Costs and Expenses		5,270,505		-			5,270,505		10,926,809		-			10,926,809

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NOTE 3 – FAIR VALUE MEASUREMENT

The Company measures the fair value of financial instruments in accordance with ASC 820. ASC 820 defines fair value, establishes a framework for measuring fair value in accordance with U.S. GAAP, and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements, ASC 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three levels, as follows:

Level 1	Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2	Significant other inputs that are directly or indirectly observable in the marketplace.
Level 3	Assets and liabilities whose significant value drivers are unobservable.

Observable inputs are based on market data obtained from independent sources, while unobservable inputs are based on the Company’s market assumptions. Unobservable inputs require significant management judgment or estimation. In some cases, the inputs used to measure an asset or liability may fall into different levels of the fair value hierarchy. In those instances, the fair value measurement is required to be classified using the lowest level of input that is significant to the fair value measurement. Such determination requires significant management judgment.

The following table is a summary of financial assets and liabilities measured at fair value on a recurring basis and their classification within the fair value hierarchy:

As of June 30, 2022

Schedule of fair value assets measured on recurring basis
	Carrying Value		Level 1		Level 2		Level 3		Total
ASSETS
Cash held by financial institutions	$	1,771,543	$	1,771,543	$	-	$	-	$	1,771,543
Money market funds		72,743		72,743		-		-		72,743

As of December 31, 2021

	Carrying Value		Level 1		Level 2		Level 3		Total
ASSETS
Cash held by financial institutions	$	1,299,808	$	1,299,808	$	-	$	-	$	1,299,808
Money market funds		572,721		572,721		-		-		572,721

Assets Measured at Fair Value on a Non-Recurring Basis

As discussed in Note 2, consideration from Unicorns customers generally includes a commitment to issue stock options or warrants from customers who appear on the Unicorn Hunters show. This non-cash consideration is recognized in accounts receivable at the estimated fair values at or near the dates of contract inception using Level 3 inputs. The fair value of these commitments, as well as the options or warrants of private companies, held upon settlement of such receivables, as measured using Level 3 inputs, may fluctuate as discussed in the Company’s accounting policy for private company investments, which is included in Note 4 below. Certain other items such as goodwill, intangible assets, contingent divestiture and NCI resulting from the ITSQuest acquisition are recognized or disclosed at fair value on a non-recurring basis. The Company determines the fair value of these items using Level 3 inputs. There are inherent limitations when estimating the fair value of financial instruments, and the fair values reported are not necessarily indicative of the amounts that would be realized in current market transactions.

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NOTE 4 – UNICORNS ACQUISITION

Unicorns Acquisition

In April 2021, Alex Konanykhin, founder of Unicorns, a Nevada corporation, transferred 50,000,001 shares of common stock to TransparentBusiness out of the 75,000,000 shares it had issued to date. TransparentBusiness became a majority owner of Unicorns, obtaining a 66.67% interest. In addition to the Company’s 66.67% interest in Unicorns, 20,000,000 shares of Unicorns or 26.7% are held by officers and directors of the Company. This consists of 5,000,000 shares or 6.67% held by Alex Konanykhin, CEO of TransparentBusiness, 5,000,000 shares or 6.67% held by Silvina Moschini, President of TransparentBusiness, 2,500,000 shares or 3.33% held by Andrew Winn, CFO of TransparentBusiness and 7,500,000 shares or 10.00% held by Moe Vela, a TransparentBusiness director. The remaining 5,000,000 shares, or 6.67%, are held by Craig Plestis, Executive Producer of the Unicorn Hunters show. Because the same related party shareholder group owned a majority of the voting shares of both companies prior to and after the issuance of shares to TransparentBusiness, Unicorns and the Company are considered to be entities under common control.

Management evaluated whether Unicorns meets the criteria for classification as a VIE or as a voting interest entity (“VOE”) and concluded that Unicorns meets the criteria of a VIE. Management further concluded that the Company is the primary beneficiary of the Unicorns VIE because the Company has the power to direct the activities that most affect its economic performance and further has the obligation to absorb losses and the right to receive benefits that could be significant to the VIE. Accordingly, the Company is required to consolidate Unicorns as a VIE.

Unicorns was consolidated in the Company’s financial statements, prior to it being acquired in April 2021, as an entity under common control with the Company. The Unicorns NCI was 100% prior to the April 2021 acquisition because the Company didn’t own any shares of Unicorns stock. Subsequent to issuance of 66.67% of Unicorns shares to the Company in April 2021, the NCI decreased from 100% to 33.33%.

In accordance with ASC 810 – Consolidations, the Company initially measured the assets and liabilities of Unicorns, including the NCI, at their previous carrying amounts because Unicorns and the Company are under common control.

The Company’s consolidated balance sheets included the following assets and liabilities of Unicorns, after eliminations, as of June 30, 2022 and December 31, 2021, respectively.

Schedule of consolidated balance sheet
	June 30, 2022		December 31, 2021
Assets
Cash and cash equivalents	$	253,757	$	230,059
Accounts receivable, net
Trade receivables payable in cash		6,000		-
Unicorn Hunters non-cash receivables		8,420,000		4,281,000
Prepaid expenses and other current assets		171,633		46,273
Property and equipment, net		48,082		-
Total assets		8,899,472		4,557,332
Liabilities
Accounts payable	$	66,404	$	-
Accrued expenses		62,099		86,996
Total liabilities		128,503		86,996

As part of the agreement in which the Company received 50,000,001 shares of Unicorns stock, the Company extended a line of credit to Unicorns in the amount of $10,000 thousand to fund production of the Unicorn Hunters show and related expenses. Further additional ongoing funding was provided by TransparentBusiness to Unicorns to fund the production related expenses of Unicorn Hunters show. This intercompany loan, which is eliminated in consolidation, totalled $25,345 thousand and $16,775 thousand as of June 30, 2022 and December 31, 2021, respectively.

As more fully discussed in Note 6 – Segment Information, Unicorns is a separate reportable segment for the Company. Refer to Note 6 for revenues, cost of revenues and gross profit related to Unicorns.

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Unicorns NCI

The NCI of Unicorns as of June 30, 2021 was negative $2,491 thousand which consisted of 100% of the loss for the first quarter of 2021 and 33.33% of the net loss for the second quarter of 2021 plus $2.5 thousand which represents 33.33% of the $7.5 thousand par value of Unicorns common stock. The Unicorns net loss for the year ended December 31, 2021 was $12,336 thousand of which $4,608 thousand related to the NCI resulting in a negative NCI balance of $4,606 thousand as of December 31, 2021. The Unicorns net loss for the six months ended June 30, 2022 was $4,089 thousand of which $1,363 thousand related to the NCI resulting in a negative NCI balance of $5,969 thousand as of June 30, 2022.

Unicorn Hunters Revenue and Non-Cash Receivables

Revenue and accounts receivable for Unicorns generally consists of the fair value of stock options or warrants committed from companies that have appeared on the Unicorn Hunters show. The options or warrants underlying the commitments typically have a term of five to ten years and accounts receivable are recorded at the estimated fair value of such options or warrants as determined at contract inception. The estimated fair value of stock options and warrants, expected to be received as consideration, is dependent on the fair value of the underlying equity of each privately held presenting company.

The fair value of such underlying private company equity is determined based on (i) the valuation indicated in a recent round of financing (ii) a recent pre-existing third-party valuation report or (iii) a new third-party valuation report as of or near the date of contract inception. Third-party valuation reports consider factors such as recent financing rounds, third-party financing transactions, discounted cash flow analyses and market-based information, including comparable transactions, trading multiples and other factors based on facts and circumstances specific to each privately held presenting company. For non-cash consideration in the form of “stock options” or “warrants” of the presenting company, the Company, with assistance from third-party valuation advisors, determines the fair value of such consideration using the Black-Scholes option pricing model which, in addition to the fair value of underlying stock, considers the term of the stock options or warrants, exercise price, volatility, interest rate and dividend yield. These are Level 3 estimates under the fair value hierarchy because they involve significant unobservable inputs. The valuation of stock options or warrants committed by Unicorns customers requires management judgement due to the absence of an observable market price for those options or warrants.

Unicorns invoices customers for the number of committed options or warrants, and records the corresponding revenue and accounts receivable, when an episode is distributed for broadcast or streaming. Unicorns receivables are classified as current because the underlying option or warrant certificates are expected to be received within one year of invoicing. Subsequent to issuance of these option or warrant certificates to the Company, the related receivables will be reclassified to a long-term asset account representing investments in private company equity securities.

Accounting for Investments in Private Companies

In accordance with ASC 321 “Investments-Equity Securities” (“ASC 321”), equity securities for which the Company has no significant influence (generally less than a 20% ownership interest), and which do not have readily determinable fair values, are accounted for using the measurement alternative which is at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for identical or a similar investments of the same issuer. All gains and losses on investments in equity securities are recognized in the consolidated statements of operations.

The Company regularly reviews such equity securities for impairment based on a qualitative assessment which includes, but is not limited to (i) significant deterioration in the earnings performance, credit rating, asset quality or business prospects of the investee, (ii) significant adverse changes in the regulatory, economic or technological environment of the investee and (iii) significant adverse changes in the general market condition of either the geographical area or the industry in which the investee operates, (iv) a bona fide offer to purchase, an offer by the investee to sell, or a completed auction process for the same or similar investment for an amount less than the carrying amount of that investment, (v) factors that raise significant concerns about the investee’s ability to continue as a going concern such as negative cash flows from operations, working capital deficiencies, or non-compliance with statutory capital requirements or debt covenants. If an equity security is impaired, an impairment loss is recognized in the consolidated statements of operations equal to the difference between the fair value of the investment and its carrying amount. If such impairment is determined prior to receiving options or warrants to be received as consideration for Unicorns customer contracts, the related loss on impairment is reflected as bad debt expense. As of June 30, 2022, all such commitments to issue options or warrants remain classified in accounts receivable and no impairment or bad debt expense have been recorded to-date.

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NOTE 5 – DIGITAL ASSETS

As more fully discussed in the Company’s audited financial statements for the years ended December 31, 2021 and 2020, the Company records the initial cost basis of digital assets at then-current quoted market prices and presents all digital asset holdings as indefinite-lived intangible assets in accordance with ASC 350, Intangibles—Goodwill and Other. The Company performs an analysis each quarter to identify whether events or changes in circumstances, principally decreases in the quoted prices on active exchanges, indicate that it is more likely than not that our digital assets are impaired. In determining if an impairment has occurred, we consider the quoted price of the digital asset. If the then current carrying value of a digital asset exceeds the fair value so determined, an impairment loss has occurred with respect to those digital assets in the amount equal to the difference between their carrying values and the price determined.

During the three months ended June 30, 2022 and 2021, the Company received digital assets of $270 thousand and zero, respectively, as consideration from certain investors. During the six months ended June 30, 2022 and 2021, the Company received digital assets of $1,423 thousand and $30 thousand, respectively, as consideration from certain investors. These digital assets included Bitcoin (BTC), Ethereum (ETH), Litecoin (LTC), Dai (DAI), USD Coin (USDC) and Bitcoin Cash (BCH). As shown in the tables below, these digital assets were transferred to the Company in exchange for TransparentBusiness common stock or rights to purchase Unicoins issued by the Company. Unicoins are more fully discussed in Note 2 and Note 8.

