Document And Entity Information
Document And Entity Information - shares | 3 Months Ended | |
May 31, 2021 | Jul. 18, 2021 | |
Document Information Line Items | ||
Entity Registrant Name | Enigma MPC | |
Document Type | 10-Q | |
Current Fiscal Year End Date | --02-28 | |
Entity Common Stock, Shares Outstanding | 3,195,652 | |
Amendment Flag | false | |
Entity Central Index Key | 0001816114 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Document Period End Date | May 31, 2021 | |
Document Fiscal Year Focus | 2022 | |
Document Fiscal Period Focus | Q1 | |
Entity Small Business | true | |
Entity Emerging Growth Company | true | |
Entity Shell Company | false | |
Entity Ex Transition Period | false | |
Entity File Number | 000-56202 | |
Entity Incorporation, State or Country Code | DE | |
Entity Interactive Data Current | Yes |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | May 31, 2021 | Feb. 28, 2021 | |
Current Assets: | |||
Cash and Cash Equivalents | $ 30,992 | $ 19,671 | |
Digital Assets (Note 5) | 8,959 | 7,240 | |
Other Current Assets (Note 4) | 376 | 1,219 | |
Total Current Assets | 40,327 | 28,130 | |
Non-Current Assets: | |||
Property and Equipment, net (Note 3) | 3 | ||
Total Non-Current Assets | 3 | ||
TOTAL ASSETS | 40,327 | 28,133 | |
Current Liabilities: | |||
Accounts Payable | 10 | 6 | |
Other Accounts Liabilities (Note 6) | 4,574 | 3,104 | |
Related Party | 2,657 | 3,119 | |
Provision for Claims (Note 1B) | 24,858 | 24,858 | |
Total Current Liabilities | 32,099 | 31,087 | |
STOCKHOLDERS’ STOCKHOLDERS’ EQUITY (DEFICIT): | |||
Common Stock of $0.0001 par value per share; 10,000,000 shares authorized at February 28, 2019, May 31, 2021 and February 28, 2021; 3,714,085 and 3,195,652 shares issued and outstanding at February 28, 2021 and May 31, 2021 respectively. | [1] | ||
Additional Paid In Capital | (1,000) | (1,000) | |
Accumulated Deficit | 9,228 | (1,954) | |
Total Stockholders’ Equity (Deficit) | 8,228 | (2,954) | |
TOTAL LIABILITIES AND STOCKHOLDER’S EQUITY (DEFICIT) | $ 40,327 | $ 28,133 | |
[1] | Represents an amount lower than $1 thousand. |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Parentheticals) - $ / shares | May 31, 2021 | Feb. 28, 2021 |
Statement of Financial Position [Abstract] | ||
Common stock, par value (in Dollars per share) | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized | 10,000,000 | 10,000,000 |
Common stock, shares issued | 3,714,085 | 3,195,652 |
Common stock, shares outstanding | 3,714,085 | 3,195,652 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) - USD ($) $ in Thousands | 3 Months Ended | |
May 31, 2021 | May 31, 2020 | |
Income Statement [Abstract] | ||
Revenue | $ 2,109 | |
Operating Expenses: | ||
Research and Development | 1,114 | 1,047 |
General Marketing and Administrative | 3,094 | 375 |
Impairment of Digital Assets | 404 | |
Total Operating Expenses | 4,612 | 1,422 |
Income (Loss) from Operations | (2,503) | (1,422) |
Realized Gain (Loss) on Sale of Digital Assets | 15,098 | 216 |
Financial Income (Expenses), Net | 16 | (6) |
Loss before Taxes on Income | 12,611 | (1,212) |
Taxes on Income | (1,429) | (2) |
Net Income (Loss) Attributable to Common Stockholders | $ 11,182 | $ (1,214) |
Condensed Consolidated Statem_2
Condensed Consolidated Statement of Stockholders’ Equity - USD ($) $ in Thousands | Common Stock | Accumulated Deficit | Treasury Stocks | Total | |
Balance at Feb. 29, 2020 | [1] | $ (1,948) | $ (1,948) | ||
Balance (in Shares) at Feb. 29, 2020 | 3,714,085 | ||||
Net Income (Loss) | (6) | (6) | |||
Forfeiture of Stocks | (1,000) | (1,000) | |||
Forfeiture of Stocks (in Shares) | (518,433) | ||||
Balance at Feb. 28, 2021 | [1] | (1,954) | (1,000) | (2,954) | |
Balance (in Shares) at Feb. 28, 2021 | 3,195,652 | ||||
Net Income (Loss) | 11,182 | 11,182 | |||
Balance at May. 31, 2021 | [1] | $ 9,228 | $ (1,000) | $ 8,228 | |
Balance (in Shares) at May. 31, 2021 | 3,195,652 | ||||
[1] | Represents an amount lower than $1 thousands. |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 3 Months Ended | |
May 31, 2021 | May 31, 2020 | |
Cash Flows from Operating Activities: | ||
Net Loss | $ 11,182 | $ (1,214) |
Depreciation | 3 | 3 |
Impairment of Digital Assets | 404 | |
Realized Gain on Sale of Digital Assets | (15,098) | (216) |
Interest Accrued | ||
Changes in Assets and Liabilities: | ||
Prepaid Expenses and Other Current and Long-Term Assets | 843 | 978 |
Due to Related Parties | (462) | |
Trade Payables | (12) | (22) |
Accrued Liabilities | 1,461 | (571) |
Net Cash used in Operating Activities | (1,679) | (1,042) |
Cash Flow from Investing Activities: | ||
Proceeds from Sale of Digital Assets | 13,000 | 496 |
Redemption of Loan to a Related Party | 12 | |
Net Cash provided by Investing Activities | 13,000 | 508 |
Cash Flow from Financing Activities: | ||
Government Loan Program | 103 | |
Net Cash provided by Financing Activities | 103 | |
Increase (Decrease) in Cash & Cash Equivalents | 11,321 | (431) |
