TransparentBusiness 10-Q 2023 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, 2023

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

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 August 14, 2023, there were 733,507,964 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	30
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	44
Item 4.	Controls and Procedures	45
PART II.	OTHER INFORMATION	46
Item 1.	Legal Proceedings	46
Item 1A.	Risk Factors	46
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	47
Item 3.	Defaults Upon Senior Securities	49
Item 4.	Mine Safety Disclosures	49
Item 5.	Other Information	49
Item 6.	Exhibits	49
Signatures		50

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.

UNICOIN INC. AND SUBSIDIARIES

(fORMERLY kNOWN AS TRANSPARENTBUSINESS, INC.)

CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)

	June 30,			December 31,
	2023			2022
ASSETS
Cash and cash equivalents	$	6,623,089		$	1,522,069
Accounts receivable, net
Trade receivables payable in cash (Note 2)		1,949,294			2,418,773
Unicorn Hunters non-cash receivables (Note 4)		-			8,322,000
Prepaid expenses and other current assets (Note 2)		707,502			511,790
Indemnification asset		4,785,455			4,659,700
TOTAL CURRENT ASSETS		14,065,340			17,434,332
Property and equipment, net		40,641			46,032
Goodwill		3,865,695			3,865,695
Intangible assets, net		2,883,386			3,041,972
Investments in privately-held companies (Note 4)		8,627,000			298,000
Operating lease right-of-use assets		270,406			349,631
TOTAL ASSETS	$	29,752,468		$	25,035,662
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Accounts payable	$	1,456,650		$	2,159,677
Income tax payable		24,467			27,500
Accrued expenses		2,316,899			1,314,195
Accrued payroll liabilities		680,172			611,614
Deferred revenue		25,116			18,969
ITSQuest tax liability		4,785,455			4,659,700
Short-term debt		570,300			708,100
Loan from related party (Note 13)		395,000			645,000
Operating lease liabilities, current		140,744			149,802
Other current liabilities		464,315			823,876
TOTAL CURRENT LIABILITIES		10,859,118			11,118,433
Deferred income tax liability, net		1,141,453			1,141,453
Unicoin rights financing obligation (Note 7)		48,359,967			37,461,847
Operating lease liabilities, noncurrent		132,636			199,629
TOTAL LIABILITIES		60,493,174			49,921,362
STOCKHOLDERS’ EQUITY (DEFICIT)
Common stock, $0.001 par value; 1,000,000,000 authorized; 773,030,006 and 772,938,415 issued; 733,507,964 and 733,427,768 outstanding, net of treasury stock as of June 30, 2023 and December 31, 2022, respectively		773,030			772,938
Treasury stock, at cost; 39,522,042 and 39,510,647 shares as of June 30, 2023 and December 31, 2022, respectively		(3,393,525	)		(3,389,446	)
Additional paid-in capital		72,947,626			72,831,056
Accumulated deficit		(98,622,983	)		(92,570,448	)
TOTAL UNICOIN INC. STOCKHOLDERS’ EQUITY (DEFICIT)		(28,295,852	)		(22,355,900	)
Noncontrolling interest		(2,444,854	)		(2,529,800	)
TOTAL STOCKHOLDERS’ DEFICIT		(30,740,706	)		(24,885,700	)
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)	$	29,752,468		$	25,035,662

See accompanying notes to the unaudited condensed consolidated financial statements.

1

UNICOIN INC. AND SUBSIDIARIES

(fORMERLY kNOWN AS TRANSPARENTBUSINESS, INC.)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(UNAUDITED)

	Three Months Ended June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
REVENUES	$	4,508,378		$	4,860,714			8,784,460		$	13,592,784
COST OF REVENUES		3,532,220			9,074,444			6,966,699			12,669,369
GROSS PROFIT		976,158			(4,213,730	)		1,817,761			923,415
OPERATING COSTS AND EXPENSES
General and administrative		3,916,250			4,670,846			6,834,266			8,070,650
Sales and marketing		367,757			12,458,119			611,229			14,206,122
Research and development		56,242			126,703			114,607			249,401
TOTAL OPERATING COSTS AND EXPENSES		4,340,249			17,255,668			7,560,102			22,526,173
LOSS FROM OPERATIONS		(3,364,091	)		(21,469,398	)		(5,742,341	)		(21,602,758	)
Interest income (expense), net		(44,186	)		(57,386	)		(117,406	)		(118,845	)
Other income (expense), net		391			(586	)		-			(616	)
LOSS BEFORE INCOME TAXES		(3,407,886	)		(21,527,370	)		(5,859,747	)		(21,722,219	)
Income tax benefit (expense)		(37,826	)		65,309			(107,842	)		(115,293	)
NET LOSS AND COMPREHENSIVE LOSS		(3,445,712	)	$	(21,462,061	)		(5,967,589	)	$	(21,837,512	)
Less: net income/(loss) attributable to the noncontrolling interest		22,934			(2,173,258	)		84,946			(1,193,484	)
NET LOSS ATTRIBUTABLE TO UNICOIN INC.	$	(3,468,646	)	$	(19,288,803	)	$	(6,052,535	)	$	(20,644,028	)
Net loss per share attributable to Unicoin Inc., basic and diluted	$	(0.01	)		(0.03	)	$	(0.01	)	$	(0.03	)
Weighted average common shares outstanding used to compute basic and diluted loss per share		733,485,437			734,018,271			733,469,733			733,516,974

See accompanying notes to the unaudited condensed consolidated financial statements.

2

UNICOIN INC. AND SUBSIDIARIES

(fORMERLY kNOWN AS TRANSPARENTBUSINESS, INC.)

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

(UNAUDITED)

					Additional												Unicoin Inc. Stockholders’			Unicoin Inc.			Total Stockholders’
	Common Stock				Paid-In			Treasury Stock						Accumulated			Equity			Noncontrolling			Equity
	Shares		Amount		Capital			Shares			Amount			Deficit			(Deficit)			Interest			(Deficit)
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 (Note 8)		-		-		-			(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 7)		-		-		(68,510	)		-			-			-			(68,510	)		-			(68,510	)
Net Income (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 7)		-		-		(4,540	)		-			-			-			(4,540	)		-			(4,540	)
Net Income (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	)
Balance as of December 31, 2022		772,938,415		772,938		72,831,056			(39,510,647	)		(3,389,446	)		(92,570,448	)		(22,355,900	)		(2,529,800	)		(24,885,700	)
Issuance of common stock		12,445		12		33,988			-			-			-			34,000			-			34,000
Stock-based compensation expense		-		-		38,523			-			-			-			38,523			-			38,523
Repurchase of common stock		-		-		-			(6,185	)		(2,412	)		-			(2,412	)		-			(2,412	)
Common stock issued for services		38,837		40		(40	)		-			-			-			-			-			-
Net Income (Loss)		-		-		-			-			-			(2,583,889	)		(2,583,889	)		62,012			(2,521,877	)
Balance as of March 31, 2023		772,989,697		772,990		72,903,527			(39,516,832	)		(3,391,858	)		(95,154,337	)		(24,869,678	)		(2,467,788	)		(27,337,466	)
Issuance of common stock		2,534		2		7,498			-			-			-			7,500			-			7,500
Stock-based compensation expense		-		-		36,639												36,639						36,639
Repurchase of common stock		-		-		-			(5,210	)		(1,667	)		-			(1,667	)		-			(1,667	)
Common stock issued for services		37,775		38		(38	)		-			-			-						-
Net Income (Loss)		-		-		-			-			-			(3,468,646	)		(3,468,646	)		22,934			(3,445,712	)
Balance as of June 30, 2023		773,030,006	$	773,030	$	72,947,626			(39,522,042	)	$	(3,393,525	)	$	(98,622,983	)	$	(28,295,852	)	$	(2,444,854	)	$	(30,740,706	)

See accompanying notes to the unaudited condensed consolidated financial statements.

3

UNICOIN INC. AND SUBSIDIARIES

(fORMERLY kNOWN AS TRANSPARENTBUSINESS, INC.)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

	Six Months Ended June 30,
	2023			2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(5,967,589	)	$	(21,837,512	)
Adjustments to reconcile net loss to cash used in operating activities:
Stock-based compensation expense		75,162			117,427
Operating expenses paid with Unicoin rights (Note 7)		1,114,836			7,933,025
Operating expenses paid with digital assets (Note 5)		131,433			-
Noncash consideration (Note 4)		(7,000	)		(4,139,000	)
Impairment of digital assets (Note 5)		-			617,173
Depreciation and amortization expense		182,757			178,866
Noncash operating lease expense (Notes 2 and 11)		79,225			68,927
Changes in operating assets and liabilities:
Trade receivables payable in cash (Note 2)		469,479			(159,976	)
Prepaid expenses and other current assets (Note 2)		(196,725	)		(1,298,400	)
Accounts payable		(703,027	)		(157,394	)
Accrued expenses and payroll liabilities		657,810			89,846
Deferred revenue		6,147			53,760
Operating lease liability (Notes 2 and 11)		(76,051	)		(68,927	)
Other liabilities		(326,520)			(434,286	)
Net cash used in operating activities		(4,560,063	)		(19,036,471	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment		-			(50,759	)
Net cash used in investing activities		-			(50,759	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of private placement unsecured notes		199,200			48,000
Payment of short-term debt		(337,000	)		(345,000	)
Proceeds from sales of Unicoin rights (Note 7)		10,011,464			18,218,967
Proceeds from sales of common stock		41,498			1,470,890
Repurchase of common stock		(4,079	)		(339,873	)
Proceeds from exercise of stock options and warrants		-			6,003
Repayment of related party loan payable (Note 13)		(250,000	)		-
Net cash provided by financing activities		9,661,083			19,058,987
NET INCREASE IN CASH AND CASH EQUIVALENTS		5,101,020			(28,243	)
CASH AND CASH EQUIVALENTS—Beginning of period		1,522,069			1,872,529
CASH AND CASH EQUIVALENTS—End of period	$	6,623,089		$	1,844,286
Supplemental Non-Cash Disclosures:
Market value of digital assets received as proceeds from sales of common stock (Notes 5 and 8)		-			22,980
Market value of digital assets received as proceeds from sales of Unicoin rights (Notes 5 and 7)		149,200			1,399,530
Receipt (i.e., “collection”) of private company equity securities (Note 4)		8,329,000			-
Recognition of operating lease right-of-use assets and operating lease liabilities upon adoption of ASC 842 (Note 2)		-			187,963
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

Unicoin Inc. AND SUBSIDIARIES

(fORMERLY kNOWN AS TRANSPARENTBUSINESS, INC.)

NOTES TO CONDENSED Consolidated FINANCIAL STATEMENTS
(UNAUDITED)

AS OF June 30, 2023 AND DECEMBER 31, 2022 AND

FOR THE THREE AND SIX MONTHS ENDED June 30, 2023 AND 2022

NOTE 1 – ORGANIZATION AND OPERATIONS

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. (“Unicoin” or the “Company”). The name change was effective as of October 6, 2022.

Description of Business

Unicoin Inc. formerly known as TransparentBusiness, Inc. was incorporated in the state of Delaware on June 22, 2015. The Company’s SaaS (Software-as-a-Service) platform was developed in 2008 by KMGi Group, the predecessor to Unicoin 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 of contractors. The TransparentBusiness platform has been in use since 2009, initially under the name TransparentBilling, Inc. serving KMGi Group’s internal operations. The Company markets its services throughout the United States of America.

In addition to operating its original SaaS business, the Company wholly owns two TaaS (Talent-as-a-Service) companies and platforms, SheWorks! And Yandiki, and holds majority ownership interests in ITSQuest, Inc, (“ITSQuest”) a regional staffing agency, as well as Unicorns, Inc. (“Unicorns” or “Unicorn Hunters”) which produces reality television/streaming shows.

In June 2023, the Company merged two of its wholly owned subsidiaries, SheWorks! and Yandiki, into one operating entity. The surviving post-merger entity will operate under the name SheWorks!. 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.

In November 2020 the Company acquired a 51% ownership interest in ITSQuest, Inc which is a regional staffing agency with twelve locations throughout New Mexico and Texas. ITSQuest has significant contact with employers throughout the US Southwest and utilizes its sales force and contacts to promote and sell the Company’s SaaS and TaaS products. Customers of ITSQuest are primarily governmental agencies.

