UNICOIN RIGHTS FINANCING OBLIGATION | NOTE 7 – UNICOIN RIGHTS FINANCING OBLIGATION The Company is developing a security token, which is more fully described in the Description of Business section of Note 1 Organization and Operations. As of June 30, 2024 and through the filing date of this Quarterly Report on Form 10-Q, the Company has not 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. The Company is offering rights to receive unicoins upon tokenization (“Unicoin Rights” or “Rights”) with terms and conditions set forth in a confidential private placement memorandum initially dated February 2022 and updated periodically thereafter (“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. 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 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. There are currently 79,823 total holders of Unicoin Rights listed in the Company’s registry (some duplication for individuals who invested more than once may be reflected in this total), including the holders of discretionary Unicoin Rights, and 4,061 purchasers worldwide. Of these, approximately 1,279 (1.60% of total holders and 31.49% of purchasers) are accredited and 2,827 (3.54% of holders) are not accredited or were not verified. Of the 4,061 purchasers, approximately 2,827 were not accredited or not verified (69.61%). Note that non-accredited holders or those not verified are either non-US Persons who purchased pursuant to Regulation S, or were given Unicoin Rights for free, and thus were not sold Unicoin Rights. The Company will no longer issue Unicoin Rights to U.S. domiciled investor who are not accredited. As of June 30, 2024 and December 31, 2023, the Company has issued rights to acquire 6.6 6.2 101,212 84,674 During the three months ended June 30, 2024 and 2023, the Company paid operating expenses to employees and service providers by issuing Unicoin Rights with a fair value of $ 6,863 929 7,278 1,115 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, 2024 and December 31, 2023: Schedule of components of the unicoin rights financing obligation Outstanding Unicoin Rights and June 30, December 31, Nature / Category of Unicoin Right Holder Form of Consideration Units Amount Units Amount Sales to Investors Cash, Digital Assets and Treasury Stock 1,731,761,065 $ 38,029,928 1,763,813,346 $ 38,198,488 Unicoin Inc. Shareholders Non-Cash Dividends 727,725,875 72,773 727,594,375 72,772 Employee, Contractors, Directors Discretionary Compensation 521,771,178 52,177 340,112,801 34,012 Service Providers, Influencers and Employees Services and Employee Labor 265,465,867 34,472,541 243,287,273 25,603,663 Subtotal 3,246,723,985 72,627,419 3,074,807,795 $ 63,908,935 ITSQuest Contingent Divestiture Amendment Contract Amendment 20,000,000 1,780,000 20,000,000 1,780,000 Five-Year Deferred Payment Plan Cash and Treasury Stock 3,277,959,535 23,679,717 3,101,478,719 * 17,047,143 Ten-Year Prepaid Plan Cash 8,309,046 2,110,726 8,175,047 * 1,937,944 Asset Swap Agreement and Related Commissions Land 2,743,507 1,013,708 - - Total 6,555,736,073 $ 101,211,570 6,204,461,561 $ 84,674,022 * Unicoin Rights certificates for Units under the Five-Year Deferred Payment Plan and the Ten-Year Prepaid Plan will not be issued until the purchase transaction is completed under the terms discussed in the explanatory sections below for “Five-Year Deferred Payment Plan” and “Ten-Year Prepaid Plan”. Sales to Investors As of June 30, 2024 and December 31, 2023, the Unicoin Rights financing obligation associated with sales to investors amounted to $ 38,030 38,198 0.01 0.75 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, 2024 and December 31, 2023, the Unicoin Rights financing obligation associated non-cash dividend of Unicoin Rights amounted to $ 73 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, 2024 and December 31, 2023, the Unicoin Rights financing obligation associated with discretionary payments to employees, contractors and directors amounted to $ 52 34 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 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, 2024 and December 31, 2023, the Unicoin Rights financing obligation associated with Unicoin Rights issued to service providers, influencers and employees amounted to $ 34,473 25,604 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. The following table summarizes the pledged collateral pursuant to the deferred payment plan as of June 30, 2024 and December 31, 2023: Schedule of pledged collateral Estimated Fair Value of Form of Collateral Received June 30, December 31, Cash $ 1,023,055 $ 870,715 Digital Assets 146,841 127,840 Non-Unicoin Inc. Stock 1,769,980 1,771,180 Unicoin Inc. Shares of Common Stock 3,427,182 4,457,432 Unicoin Rights 29,842,294 17,135,029 Real Estate 13,629,514 13,129,514 Total $ 49,838,866 $ 37,491,710 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 near the date the real estate was accepted as collateral. 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. Under the prepaid plan, the investor remits cash or digital asset deposits (the “principal”) for a period of up to ten years. After the first year (the “maturity date”), 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, 2024 and December 31, 2023, cumulative cash receipts of $ 2,111 1,938 1,636 248 228 149 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 Asset Swap Agreement and Related Commission On October 9, 2023, the Company entered into an Asset Swap Agreement with Cesar Armando Sánchez Roberto, a resident of Venezuela, wherein the Company agreed to provide a total of 1,746,497 Unicoin Rights in exchange for real estate assets consisting of 175.265 square meters of land, located in Fundo el Chuponal del Sector la Entrada, Municipio Naguanagua Edo Carabobo, Venezuela. In March 2024, the Company completed its due diligence, released 1,746,497 Unicoin Rights and received the title for the real estate assets. 624 711 624 87 On February 9, 2024, the Company entered into an Asset Swap Agreement with Vessa Jenine Rinehart-Phillips, a U.S. Citizen, wherein the Company agreed to provide a total of 747,600 Unicoin Rights in exchange for real estate assets consisting of vacant land described as Parcel 48 of Tract 2147, in the City of California City, County of Kern, State of California, USA, as recorded in Book 7, Page 91 of records of survey in the Office of the County Recorder of said County. 267 304 267 37 Unicoin Rights Issued to Related Parties The Unicoin Rights issuances discussed above include a total of 1,049 million Unicoin Rights, and the respective Unicoin Rights Financing Obligation of $5,441 thousand, which represent the cumulative amounts issued to related parties during the six months ended June 30, 2024. The composition of this is summarized in the following table: Schedule of unicoin rights issued to related parties Outstanding Unicoin Rights and June 30, December 31, Nature / Category Relationship Units Amount Units Amount Sales to Investors Officers and Directors 4,006,000 $ 41,200 3,000,000 $ 30,000 Unicoin Inc. Shareholders (Dividends) Officers and Directors 544,099,208 54,410 542,425,284 54,242 Discretionary Awards Officers and Directors 204,316,329 22,111 89,329,000 8,933 Consideration for Services Officers and Directors 24,460,832 3,525,370 * 70,895,600 12,723,470 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 and Directors 251,666,500 17,500 251,666,500 17,500 Total 1,048,548,869 $ 5,440,591 977,316,384 $ 14,614,145 * As of June 30, 2024, management updated the informational list above to exclude certain officers and members of the board of directors that are no longer employed by the Company. During their tenure, such officers and directors received 51,425,705 Unicoin Rights for their services amounting to a Unicoin Right Financing Obligation of $10,603 thousand. The liability related to the Unicoin Rights held by those former directors remains recorded as a Unicoin Rights Financing Obligation in the Condensed Consolidated Balance Sheets as of June 30, 2024 and December 31, 2023. As of June 30, 2024 and December 31, 2023, the Company held approximately $468 thousand and $ 269 Transaction loss on Repurchase of Unicoin Rights During the six months ended June 30, 2024, the Company recorded a transaction loss on repurchase of Unicoin Rights amounting to $ 5,832 |