0001493152-20-012072.txt : 20200629 0001493152-20-012072.hdr.sgml : 20200629 20200629143005 ACCESSION NUMBER: 0001493152-20-012072 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 49 CONFORMED PERIOD OF REPORT: 20200331 FILED AS OF DATE: 20200629 DATE AS OF CHANGE: 20200629 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Crypto Co CENTRAL INDEX KEY: 0001688126 STANDARD INDUSTRIAL CLASSIFICATION: WOMEN'S, MISSES', CHILDREN'S & INFANTS' UNDERGARMENTS [2340] IRS NUMBER: 464212405 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-55726 FILM NUMBER: 20996824 BUSINESS ADDRESS: STREET 1: 23805 STUART RANCH ROAD, STREET 2: SUITE 235 CITY: MALIBU STATE: CA ZIP: 90265 BUSINESS PHONE: (424) 228-9955 MAIL ADDRESS: STREET 1: 23805 STUART RANCH ROAD, STREET 2: SUITE 235 CITY: MALIBU STATE: CA ZIP: 90265 FORMER COMPANY: FORMER CONFORMED NAME: CROE, INC. DATE OF NAME CHANGE: 20161020 10-Q 1 form10-q.htm

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2020

 

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: 000-55726

 

THE CRYPTO COMPANY

(Exact name of registrant as specified in its charter)

 

Nevada   46-4212105
(State or other jurisdiction of   (I.R.S. Employer
incorporation or organization)   Identification No.)

 

22809 Pacific Coast Highway

Malibu, California 90265

(Address of principal executive offices)

 

(424) 228-9955

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:

 

Title of each class   Trading Symbol(s)   Name of each exchange on which registered
None   N/A   N/A

 

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 [X] 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 than the registrant was required to submit such files). Yes [X] No [  ]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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. (Check one):

 

Large accelerated filer [  ] Accelerated filer [  ]
   
Non-accelerated filer [  ] Smaller reporting company [X]
   
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 [X]

 

As of June 29, 2020, the issuer had 21,400,591 shares of common stock, par value $0.001 per share, outstanding.

 

 

 

 
 

 

TABLE OF CONTENTS

 

    Page No.
PART I FINANCIAL INFORMATION 5
 
Item 1. Financial Statements 5
     
  Unaudited Consolidated Balance Sheets as of March 31, 2020, and December 31, 2019 5
     
  Interim Unaudited Consolidated Statements of Operations for the Three Months Ended March 31, 2020, and 2019 6
     
  Unaudited Consolidated Statements of Stockholders’ Equity (Deficit) for the Three Months Ended March 31, 2020, and 2019 7
     
  Interim Unaudited Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2020, and 2019 8
     
  Notes to Interim Unaudited Consolidated Financial Statements 9
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 18
     
Item 3. Quantitative and Qualitative Disclosures About Market Risk 19
     
Item 4. Controls and Procedures 19
     
PART II OTHER INFORMATION 20
     
Item 1. Legal Proceedings 20
     
Item 6. Exhibits 20
     
SIGNATURES 21

 

2
 

 

EXPLANATORY NOTE

 

The Crypto Company (the “Company”) is hereby relying on the Securities and Exchange Commission’s Order under Section 36 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), Modifying Exemptions From the Reporting and Proxy Delivery Requirements for Public Companies dated March 25, 2020 (Release No 34-88465) (the “Order”) in connection with this filing of the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 (the “Q1 Form 10-Q”) due to the circumstances related to COVID-19. In particular, COVID-19 has caused disruptions in our normal interactions with our auditors. The Company has a minimal accounting staff and historically provided its auditors with full access to work papers and related information. Because the audit personnel are now working remotely as much as possible, and relying on our minimal staff to furnish work papers and other documents, the Company’s ability to complete its audit and file the Q1 Form 10-Q prior to its original due date was delayed.

 

3
 

 

NOTE ABOUT FORWARD-LOOKING STATEMENTS

 

This Quarterly Report on Form 10-Q (the “Quarterly Report”) contains forward-looking statements. All statements contained in this Quarterly Report other than statements of historical fact, including statements regarding our future results of operations and financial position, our business strategy and plans, and our objectives for future operations, are forward-looking statements. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” and similar expressions are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations, and objectives, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties, and assumptions, including those described in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019 (the “2019 Annual Report”) as filed with the U.S. Securities and Exchange Commission (“SEC”) and in any subsequent filings with the SEC. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. Our management can’t predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties, and assumptions, the future events, and trends discussed in this Quarterly Report may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

 

We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements, except as required by law. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.

 

Unless expressly indicated or the context requires otherwise, the terms “Crypto”, the “Company”, “we”, “us” and “our” in this Quarterly Report refer to The Crypto Company, a Nevada corporation, and, where appropriate, its wholly-owned subsidiaries, Crypto Sub, Inc., a Nevada corporation; CoinTracking, LLC, a Nevada limited liability company (“CoinTracking”); and Malibu Blockchain, LLC, a Nevada limited liability company (“Malibu Blockchain”).

 

4
 

 

PART I. FINANCIAL INFORMATION

 

ITEM 1. Financial Statements

 

THE CRYPTO COMPANY

CONSOLIDATED BALANCE SHEETS

 

   March 31, 2020   December 31, 2019 
   (unaudited)     
ASSETS          
CURRENT ASSETS          
Cash and cash equivalents  $5,728   $1,611 
Accounts receivable, net   2,500    - 
Total current assets   8,228    1,611 
           
TOTAL ASSETS  $8,228   $1,611 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY          
           
CURRENT LIABILITIES          
Accounts payable and accrued expenses  $1,673,280   $1,574,614 
Income taxes payable   895    1,600 
Notes Payable   300,000    300,000 
Total current liabilities   1,974,175    1,876,214 
           
Convertible debt   97,500    75,000 
TOTAL LIABILITIES   2,071,675    1,951,214 
           
STOCKHOLDERS’ EQUITY          
Common stock, $0.001 par value; 50,000,000 shares authorized, 21,400,591 and 21,400,591 shares issued and outstanding, respectively   21,401    21,401 
Additional paid-in-capital   28,316,667    28,294,167 
Accumulated deficit   (30,401,514)   (30,265,171)
TOTAL STOCKHOLDERS’ EQUITY   (2,063,447)   (1,949,603)
           
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY  $8,228   $1,611 

 

5
 

 

THE CRYPTO COMPANY

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

 

   For the three months ended 
   March 31, 2020   March 31, 2019 
         
Revenue:          
Services  $2,500   $3,975 
           
Total Revenue, net  $2,500   $3,975 
           
Operating expenses:          
General and administrative expenses   112,092    412,410 
Share-based compensation   -    (58,791)
           
Total Operating Expenses   (112,092)   (353,618)
           
Operating loss   (109,592)   (349,643)
           
Other expense   -    1,130 
Interest expense   (26,752)   (2,291)
           
Loss before provision for income taxes   (136,344)   (350,804)
           
Loss from continuing operations   (136,344)   (350,804)
           
Income from discontinued operations attributable to the Crypto Company   -    14,166 
           
Net loss attributable to the Crypto Company   (136,344)   (336,638)
           
Net loss  $(136,344)  $(336,638)
           
Continuing operations:          
Net loss attributable to the Crypto Company per common share – basic and diluted  $(0.01)  $(0.02)
Discontinued operations:          
Income/(loss) attributable to the Crypto Company per common share – basic and diluted  $-   $- 
Net loss attributable to the Crypto Company per common share – basic and diluted  $(0.01)  $(0.02)
Weighted average common shares outstanding – basic and diluted   21,400,591    21,212,860 

 

6
 

 

THE CRYPTO COMPANY

UNAUDITED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

 

For the Three Months Ended March 31, 2020, and 2019

 

           Additional       Accumulated Other       Total 
   Common stock   paid-in-   Accumulated   Comprehensive   Noncontrolling   Stockholders’ 
   Shares   Amount   capital   Deficit   Income   Interest   Equity 
Balance, December 31, 2018   21,212,860   $21,213   $28,219,355   $(28,456,550)  $(743,987)  $2,177,108   $1,217,140 
Sale of CoinTracking GmbH   -    -    -    -    743,987    (2,177,108)   (1,433,121)
Warrants issued in connection with Convertible Notes   -    -    -    -    -    -    - 
Stock compensation expense in connection with issuance of options   -    -    (58,792.00)   -    -    -    (58,792)
Net loss   -    -    -    (336,638)   -    -    (336,638)
Balance, March 31, 2019   21,212,860   $21,213   $28,160,563   $(28,793,188)  $-   $-   $(611,411)

 

           Additional       Accumulated Other       Total 
   Common stock   paid-in-   Accumulated   Comprehensive   Noncontrolling   Stockholders’ 
   Shares   Amount   capital   Deficit   Income   Interest   Equity 
Balance, December 31, 2019   21,400,591   $21,401   $28,294,167   $(30,265,172)  $-   $-   $(1,949,603)
Sale of CoinTracking GmbH   -    -    -    -    -    -    - 
Warrants issued in connection with Convertible Notes   -    -    22,500    -    -    -    22,500 
Stock compensation expense in connection with issuance of options   -    -    -    -    -    -    - 
To correct prior year share issuances   -    -    -    -    -    -    - 
Net loss   -    -    -    (136,344)   -    -    (136,344)
Balance, March 31, 2020   21,400,591   $21,401   $28,316,667   $(30,401,516)  $-   $-   $(2,063,447)

 

7
 

 

THE CRYPTO COMPANY

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

   For the Three Months Ended 
   March 31, 2020   March 31, 2019 
         
Cash flows from operating activities:          
Net loss  $(136,344)  $(336,638)
Adjustments to reconcile net loss to net cash used in operations:          
Gain on sale on CoinTracking GmbH   -    (14,166)
Depreciation and amortization   -    5,706 
Share-based compensation   -    (58,792)
Financing costs associated with convertible debt   22,500    - 
Change in operating assets and liabilities:          
Accounts receivable   (2,500)   (3,975)
Prepaid expenses   -    29,549 
Accounts payable and accrued expenses   97,961    (142,906)
Net cash used in operating activities   (18,383)   (521,222)
           
Cash flows from investing activities:          
Net cash from the sale of CoinTracking GmbH   -    1,000,000 
Net cash used in investing activities   -    1,000,000 
           
Cash flows from financing activities:          
Proceeds from issuance of convertible notes   22,500    - 
Net cash provided by financing activities   22,500    - 
           
Net (decrease) increase in cash and cash equivalents   4,117    478,778 
Cash and cash equivalents at the beginning of the period   1,611    2,448 
Cash and cash equivalents at the end of the period  $5,728   $481,226 
           
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:          
Cash paid for interest  $-   $30,950 

 

8
 

 

THE CRYPTO COMPANY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 1 – ORGANIZATION AND DESCRIPTION OF THE BUSINESS

 

The Crypto Company was incorporated in the State of Nevada on March 9, 2017 (“Inception”). The Company is engaged in the business of providing consulting services and education for distributed ledger technologies (“blockchain”), for the building of technological infrastructure and enterprise blockchain technology solutions. The Company currently generates revenues and incurs expenses solely through these consulting operations.

 

Unless expressly indicated or the context requires otherwise, the terms “Crypto,” the “Company,” “we,” “us,” and “our” in this quarterly Report (“Quarterly Report”) on Form 10-Q for the refer to The Crypto Company and, where appropriate, its wholly-owned subsidiaries, Crypto Sub, Inc., a Nevada corporation (“Crypto Sub”); CoinTracking, LLC, a Nevada limited liability company (“CoinTracking”); and Malibu Blockchain, LLC, a Nevada limited liability company (“Malibu Blockchain”).

 

During the three months ended March 31, 2020, the Company did not generate any revenue.

 

During the year ended December 31, 2019, the Company generated revenues and incurred expenses primarily through the business of providing consulting services and education for distributed ledger technologies (“blockchain”), for the building of technological infrastructure and enterprise blockchain technology solutions, both of which have ceased operations as of the date of this Quarterly Report

 

The Company’s accounting year-end is December 31.

 

COVID-19

 

On March 11, 2020, the World Health Organization (“WHO”) declared the Covid-19 outbreak to be a global pandemic. In addition to the devastating effects on human life, the pandemic is having a negative ripple effect on the global economy, leading to disruptions and volatility in the global financial markets. Most US states and many countries have issued policies intended to stop or slow the further spread of the disease.

 

Covid-19 and the U.S’s response to the pandemic are significantly affecting the economy. There are no comparable events that provide guidance as to the effect the Covid-19 pandemic may have, and, as a result, the ultimate effect of the pandemic is highly uncertain and subject to change. We do not yet know the full extent of the effects on the economy, the markets we serve, our business, or our operations.

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Management’s Representation of Interim Financial Statements

 

The accompanying unaudited consolidated financial statements have been prepared by the Company without audit pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been condensed or omitted as allowed by such rules and regulations, and management believes that the disclosures are adequate to make the information presented not misleading. These consolidated financial statements include all of the adjustments, which in the opinion of management are necessary to a fair presentation of financial position and results of operations. All such adjustments are of a normal and recurring nature. Interim results are not necessarily indicative of results for a full year. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements at December 31, 2019, and 2018.

 

The Company prepares its consolidated financial statements based upon the accrual method of accounting, recognizing income when earned and expenses when incurred.

 

Basis of Presentation and Principles of Consolidation

 

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Crypto Sub, CoinTracking, and Malibu Blockchain, as well as its prior 50.1% ownership of CoinTracking GmbH. On January 2, 2019, the Company sold its entire equity ownership stake in CoinTracking GmbH. All significant intercompany accounts and transactions are eliminated in consolidation.

 

Liquidity and Going Concern

 

The Company’s consolidated financial statements are prepared using the accrual method of accounting in accordance with United States (“U.S.”) generally accepted accounting principles (“GAAP”) and have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities in the normal course of business. The Company has incurred significant losses and experienced negative cash flows since inception. As of March 31, 2020, the Company had cash of $5,728. In addition, the Company’s net loss was $136,344 for the three months ended March 31, 2020. The Company’s working capital was negative $2,063,447 as of March 31, 2020. As of March 31, 2020, the accumulated deficit amounted to $30,401,514. As a result of the Company’s history of losses and financial condition, there is substantial doubt about the ability of the Company to continue as a going concern.

 

The ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and/or obtaining the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management is evaluating different strategies to obtain financing to fund the Company’s expenses and achieve a level of revenue adequate to support the Company’s current cost structure. Financing strategies may include, but are not limited to, private placements of capital stock, debt borrowings, partnerships and/or collaborations. There can be no assurance that any of these future-funding efforts will be successful or that the Company will be able to replace the revenues lost as a result of the sale of CoinTracking GmbH, for the remaining quarters of 2020 and beyond. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty.

 

9
 

 

Use of estimates

 

The preparation of these consolidated financial statements in conformity with US GAAP requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses and the related disclosure of contingent assets and liabilities. The Company bases its estimates on historical experience and on various other assumptions that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. The Company’s significant estimates and assumptions include but are not limited to the valuation allowances of deferred taxes, and share-based compensation expenses. Actual results may differ from these estimates. In addition, any change in these estimates or their related assumptions could have an adverse effect on the Company’s operating results.