In April 2021, the Company acquired a 66.67% ownership interest in Unicorns, Inc. 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. Alex Konanykhin, CEO of the Company and founder of Unicorns, issued 50,000,001 shares of Unicorns common stock to Unicoin giving the Company a 66.67% majority interest in Unicorns. An additional 26.67% of Unicorns shares are held by officers and directors of the Company.

5

Going Concern

These 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 ($5,968) thousand (5,967,589) and ($21,838) thousand (21,837,512) and used cash in operating activities of ($4,560) thousand and ($19,036) thousand for the six months ended June 30, 2023 and 2022, respectively, and has an accumulated deficit of ($98,623) thousand and ($92,570) thousand as of June 30, 2023 and December 31, 2022, 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, issuing Unicoin rights, 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 condensed 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.

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 Unicoin Inc., its wholly owned subsidiary, SheWorks!, 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 and Unicorns which are 51% and 66.67% owned, respectively, the minority interests are reflected in the condensed consolidated financial statements as non-controlling interests (“NCI”).

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, 2022 and 2021. The unaudited condensed consolidated balance sheet as of December 31, 2022, included herein, was derived from the audited consolidated balance sheet of the Company as of that date.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions in the condensed consolidated financial statements and accompanying notes. Significant estimates and assumptions made by us include: the valuation of Unicoin rights and the related embedded feature, valuation of non-cash contract consideration received from certain investors in Unicoin rights, the valuation of non-cash consideration received from Unicorns customers and the associated revenue recognition; valuation of investments in private companies; valuation of the 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. We base our estimates on historical experience and on various other assumptions that are believed 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.

6

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.

Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash, cash equivalents and accounts receivable. The Company’s cash and cash equivalents are held in accounts with major financial institutions, and, at times, exceed federally insured limits. As of June 30, 2023 and December 31, 2022, respectively, the Company had $3,692 thousand and $700 thousand of cash in excess of the FDIC insured amounts. The bank at which the Company had deposits that exceed FDIC limits is not in receivership or under the control of the FDIC. The Company has not experienced any losses in such accounts.

In addition, as discussed in Note 4, as of December 31, 2022 the Company had non-cash receivables consisting of options and warrants to purchase common stock in small privately-held companies. The options and warrants underlying these non-cash receivables are subject to significant fluctuations in market values. As of June 30, 2023 all related option and warrant certificates have been received and these accounts receivable have been reclassified to investments in privately-held companies in the Company’s consolidated balance sheets.

As discussed in Note 5, the Company has accepted digital assets as consideration from certain investors in exchange for equity, debt or Unicoin rights issued by the Company. Digital asset market values are subject to significant fluctuations based on supply and demand for such digital assets and other factors. The Company can either hold, sell, or use digital assets as payment to vendors. Digital asset price risk could adversely affect future operating results including earnings, cash flows and the Company’s ability to meet its ongoing obligations.

During the three months ended June 30, 2023, the Company had one customer for which revenue accounted for 16% or more of total revenue. This customer accounted for 6% of total customer receivables as of June 30, 2023. 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 six months ended June 30, 2023 two customers accounted for 11% and 10% of the Company’s total revenue. These customers accounted for 6% and 12% of total customer receivables, respectively, as of June 30, 2022. 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.

The Share Exchange Agreement (“SEA”) that the Company entered into in order to acquire a majority stake in ITSQuest, as amended on December 28, 2022, contains a contingent divestiture provision whereby if by December 31, 2024, the Company does not either (i) engage in an initial public offering of its securities at a price of at least $10.00 per share or (ii) cause the Company’s proposed security tokens (Unicoins) to become tokenized and listed on a cryptocurrency exchange with a quoted price at or above $1.00 per token, then the Company 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 the Company received pursuant to the SEA. As of the filing date of this Quarterly Report on Form 10-Q, the Company cannot yet assess the likelihood or probability of achieving either of the two trigger events necessary to avoid divestiture of ITSQuest. However, if the Company is not able to achieve an initial offering of its Common Stock or an initial registration of its Unicoins, sufficient to meet the criteria outlined in the Amended SEA on or before December 31, 2024, the Company’s business, financial condition, results of operations and liquidity will be materially impacted.

ITSQuest represents Company assets of $10,215 thousand, revenues of $7,342 thousand, and generated gross margins of $1,401 thousand, respectively, as of and for the six months ended June 30, 2023, respectively.

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.

7

Accounting Pronouncements Recently Adopted

Financial Instruments – Credit Losses

The Company adopted Accounting Standards Update (“ASU”) 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit losses on financial instruments later codified as Accounting Standard codification (“ASC”) 326 (“ASC 326”), effective January 1, 2023, using a modified retrospective approach. The guidance introduces a revised approach to the recognition and measurement of credit losses, emphasizing an updated model based on expected losses rather than incurred losses. There was no significant impact on the date of adoption of ASC 326.

Under ASC 326, Accounts receivable are recorded at the invoiced amount, net of allowance for expected credit losses. The Company’s primary allowance for credit losses is the allowance for doubtful accounts. The allowance for doubtful accounts reduces the Accounts receivable balance to the estimated net realizable value. The Company regularly reviews the adequacy of the allowance for credit losses based on a combination of factors. In establishing any required allowance, management considers historical losses adjusted for current market conditions, the Company’s customers’ financial condition, the amount of any receivables in dispute, the current receivables aging, current payment terms and expectations of forward-looking loss estimates.

All provisions for the allowance for doubtful accounts are included as a component of general and administrative expenses on the accompanying consolidated statements of operations and comprehensive loss. Accounts receivable deemed uncollectible are charged against the allowance for credit losses when identified. Subsequent recoveries of amounts previously written off are credited to earnings in the period recovered.

The allowance for doubtful accounts related to Unicorns non-cash receivables is subject to uncertainty because the fair value of the underlying private company options, warrants or shares could change subsequent to the initial determination of fair value and before receipt of the related option, warrant or share certificates. In addition, unforeseen circumstances could arise after contract inception which could impact the customer’s intent or ability to pay. Because the value of any one of the receivables associated with Unicorn’s contracts may be material, changes such as these could have a material effect on the Company’s future financial condition, results of operations and cash flows.

To date, the Company has recognized revenue in connection with six Unicorn Hunters agreements. The total revenue amount related to these agreements was $8,620 thousand to-date. As of June 30, 2023 and December 31, 2022, Unicorn Hunters non-cash receivables were $0 and $8,322 thousand, respectively and represented 0% and 77% of total receivables, respectively. In addition, these receivables represented 0% and 33% of total assets as of June 30, 2023 and December 31, 2022, respectively.

The Company reviews each outstanding customer’s non-cash receivable balance with management of the private company customer, and records an allowance for doubtful accounts if either of the following are noted:

a. A specific milestone, equity financing or other event has occurred that is a clear indication that there has been a material change in the enterprise value of the private company customer since the original recording of the Unicorns accounts receivable balance and before the Company has received the underlying stock option, warrants or shares certificates.

The Company’s review identifies facts and circumstances that have substantially changed either the private company customers’ intent or its ability to issue the stock option, warrants or shares certificates due in satisfaction of their related accounts receivable balance.

To date, the Company has not recorded any bad debt expense or allowance for doubtful accounts related to Unicorn Hunters non-cash receivables and the Company has not experienced any fluctuations or significant matters that would require recording a material allowance for doubtful accounts in any period to date.

As of June 30, 2023 and December 31, 2022, the Company had an allowance for doubtful accounts balance of $35 thousand and $0, respectively. For the six months ended June 30, 2023 and 2022, the Company recorded bad debt expense of $35 thousand and $1 thousand, respectively. For the three months ended June 30, 2023 and 2022, the Company recorded bad debt expense of $0. These amounts were related to trade receivables payable in cash.

8

Leases

As discussed in the Company’s consolidated financial statements and accompanying notes for the years ended December 31, 2022 and 2021, the Company adopted ASU 2016-02, Leases (Topic 842) which was later codified as ASC 842 (“ASC 842”) effective January 1, 2022 using a modified retrospective approach. This guidance requires an entity to recognize operating lease liabilities and corresponding right-of-use (“ROU”) assets on its balance sheet.

The adoption of ASC 842 resulted in the recognition of $188 thousand of operating lease ROU assets and $188 thousand of operating lease liabilities on the condensed consolidated balance sheet as of January 1, 2022. Because the standard was effective January 1, 2022, but was not required to be reflected in quarterly financial statements until the first quarter of 2023, the comparative financial statements for the second quarter of 2022, included herein, differ from the financial statements included with the Company’s quarterly reports on Form 10-Q, for the six and three months ended June 30, 2022, as a result of recognition of assets and liabilities for the rights and obligations created by the Company’s leases. Refer to the Adjustment section below and Note 11 for further information.

Adjustments to Previously Reported Financial Information

Adoption of ASC 842

As noted above, the adoption of ASC 842 was effective January 1, 2022, which resulted in recognition of operating lease ROU assets and operating lease liabilities on the condensed consolidated balance sheet that were not reflected in the financial statements included with the Company’s Quarterly Report on Form 10-Q for the three and six months ended June 30, 2022.

The following table summarizes the ASC 842 related adjustments made to the Company’s previously reported financial information for the comparative financial statements included herein:

Schedule of reclassification of operating costs and expenses
	As of and for the Six Months Ended June 30, 2022
	As Previously Reported			Adjustment for ASC 842 Adoption			As Adjusted
Changes to the Consolidated Balance Sheet (not included herein)
Operating lease right of use assets	$	-		$	119,036		$	119,036
Total assets		26,731,588			119,036			26,850,624
Operating lease liabilities, current portion		-			106,499			106,499
Current liabilities		10,600,417			106,499			10,706,916
Operating lease liabilities, non-current		-			12,537			12,537
Total liabilities		39,046,041			119,036			39,165,077
Total stockholders’ equity		(12,314,453)			-			(12,314,453)
Total liabilities and stockholders’ equity		26,731,588			119,036			26,850,624
Changes to the Consolidated Statement of Cash Flows
Noncash operating lease expense		-			68,927			68,927
Operating lease liability change		-			(68,927	)		(68,927	)
Net cash used in operating activities		(19,036,471	)		-			(19,036,471	)

9

Unbilled Receivables

In addition, in connection with the Company’s implementation of new ERP system during the six months ended June 30, 2023, the chart of accounts for ITSQuest was updated to be more consistent with that of other Company subsidiaries. As a result, ITSQuest unbilled receivables, which had previously been reported as other current assets were reclassified and reported as trade receivables payable in cash in the consolidated balance sheets.

This change was effective as of June 30, 2022 and previously reported amounts were adjusted to conform with current presentation as shown in the table below.

Schedule of reclassification of assets and liabilities
	As Previously Reported			Adjustment			As Adjusted
Changes to the Consolidated Balance Sheet as of December 31, 2022
Trade receivables payable in cash	$	2,179,586		$	239,187		$	2,418,773
Prepaid expenses and other current assets		750,977			(239,187	)		511,790
Changes to the Consolidated Balance Sheet as of June 30, 2022 (not included herein)
Trade receivables payable in cash		2,328,028			53,587			2,381,615
Prepaid expenses and other current assets		1,566,620			(53,587	)		1,513,033
Changes to the Consolidated Statement of Cash Flows for the Six Months Ended June 30, 2022
Changes in operating assets and liabilities:
Trade receivables payable in cash		(106,389	)		(53,587	)		(159,976	)
Prepaid expenses and other current assets		(1,351,987	)		53,587			(1,298,400	)

Note: the consolidated balance sheet as of December 31, 2021 was not impacted.

10

Significant Accounting Policies

During the six-month period ended June 30, 2023, there have been no material changes to the Company’s significant accounting policies disclosed in its audited condensed consolidated financial statements for the years ended December 31, 2022 and 2021.

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.

Refer to Note 16 – Segment Information for disaggregated revenue information.