Cash & Cash Equivalents at the Beginning of the Period | 19,671 | 10,451 |
Cash & Cash Equivalents at the End of the Period | 30,992 | 10,020 |
Supplemental Disclosures of Cash Flow Information: | ||
Cash Received for Interest | 1 | 1 |
Cash Paid for Income Taxes | ||
Supplemental Disclosures of Non-Cash Operating Activities: | ||
Exchange of Digital Assets | $ 4,949 |
Organization and Nature of Oper
Organization and Nature of Operations | 3 Months Ended |
May 31, 2021 | |
Accounting Policies [Abstract] | |
Organization and Nature of Operations | Note 1 - Organization and Nature of Operations A. General Enigma MPC Inc., (the “Company” or “Enigma”) was incorporated in Delaware, USA with the goal of changing and improving the way data is shared, aggregated and monetized through the use of privacy preserving computation technologies. The Company’s business is to facilitate global adoption and usage of decentralized technologies. In order to raise money to fund the development of Catalyst and the Enigma Data Marketplace (Catalyst and Enigma Data Marketplace together – the “Enigma Network”), the Company sold digital tokens (“ENG Tokens”) in an initial coin offering (“ICO”) through its wholly owned subsidiary in the Cayman Islands, Enigma ENG International Ltd., (the “Cayman Subsidiary”), which was incorporated in 2017. From June to September 11, 2017, the Company sold approximately 75 million ENG Tokens in exchange for Bitcoin or Ether in two phases. In the first phase, $48 million ENG Tokens were sold pursuant to Simple Agreements for Future Tokens (“SAFT”) for aggregate proceeds of approximately $25 million. These ENG Tokens were sold at an approximate 10% discount relative to the ENG Tokens sold in the second phase. In the second phase, on September 11, 2017, the Company conducted a one-day crowd sale and sold 27 million ENG Tokens at a price of $0.60 per token, for aggregate proceeds of approximately $17 million. The total gross proceeds received from the ICO were approximately $42 million. The ENG Tokens were delivered to the purchasers in October 2017. In addition to the Cayman Subsidiary, the Company has a wholly owned Israeli subsidiary, Enigma Lab Ltd. (the “Israeli Subsidiary”), which was incorporated in January 2018. At the time of the ICO, the Company’s goals were for ENG Tokens to serve as a way to incentivize and monetize data curation on the Enigma Network. The Company represented to the purchasers of ENG Tokens through SAFTs that it expected that a substantial portion of the proceeds from the ICO would be used to fund the development of the Enigma Network. In a discussion of expected use of proceeds included in a private placement memorandum (“PPM”) provided to purchasers through SAFTs, the Company estimated that the funds raised would be used approximately as follows – (i) product and technology development – 60% (ii) operations – 15% (iii) marketing – 10% and (iv) legal and administrative – 5%. The PPM also stated that the Company reserves the right to modify its use of proceeds at its discretion, and that all estimates provided are subject to change. The terms of sale of the ENG Tokens, which every purchaser accepted state, among others things, that the ownership of ENG Tokens carries no rights, express or implied, other than the right to enable usage of and interact with the Enigma Network, if successfully completed and deployed. In particular, purchasers accept that ENG Tokens do not represent or confer any ownership right or stake, share or security or equivalent rights, or any right to receive future revenue shares, intellectual property rights or any other form of participation in or relating to the Enigma Network, and/or the Company and its corporate affiliates, other than rights relating to use of the Enigma Network, subject to limitations and conditions stated in the terms of sale. The ENG Tokens do not pay interest and have no maturity date. The ENG Tokens confer only the right to usage with the Enigma Network and confer no other rights of any form with respect to the Company, including, but not limited to, any voting, distribution, redemption, liquidation, proprietary (including all forms of intellectual property), or other financial or legal rights. Based on the above, the Company has determined that the issuance of ENG Tokens in the ICO represented an implied obligation to perform research and development services and therefore accounts for the proceeds received in the ICO in accordance with ASC 730-20, “Research and Development Arrangements” (“ASC 730-20”). Pursuant to ASC 730-20, all proceeds received from the ICO are recorded as deferred revenues. Due to the difficulty at the time of the ICO in estimating the timing and success of outcome of the development of the Enigma Network, all development cost are expensed as incurred. Deferred revenues are recognized as income over the period of development in an amount equal to the operational expenditures incurred with no profit margin (net 0), until the completion of