During the three months ended June 30, 2022 and 2021, the Company recorded $613 thousand and zero, respectively, of impairment losses on digital assets. During the six months ended June 30, 2022 and 2021, the Company recorded $617 thousand and zero, respectively, of impairment losses on digital assets. Impairment losses are included in operating expenses in the consolidated statements of operations.

The table below summarizes the carrying values of the Company’s digital asset holdings as of June 30, 2022 and December 31, 2021:

Schedule of digital assets
	June 30, 2022		December 31, 2021
Bitcoin (BTC)	$	367,016	$	167,795
Ethereum (ETH)		128,150		24,365
Litecoin (LTC)		17,210		3,482
USD Coin (USDC)		508,587		42,331
Dai (DAI)		19,800		-
Bitcoin Cash (BCH)		2,547		-
	$	1,043,310	$	237,973

The table below summarizes the Company’s digital asset activity for the three and six months ended June 30, 2022 and 2021:

Schedule of digital assets activity
	Three Months Ended June 30,					Six Months Ended June 30,
	2022			2021		2022			2021
Beginning balance	$	1,386,407		$	30,000	$	237,973		$	-
Received as consideration in sales of common stock		-			-		22,980			30,000
Received as consideration in sales of Unicoin rights		270,326			-		1,399,530			-
Impairments recorded		(613,423	)		-		(617,173	)		-
Ending balance	$	1,043,310		$	30,000	$	1,043,310		$	30,000

The market value of digital assets, based on quoted prices on active exchanges, was approximately $1,107 thousand and $373 thousand as of June 30, 2022 and December 31, 2021, respectively.

To date, the Company has not sold any digital assets, converted any into fiat currency nor used any as payment to vendors. The Company may use cryptocurrencies as payment to vendors for goods or services from time to time in the future. The Company’s policy is to compute resulting gains or losses by subtracting the then-current carrying value from the realized proceeds or the fair value of cryptocurrencies on the goods or services transaction date or the fair value of the goods or services received in exchange for cryptocurrencies, if more readily determinable. Any such transactions will be handled through Coinbase, the third-party custodian and exchange platform the Company utilizes to store its digital assets and facilitate transactions. The transfer of control and transaction date would be based on the transaction date as indicated in Coinbase exchange platform. The gain or loss will be determined for each digital asset purchase separately in accordance with first in first out (FIFO) method of accounting.

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NOTE 6 – SEGMENT INFORMATION

Operating segments are defined as components of an enterprise for which separate financial information is evaluated regularly by the chief operating decision maker, or decision-making group in deciding how to allocate resources and in assessing performance. The Company evaluates operating results based on measures of performance, including revenues and profit (loss). The Company currently operates in the following three reporting segments: SaaS, TaaS and Unicorn Hunters.

Our reportable segments consist of SaaS, TaaS and Unicorn Hunters. We determine our operating segments based on how the chief operating decision makers (“CODM”) manage the business, allocates resources, makes operating decisions and evaluates operating performance. The chief operating decision makers (“CODM”) are the Chief Executive Officer and the President of the Company. Our chief operating decision makers review financial information presented on a consolidated basis accompanied by information about revenue and cost of revenue by services type along with gross profit for purposes of allocating resources and evaluating financial performance, as such we have disclosed segment information up to gross profit for each operating segment. Furthermore, our revenues are derived from the United States and foreign countries which includes the South American and Europeans regions (“Foreign countries”).

Historically the Company has operated in two segments – SaaS, which consists of operations relative to the Company’s fully integrated all-in-one cloud-based solution to manage remote workers and TaaS, which consists of operations relative to the Company’s staffing service offerings, where Customers are connected to individuals by the Company who are able to assist them in projects.

A third segment was added in 2021, upon acquisition of Unicorns, which consists of operations relative to production and streaming of the Unicorn Hunters show which provides publicity and exposure to customers through their appearances on the Unicorn Hunters show.

The following tables set forth certain reportable segment information relating to where the Company derived its revenue for the three and six months ended June 30, 2022, and 2021:

Schedule of revenue from segments
	Three Months Ended June 30,
	2022						2021
	United States		Foreign countries		Consolidated		United States		Foreign countries		Consolidated
Staffing revenues	$	4,463,870	$	388,823	$	4,852,693	$	3,833,431	$	15,773	$	3,849,204
Subscription revenues		494		7,527		8,021		1,493		49,335		50,828
Unicorn Hunters		-		-		-		-		-		-
Total revenues	$	4,464,364	$	396,350	$	4,860,714	$	3,834,924	$	65,108	$	3,900,032

	Six Months Ended June 30,
	2022						2021
	United States		Foreign countries		Consolidated		United States		Foreign countries		Consolidated
Staffing revenues	$	8,824,134	$	617,786	$	9,441,920	$	6,831,956	$	18,495	$	6,850,451
Subscription revenues		848		11,016		11,864		3,650		96,362		100,012
Unicorn Hunters		-		4,139,000		4,139,000		-		-		-
Total revenues	$	8,824,982	$	4,767,802	$	13,592,784	$	6,835,606	$	114,857	$	6,950,463

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The following tables set forth certain reportable segment information relating to the Company’s operations for the three and six months ended June 30, 2022 and 2021:

Schedule of operations from operations
	Three months ended June 30, 2022
	SaaS		TaaS		Unicorn Hunters			Consolidated
Revenues	$	8,021	$	4,852,693	$	-		$	4,860,714
Cost of revenues		573		3,703,279		5,370,592			9,074,444
Gross profit		7,448		1,149,414		(5,370,592	)		(4,213,730	)

	Three months ended June 30, 2021
	SaaS		TaaS		Unicorn Hunters			Consolidated
Revenues	$	50,828	$	3,849,204	$	-		$	3,900,032
Cost of revenues		27,852		2,985,631		4,929,123			7,942,606
Gross profit		22,976		863,573		(4,929,123	)		(4,042,574	)

	Six months ended June 30, 2022
	SaaS		TaaS		Unicorn Hunters			Consolidated
Revenues	$	11,864	$	9,441,920	$	4,139,000		$	13,592,784
Cost of revenues		870		7,286,086		5,382,413			12,669,369
Gross profit		10,994		2,155,834		(1,243,413	)		923,415

	Six months ended June 30, 2021
	SaaS		TaaS		Unicorn Hunters			Consolidated
Revenues	$	100,012	$	6,850,451	$	-		$	6,950,463
Cost of revenues		44,773		5,231,313		4,929,123			10,205,209
Gross profit		55,239		1,619,138		(4,929,123	)		(3,254,746	)

There were no material transactions between reportable segments during the six months ended June 30, 2022 and 2021.

Assets by reportable segment and operating costs by reportable segment are not presented as the Company does not allocate assets to its reportable segments, nor is such information used by management for purposes of assessing performance or allocating resources.

NOTE 7 – DEBT

As more fully described below, the Company’s short-term debt as of June 30, 2022 and December 31, 2021 totalled $919 thousand and $1,216 thousand, respectively. The Company did not hold any long-term debt as of June 30, 2022 or December 31, 2021.

Unsecured Notes

From June 3, 2021 through November 23, 2021 the Company issued 89 private placement unsecured promissory notes with aggregate principal amount of $1,216 thousand and interest of 20.0% per annum, payable at maturity (the “Unsecured Notes”) resulting in an outstanding balance of $1,216 thousand as of December 31, 2021.

During the six months ended June 30, 2022, additional five Unsecured Notes with aggregate principal amount of $48 thousand were issued and Unsecured Notes with aggregate principal amount of $345 thousand were redeemed resulting in an ending balance of $919 thousand as of June 30, 2022.

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The Unsecured Notes mature one year from issuance unless the holder elects to extend the maturity for one additional year. Prepayment is not permitted. The Unsecured Notes generally rank pari-passu relative to other unsecured obligations. As of June 30, 2022, $871 thousand of Unsecured Notes are due and payable during the second half of 2022 and $48 thousand are due and payable during the first half of 2023, to the extent holders do not elect to extend one additional year.

Unsecured Notes interest expense of $57 thousand $119 thousand was incurred during the three and six months ended June 30, 2022 and was recorded as accrued expenses in the consolidated balance sheets. No interest was incurred during the six months ended June 30, 2021.

No significant third-party financing costs were incurred because the Company managed issuance of the Unsecured Notes internally, without use of an underwriter or trustee. Based on their short duration, the fair value of the Unsecured Notes as of June 30, 2022 and December 31, 2021 approximates the carrying amounts.

NOTE 8 – UNICOIN RIGHTS FINANCING OBLIGATION

The Company is developing a security token called Unicoin (“Unicoins” or “Tokens”) whose value is intended to be supported by equity positions purchased from Unicorn Hunters show participants, as well as equity positions acquired by non-show participants for other services. Such equity positions may be held in a to-be-created investment fund (the “Fund”), to facilitate proper management of the equity portfolio. The intention of the Company is that when equity positions held by the Fund are liquidated through a liquidity event, some or all of the resulting proceeds are to be distributed to holders of the Unicoins.

The Company is offering Unicoin Right Certificates with terms and conditions which are set forth in a confidential private placement memorandum dated March 2022 and subsequently updated in June 2022 (“the Offering”). The Offering is being conducted pursuant to an exemption from U.S. securities registration requirements provided by Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”) and Rule 506(c) thereunder. Each U.S. domiciled investor in Unicoin Rights must be an “accredited investor,” as defined in Rule 501 of the Securities Act.

During the six months ended June 30, 2022, the Company issued rights to acquire 2.7 billion Unicoins in exchange for $17,943 thousand in cash, $1,400 thousand in digital assets (Note 5), $7,894 thousand of services from vendors, $39 thousand of services from employees, contractors and directors and $73 thousand which was recorded as a dividend to company stockholders (Note 9).

As of June 30, 2022, the Company held approximately $276 thousand of cash deposits pursuant to completion of the due diligence process required before issuance of Unicoin Right certificates. This amount is included in accrued liabilities on the condensed consolidated balance sheet and in proceeds from sales of Unicoin Rights on the condensed consolidated statements of cash flows. As discussed in Note 16, additional rights to acquire Unicoins were issued subsequent to June 30, 2022.

The Company accounts for Unicoin Rights by recording a liability representing the amount that management believes the Company would be obligated to pay or refund (i.e., the amount holders have a right to claim and would likely be awarded in settlement) for fair value exchanged (i.e., in the form of cash or services) for rights to receive Unicoins in the future and in the event the Unicoin is never developed and launched. As of June 30, 2022 the outstanding financing obligation related to Unicoin Rights Issued was $27,349 thousand.

As of June 30, 2022 and through the date of filing, the Company has not developed or issued any Unicoins and there is no assurance as to whether, or at what amount, or on what terms, Unicoins will be available to be issued, if ever. As of June 30, 2022, as the Unicoins do not exist, and any amounts received for Unicoins are not considered equity or revenue, management determined that 100% of the obligation of $27,349 thousand is a liability to be settled by through the issuance of Unicoins, or through other means if Unicoins are never issued. The obligation to settle this liability through the exchange of a fixed number of Unicoins, when and if all contingencies are resolved and Unicoins are launched, represents an embedded feature that may result in additional charges to the Company’s consolidated statement of operations upon settlement.

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NOTE 9 – COMMON STOCK

The Company is authorized to issue 1,000,000,000 shares with 772,742,352 shares and 767,525,220 shares of common stock issued and with 734,069,873 shares and 732,251,471 shares outstanding, net of treasury stock, as of June 30, 2022 and December 31, 2021, respectively. Stockholders are entitled to one vote for each share held of record on all matters to be voted on by stockholders. Stockholders have no conversion, pre-emptive, or other subscription rights and there are no sinking fund or redemption provisions applicable to the common stock.