Deferred revenue

The Company had deferred revenue of $19 thousand and $51 thousand as of December 31, 2022 and December 2021, respectively. The amount of revenue recognized during the six months ended June 30, 2023 and 2022, respectively, that was included in deferred revenue at the beginning of each calendar year, was $17 thousand and $20 thousand, respectively. The amount of revenue recognized during the three months ended June 30, 2023 and 2022, respectively, that was included in deferred revenue at the beginning of each calendar year, was $6 thousand and $11 thousand, respectively.

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NOTE 3 – FAIR VALUE MEASUREMENT

The Company measures the fair value for financial instruments under 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 Company has revised its Intangible Assets and Financial Assets accounting policies to acknowledge that USD Coin (“USDC”) meets the definition of financial assets and as such will be measured going forward at fair value. The Company previously reported USDC within Intangible assets, net, and will report USDC within the prepaid expenses and other current assets line item going forward. The Company had a balance of $0 USDC as of June 30, 2023 and December 31, 2022. Management assessed the balance of USDC in historical periods, noting the previously reported amounts were immaterial.

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

Schedule of fair value assets measured on recurring basis
As of June 30, 2023	Carrying Value		Level 1		Level 2		Level 3		Total
ASSETS
Money market funds	$	2,102,045	$	2,102,045	$	-	$	-	$	2,102,045

As of December 31, 2022	Carrying Value		Level 1		Level 2		Level 3		Total
ASSETS
Money market funds	$	166,343	$	166,343	$	-	$	-	$	166,343

Assets Measured at Fair Value on a Non-Recurring Basis

As discussed in Notes 2 and 5, consideration from Unicorns customers generally consists of commitments to issue stock options or warrants from customers which 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 in Note 5. 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 – INVESTMENTS IN PRIVATELY-HELD COMPANIES

As discussed in Note 2, revenue and accounts receivable for Unicorns generally consist 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. Subsequent to issuance of the option or warrant certificates to the Company, the related receivables are reclassified to investments in privately-held companies, a long-term asset account representing investments in private company equity securities.

The Company’s non-cash receivables and the underlying investments in privately-held companies do not have readily determinable fair values. Their initial cost is subsequently adjusted to fair value on a nonrecurring basis based on observable price changes from orderly transactions of identical or similar securities of the same issuer or for impairment. These investments are classified within Level 3 of the fair value hierarchy as we estimate the value based on valuation methods using the observable transaction price at the transaction date and other significant unobservable inputs, such as volatility, rights and obligations related to these securities. These valuations require management judgment due to the absence of an observable market price and lack of liquidity.

As shown in the table below, no impairments or upward adjustments to estimated fair values have been recorded to-date because there have been no observable price changes related to the Company’s investments in privately held companies or non-cash receivables representing promises to issue such securities.

The following tables summarize the Company’s non-cash receivables and investments in privately held companies as of June 30, 2023 and December 31, 2022, respectively:

Schedule of non-cash receivables and investments in privately held companies
	June 30, 2023		December 31, 2022
Non-cash receivables	$	-	$	8,322,000
Investments in privately-held companies		8,627,000		298,000
Carrying value of non-cash consideration	$	8,627,000	$	8,620,000

	June 30, 2023		December 31, 2022
Cost of investments in privately-held companies	$	8,627,000	$	298,000
Cumulative impairments		-		-
Cumulative upward adjustments		-		-
Carrying value of investments in privately-held companies	$	8,627,000	$	298,000

During the six months ended June 30, 2023, the Company received warrant certificates from five Unicorn Hunters customers with an aggregate carrying value, and estimated fair value, of $8,322 thousand. During the three months ended June 30, 2023, the Company received warrant certificates from four Unicorn Hunters customers with an aggregate carrying value, and estimated fair value, of $6,081 thousand. In addition, during the six months ended June 30, 2023, stock certificates with an aggregate carrying value, and estimated fair value, of $7 thousand were received from a TaaS customer. No such receipts took place during the three months ended June 30, 2022.

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NOTE 5 – DIGITAL ASSETS

As more fully discussed in the Company’s financial statements for the years ended December 31, 2022 and 2021, 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 prices determined.

The Company has revised its impairment loss assessment methodology for digital assets to record write-downs to the lowest market price of one unit of digital asset quoted on the active exchange since acquiring the digital asset. This revision would be consistent with the requirements of ASC 350-30-35-19, which indicates impairment exists whenever carrying value exceeds fair value. It also indicates that after an impairment loss is recognized, the adjusted carrying amount of the intangible asset shall be its new accounting basis. Management assessed the potential difference in impairment loss that would have resulted in prior periods if this impairment methodology had been applied retroactively, noting the amounts were immaterial.

During the three and six months ended June 30, 2023, the Company received $150 thousand of digital assets as consideration in sales of Unicoin rights. The Company utilized $130 thousand of its digital asset holdings for vendor payments during the three months and six months ended June 30, 2023. Remaining digital asset holdings as of June 30, 2023 amounted to $19 thousand.

During the three months ended June 30, 2022, the Company received $270 thousand of digital assets as consideration in sales of Unicoin rights and recorded impairment losses of $613 thousand. During the six months ended June 30, 2022, the Company received $23 thousand of digital assets as consideration in sales of common stock and $1,400 thousand of digital assets as consideration in sales of Unicoin rights. The Company utilized $0 thousand of its digital asset holdings for vendor payments during the three months and six months ended June 30, 2022. Therefore, the Company had ending digital asset holdings of $1,043 thousand as of June 30, 2022.

The digital assets received as consideration included Bitcoin (BTC), Bitcoin Cash (BCH), Ethereum (ETH), Litecoin (LTC), and Tether (USDT). As shown in the table below, these digital assets were transferred to the Company as consideration for sale of Unicoin rights. Unicoin rights are more fully discussed in Note 7.

The table below summarizes the Company’s digital asset activity for the three months ended as of June 30, 2023 and 2022:

Schedule of digital assets activity
	Bitcoin			Bitcoin Cash		Ethereum			Litecoin		Dai		Tether			Three Months Ended June 30,
	(BTC)			(BCH)		(ETH)			(LTC)		(DAI)		(USDT)			2023			2022
Beginning balance	$	-		$	-	$	-		$	-	$	-	$	-		$	-		$	1,386,407
Received as consideration in sales of Unicoin rights		23,728			807		18,233			4,714		-		101,719			149,200			270,326
Vendor Payments		(21,757	)		-		(12,500	)		-		-		(95,986	)		(130,243	)		-
Fees and Other		(174	)		-		(3,483	)		-		-		3,481			(177	)		-
Impairments		-			-		-			-		-		-			-			(613,423	)
Ending balance	$	1,797		$	807	$	2,249		$	4,714	$	-	$	9,213		$	18,780		$	1,043,310

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The table below summarizes the Company’s digital asset activity for the six months ended as of June 30, 2023 and 2022:

	Bitcoin			Bitcoin Cash		Ethereum			Litecoin		Dai		Tether			Six Months Ended June 30,
	(BTC)			(BCH)		(ETH)			(LTC)		(DAI)		(USDT)			2023			2022
Beginning balance	$	-		$	-	$	-		$	-	$	-	$	-		$	-		$	237,973
Received as consideration in sales of common stock		-			-		-			-		-		-			-			22,980
Received as consideration in sales of Unicoin rights		23,728			807		18,233			4,714		-		101,719			149,200			1,399,530
Vendor Payments		(21,757	)		-		(12,500	)		-		-		(95,986	)		(130,243	)		-
Fees and Other		(174	)		-		(3,483	)		-		-		3,481			(177	)		-
Impairments																				(617,173	)
Ending balance	$	1,797		$	807	$	2,249		$	4,714	$	-	$	9,213		$	18,780		$	1,043,310

The table below summarizes the carrying values for the Company’s digital asset holdings as of June 30, 2023 and December 31, 2022:

Schedule of digital assets holdings
	June 30, 2023		December 31, 2022
Bitcoin (BTC)	$	1,797	$	-
Bitcoin Cash (BCH)		807		-
Ethereum (ETH)		2,249		-
Litecoin (LTC)		4,714		-
Dai (DAI)		-		-
Tether (USDT)		9,213		-
Total	$	18,780	$	-

The market value of the Company’s digital assets, based on quoted prices on active exchanges, was approximately $25 thousand and $0 as of June 30, 2023 and December 31, 2022, respectively.

As discussed in the Company’s financial statements for the years ended December 31, 2022 and 2021, during the second half of the year ended December 31, 2022 the Company identified an $851 thousand difference between certain reports provided by its digital asset custodian. The Company’s digital assets, as reported in the consolidated balance sheet as of December 31, 2022, presented the lower of the reported amounts and the $851 thousand difference was written off during the fourth quarter of 2022 pending resolution with the custodian. As of June 30, 2023, the Company completed its investigation of the matter and concluded that related digital assets were misappropriated by an unknown and unauthorized outside party that bypassed the Company’s security procedures and operational infrastructure. The Company is currently exploring its legal options; however, has determined it will not be able to recover those assets.

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NOTE 6 – DEBT

The Company’s short-term debt as of June 30, 2023 and December 31, 2022 totaled $570 thousand and $708 thousand, respectively of unsecured promissory notes (the “Unsecured Notes”) at 20% annual interest rate. The Company issued $199 and $48 thousand, respectively of Unsecured Notes during the six months ended June 30, 2023 and 2022, respectively. The Company issued $199 and $0 thousand, respectively of Unsecured Notes during the three months ended June 30, 2023 and 2022, respectively. Unsecured Notes interest expense of $82 thousand and $119 thousand was incurred during the six months ended June 30, 2023 and 2022, respectively and was recorded as accrued expenses in the condensed consolidated balance sheets. Unsecured Notes interest expense of $45 thousand and $57 thousand was incurred during the three months ended June 30, 2023 and 2022, respectively and was recorded as accrued expenses in the condensed consolidated balance sheets.

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. 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, 2023 and December 31, 2022 approximates the carrying amounts. Substantially all of the Unsecured Notes are due and payable during the year ending December 31, 2023 to the extent holders do not elect to extend one additional year.

NOTE 7 – UNICOIN RIGHTS FINANCING OBLIGATION

The Company is developing a security token called Unicoin (“Unicoins” or “Tokens”) whose value is intended to be supported by the returns generated by equity positions purchased from Unicorn Hunters show participants, as well as the returns from equity positions acquired from 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 realized gains are to be distributed to holders of the Unicoins.

The holders of Unicoins will only realize a gain in the event of a liquidity event of such equity positions. Unicoin rights do not represent an equity interest in the Company or any other entity, there are no voting rights granted to the holder of Unicoin rights, the Unicoin rights Certificate currently does not trade on any stock exchange or cryptocurrency exchange platform, and that Unicoins might never be developed or launched and that this investment could result in total loss of invested funds.

The Company is offering Unicoin Right Certificates (“Unicoin rights” or “Rights”) with terms and conditions which are set forth in a confidential private placement memorandum initially dated February 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 three months ended June 30, 2023 and 2022, the Company issued rights to acquire 0.3 billion and 0.4 billion Unicoins, respectively. During the six months ended June 30, 2023 and 2022, the Company issued rights to acquire 1.6 billion and 2.7 billion Unicoins, respectively. 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 as consideration for Rights to receive Unicoins in the future and in the event the Unicoin is never developed and launched. The Company concluded that it has a legal or contractual obligation and recorded an amount necessary to refund the amount originally paid by investors if holders’ reasonable expectation to receive Unicoins is not achieved.

To date, the Company has begun exploring possible service providers and exchanges which can assist with the tokenization of Unicoins and eventual launch but has not yet begun actual technological development or coding of the tokens. The Company reasonably expects that technical development can happen in a relatively short time, assuming regulatory readiness for launch, and hopes to complete this process by the end of the 2023 calendar year. Neither the Unicoin rights nor the tokenized Unicoins will grant any intellectual property rights to holders. As of June 30, 2023 and through the filing date of this Quarterly Report on Form 10-Q, 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.