the development. During the years 2017-2018, the company developed and completed Enigma Network. The development of the Enigma Network was completed and functioning as of February 28, 2019. Accordingly, the Company believes that it has completed all of its implied obligation to perform the research and development services. Therefore, there is currently no requirement to defer any revenue, and any remaining balance of the ENG Token liability subsequent to the Claims Form Deadline (as defined in below in this Note 1A) will be recorded as income immediately up to the estimated total claims as described in note 1B. As of February 28, 2019, the Enigma Network was live. Concurrently, and throughout 2019, the Company also developed the Enigma Protocol. All of these products were designed to support ENG Tokens. Since the beginning of 2020, the Company has ceased development of the Enigma Protocol, and has been focusing on supporting the development of the Secret Network. The Secret Network was originally launched In February 2020, by the Company together with an initial group of 20 other independent parties (the Secret Network Community), consisting of cryptocurrency and privacy enthusiasts and entities, including funds, companies that offer professional staking service providers (validators), exchanges and companies building products in the cryptocurrency ecosystem. Launching the Secret Network was a technical process in which the network’s Genesis Block was signed by all participants in the Secret Network Community. The Secret Network shares a mission with the previously developed Enigma Protocol, a prior initiative undertaken by us to enable “secret” contracts on blockchain technology. B. Settlement of U.S. Securities and Exchange Commission (“SEC”) Administrative Proceeding In February 2020, the Company reached a settlement with the SEC (the “Settlement”) related to the issuance of the ENG Tokens in the ICO, as described above. As part of the Settlement, the Company has agreed to administer a claims process available to those who purchased ENG Tokens from the Company before and up to September 11, 2017. Such purchasers who elect to participate and timely submit completed claims form along with certain required supporting documentation will be permitted to tender their ENG Tokens to the Company in exchange for payment of the consideration paid for the ENG Tokens, plus interest thereon, less the amount of any income received thereon. If the purchaser of the ENG Tokens no longer owns the ENG Tokens that were purchased in the ICO, the purchaser is entitled to claim for any damages incurred. Pursuant to the terms of the Settlement, ENG holders that wish to participate in the claims process have until the earlier of three months from the date that the SEC’s Division of Corporation Finance notifies the Company that it has completed its review of the Company’s registration statement on Form 10 (the “Form 10) has been concluded or six months from the effective date of the Form 10 (the “Effective Date and the “Claims Form Deadline,” respectively). Payment by the Company of all substantiated claims is required within three months Claims Form Deadline (“Final Payment Date”). The total maximum claim could be up to $42 million, which is the equivalent of our net proceeds from the ICO, including the pre-sale, after discounts, however, this maximum claim amount assumes that all ICO participants still hold the ENG Tokens or sold at a loss. Based on the ENG Token market the Company knows that some of the $42 million ENG Tokens sold at the ICO have since been sold at a profit. Accordingly, in exercising a prudent approach, as of the end of the reporting periods presented herein, the Company has recorded a liability for the estimated of claims of $24.9 million (the “ENG Token Liability”). All payments by the Company of substantiated claims pursuant to the terms of the Settlement will be offset against the ENG Token Liability. Based on current cash and value of intangible assets the Company may have a sufficient amount of cash or cash equivalents on hand, and all valid refund claims will be paid in full. If the Company does not have the sufficient amount of cash on hand or cash from the sale of cash equivalents to pay all valid refund claims, depending on the cash shortfall, the Company may seek other funding options. If the Company has a sufficient amount of cash or cash equivalents on hand, all valid refund claims will be paid in full. If the Company will not have a sufficient amount of cash on hand or cash from the sale of cash equivalents to pay all valid refund claims, depending on the cash shortfall, the Company may seek funding from potential investors or any other available resources. In case of shortfall, the Company intend to partially pay all valid refund claims, on a pro rata basis, until the Company can obtain additional cash to cover all valid payments, in full, and all unpaid amounts will continue to accrue interest until paid in full. There can be no guarantee that that company will ever seek additional financing and that if it does, that such additional financing (whether debt or equity) will be available to on favorable terms. If the Company is required to seek additional financing or sell assets that we hold, this could result in significant expenses to the Company and have a material adverse effect on the financial position. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The audited consolidated financial statements do not include any adjustments relating to the recoverability and classification of assets or liabilities that might be necessary should the Company be unable to continue as a going concern In late 2019, a novel strain of COVID-19, also known as coronavirus, was reported in Wuhan, China. While initially the outbreak was largely concentrated in China, it has now spread to Israel and the United States, and infections have been reported globally. Many countries around the world, including in Israel, have significant governmental measures implemented to control the spread of the virus, including temporary closure of businesses, severe restrictions on travel and the movement of people, and other material limitations on the conduct of business. These measures have resulted in work stoppages and other disruptions. Although we have not been materially impacted by coronavirus as of the end of the three months ended May 31, 2021, the extent to which the coronavirus impacts our operations will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration and severity of the outbreak, and the actions that may be required to contain the coronavirus or treat its impact. In particular, the continued spread of the coronavirus globally, could have a material adverse impact on our operations and workforce, including our marketing and sales activities and ability to raise additional capital, which in turn could have a material adverse impact on our business, financial condition and results of operation. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 3 Months Ended |
May 31, 2021 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Note 2 - Summary of Significant Accounting Policies Basis of Presentation The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information. Accordingly, they do not include all of the information and notes required by GAAP for annual financial statements. In the opinion of management, all adjustments (of a normal recurring nature) considered necessary for a fair statement of the results for the interim periods presented have been included. Operating results for the interim period are not necessarily indicative of the results that may be expected for the full year. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended February 29, 2020 included in the Company’s final registration Statement filed with the Commission pursuant. The comparative balance sheet at February 29, 2020 has been derived from the audited financial statements at that date. Except as noted below, the Company’s significant accounting policies have not changed materially from those included in Note 2 of our audited consolidated financial statements for the year ended February 29, 2020 included in our registration Statement. Effective January 1, 2017, the Company changed its fiscal year end from December 31 to February 28. Therefore fiscal 2018 includes the period from March 1, 2018 to February 28, 2019 (“Fiscal 2018”) while fiscal 2019 includes the period from March 1, 2019 to February 29, 2020 (“Fiscal 2019”). Principles of Consolidation The accompanying consolidated financial statements includes the accounts of the Company and its owned subsidiaries. All intercompany transactions have been eliminated in consolidation. The Company is not involved with variable interest entities. The Company fully owns the Cayman Subsidiary and Israel Subsidiary; accordingly, the Company consolidates these entities. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the balance sheet and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ significantly from those estimates. The most significant accounting estimates inherent in the preparation of the Company’s financial statements includes the revenue recognition. ENG Token Liabilities claims process provision and deferred tax valuation allowance. Revenue Recognition The Company has determined that the issuance of ENG Tokens in the ICO represented an implied obligation to perform research and development services and therefore accounts for the proceeds received in the ICO in accordance with ASC 730-20, “Research and Development Arrangements.” At the time of, and in conjunction with the ENG Token issuance, the Company’s obligation was to develop Catalyst and the Enigma Data Marketplace (together, the Enigma Network). Due to the significant hurdles in developing the Enigma Network, all of the Company’s development costs were expensed. Pursuant to ASC 730-20, all proceeds received from the ICO are recorded as