Issuance of Common Stock

For the three months ended June 30, 2022 and 2021, the Company raised cash proceeds of $134 thousand and $17,765 thousand, respectively, through a series of equity funding rounds as follows:

Schedule of issuance of common stock
	Three Months Ended June 30, 2022
Series	Shares			Weighted Average Price per Share		Proceeds
Plus: Stock issues - Round 3b		2		$	0.30	$	1
Plus: Stock issues - Round 4a		60,500			2.00		121,000
Plus: Stock issues - Round 4b		(3,000	)		3.00		(9,000	)
Plus: Stock issues - Round 5		5,698			3.86		22,000
Total stock issues		63,200				$	134,001

	Three Months Ended June 30, 2021
Series	Shares		Weighted Average Price per Share		Proceeds
Plus: Stock issues - Round 3a		95,000	$	0.20	$	19,000
Plus: Stock issues - Round 3d		5,000	$	1.00		5,000
Plus: Stock issues - Round 4a		8,870,279	$	2.00		17,740,558
Total stock issues		8,970,279			$	17,764,558

For the six months ended June 30, 2022 and 2021, the Company raised $1,494 thousand and $17,778 thousand, respectively, through a series of equity funding rounds as presented below. Proceeds for the six months ended June 30, 2022 and 2021 included digital assets of $23 thousand and $30 thousand, respectively.

	Six Months Ended June 30, 2022
Series	Shares		Weighted Average Price per Share		Proceeds
Plus: Stock issues - Round 3b		2	$	0.50	$	1
Plus: Stock issues - Round 4a		90,000		2.00		180,000
Plus: Stock issues - Round 4b		24,001		3.00		72,000
Plus: Stock issues - Round 5		343,311		3.62		1,241,868
Total stock issues		457,314			$	1,493,869

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	Six Months Ended June 30, 2021
Series	Shares		Weighted Average Price per Share		Proceeds
Plus: Stock issues - Round 3a		95,000	$	0.20	$	19,000
Plus: Stock issues - Round 3b		3,333		0.30		1,000
Plus: Stock issues - Round 3d		25,000		0.68		17,000
Plus: Stock issues - Round 4a		8,870,279		2.00		17,740,558
Total stock issues		8,993,612			$	17,777,558

All shares were issued from the Company’s pool of authorized common stock, which rights and privileges are discussed above and were the same for all shares issued to date. Each funding round was available for a defined period with a specified price per share and did not overlap with other funding rounds. Investors that subscribed during a specific round, locked the pricing offered for that round and Company had a limited time to close on the issuance of shares. Once a funding round was fully subscribed and committed, management evaluated capital needs and determined the price for the following round. 

Repurchases of Common Stock

During the six months ended June 30, 2022 the Company repurchased 3,398,730 shares in exchange for $340 thousand. Treasury stock is recorded on the consolidated balance sheets at cost and is reflected as an increase to stockholders’ deficit. The Company intends to resell the treasury stock which was held as of June 30, 2022.

Shares of common stock reserved for future issuance are as follows:

Schedule of common stock reserved
	June 30, 2022		December 31, 2021
Stock options outstanding (Note 10)		55,535,881		58,737,070
Warrants for common stock (Note 11)		10,310,000		11,570,000
Restricted stock units (Note 10)		529,697		788,797

Dividend of Unicoins

In connection with a February 10, 2022 board consent, the Company declared a non-cash dividend of one Unicoin Right per each common share of record held on February 10, 2022. A total of 730,503,862 Unicoin Rights were issued as non-cash dividends aggregating to $73 thousand, or $0.0001 per share and was recorded as a reduction of additional paid-in-capital and an increase to the Unicoin Rights liability in the Company’s consolidated balance sheet. The dividend was recorded as a reduction of additional paid-in-capital because the Company is in a retained deficit position.

Management believes the fair value of the Unicoin rights issued to its shareholders was de minimis given the following:

● The legal terms and conditions (and therefore the rights and obligations of the Company and holders of Unicoins) have not yet been finalized.

● Certain regulatory and other approvals will have to be obtained before the Unicoin can be launched by the Company and the yet-to-be newly formed entity that will ultimately issue Unicoins will be required to go through Registration with the SEC or identify an appropriate exemption from Registration before Unicoins can be actively traded. Obtaining these approvals and achieving appropriate Registration or exemption status may be outside of the Company’s control.

● The underlying business and related private company investment holdings that are intended to support the underlying value of Unicoins is in the early stages of operation and has not yet realized any investment gains and is likely to experience volatility that may be significant.

Future dividends of Unicoin Rights will depend upon factors to be determined as the Company further develops its plans for Unicoins. The Company has not paid any cash dividends to date and does not anticipate or contemplate paying cash dividends in the foreseeable future; management’s intention is to utilize all available funds for further development of the Company’s business.

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NOTE 10 – STOCK-BASED COMPENSATION

Options to purchase common stock are granted at the discretion of the Board of Directors, a committee thereof or, subject to defined limitations, an executive officer of the Company to whom such authority has been delegated.

Non-Plan Equity Incentive Awards

The Company provides discretionary awards such as nonqualified stock options as well as stock awards, any or all of which may be made contingent upon the achievement of performance criteria. The Company at its discretion determines the terms and conditions of the option award, including the time or times at which an option may be exercised, the methods by which such exercise price may be paid, and the form of such payment. Options are generally granted with an exercise price ranging from $0.001 to $2. Upon exercise, the option exercise price may be paid in cash or by the delivery of previously owned shares of common stock, through an option exercise arrangement. The Administrator determines the terms relating to the exercise, cancellation, or other disposition of options and stock awards upon a termination of employment, whether by reason of disability, retirement, death, or any other reason.

Stock Options

The Company recorded zero and $7 thousand of stock-based compensation expense relating to stock option awards during the three months ended June 30, 2022 and 2021, respectively. The Company recorded $11 thousand and $89 thousand of stock-based compensation expense relating to stock option awards during the six months ended June 30, 2022 and 2021, respectively. The Company measures the expense using the Black-Scholes option-pricing model. The Black-Scholes option pricing model requires the use of a number of assumptions, including expected volatility, risk-free interest rate, expected dividends, and expected term. Management estimates the expected term of the award based on the contractual as well as the exercise price of the options. Expected volatility is based on the historic volatility of a basket of certain publicly traded comparable companies. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for the expected term of the unit.

The following is a summary of stock option activity for the six months ended June 30, 2022:

Schedule of stock option activity
	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value
Beginning balance January 1, 2022		58,737,070		$	0.029		7.58	$	58,764,812
Granted		17,541			1.030
Exercised		(3,218,730	)		0.002				3,280,250
Ending balance June 30, 2022		55,535,881			0.031		7.11		48,919,823
Vested and exercisable as of June 30, 2022		55,535,881		$	0.031		7.11	$	48,919,823

The assumptions used to determine stock-based compensation expense for the six months ended June 30, 2022 and 2021 were as follows:

Schedule of assumptions used
	June 30, 2022	June 30, 2021
Fair value of common stock	$0.91 - $0.94	$0.39 - $0.52
Expected term (in years)	10	10
Volatility	58.00% - 59.00%	52.40% - 57.70%
Risk-free rate	2.30% - 2.90%	1.47% - 1.75%
Dividend yield	-	-

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Restricted Stock Units

RSU’s Classified as a Liability

Prior to July 2021 the Company issued Restricted Stock Units (“RSU’s”) in which the Company has an obligation to issue a variable number of shares that are based on a fixed monetary amount. These awards are classified as a liability. The Company measures the cost of employee services received in exchange for a liability classified award based on the fixed dollar value of the awards.

RSU’s Classified as Equity

During 2021, the Company amended certain employment agreements for some of its employees that enabled those employees to receive stock awards worth a fixed dollar amount, either: (i) at end of every month in certain instances; or (ii) on the first anniversary of their respective employments in other instances. The revised employment agreement specifies the maximum number of shares to be issued upon vesting to the respective employees. Equity-classified RSU’s have a grant-date fair value equal to the fair market value of the underlying stock on the grant date less present value of expected dividends. These awards vest immediately.

The following is a summary of RSU activity for the six months ended June 30, 2022:

Schedule of liability and restricted stock units
	Liability Classified			Equity Classified			Total			Weighted Average Grant Date Fair Value
Beginning balance - January 1, 2022		172,247			616,550			788,797
Granted		-			15,135			15,135		$	0.98
Vested		(99,534	)		(174,168	)		(273,702	)
Forfeited		-			(533	)		(533	)
Ending balance - June 30, 2022		72,713			456,984			529,697

The Company recorded $52 thousand and $432 thousand of stock-based compensation expense relating to RSU’s during the three months ended June 30, 2022 and 2021, respectively. The Company recorded $106 thousand and $758 thousand of stock-based compensation expense relating to RSU’s during six months ended June 30, 2022 and 2021, respectively. During the three and six months ended June 30, 2022 and 2021 substantially all stock-based compensation expense was classified as general and administrative expense.

NOTE 11 – WARRANTS

In connection with the execution of multiple Private Placement Memoranda during the years ended December 31, 2018 and 2017, the Company granted sales commission warrants to purchase shares of the Company’s common stock at exercise prices ranging from $0.001 to $1.00 per share with a term of 10 years from the closing date of each offer. These were considered to be share issuance costs and have been recognized in Additional Paid in Capital.

Common stock purchase warrants issued and currently outstanding are recorded at their initial fair value and reported in stockholders’ equity (deficit) as increases to additional paid-in capital. These warrants were reported as equity, rather than liabilities, since (i) the warrants may not be net-cash settled, (ii) the warrant contractually limits the number of shares to be delivered in a net-share settlement, and (iii) the Company has sufficient unissued common shares available to settle outstanding warrants. Subsequent changes in fair value from the warrants’ initial fair value are not recognized as long as the warrants continue to be classified as equity. As of June 30, 2022 and December 31, 2021 all warrants were classified as equity. 

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The table below summarizes warrant activity for the six months ended June 30, 2022:

Schedule of common stock warrants
	Number of Warrants			Weighted- Average Grant-Date Fair Value
Beginning balance as of January 1, 2022		11,570,000		$	0.02
Granted		-			-
Exercised		(1,260,000	)		0.02
Forfeited		-			-
Ending balance as of June 30, 2022		10,310,000		$	0.02

NOTE 12 – NET LOSS PER SHARE

Net loss per common share is calculated in accordance with ASC Topic 260, Earnings Per Share. Basic net loss per share is computed by dividing net loss by the weighted-average number of shares of common stock outstanding during the period. The computation of diluted net loss per share does not include dilutive common stock equivalents in the weighted-average shares outstanding, as the inclusion of common share equivalents would be antidilutive. The common share equivalents consist of stock options, restricted stock units, warrants for common stock, and common stock.