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As of June 30, 2023 and December 31, 2022 the outstanding financing obligation related to Unicoin rights was $48,360 thousand and $37,462 thousand, respectively. 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 condensed consolidated statements of operations and comprehensive loss upon settlement. Although the Company intends to do so, if it is unable to develop and launch the Unicoin, there can be no assurance that the Company can generate sufficient funds through operations, or through financing transactions on terms acceptable to the Company in order to settle the Unicoin rights financing obligation. Due to the currently undetermined rights of Unicoin holders, the significant nature of required regulatory approvals and the likely registration required prior to Unicoins achieving liquidity (all of which have aspects whose success is outside of the Company’s control), management initially concluded that the value of the embedded feature is de minimis and will likely remain de minimis until the Unicoin is probable of regulatory approval and launch. Accordingly, the embedded feature was initially valued at $0 and is not expected to fluctuate until the Unicoin is launched or probable of launch.

The fair value measurement of the Unicoin rights financing obligation was based on significant inputs not observable in the market and represent Level 3 measurements within the fair value measurement hierarchy. Level 3 fair market values were determined using a variety of information, including estimated future cash flows.

The following table summarizes the components of the Unicoin rights financing obligation recorded on the Company’s condensed consolidated balance sheet as of June 30, 2023 and December 31, 2022:

Schedule of components of the unicoin rights financing obligation
		Outstanding Unicoin Rights and Related Financing Obligation
Nature / Category of Unicoin Right Holder		June 30, 2023				December 31, 2022
	Form of Consideration	Units		Amount		Units		Amount
Accredited Investors	Cash and Digital Assets		1,675,905,941		31,228,923		1,532,851,167	$	23,454,700
Unicoin Inc. Shareholders	Non-Cash Dividends		730,522,705		73,052		730,524,705		73,052
Employee, Contractors, Directors	Discretionary Compensation		343,680,612		34,368		330,052,274		361,119
Service Providers, Influencers and Employees	Services and Employee Labor		203,439,167		12,499,681		197,505,326		11,058,094
Subtotal			2,953,548,425		43,836,024		2,790,933,472	$	34,946,965
ITSQuest Contingent Divestiture Amendment	Contract Amendment		20,000,000		1,780,000		20,000,000		1,780,000
Five-Year Deferred Payment Plan	Cash		3,078,997,452		972,663		1,630,136,422		297,882
Ten-Year Prepaid Plan	Cash		8,151,047		1,771,280		2,131,667		437,000
Total			6,060,696,924		48,359,967		4,443,201,561	$	37,461,847

Sales to Accredited Investors

As of June 30, 2023 and December 31, 2022, the Unicoin rights financing obligation associated with sales to Accredited Investors amounted to $31,229 thousand and $23,455 thousand, respectively. The cumulative amounts were received from completed cash and non-cash sales of Unicoin rights in the Company’s various financing rounds at prices ranging from $0.01 to $0.50. Although there are no stated legal rights requiring the Company to return amounts received from investors, management believes the holder of Unicoin rights has a reasonable right to either 1) receive the number of Unicoins specified in their Unicoin rights agreement upon the future development and launch of the Unicoin or 2) a refund of the amount invested in anticipation of the future development and launch of Unicoins. Therefore, all amounts received from sales to Accredited Investors have been recorded as a Unicoin rights financing obligation.

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Dividend Issued to Shareholders

The Company declared and issued a non-cash dividend of Unicoin rights, on a pro-rata basis, to all shareholders of record as of the dividend declaration date of February 10, 2022. This non-cash dividend was the initial issuance of Unicoin rights, prior to finalizing any plan to market and sell Rights in connection with any of the Company’s financing rounds, and at the time of the pro-rata distribution, management and the Board had not yet ascribed a value to such Rights. As a result, the Company has ascribed a de minimis value to all Unicoin rights issued to shareholders on February 10, 2022. As of June 30, 2023 and December 31, 2022, the Unicoin rights financing obligation associated non-cash dividend of Unicoin rights amounted to $73 thousand.

Discretionary Payments to Employees, Contractors and Directors

The Company has issued Unicoin rights to certain employees, Board members and external contractors/consultants as discretionary awards. These Unicoin rights were issued on a discretionary basis and do not indicate that employees, Board members or contractors/consultants are being rewarded with a specific value attributable to past or future services rendered by such individuals. The Unicoin rights were also not issued as a replacement for, or in lieu of, cash or equity awards due under any type of pre-determined bonus or other incentive plan that quantifies a value that the holders are entitled to as a result of their services or performance. The Company believes that, because of the nature of these discretionary awards (i.e., nothing of specific value was exchanged to the Company in return), together with the legal disclaimer of any obligation to launch the Unicoin within the terms of the Unicoin rights agreement, on a per Unicoin Right basis, the amount that holders would be entitled to if the Unicoin is not ultimately launched is de minimis in relation to the actual fair value per Unicoin Right. As of June 30, 2023 and December 31, 2022, the Unicoin rights financing obligation associated with discretionary payments to employees, contractors and directors amounted to $34 thousand and $361 thousand, respectively.

Issued to Service Providers, Influencers and Employees

The Company has issued Unicoin rights in exchange for services from advertising agencies, marketing firms and other vendors. Also, the Company has issued Unicoin rights as part of the compensation package negotiated with certain employees. The related contracts for these third-party providers and employees specify the value provided, as negotiated by these parties, and the number of Unicoin rights accepted as compensation for the dollar value of those services.

Similar to Accredited Investors, service providers exchanged a specified, negotiated value in exchange for Unicoin rights and has rights to receive either 1) the negotiated number of Unicoins upon development or launch, or 2) payment of cash equivalent to the value of services provided. In addition, from time to time the Company engages Influencers to promote Unicoins and/or the Unicorn Hunters show in exchange for Unicoin rights. The form of Influencer engagement may include promoting Unicoin in a social media post, making brief reference in a speech, posting about Unicoin on a website or any other media form.

These contracts do not specify the value of services rendered by Influencer nor the specific format of engagement required. Because an “engagement” can represent something as simple as brief mention in a speaking engagement, or posting on a social media account, etc. management determined there is very little effort involved by the Influencer in order to perform services in a manner consistent with the contractual terms. As of June 30, 2023 and December 31, 2022, the Unicoin rights financing obligation associated with Unicoin rights issued to service providers, influencers and employees amounted to $12,500 thousand and $11,058 thousand, respectively.

Five-Year Deferred Payment Plan

In August 2022 the Company began offering a five-year deferred payment plan (the “deferred payment plan”) to investors in its ongoing Unicoin rights offering. The deferred payment plan permits investors to purchase Unicoin rights immediately and pay for such Unicoin rights in five equal annual installments, with the first installment due one year after the date of purchase. Purchases through the deferred payment plan requires that investors provide collateral to the Company having a value of up to 20% of the total purchase price of the purchased Unicoin rights. Collateral can be in the form of Company common stock owned by the investor, Unicoin rights already owned by the investor, cash, digital assets or other assets with a demonstrable value, at 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.

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Because there is no history of collections under the deferred payment plan, as no annual installment have become due yet and because there is uncertainty regarding payment in the event that Unicoins have not been developed and launched by the time the first annual installments become due, the Company has not recorded a receivable and a corresponding Unicoin rights financing obligation for uncollected amounts. As of June 30, 2023 and December 31, 2022, the Company has recognized an asset and a corresponding Unicoin rights financing obligation of $973 thousand and $298 thousand, respectively, for cash collateral submitted by investors under the deferred payment plan. However, no asset will be recognized for the fair value of non-cash collateral unless and until one or more investors default on their payment obligation.

As of December 31, 2022, investors had signed contracts for the purchase of 1.63 billion Unicoin rights under the five-year deferred payment plan that may lead to proceeds of up to $170,418 thousand through the five-year period if the Unicoin is successfully developed and launched and the Company’s deferred payment installment sales are fully executed. Upon receiving the annual payments over the five-year term or upon having sufficient history and other positive information regarding collectability to record accounts or notes receivable for remaining amounts due under the deferred sale arrangements, the Company expects to record cash or notes receivable and a corresponding financing obligation, as it would through Sales to Accredited Investors as discussed above, until the point in time that the investment contracts are settled through issuance of Unicoins.

The following table summarizes the pledged collateral pursuant to the five-year deferred payment plan as of June 30, 2023 and December 31, 2022:

Schedule of pledged collateral
	Estimated Fair Value of Collateral Received as of:
Form of Collateral Received	June 30, 2023		December 31, 2022
Cash	$	972,663	$	297,882
Digital Assets		131,841		94,102
Non-Unicoin Inc. Stock		1,771,180		-
Unicoin Inc. Common Stock		4,633,210		1,931,116
Unicoin rights		19,631,505		8,175,000
Real Estate		12,719,514		2,300,000
Total	$	39,859,913	$	12,798,100

The fair value of the collateral received by Company is determined as follows:

○ Cash – Based on the value of cash received.

○ Digital Assets – Fair value is determined based on quoted prices on the active exchanges as of the balance sheet date for the reporting period.

○ Non Unicoin Inc. Stock – Fair value is determined based on quoted prices on the active exchanges as of the balance sheet date for the reporting period.

○ Unicoin Inc. Common Stock – Based on fair value of common stock, as of the balance sheet date for the reporting period, determined with the assistance of a third-party valuation firm.

○ Unicoin rights – Based on fair value of Unicoin rights, as of the balance sheet date for the reporting period, determined with the assistance of a third-party valuation firm.

○ Real Estate – Based on third-party appraisal as of or near the balance sheet date for the reporting period.

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Ten-Year Prepaid Plan

In November 2022 the Company began offering a ten-year prepaid plan (the “prepaid plan”) to investors in its ongoing Unicoin rights offering. The investor remits a cash or digital asset deposit (the “principal”) for a period of up to ten years. After the first year, the investor can either withdraw the principal or apply it towards the purchase of Unicoins at 20 cents per unit. Five years after the deposit (the “maturity”), the investor earns a cumulative interest of 50% of the principal, which qualifies toward the withdrawal or purchase of Unicoins. As of June 30, 2023 and December 31, 2022, cumulative cash receipts of $1,771 thousand and $437 thousand, respectively, were recorded as Unicoin rights financing obligation in connection with the ten-year prepaid plan. As of June 30, 2023 and December 31, 2022, accrued interest recorded within the Unicoin rights financing obligation amounted to $36 thousand and zero, respectively.

ITSQuest Contingent Divestiture Amendment

In December 2022, the Company issued 20 million Unicoin rights to the previous owners of ITSQuest as part of the consideration given in exchange for amending ITSQuest’s contingent divestiture provision. A total of $1,780 thousand was recorded relating to the Unicoin rights financing obligation associated with these Unicoin rights. Representing the approximate fair value of the Unicoin rights at the time of issuance.

Unicoin Rights Issued to Related Parties

The following table summarizes Unicoin rights issued to related parties as of June 30, 2023 and December 31, 2022:

Schedule of unicoin rights issued to related parties
		Outstanding Unicoin Rights and Related Financing Obligation
		June 30, 2023				December 31, 2022
Nature / Category	Relationship	Units		Amount		Units		Amount
Accredited Investors	Officers and Directors		3,000,000		30,000		3,000,000	$	30,000
Unicoin Inc. Shareholders (Dividends)	Officers and Directors		542,425,284		54,242		542,014,208		54,201
Discretionary Awards	Officers, Directors & their Families		89,329,000		8,933		83,514,999		453,705
Consideration for Services	Officers, Directors & their Families		28,939,112		1,928,449		28,747,043		852,514
ITSQuest Contingent Divestiture Amendment	Former Owners of ITSQuest		20,000,000		1,780,000		20,000,000		1,780,000
Five-Year Deferred Payment Plan	Officers, Directors & their Families		251,666,500		-		-		-
Total			935,359,896		$3,801,624		677,276,250	$	3,170,420

Other Matters

As of June 30, 2023 and December 31, 2022, the Company held $606 thousand and $192 thousand of cash deposits pursuant to completion of the due diligence process required before issuance of Unicoin Right certificates. This amount is included in other current liabilities on the condensed consolidated balance sheet and in proceeds from sales of Unicoin rights on the condensed consolidated statements of cash flows.

On May 5, 2023, the Company entered into an Asset Swap Agreement with an investor in Thailand, the Company agreed to provide 12.8 million Unicoin rights in exchange for real estate assets located in Thailand, currently owned by the noted investor. As it awaits the completion of the due diligence process, the Company has not yet received the deed to the related real estate assets. Accordingly, the Company has not recorded any accounting entries regarding this Asset Swap Agreement with the investor in Thailand.