deferred revenues. As of February 28, 2019, the Company believes that it has completed its implied obligation to perform the research and development services. Therefore, there is currently no requirement to defer any revenue, and any remaining balance of the deferred revenue subsequent to the Claims Form Deadline will be recorded immediately as revenue. Pursuant to the Settlement Agreement (as defined and described further in Note 1B), the Company is obligated to refund amounts raised for the purpose of developing the Enigma Network if valid claims are submitted and may incur other fines and penalties. As of February 28, 2019, and February 28, 2018, the Company estimated the amount of refunds to be paid to the claimants at $24.9 million (as noted in the ENG Token Liability) of the proceeds and as such the Company recorded this amount as a liability. Fair Value of Financial Instruments: The Company measures and discloses the fair value of financial assets and liabilities in accordance with ASC Topic 820, “Fair Value Measurement.” Fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The accounting standard establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three broad levels, which are described below: Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs. Level 2: Observable inputs that are based on inputs not quoted on active markets but corroborated by market data. Level 3: Unobservable inputs are used when little or no market data are available. Newly Issued Accounting Pronouncements In February 2016, the FASB issued ASU 2016-02—Leases, requiring the recognition of lease assets and liabilities on the balance sheet. The standard: (a) clarifies the definition of a lease; (b) requires a dual approach to lease classification similar to current lease classifications; and (c)causes lessees to recognize leases on the balance sheet as a lease liability with a corresponding right-of-use asset for leases with a lease-term of more than 12 months. The standard is effective for public entities for fiscal years beginning after December 15, 2018 and for the Company for fiscal years beginning after December 15, 2021. The Company is currently evaluating the impact of adopting this new guidance on its financial statements. In June 2016, the FASB issued ASU No. 2016-13 (Topic 326), Financial Instruments—Credit Losses: Measurement of Credit Losses on Financial Instruments, which replaces the existing incurred loss impairment model with an expected credit loss model and requires a financial asset measured at amortized cost to be presented at the net amount expected to be collected. The guidance will be effective for the Company for fiscal years beginning after December 15, 2022. Early adoption is permitted. The Company is currently evaluating the effect that ASU 2016-13 will have on its consolidated financial statements. |
Digital Assets
Digital Assets | 3 Months Ended |
May 31, 2021 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Digital Assets | Note 3 - Digital Assets Digital Assets held by the Company consist of primarily Ether and Bitcoin (the “Digital Assets”) and are included in current assets in the consolidated balance sheets. Due to the lack of authoritative GAAP guidance, the Company has determined its Digital Assets to be akin to intangible assets and are accounted in such manner. As intangible assets, Digital Assets are initially measured at cost. Since there is no limit on the useful life of the Company’s Ether and Bitcoin, they are classified as indefinite-lived intangible assets. Indefinite-lived intangible assets are not subject to amortization. Instead they are tested for impairment on an annual basis and more frequently if events or circumstances change that indicate that it’s more likely than not that the asset is impaired. As a result of the aforementioned, the Company will only recognize decreases in the value of its Ether and Bitcoin, and any increase in value will be recognized upon disposition. Ether and Bitcoin are traded on exchanges in which there are observable prices in an active market, the Company views a decline in the quoted price below the cost to be an impairment indicator. The quoted price and observable prices, for Ether and Bitcoin, are determined by the Company using a principal market analysis in accordance with ASC 820, Fair Value Measurement When the Company evaluates its Ether and Bitcoin for impairment under ASC 350, Intangible – Goodwill and Other Realized gain (loss) on sale of Digital Assets is included in other income (expense) in the consolidated statements of operations, while impairment of Digital Assets is included in operating expenses because of the nature of the assets. Changes in Digital Assets during Fiscal 2020 and for three months ended May 31, 2021 were as follows: Ether Bitcoin ZEC XLM USDT USDC Other XRP Total Balance at February 29, 2020 $ 5,713 $ 4,827 $ - $ - $ - $ - $ - $ - $ 10,540 Receipt of Digital Assets $ 40 $ 7 $ - $ - $ 189 $ 275 $ 30 $ - $ 541 Sale of Digital Assets $ (3,005 ) $ (1,631 ) $ - $ - $ - $ - $ (30 ) $ - $ (4,666 ) Expensed as Compensation for Services $ - $ - $ - $ - $ - $ - $ - $ - $ - Impairment $ 687 $ 138 $ - $ - $ - $ - $ - $ - $ 825 Balance at February 28, 2021 $ 3,435 $ 3,341 $ - $ - $ 189 $ 275 $ - $ - $ 7,240 Receipt of Digital Assets $ $ 4,949 $ - $ - $ - $ - $ - $ - $ 4,949 Sale of Digital Assets $ (1,506 ) $ (1,320 ) $ - $ - $ - $ - $ - $ - $ (2,826 ) Expensed as Compensation for Services $ - $ - $ - $ - $ - $ - $ - $ - $ - Impairment $ 821 (1,225 ) $ - $ - $ - $ - $ - $ - $ (404 ) Balance at May 31, 2021 $ 2,750 $ 5,745 $ - $ - $ 189 $ 275 $ - $ - $ 8,959 |