Net loss per share for the three and six months ended June 30 2022 and 2021 was computed as follows:

Schedule of earning per shares basis and diluted
	Three months ended June 30,						Six months ended June 30,
Basic and Diluted:	2022			2021			2022			2021
Numerator:
Net loss attributable to TransparentBusiness per consolidated statements of operations	$	(19,288,803	)	$	(10,045,139	)	$	(20,644,028	)	$	(19,416,144	)
Denominator:
Weighted average common shares outstanding used to compute basic and diluted loss per share		734,018,271			726,375,940			733,516,974			726,742,756
Net loss per common shares, basic and diluted	$	(0.03	)	$	(0.01	)	$	(0.03	)	$	(0.03	)

The following table presents the potentially dilutive shares that were excluded from the computation of diluted net loss per share of common stock attributable to common stockholders, because their effect was anti-dilutive:

Schedule of potentially dilutive shares
	Three months ended June 30,				Six months ended June 30,
	2022		2021		2022		2021
Stock options outstanding (Note 10)		55,535,881		47,285,400		55,535,881		47,285,400
Warrants for common stock (Note 11)		10,310,000		12,570,000		10,310,000		12,570,000
Restricted stock units (Note 10)		529,697		1,034,070		529,697		1,034,070

NOTE 13 – INCOME TAXES

The Company’s effective tax rate was (0.30)% and 0.07% for the three months ended June 30, 2022 and 2021, respectively. The Company’s effective tax rate was 0.53% and 0.04% for the six months ended June 30, 2022 and 2021, respectively. The Company’s estimated effective tax rate differs from the U.S. federal statutory rate of 21%, primarily due to the valuation allowance recorded against the company’s deferred tax assets and the tax expense recorded for ITSQuest’s separate federal income tax return because ITSQuest is not included in the Company’s consolidated U.S. federal income tax return. During the six months ended June 30, 2022 and 2021, there were no significant changes to the total amount of unrecognized tax benefits.

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NOTE 14 – COMMITMENTS AND CONTINGENCIES

From time to time, the Company may be subject to legal proceedings and claims in the ordinary course of business. The Company is currently not aware of any legal proceedings or claims that will have, individually or in the aggregate, a material adverse effect on its consolidated business, financial condition, operation results or cash flows.

The Company engages in operating leases primarily for the purpose of leasing office space to conduct day-to-day operations. Expenses incurred related to operating leases was $140 thousand and $130 thousand for the six months ended June 30, 2022 and 2021, respectively.

Future minimum annual payments required under operating leases as of June 30, 2022 is as follows:

Schedule of future minimum payments operating leases
Years Ended December 31,	Amount
2022 (July through December)	$	116,972
2023		37,229
2024		-
2025		-
2026		-
After 2026		-
Total	$	154,201

The Company has agreed to indemnify its directors and executive officers for costs associated with any fees, expenses, judgments, fines and settlement amounts incurred by any of these persons in any action or proceeding to which any of those persons is, or is threatened to be, made a party by reason of the person’s service as a director or officer, including any action by the Company, arising out of that person’s services as the Company’s director or officer or that person’s services provided to any other company or enterprise at the Company’s request. The Company maintains director and officer insurance coverage that would generally enable the Company to recover a portion of any future amounts paid. The Company may also be subject to indemnification obligations by law with respect to the actions of its employees under certain circumstances and in certain jurisdictions.

NOTE 15 – RELATED PARTY TRANSACTIONS

Unicorns Acquisition

As more fully described in Note 4, in April 2021, Alex Konanykhin, CEO of the Company and founder of Unicorns, issued 50,000,001 shares of Unicorns common stock to TransparentBusiness giving the Company a 66.67% majority interest in Unicorns. As discussed in Note 4, an additional 26.67% of Unicorns shares are held by officers and directors of the Company.

Related Party Promissory Note

On October 24, 2020, the Company entered into a one-year Loan Agreement and Promissory Note (“Loan Agreement”) for $1,700 thousand with the current President of the Company (the “Borrower”). The Loan Agreement accrues interest at 3.06% per annum. The loan was collateralized by 3,400,000 shares of TransparentBusiness common stock owned by Ms. Moschini. Using funds provided by this loan, Ms. Moschini acquired a residential real estate property in Miami, Florida and the Company used the property for corporate purposes. During the six months ended June 30, 2021, $485 thousand of the $1,700 principal balance was repaid through a cash payment of $200 thousand and relinquishment of 1,500,000 shares of TransparentBusiness common stock valued at $0.19 per share based on a third-party valuation report. On July 2, 2021, the remaining principal balance of $1,215 thousand was repaid through relinquishment of an additional 6,394,737 shares which were valued at $0.19 per share based on a third-party valuation report. During the six months ended June 30, 2021 the Company recognized $17 thousand in interest income related to the Loan Agreement. Upon repayment of the loan, the space reverted to Ms. Moschini’s personal use. The receipt of shares was included with repurchases of common stock in the consolidated statement of changes in stockholders’ equity (deficit).

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NOTE 16 – SUBSEQUENT EVENTS

Management has evaluated subsequent events through the date of issuance of these financial statements and has determined that there are no subsequent events outside the ordinary scope of business that require adjustment to, or disclosure in, the financial statements other than those described below.

Name Change

On October 6, 2022, the Company filed an amendment to its Certificate of Incorporation with the Secretary of State of the State of Delaware changing its name from TransparentBusiness, Inc. to Unicoin Inc. The name change was effective as of October 6, 2022.

Deferred Payment Option for Sales of Unicoin Rights and Unicoins Rights Issued

In August 2022 the Company began offering a deferred payment option to investors in its ongoing Unicoin Rights offering. The deferred payment option permits investors to purchase Unicoin Rights immediately and pay for such Rights in five equal annual installments, with the first installment due one year after the date of purchase. Use of the deferred payment option requires that investors provide collateral to the Company having a value, as estimated by the Company’s opinion, equal to 20% of the total purchase price of the purchased rights. Collateral can be in the form of TransparentBusiness common shares owned by the investor, Unicoin Rights already owned by the investor, cash, digital assets or other assets with a demonstrable value, in the Company’s discretion, if such assets can be transferred to the Company or a valid lien on such assets can be secured.

Pursuant to the terms of the installment payment plan, both the pledged collateral and the Unicoin Rights being purchased under the installment plan will be forfeited to the Company if the investor fails to make any of the five annual installment payments. The Company is currently evaluating the accounting for sales of Unicoin Rights under the deferred payment option to determine the potential impact of the installment sales, and the collateral terms, on its financial position, results of operations and cash flows and related disclosures. Subsequent to June 30, 2022, investors signed agreements to purchase approximately 2.0 billion Unicoin Rights under this deferred payment option.

Additionally subsequent to June 30, 2022, the Company issued 83.4 million Unicoin Rights in exchange for consideration of approximately $4,708 thousand including cash of $2,665 thousand, digital assets of $219 thousand and $1,771 thousand in value of services. Additional Unicoin Rights with estimated value of $53 thousand were issued to Company employees and non-employees.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read together with our unaudited condensed consolidated financial statements and related notes which are included elsewhere in this Quarterly Report on Form 10-Q. This discussion may contain forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors. See “Cautionary Note on Forward-Looking Statements”.

Our Company

Unicoin Inc. (formerly known as TransparentBusiness, Inc. and hereinafter the “Company”, “Unicoin Inc.”, “we”, “us”, or “our”) was incorporated in the state of Delaware on June 22, 2015. In 2008, our Software-as-a Service (“SaaS”) platform was developed by KMGi, the precursor to Unicoin Inc., as an internal tool for monitoring and managing computer-based work for the purpose of improving efficiency of both remote and on-site employees and eliminating overbilling by contractors. The SaaS platform has been in use since 2009, initially under the name TransparentBilling, serving KMGi’s internal operations. Unicoin Inc. was never subject to bankruptcy, receivership or similar proceedings.

Unicoin Inc. is an operating and holding company. As an operating company, Unicoin Inc. manages its SaaS software business, which provides for simple and seamless monitoring and management of remote or work-from-home employees. As a holding company, Unicoin Inc. wholly owns two Talent-as-a-Service (“TaaS”) operating companies and platforms – SheWorks! and Yandiki. Yandiki was previously owned by KMGi and Silvina Moschini, each of whom transferred their ownership interests in Yandiki to Unicoin Inc. on January 1, 2018. SheWorks! was founded by Silvina Moschini, who transferred her ownership interest to Unicoin Inc. on January 1, 2018. KMGi transferred intellectual property related to the Unicoin Inc. SaaS platform to Unicoin Inc. in 2018. In November 2020, Unicoin Inc. acquired a 51% majority ownership interest in ITSQuest, Inc, a regional staffing agency founded on September 21, 1994. In April 2021, Transparent Business acquired a 66.67% ownership interest in Unicorns, Inc. (hereinafter “Unicorns” or “Unicorn Hunters”) a media company showcasing private companies seeking to obtain publicity for their private offerings. Unicoin Inc. and its subsidiaries principally operate in North America, South America and Central America. On October 6, 2022, the Company filed an amendment to its Certificate of Incorporation with the Secretary of State of the State of Delaware changing its name from TransparentBusiness, Inc. to Unicoin Inc. The name change was effective as of October 6, 2022.

The organization chart below shows the operating subsidiaries and the interests held in them by the Company:

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The Company has accepted digital assets including Bitcoin (BTC), Ether (ETH), Litecoin (LTC) and USD Coin (USDC) as consideration from certain investors in exchange for equity or debt issued by the Company. The Company has ownership of and control over its digital assets and uses the third-party custodial services of Coinbase Global, Inc (“Coinbase”) which is a publicly-traded company that operates a cryptocurrency exchange platform and provides custodial wallets to hold the digital assets. Coinbase provides us protection through dual authentication security. Access is controlled by dual authentication to separate authentication from account access so that two authorized individuals are required to access our accounts. Management monitors transaction and account balances through the Coinbase client portal, as applicable. We also intend to use Coinbase to facilitate the management of Unicoins, which are described below, upon development and launch.

Unicoin Inc. is also developing a security token called Unicoin (“Unicoins” or “Tokens”), whose value is intended to be supported by the equity positions purchased from Unicorn Hunters show participants, as well as equity positions acquired by non-show participants for other services. Such equity positions may be held in a to-be-created investment fund (the “Fund”), to facilitate proper management of the equity portfolio. The intention of the Company is that when equity positions held the Fund are liquidated through a liquidity event, some or all of the resulting proceeds are to be distributed to holders of Unicoins. The Company is currently engaged in private placement of rights to acquire Unicoins, upon completion of their technological and legal development, and the funds being raised in such rights offering are to be used to fund the development and launch of Unicoins, as well as creating worldwide brand awareness of Unicoins. The Unicoins project is currently being undertaken by Unicoin Inc., but may in the future be transferred to a to-be-formed subsidiary of Unicoin Inc.. The private placement is being conducted pursuant to an exemption from U.S. securities registration requirements provided by Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”) and Rule 506(c) thereunder.

We may accept certain cryptocurrencies, such as Bitcoin (BTC), Ether (ETH), Litecoin (LTC) and USD Coin (USDC) among others, as payment for the purchase of Unicoins. The Company intends to hold these cryptocurrencies without converting into fiat currencies, in custodial wallets through Coinbase. Upon future liquidity needs, through Coinbase, the Company could pay a vendor for goods or services or convert the digital assets to a fiat currency, using the proceeds for general business operational purposes.

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Key Factors and Measures We Use to Evaluate Our Business

Sources of Revenue

The Company primarily derives its revenues from three revenue streams:

1. Subscription Revenue (Software-as-a-Service or “SaaS”) – which are comprised of subscription license fees from customers accessing the Company’s all-in-one cloud-based solution to manage remote workers (“software platform”).

2. Staffing Revenue (Talent-as-a-Service or “TaaS”) – whereby enterprise customers are connected to individuals who are able to assist them in projects.