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NOTE 8 – COMMON STOCK

The Company is authorized to issue 1,000,000,000 shares with 773,030,006 and 772,938,415 shares of common stock issued and 733,507,964 and 733,427,768 outstanding, net of treasury stock, as of June 30, 2023, and December 31, 2022, 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, 2023 and 2022, the Company raised $8 thousand and $134 thousand, respectively, via a series of funding rounds as follows:

Schedule of issuance of common stock
	Three Months Ended June 30, 2023
Common Stock Issuances by Round	Shares		Weighted Average Price per Share		Proceeds
Round 4a and 4b		2,500		3.00	$	7,500
Round 5*		34		-		-
Total stock issued		2,534			$	7,500

* In the three months ended June 30, 2023, the Company issued 34 shares as part of Round 5 to correct a previously issued stock certificate. No additional proceeds were collected as part of the correction.

	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

For the six months ended June 30, 2023 and 2022, the Company raised $42 thousand and $1,494 thousand, respectively, via a series of funding rounds as follows:

	Six Months Ended June 30, 2023
Common Stock Issuances by Round	Shares		Weighted Average Price per Share		Proceeds
Round 4a and 4b		8,000		2.06	$	16,500
Round 5		6,979		3.58		25,000
Total stock issued		14,979			$	41,500

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

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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 to and committed, management evaluated capital needs and determined the price for the following round.

Repurchases of Common Stock

For the three months ended June 30, 2023 and 2022, the Company repurchased 5,210 and 0 shares in exchange for $2 thousand and $0 thousand, respectively. For the six months ended June 30, 2023 and 2022, the Company repurchased 11,395 and 3,398,730 shares in exchange for $4 thousand and $340 thousand, respectively. Treasury stock is recorded on the condensed 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, 2023.

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

Schedule of common stock reserved
	June 30, 2023		December 31, 2022
Stock options outstanding (Note 9)		55,535,881		55,535,881
Warrants for common stock (Note 10)		10,310,000		10,310,000
Restricted stock units (Note 9)		290,142		369,571

Dividend of Unicoins

As discussed in Note 7, 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. Approximately 731 million 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 condensed consolidated balance sheet. The dividend was recorded as a reduction of additional paid-in-capital because the Company is in a retained deficit position.

NOTE 9 – STOCK-BASED COMPENSATION

Stock Options

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. 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 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 $0.0001 to $2.00. 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.

The Company recorded $0 and $12 thousand of stock-based compensation expense relating to stock option awards during the six months ended June 30, 2023 and 2022, 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. Expected volatility is based on the historic volatility of a basket of certain publicly traded comparable companies. Management estimates the expected term of the award based on the contractual as well as the exercise price of the options. The risk-free interest rate is based on the U.S. Treasury yield curve applicable to a period equal to the expected term of the award. The Company accounts for forfeitures as they occur.

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The following is a summary of stock option activity for the six months ended June 30, 2023:

Schedule of assumptions used
	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value
Beginning balance January 1, 2023		55,535,881	$	0.031		6.61	$	20,271,659
Granted		-
Exercised		-
Cancelled		-
Ending balance June 30, 2023		55,535,881	$	0.031		6.11	$	17,517,773
Vested and exercisable as of June 30, 2023		55,535,881	$	0.031		6.11	$	17,517,773

The assumptions used to determine stock-based compensation expense for the six months ended June 30, 2023 and 2022 were as follows:

Schedule of stock option activity
	Six Months Ended June 30,
	2023			2022
Fair value of common stock	$	0.34		$	0.91 - 0.94
Expected term (in years)		10			10
Volatility		55.00	%		58.00% - 59.00	%
Risk-free rate		5.27	%		2.30% - 2.90	%
Dividend yield		-			-

Restricted Stock Units

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. No liability-classified RSU’s existed subsequent to December 31, 2022.

The following is a summary of RSU activity for the six months ended June 30, 2023:

Schedule of liability and restricted stock units
	Number of RSU’s
Beginning balance - January 1, 2023		369,571
Granted		-
Vested		(76,612	)
Forfeited		(2,817	)
Ending balance - June 30, 2023		290,142

The Company recorded $37 thousand and $52 thousand of stock-based compensation expense relating to RSU’s during the three months ended June 30, 2023 and 2022, respectively. The Company recorded $75 thousand and $106 thousand of stock-based compensation expense relating to RSU’s during the six months ended June 30, 2023 and 2022, respectively.

During the three and six months ended June 30, 2023 and 2022 substantially all stock-based compensation expense was classified as general and administrative expense.

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NOTE 10 – 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 were 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, 2023 and December 31, 2022 all warrants were classified as equity with a weighted average grant date fair value of $0.02.

The table below summarizes warrant activity for the three months and six months ended June 30, 2023:

Schedule of common stock warrants
	Number of Warrants
Beginning balance as of January 1, 2023		10,310,000
Granted		-
Exercised		-
Forfeited		-
Ending balance as of June 30, 2023		10,310,000

NOTE 11 – LEASES

As discussed in Note 2, the Company adopted ASC 842 effective January 1, 2022 and applied a modified retrospective transition approach. The Company leases its office facilities under operating lease arrangements with varying expiration dates through 2025. Operating lease ROU assets and operating lease liabilities are recognized at the lease commencement date based on the present value of the lease payments over the lease term. ROU assets also include adjustments related to prepaid or deferred lease payments. As the Company’s leases do not provide an implicit rate, it uses the incremental borrowing rate based on the information available at lease commencement date in determining the present value of lease payments. Options to extend a lease are included in the lease term when it is reasonably certain that the Company will exercise such options. As of June 30, 2023, the remaining lease term of the Company’s operating leases ranges from less than one year to three years.

As of June 30, 2023 and December 31, 2022, total operating lease ROU assets were $270 thousand and $350 thousand, respectively. As of June 30, 2023 and December 31, 2022 operating lease liabilities totaled $273 273,380 thousand and $350 thousand, respectively. As of June 30, 2023 and December 31, 2022 the current portion of the operating lease liability was $141 thousand and $150 thousand, respectively. As of June 30, 2023 and December 31, 2022 the non-current portion was $133 thousand and $200 thousand, respectively.

As of June 30, 2023 and December 31, 2022, the Company’s operating leases had a weighted-average remaining lease term of 1.8 years and 1.6 years, respectively. As of June 30, 2023 and December 31, 2022, the Company’s operating leases had a weighted-average discount rate of 10%.

The Company recorded aggregate operating lease expense of $186 thousand and $140 thousand for the six months ended June 30, 2023 and 2022, respectively. The Company recorded aggregate operating lease expense of $92 thousand and $73 thousand for the three months ended June 30, 2023 and 2022, respectively.

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For the six months ended June 30, 2023 and 2022, the Company recorded operating lease expense of $95 thousand and $76 thousand, respectively, for leases which were capitalized as ROU assets and operating lease liabilities. For the three months ended June 30, 2023 and 2022, the Company recorded operating lease expense of $53 thousand and $38 thousand, respectively, for leases which were capitalized as ROU assets and operating lease liabilities. The Company elected to exclude leases with a term of 12 months or less from its condensed consolidated balance sheets. For the six months ended June 30, 2023 and 2022, the Company recorded operating lease expense of $91 thousand and $64 thousand, respectively, for these leases that were not capitalized. For the three months ended June 30, 2023 and 2022, the Company recorded operating lease expense of $39 thousand and $38 thousand, respectively, for these leases that were not capitalized.

As of June 30, 2023, future maturities of operating lease liabilities were as follows:

Schedule of maturities of operating lease liabilities
	Amount
2023 (July 1 through December 31)	$	85,803
2024		142,953
2025		73,696
Future operating lease payments		302,452
Imputed interest		(29,072	)
Total operating lease liabilities		273,380
Current portion		(140,744	)
Operating lease liabilities, noncurrent	$	132,636

NOTE 12 – 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 condensed consolidated business, financial condition, operation results or cash flows.

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 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 13 – RELATED PARTY TRANSACTIONS

Unicoin Rights Issued to Related Parties

As discussed in Note 7, a Financing Obligation of $3,802 thousand and $3,170 thousand has been recorded in connection to Unicoin rights issued to related parties as of June 30, 2023 and December 31, 2022, respectively.

Loan from Chief Executive Officer

During the second half of the year ended December 31, 2022, Alex Konanykhin, CEO and a director of the Company made interest-free advances totaling $645 thousand to the Company. During the three months ended June 30, 2023, the Company repaid $250 thousand to the CEO. As of June 30, 2023 and December 31, 2023, related party loan payable amounted to $395 thousand and $645 thousand, respectively. These advances were for general corporate purposes. No maturity date is specified but management’s intent is to repay the loan during the year ending December 31, 2023 therefore the balance is classified as a current liability in the condensed consolidated balance sheet.

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NOTE 14 – INCOME TAXES

The Company recorded income tax benefit (expense) of ($38) thousand and $65 thousand for the three months ended June 30, 2023 and 2022, respectively. The resulting effective tax rates were 1.1% and (0.3%) for the three months ended June 30, 2023 and 2022, respectively. The Company recorded income tax benefit (expense) of ($108) thousand and ($115) thousand for the six months ended June 30, 2023 and 2022, respectively. The resulting effective tax rates were 1.8% and 0.5% for the six months ended June 30, 2023 and 2022, 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 and is not able to utilize Unicoin’s deferred tax assets to offset taxable income. During the three months ended June 30, 2023 and 2022, there were no significant changes to the total amount of unrecognized tax benefits.

NOTE 15 – 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.

Calculation of net loss per share is as follows for the three months and six months ended June 30 2023 and June 30, 2022 respectively:

Schedule of earning per shares basis and diluted
	Three Months Ended June 30,						Six Months Ended June 30,
Basic and Diluted:	2023			2022			2023			2022
Numerator:
Net loss attributable to Unicoin Inc. per consolidated statements of operations	$	(3,468,646	)	$	(19,288,803	)		(6,052,535	)		(20,644,028	)
Denominator:
Weighted average common shares outstanding used to compute basic and diluted loss per share		733,485,437			734,018,271			733,469,733			733,516,974
Net loss per common share attributable to Unicoin Inc., basic and diluted	$	(0.01	)	$	(0.03	)	$	(0.01	)	$	(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,
	2023		2022		2023		2022
Stock options outstanding (Note 9)		55,535,881		55,535,881		55,535,881		55,535,881
Warrants for common stock (Note 10)		10,310,000		10,310,000		10,310,000		10,310,000
Restricted stock units (Note 9)		290,142		529,697		290,142		529,697

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NOTE 16 – 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.

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”).

The following tables you set forth certain reportable segment information relating to where the Company derived its revenue for the three months ended June 30, 2023, and 2022:

Schedule of revenue from segments
	Three Months Ended June 30,
	2023						2022
	United States		Foreign countries		Consolidated		United States		Foreign countries		Consolidated
Staffing revenues	$	4,387,559	$	115,306	$	4,502,865	$	4,463,870	$	388,823	$	4,852,693
Subscription revenues		433		2,751		3,184		494		7,527		8,021
Unicorn Hunters		2,329		-		2,329		-		-		-
Total revenues	$	4,390,321	$	118,057	$	4,508,378	$	4,464,364	$	396,350	$	4,860,714

The following tables you set forth certain reportable segment information relating to where the Company derived its revenue for the six months ended June 30, 2023, and 2022:

	Six Months Ended June 30,
	2023						2022
	United States		Foreign countries		Consolidated		United States		Foreign countries		Consolidated
Staffing revenues	$	8,546,035	$	227,363	$	8,773,398	$	8,824,134	$	617,786	$	9,441,920
Subscription revenues		933		5,941		6,874		848		11,016		11,864
Unicorn Hunters		2,677		1,511		4,188		-		4,139,000		4,139,000
Total revenues	$	8,549,645	$	234,815	$	8,784,460	$	8,824,982	$	4,767,802	$	13,592,784

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The following tables set forth certain reportable segment information relating to the Company’s operations for the three months ended June 30, 2023 and 2022:

Schedule of operations from operations
	Three Months Ended June 30, 2023
	SaaS		TaaS		Unicorn Hunters			Consolidated
Revenues	$	3,184	$	4,502,865	$	2,329		$	4,508,378
Cost of revenues		-		3,526,595		5,625			3,532,220
Gross profit (loss)	$	3,184	$	976,270	$	(3,296	)	$	976,158

	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	)

The following tables set forth certain reportable segment information relating to the Company’s operations for the six months ended June 30, 2023 and 2022:

	Six Months Ended June 30, 2023
	SaaS		TaaS		Unicorn Hunters			Consolidated
Revenues	$	6,874	$	8,773,398	$	4,188		$	8,784,460
Cost of revenues		-		6,937,065		29,634			6,966,699
Gross profit (loss)	$	6,874	$	1,836,333	$	(25,446	)	$	1,817,761

	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

There were no material transactions between reportable segments during the three months ended June 30, 2023 and 2022.