Related Party Transactions
Related Party Transactions | 3 Months Ended |
May 31, 2021 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | Note 4 - Related Party Transaction During the three months ended May 31, 2021 and May 31, 2020, the company an amount of $1.1 million Gamma Research and Development Ltd. related transactions . On September 12, 2019, the Company entered into a services agreement, or the Services Agreement, with a company owned by a major shareholder and Chief Executive Officer, Chief Technology Officer, President and Director, (“the service provider”) to provide research and development services to us for a total consideration of NIS 3,250 thousand (approximately $922 thousand). The Services Agreement ended at the end of fiscal year of 2019. Additionally, the Company entered into a Non-recurring Engineering, or NRE, Funding Agreement, or the NRE Agreement, pursuant to which the same service provider performs block chain technology development work which is funded by the Company based on an NRE model. The NRE Agreement provides that we will fund the services provider’s research and development expenses, dedicated capital expenditures, non-recurring engineering costs, and third-party costs, or Project Expenditures, targeted at developing the project described in the development plan attached to the NRE Agreement, or the Development Plan, during the period starting on January 1, 2020, and ending on June 30, 2022, or the Funding Period. The Development Plan concentrates on the development of the Secret Network infrastructure in four development phases. The total estimated amount of Project Expenditures which we will fund and remit to Service Provider during the Funding Period is expected to be NIS 38,650 (approximately $11,300 thousand) which is paid in quarterly instalments, except for the first payment which includes an advance payment of two quarters. In addition to the general business interests that the Company have in supporting the development of the Secret Network, in consideration for funding provided to Gamma, the Company received from Gamma 10,000,000 SCRT Tokens. The Company recognized $1,026 thousand and $1,083 thousand in the three months that ended May 31, 2021 and 2020, respectively. In addition, during the period that commenced on the date of signing the NRE Agreement and ending on March 31, 2023, the Company shall be entitled to purchase from Gamma up to 15,000,000 SCRT Tokens at a purchase price equal to 80% of the fair market value. |
Accounting Policies, by Policy
Accounting Policies, by Policy (Policies) | 3 Months Ended |
May 31, 2021 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information. Accordingly, they do not include all of the information and notes required by GAAP for annual financial statements. In the opinion of management, all adjustments (of a normal recurring nature) considered necessary for a fair statement of the results for the interim periods presented have been included. Operating results for the interim period are not necessarily indicative of the results that may be expected for the full year. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended February 29, 2020 included in the Company’s final registration Statement filed with the Commission pursuant. The comparative balance sheet at February 29, 2020 has been derived from the audited financial statements at that date. Except as noted below, the Company’s significant accounting policies have not changed materially from those included in Note 2 of our audited consolidated financial statements for the year ended February 29, 2020 included in our registration Statement. Effective January 1, 2017, the Company changed its fiscal year end from December 31 to February 28. Therefore fiscal 2018 includes the period from March 1, 2018 to February 28, 2019 (“Fiscal 2018”) while fiscal 2019 includes the period from March 1, 2019 to February 29, 2020 (“Fiscal 2019”). |
Principles of Consolidation | Principles of Consolidation The accompanying consolidated financial statements includes the accounts of the Company and its owned subsidiaries. All intercompany transactions have been eliminated in consolidation. The Company is not involved with variable interest entities. The Company fully owns the Cayman Subsidiary and Israel Subsidiary; accordingly, the Company consolidates these entities. |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the balance sheet and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ significantly from those estimates. The most significant accounting estimates inherent in the preparation of the Company’s financial statements includes the revenue recognition. ENG Token Liabilities claims process provision and deferred tax valuation allowance. |