3. Unicorns Revenue – which generally consists of the fair value of private company stock options or warrants, committed to be granted to the Company, as consideration for the right to present and promote those private companies on the Unicorn Hunters show.

SaaS Revenue. For SaaS contracts, the typical subscription term is one year or less and the Company generally invoices its customers at the start of the subscription period when access to the software platform is provided. Amounts that have been invoiced are recorded in accounts receivable and deferred revenue and revenue is recognized over time.

TaaS Revenue. For TaaS contracts, the Company’s staffing contracts are typically for a duration of less than a year and are either on a fixed hourly rate basis or on fixed cost basis billed upon satisfaction of respective milestones. The Company typically invoices its TAAS customers at the end of each month in cases where the contracts involve billing on fixed hourly rates and/or once milestone is reached. An over-time method is used to measure progress because the Company’s obligation is to provide continuous service over the contractual period where fixed hourly rate billing is involved. For time-and-materials contracts, revenue from contracts with customers is recognized in the amount to which the Company has a right to invoice, when the services are rendered by the Company’s remote workers in such cases. For milestone-based contracts, revenue is recognized over time using an output method based upon milestones achieved. Revenue is recognized once a milestone is reached. Milestones reached represent work performed and thereby best depicts the transfer of control to the customer.

Unicorns Revenue. For Unicorns contracts, customers are billed when an episode is distributed for broadcast or streaming. The full amount of revenue is recognized when an episode is distributed on the Unicorn Hunters website.

Gross Profit

We define gross profit as the difference between total revenue and cost of revenue.

Costs of revenue include salaries, and personnel compensation costs, associated with the Company’s SaaS and TaaS personnel, website hosting and other costs including providing technical support, materials, and supplies.

For Unicorns, cost of revenue includes salaries and personnel compensation costs as noted for SaaS and TaaS but also includes third party costs for the production team, celebrity hosts and travel. The Company evaluates if Unicorn Hunters show production costs are expected to be recovered. Costs are capitalized if expected to be recovered and otherwise are expensed as incurred. Any such capitalized costs are expensed when the related show is distributed on the Unicorn Hunters website.

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Operating Expenses

Research and development expenses. Our research and development team is focused on maintaining and improving our software and platform, enabling customers to derive efficiencies while enhancing functionality. Research and development expenses consist primarily of personnel-related costs for our development team, including salaries and bonuses, benefits and stock-based compensation expense for research, design and development activities.

Sales and marketing expenses. Sales and marketing expense principally consists of third-party marketing, advertising, and branding in addition to compensation and benefits of the Company’s own marketing personnel.

General and administrative expenses. Our general and administrative expenses primarily consist of costs associated with corporate departments, primarily salaries and benefits, rent and utilities, accounting and legal services, and travel and entertainment.

Global Pandemic Conditions

The coronavirus pandemic has given rise to increased remote work for millions of companies around the world. Millions of entrepreneurs, managers, and leaders are making a major shift to home office models without protocols, workflows, and tools to support the management of a remote workforce. Our platform is designed to increase remote workers´ productivity, protect client budgets from overbilling, allow coordination and monitoring of their remote workforce and provide real-time information on the cost and status of all tasks and projects. As a result, we expect a positive impact to our businesses, from both a SaaS and TaaS point of view, stemming from increased remote working opportunities and the need to manage such remote working environment and conditions.

Economic and Labor Trends

Demand for our talent pool, consultants and growth of placement services are dependent upon general economic and labor trends. We believe that the Company is well positioned in the current macroeconomic environment, particularly as economies start to reopen and demand for services increase. We expect greater geographical work flexibility, the legacy of the coronavirus pandemic, to continue and help drive business growth as travel restrictions may be slow to be lifted. A Gartner survey revealed that 74% of CFO’s intend to shift some employees to remote work permanently, post COVID-19.

Demand for Diversity and Demographic Changes

Diversity and talent form the bedrock of our company. We help customers drive diversity by connecting them to a talent pool of professional women through our SheWorks! business. We believe that female engagement in the workplace will increase and become a major feature of the corporate environment going forward as female workforce participation and higher education opportunities increase.

Dynamic and evolving technology

The ability to respond in time to technology trends and new developments is a key determinant of our business and operational performance. We have a clearly focused technology roadmap that introduces new functionality and features within our platform, thereby ensuring a dynamic and evolving product experience. We believe this will widen our platform’s appeal to new customers, while creating potential for expanded use by existing customers, resulting in greater revenue growth opportunities.

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Business Acquisitions

ITSQuest, Inc.

We acquired ITSQuest as an information technology staffing company, providing staffing services and solutions.

Total consideration paid on the closing date was $3,800 thousand. Equity sources of funding included 10,000,000 shares of the Company’s common stock to the Sellers at a value of $1,900 thousand and an estimated contingent divestiture feature at a value of $1,900 thousand. As of the closing date, ITSQuest was responsible for an outstanding tax liability in the amount of $4,390 thousand. As result of the tax liability, under the Share Exchange Agreement (“SEA”), the Company will withhold in reserve 3,500,000 of the 10,000,000 shares of common stock until the liability has been settled. These shares will be held in reserve or subject to an agreed-upon Escrow Agreement.

As it relates to the contingent divestiture, in the event that Unicoin Inc. does not conduct a registered public offering of its Common Stock in which the Unicoin Inc. Shares issued to ITSQuest pursuant to the agreement are registered with the SEC and listed for trading on a national securities exchange in the United States, with an initial listing price of at least $10 per share, on or before December 31, 2022, Unicoin Inc. shall transfer to ITSQuest all of Unicoin Inc.’s right, title and interest in the Company Shares, including any Unicoin Inc. Shares that remain subject to the escrow agreement, thus completely divesting itself of all ownership in ITSQuest. Therefore, the Company recorded an estimated contingent divestiture equity of $1,900 thousand. The estimate was calculated by applying a probability model using expected values. The most significant assumption utilized in this model is the probability related to achieving the $10 per share IPO, which had a probability of 0%. In addition, the other significant estimate relates to the estimated value of the stock issued.

As of the acquisition date the fair value of the noncontrolling interest in the net assets acquired was approximately $3,730 thousand. We utilized the Guideline Public Company Method that uses business enterprise value multiples from data on comparable public companies. The selected multiple used to calculate the fair value of ITSQuest noncontrolling interest was based on several considerations such as the growth prospects of the Company. A 10% control premium was accounted for to reflect the impact on an asking price for a controlling interest in the Company based on management’s judgement.

Unicorns, Inc.

In April 2021, Alex Konanykhin, founder of Unicorns, a Nevada corporation, issued 50,000,001 shares of Unicorns’ common stock to Unicoin Inc. out of the 75,000,000 shares it had issued to date. Unicoin Inc. became a majority owner of Unicorns, obtaining a 66.67% interest. In addition to the Company’s 66.67% interest in Unicorns, 20,000,000 shares of Unicorns or 26.67% are held by officers and directors of the Company. This consists of 5,000,000 shares or 6.67% held by Alex Konanykhin, CEO of Unicoin Inc., 5,000,000 shares or 6.67% held by Silvina Moschini, President of Unicoin Inc., 2,500,000 shares or 3.33% held by Andrew Winn, CFO of Unicoin Inc. and 7,500,000 shares or 10.00% held by Moe Vela. The remaining 5,000,000 shares, or 6.66%, are held by Craig Plestis & Chris Wagner, Executive Producers of the Unicorn Hunters show. As such, Unicorns and the Company are under common control.

Major operations in Unicorns were initiated after the year ended December 31, 2020. Unicorns produces a reality television/streaming show called Unicorn Hunters that showcases private companies seeking to obtain publicity for their private offerings by appearing on the show and attempting to raise capital by advertising their exempt offerings to a wide audience. The revenue consideration generally consists of the fair value of stock options or warrants committed from companies that have appeared on the Unicorn Hunters show. Non-cash consideration is recognized at the estimated fair value at or near the date of contract inception.

27

Results of Operations

Comparison of the Six Months Ended June 30, 2022 to the Six Months Ended June 30, 2021

The following table summarizes key components of our results of operations for the periods indicated, both in dollars and as a percentage of our sales.

We derived the condensed consolidated statements of operations and comprehensive loss for the six months ended June 30, 2022 and 2021 from our condensed consolidated financial statements, respectively. Furthermore, our condensed consolidated statements of operations include the post-acquisition period activity for ITSQuest and Unicorns. Our historical results are not necessarily indicative of the results that may be expected in the future.

	Six months ended June 30,
	2022			% of Total Revenue			2021			% of Total Revenue
REVENUES:
Staffing revenues	$	9,441,920			69	%	$	6,850,451			99	%
Subscription revenues		11,864			-			100,012			1	%
Unicorns revenues		4,139,000			30	%		-			-
Total Revenues		13,592,784			100	%		6,950,463			100	%
COST OF REVENUES:
Staffing cost of revenues		7,286,086			54	%		5,231,313			75	%
Subscription cost of revenues		870			-			44,773			1	%
Unicorns cost of revenues		5,382,413			40	%		4,929,123			71	%
Total Cost of Revenues		12,669,369			93	%		10,205,209			147	%
GROSS PROFIT (LOSS)		923,415			7	%		(3,254,746	)		(47	)%
OPERATING COSTS AND EXPENSES
General and administrative		8,070,650			59	%		8,792,819			127	%
Sales and marketing		14,206,122			105	%		9,617,300			138	%
Research and development		249,401			2	%		293,376			4	%
TOTAL OPERATING COSTS AND EXPENSES		22,526,173			166	%		18,703,495			269	%
LOSS FROM OPERATIONS		(21,602,758	)		(159	)%		(21,958,241	)		(316	)%
Interest income (expense), net		(118,845	)		(1	)%		17,847			-
Other expense, net		(616	)		-			(1,287	)		-
LOSS BEFORE INCOME TAXES		(21,722,219	)		(160	)%		(21,941,681	)		(316	)%
Income tax expense		(115,293	)		(1	)%		(8,920	)		-
NET LOSS AND COMPREHENSIVE LOSS		(21,837,512	)		(161	)%		(21,950,601	)		(316	)%
Less: net income (loss) attributable to the noncontrolling interest		(1,193,484	)		(9	)%		(2,534,457	)		(36	)%
NET LOSS ATTRIBUTABLE TO THE COMPANY	$	(20,644,028	)		(152	)%	$	(19,416,144	)		(279	)%

28

Revenues

The following table presents our revenue for the periods indicated.

	Six months ended June 30,
	2022		2021		Change ($)			Change (%)
TAAS revenues	$	9,441,920	$	6,850,451	$	2,591,469			38	%
SAAS revenues		11,864		100,012		(88,148	)		(88	)%
Unicorns revenues		4,139,000		-		4,139,000			N/A
Total Revenues	$	13,592,784	$	6,950,463	$	6,642,321			96	%

Total revenues increased by $6,642 thousand, or 96%, to $13,593 thousand for the six months ended June 30, 2022, from $6,950 thousand for the six months ended June 30, 2021.