 

Cash and cash equivalents

 

The Company defines its cash and cash equivalents to include only cash on hand and certain highly liquid investments with original maturities of ninety days or less. The Company maintains its cash and cash equivalents at financial institutions, the balances of which may, at times, exceed federally insured limits. Management believes that the risk of loss due to the concentration is minimal.

 

Investments in cryptocurrency

 

Investments are comprised of several cryptocurrencies the Company owns, of which a majority is Bitcoin, that were actively traded on exchanges. During 2018, the Company sold most of its investments and is no longer actively trading.

 

The Company records its investments as indefinite-lived intangible assets at cost less impairment and are reported as long-term assets in the consolidated balance sheets. An intangible asset with an indefinite useful life is not amortized but assessed for impairment annually, or more frequently, when events or changes in circumstances occur indicating that it is more likely than not that the indefinite-lived asset is impaired. Impairment exists when the carrying amount exceeds its fair value. In testing for impairment, the Company has the option to first perform a qualitative assessment to determine whether it is more likely than not that an impairment exists. If it is determined that it is not more likely than not that an impairment exists, a quantitative impairment test is not necessary. If the Company concludes otherwise, it is required to perform a quantitative impairment test. To the extent an impairment loss is recognized, the loss establishes the new cost basis of the asset. Subsequent reversal of impairment losses is not permitted. The primary exchanges and principal markets the Company utilizes for its trading are Kraken, Bittrex, Poloniex, and Bitstamp.

 

As of March 31, 2020, the Company had no investments in cryptocurrency

 

Investments non-cryptocurrency

 

The Company has historically invested in simple agreement for future tokens (“SAFT”) and a simple agreement for future equity (“SAFE”) agreements. The SAFT agreements provide for the issuance of tokens in anticipation of a future token generation event, with the number of tokens predetermined based on the price established in each respective agreement. The SAFE investment included provisions that provide for either equity or tokens or both. As of March 31, 2020, and December 31, 2019 the Company had no investments in non-cryptocurrency.

 

Business combination

 

The purchase price of an acquired company is allocated between tangible and intangible assets acquired and liabilities assumed from the acquired business based on their estimated fair values with the residual of the purchase price recorded as goodwill. The results of operations of acquired businesses are included in our operating results from the dates of acquisition.

 

Foreign Currency Translation

 

Results of foreign operations are translated into USD using average rates prevailing throughout the period, while assets and liabilities are translated in USD at period end foreign exchange rates. Transactions gains and losses resulting from exchange rate changes on transactions denominated in currencies other than the functional currency of the applicable subsidiary are included in the consolidated statements of operations, within other income, in the year in which the change occurs. The Company’s functional currency is USD while the functional currency for CoinTracking GmbH, which was owned by the Company for the first two calendar days of 2019, is in euros.

 

Income taxes

 

Deferred tax assets and liabilities are recognized for expected future consequences of events that have been included in the financial statements or tax returns. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized. The provision for income taxes represents the tax payable for the period and the change during the period in deferred tax assets and liabilities.

 

10
 

 

When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceed the amount measured as described above is reflected as a liability for unrecognized tax benefits along with any associated interest and penalties that would be payable to the taxing authorities upon examination.

 

As of March 31, 2020, we are subject to federal taxation in the U.S, as well as state taxes. For 2018, we were subject to taxation in Germany as well. The Company has not been audited by the U.S. Internal Revenue Service, nor has the Company been audited by any states or in Germany. On January 2, 2019, the Company sold its entire equity ownership stake in CoinTracking GmbH.

 

Fair value measurements

 

The Company recognizes and discloses the fair value of its assets and liabilities using a hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to valuations based upon unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to valuations based upon unobservable inputs that are significant to the valuation (Level 3 measurements). Each level of input has different levels of subjectivity and the difficulty involved in determining fair value.

 

  Level 1 Inputs are unadjusted, quoted prices for identical assets or liabilities in active markets at the measurable date.
     
  Level 2 Inputs, other than quoted prices included in Level 1, which are observable for the asset or liability through corroboration with market data at the measurement date.
     
  Level 3 Unobservable inputs that reflect management’s best estimate of what participants would use in pricing the asset or liability at the measurement date.

 

The carrying amounts of the Company’s financial assets and liabilities, including cash, accounts payable and accrued expenses approximate fair value because of the short maturity of these instruments.

 

Revenue recognition

 

The Company recognizes revenue under ASC 606, Revenue from Contracts with Customers (“ASC 606”). The core principle of the new revenue standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The following five steps are applied to achieve that core principle:

 

  Step 1: Identify the contract with the customer
  Step 2: Identify the performance obligations in the contract
  Step 3: Determine the transaction price
  Step 4: Allocate the transaction price to the performance obligations in the contract
  Step 5: Recognize revenue when the Company satisfies a performance obligation

 

In order to identify the performance obligations in a contract with a customer, a company must assess the promised goods or services in the contract and identify each promised good or service that is distinct. A performance obligation meets ASC 606’s definition of a “distinct” good or service (or bundle of goods or services) if both of the following criteria are met: The customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer (i.e., the good or service is capable of being distinct), and the entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract (i.e., the promise to transfer the good or service is distinct within the context of the contract).

 

If a good or service is not distinct, the good or service is combined with other promised goods or services until a bundle of goods or services is identified that is distinct.

 

The transaction price is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer. The consideration promised in a contract with a customer may include fixed amounts, variable amounts, or both. When determining the transaction price, an entity must consider the effects of all of the following:

 

Variable consideration is included in the transaction price only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. The transaction price is allocated to each performance obligation on a relative standalone selling price basis. The transaction price allocated to each performance obligation is recognized when that performance obligation is satisfied, at a point in time or over time as appropriate.

 

11
 

 

The Company adopted ASC 606 as of January 1, 2018, using the modified retrospective transition method for contracts as of the date of initial application. There was no cumulative impact on the Company’s retained earnings.

 

During 2019, the Company’s main source of revenue was consulting and development services for a single customer. The Company has determined that revenue should be recognized over time, as the service is provided. The Company considered the criteria in ASC 606 in reaching this determination, specifically:

 

  The customer receives and consumes the benefit provided by the Company’s performance as the Company performs.
  The Company’s performance enhances an asset controlled by the customer.
  The Company’s performance does not create an asset with alternative use, and the Company has an enforceable right to payment for performance completed to date.

 

The consulting arrangement meet more than one of the criteria above.

 

Share-based compensation

 

In accordance with ASC No. 718, Compensation-Stock Compensation (“ASC 718”), the Company measures the compensation costs of share-based compensation arrangements based on the grant date fair value of granted instruments and recognizes the costs in financial statements over the period during which employees are required to provide services. Share-based compensation arrangements include stock options.

 

On January 1, 2019, the Company adopted ASC No. 2018-07, Improvements to Nonemployee Share-Based Payment Accounting, which simplifies the accounting for share-based payments to nonemployees by aligning it with the accounting for share-based payments to employees, with certain exceptions. Previously, share-based payments to nonemployees was accounted for in accordance with ASC No. 505, Equity-Based Payments to Non-Employees, which required compensation cost to be remeasured at fair value at each reporting period when the award vests. As a result, stock option-based payments to non-employees resulted in significant volatility in compensation expense in prior years.

 

The Company accounts for its share-based compensation using the Black-Scholes model to estimate the fair value of stock option awards. Using this model, fair value is calculated based on assumptions with respect to the (i) expected volatility of the Company’s common stock price, (ii) expected life of the award, which for options is the time over which employees and non-employees are expected to hold their options prior to exercise, and (iii) risk-free interest rate.

 

Net loss per common share

 

The Company reports earnings per share (“EPS”) with a dual presentation of basic EPS and diluted EPS. Basic EPS is computed as net income divided by the weighted average of common shares for the period. Diluted EPS reflects the potential dilution that could occur from common shares issued through stock options, or warrants. For the three months ended March 31, 2020, and 2019, the Company had no potentially dilutive common stock equivalents. Therefore, the basic EPS and diluted EPS are the same.

 

NOTE 3 - RECENT ACCOUNTING PRONOUNCEMENTS

 

In July 2018, the FASB issued ASU No. 2018-09, Codification Improvements. The amendments in this ASU clarify certain aspects of the guidance related to reporting comprehensive income, debt modification and extinguishment, income taxes related to stock compensation, income taxes related to business combinations, derivatives and hedging, fair value measurements, brokers and dealers liabilities, and plan accounting. This new standard is effective for annual reporting periods, and interim periods within those annual periods, beginning after December 15, 2018. The adoption of ASU No. 2018-09 did not have a material impact on the Company’s consolidated financial statements and related disclosures.

 

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. The amendments in this ASU remove, add, and modify certain disclosures. The ASU removes the following disclosure requirements from Topic 820: (1) the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy; (2) the policy for timing of transfers between levels; (3) the valuation process for Level 3 fair value measurements; and (4) certain other requirements for nonpublic entities. The ASU adds the following disclosure requirements: (1) the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period and (2) the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. For certain unobservable inputs, disclosure of other quantitative information may be more appropriate if the entity determines that other quantitative information would be a more reasonable and rational method to reflect the distribution of unobservable inputs used to develop Level 3 fair value measurements. The ASU modifies disclosure requirements in Topic 820 relating to the timing of liquidation of an investee’s assets, the disclosure of the date when restrictions from redemption might lapse, the intention of the measurement uncertainty disclosure, and certain other requirements for nonpublic entities. This new standard is effective for annual reporting periods, and interim periods within those annual periods, beginning after December 15, 2019. The adoption of ASU No. 2018-13 is not expected to have a material impact on the Company’s consolidated financial statements and related disclosures.

 

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In August 2018, the FASB issued ASU No. 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. The amendments in this ASU align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software). The amendments in this ASU require an entity (customer) in a hosting arrangement that is a service to (1) determine which implementation costs to capitalize as an asset related to the service contract and which costs to expense; (2) expense the capitalized implementation costs of a hosting arrangement that is a service contract over the term of the hosting arrangement; (3) apply the existing impairment guidance to the capitalized implementation costs as if the costs were long-lived assets; (4) present the expense related to the capitalized implementation costs in the same line item in the statement of income as the fees associated with the hosting element (service) of the arrangement and classify payments for capitalized implementation costs in the statement of cash flows in the same manner as payments made for fees associated with the hosting arrangements; and (5) present the capitalized implementation costs in the statement of financial position in the same line item that a prepayment for the fees of the associated hosting arrangement would be presented. This new standard is effective for annual reporting periods, and interim periods within those annual periods, beginning after December 15, 2019. The adoption of ASU No. 2018-15 is not expected to have a material impact on the Company’s consolidated financial statements and related disclosures.

 

In June 2018, the FASB issued ASU No. 2018-07, Improvements to Nonemployee Share-Based Payment Accounting, which simplifies the accounting for share-based payments to nonemployees by aligning it with the accounting for share-based payments to employees, with certain exceptions. The ASU expands the scope of Topic 718, Compensation-Stock Compensation, which currently only includes share-based payments issued to employees, to also include share-based payments issued to non-employees for goods and services. Consequently, the accounting for share-based payments to non-employees and employees will be substantially aligned. Management currently does not plan to early adopt this guidance. The new standard is effective for annual reporting periods beginning after December 15, 2018, with early adoption permitted. The adoption of ASU No. 2018-07 did not have a material impact on the Company’s consolidated financial statements and related disclosures.

 

In July 2017, the FASB issued No. ASU 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480) and Derivatives and Hedging (Topic 815): I. Accounting for Certain Financial Instruments with Down Rounds and II. Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception. This ASU changes the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. The amendments also clarify existing disclosure requirements for equity-classified instruments. The amendments also require entities to recognize the effect of the down round feature on EPS when it is triggered. ASU 2017-11 should be adopted retrospectively or as a cumulative-effect adjustment as of the date of adoption, only to financial instruments outstanding as of the initial application date. ASU 2017-11 will be effective for annual reporting periods, and interim periods within those annual periods, beginning after December 15, 2018. The adoption of ASU No. 2017-11 did not have a material impact on the Company’s consolidated financial statements and related disclosures.

 

In January 2017, the FASB issued ASU No. 2017-04, Simplifying the Test for Goodwill Impairment (Topic 350) which removes “Step Two” of the goodwill impairment test, which required a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The ASU is effective for annual reporting periods beginning after December 15, 2019, and for interim periods within those years, with early adoption permitted. The adoption of ASU No. 2017-04 is not expected to have a material impact on the Company’s consolidated financial statements and related disclosures.

 

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which, among other things, requires lessees to recognize most leases on their balance sheets related to the rights and obligations created by those leases. The new standard also requires new disclosures to help financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. The new standard became effective for us on January 1, 2019. Early adoption is permitted. The amendments in this update should be applied under a modified retrospective approach. Adoption of ASU No. 2016-02 and will not have a significant impact on our consolidated financial statements and related disclosures.

 

NOTE 4 - ACQUISITION

 

On January 16, 2018, pursuant to an Equity Purchase Agreement (the “CoinTracking Purchase Agreement”) entered into on December 22, 2017, by and among the Company, CoinTracking, Kachel Holding GmbH, an entity formed under the laws of the Republic of Germany (“Kachel Holding”), and Dario Kachel, an individual, CoinTracking purchased from Kachel Holding 12,525 shares of CoinTracking GmbH, an entity formed under the laws of Germany (“CoinTracking GmbH”), representing 50.1% of the equity interests in CoinTracking GmbH, for a purchase price of (i) $4,736,400 in cash, and (ii) 473,640 shares of common stock of the Company, par value $0.001 per share, subject to adjustment as provided in the CoinTracking Purchase Agreement (the “CoinTracking Acquisition”). The CoinTracking Acquisition was consummated on January 26, 2018.

 

On December 28, 2018, CoinTracking agreed on the purchase and assignment of shares, agreements on a purchase price of the loan agreement and a compensation agreement, with Kachel Holding and CoinTracking GmbH pursuant to which, on January 2, 2019, CoinTracking sold 12,525 shares of equity interest in CoinTracking GmbH, representing 50.1% of the outstanding equity interests in CoinTracking GmbH and CoinTracking’s entire equity ownership stake in CoinTracking GmbH, to Kachel Holding in exchange for $2,200,000, of which (i) $1,000,000 was paid in cash to CoinTracking and (ii) $1,200,000 was applied toward the repayment of an outstanding loan of $1,500,000 from CoinTracking GmbH to CoinTracking under the CoinTracking Note (the “CoinTracking Disposition”).

 

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In 2019, the Company had holdings of cryptocurrency from its investment segment, and therefore has classified those assets as assets held for sale in its consolidated balance sheets, and reports current operating results as discontinued operations in the consolidated statements of operations for the year ended December 31, 2019. The balance of cryptocurrency assets on our balance sheet as of March 31, 2020, and December 31, 2019, was zero.