Revenue Recognition | Revenue Recognition The Company has determined that the issuance of ENG Tokens in the ICO represented an implied obligation to perform research and development services and therefore accounts for the proceeds received in the ICO in accordance with ASC 730-20, “Research and Development Arrangements.” At the time of, and in conjunction with the ENG Token issuance, the Company’s obligation was to develop Catalyst and the Enigma Data Marketplace (together, the Enigma Network). Due to the significant hurdles in developing the Enigma Network, all of the Company’s development costs were expensed. Pursuant to ASC 730-20, all proceeds received from the ICO are recorded as deferred revenues. As of February 28, 2019, the Company believes that it has completed its implied obligation to perform the research and development services. Therefore, there is currently no requirement to defer any revenue, and any remaining balance of the deferred revenue subsequent to the Claims Form Deadline will be recorded immediately as revenue. Pursuant to the Settlement Agreement (as defined and described further in Note 1B), the Company is obligated to refund amounts raised for the purpose of developing the Enigma Network if valid claims are submitted and may incur other fines and penalties. As of February 28, 2019, and February 28, 2018, the Company estimated the amount of refunds to be paid to the claimants at $24.9 million (as noted in the ENG Token Liability) of the proceeds and as such the Company recorded this amount as a liability. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments: The Company measures and discloses the fair value of financial assets and liabilities in accordance with ASC Topic 820, “Fair Value Measurement.” Fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The accounting standard establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three broad levels, which are described below: Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs. Level 2: Observable inputs that are based on inputs not quoted on active markets but corroborated by market data. Level 3: Unobservable inputs are used when little or no market data are available. |
Newly Issued Accounting Pronouncements | Newly Issued Accounting Pronouncements In February 2016, the FASB issued ASU 2016-02—Leases, requiring the recognition of lease assets and liabilities on the balance sheet. The standard: (a) clarifies the definition of a lease; (b) requires a dual approach to lease classification similar to current lease classifications; and (c)causes lessees to recognize leases on the balance sheet as a lease liability with a corresponding right-of-use asset for leases with a lease-term of more than 12 months. The standard is effective for public entities for fiscal years beginning after December 15, 2018 and for the Company for fiscal years beginning after December 15, 2021. The Company is currently evaluating the impact of adopting this new guidance on its financial statements. In June 2016, the FASB issued ASU No. 2016-13 (Topic 326), Financial Instruments—Credit Losses: Measurement of Credit Losses on Financial Instruments, which replaces the existing incurred loss impairment model with an expected credit loss model and requires a financial asset measured at amortized cost to be presented at the net amount expected to be collected. The guidance will be effective for the Company for fiscal years beginning after December 15, 2022. Early adoption is permitted. The Company is currently evaluating the effect that ASU 2016-13 will have on its consolidated financial statements. |
Digital Assets (Tables)
Digital Assets (Tables) | 3 Months Ended |
May 31, 2021 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of changes in digital assets | Ether Bitcoin ZEC XLM USDT USDC Other XRP Total Balance at February 29, 2020 $ 5,713 $ 4,827 $ - $ - $ - $ - $ - $ - $ 10,540 Receipt of Digital Assets $ 40 $ 7 $ - $ - $ 189 $ 275 $ 30 $ - $ 541 Sale of Digital Assets $ (3,005 ) $ (1,631 ) $ - $ - $ - $ - $ (30 ) $ - $ (4,666 ) Expensed as Compensation for Services $ - $ - $ - $ - $ - $ - $ - $ - $ - Impairment $ 687 $ 138 $ - $ - $ - $ - $ - $ - $ 825 Balance at February 28, 2021 $ 3,435 $ 3,341 $ - $ - $ 189 $ 275 $ - $ - $ 7,240 Receipt of Digital Assets $ $ 4,949 $ - $ - $ - $ - $ - $ - $ 4,949 Sale of Digital Assets $ (1,506 ) $ (1,320 ) $ - $ - $ - $ - $ - $ - $ (2,826 ) Expensed as Compensation for Services $ - $ - $ - $ - $ - $ - $ - $ - $ - Impairment $ 821 (1,225 ) $ - $ - $ - $ - $ - $ - $ (404 ) Balance at May 31, 2021 $ 2,750 $ 5,745 $ - $ - $ 189 $ 275 $ - $ - $ 8,959 |