TaaS. TAAS revenues increased by $2,591 thousand, or 38%, to $9,442 thousand for the six months ended June 30, 2022, from $6,850 thousand for the six months ended June 30, 2021. The increase was primarily due to increases in ITSQuest and SheWorks related revenues of $1,749 thousand and $758 thousand, respectively, for the six months ended June 30, 2022. The increase in ITSQuest was mainly because the State of New Mexico was still in a COVID-19 related lockdown during the six months ended June 30, 2021, which negatively impacted our ability to generate revenues in relation to our contracts with customers located in the State of New Mexico. COVID-19 related lockdowns had dissipated or were not in effect during the six months ended June 30, 2022, which resulted in a higher demand for ITSQuest staffing services in those locations as compared to the same period in the prior year. The increase in SheWorks was a result of increased female engagement in the workplace, which we believe will increase and become a continuing trend in the corporate environment going forward as female workforce participation and higher education opportunities increase.

SaaS. Subscription revenues decreased by $88 thousand, or 88% to $12 thousand for the six months ended June 30, 2022. The decrease was mainly due to lower renewal rates.

Unicorns. Unicorns revenues were $4,139 thousand, for the six months ended June 30, 2022, compared to $0, for the six months ended June 30, 2021. Unicorns recognizes revenues when an episode of Unicorn Hunters is distributed for broadcast or streaming. Unicorns revenues of $4,139 thousand for the six months ended June 30, 2022, corresponded to the two episodes that were distributed during the six months ended June 30, 2022. The Company distributed four episodes during the six months ended June 30, 2021; however, as part of initial brand building campaign, no revenue was generated by these four episodes.

Cost of Revenues

The following table presents our cost of revenues for the periods indicated.

	Six months ended June 30,
	2022		2021		Change ($)			Change (%)
TAAS cost of revenues	$	7,286,086		5,231,313		2,054,773			39	%
SAAS cost of revenues		870		44,773		(43,903	)		(98	)%
Unicorns cost of revenues		5,382,413		4,929,123		453,290			9	%
Total Cost of Revenues	$	12,669,369	$	10,205,209	$	2,464,160			24	%

Total cost of revenues increased by $2,464 thousand, or 24%, to $12,669 thousand for the six months ended June 30, 2022.

29

TaaS. TAAS cost of revenues increased by $2,055 thousand, or 39%, to $7,286 thousand. The increase was mainly due to a proportional increase in TAAS revenues.

Unicorns. Unicorns cost of revenues increased by $453 thousand or 9%, to $5,382 thousand for the six months ended June 30, 2022. Unicorn Hunters produced 5 episodes during the six months ended June 30, 2022, none of which were released by June 30, 2022. Unicorn Hunters produced 5 episodes during the six months ended June 30, 2021, of which 4 episodes were distributed during that same period. Per the accounting policy, Unicorns capitalizes production costs, to the extent the Company expects to recover such costs. Any such capitalized costs are expensed when the related show is distributed on the Unicorn Hunters website. As of Unicorns acquisition date in April 2021, June 30, 2021, December 31, 2021 and June 30, 2022, the Company did not capitalize any costs of revenues based on the uncertainty as to whether the costs of such episodes was recoverable during the Company’s start-up phase.

General and administrative

General and administrative expenses decreased by $722 thousand, or 8%, to $8,071 thousand for the six months ended June 30, 2022. The decrease was primarily due to a decrease in wages and salaries of $548 thousand, a decrease in accounting service of $1,185 thousand and a decrease in stock-based compensation of $733 thousand. These decreases were partially offset by an increase in contractors and professional services of $730 thousand, an increase in conference and convention costs of $546 thousand and an increase in travel and entertainment of $474 thousand for the six months ended June 30, 2022.

Sales and marketing

Sales and marketing expenses increased by $4,589 thousand, or 48%, to $14,206 thousand for the six months ended June 30, 2022. Unicorns was acquired midway through the six months ended June 30, 2021, which resulted in an increase in sales marketing cost when compared to the six months ended June 30, 2022 of $1,268 thousand. In addition, the Company recorded expenses of $1,014 thousand in relation to advertising and marketing services paid in exchange for Unicoin Rights during the six months ended June 30, 2022, there were no such expenses incurred during the six months ended June 30, 2021. The remaining increase was primarily due to increases in use of third-party marketing, advertising, and branding in addition to compensation and benefits of the Company’s own marketing personnel.

Research and development

Research and development expenses decreased by $44 thousand, or 15%, to $249 thousand for the six months ended June 30, 2022. Research and development mainly consist of personnel related costs such as salaries and benefits and stock-based compensation for research, design and development. Internally developed software costs for internal use are not material and expensed as they are incurred.

Interest income (expense), net

Interest income (expense), net increased by ($137) thousand to ($119) thousand for the six months ended June 30, 2022. The increase was primarily due to interest expense of $119 thousand and $1 thousand during the six months ended June 30, 2022 and 2021, respectively, in relation to the unsecured notes, the majority of which were issued after June 30, 2021. Interest income of $18 thousand during the six months ended June 30, 2021, was earned in connection to a related party promissory note.

Provision for Income Taxes

	Six months ended June 30,
	2022			2021			Change ($)			Change (%)
Income tax expense	$	(115,293	)	$	(8,920	)	$	(106,373	)		1,193	%
Effective tax rate		0.53	%		0.04	%

Income tax expense was $115 thousand for the six months ended June 30, 2022, compared to $9 thousand for the six months ended June 30, 2021. The increase in income tax expense was due to an increase in effective tax rate from 0.04% during the six months ended June 30, 2021 to 0.53% during the six months ended June 30, 2022. The increase in effective tax rate for the six months ended June 30, 2022, as compared to the same period in 2021 was primarily since ITSQuest files tax returns separate from Unicoin Inc. and is not able to utilize Unicoin Inc. net operating losses.

30

Comparison of the Three Months Ended June 30, 2022 to the Three Months Ended June 30, 2021

The following table summarizes key components of our results of operations for the periods indicated, both in dollars and as a percentage of our sales.

We derived the condensed consolidated statements of operations and comprehensive loss for the three months ended June 30, 2022 and 2021 from our condensed consolidated financial statements, respectively. Furthermore, our condensed consolidated statements of operations include the post-acquisition period activity for the ITSQuest and Unicorns. Our historical results are not necessarily indicative of the results that may be expected in the future.

	Three months ended June 30,
	2022			% of Total Revenues			2021			% of Total Revenues
REVENUES
Staffing revenues	$	4,852,693			100	%	$	3,849,204			99	%
Subscription revenues		8,021			-			50,828			1	%
Unicorns revenues		-			-			-			-
Total Revenues		4,860,714			100	%		3,900,032			100	%
COST OF REVENUES
Staffing cost of revenues		3,703,279			76	%		2,985,631			77	%
Subscription cost of revenues		573			-			27,852			1	%
Unicorns cost of revenues		5,370,692			110	%		4,929,123			126	%
Total Cost of Revenues		9,074,444			187	%		7,942,606			204	%
GROSS PROFIT (LOSS)		(4,213,730	)		(87	)%		(4,042,574	)		(104	)%
OPERATING COSTS AND EXPENSES
General and administrative		4,670,846			96	%		4,847,112			124	%
Sales and marketing		12,458,119			256	%		2,764,347			71	%
Research and development		126,703			3	%		165,227			4	%
TOTAL OPERATING COSTS AND EXPENSES		17,255,668			355	%		7,776,686			199	%
LOSS FROM OPERATIONS		(21,469,398	)		(442	)%		(11,819,260	)		(303	)%
Interest income (expense), net		(57,386	)		(1	)%		4,239			-
Other expense, net		(586	)		-			(870	)		-
LOSS BEFORE INCOME TAXES		(21,527,370	)		(443	)%		(11,815,891	)		(303	)%
Income tax benefit (expense)		65,309			1	%		(7,996	)		-
NET LOSS AND COMPREHENSIVE LOSS		(21,462,061	)		(442	)%		(11,823,887	)		(303	)%
Less: net loss attributable to the noncontrolling interest		(2,173,258	)		(45	)%		(1,778,748	)		(46	)%
NET LOSS ATTRIBUTABLE TO THE COMPANY	$	(19,288,803	)		(397	)%	$	(10,045,139	)		(258	)%

31

Revenues

The following table presents our revenue for the periods indicated.

	Three months ended June 30,
	2022		2021		Change ($)			Change (%)
TAAS revenues	$	4,852,693	$	3,849,204	$	1,003,489			26	%
SAAS revenues		8,021		50,828		(42,807	)		(84	)%
Unicorns revenues		-		-		-			-
Total Revenues	$	4,860,714	$	3,900,032	$	960,682			25	%

Total revenues increased by $961 thousand, or 25%, to $4,861 thousand for the three months ended June 30, 2022, from $3,900 thousand for the three months ended June 30, 2021.

TaaS. TAAS revenues increased by $1,003 thousand, or 26%, to $4,853 thousand for the three months ended June 30, 2022, from $3,849 thousand for the three months ended June 30, 2021. The increase was primarily due to increases in SheWorks and ITSQuest related revenues of $527 thousand and $430 thousand, respectively, for the three months ended June 30, 2022. The increase in ITSQuest was mainly because the State of New Mexico was still in a COVID-19 related lockdown during the three months ended June 30, 2022, which negatively impacted our ability to generate revenues in relation to our contracts with customers located in the State of New Mexico. COVID-19 related lockdowns had dissipated or were not in effect during the three months ended June 30, 2022, which resulted in a higher demand for ITSQuest staffing services in those locations as compared to the same period in the prior year. The increase in SheWorks was a result of increased female engagement in the workplace, which we believe will increase and become a continuing trend in the corporate environment going forward as female workforce participation and higher education opportunities increase.

SaaS. Subscription revenues decreased by $43 thousand, or 84% to $8 thousand for the three months ended June 30, 2022. The decrease was mainly due to lower renewal rates.

Unicorns. Unicorns recognizes revenues when an episode of Unicorn Hunters is distributed for broadcast or streaming. There were no episodes distributed during the three months ended June 30, 2022. The Company distributed four episodes during the three months ended June 30, 2021; however, as part of a brand building campaign, no revenue was generated during the show’s first four episodes.

Cost of Revenues

The following table presents our cost of revenues for the periods indicated.

	Three months ended June 30,
	2022		2021		Change ($)			Change (%)
TAAS cost of revenues	$	3,703,279		2,985,631		717,648			24	%
SAAS cost of revenues		573		27,852		(27,279	)		(98	)%
Unicorns cost of revenues		5,370,592		4,929,123		441,469			9	%
Total Cost of Revenues	$	9,074,444	$	7,942,606	$	1,131,838			14	%

Total cost of revenues increased by $1,132 thousand, or 14%, to $9,074 thousand for the three months ended June 30, 2022.

32

TaaS. TAAS cost of revenues increased by $718 thousand, or 24%, to $3,703 thousand. The increase was mainly due to a proportional increase in TAAS revenues.

SaaS. Subscription revenues decreased by $27 thousand, or 98% to $1 thousand for the three months ended June 30, 2022. The decrease was mainly due to lower renewal rates.

Unicorns. Unicorns cost of revenues for the three months ended June 30, 2021 increased by $441 thousand or 9%, to $5,371 thousand for the three months ended June 30, 2022. Unicorn Hunters produced 5 episodes during the three months ended June 30, 2022, none of which were released by June 30, 2022. Unicorn Hunters produced 5 episodes during the three months ended June 30, 2021, of which 4 episodes were distributed during the three months ended June 30, 2021. Per the accounting policy, Unicorns capitalizes production costs, to the extent the Company expects to recover such costs. Any such capitalized costs are expensed when the related show is distributed on the Unicorn Hunters website. As of Unicorns acquisition date in April 2021, December 31, 2021, March 31, 2022 and June 30, 2022, the Company did not capitalize any costs of revenues based on the uncertainty as to whether the costs of such episodes was recoverable during the Company’s start-up phase.