 

NOTE 5 – NOTE PAYABLE

 

In 2018, CoinTracking entered into a Loan Agreement (the “Loan Agreement”) with CoinTracking GmbH, which provided for total borrowings of up to $3,000,000. During 2018, CoinTracking borrowed $1,500,000 in exchange for three promissory notes (the “CoinTracking Note”) in the amounts of $300,000, $700,000 and $500,000, respectively. On December 31, 2018, the CoinTracking Note was still outstanding. On January 2, 2019, the Company sold its equity ownership stake in CoinTracking GmbH, and $1,200,000 of the sales proceeds were applied toward repayment of the $1,500,000 outstanding loan amount under the CoinTracking Note. The remaining balance of $300,000 is outstanding as of March 31, 2020, with a due date of March 31, 2021. The Note bears interest at 3%, which is payable quarterly, in arrears for additional information.

 

Interest expense was $26,752 and $2,290 for the three months ended March 31, 2020, and March 31, 2019, respectively.

 

NOTE 6 – CONVERTIBLE NOTES

 

In February 2020, the Company issued three Convertible Notes (“Notes”) to three accredited investors for an aggregate amount of $22,500. The Notes mature on February 2025, unless earlier converted. The Notes bear interest at a rate of 5% per year. The Notes will automatically convert into shares of common stock on the earlier to occur of a) a qualified equity financing, with the conversion price equal to 50% of the common stock price paid by the purchasers of the equity, or b) on the maturity date, at a price per share equal to the fair market value of the Company’s common stock on that date. If a change in control occurs before either of the automatic conversion events, the holders of the Notes will have the option to convert the Notes at a price per share equal to the fair market value of the common stock at the time of such conversion. The Company can prepay the principal and interest, in cash, at any time without any premium or penalty. The Notes have no voting rights, do not participate in dividends, and are unsecured. The Company believes it is more likely than not that the Notes will not be automatically converted in connection with a qualified equity financing prior to either prepayment or automatic conversion on maturity.

 

On September 23, 2019, the Company issued two Convertible Notes (“Notes”) to two accredited investors for an aggregate amount of $75,000, of which $50,000 was funded after March 31, 2020. The Notes mature on September 23, 2024, unless earlier converted. The Notes bear interest at a rate of 5% per year. The Notes will automatically convert into shares of common stock on the earlier to occur of a) a qualified equity financing, with the conversion price equal to 50% of the common stock price paid by the purchasers of the equity, or b) on the maturity date, at a price per share equal to the fair market value of the Company’s common stock on that date. If a change in control occurs before either of the automatic conversion events, the holders of the Notes will have the option to convert the Notes at a price per share equal to the fair market value of the common stock at the time of such conversion. The Company can prepay the principal and interest, in cash, at any time without any premium or penalty. The Notes have no voting rights, do not participate in dividends, and are unsecured. The Company believes it is more likely than not that the Notes will not be automatically converted in connection with a qualified equity financing prior to either prepayment or automatic conversion on maturity.

 

The Company reviewed ASC 815 – Derivatives and Hedging, to determine if the embedded feature in the Notes, specifically the equity conversion feature, should be accounted for as a derivative instrument. The Company considered whether the Notes included net settlement, either explicitly by the terms of the Notes or by other means, such as through the resale of the shares obtained on conversion in the public markets. The Company determined that the Notes do not contain a net settlement option. Also, conversion to cash through the public markets is unlikely, as only 3% of the Company’s outstanding shares are in public float, and the Company’s shares are listed on the OTC grey market, resulting in limited trades of insignificant volume. The Company cannot determine when, or if, its shares will be listed on an active exchange, and if shares available to trade will increase.

 

In connection with the Notes, the Company issued 75,000 warrants to purchase the Company’s common stock at a warrant price of $0.01 per share. The warrants expire in three years. The Company determined the fair value of the warrants utilizing the Black-Scholes model, resulting in an expense of $22,500, included in interest expense in the company’s consolidated statements of operations for the three months ended March 31, 2020.

 

NOTE 7 – WARRANTS FOR COMMON STOCK

 

As of March 31, 2020, outstanding warrants to purchase shares of the Company’s common stock were as follows:

 

Issuance Date  Exercisable for 

Expiration Date

  Exercise Price  

Number of Shares

Outstanding

Under Warrants

 
               
September 2019  Common Shares  September 24, 2022  $0.01    75,000 
February 2020  Common Shares  February 6, 2030  $0.01    10,000 
February 2020  Common Shares  February 12, 2030  $0.01    2,500 
February 2020  Common Shares  February 19, 2030  $0.01    10,000 

 

The warrants issued in 2017 expire on the third anniversary of their issuance dates. The exercise price of the warrants is subject to adjustment from time to time, as provided therein, to prevent dilution of purchase rights granted thereunder. The warrants are considered indexed to the Company’s own stock and therefore no subsequent remeasurement is required.

 

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NOTE 8 - SUMMARY OF STOCK OPTIONS

 

On July 21, 2017, the Company’s board of directors adopted The Crypto Company 2017 Equity Incentive Plan (the “Plan”), which was approved by its stockholders on August 24, 2017. The Plan is administered by the board of directors (the “Administrator”). Under the Plan, the Company may grant equity awards to eligible participants which may take the form of stock options (both incentive stock options and non-qualified stock options) and restricted stock awards. Awards may be granted to officers, employees, non-employee directors (as defined in the Plan) and other key persons (including consultants and prospective employees). The term of any stock option award may not exceed 10 years and may be subject to vesting conditions, as determined by the Administrator. Options granted generally vest over eighteen to thirty-six months. Incentive stock options may be granted only to employees of the Company or any subsidiary that is a “subsidiary corporation” within the meaning of Section 424(f) of the Internal Revenue Code.

 

During the three months ended March 31, 2020, the Company did not issue any options.

 

5,000,000 shares of the Company’s common stock are reserved for issuance under the Plan. As of the period ended March 31, 2020, there are no outstanding stock option awards issued from the Plan and there remains reserved for future awards 5,000,000 shares of the Company’s common stock.

 

           Weighted     
           Average     
       Weighted   Remaining     
       Average   Contractual   Aggregate 
   Number   Exercise   Term   Intrinsic 
   of Shares   Price   (years)   Value 
Options outstanding, at December 31, 2019   346,349   $8.73    8.38    3,025,003 
Options granted   -    -           
Options canceled   -    -           
Options exercised   -    -           
Options outstanding, at March 31, 2020   346,429   $8.73    8.13   $3,025,003 
Exercisable   346,429   $8.73    8.13   $3,025,003 
Vested and exercisable and expected to vest, end of the period   346,429   $8.73    8.13   $3,025,003 

 

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The Company recognized a reduction in expense of $0 and $$-0- for share-based compensation related to stock options for the three months ended March 31, 2020, respectively. See “Note 15 – Discontinued Operations” for share-based compensation related to our former cryptocurrency investment segment and CoinTracking GmbH for the three months ended March 31, 2019.

 

There were no options exercised for the three months ended March 31, 2020.

 

The Company did not grant any restricted stock awards during the three months ended March 31, 2020, and 2019, respectively.

 

As of March 31, 2020, there was $0 of unrecognized compensation costs related to stock options issued to employees and nonemployees.

 

The determination of the fair value of share-based compensation awards utilizing the Black-Scholes model is affected by the Company’s stock price and a number of complex and subjective assumptions, including stock price, volatility, expected life of the equity award, forfeitures rates if any, risk-free interest rates and expected dividends. Volatility is based on the historical volatility of comparable companies measured over the most recent period, generally commensurate with the expected life of the Company’s stock options, adjusted for future expectations given the Company’s limited historical share price data.

 

The range of assumptions used for the three months ended March 31, 2020, are as follows:

 

   Three Months Ended
March 31, 2020
 
   Ranges 
Volatility   36 – 55%
Expected dividends   0%
Expected term (in years)   5.00 – 10 years 
Risk-free rate   1.91 – 2.95%

 

NOTE 9 - RELATED PARTY TRANSACTIONS

 

The Company previously had a services agreement with Full Stack Finance for chief financial officer and accounting outsource services. Ivan Ivankovich, the Company’s CFO until he resigned effective December 6, 2019, is the Co-Managing Director of Full Stack Finance. The Company did not incur expenses in the current year. As of March 31, 2020, and December 31, 2019, there was a balance due to Full Stack Finance of $78,130 and $133,834, respectively, which is included in accounts payable and accrued expenses on the accompanying consolidated balance sheets.

 

On April 3, 2018, CoinTracking entered into a Loan Agreement (the “Loan Agreement”) with CoinTracking GmbH, pursuant to which CoinTracking GmbH was to provide a loan (the “CoinTracking Loan”) of up to $3,000,000 to CoinTracking, to be advanced to CoinTracking in one or more tranches, at such times and in such amounts as requested by CoinTracking from time to time, on or before the tenth anniversary of the Loan Agreement. The Company was deemed obligor of CoinTracking’s obligations under the Loan Agreement for United States Federal income tax purposes. Interest on the CoinTracking Loan accrued at a rate per annum of the greater of (i) three percent (3%), or (ii) the interest rates published monthly by the United States Internal Revenue Service and in effect under section 1274(d) of the Internal Revenue Code in effect as of the date of issuance of any promissory note under the CoinTracking Loan, and payable quarterly. During the year ended December 31, 2018, pursuant to the Loan Agreement, CoinTracking GmbH advanced $1,500,000 to CoinTracking in exchange for three promissory notes (the “CoinTracking Note”) in the amounts of $300,000, $700,000 and $500,000, respectively, which were still outstanding as of December 31, 2018. CoinTracking and CoinTracking GmbH are consolidated entities, as such, the loan and advances are intercompany transactions and are eliminated in consolidation. On January 2, 2019, the Company sold its equity ownership stake in CoinTracking GmbH, and $1,200,000 of the sale proceeds were applied toward repayment of the $1,500,000 outstanding loan amount under the CoinTracking Note, leaving a remaining balance of $300,000. See “Note 5 – Note Payable” for additional details.

 

Effective May 14, 2018, Michael Poutre, former Chief Executive Officer and director of the Company resigned from all of his then-current roles with the Company. Mr. Poutre remained a consultant until November 2018. In connection with Mr. Poutre’s resignation, the Company entered into a Separation and Consulting Agreement and General Mutual Release (the “Separation and Consulting Agreement”), which was executed on May 9, 2018, and approved by the Board of Directors on May 14, 2018. The Separation and Consulting Agreement was not effective until May 17, 2018, following the end of the revocation period. The Separation and Consulting Agreement provided that the Company pay Mr. Poutre a lump-sum cash payment of (i) his earned but unpaid base salary, (ii) his accrued but unpaid vacation time, and (iii) any outstanding requests for expense reimbursements that are approved pursuant to Company policy. Mr. Poutre served as a consultant of the Company for six months at a rate of $30,000 per month, payable in two separate tranches. The Separation and Consulting Agreement contained other standard provisions contained in agreements of this nature including non-disparagement and a general release of any and all claims. During 2018, the Company paid Mr. Poutre $90,000 of the $180,000 due in connection with his Separation and Consulting Agreement.

 

On January 15, 2019, the Company entered into a settlement agreement with Mr. Poutre, whereby the Company agreed to pay Mr. Poutre $40,000 as settlement of all amounts outstanding in connection with his Separation and Consulting Agreement

 

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NOTE 10 – DISCONTINUED OPERATIONS

 

On December 28, 2018, the Company entered into the Agreement with Kachel Holding and CoinTracking GmbH to sell its controlling interest in CoinTracking GmbH. CoinTracking GmbH was acquired by the Company on January 26, 2018. On January 2, 2019, pursuant to the Agreement, the Company sold 12,525 shares of equity interest in CoinTracking GmbH, representing 50.1% of the equity interests in CoinTracking GmbH and 100% of CoinTracking’s holdings in CoinTracking GmbH, to Kachel Holding in exchange for $2,200,000, of which (i) $1,000,000 was paid in cash to CoinTracking and (ii) $1,200,000 was applied toward the repayment of an outstanding loan in the amount of $1,500,000 from CoinTracking GmbH to CoinTracking under the CoinTracking Note.

 

The Company retained no ownership in CoinTracking GmbH and has no continuing involvement with CoinTracking as of the date of the sale.

 

A reconciliation of the operations of the cryptocurrency investment segment and CoinTracking GmbH to the consolidated statements of operations is shown below:

 

   For the three   For the three 
   months ended   months ended 
   March 31, 2020   March 31, 2019 
Net realized gains on investment in cryptocurrency            -    14,166 
Net income/(loss)  $-   $14,166 
Income attributable to Crypto Company  $-   $14,166 

 

Included in the net income for the three months ended March 31, 2020, and March 31, 2019, is $-0- and $14,166 respectively, from the cryptocurrency investment segment.

 

NOTE 11 - COMMITMENTS AND CONTINGENCIES

 

The Company rents, on a month to month basis, for $344 per month its corporate office from Regus Management Group, LLC, located at 22809 Pacific Coast Highway, Malibu, CA 90265. Facility rent expense was $837 for the three months ended March 31, 2020, and $1,501 for the three months ended March 31, 2019, respectively.

 

NOTE 12 – SUBSEQUENT EVENTS

 

On April 28, 2020, the Company received $22,500 in connection with its Notes.

 

On May 8, 2020, The Crypto Company (the “Company”) entered into a promissory note (the “Promissory Note”) with First Bank, a Missouri banking corporation, which provides for a loan of $53,492 (the “PPP Loan”) pursuant to the Paycheck Protection Program under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The PPP Loan has a two-year term and bears interest at a rate of 1.0% per annum. Monthly principal and interest payments are deferred for six months after the date of disbursement. The PPP Loan may be prepaid at any time prior to maturity with no prepayment penalties. The Promissory Note contains events of default and other provisions customary for a loan of this type.

 

On June 10, 2020, the Registrant received a loan from the Small Business Administration of $12,100 (the “SBA Loan”). The SBA Loan bears interest at 3.75% per annum and is payable over 30 years with all payments of principal and interest deferred for the first 12 months.

 

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

 

You should read the following discussion of our financial condition and results of operations in conjunction with the consolidated financial statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q (“Quarterly Report”) and with our audited consolidated financial statements, including the notes thereto, and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 (the “2019 Annual Report”), as filed with the U.S. Securities and Exchange Commission (“SEC”). In addition to historical consolidated financial information, the following discussion and analysis contain forward-looking statements that reflect our plans, estimates, and beliefs and involve risks and uncertainties. The words “may,” “could,” “should,” “estimate,” “project,” “forecast,” “intend,” “expect,” “anticipate,” “believe,” “target,” “plan” and similar expressions are intended to identify forward-looking statements. Our actual results could differ materially from those anticipated in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Quarterly Report, as well as risks referenced in our other filings with the SEC, including Part I, Item 1A. “Risk Factors” of the 2019 Annual Report.