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.

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NOTE 17 – 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.

Unicoin Rights Issued

Subsequent to June 30, 2023, the Company issued Unicoin rights as follows:

- Issued rights to acquire 20,905 thousand Unicoins in exchange for consideration of approximately $1,075 thousand (cash of $535 thousand and non-cash of $540 thousand).

- Accredited investors contributed $50 thousand in cash toward the future acquisition of Unicoins under the ten-year prepaid plan.

In addition, on August 7, 2023, the Company entered into an Asset Swap Agreement with Electroquimica Del Neuquen S.A., a mining company in Argentina (the “Argentinian counterpart”), the Company agreed to provide 420 million Unicoin rights in exchange for real estate assets owned by the Argentinian counterpart. As it awaits the completion of the due diligence process, the Company has not issued the Unicoin rights nor has received the deed to the related real estate assets.

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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. (hereinafter the “Company”, “Unicoin Inc.”, “we”, “us”, or “our”) was incorporated in the state of Delaware on June 22, 2015. In 2008, our 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. With clients of all sizes in multiple countries around the world, and over 30,000 individual users of our platforms, Unicoin Inc. brings together an end-to-end solution to manage distributed teams in a transparent and efficient way.

Unicoin Inc. is an operating and holding company. As an operating company, Unicoin Inc. manages its SaaS (Software-as-a-Service) software business which provides for simple and seamless monitoring and management of remote or work-from-home employees. Unicoin Inc. has also launched a security token project in early 2022, as a complementary business to its Unicorns, Inc. (hereinafter “Unicorns” or “Unicorn Hunters”) subsidiary. As a holding company, Unicoin Inc. wholly owns two TaaS (Talent-as-a-Service) operating companies and platforms – SheWorks! and Yandiki. In June 2023, the Company merged Yandiki into the SheWorks! operating company. As a holding company, Unicoin Inc. is also the majority owner of a traditional staffing agency, ITSQuest, with a regional presence in the U.S. Southwest. Finally, as a holding company, Unicoin Inc. also became the majority owner in 2021 of Unicorns Inc., a media production company producing Unicorn Hunters, a business and investing reality show.

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.

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

The Company has accepted digital assets including Bitcoin (BTC), Ether (ETH), Litecoin (LTC), Dai (DAI), USD Coin (USDC), Bitcoin Cash (BCH) and Tether (USDT) 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, which controls account access through requiring separate authentication from two authorized individuals. Management monitors transactions and account balances through the Coinbase client portal, as applicable. We also intend to use Coinbase as a third-party custodial service to facilitate the holding and exchange of Unicoins, which are described below, upon development and launch. 

Unicoin Inc. is also developing a security token related to the Unicorn Hunters show, called Unicoin. Unicoin’s value is intended to be supported by the equity positions given to Unicorns by Unicorn Hunters show participants, as well as equity positions acquired from 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 either Unicorns Inc. or 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 a 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, create worldwide brand awareness of Unicoins, and pay for general corporate matters and operating expenses. The Unicoins development project is currently being undertaken by Unicoin Inc., but may in the future be transferred to a to-be-formed subsidiary of Unicoin Inc.

Unicoins are expected to also have a utility function in what is referred to as the “Unicorn Hunters Ecosystem,” in that holders may use Unicoins to purchase media inventory at our discounted rate. The Company plans to purchase media inventory and resell it to Unicoin holders in exchange for Unicoins and/or cash, thereby giving such holders preferred access and pricing for media inventory, and retention of a portion of the “spread” in pricing for its effort. Exact pricing and spreads will be determined on a case-by-case basis and have not been predetermined. 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), Dai (DAI), USD Coin (USDC), Bitcoin Cash (BCH) and Tether (USDT) 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 is 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 represents 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 the subscription period.

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 a fixed cost basis billed upon satisfaction of respective milestones. The Company typically invoices its customers at the end of each month in cases where the contracts involve billing based on fixed hourly rates and/or once a 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 when 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 for an amount of the transaction price that is proportionate to the total milestones in the contract. 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 promise to the customer is fulfilled and revenue is recognized for the entire transaction price 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.

For the SaaS and TaaS segments, cost of revenue includes salaries, and personnel compensation costs, associated with the Company’s 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 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 capitalized costs are expensed when the related show is distributed on the Unicorn Hunters website.

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Operating Expenses

Research and development costs are related to maintaining and improving the Company’s software platform and primarily consist of personnel-related costs, including salaries and bonuses, benefits and stock-based compensation expense. Research and development costs related to internal use software are not material and are expensed as they are incurred.

Sales and marketing costs principally consist of third-party marketing, advertising, and branding in addition to compensation and benefits of the Company’s own marketing personnel. Sales, marketing and advertising costs are expensed as incurred.

General and administrative costs primarily consist of compensation, employee benefits, and stock-based compensation related to executive management, finance, administration and human resources, facility costs, professional service fees, and other general overhead costs.

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 on 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 continue to reopen and demand for services increase. We expect the legacy of the coronavirus pandemic to continue promoting geographical work flexibility as travel restrictions may be slow to be lifted, which would help drive business growth. A Gartner survey revealed that 74% of CFOs intend to shift at least 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 continue to 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 technological 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.

In November 2020, 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 withheld in reserve 3,500,000 of the 10,000,000 shares of common stock until the tax liability has been settled. These shares have been held in reserve and subject to an agreed-upon Escrow Agreement.

The contingent divestiture clause provided that, in the event that Unicoin Inc. did 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 (the “trigger event”), on or before December 31, 2022, Unicoin Inc. shall transfer to ITSQuest all of Unicoin Inc.’s rights, title and interest in ITSQuest, including ITSQuest equity as well as any Unicoin Inc. shares that remain subject to a holdback provision regarding tax liabilities, thus completely divesting itself of all ownership in ITSQuest.

On December 28, 2022, the Company and the sellers of ITSQuest amended the SEA (the “Amended SEA”) to delay the date of the trigger event to December 31, 2024 (i.e., by an additional 24 months). In addition, the Amended SEA incorporated a second alternative trigger event, also required to be achieved on or before December 31, 2024, whereby ITSQuest would not be required to divest its interest in ITSQuest back to the sellers if Unicoin Inc.’s proposed security tokens “Unicoins” are tokenized and listed on an available Alternative Trading System or cryptocurrency exchange (whichever is applicable), with a quoted price at or above $1.00 per token. As consideration for the Amended SEA, 1,500,000 of the Company’s shares previously held in escrow, pending resolution of the ITSQuest tax liability that existed at the time of the acquisition, were released to the sellers of ITSQuest and 20,000,000 Unicoin rights (i.e., 10,000,000 to each of the two prior ITSQuest owners) were issued upon its execution. After release of a forementioned shares held in escrow upon signing the Amended SEA, 2,000,000 shares of common stock remain in reserve and subject to a holdback provision regarding tax liabilities.

The Company originally recorded estimated contingent consideration in the form of the contingent divestiture provision in the amount 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 trading price, which had a probability of 0%. In addition, the other significant estimate relates to the estimated fair value of the common stock issued in exchange for the 51% interest in ITSQuest.”

As of the date of filing of this Quarterly Report on Form 10-Q, as a result of the extended deadline provided in the Amended SEA, the Company cannot yet assess the likelihood or probability of achieving either of the two trigger events necessary to avoid divestiture of ITSQuest. However, if the Company is not able to achieve an initial offering of its Common Stock or an initial registration of its Unicoins, sufficient to meet the criteria outlined in the Amended SEA on or before December 31, 2024, the Company’s business, financial condition, results of operations and liquidity will be materially impacted as ITSQuest represented Company assets of $10,225 thousand and $9,338 thousand, revenues of $15,667 thousand and $13,050 thousand, and generated gross margins of $3,218 thousand and $2,527 thousand as of December 31, 2022 and December 31, 2021, respectively.

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.

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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 the 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 from Unicorns customers is fixed at contract inception and has historically been received in one of two forms: 1) either a pre-determined number of stock options, warrants or shares or 2) options or warrants or shares representing a specific percentage of the customer’s common stock outstanding as of a particular point in time. Non-cash consideration is recognized at the estimated fair value at or near the date of contract inception. As of the date of this Quarterly Report on Form 10-Q, we have collected securities as payment for Unicorns services from all participants who have been charged a fee.

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Results of Operations

Comparison of the Six Months Ended June 30, 2023 to the Six Months Ended June 30, 2022

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, 2023 and 2022 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,
	2023			% of Total Revenues			2022			% of Total Revenues
REVENUES:
Staffing revenues	$	8,733,398			100	%	$	9,441,920			69	%
Subscription revenues		6,874			-			11,864			-
Unicorns revenues		4,188			-			4,139,000			30	%
Total Revenues		8,784,460			100	%		13,592,784			100	%
COST OF REVENUES:
Staffing cost of revenues		6,937,065			79	%		7,286,086			54	%
Subscription cost of revenues		-			-			870			-
Unicorns cost of revenues		29,634			0	%		5,382,413			40	%
Total Cost of Revenues		6,966,699			79	%		12,669,369			93	%
GROSS PROFIT		1,817,761			21	%		923,415			7	%
OPERATING COSTS AND EXPENSES
General and administrative		6,834,265			78	%		8,070,650			59	%
Sales and marketing		611,229			7	%		14,206,122			105	%
Research and development		114,607			1	%		249,401			2	%
TOTAL OPERATING COSTS AND EXPENSES		7,560,101			86	%		22,526,173			166	%
LOSS FROM OPERATIONS		(5,742,340	)		(65	)%		(21,602,758	)		(159	)%
Interest income (expense), net		(117,406	)		(1	)%		(118,845	)		(1	)%
Other income (expense), net		-			-			(616	)		-
LOSS BEFORE INCOME TAXES		(5,859,746	)		(67	)%		(21,722,219	)		(160	)%
Income tax expense		(107,842	)		(1	)%		(115,293	)		(1	)%
NET LOSS AND COMPREHENSIVE LOSS		(5,967,588	)		(68	)%		(21,837,512	)		(161	)%
Less: net income (loss) attributable to the noncontrolling interest		84,946			1	%		(1,193,484	)		(9	)%
NET LOSS ATTRIBUTABLE TO THE COMPANY	$	(6,052,534	)		(69	)%	$	(20,644,028	)		(152	)%

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Revenues

The following table presents our revenue for the periods indicated.

	Six Months Ended June 30,
	2023		2022		Change ($)			Change (%)
TAAS revenues	$	8,773,398	$	9,441,920	$	(668,522	)		(7	)%
SAAS revenues		6,874		11,864		(4,990	)		(42	)%
Unicorns revenues		4,188		4,139,000		(4,134,812	)		(100	)%
Total Revenues	$	8,784,460	$	13,592,784	$	(4,808,324	)		(35	)%

Total revenues decreased by $4,808 thousand, or 35%, to $8,784 thousand for the six months ended June 30, 2023, from $13,593 thousand for the six months ended June 30, 2022.