General and administrative

General and administrative expenses decreased by $176 thousand, or 4%, to $4,671 thousand for the three months ended June 30, 2022. The decrease was primarily due to a decrease in stock-based compensation expense of $390 thousand and a decrease in employee compensation of $104 thousand for the three months ended June 30, 2022. These decreases were partially offset by an increase in contractors & professional services of $330 thousand for the three months ended June 30, 2022.

Sales and marketing

Sales and marketing expenses increased by $9,694 thousand, or 351%, to $12,458 thousand for the three months ended June 30, 2022. Overall, the Company shifted its sales and marketing strategy for the three months ended June 30, 2022 to incorporate significant spending in third-party agencies focusing on marketing, advertising and branding, which accounted for an increase in sales and marketing expenses of $8,570 thousand when compared to the three months ended June 30, 2021. In addition, the Company recorded expenses of $1,014 thousand in relation to advertising and marketing services paid in exchange for Unicoin Rights during the three months ended June 30, 2022, there were no such expenses incurred during the three months ended June 30, 2021. The remaining increase was primarily due to increases in use of third-party marketing, advertising, and branding in addition to compensation and benefits of the Company’s own marketing personnel.

Research and development

Research and development expenses decreased by $39 thousand, or 23% to $127 thousand for the three months ended June 30, 2022. Research and development mainly consist of personnel related costs such as salaries and benefits and stock-based compensation for research, design and development. Internally developed software costs for internal use are not material and expensed as they are incurred.

Interest income (expense), net

Interest income (expense), net increased by ($62) thousand to ($57) thousand for the three months ended June 30, 2022. The increase was primarily due to interest expense of $65 thousand and $1 thousand during the three months ended June 30, 2022 and 2021, respectively, in relation to the unsecured notes, the majority of which were issued after June 30, 2021. Interest income of $4 thousand during the three months ended June 30, 2021, was earned in connection to a related party promissory note.

Provision for Income Taxes

	Three months ended June 30,
	2022			2021			Change ($)		Change (%)
Income tax (expense) benefit	$	65,309		$	(7,996	)	$	73,305		(917	)%
Effective tax rate		(0.30	)%		0.07	%

Income tax benefit was $65 thousand for the three months ended June 30, 2022, compared to an income tax expense of ($8) thousand for the three months ended June 30, 2021. The Company’s effective tax rate was (0.30%) and 0.07% during the three months ended June 30, 2022 and 2021, respectively. The Company recorded a full valuation allowance against its otherwise recognizable deferred income tax assets, except for deferred taxes related to ITSQuest, a majority owned company. The Company’s deferred tax assets principally result from net operating loss carryforwards.

33

Liquidity and Capital Resources

Our primary future uses of cash will be to fund working capital requirements and expenditures of Unicorns.

We had cash and cash equivalents of $1,844 thousand available as of June 30, 2022. Based on currently available capital resources (cash and cash equivalents on hand as of June 30, 2022), we estimate that we would be able to conduct our planned operations for between one or two additional months without raising additional equity or debt financing. We estimate that at our current cash “burn rate”, the Company will not be able to operate for more than 12 months unless we receive further equity or debt financing of approximately $16,723 thousand. For the period from July 1, 2022 through the date of filing this Quarterly Report on Form 10-Q we have received funding of $2,932 thousand which is used to support our planned operations. However, given the impact of the economic downturn on the U.S. and global financial markets, the Company may be unable to access further equity or debt financing when needed. As such, there can be no assurance that the Company will be able to obtain additional liquidity when needed or under acceptable terms, if at all. Our auditors have included an explanatory paragraph in their audit opinion that that our current liquidity position raises substantial doubt about our ability to continue as a going concern for the next twelve months unless we obtain additional capital.

From January 1, 2022 through the day of this Quarterly Report on Form 10-Q, the Company issued 585,319 additional common stock shares and raised $1,494 thousand in cash proceeds (primarily from sales at $4 per share from Round 5).

From February 7, 2022 through June 30, 2022, the Company issued 1,608,838,109 rights to receive Unicoins (“Unicoin Rights”) to accredited investors and service providers in exchange of consideration consisting of cash, digital assets and services received amounting to approximately $27,237 thousand. The total consideration is based on unaudited preliminary fair values of cash, digital assets and services received. Amounts issued are as follows:

Price		Unicoin Rights	Period	Total Consideration
$	0.010	850,030,000	February 2022	$	8,500 thousand
$	0.010	437,650,000	March 2022	$	4,377 thousand
$	0.050	37,134,000	March 2022	$	1,857 thousand
$	0.100	3,595,000	March 2022	$	360 thousand
$	0.010	87,400,000	April 2022	$	874 thousand
$	0.050	7,480,000	April 2022	$	374 thousand
$	0.100	47,830,000	April 2022	$	4,783 thousand
$	0.017	11,500,000	April 2022	$	196 thousand
$	0.010	13,900,000	May 2022	$	139 thousand
$	0.050	6,900,000	May 2022	$	345 thousand
$	0.100	6,390,000	May 2022	$	639 thousand
$	0.017	16,500,000	May 2022	$	281 thousand
$	0.010	8,500,000	June 2022	$	85 thousand
$	0.050	2,100,000	June 2022	$	105 thousand
$	0.100	38,250,000	June 2022	$	3,825 thousand
$	0.017	33,679,109	June 2022	$	497 thousand
	Total	1,608,838,109		$	27,237 thousand

34

Subsequent to June 30, 2022, the Company issued 83.4 million Unicoin Rights in exchange for consideration of approximately $4,708 thousand including cash of $2,665 thousand, digital assets of $219 thousand and $1,771 thousand in value of services.

During 2020, ITSQuest entered an account receivable financing arrangement with a financial institution (“Factor”). Pursuant to the terms of the arrangement, the Company sells amounts of its accounts receivable balances to the Factor as absolute owner with full recourse against ITSQuest. In accordance with ASC 860, Transfers and Servicing (“ASC 860”), we concluded that the transaction with the Factor represents a transfer of financial assets in which the Company retains effective control over the transferred receivables. As such it was determined that the transfer of financial asset should be recorded as a secured borrowing. Furthermore, the Company shall continue to report the transferred financial asset in its statement of financial position with no change in the asset’s measurement. Accordingly, the Company records the receivable as is on its Consolidated Balance Sheets and records a liability for the amount received from the Factor towards factored receivables in a manner similar to secured borrowing with pledge of a collateral. The Factor remits 95% of the account receivable balance to the Company and retains 5% factoring fee for the invoices factored. As of June 30, 2022, the Company recorded a liability of $306 thousand towards the Factor. The cost of factoring is included as a component of general and administrative expenses in the accompanying consolidated statements of operations.

As part of the agreement in which the Company received 50,000,001 shares of Unicorns stock, the Company extended an initial line of credit to Unicorns in the amount of $10,000 thousand to fund production of the Unicorn Hunters show and related expenses. Further additional ongoing funding has been provided by Unicoin Inc. to Unicorns, since the initial line of credit, to fund the production- related expenses of Unicorn Hunters show. This intercompany loan, which is eliminated in consolidation, amounted to $25,345 thousand as of June 30, 2022. Beyond the initial $10,000 thousand line of credit, the Company does not have any contractual commitments to fund the operations of Unicorns. However, it is the Company’s intention to continue funding the operations of Unicorns, until Unicorns begins generating sufficient cash flows to sustain its own business operations without using additional funding from the Company.

Summary of Cash Flows

The following table sets forth our cash flows for the periods indicated:

	Six months ended June 30,
(In thousand)	2022			2021
Cash flows provided by (used in) continuing operations:
Net cash used in operating activities	$	(19,036	)	$	(18,698	)
Net cash provided by (used in) investing activities		(51	)		197
Net cash provided by financing activities		19,059			18,097
Net decrease in cash and cash equivalents	$	(28	)	$	(404	)

Cash Used in Operating Activities

Cash flows used in operating activities increased by ($338) thousand to ($19,036) thousand for the six months ended June 30, 2022, compared to ($18,698) thousand for the six months ended June 30, 2021. Net cash used in operating activities for the six months ended June 30, 2022, was due to our net loss of ($21,838) thousand, adjusted by non-cash items of $4,708 thousand and decreases in working capital of ($1,906) thousand. Net cash used in operating activities for the six months ended June 30, 2021, was due to our net loss of ($21,951) thousand, adjusted by non-cash items of $301 thousand and increases in working capital of $2,952 thousand.

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Cash Provided by (used in) Investing Activities

Net cash flows used in investing activities of ($51) thousand for the six months ended June 30, 2022, compared to net cash flows provided by investing activities of $197 thousand for the six months ended June 30, 2021. For the six months ended June 30, 2022, the Company purchased property and equipment of ($51) thousand. For the six months ended June 30, 2021, the Company received a repayment of a related party promissory note of $200 thousand and purchased property and equipment of ($3) thousand.

Cash Provided by Financing Activities

Net cash flows provided by financing activities increased by $962 thousand to $19,059 thousand for the six months ended June 30, 2022, compared to $18,097 thousand for the six months ended June 30, 2021. The increase in cash provided by financing activities was mainly due to the issuance of Unicoin Rights of $18,219 thousand, partially offset by a decrease in proceeds from sales of common stock of ($16,277) thousand, an increase in payments of short-term debt of ($345) thousand, an increase in repurchase of common stock of ($340) thousand and a decrease in proceeds from issuance of unsecured notes of ($302) thousand.

Cash and Cash Equivalents

We maintain cash with several high credit quality financial institutions. Temporary cash investments with original maturities of 90 days or less are considered cash equivalents. Temporary cash investments are stated at cost, which approximates fair value. These investments are not subject to significant market risk. We maintain our cash and cash equivalents in bank accounts which, at times, exceed the federally insured limits. We have not experienced any losses in such accounts.

COVID-19

In January 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus (“COVID-19”) and the risks to the international community. In March 2020, WHO classified the COVID-19 outbreak as a pandemic based on the rapid increase in exposure globally. The outbreak of the COVID-19 pandemic has affected the United States and global economies and may affect the Company’s operations and those of third parties on which the Company relies. While the potential economic impact brought by, and the duration of, the COVID-19 pandemic is difficult to assess or predict, the impact of the COVID-19 pandemic on the global financial markets may reduce the Company’s ability to access capital, which could negatively impact the Company’s short-term and long-term liquidity. The ultimate impact of the COVID-19 pandemic is uncertain and subject to change. As of the date of this report, the Company’s efforts to respond to the challenges presented by the conditions described above have allowed the Company to minimize the impacts of these challenges to its business.

Off-Balance Sheet Arrangements

As of June 30, 2022 we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K promulgated under the Securities Act of 1934.

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Critical Accounting Policies and Estimates

For more information regarding our critical accounting policies and estimates, refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimates” contained Note 2 to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q. There have been no material changes to the critical accounting policies and estimates disclosed in the registration statement on Form 10-12G/A. However, the Company has expanded the description of its accounting policy for Unicorn Hunters Revenue and Non-Cash Receivable and Accounting for Investments in Private Companies in Note 4 – Unicorns Acquisition to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

As fully discussed in the Company’s audited financial statements for the years ended December 31, 2021 and 2020, in February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). Under ASU 2016-02, entities are required to recognize assets and liabilities for the rights and obligations created by leases on the entity’s consolidated balance sheets for both finance and operating leases. Topic 842 is effective for the Company beginning January 1, 2022 in connection with the issuance of its annual financial statements for the year ended December 31, 2022 and for interim periods beginning with its quarterly condensed consolidated financial statements for the three months ended March 31, 2023. Since the standard is effective January 1, 2022, but is not required to be reflected in quarterly condensed consolidated financial statements until the first quarter of 2023, the comparative condensed consolidated financial statements for the first quarter of 2022 to be included with the condensed consolidated financial statements for the first quarter of 2023 may differ from these condensed consolidated financial statements as a result of recognition of assets and liabilities for the rights and obligations created by the Company’s leases.