 

Overview of Our Business

 

We are engaged in the business of providing consulting services and education for distributed ledger technologies (“blockchain”), for the building of technological infrastructure and enterprise blockchain technology solutions. We currently generate revenues and incur expenses solely through these consulting operations. We have disposed of our entire ownership interest in CoinTracking GmbH and also divested substantially all of our cryptocurrency assets owned by our former cryptocurrency investment segment, which has ceased operations.

 

Comparison of the three months ended March 31, 2020, and the three months March 31, 2019

 

Revenue

 

Revenues for the three months ended March 31, 2020, and March 31, 2019, were $2,500 and $3,975, respectively. Revenues consisted of fees received for blockchain training, consulting, and software development, primarily for a single customer.

 

General and administrative expenses and share-based compensation

 

For the three months ended March 31, 2020, our general and administrative expenses were $112,092, a decrease of 68.3% compared to $353,618 for the period ended March 31, 2019. General and administrative expenses consist primarily of costs relating to professional services, payroll, and payroll-related expenses, and depreciation and amortization expenses. Professional services included in general and administrative expenses consist primarily of contracting fees, consulting fees, and accounting fees. Management has significantly reduced all expenses for the three months ended March 31, 2020, in particular, payroll and payroll-related expenses and contracting and consulting fees until it can generate significant revenues from its consulting businesses.

 

Liquidity, Going Concern and Capital Resources

 

The Company’s consolidated financial statements are prepared using the accrual method of accounting in accordance with United States (“U.S.”) generally accepted accounting principles (“GAAP”) and have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities in the normal course of business. The Company has incurred significant losses and experienced negative cash flows since inception. As of March 31, 2020, the Company had cash of $5,728, compared to $1,611 as of December 31, 2019. In addition, the Company’s net loss was $136,344 for the three months ended March 31, 2020. The Company’s working capital was negative $2,063,447 as of March 31, 2020. During 2019, the Company liquidated a majority of its investments in cryptocurrency. As of March 31, 2020, the accumulated deficit amounted to $30,401,514. As a result of the Company’s history of losses and financial condition, there is substantial doubt about the ability of the Company to continue as a going concern.

 

The ability to continue as a going concern is dependent upon us generating profitable operations in the future and/or obtaining the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they come due. Management is evaluating different strategies to obtain financing to fund our expenses and achieve a level of revenue adequate to support our current cost structure. Financing strategies may include but are not limited to, private placements of capital stock, debt borrowings, partnerships, and/or collaborations. There can be no assurance that any of these future-funding efforts will be successful, that we will be able to replace the revenues lost as a result of the sale of CoinTracking GmbH in early 2019, or that we will achieve our projected level of revenues in 2020 and beyond. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty.

 

The following table summarizes the primary sources and uses of cash for the periods presented below:

 

   Three months ended 
   March 31, 
   2020   2019 
         
Net cash used in operating activities  $(18,384)  $(521.222)
Net cash used in investing activities   -    1,000,000 
Net cash provided by financing activities   22,500    - 
Net decrease in cash and cash equivalents  $4,116   $478,778 

 

Operating Activities

 

Net cash used in operating activities was $18,384 for the three months ended March 31, 2020, compared to $521,222 for the three months ended March 31, 2019. The decrease in net cash used in operating activities was primarily due to a decline in our net loss to $136,344 for the three months ended March 31, 2020, compared to $336,638 for the three months ended March 31, 2019. Partially offsetting this decrease was a reduction in non-cash stock compensation expense of $0 for the three months ended March 31, 2020, compared to an expense of $58,792 for the prior-year period.

 

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Investing Activities

 

Net cash from investing activities for the three months ended March 31, 2020, was $0, compared to $1,000,000 for the three months ended March 31, 2019. The prior-year period included the sale of CoinTracking GmbH for $2,200,000, net of acquired cash of $1,000,000.

 

Financing Activities

 

Net cash from financing activities for the three months ended March 31, 2020, was $22,500, compared to $0 for the three months ended March 31, 2019.

 

Trends, Events, and Uncertainties

 

The blockchain technology market is dynamic and unpredictable. Although we will undertake compliance efforts, including efforts with commercially reasonable diligence, there can be no assurance that there will not be a new or unforeseen law, regulation or risk factor which will materially impact our ability to continue our business as currently operated or raise additional capital to foster our continued growth.

 

We cannot assure you that our consulting business will develop as planned, that we will ever earn revenues sufficient to support our operations, or that we will ever be profitable. Furthermore, since we have no committed source of financing, we cannot assure you that we will be able to raise money as and when we need it to continue our operations. If we cannot raise funds as and when we need them, we may be required to severely curtail, or even to cease our operations.

 

Other than as discussed elsewhere in this Quarterly Report and our 2019 Annual Report, we are not aware of any trends, events, or uncertainties that are likely to have a material effect on our financial condition.

 

Critical Accounting Policies and Estimates

 

The preparation of our consolidated financial statements requires us to make estimates that affect the reported amounts of assets, liabilities, revenue and expenses, and the related disclosure of contingent liabilities. We base our judgments on our historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making estimates about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We have no material changes to our Critical Accounting Policies and Estimates disclosure as filed in our 2019 Annual Report.

 

Recent Accounting Pronouncements

 

See Note 3 to the consolidated financial statements for a discussion of recent accounting pronouncements.

 

Off-Balance Sheet Transactions

 

We do not have any off-balance sheet transactions.

 

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk.

 

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide the information required by this Item.

 

ITEM 4. Controls and Procedures.

 

Evaluation of Disclosure Controls and Procedures

 

Our management, including our principal executive officer and principal financial officer, conducted an evaluation of the effectiveness of our disclosure controls and procedures, as defined in Rule 13a-15(e) or 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of March 31, 2020. Based upon that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of March 31, 2020, to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosures. In designing and evaluating our disclosure controls and procedures, our management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their desired control objectives, and our management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

 

Changes in Internal Control over Financial Reporting

 

There have been no changes in our internal control over financial reporting during the three months ended March 31, 2020, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

19
 

 

PART II-OTHER INFORMATION

 

ITEM 1. Legal Proceedings.

 

See the discussion of legal proceedings in Note 11 (Commitments and Contingencies) to the Consolidated Financial Statements included in Item 1 of Part I of this Quarterly Report, which is incorporated by reference into this Item 1 of Part II.

 

ITEM 6. Exhibits.

 

Exhibit    
Number   Document
     
3.1   Articles of Conversion (Utah) (incorporated by reference from Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on October 11, 2017)
     
3.2   Articles of Conversion (Nevada) (incorporated by reference from Exhibit 3.2 to the Company’s Current Report on Form 8-K filed on October 11, 2017)
     
3.3   Articles of Incorporation of The Crypto Company (incorporated by reference from Exhibit 3.3 to the Company’s Current Report on Form 8-K filed on October 11, 2017)
     
3.4   Certificate of Amendment to Articles of Incorporation of Crypto Sub, Inc. (incorporated by reference from Exhibit 3.4 to the Company’s Current Report on Form 8-K filed on October 11, 2017)
     
3.5   Amended and Restated Bylaws of The Crypto Company (incorporated by reference from Exhibit 3.1 to the Company’s Current Report on Form 8- K filed on February 28, 2018)
     
31.1   Certification of the Company’s Principal Executive Officer, Principal Financial and Accounting Officer pursuant to Rule 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
     
32.1 +   Certification of the Company’s Principal Executive Officer, Principal Financial and Accounting Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
     
101 INS   XBRL Instance Document
     
101.SCH   XBRL Taxonomy Extension Schema Document
     
101.CAL   XBRL Taxonomy Extension Calculation Linkbase Document
     
101.DEF   XBRL Taxonomy Extension Definition Linkbase Document
     
101.LAB   XBRL Taxonomy Extension Label Linkbase Document
     
101.PRE   XBRL Taxonomy Extension Presentation Linkbase Document

 

+ This document is deemed not filed for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act.

 

20
 

 

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.

 

Dated: June 29, 2020 THE CRYPTO COMPANY
  (Registrant)
     
  By: /s/ Ron Levy
    Ron Levy
    Chief Executive Officer, Interim Chief Financial Officer, Chief Operating Officer and Secretary (Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer)

 

21

 

EX-31.1 2 ex31-1.htm

 

Exhibit 31.1

 

CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT

 

I, Ron Levy, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q for the period ended March 31, 2020, of The Crypto Company;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the period presented in this report;

 

4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared;

 

b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c. evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d. disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

 

a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

 

Date: June 29, 2020

 

/s/ Ron Levy  
Ron Levy  
Chief Executive Officer, Interim Chief Financial Officer, Chief Operating Officer, and Secretary (Principal Executive Officer and Principal Financial Officer)  

 

 

 

EX-32.1 3 ex32-1.htm

 

Exhibit 32.1

 

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report of The Crypto Company. (the “Company”) on Form 10-Q for the period ended March 31, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Ron Levy, Chief Executive Officer, Interim Chief Financial Officer, Chief Operating Officer and Secretary of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to ss.906 of the Sarbanes-Oxley Act of 2002, that:

 

  (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
     
  (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

 

IN WITNESS WHEREOF, the undersigned has executed this certification as of June 29, 2020.

 

/s/ Ron Levy  
Ron Levy  
Chief Executive Officer, Interim Chief Financial Officer, Chief Operating Officer, and Secretary (Principal Executive Officer and Principal Financial Officer)  

 

 

 

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respectively Additional paid-in-capital Accumulated deficit TOTAL STOCKHOLDERS' EQUITY TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY Common stock, par value Common stock, shares authorized Common stock, shares issued Common stock, shares outstanding Statement [Table] Statement [Line Items] Revenue: Total Revenue, net Operating expenses: General and administrative expenses Share-based compensation Total Operating Expenses Operating loss Other expense Interest expense Loss before provision for income taxes Loss from continuing operations Income from discontinued operations attributable to the Crypto Company Net loss attributable to the Crypto Company Net loss Continuing operations: Net loss attributable to the Crypto Company per common share - basic and diluted Discontinued operations: Income/(loss) attributable to the Crypto Company per common share - basic and diluted Net loss attributable to the Crypto Company per common share - basic and diluted Weighted average common shares 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Document and Entity Information - shares
3 Months Ended
Mar. 31, 2020
Jun. 29, 2020
Cover [Abstract]    
Entity Registrant Name Crypto Co  
Entity Central Index Key 0001688126  
Document Type 10-Q  
Document Period End Date Mar. 31, 2020  
Amendment Flag false  
Current Fiscal Year End Date --12-31  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Non-accelerated Filer  
Entity Small Business Flag true  
Entity Emerging Growth Company false  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding   21,400,591
Document Fiscal Period Focus Q1  
Document Fiscal Year Focus 2020  
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Consolidated Balance Sheets - USD ($)
Mar. 31, 2020
Dec. 31, 2019
CURRENT ASSETS    
Cash and cash equivalents $ 5,728 $ 1,611
Accounts receivable, net 2,500
Total current assets 8,228 1,611
TOTAL ASSETS 8,228 1,611
CURRENT LIABILITIES    
Accounts payable and accrued expenses 1,673,280 1,574,614
Income taxes payable 895 1,600
Notes Payable 300,000 300,000
Total current liabilities 1,974,175 1,876,214
Convertible debt 97,500 75,000
TOTAL LIABILITIES 2,071,675 1,951,214
STOCKHOLDERS' EQUITY    
Common stock, $0.001 par value; 50,000,000 shares authorized, 21,400,591 and 21,400,591 shares issued and outstanding, respectively 21,401 21,401
Additional paid-in-capital 28,316,667 28,294,167
Accumulated deficit (30,401,514) (30,265,171)
TOTAL STOCKHOLDERS' EQUITY (2,063,447) (1,949,603)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 8,228 $ 1,611
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Consolidated Balance Sheets (Parenthetical) - $ / shares
Mar. 31, 2020
Dec. 31, 2019
Statement of Financial Position [Abstract]    
Common stock, par value $ 0.001 $ 0.001
Common stock, shares authorized 50,000,000 50,000,000
Common stock, shares issued 21,400,591 21,400,591
Common stock, shares outstanding 21,400,591 21,400,591
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Consolidated Statements of Operations (Unaudited) - USD ($)
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Revenue:    
Total Revenue, net $ 2,500 $ 3,975
Operating expenses:    
General and administrative expenses 112,092 412,410
Share-based compensation (58,791)
Total Operating Expenses (112,092) (353,618)
Operating loss (109,592) (349,643)
Other expense 1,130
Interest expense (26,752) (2,291)
Loss before provision for income taxes (136,344) (350,804)
Loss from continuing operations (136,344) (350,804)
Income from discontinued operations attributable to the Crypto Company 14,166
Net loss attributable to the Crypto Company (136,344) (336,638)
Net loss $ (136,344) $ (336,638)
Continuing operations:    
Net loss attributable to the Crypto Company per common share - basic and diluted $ (0.01) $ (0.02)
Discontinued operations:    
Income/(loss) attributable to the Crypto Company per common share - basic and diluted
Net loss attributable to the Crypto Company per common share - basic and diluted $ (0.01) $ (0.02)
Weighted average common shares outstanding - basic and diluted 21,400,591 21,212,860
Service [Member]    
Revenue:    
Total Revenue, net $ 2,500 $ 3,975
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Consolidated Statement Of Stockholders' Equity (Unaudited) - USD ($)
Common Stock [Member]
Additional Paid-In Capital [Member]
Accumulated Deficit [Member]
Accumulated Other Comprehensive Income [Member]
Noncontrolling Interest [Member]
Total
Begining balance at Dec. 31, 2018 $ 21,213 $ 28,219,355 $ (28,456,550) $ (743,987) $ 2,177,108 $ 1,217,140
Begining balance, shares at Dec. 31, 2018 21,212,860          
Sale of CoinTracking GmbH       743,987 (2,177,108) (1,433,121)
Stock compensation expense in connection with issuance of options   (58,792)       (58,792)
Net loss     (336,638)     (336,638)
Ending balance at Mar. 31, 2019 $ 21,213 28,160,563 (28,793,188) (611,411)
Ending balance, shares at Mar. 31, 2019 21,212,860          
Begining balance at Dec. 31, 2019 $ 21,401 28,294,167 (30,265,172)     (1,949,603)
Begining balance, shares at Dec. 31, 2019 21,400,591          
Sale of CoinTracking GmbH
Warrants issued in connection with Convertible Notes 22,500 22,500
Stock compensation expense in connection with issuance of options
To correct prior year share issuances
Net loss (136,344) (136,344)
Ending balance at Mar. 31, 2020 $ 21,401 $ 28,316,667 $ (30,401,516) $ (2,063,447)
Ending balance, shares at Mar. 31, 2020 21,400,591          
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Consolidated Statements of Cash Flows (Unaudited) - USD ($)
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Cash flows from operating activities:    
Net loss $ (136,344) $ (336,638)
Adjustments to reconcile net loss to net cash used in operations:    
Gain on sale on CoinTracking GmbH (14,166)
Depreciation and amortization 5,706
Share-based compensation (58,791)
Financing costs associated with convertible debt 22,500
Change in operating assets and liabilities:    
Accounts receivable (2,500) (3,975)
Prepaid expenses 29,549
Accounts payable and accrued expenses 97,961 (142,906)
Net cash used in operating activities (18,383) (521,222)
Cash flows from investing activities:    
Net cash from the sale of CoinTracking GmbH 1,000,000
Net cash used in investing activities 1,000,000
Cash flows from financing activities:    
Proceeds from issuance of convertible notes 22,500
Net cash provided by financing activities 22,500
Net (decrease) increase in cash and cash equivalents 4,117 478,778
Cash and cash equivalents at the beginning of the period 1,611 2,448
Cash and cash equivalents at the end of the period 5,728 481,226
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:    
Cash paid for interest $ 30,950
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Organization and Description of the Business
3 Months Ended
Mar. 31, 2020
Organization And Description Of Business  
Organization and Description of the Business

NOTE 1 – ORGANIZATION AND DESCRIPTION OF THE BUSINESS

 

The Crypto Company was incorporated in the State of Nevada on March 9, 2017 (“Inception”). The Company is engaged in the business of providing consulting services and education for distributed ledger technologies (“blockchain”), for the building of technological infrastructure and enterprise blockchain technology solutions. The Company currently generates revenues and incurs expenses solely through these consulting operations.