TaaS. TAAS revenues decreased by $669 thousand, or 7%, to $8,773 thousand for the six months ended June 30, 2023, from $9,442 thousand for the six months ended June 30, 2022. The decrease was primarily due to a decrease in ITSQuest revenue of $612 thousand, a decrease in Yandiki revenue of $201 thousand, partially offset by an increase in SheWorks! revenue of $151 thousand for the six months ended June 30, 2023. The State of New Mexico began lifting the strict COVID-19 lockdowns by the end of the 2021 calendar year, which led to higher-than-normal levels of revenues for ITSQuest in the State of New Mexico during the six months ended June 30, 2022. The increase in SheWorks! revenue 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. 

Unicorns. Unicorns revenues decreased by $4,135 thousand, or 100%, to $4 thousand for the six months ended June 30, 2023. Unicorns recognizes revenues when an episode of Unicorn Hunters is distributed for broadcast or streaming. The Company did not record any significant revenue during the six months ended June 30, 2023, as there were no episodes distributed during that period. Unicorns revenues of $4,139 thousand for the six months ended June 30, 2022, corresponded to the two episodes that were distributed during that same period.

Cost of Revenues

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

	Six Months Ended June 30,
	2023		2022		Change ($)			Change (%)
TAAS cost of revenues	$	6,937,065	$	7,286,086	$	(349,021	)		(5	)%
SAAS cost of revenues		-		870		(870	)		N/A
Unicorns cost of revenues		29,634		5,382,413		(5,352,779	)		(99	)%
Total Cost of Revenues	$	6,966,699	$	12,669,369	$	(5,702,670	)		(45	)%

Total cost of revenues decreased by $5,703 thousand, or 45%, to $6,967 thousand for the six months ended June 30, 2023, from $12,669 thousand for the six months ended June 30, 2022.

TaaS. TAAS cost of revenues decreased by $349 thousand, or 5%, to $6,937 thousand. The decrease was mainly due to a proportional decrease in TAAS revenues.

Unicorns. Unicorns cost of revenues was decreased by $5,353 thousand to $30 thousand for the six months ended June 30, 2023, compared to $5,382 thousand, for the six months ended June 30, 2022. No episodes were produced during each of the six months ended June 30, 2023 and 2022.

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General and administrative

General and administrative expenses decreased by $1,236 thousand, or 15%, to $6,834 thousand for the six months ended June 30, 2023. The decrease was primarily due to a decrease in impairment loss recognized on cryptocurrency assets of $617 thousand, decrease in contractor and professional service expenses of $587 thousand, a decrease in travel and entertainment expenses of $497 thousand and a decrease in IT expenses of $106 thousand. These decreases were partially offset by an increase in accounting services of $789 thousand.

Sales and marketing

Sales and marketing expenses decreased by $13,595 thousand, or 96%, to $611 thousand for the six months ended June 30, 2023. The decrease was primarily attributable to a decrease in advertising for the Unicorn Hunters show of $1,913 thousand, as no episodes were released during the period, a decrease of $1,014 thousand in relation to general advertising paid for by exchanging Unicoin rights and an overall decrease in general advertising spending for the rest of our business of $10,668 thousand.

Research and development

Research and development expense decreased by $135 thousand, or 54%, to $115 thousand for the six months ended June 30, 2023. Research and development expense mainly consists of personnel related costs, such as salaries and benefits and stock-based compensation for research, design and development activities. Internally developed software costs for internal use are not material and are expensed as they are incurred.

Interest income (expense), net

Interest income (expense), net decreased by $1 thousand to ($117) thousand for the six months ended June 30, 2023. The change was primarily due to increases in interest expense of $36 thousand payable to holders of Unicoin rights issued under the ten-year prepaid plan, partially offset by a decrease in interest expense of $37 thousand from a net reduction in outstanding Unsecured Notes.

Provision for Income Taxes

	Six Months Ended June 30,
	2023			2022			Change ($)			Change (%)
Income tax expense	$	107,842		$	115,293		$	(7,451	)		(6	)%
Effective tax rate		1.8	%		0.5	%

The Company recorded income tax expense of $108 thousand and $115 thousand for the six months ended June 30, 2023 and 2022, respectively. The resulting effective tax rate was 1.8% and 0.5% for the six months ended June 30, 2023 and 2022, 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 and is not able to utilize Unicoin’s deferred tax assets to offset taxable income. During the six months ended June 30, 2023 and 2022, there were no significant changes to the total amount of unrecognized tax benefits.

Net income (losses) attributable to the noncontrolling interest

Net income (losses) attributable to the noncontrolling interest increased by $1,278 thousand, or 107%, to net income of $85 thousand for the six months ended June 30, 2023. Our noncontrolling interest holders in ITSQuest were allocated income of $159 thousand and $169 thousand for the six months ended June 30, 2023 and 2022, respectively. Our noncontrolling interest holders in Unicorns were allocated losses of ($74) thousand and ($1,363) thousand for the six months ended June 30, 2023 and 2022, respectively. As of both June 30, 2023 and 2022, noncontrolling interest in ITSQuest and Unicorns represented an ownership interest of 49% and 33.3%, respectively.

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Comparison of the Three Months Ended June 30, 2023 to the Three Months Ended June 30, 2022

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, 2023 and 2022 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.

	Three Months Ended June 30,
	2023			% of Total Revenues			2022			% of Total Revenues
REVENUES:
Staffing revenues	$	4,502,865			100	%	$	4,852,693			100	%
Subscription revenues		3,184			-			8,021			-
Unicorns revenues		2,329			-			-			-
Total Revenues		4,508,378			100	%		4,860,714			100	%
COST OF REVENUES:
Staffing cost of revenues		3,526,595			78	%		3,703,279			76	%
Subscription cost of revenues		-			-			573			-
Unicorns cost of revenues		5,625			-			5,370,592			110	%
Total Cost of Revenues		3,532,220			78	%		9,074,444			187	%
GROSS PROFIT		976,158			22	%		(4,213,730	)		(87	)%
OPERATING COSTS AND EXPENSES
General and administrative		3,916,249			87	%		4,670,846			96	%
Sales and marketing		367,757			8	%		12,458,119			256	%
Research and development		56,242			1	%		126,703			3	%
TOTAL OPERATING COSTS AND EXPENSES		4,340,248			96	%		17,255,668			355	%
LOSS FROM OPERATIONS		(3,364,090	)		(75	)%		(21,469,398	)		(442	)%
Interest income (expense), net		(44,186	)		(1	)%		(57,386	)		(1	)%
Other income (expense), net		391			0	%		(586	)		-
LOSS BEFORE INCOME TAXES		(3,407,885	)		(76	)%		(21,527,370	)		(443	)%
Income tax benefit (expense)		(37,826	)		(1	)%		65,309			1	%
NET LOSS AND COMPREHENSIVE LOSS		(3,445,711	)		(76	)%		(21,462,061	)		(442	)%
Less: net income (loss) attributable to the noncontrolling interest		22,934			1	%		(2,173,258	)		(45	)%
NET LOSS ATTRIBUTABLE TO THE COMPANY	$	(3,468,645	)		(77	)%	$	(19,288,803	)		(397	)%

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Revenues

The following table presents our revenue for the periods indicated.

	Three Months Ended June 30,
	2023		2022		Change ($)			Change (%)
TAAS revenues	$	4,502,865	$	4,852,693	$	(349,828	)		(7	)%
SAAS revenues		3,184		8,021		(4,837	)		(60	)%
Unicorns revenues		2,329		-		2,329			N/A
Total Revenues	$	4,508,378	$	4,860,714	$	(352,336	)		(7	)%

Total revenues decreased by $352 thousand, or 7%, to $4,508 thousand for the three months ended June 30, 2023, from $4,861 thousand for the three months ended June 30, 2022.

TaaS. TAAS revenues decreased by $350 thousand, or 7%, to $4,503 thousand for the three months ended June 30, 2023, from $4,853 thousand for the three months ended June 30, 2022. The decrease was primarily due to a decrease in ITSQuest revenue of $149 thousand, a decrease in Yandiki revenue of $139 thousand, and a decrease in SheWorks! revenue of $55 thousand for the three months ended June 30, 2023. The State of New Mexico began lifting the strict COVID-19 lockdowns by the end of the 2021 calendar year. The lifting of such shutdown led to higher-than-normal levels of revenues for ITSQuest in the State of New Mexico during the three months ended June 30, 2022. The Company scaled down Yandiki operations and completed its merger of Yandiki into SheWorks! in June 2023. The decrease in SheWorks! revenue can be attributable to normal fluctuations in the jobs market and overall economy.

Unicorns. Unicorns revenues increased by $2 thousand for the three months ended June 30, 2023. There were no Unicorn Hunters episodes distributed during each of the three months ended June 30, 2023 and 2022.

Cost of Revenues

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

	Three Months Ended June 30,
	2023		2022		Change ($)			Change (%)
TAAS cost of revenues	$	3,526,595	$	3,703,279	$	(176,684	)		(5	)%
SAAS cost of revenues		-		573		(573	)		N/A
Unicorns cost of revenues		5,625		5,370,592		(5,364,967	)		(100	)%
Total Cost of Revenues	$	3,532,220	$	9,074,444	$	(5,542,224	)		(61	)%

Total cost of revenues decreased by $5,542 thousand, or 61%, to $3,532 thousand for the three months ended June 30, 2023.

TaaS. TAAS cost of revenues decreased by $177 thousand, or 5%, to $3,527 thousand. The decrease was mainly due to a proportional decrease in TAAS revenues.

Unicorns. Unicorns cost of revenues decreased by $5,365 thousand to $6 thousand for the three months ended June 30, 2023, compared to $5,371 thousand, for the three months ended June 30, 2022. No episodes were produced during each of the three months ended June 30, 2023 and 2022.

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General and administrative

General and administrative expenses decreased by $755 thousand, or 16%, to $3,916 thousand for the three months ended June 30, 2023. The decrease was primarily due to a decrease in impairment loss recognized on cryptocurrency assets of $613 thousand, a decrease in contractors and professional services of $511 thousand and a decrease in travel and entertainment of $263 thousand. These decreases were partially offset by an increase in accounting service of $557 thousand.

Sales and marketing

Sales and marketing expenses decreased by $12,090 thousand, or 97%, to $368 thousand for the three months ended June 30, 2023. The decrease was primarily attributable to a decrease in advertising for the Unicorn Hunters show of $1,006 thousand, as there were no episodes released during the period, a decrease of $1,014 thousand in relation to general advertising paid for by exchanging Unicoin rights and an overall decrease in general advertising spending for the rest of our business of $10,071 thousand.

Research and development

Research and development expense decreased by $70 thousand, or 56%, to $56 thousand for the three months ended June 30, 2023. Research and development expense mainly consists of personnel related costs such as salaries and benefits and stock-based compensation for research, design and development activities. Internally developed software costs for internal use are not material and are expensed as they are incurred.

Interest income (expense), net

Interest income (expense), net increased by $(7) thousand to $(65) thousand for the three months ended June 30, 2023. The increase was primarily due to an increases in interest expense of $19 thousand payable to holders of Unicoin rights issued under the ten-year prepaid plan, partially offset by a decrease in interest expense of $12 thousand from a net reduction in outstanding Unsecured Notes.

Provision for Income Taxes

	Three Months Ended June 30,
	2023			2022			Change ($)			Change (%)
Income tax expense	$	(37,826	)	$	65,309		$	(103,135	)		(158	)%
Effective tax rate		1.1	%		(0.3	)%

The Company recorded income tax benefit (expense) of $(38) thousand and $65 thousand for the three months ended June 30, 2023 and 2022, respectively. The resulting effective tax rate was 1.1% and (0.3)% for the three months ended June 30, 2023 and 2022, 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 and is not able to utilize Unicoin’s deferred tax assets to offset taxable income. During the three months ended June 30, 2023 and 2022, there were no significant changes to the total amount of unrecognized tax benefits.

Net income (losses) attributable to the noncontrolling interest

Net income (losses) attributable to the noncontrolling interest increased income by $2,258 thousand, or 104%, to net income of $23 thousand for the three months ended June 30, 2023. Our noncontrolling interest holders in ITSQuest were allocated income of $56 thousand and $75 thousand for the three months ended June 30, 2023 and 2022, respectively. Our noncontrolling interest holders in Unicorns were allocated losses of $(33) thousand and $(2,248) thousand for the three months ended June 30, 2023 and 2022, respectively. As of both June 30, 2023 and 2022, noncontrolling interest in ITSQuest and Unicorns represented an ownership interest of 49% and 33.3%, respectively.