Organization and Nature of Op_2
Organization and Nature of Operations (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions | Sep. 11, 2017 | May 31, 2021 |
Organization and Nature of Operations (Details) [Line Items] | ||
Sale of token (in Shares) | 27 | 42 |
Aggregate proceeds | $ 17 | |
Discount rate | 10.00% | |
Price per unit (in Dollars per share) | $ 0.60 | |
Total proceeds | $ 42 | |
Fund raised description | the Company estimated that the funds raised would be used approximately as follows – (i) product and technology development – 60% (ii) operations – 15% (iii) marketing – 10% and (iv) legal and administrative – 5%. The PPM also stated that the Company reserves the right to modify its use of proceeds at its discretion, and that all estimates provided are subject to change. | |
Total maximum claim amount | $ 42 | |
Other liability | $ 24.9 | |
ENG Tokens [Member] | ||
Organization and Nature of Operations (Details) [Line Items] | ||
Sale of token (in Shares) | 75 | |
Aggregate proceeds | $ 25 | |
SAFT [Member] | ||
Organization and Nature of Operations (Details) [Line Items] | ||
Sale of token (in Shares) | 48 |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Details) - USD ($) $ in Millions | 1 Months Ended | |
Feb. 28, 2019 | Feb. 28, 2018 | |
Accounting Policies [Abstract] | ||
Estimated refund to be paid | $ 24.9 | $ 24.9 |
Digital Assets (Details) - Sche
Digital Assets (Details) - Schedule of changes in digital assets - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended |
May 31, 2021 | Feb. 28, 2021 | |
Digital Assets (Details) - Schedule of changes in digital assets [Line Items] | ||
Beginning Balance | $ 7,240 | $ 10,540 |
Receipt of Digital Assets | 4,949 | 541 |
Sale of Digital Assets | (2,826) | (4,666) |
Expensed as Compensation for Services | ||
Impairment | (404) | 825 |
Ending Balance | 8,959 | 7,240 |
Ether [Member] | ||
Digital Assets (Details) - Schedule of changes in digital assets [Line Items] | ||
Beginning Balance | 3,435 | 5,713 |
Receipt of Digital Assets | 40 | |
Sale of Digital Assets | (1,506) | (3,005) |
Expensed as Compensation for Services | ||
Impairment | 821 | 687 |
Ending Balance | 2,750 | 3,435 |
Bitcoin [Member] | ||
Digital Assets (Details) - Schedule of changes in digital assets [Line Items] | ||
Beginning Balance | 3,341 | 4,827 |
Receipt of Digital Assets | 4,949 | 7 |
Sale of Digital Assets | (1,320) | (1,631) |
Expensed as Compensation for Services | ||
Impairment | (1,225) | 138 |
Ending Balance | 5,745 | 3,341 |
ZEC [Member] | ||
Digital Assets (Details) - Schedule of changes in digital assets [Line Items] | ||
Beginning Balance | ||
Receipt of Digital Assets | ||
Sale of Digital Assets | ||
Expensed as Compensation for Services | ||
Impairment | ||
Ending Balance | ||
XLM [Member] | ||
Digital Assets (Details) - Schedule of changes in digital assets [Line Items] | ||
Beginning Balance | ||
Receipt of Digital Assets | ||
Sale of Digital Assets | ||
Expensed as Compensation for Services | ||
Impairment | ||
Ending Balance | ||
USDT [Member] | ||
Digital Assets (Details) - Schedule of changes in digital assets [Line Items] | ||
Beginning Balance | 189 | |
Receipt of Digital Assets | 189 | |
Sale of Digital Assets | ||
Expensed as Compensation for Services | ||
Impairment | ||
Ending Balance | 189 | 189 |
USDC [Member] | ||
Digital Assets (Details) - Schedule of changes in digital assets [Line Items] | ||
Beginning Balance | 275 | |
Receipt of Digital Assets | 275 | |
Sale of Digital Assets | ||
Expensed as Compensation for Services | ||
Impairment | ||
Ending Balance | 275 | 275 |
Others [Member] | ||
Digital Assets (Details) - Schedule of changes in digital assets [Line Items] | ||
Beginning Balance | ||
Receipt of Digital Assets | 30 | |
Sale of Digital Assets | (30) | |
Expensed as Compensation for Services | ||
Impairment | ||
Ending Balance | ||
XRP [Member] | ||
Digital Assets (Details) - Schedule of changes in digital assets [Line Items] | ||
Beginning Balance | ||
Receipt of Digital Assets | ||
Sale of Digital Assets | ||
Expensed as Compensation for Services | ||
Impairment | ||
Ending Balance |
Related Party Transactions (Det
Related Party Transactions (Details) ₪ in Thousands | Sep. 12, 2019USD ($) | Sep. 12, 2019ILS (₪) | Mar. 31, 2023USD ($) | May 31, 2021USD ($)shares | May 31, 2021ILS (₪)shares | May 31, 2020USD ($) |
Related Party Transactions (Details) [Line Items] | ||||||
Research and development | $ 922,000 | ₪ 3,250 | ||||
Project expenditures | $ 11,300,000 | ₪ 38,650 | ||||
SCRT token received (in Shares) | shares | 10,000,000 | 10,000,000 | ||||
Consideration recognized | $ 1,026,000 | $ 1,083,000 | ||||
Gamma Research Development Ltd [Member] | ||||||
Related Party Transactions (Details) [Line Items] | ||||||
Due to shareholder | $ 1,100,000 | $ 1,100,000 | ||||
Forecast [Member] | ||||||
Related Party Transactions (Details) [Line Items] | ||||||
Sale of tokens | $ 15,000,000 | |||||
Fair market value percentage | 80.00% |