 

Unless expressly indicated or the context requires otherwise, the terms “Crypto,” the “Company,” “we,” “us,” and “our” in this quarterly Report (“Quarterly Report”) on Form 10-Q for the refer to The Crypto Company and, where appropriate, its wholly-owned subsidiaries, Crypto Sub, Inc., a Nevada corporation (“Crypto Sub”); CoinTracking, LLC, a Nevada limited liability company (“CoinTracking”); and Malibu Blockchain, LLC, a Nevada limited liability company (“Malibu Blockchain”).

 

During the three months ended March 31, 2020, the Company did not generate any revenue.

 

During the year ended December 31, 2019, the Company generated revenues and incurred expenses primarily through the business of providing consulting services and education for distributed ledger technologies (“blockchain”), for the building of technological infrastructure and enterprise blockchain technology solutions, both of which have ceased operations as of the date of this Quarterly Report

 

The Company’s accounting year-end is December 31.

 

COVID-19

 

On March 11, 2020, the World Health Organization (“WHO”) declared the Covid-19 outbreak to be a global pandemic. In addition to the devastating effects on human life, the pandemic is having a negative ripple effect on the global economy, leading to disruptions and volatility in the global financial markets. Most US states and many countries have issued policies intended to stop or slow the further spread of the disease.

 

Covid-19 and the U.S’s response to the pandemic are significantly affecting the economy. There are no comparable events that provide guidance as to the effect the Covid-19 pandemic may have, and, as a result, the ultimate effect of the pandemic is highly uncertain and subject to change. We do not yet know the full extent of the effects on the economy, the markets we serve, our business, or our operations.

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Summary of Significant Accounting Policies
3 Months Ended
Mar. 31, 2020
Organization And Description Of Business  
Summary of Significant Accounting Policies

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Management’s Representation of Interim Financial Statements

 

The accompanying unaudited consolidated financial statements have been prepared by the Company without audit pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been condensed or omitted as allowed by such rules and regulations, and management believes that the disclosures are adequate to make the information presented not misleading. These consolidated financial statements include all of the adjustments, which in the opinion of management are necessary to a fair presentation of financial position and results of operations. All such adjustments are of a normal and recurring nature. Interim results are not necessarily indicative of results for a full year. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements at December 31, 2019, and 2018.

 

The Company prepares its consolidated financial statements based upon the accrual method of accounting, recognizing income when earned and expenses when incurred.

 

Basis of Presentation and Principles of Consolidation

 

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Crypto Sub, CoinTracking, and Malibu Blockchain, as well as its prior 50.1% ownership of CoinTracking GmbH. On January 2, 2019, the Company sold its entire equity ownership stake in CoinTracking GmbH. All significant intercompany accounts and transactions are eliminated in consolidation.

 

Liquidity and Going Concern

 

The Company’s consolidated financial statements are prepared using the accrual method of accounting in accordance with United States (“U.S.”) generally accepted accounting principles (“GAAP”) and have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities in the normal course of business. The Company has incurred significant losses and experienced negative cash flows since inception. As of March 31, 2020, the Company had cash of $5,728. In addition, the Company’s net loss was $136,344 for the three months ended March 31, 2020. The Company’s working capital was negative $2,063,447 as of March 31, 2020. As of March 31, 2020, the accumulated deficit amounted to $30,401,514. As a result of the Company’s history of losses and financial condition, there is substantial doubt about the ability of the Company to continue as a going concern.

 

The ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and/or obtaining the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management is evaluating different strategies to obtain financing to fund the Company’s expenses and achieve a level of revenue adequate to support the Company’s current cost structure. Financing strategies may include, but are not limited to, private placements of capital stock, debt borrowings, partnerships and/or collaborations. There can be no assurance that any of these future-funding efforts will be successful or that the Company will be able to replace the revenues lost as a result of the sale of CoinTracking GmbH, for the remaining quarters of 2020 and beyond. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty.

 

Use of estimates

 

The preparation of these consolidated financial statements in conformity with US GAAP requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses and the related disclosure of contingent assets and liabilities. The Company bases its estimates on historical experience and on various other assumptions that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. The Company’s significant estimates and assumptions include but are not limited to the valuation allowances of deferred taxes, and share-based compensation expenses. Actual results may differ from these estimates. In addition, any change in these estimates or their related assumptions could have an adverse effect on the Company’s operating results.

 

Cash and cash equivalents

 

The Company defines its cash and cash equivalents to include only cash on hand and certain highly liquid investments with original maturities of ninety days or less. The Company maintains its cash and cash equivalents at financial institutions, the balances of which may, at times, exceed federally insured limits. Management believes that the risk of loss due to the concentration is minimal.

 

Investments in cryptocurrency

 

Investments are comprised of several cryptocurrencies the Company owns, of which a majority is Bitcoin, that were actively traded on exchanges. During 2018, the Company sold most of its investments and is no longer actively trading.

 

The Company records its investments as indefinite-lived intangible assets at cost less impairment and are reported as long-term assets in the consolidated balance sheets. An intangible asset with an indefinite useful life is not amortized but assessed for impairment annually, or more frequently, when events or changes in circumstances occur indicating that it is more likely than not that the indefinite-lived asset is impaired. Impairment exists when the carrying amount exceeds its fair value. In testing for impairment, the Company has the option to first perform a qualitative assessment to determine whether it is more likely than not that an impairment exists. If it is determined that it is not more likely than not that an impairment exists, a quantitative impairment test is not necessary. If the Company concludes otherwise, it is required to perform a quantitative impairment test. To the extent an impairment loss is recognized, the loss establishes the new cost basis of the asset. Subsequent reversal of impairment losses is not permitted. The primary exchanges and principal markets the Company utilizes for its trading are Kraken, Bittrex, Poloniex, and Bitstamp.

 

As of March 31, 2020, the Company had no investments in cryptocurrency

 

Investments non-cryptocurrency

 

The Company has historically invested in simple agreement for future tokens (“SAFT”) and a simple agreement for future equity (“SAFE”) agreements. The SAFT agreements provide for the issuance of tokens in anticipation of a future token generation event, with the number of tokens predetermined based on the price established in each respective agreement. The SAFE investment included provisions that provide for either equity or tokens or both. As of March 31, 2020, and December 31, 2019 the Company had no investments in non-cryptocurrency.

 

Business combination

 

The purchase price of an acquired company is allocated between tangible and intangible assets acquired and liabilities assumed from the acquired business based on their estimated fair values with the residual of the purchase price recorded as goodwill. The results of operations of acquired businesses are included in our operating results from the dates of acquisition.

 

Foreign Currency Translation

 

Results of foreign operations are translated into USD using average rates prevailing throughout the period, while assets and liabilities are translated in USD at period end foreign exchange rates. Transactions gains and losses resulting from exchange rate changes on transactions denominated in currencies other than the functional currency of the applicable subsidiary are included in the consolidated statements of operations, within other income, in the year in which the change occurs. The Company’s functional currency is USD while the functional currency for CoinTracking GmbH, which was owned by the Company for the first two calendar days of 2019, is in euros.

 

Income taxes

 

Deferred tax assets and liabilities are recognized for expected future consequences of events that have been included in the financial statements or tax returns. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized. The provision for income taxes represents the tax payable for the period and the change during the period in deferred tax assets and liabilities.

 

When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceed the amount measured as described above is reflected as a liability for unrecognized tax benefits along with any associated interest and penalties that would be payable to the taxing authorities upon examination.

 

As of March 31, 2020, we are subject to federal taxation in the U.S, as well as state taxes. For 2018, we were subject to taxation in Germany as well. The Company has not been audited by the U.S. Internal Revenue Service, nor has the Company been audited by any states or in Germany. On January 2, 2019, the Company sold its entire equity ownership stake in CoinTracking GmbH.

 

Fair value measurements

 

The Company recognizes and discloses the fair value of its assets and liabilities using a hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to valuations based upon unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to valuations based upon unobservable inputs that are significant to the valuation (Level 3 measurements). Each level of input has different levels of subjectivity and the difficulty involved in determining fair value.

 

  Level 1 Inputs are unadjusted, quoted prices for identical assets or liabilities in active markets at the measurable date.
     
  Level 2 Inputs, other than quoted prices included in Level 1, which are observable for the asset or liability through corroboration with market data at the measurement date.
     
  Level 3 Unobservable inputs that reflect management’s best estimate of what participants would use in pricing the asset or liability at the measurement date.

 

The carrying amounts of the Company’s financial assets and liabilities, including cash, accounts payable and accrued expenses approximate fair value because of the short maturity of these instruments.

 

Revenue recognition

 

The Company recognizes revenue under ASC 606, Revenue from Contracts with Customers (“ASC 606”). The core principle of the new revenue standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The following five steps are applied to achieve that core principle:

 

  Step 1: Identify the contract with the customer
  Step 2: Identify the performance obligations in the contract
  Step 3: Determine the transaction price
  Step 4: Allocate the transaction price to the performance obligations in the contract
  Step 5: Recognize revenue when the Company satisfies a performance obligation

 

In order to identify the performance obligations in a contract with a customer, a company must assess the promised goods or services in the contract and identify each promised good or service that is distinct. A performance obligation meets ASC 606’s definition of a “distinct” good or service (or bundle of goods or services) if both of the following criteria are met: The customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer (i.e., the good or service is capable of being distinct), and the entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract (i.e., the promise to transfer the good or service is distinct within the context of the contract).

 

If a good or service is not distinct, the good or service is combined with other promised goods or services until a bundle of goods or services is identified that is distinct.

 

The transaction price is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer. The consideration promised in a contract with a customer may include fixed amounts, variable amounts, or both. When determining the transaction price, an entity must consider the effects of all of the following:

 

Variable consideration is included in the transaction price only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. The transaction price is allocated to each performance obligation on a relative standalone selling price basis. The transaction price allocated to each performance obligation is recognized when that performance obligation is satisfied, at a point in time or over time as appropriate.

 

The Company adopted ASC 606 as of January 1, 2018, using the modified retrospective transition method for contracts as of the date of initial application. There was no cumulative impact on the Company’s retained earnings.

 

During 2019, the Company’s main source of revenue was consulting and development services for a single customer. The Company has determined that revenue should be recognized over time, as the service is provided. The Company considered the criteria in ASC 606 in reaching this determination, specifically:

 

  The customer receives and consumes the benefit provided by the Company’s performance as the Company performs.
  The Company’s performance enhances an asset controlled by the customer.
  The Company’s performance does not create an asset with alternative use, and the Company has an enforceable right to payment for performance completed to date.

 

The consulting arrangement meet more than one of the criteria above.

 

Share-based compensation

 

In accordance with ASC No. 718, Compensation-Stock Compensation (“ASC 718”), the Company measures the compensation costs of share-based compensation arrangements based on the grant date fair value of granted instruments and recognizes the costs in financial statements over the period during which employees are required to provide services. Share-based compensation arrangements include stock options.

 

On January 1, 2019, the Company adopted ASC No. 2018-07, Improvements to Nonemployee Share-Based Payment Accounting, which simplifies the accounting for share-based payments to nonemployees by aligning it with the accounting for share-based payments to employees, with certain exceptions. Previously, share-based payments to nonemployees was accounted for in accordance with ASC No. 505, Equity-Based Payments to Non-Employees, which required compensation cost to be remeasured at fair value at each reporting period when the award vests. As a result, stock option-based payments to non-employees resulted in significant volatility in compensation expense in prior years.

 

The Company accounts for its share-based compensation using the Black-Scholes model to estimate the fair value of stock option awards. Using this model, fair value is calculated based on assumptions with respect to the (i) expected volatility of the Company’s common stock price, (ii) expected life of the award, which for options is the time over which employees and non-employees are expected to hold their options prior to exercise, and (iii) risk-free interest rate.

 

Net loss per common share

 

The Company reports earnings per share (“EPS”) with a dual presentation of basic EPS and diluted EPS. Basic EPS is computed as net income divided by the weighted average of common shares for the period. Diluted EPS reflects the potential dilution that could occur from common shares issued through stock options, or warrants. For the three months ended March 31, 2020, and 2019, the Company had no potentially dilutive common stock equivalents. Therefore, the basic EPS and diluted EPS are the same.

XML 18 R9.htm IDEA: XBRL DOCUMENT v3.20.2
Recent Accounting Pronouncements
3 Months Ended
Mar. 31, 2020
Organization And Description Of Business  
Recent Accounting Pronouncements

NOTE 3 - RECENT ACCOUNTING PRONOUNCEMENTS

 

In July 2018, the FASB issued ASU No. 2018-09, Codification Improvements. The amendments in this ASU clarify certain aspects of the guidance related to reporting comprehensive income, debt modification and extinguishment, income taxes related to stock compensation, income taxes related to business combinations, derivatives and hedging, fair value measurements, brokers and dealers liabilities, and plan accounting. This new standard is effective for annual reporting periods, and interim periods within those annual periods, beginning after December 15, 2018. The adoption of ASU No. 2018-09 did not have a material impact on the Company’s consolidated financial statements and related disclosures.

 

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. The amendments in this ASU remove, add, and modify certain disclosures. The ASU removes the following disclosure requirements from Topic 820: (1) the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy; (2) the policy for timing of transfers between levels; (3) the valuation process for Level 3 fair value measurements; and (4) certain other requirements for nonpublic entities. The ASU adds the following disclosure requirements: (1) the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period and (2) the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. For certain unobservable inputs, disclosure of other quantitative information may be more appropriate if the entity determines that other quantitative information would be a more reasonable and rational method to reflect the distribution of unobservable inputs used to develop Level 3 fair value measurements. The ASU modifies disclosure requirements in Topic 820 relating to the timing of liquidation of an investee’s assets, the disclosure of the date when restrictions from redemption might lapse, the intention of the measurement uncertainty disclosure, and certain other requirements for nonpublic entities. This new standard is effective for annual reporting periods, and interim periods within those annual periods, beginning after December 15, 2019. The adoption of ASU No. 2018-13 is not expected to have a material impact on the Company’s consolidated financial statements and related disclosures.