Recent accounting pronouncements

See “Significant Accounting Policies” in Note 2 of the notes to our condensed consolidated financial statements included in Part 1, Item 1 of this Quarterly Report on Form 10-Q for recent accounting pronouncements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Interest Rate Risk

We had cash and cash equivalents of $1,844 thousand available as of June 30, 2022, which consists of cash on hand and temporary cash investments with original maturities of three months or less, which are unrestricted as to withdrawal and use. Temporary cash investments are stated at cost, which approximates fair value. These investments are not subject to significant market risk. The Company maintains its cash and cash equivalents in bank accounts which, at times, exceed the federally insured limits. The Company has not experienced any losses in such accounts.

Foreign Currency Exchange Risk

Our reporting currency is the United States dollar. The functional currency of our foreign subsidiaries is the U.S. dollar. The majority of our sales are currently denominated in U.S. dollars, although we also have sales internationally. Therefore, our revenue is not currently subject to significant foreign currency risk, but that may change in the future. Our operating expenses are denominated in the currencies of the countries in which our operations are located, which is primarily in the United States. Our consolidated results of operations and cash flows are, therefore, subject to fluctuations due to changes in foreign currency exchange rates and may be adversely affected in the future due to changes in foreign exchange rates. To date, we have not entered into any hedging arrangements with respect to foreign currency risk or other derivative financial instruments, although we may choose to do so in the future. We do not believe a 10% increase or decrease in the relative value of the U.S. dollar would have a material impact on our operating results.

Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash and cash equivalents and accounts receivables. The Company’s cash and cash equivalents are held in accounts with major financial institutions, and, at times, exceed federally insured limits. We have not experienced any losses on our deposits of cash and cash equivalents, and accounts are monitored by management to mitigate risk. We are exposed to credit risk in the event of default by the financial institutions holding our cash and cash equivalents or an event of default by the issuers of the corporate debt securities we hold.

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Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Based on an evaluation under the supervision and with the participation of the Company’s management, and due to the material weakness in internal controls over financial reporting described below, the Company’s principal executive officer and principal financial officer have concluded that the Company’s disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act were not effective for the period ending June 30, 2022 to provide reasonable assurance that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms and (ii) accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Inherent Limitations Over Internal Controls

The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles (“GAAP”). The Company’s internal control over financial reporting includes those policies and procedures that:

(i)	pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the Company’s assets;
(ii)	provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that the Company’s receipts and expenditures are being made only in accordance with authorizations of the Company’s management and directors; and
(iii)	provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.

Management, including the Company’s Chief Executive Officer and Chief Financial Officer, does not expect that the Company’s internal controls will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. 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 internal controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Also, any evaluation of the effectiveness of controls in future periods are subject to the risk that those internal controls may become inadequate because of changes in business conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management’s Annual Report on Internal Control Over Financial Reporting

Management conducted an assessment of the effectiveness of our internal control over financial reporting as of June 30, 2022, based on the framework established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on the assessment, management has determined that our internal control over financial reporting as of June 30, 2022, was not effective due to material weaknesses in internal controls over financial reporting.

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Material Weaknesses in Internal Control Over Financial Reporting 

A material weakness in internal controls over financial reporting is a deficiency, or a combination of deficiencies, in internal controls over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.

The review, testing and evaluation of key internal controls over financial reporting completed by the Company resulted in the Company’s principal executive officer and principal financial officer concluding that as of June 30, 2022, material weaknesses existed in the Company’s internal controls over financial reporting. Specifically, in connection with our:

(i)	entity-level controls - Controls are not in place with respect to the five components of entity-level controls: Control Environment, Risk Assessment, Monitoring, Information and Communication, and Control Activities;
(ii)	information technology general controls and segregation of duties - Lack of proper segregation of duties related to journal entries. The accounting software does not require approval before a journal entry is posted to the general ledger. Thus, an unapproved journal entry can be easily input into the system without the knowledge of senior management; and
(iii)	equity accounting - There was a large volume of equity transactions, mainly related to the issuance of stock to investors. The Company has a manually intensive set of processes and controls in place to record and review these transactions. We do not believe the controls are properly designed to sufficiently mitigate the risk of material misstatement given the large volume of transactions that are processed.

The Company has continued to address the material weaknesses described above through the following actions:

- Engaging third-party consultants with appropriate expertise to assist the finance and accounting department on an interim basis until key roles are filled;

- Assessing finance and accounting resources to identify the areas and functions that lack sufficient personnel and recruiting for experienced personnel to assume these roles;

- Further centralization of key accounting processes to enable greater segregation of duties;

- Developing further training on segregation of duties; and

- Designing and implementing additional compensating controls where necessary.

While we are working diligently to remediate these material weaknesses, there is no assurance that these material weaknesses will be fully remediated by December 31, 2022. 

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as that term is defined in Rules 13a-15(d) or 15d-15(d) of the Exchange Act) identified in connection with management’s evaluation during the quarter ended June 30, 2022 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II-OTHER INFORMATION

Item 1. Legal Proceedings.

We may from time to time be involved in various claims and legal proceedings of a nature we believe are normal and incidental to our business. These matters may include product liability, intellectual property, employment, personal injury cause by our employees, and other general claims. We are not presently a party to any legal proceedings that, in the opinion of our management, are likely to have a material adverse effect on our business. Regardless of outcome, litigation can have an adverse impact on us because of defence and settlement costs, diversion of management resources and other factors.

Item 1A. Risk Factors.

In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the factors discussed in Part I, Item 1A Risk Factors in our registration statement on Form 10-12G/A (the “Risk Factors”). These Risk Factors could materially affect our business, financial condition and future results. These Risk Factors are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be insignificant also may materially and adversely affect our business, financial condition or operating results in the future.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Capital Raising Transactions - Common Stock

Price		Common Stock Shares Issued		Dates	Exemption
	Various	82,913,691	*	5/1/18 to 5/31/20	Section 4(a)(2)
$	0.10	44,150,000		1/8/19 to 2/3/20	Rule 506(c); Reg. S
$	0.20	22,306,525		5/1/20 to 8/2/20	Rule 506(c); Reg. S
$	0.30	7,398,276		8/3/20 to 8/23/20	Rule 506(c); Reg. S
$	0.60	7,598,831		8/24/20 to 10/5/20	Rule 506(c); Reg. S
$	1.00	7,485,660		10/6/20 to 11/30/20	Rule 506(c); Reg. S
$	2.00	9,148,529		12/1/20 to 7/31/21	Rule 506(c); Reg. S
$	3.00	1,877,356		7/31/21 to 8/7/21	Rule 506(c); Reg. S
$	4.00	1,107,628		12/1/20 to 8/5/22	Rule 506(c); Reg. S

* Convertible Notes. All notes have converted. Original total face amount of $2,097,000 and accrued interest of $307,682 into 82,913,691 shares, for an average conversion price of $0.13

Common Stock Shares Issued in Exchange for Other Securities – ITSQuest, Inc. Acquisition

Agreed Value At Issuance, Per Share		Common Stock Shares Issued		Dates		Exemption
$	1.00		6,500,000		11/25/20		Section 4(a)(2)

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Capital Raising Transaction – Debt

On May 24, 2021, we commenced a private placement of debt securities, in the form of short-term unsecured promissory notes. Amounts sold through March, 11, 2022 (the last date we issued unsecured promissory notes) are as follows:

Minimum Price		Total Amount Sold		Interest Rate			Dates	Exemption
$	1,000	$	1,264,000		20.0	%	6/3/21 to 3/11/22	Rule 506(c); Reg. S

Capital Raising Transaction – Offering of Unicoins Rights

On February 7, 2022, we commenced a private placement of rights to receive Unicoins, in the form of a Token Purchase Agreement or Unicoin Grant Agreement. Amounts sold to such investors pursuant to the private placement of rights in exchange of cash and digital assets through the day of this Quarterly Report on Form 10-Q are as follows:

Price Paid Per Unicoin Right		Total Number of Unicoin Rights Sold	Dates	Exemption
$	0.01	1,406,180,000	2/24/22 to 10/4/22	Rule 506(c); Reg. S
$	0.05	54,014,000	3/12/22 to 7/29/22	Rule 506(c); Reg. S
$	0.10	125,033,111	3/18/22 to present	Rule 506(c); Reg. S
$	0.20	330,000	9/8/22 to present	Rule 506(c); Reg. S

Pursuant to the deferred payment option plan discussed in Note 16 – Subsequent Events of “Notes to Condensed Consolidated Financial Statements,” included in Item 1 of this Quarterly Report on Form 10-Q, beginning in August 2022, investors signed agreements to purchase approximately 2.0 billion Unicoin Rights. As of the date of this Quarterly Report on Form 10-Q the Company has not collected consideration from these purchase agreements.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

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Item 6. Exhibits

Exhibit Index

Exhibit No.	Description
3.1	Articles of Incorporation, dated June 22, 2015*
3.2	Certificate of Amendment, dated August 10, 2020*
3.3	Amended and Restated Bylaws*
3.4	Certificate of Amendment, dated October 6, 2022*
10.1	TV Series Producer Agreement, dated February 3, 2021, by and between Unicoin Inc., Unicorns, Inc. and Alexander Konanykhin*
10.2	Share Exchange Agreement, dated November 19, 2020, by and between Unicoin Inc., ITSQuest, Inc., Sarah Reagan and Jeff Reagan*
10.3	Loan Agreement and Promissory Note, dated October 24, 2020, by and between Unicoin Inc. and Silvina Moschini*
10.4	Termination of the Loan Agreement and Promissory Note, dated April 28, 2021, by and between Unicoin Inc. and Silvina Moschini*
10.5	Share Transfer Agreement, dated January 1, 2018, by and between Unicoin Inc. and KMGI Studios, Inc.*
10.6	Share Transfer Agreement, dated January 1, 2018, by and between Unicoin Inc. and Maria Silvina Moschini.*
10.7	Amendment No. 1 to Termination of Loan Agreement and Promissory Note, dated July 2, 2021, by and between Unicoin Inc. and Silvina Moschini*
10.10	Advisory Service Agreement dated May 1, 2021 by and between Unicoin Inc. and Red River Associates, LLC.*
21.1	Subsidiaries of the Registrant*
31.1	Certification of Chief Executive Officer pursuant to Rule 13(a)-14(a)/15(d)-14(a) of the Securities Act of 1934
31.2	Certification of Chief Financial Officer pursuant to Rule 13(a)-14(a)/15(d)-14(a) of the Securities Act of 1934
32.1	Certification of Chief Executive Officer Executive Officer under Section 1350 as adopted pursuant Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of Chief Financial Officer under Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

* Previously filed

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SIGNATURES

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.

	Unicoin Inc.
Date: October 28, 2022	By:	/s/ Alex Konanykhin
		Alex Konanykhin
		Chief Executive Officer

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