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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 $6,623 thousand available as of June 30, 2023. Based on currently available capital resources (cash and cash equivalents on hand as of June 30, 2023), we estimate that we would be able to conduct our planned operations for eight to nine 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 at least twelve months unless we receive further equity or debt financing of approximately $2,495 thousand. For the period from July 1, 2023 through the date of this Quarterly Report on Form 10-Q, we have received cash funding of $1,062 thousand ($1,055 thousand and $7 thousand from issuances of Unicoin rights and common stock, respectively), 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, included as part of our Annual Report on Form 10-K for the year ended December 31, 2022, 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, 2023 through June 30, 2023, the Company issued 1.6 billion rights to receive Unicoins (“Unicoin rights”) to investors and service providers in exchange of consideration consisting of cash ($10,011 thousand) and operating expenses paid with Unicoin rights ($1,115 thousand) amounting to approximately $11,126 thousand.

Subsequent to June 30, 2022, the Company issued Unicoin rights as follows:

- Issued rights to acquire 20,905 thousand Unicoins in exchange for consideration of approximately $1,075 thousand (cash of $535 thousand and non-cash of $540 thousand).

- Accredited investors contributed $50 thousand in cash toward the future acquisition of Unicoins under the ten-year prepaid plan.

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, 2023, the Company recorded a liability of $405 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 $25,485 thousand as of June 30, 2023. 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.

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Summary of Cash Flows

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

	Six Months Ended June 30,
(In thousand)	2023			2022
Cash flows provided by (used in) continuing operations:
Net cash used in operating activities	$	(4,560	)	$	(19,036	)
Net cash used in investing activities		-			(51	)
Net cash provided by financing activities		9,661			19,059
Net increase in cash and cash equivalents	$	5,101		$	(28	)

Cash Used in Operating Activities

Cash flows used for operating activities decreased by ($14,476) thousand to ($4,560) thousand for the six months ended June 30, 2023, compared to ($19,036) thousand for the six months ended June 30, 2022. Net cash used in operating activities for the six months ended June 30, 2023, was due to our net loss of ($5,968) thousand, offset by the non-cash items of $1,576 thousand and decreases in working capital of ($169) thousand. Net cash used in operating activities for the six months ended June 30, 2022, was ($19,036) thousand, due to our net loss of ($21,837) thousand, adjusted by non-cash items of $4,776 thousand and decreases in working capital of operating assets and liabilities of ($1,975) thousand.

Cash Provided by Financing Activities

Net cash flows provided by financing activities decreased by ($9,398) thousand to $9,661 thousand for the six months ended June 30, 2023, compared to $19,059 thousand for the six months ended June 30, 2022. The decrease in net cash provided by financing activities was mainly due to a decrease in proceeds from the issuance of Unicoin rights of ($8,208) thousand and a decrease in proceeds from sales of common stock of ($1,429) thousand, partially offset by a decrease in payments to repurchase common stock of $336 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 consist of money market accounts 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, 2023 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

Our significant accounting policies are described in Note 2 to the consolidated financial statements presented in the Annual Report on Form 10-K. Our critical accounting policies and estimates are described in “Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Annual Report on Form 10-K. Except for the revision to the impairment loss assessment methodology for our digital assets and the classification of USD Coin as a financial asset, our significant and critical accounting policies and estimates have not changed significantly since the filing of the Annual Report on Form 10-K. The Company has revised its impairment loss assessment methodology for digital assets to record write-downs to the lowest market price of one unit of digital asset quoted on the active exchange since acquiring the digital asset. This revision would be consistent with the requirements of ASC 350-30-35-19, which indicates impairment exists whenever carrying value exceeds fair value. It also indicates that after an impairment loss is recognized, the adjusted carrying amount of the intangible asset shall be its new accounting basis. The Company has revised its Intangible Assets and Financial Assets accounting policies to acknowledge that USD Coin (“USDC”) meets the definition of financial assets and as such will be measured going forward at fair value. The Company previously reported USDC within Intangible assets, net, and will report USDC within the prepaid expenses and other current assets line item going forward.

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 $6,623 thousand available as of June 30, 2023, 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 consist of money market accounts 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.

44

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, 2023 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.

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, 2023 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 caused 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 the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.

Item 1A. Risk Factors.

There are multiple cryptocurrencies in various stages of development with the name Unicoin or a similar variant of Unicoin. Investors may be confused as to which cryptocurrency or digital asset is the one offered by the company.

Despite the distinguishing characteristics of similarly-named cryptocurrency projects, such as the “central bank cash reserve currency” being developed by the Digital Currency Monetary Authority, also called “Unicoin,” there remains a risk of investor confusion in the marketplace. We have had initial discussions about trademark coverage with the owner of the DMCA’s cryptocurrency, also call “Unicoin,” although we cannot guarantee that we will come to a favorable resolution with the DCMA on this issue and cannot determine its materiality at this time. Despite the different structure, target audience and features of the DCMA’s coin and other similarly named coins, there remains a risk that potential investors may select the wrong “unicoin” when attempting to purchase unicoins on an exchange after tokenization.

The Company’s business is exposed to the potential misuse of digital assets and malicious actors.

The security procedures and operational infrastructure of the Company and Coinbase may be breached due to the actions of outside parties, error or malfeasance of an employee of the Company or Coinbase, or otherwise, and, as a result, an unauthorized party may obtain access to the Company’s digital asset accounts, private keys, data or tokens. Additionally, outside parties may attempt to fraudulently induce employees of the Company or Coinbase to disclose sensitive information in order to gain access to the infrastructure of the Company or Coinbase. As the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently, or may be designed to remain dormant until a predetermined event, and often are not recognized until launched against a target, The Company may be unable to anticipate these techniques or implement adequate preventative measures. If an actual or perceived breach of the Company’s digital assets account occurs, the market perception of the effectiveness of its security protocols could be harmed and the value of the Company’s common stock could be materially adversely affected.

In addition to the incremental risk factors and 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 Annual Report on Form 10-K (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 may materially and adversely affect our business, financial condition or operating results in the future.

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

Capital Raising Transactions – Common Stock

Price		Common Stock Shares Issued		Dates	Exemption
	Various	82,913,692	*	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	7,398,278		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	9,158,529		12/1/20 to 3/31/23	Rule 506(c); Reg. S
$	3.00	1,877,856		7/31/21 to 3/31/23	Rule 506(c); Reg. S
$	4.00	1,114,607		12/1/20 to 3/31/23	Rule 506(c); Reg. S

* Convertible Notes. All notes have been 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

Fair Value on Date of Issuance or Release from Escrow		Common Stock Shares Issued		Dates			Exemption
$	0.19		6,500,000		11/25/20			Section 4(a)(2)
$	0.39		1,500,000		12/28/22	*		Section 4(a)(2)

* Out of the initial 3,500,000 shares subject to the holdback provision, the Company released 1,500,000 shares on December 28, 2022, pursuant to the amended Share Exchange Agreement, as discussed in the Business Acquisition section of Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations of this Quarterly Report on Form 10-Q. As of the day of this Quarterly Report on Form 10-Q, 2,000,000 shares remain subject to the holdback provision, pending resolution of the ITSQuest tax liability that existed at the time of the acquisition.

Capital Raising Transaction – Debt

Amounts sold through private placement of debt securities, in the form of short-term unsecured promissory notes, are as follows:

Total Amount Sold*		Interest Rate			Dates	Exemption
$	1,229,000		20	%	6/3/21 to 12/31/21	Rule 506(c); Reg. S
$	81,100		20	%	1/26/22 to 12/31/22	Rule 506(c); Reg. S
$	219,200		20	%	4/17/23 to 7/31/23	Rule 506(c); Reg. S

* Through the day of this Quarterly Report on Form 10-Q, the Company’s outstanding Unsecured Notes amount to $570 thousand.

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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 accredited investors or issued to service providers through the day of this quarterly report on Form 10-Q are as follows:

Price per Unicoin Right*		Total Number of Unicoin Rights Sold**	Dates***	Exemption
$	0.01	1,421,780,000	2/24/22 to 5/31/23	Rule 506(c); Reg. S
$	0.017	80,940,886	4/1/22 to 8/30/22	Rule 506(c); Reg. S
$	0.05	54,314,000	3/12/22 to 12/31/22	Rule 506(c); Reg. S
$	0.055	28,808,927	9/1/22 to 11/30/22	Rule 506(c); Reg. S
$	0.07	8,700,000	4/1/23 to 6/30/23	Rule 506(c); Reg. S
$	0.08	325,000	4/1/23 to 5/31/23	Rule 506(c); Reg. S
$	0.089	28,112,947	12/1/22 to 2/28/23	Rule 506(c); Reg. S
$	0.1	128,728,667	3/18/22 to 7/31/23	Rule 506(c); Reg. S
$	0.101	4,666,900	3/1/23 to 3/31/23	Rule 506(c); Reg. S
$	0.11	226,667	4/1/23 to 6/30/23	Rule 506(c); Reg. S
$	0.12	104,000	5/1/23 to 5/31/23	Rule 506(c); Reg. S
$	0.122	558,800	6/123 to 6/30/23	Rule 506(c); Reg. S
$	0.14	375,000	4/1/23 to 5/31/23	Rule 506(c); Reg. S
$	0.2	9,950,945	9/8/22 to 5/31/23	Rule 506(c); Reg. S
$	0.35	150,000	6/1/23 to 6/30/23	Rule 506(c); Reg. S
$	0.4	2,084,417	11/2/22 to 5/31/23	Rule 506(c); Reg. S
$	0.5	1,673,525	3/1/23 to 7/31/23	Rule 506(c); Reg. S
$	0.05	140,931,582	5/1/23 to 7/31/23	Rule 506(c); Reg. S

*	The price per Unicoin Right was determined by a tiered pricing schedule based on volume. Each transaction on each of these issuances had at least a certain number of Unicoin rights issued at the specified price.
**	Unicoin rights issued as a non-cash distribution to shareholders and as discretionary compensation to employees are not included in this table. Refer to Note 7 – Unicoin Rights Financing Obligation of “Notes to Condensed Consolidated Financial Statements”, for details regarding the issuance of those Unicoin rights.
***	The date represents when the Unicoin Right transaction was funded by the investor. The price was agreed at a previous date when the investor subscribed to such price with a commitment to purchase soon after. In the future, there might be additional transactions funded at each of these prices listed.

Pursuant to the five-year deferred payment plan and ten-year prepaid plan discussed in Note 7 – Unicoin Rights Financing Obligation of “Notes to Condensed Consolidated Financial Statements”, included in Item 1 of this Quarterly Report on Form 10-Q, we are reporting the following transactions up to the date of this report:

- Five-Year Deferred Payment Plan – Since the launch of plan through June 30, 2023 and August 14, 2023, investors signed agreements to purchase 3.1 billion Unicoin rights.

- Ten-Year Prepaid Plan – Since the launch of plan through June 30, 2023 and August 14, 2023, investors paid $1,771 thousand and $50 thousand, respectively, for the future purchase of Unicoins pursuant to the ten-year plan.

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Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

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*
10.3	Amendment to Share Exchange Agreement, effective on December 28, 2022, by and between Unicoin Inc., ITSQuest, Inc., Sarah Reagan and Jeff Reagan*
10.5	Termination of the Loan Agreement and Promissory Note, dated April 28, 2021, by and between Unicoin Inc. and Silvina Moschini*
10.8	Amendment No. 1 to Termination of Loan Agreement and Promissory Note, dated July 2, 2021, by and between Unicoin Inc. and Silvina Moschini*
10.9	Advisory Service Agreement dated May 1, 2021 by and between Unicoin Inc. and Red River Associates, LLC.*
10.10	Board of Directors Services Agreement dated March 17, 2022 by and among TransparentBusiness, Inc., Rosa G. Rios and Red River Associates, LLC*
10.11	Indemnification Agreement dated March 17, 2022 by and between TransparentBusiness, Inc. and Rosa G. Rios*
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: August 14, 2023	By:	/s/ Alex Konanykhin
		Alex Konanykhin
		Chief Executive Officer

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