 

In August 2018, the FASB issued ASU No. 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. The amendments in this ASU align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software). The amendments in this ASU require an entity (customer) in a hosting arrangement that is a service to (1) determine which implementation costs to capitalize as an asset related to the service contract and which costs to expense; (2) expense the capitalized implementation costs of a hosting arrangement that is a service contract over the term of the hosting arrangement; (3) apply the existing impairment guidance to the capitalized implementation costs as if the costs were long-lived assets; (4) present the expense related to the capitalized implementation costs in the same line item in the statement of income as the fees associated with the hosting element (service) of the arrangement and classify payments for capitalized implementation costs in the statement of cash flows in the same manner as payments made for fees associated with the hosting arrangements; and (5) present the capitalized implementation costs in the statement of financial position in the same line item that a prepayment for the fees of the associated hosting arrangement would be presented. This new standard is effective for annual reporting periods, and interim periods within those annual periods, beginning after December 15, 2019. The adoption of ASU No. 2018-15 is not expected to have a material impact on the Company’s consolidated financial statements and related disclosures.

 

In June 2018, the FASB issued ASU No. 2018-07, Improvements to Nonemployee Share-Based Payment Accounting, which simplifies the accounting for share-based payments to nonemployees by aligning it with the accounting for share-based payments to employees, with certain exceptions. The ASU expands the scope of Topic 718, Compensation-Stock Compensation, which currently only includes share-based payments issued to employees, to also include share-based payments issued to non-employees for goods and services. Consequently, the accounting for share-based payments to non-employees and employees will be substantially aligned. Management currently does not plan to early adopt this guidance. The new standard is effective for annual reporting periods beginning after December 15, 2018, with early adoption permitted. The adoption of ASU No. 2018-07 did not have a material impact on the Company’s consolidated financial statements and related disclosures.

 

In July 2017, the FASB issued No. ASU 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480) and Derivatives and Hedging (Topic 815): I. Accounting for Certain Financial Instruments with Down Rounds and II. Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception. This ASU changes the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. The amendments also clarify existing disclosure requirements for equity-classified instruments. The amendments also require entities to recognize the effect of the down round feature on EPS when it is triggered. ASU 2017-11 should be adopted retrospectively or as a cumulative-effect adjustment as of the date of adoption, only to financial instruments outstanding as of the initial application date. ASU 2017-11 will be effective for annual reporting periods, and interim periods within those annual periods, beginning after December 15, 2018. The adoption of ASU No. 2017-11 did not have a material impact on the Company’s consolidated financial statements and related disclosures.

 

In January 2017, the FASB issued ASU No. 2017-04, Simplifying the Test for Goodwill Impairment (Topic 350) which removes “Step Two” of the goodwill impairment test, which required a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The ASU is effective for annual reporting periods beginning after December 15, 2019, and for interim periods within those years, with early adoption permitted. The adoption of ASU No. 2017-04 is not expected to have a material impact on the Company’s consolidated financial statements and related disclosures.

 

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which, among other things, requires lessees to recognize most leases on their balance sheets related to the rights and obligations created by those leases. The new standard also requires new disclosures to help financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. The new standard became effective for us on January 1, 2019. Early adoption is permitted. The amendments in this update should be applied under a modified retrospective approach. Adoption of ASU No. 2016-02 and will not have a significant impact on our consolidated financial statements and related disclosures.

XML 19 R10.htm IDEA: XBRL DOCUMENT v3.20.2
Acquisition
3 Months Ended
Mar. 31, 2020
Organization And Description Of Business  
Acquisition

NOTE 4 - ACQUISITION

 

On January 16, 2018, pursuant to an Equity Purchase Agreement (the “CoinTracking Purchase Agreement”) entered into on December 22, 2017, by and among the Company, CoinTracking, Kachel Holding GmbH, an entity formed under the laws of the Republic of Germany (“Kachel Holding”), and Dario Kachel, an individual, CoinTracking purchased from Kachel Holding 12,525 shares of CoinTracking GmbH, an entity formed under the laws of Germany (“CoinTracking GmbH”), representing 50.1% of the equity interests in CoinTracking GmbH, for a purchase price of (i) $4,736,400 in cash, and (ii) 473,640 shares of common stock of the Company, par value $0.001 per share, subject to adjustment as provided in the CoinTracking Purchase Agreement (the “CoinTracking Acquisition”). The CoinTracking Acquisition was consummated on January 26, 2018.

 

On December 28, 2018, CoinTracking agreed on the purchase and assignment of shares, agreements on a purchase price of the loan agreement and a compensation agreement, with Kachel Holding and CoinTracking GmbH pursuant to which, on January 2, 2019, CoinTracking sold 12,525 shares of equity interest in CoinTracking GmbH, representing 50.1% of the outstanding equity interests in CoinTracking GmbH and CoinTracking’s entire equity ownership stake in CoinTracking GmbH, to Kachel Holding in exchange for $2,200,000, of which (i) $1,000,000 was paid in cash to CoinTracking and (ii) $1,200,000 was applied toward the repayment of an outstanding loan of $1,500,000 from CoinTracking GmbH to CoinTracking under the CoinTracking Note (the “CoinTracking Disposition”).

 

In 2019, the Company had holdings of cryptocurrency from its investment segment, and therefore has classified those assets as assets held for sale in its consolidated balance sheets, and reports current operating results as discontinued operations in the consolidated statements of operations for the year ended December 31, 2019. The balance of cryptocurrency assets on our balance sheet as of March 31, 2020, and December 31, 2019, was zero.

XML 20 R11.htm IDEA: XBRL DOCUMENT v3.20.2
Note Payable
3 Months Ended
Mar. 31, 2020
Organization And Description Of Business  
Note Payable

NOTE 5 – NOTE PAYABLE

 

In 2018, CoinTracking entered into a Loan Agreement (the “Loan Agreement”) with CoinTracking GmbH, which provided for total borrowings of up to $3,000,000. During 2018, CoinTracking borrowed $1,500,000 in exchange for three promissory notes (the “CoinTracking Note”) in the amounts of $300,000, $700,000 and $500,000, respectively. On December 31, 2018, the CoinTracking Note was still outstanding. On January 2, 2019, the Company sold its equity ownership stake in CoinTracking GmbH, and $1,200,000 of the sales proceeds were applied toward repayment of the $1,500,000 outstanding loan amount under the CoinTracking Note. The remaining balance of $300,000 is outstanding as of March 31, 2020, with a due date of March 31, 2021. The Note bears interest at 3%, which is payable quarterly, in arrears for additional information.

 

Interest expense was $26,752 and $2,290 for the three months ended March 31, 2020, and March 31, 2019, respectively.

XML 21 R12.htm IDEA: XBRL DOCUMENT v3.20.2
Convertible Notes
3 Months Ended
Mar. 31, 2020
Organization And Description Of Business  
Convertible Notes

NOTE 6 – CONVERTIBLE NOTES

 

In February 2020, the Company issued three Convertible Notes (“Notes”) to three accredited investors for an aggregate amount of $22,500. The Notes mature on February 2025, unless earlier converted. The Notes bear interest at a rate of 5% per year. The Notes will automatically convert into shares of common stock on the earlier to occur of a) a qualified equity financing, with the conversion price equal to 50% of the common stock price paid by the purchasers of the equity, or b) on the maturity date, at a price per share equal to the fair market value of the Company’s common stock on that date. If a change in control occurs before either of the automatic conversion events, the holders of the Notes will have the option to convert the Notes at a price per share equal to the fair market value of the common stock at the time of such conversion. The Company can prepay the principal and interest, in cash, at any time without any premium or penalty. The Notes have no voting rights, do not participate in dividends, and are unsecured. The Company believes it is more likely than not that the Notes will not be automatically converted in connection with a qualified equity financing prior to either prepayment or automatic conversion on maturity.

 

On September 23, 2019, the Company issued two Convertible Notes (“Notes”) to two accredited investors for an aggregate amount of $75,000, of which $50,000 was funded after March 31, 2020. The Notes mature on September 23, 2024, unless earlier converted. The Notes bear interest at a rate of 5% per year. The Notes will automatically convert into shares of common stock on the earlier to occur of a) a qualified equity financing, with the conversion price equal to 50% of the common stock price paid by the purchasers of the equity, or b) on the maturity date, at a price per share equal to the fair market value of the Company’s common stock on that date. If a change in control occurs before either of the automatic conversion events, the holders of the Notes will have the option to convert the Notes at a price per share equal to the fair market value of the common stock at the time of such conversion. The Company can prepay the principal and interest, in cash, at any time without any premium or penalty. The Notes have no voting rights, do not participate in dividends, and are unsecured. The Company believes it is more likely than not that the Notes will not be automatically converted in connection with a qualified equity financing prior to either prepayment or automatic conversion on maturity.

 

The Company reviewed ASC 815 – Derivatives and Hedging, to determine if the embedded feature in the Notes, specifically the equity conversion feature, should be accounted for as a derivative instrument. The Company considered whether the Notes included net settlement, either explicitly by the terms of the Notes or by other means, such as through the resale of the shares obtained on conversion in the public markets. The Company determined that the Notes do not contain a net settlement option. Also, conversion to cash through the public markets is unlikely, as only 3% of the Company’s outstanding shares are in public float, and the Company’s shares are listed on the OTC grey market, resulting in limited trades of insignificant volume. The Company cannot determine when, or if, its shares will be listed on an active exchange, and if shares available to trade will increase.

 

In connection with the Notes, the Company issued 75,000 warrants to purchase the Company’s common stock at a warrant price of $0.01 per share. The warrants expire in three years. The Company determined the fair value of the warrants utilizing the Black-Scholes model, resulting in an expense of $22,500, included in interest expense in the company’s consolidated statements of operations for the three months ended March 31, 2020.

XML 22 R13.htm IDEA: XBRL DOCUMENT v3.20.2
Warrants for Common Stock
3 Months Ended
Mar. 31, 2020
Organization And Description Of Business  
Warrants for Common Stock

NOTE 7 – WARRANTS FOR COMMON STOCK

 

As of March 31, 2020, outstanding warrants to purchase shares of the Company’s common stock were as follows:

 

Issuance Date   Exercisable for   Expiration Date   Exercise Price    

Number of Shares

Outstanding

Under Warrants

 
                     
September 2019   Common Shares   September 24, 2022   $ 0.01       75,000  
February 2020   Common Shares   February 6, 2030   $ 0.01       10,000  
February 2020   Common Shares   February 12, 2030   $ 0.01       2,500  
February 2020   Common Shares   February 19, 2030   $ 0.01       10,000  

 

The warrants issued in 2017 expire on the third anniversary of their issuance dates. The exercise price of the warrants is subject to adjustment from time to time, as provided therein, to prevent dilution of purchase rights granted thereunder. The warrants are considered indexed to the Company’s own stock and therefore no subsequent remeasurement is required.

XML 23 R14.htm IDEA: XBRL DOCUMENT v3.20.2
Summary of Stock Options
3 Months Ended
Mar. 31, 2020
Organization And Description Of Business  
Summary of Stock Options

NOTE 8 - SUMMARY OF STOCK OPTIONS

 

On July 21, 2017, the Company’s board of directors adopted The Crypto Company 2017 Equity Incentive Plan (the “Plan”), which was approved by its stockholders on August 24, 2017. The Plan is administered by the board of directors (the “Administrator”). Under the Plan, the Company may grant equity awards to eligible participants which may take the form of stock options (both incentive stock options and non-qualified stock options) and restricted stock awards. Awards may be granted to officers, employees, non-employee directors (as defined in the Plan) and other key persons (including consultants and prospective employees). The term of any stock option award may not exceed 10 years and may be subject to vesting conditions, as determined by the Administrator. Options granted generally vest over eighteen to thirty-six months. Incentive stock options may be granted only to employees of the Company or any subsidiary that is a “subsidiary corporation” within the meaning of Section 424(f) of the Internal Revenue Code.

 

During the three months ended March 31, 2020, the Company did not issue any options.

 

5,000,000 shares of the Company’s common stock are reserved for issuance under the Plan. As of the period ended March 31, 2020, there are no outstanding stock option awards issued from the Plan and there remains reserved for future awards 5,000,000 shares of the Company’s common stock.

 

                Weighted        
                Average        
          Weighted     Remaining        
          Average     Contractual     Aggregate  
    Number     Exercise     Term     Intrinsic  
    of Shares     Price     (years)     Value  
Options outstanding, at December 31, 2019     346,349     $ 8.73       8.38       3,025,003  
Options granted     -       -                  
Options canceled     -       -                  
Options exercised     -       -                  
Options outstanding, at March 31, 2020     346,429     $ 8.73       8.13     $ 3,025,003  
Exercisable     346,429     $ 8.73       8.13     $ 3,025,003  
Vested and exercisable and expected to vest, end of the period     346,429     $ 8.73       8.13     $ 3,025,003  

 

The Company recognized a reduction in expense of $0 and $$-0- for share-based compensation related to stock options for the three months ended March 31, 2020, respectively. See “Note 15 – Discontinued Operations” for share-based compensation related to our former cryptocurrency investment segment and CoinTracking GmbH for the three months ended March 31, 2019.

 

There were no options exercised for the three months ended March 31, 2020.

 

The Company did not grant any restricted stock awards during the three months ended March 31, 2020, and 2019, respectively.

 

As of March 31, 2020, there was $0 of unrecognized compensation costs related to stock options issued to employees and nonemployees.

 

The determination of the fair value of share-based compensation awards utilizing the Black-Scholes model is affected by the Company’s stock price and a number of complex and subjective assumptions, including stock price, volatility, expected life of the equity award, forfeitures rates if any, risk-free interest rates and expected dividends. Volatility is based on the historical volatility of comparable companies measured over the most recent period, generally commensurate with the expected life of the Company’s stock options, adjusted for future expectations given the Company’s limited historical share price data.

 

The range of assumptions used for the three months ended March 31, 2020, are as follows:

 

    Three Months Ended
March 31, 2020
 
    Ranges  
Volatility     36 – 55 %
Expected dividends     0 %
Expected term (in years)     5.00 – 10 years  
Risk-free rate     1.91 – 2.95 %

XML 24 R15.htm IDEA: XBRL DOCUMENT v3.20.2
Related Party Transactions
3 Months Ended
Mar. 31, 2020
Organization And Description Of Business  
Related Party Transactions

NOTE 9 - RELATED PARTY TRANSACTIONS

 

The Company previously had a services agreement with Full Stack Finance for chief financial officer and accounting outsource services. Ivan Ivankovich, the Company’s CFO until he resigned effective December 6, 2019, is the Co-Managing Director of Full Stack Finance. The Company did not incur expenses in the current year. As of March 31, 2020, and December 31, 2019, there was a balance due to Full Stack Finance of $78,130 and $133,834, respectively, which is included in accounts payable and accrued expenses on the accompanying consolidated balance sheets.

 

On April 3, 2018, CoinTracking entered into a Loan Agreement (the “Loan Agreement”) with CoinTracking GmbH, pursuant to which CoinTracking GmbH was to provide a loan (the “CoinTracking Loan”) of up to $3,000,000 to CoinTracking, to be advanced to CoinTracking in one or more tranches, at such times and in such amounts as requested by CoinTracking from time to time, on or before the tenth anniversary of the Loan Agreement. The Company was deemed obligor of CoinTracking’s obligations under the Loan Agreement for United States Federal income tax purposes. Interest on the CoinTracking Loan accrued at a rate per annum of the greater of (i) three percent (3%), or (ii) the interest rates published monthly by the United States Internal Revenue Service and in effect under section 1274(d) of the Internal Revenue Code in effect as of the date of issuance of any promissory note under the CoinTracking Loan, and payable quarterly. During the year ended December 31, 2018, pursuant to the Loan Agreement, CoinTracking GmbH advanced $1,500,000 to CoinTracking in exchange for three promissory notes (the “CoinTracking Note”) in the amounts of $300,000, $700,000 and $500,000, respectively, which were still outstanding as of December 31, 2018. CoinTracking and CoinTracking GmbH are consolidated entities, as such, the loan and advances are intercompany transactions and are eliminated in consolidation. On January 2, 2019, the Company sold its equity ownership stake in CoinTracking GmbH, and $1,200,000 of the sale proceeds were applied toward repayment of the $1,500,000 outstanding loan amount under the CoinTracking Note, leaving a remaining balance of $300,000. See “Note 5 – Note Payable” for additional details.

 

Effective May 14, 2018, Michael Poutre, former Chief Executive Officer and director of the Company resigned from all of his then-current roles with the Company. Mr. Poutre remained a consultant until November 2018. In connection with Mr. Poutre’s resignation, the Company entered into a Separation and Consulting Agreement and General Mutual Release (the “Separation and Consulting Agreement”), which was executed on May 9, 2018, and approved by the Board of Directors on May 14, 2018. The Separation and Consulting Agreement was not effective until May 17, 2018, following the end of the revocation period. The Separation and Consulting Agreement provided that the Company pay Mr. Poutre a lump-sum cash payment of (i) his earned but unpaid base salary, (ii) his accrued but unpaid vacation time, and (iii) any outstanding requests for expense reimbursements that are approved pursuant to Company policy. Mr. Poutre served as a consultant of the Company for six months at a rate of $30,000 per month, payable in two separate tranches. The Separation and Consulting Agreement contained other standard provisions contained in agreements of this nature including non-disparagement and a general release of any and all claims. During 2018, the Company paid Mr. Poutre $90,000 of the $180,000 due in connection with his Separation and Consulting Agreement.

 

On January 15, 2019, the Company entered into a settlement agreement with Mr. Poutre, whereby the Company agreed to pay Mr. Poutre $40,000 as settlement of all amounts outstanding in connection with his Separation and Consulting Agreement

XML 25 R16.htm IDEA: XBRL DOCUMENT v3.20.2
Discontinued Operations
3 Months Ended
Mar. 31, 2020
Discontinued Operations and Disposal Groups [Abstract]  
Discontinued Operations

NOTE 10 – DISCONTINUED OPERATIONS

 

On December 28, 2018, the Company entered into the Agreement with Kachel Holding and CoinTracking GmbH to sell its controlling interest in CoinTracking GmbH. CoinTracking GmbH was acquired by the Company on January 26, 2018. On January 2, 2019, pursuant to the Agreement, the Company sold 12,525 shares of equity interest in CoinTracking GmbH, representing 50.1% of the equity interests in CoinTracking GmbH and 100% of CoinTracking’s holdings in CoinTracking GmbH, to Kachel Holding in exchange for $2,200,000, of which (i) $1,000,000 was paid in cash to CoinTracking and (ii) $1,200,000 was applied toward the repayment of an outstanding loan in the amount of $1,500,000 from CoinTracking GmbH to CoinTracking under the CoinTracking Note.

 

The Company retained no ownership in CoinTracking GmbH and has no continuing involvement with CoinTracking as of the date of the sale.

 

A reconciliation of the operations of the cryptocurrency investment segment and CoinTracking GmbH to the consolidated statements of operations is shown below:

 

    For the three     For the three  
    months ended     months ended  
    March 31, 2020     March 31, 2019  
Net realized gains on investment in cryptocurrency              -       14,166  
Net income/(loss)   $ -     $ 14,166  
Income attributable to Crypto Company   $ -     $ 14,166  

 

Included in the net income for the three months ended March 31, 2020, and March 31, 2019, is $-0- and $14,166 respectively, from the cryptocurrency investment segment.

XML 26 R17.htm IDEA: XBRL DOCUMENT v3.20.2
Commitments and Contingencies
3 Months Ended
Mar. 31, 2020
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies

NOTE 11 - COMMITMENTS AND CONTINGENCIES

 

The Company rents, on a month to month basis, for $344 per month its corporate office from Regus Management Group, LLC, located at 22809 Pacific Coast Highway, Malibu, CA 90265. Facility rent expense was $837 for the three months ended March 31, 2020, and $1,501 for the three months ended March 31, 2019, respectively.

XML 27 R18.htm IDEA: XBRL DOCUMENT v3.20.2
Subsequent Events
3 Months Ended
Mar. 31, 2020
Subsequent Events [Abstract]  
Subsequent Events

NOTE 12 – SUBSEQUENT EVENTS

 

On April 28, 2020, the Company received $22,500 in connection with its Notes.

 

On May 8, 2020, The Crypto Company (the “Company”) entered into a promissory note (the “Promissory Note”) with First Bank, a Missouri banking corporation, which provides for a loan of $53,492 (the “PPP Loan”) pursuant to the Paycheck Protection Program under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The PPP Loan has a two-year term and bears interest at a rate of 1.0% per annum. Monthly principal and interest payments are deferred for six months after the date of disbursement. The PPP Loan may be prepaid at any time prior to maturity with no prepayment penalties. The Promissory Note contains events of default and other provisions customary for a loan of this type.

 

On June 10, 2020, the Registrant received a loan from the Small Business Administration of $12,100 (the “SBA Loan”). The SBA Loan bears interest at 3.75% per annum and is payable over 30 years with all payments of principal and interest deferred for the first 12 months.

XML 28 R19.htm IDEA: XBRL DOCUMENT v3.20.2
Summary of Significant Accounting Policies (Policies)
3 Months Ended
Mar. 31, 2020
Accounting Policies [Abstract]  
Management's Representation of Interim Financial Statements

Management’s Representation of Interim Financial Statements

 

The accompanying unaudited consolidated financial statements have been prepared by the Company without audit pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been condensed or omitted as allowed by such rules and regulations, and management believes that the disclosures are adequate to make the information presented not misleading. These consolidated financial statements include all of the adjustments, which in the opinion of management are necessary to a fair presentation of financial position and results of operations. All such adjustments are of a normal and recurring nature. Interim results are not necessarily indicative of results for a full year. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements at December 31, 2019, and 2018.

 

The Company prepares its consolidated financial statements based upon the accrual method of accounting, recognizing income when earned and expenses when incurred.

Basis of Presentation and Principles of Consolidation

Basis of Presentation and Principles of Consolidation

 

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Crypto Sub, CoinTracking, and Malibu Blockchain, as well as its prior 50.1% ownership of CoinTracking GmbH. On January 2, 2019, the Company sold its entire equity ownership stake in CoinTracking GmbH. All significant intercompany accounts and transactions are eliminated in consolidation.

Liquidity and Going Concern

Liquidity and Going Concern

 

The Company’s consolidated financial statements are prepared using the accrual method of accounting in accordance with United States (“U.S.”) generally accepted accounting principles (“GAAP”) and have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities in the normal course of business. The Company has incurred significant losses and experienced negative cash flows since inception. As of March 31, 2020, the Company had cash of $5,728. In addition, the Company’s net loss was $136,344 for the three months ended March 31, 2020. The Company’s working capital was negative $2,063,447 as of March 31, 2020. As of March 31, 2020, the accumulated deficit amounted to $30,401,514. As a result of the Company’s history of losses and financial condition, there is substantial doubt about the ability of the Company to continue as a going concern.

 

The ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and/or obtaining the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management is evaluating different strategies to obtain financing to fund the Company’s expenses and achieve a level of revenue adequate to support the Company’s current cost structure. Financing strategies may include, but are not limited to, private placements of capital stock, debt borrowings, partnerships and/or collaborations. There can be no assurance that any of these future-funding efforts will be successful or that the Company will be able to replace the revenues lost as a result of the sale of CoinTracking GmbH, for the remaining quarters of 2020 and beyond. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty.

Use of Estimates

Use of estimates

 

The preparation of these consolidated financial statements in conformity with US GAAP requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses and the related disclosure of contingent assets and liabilities. The Company bases its estimates on historical experience and on various other assumptions that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. The Company’s significant estimates and assumptions include but are not limited to the valuation allowances of deferred taxes, and share-based compensation expenses. Actual results may differ from these estimates. In addition, any change in these estimates or their related assumptions could have an adverse effect on the Company’s operating results.

Cash and Cash Equivalents

Cash and cash equivalents

 

The Company defines its cash and cash equivalents to include only cash on hand and certain highly liquid investments with original maturities of ninety days or less. The Company maintains its cash and cash equivalents at financial institutions, the balances of which may, at times, exceed federally insured limits. Management believes that the risk of loss due to the concentration is minimal.

Investments in Cryptocurrency

Investments in cryptocurrency

 

Investments are comprised of several cryptocurrencies the Company owns, of which a majority is Bitcoin, that were actively traded on exchanges. During 2018, the Company sold most of its investments and is no longer actively trading.

 

The Company records its investments as indefinite-lived intangible assets at cost less impairment and are reported as long-term assets in the consolidated balance sheets. An intangible asset with an indefinite useful life is not amortized but assessed for impairment annually, or more frequently, when events or changes in circumstances occur indicating that it is more likely than not that the indefinite-lived asset is impaired. Impairment exists when the carrying amount exceeds its fair value. In testing for impairment, the Company has the option to first perform a qualitative assessment to determine whether it is more likely than not that an impairment exists. If it is determined that it is not more likely than not that an impairment exists, a quantitative impairment test is not necessary. If the Company concludes otherwise, it is required to perform a quantitative impairment test. To the extent an impairment loss is recognized, the loss establishes the new cost basis of the asset. Subsequent reversal of impairment losses is not permitted. The primary exchanges and principal markets the Company utilizes for its trading are Kraken, Bittrex, Poloniex, and Bitstamp.

 

As of March 31, 2020, the Company had no investments in cryptocurrency

Investments Non-Cryptocurrency

Investments non-cryptocurrency

 

The Company has historically invested in simple agreement for future tokens (“SAFT”) and a simple agreement for future equity (“SAFE”) agreements. The SAFT agreements provide for the issuance of tokens in anticipation of a future token generation event, with the number of tokens predetermined based on the price established in each respective agreement. The SAFE investment included provisions that provide for either equity or tokens or both. As of March 31, 2020, and December 31, 2019 the Company had no investments in non-cryptocurrency.

Business Combination

Business combination

 

The purchase price of an acquired company is allocated between tangible and intangible assets acquired and liabilities assumed from the acquired business based on their estimated fair values with the residual of the purchase price recorded as goodwill. The results of operations of acquired businesses are included in our operating results from the dates of acquisition.

Foreign Currency Translation

Foreign Currency Translation

 

Results of foreign operations are translated into USD using average rates prevailing throughout the period, while assets and liabilities are translated in USD at period end foreign exchange rates. Transactions gains and losses resulting from exchange rate changes on transactions denominated in currencies other than the functional currency of the applicable subsidiary are included in the consolidated statements of operations, within other income, in the year in which the change occurs. The Company’s functional currency is USD while the functional currency for CoinTracking GmbH, which was owned by the Company for the first two calendar days of 2019, is in euros.

Income Taxes

Income taxes

 

Deferred tax assets and liabilities are recognized for expected future consequences of events that have been included in the financial statements or tax returns. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized. The provision for income taxes represents the tax payable for the period and the change during the period in deferred tax assets and liabilities.

 

When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceed the amount measured as described above is reflected as a liability for unrecognized tax benefits along with any associated interest and penalties that would be payable to the taxing authorities upon examination.

 

As of March 31, 2020, we are subject to federal taxation in the U.S, as well as state taxes. For 2018, we were subject to taxation in Germany as well. The Company has not been audited by the U.S. Internal Revenue Service, nor has the Company been audited by any states or in Germany. On January 2, 2019, the Company sold its entire equity ownership stake in CoinTracking GmbH.

Fair Value Measurements

Fair value measurements

 

The Company recognizes and discloses the fair value of its assets and liabilities using a hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to valuations based upon unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to valuations based upon unobservable inputs that are significant to the valuation (Level 3 measurements). Each level of input has different levels of subjectivity and the difficulty involved in determining fair value.

 

  Level 1 Inputs are unadjusted, quoted prices for identical assets or liabilities in active markets at the measurable date.
     
  Level 2 Inputs, other than quoted prices included in Level 1, which are observable for the asset or liability through corroboration with market data at the measurement date.
     
  Level 3 Unobservable inputs that reflect management’s best estimate of what participants would use in pricing the asset or liability at the measurement date.

 

The carrying amounts of the Company’s financial assets and liabilities, including cash, accounts payable and accrued expenses approximate fair value because of the short maturity of these instruments.

Revenue Recognition

Revenue recognition

 

The Company recognizes revenue under ASC 606, Revenue from Contracts with Customers (“ASC 606”). The core principle of the new revenue standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The following five steps are applied to achieve that core principle:

 

  Step 1: Identify the contract with the customer
  Step 2: Identify the performance obligations in the contract
  Step 3: Determine the transaction price
  Step 4: Allocate the transaction price to the performance obligations in the contract
  Step 5: Recognize revenue when the Company satisfies a performance obligation

 

In order to identify the performance obligations in a contract with a customer, a company must assess the promised goods or services in the contract and identify each promised good or service that is distinct. A performance obligation meets ASC 606’s definition of a “distinct” good or service (or bundle of goods or services) if both of the following criteria are met: The customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer (i.e., the good or service is capable of being distinct), and the entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract (i.e., the promise to transfer the good or service is distinct within the context of the contract).

 

If a good or service is not distinct, the good or service is combined with other promised goods or services until a bundle of goods or services is identified that is distinct.

 

The transaction price is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer. The consideration promised in a contract with a customer may include fixed amounts, variable amounts, or both. When determining the transaction price, an entity must consider the effects of all of the following:

 

Variable consideration is included in the transaction price only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. The transaction price is allocated to each performance obligation on a relative standalone selling price basis. The transaction price allocated to each performance obligation is recognized when that performance obligation is satisfied, at a point in time or over time as appropriate.

 

The Company adopted ASC 606 as of January 1, 2018, using the modified retrospective transition method for contracts as of the date of initial application. There was no cumulative impact on the Company’s retained earnings.

 

During 2019, the Company’s main source of revenue was consulting and development services for a single customer. The Company has determined that revenue should be recognized over time, as the service is provided. The Company considered the criteria in ASC 606 in reaching this determination, specifically:

 

  The customer receives and consumes the benefit provided by the Company’s performance as the Company performs.
  The Company’s performance enhances an asset controlled by the customer.
  The Company’s performance does not create an asset with alternative use, and the Company has an enforceable right to payment for performance completed to date.

 

The consulting arrangement meet more than one of the criteria above.

Share-Based Compensation

Share-based compensation

 

In accordance with ASC No. 718, Compensation-Stock Compensation (“ASC 718”), the Company measures the compensation costs of share-based compensation arrangements based on the grant date fair value of granted instruments and recognizes the costs in financial statements over the period during which employees are required to provide services. Share-based compensation arrangements include stock options.

 

On January 1, 2019, the Company adopted ASC No. 2018-07, Improvements to Nonemployee Share-Based Payment Accounting, which simplifies the accounting for share-based payments to nonemployees by aligning it with the accounting for share-based payments to employees, with certain exceptions. Previously, share-based payments to nonemployees was accounted for in accordance with ASC No. 505, Equity-Based Payments to Non-Employees, which required compensation cost to be remeasured at fair value at each reporting period when the award vests. As a result, stock option-based payments to non-employees resulted in significant volatility in compensation expense in prior years.

 

The Company accounts for its share-based compensation using the Black-Scholes model to estimate the fair value of stock option awards. Using this model, fair value is calculated based on assumptions with respect to the (i) expected volatility of the Company’s common stock price, (ii) expected life of the award, which for options is the time over which employees and non-employees are expected to hold their options prior to exercise, and (iii) risk-free interest rate.

Net Loss Per Common Share

Net loss per common share

 

The Company reports earnings per share (“EPS”) with a dual presentation of basic EPS and diluted EPS. Basic EPS is computed as net income divided by the weighted average of common shares for the period. Diluted EPS reflects the potential dilution that could occur from common shares issued through stock options, or warrants. For the three months ended March 31, 2020, and 2019, the Company had no potentially dilutive common stock equivalents. Therefore, the basic EPS and diluted EPS are the same.

XML 29 R20.htm IDEA: XBRL DOCUMENT v3.20.2
Warrants for Common Stock (Tables)
3 Months Ended
Mar. 31, 2020
Warrants and Rights Note Disclosure [Abstract]  
Schedule of Outstanding Warrants to Purchase Shares of Common Stock

As of March 31, 2020, outstanding warrants to purchase shares of the Company’s common stock were as follows:

 

Issuance Date   Exercisable for   Expiration Date   Exercise Price    

Number of Shares

Outstanding

Under Warrants

 
                     
September 2019   Common Shares   September 24, 2022   $ 0.01       75,000  
February 2020   Common Shares   February 6, 2030   $ 0.01       10,000  
February 2020   Common Shares   February 12, 2030   $ 0.01       2,500  
February 2020   Common Shares   February 19, 2030   $ 0.01       10,000  

XML 30 R21.htm IDEA: XBRL DOCUMENT v3.20.2
Summary of Stock Options (Tables)
3 Months Ended
Mar. 31, 2020
Share-based Payment Arrangement [Abstract]  
Schedule of Stock Options Activity
                Weighted        
                Average        
          Weighted     Remaining        
          Average     Contractual     Aggregate  
    Number     Exercise     Term     Intrinsic  
    of Shares     Price     (years)     Value  
Options outstanding, at December 31, 2019     346,349     $ 8.73       8.38       3,025,003  
Options granted     -       -                  
Options canceled     -       -                  
Options exercised     -       -                  
Options outstanding, at March 31, 2020     346,429     $ 8.73       8.13     $ 3,025,003  
Exercisable     346,429     $ 8.73       8.13     $ 3,025,003  
Vested and exercisable and expected to vest, end of the period     346,429     $ 8.73       8.13     $ 3,025,003  

Schedule of Stock Option Assumptions Used

The range of assumptions used for the three months ended March 31, 2020, are as follows:

 

    Three Months Ended
March 31, 2020
 
    Ranges  
Volatility     36 – 55 %
Expected dividends     0 %
Expected term (in years)     5.00 – 10 years  
Risk-free rate     1.91 – 2.95 %

XML 31 R22.htm IDEA: XBRL DOCUMENT v3.20.2
Discontinued Operations (Tables)
3 Months Ended
Mar. 31, 2020
Discontinued Operations and Disposal Groups [Abstract]  
Schedule of Reconciliation of Operations and Balance Sheet of Cryptocurrency Investment

A reconciliation of the operations of the cryptocurrency investment segment and CoinTracking GmbH to the consolidated statements of operations is shown below:

 

    For the three     For the three  
    months ended     months ended  
    March 31, 2020     March 31, 2019  
Net realized gains on investment in cryptocurrency              -       14,166  
Net income/(loss)   $ -     $ 14,166  
Income attributable to Crypto Company   $ -     $ 14,166  

XML 32 R23.htm IDEA: XBRL DOCUMENT v3.20.2
Summary of Significant Accounting Policies (Details Narrative) - USD ($)
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Dec. 31, 2019
Jan. 16, 2018
Cash balance $ 5,728   $ 1,611  
Net loss (136,344) $ (336,638)    
Working capital (2,063,447)      
Accumulated deficit (30,401,514)   (30,265,171)  
Investments in cryptocurrency    
Investment in non-cryptocurrency    
Potentially dilutive common stock equivalents No potentially dilutive common stock equivalents. No potentially dilutive common stock equivalents.    
CoinTracking GmbH [Member]        
Common stock ownership percentage 50.10%     50.10%
XML 33 R24.htm IDEA: XBRL DOCUMENT v3.20.2
Acquisition (Details Narrative) - USD ($)
Jan. 02, 2019
Jan. 16, 2018
Mar. 31, 2020
Dec. 31, 2019
Cryptocurrency assets    
CoinTracking GmbH [Member]        
Number of common stock shares purchased   473,640    
Equity interests, percentage   50.10% 50.10%  
Payments to acquire businesses in cash   $ 4,736,400    
Business combination, purchase price per share   $ 0.001    
CoinTracking GmbH [Member] | CoinTracking Purchase Agreement [Member]        
Number of common stock shares purchased   12,525    
CoinTracking GmbH [Member] | Loan Agreement and Compensation Agreement [Member]        
Equity interests, percentage 50.10%      
Payments to acquire businesses in cash $ 1,000,000      
Number of shares sold during period 12,525      
CoinTracking GmbH [Member] | Loan Agreement and Compensation Agreement [Member] | Coin Tracking Note [Member]        
Debt, outstanding loan $ 1,500,000      
CoinTracking GmbH [Member] | Loan Agreement and Compensation Agreement [Member] | Towards Repayments of Oustanding Loan [Member]        
Purchase price 1,200,000      
Kachel Holdings [Member] | Loan Agreement and Compensation Agreement [Member]        
Purchase price $ 2,200,000      
XML 34 R25.htm IDEA: XBRL DOCUMENT v3.20.2
Note Payable (Details Narrative) - USD ($)
3 Months Ended
Jan. 02, 2019
Mar. 31, 2020
Mar. 31, 2019
Dec. 31, 2018
Apr. 03, 2018
CoinTracking [Member]          
Borrowings amount outstanding $ 1,500,000        
Remaining balance of outstanding   $ 300,000      
CoinTracking GmbH [Member] | CoinTracking [Member]          
Repayment of outstanding loan $ 1,200,000        
CoinTracking GmbH [Member] | Loan Agreement [Member]          
Borrowings amount       $ 3,000,000 $ 3,000,000
Borrowings amount outstanding       $ 1,500,000  
Remaining balance of outstanding   $ 300,000      
Maturity date   Mar. 31, 2021      
Loan interest rate       3.00% 3.00%
Interest expense   $ 26,752 $ 2,290    
CoinTracking GmbH [Member] | Loan Agreement [Member] | Promissory Note One [Member]          
Borrowings amount outstanding       $ 300,000  
CoinTracking GmbH [Member] | Loan Agreement [Member] | Promissory Note Two [Member]          
Borrowings amount outstanding       700,000  
CoinTracking GmbH [Member] | Loan Agreement [Member] | Promissory Note Three [Member]          
Borrowings amount outstanding       $ 500,000  
XML 35 R26.htm IDEA: XBRL DOCUMENT v3.20.2
Convertible Notes (Details Anrrative) - USD ($)
3 Months Ended
Feb. 29, 2020
Sep. 23, 2019
Sep. 23, 2019
Mar. 31, 2020
Mar. 31, 2019
Interest expense       $ 26,752 $ 2,291
Convertible Notes [Member]          
Conversion of cash through public markets   3.00% 3.00%    
Warrants issued   75,000 75,000    
Warrant price     $ 0.01    
Warrant maturity date   3 years 3 years    
Interest expense       $ 22,500  
Convertible Notes [Member] | Three Accredited Investors [Member]          
Debt aggregate amount   $ 75,000 $ 75,000    
Debt maturity date   Sep. 23, 2024      
Debt instrument interest rate   5.00% 5.00%    
Debt instrument conversion percentage   50.00%      
Convertible Notes [Member] | Three Accredited Investors [Member] | Funded March 31, 2020 [Member]          
Debt aggregate amount   $ 50,000 $ 50,000    
Convertible Notes [Member] | Three Convertible Notes [Member] | Three Accredited Investors [Member]          
Debt aggregate amount $ 22,500        
Debt maturity date Feb. 28, 2025        
Debt instrument interest rate 5.00%        
XML 36 R27.htm IDEA: XBRL DOCUMENT v3.20.2
Warrants for Common Stock - Schedule of Outstanding Warrants to Purchase Shares of Common Stock (Details)
3 Months Ended
Mar. 31, 2020
$ / shares
shares
Warrant One [Member]  
Issuance Date September 2019
Exercisable for Common Shares
Expiration Date Sep. 24, 2022
Exercise Price | $ / shares $ 0.01
Number of Shares Outstanding Under Warrants | shares 75,000
Warrant Two [Member]  
Issuance Date February 2020
Exercisable for Common Shares
Expiration Date Feb. 06, 2030
Exercise Price | $ / shares $ 0.01
Number of Shares Outstanding Under Warrants | shares 10,000
Warrant Three [Member]  
Issuance Date February 2020
Exercisable for Common Shares
Expiration Date Feb. 12, 2030
Exercise Price | $ / shares $ 0.01
Number of Shares Outstanding Under Warrants | shares 2,500
Warrant Four [Member]  
Issuance Date February 2020
Exercisable for Common Shares
Expiration Date Feb. 19, 2030
Exercise Price | $ / shares $ 0.01
Number of Shares Outstanding Under Warrants | shares 10,000
XML 37 R28.htm IDEA: XBRL DOCUMENT v3.20.2
Summary of Stock Options (Details Narrative) - USD ($)
3 Months Ended
Jul. 21, 2017
Mar. 31, 2020
Stock options granted  
Stock Option [Member] | Reduction in Expense [Member]    
Share based compensation   $ 0
2017 Equity Incentive Plan [Member]    
Stock option award vesting, description Options granted generally vest over eighteen to thirty-six months  
Number of stock option remain reserved for future issuance 5,000,000 5,000,000
Unrecognized compensation costs   $ 0
2017 Equity Incentive Plan [Member] | Maximum [Member]    
Stock option award vesting period 10 years  
XML 38 R29.htm IDEA: XBRL DOCUMENT v3.20.2
Summary of Stock Options - Schedule of Stock Options Activity (Details)
3 Months Ended
Mar. 31, 2020
USD ($)
$ / shares
shares
Share-based Payment Arrangement [Abstract]  
Number of Options Outstanding, Beginning Balance | shares 346,349
Number of Options Granted | shares
Number of Options Cancelled | shares
Number of Options Exercised | shares
Number of Options Outstanding, Ending Balance | shares 346,429
Number of Options Outstanding, Exercisable | shares 346,429
Number of Options Vested and Exercisable and Expected to Vest | shares 346,429
Weighted Average Exercise Price, Options Outstanding, Beginning Balance | $ / shares $ 8.73
Weighted Average Exercise Price, Options Granted | $ / shares
Weighted Average Exercise Price, Options Cancelled | $ / shares
Weighted Average Exercise Price, Options Exercised | $ / shares
Weighted Average Exercise Price, Options Outstanding, Ending Balance | $ / shares 8.73
Weighted Average Exercise Price, Options Exercisable | $ / shares 8.73
Weighted Average Exercise Price, Vested and Exercisable and Expected to Vest | $ / shares $ 8.73
Weighted Average Remaining Contractual Term (Years), Options Outstanding, Beginning 8 years 4 months 17 days
Weighted Average Remaining Contractual Term (Years), Options Outstanding, Ending 8 years 1 month 16 days
Weighted Average Remaining Contractual Term (Years), Options Exercisable 8 years 1 month 16 days
Weighted Average Remaining Contractual Term (Years), Vested and Exercisable and Expected to Vest 8 years 1 month 16 days
Aggregate Intrinsic Value, Options Outstanding, Beginning balance | $ $ 3,025,003
Aggregate Intrinsic Value, Options Outstanding, Ending balance | $ 3,025,003
Aggregate Intrinsic Value, Options Exercisable | $ 3,025,003
Aggregate Intrinsic Value, Vested and Exercisable and Expected to Vest | $ $ 3,025,003
XML 39 R30.htm IDEA: XBRL DOCUMENT v3.20.2
Summary of Stock Options - Schedule of Stock Option Assumptions Used (Details)
3 Months Ended
Mar. 31, 2020
Expected dividends 0.00%
Minimum [Member]  
Volatility 36.00%
Expected term (in years) 5 years
Risk-free rate 1.91%
Maximum [Member]  
Volatility 55.00%
Expected term (in years) 10 years
Risk-free rate 2.95%
XML 40 R31.htm IDEA: XBRL DOCUMENT v3.20.2
Related Party Transactions (Details Narrative) - USD ($)
3 Months Ended 12 Months Ended
Jan. 02, 2019
May 17, 2018
Mar. 31, 2020
Dec. 31, 2019
Dec. 31, 2018
Jan. 15, 2019
Apr. 03, 2018
CoinTracking [Member]              
Related Party Transaction [Line Items]              
Borrowings amount outstanding $ 1,500,000            
Remaining balance of outstanding     $ 300,000        
Separation and Consulting Agreement [Member] | Michael Poutre [Member]              
Related Party Transaction [Line Items]              
Payments to related party         $ 90,000    
Due to related parties         180,000    
Settlement of final amount to related party           $ 40,000  
Separation and Consulting Agreement [Member] | Michael Poutre [Member] | Tranches One [Member]              
Related Party Transaction [Line Items]              
Consultant fee payable to CFO, per month   $ 30,000          
Separation and Consulting Agreement [Member] | Michael Poutre [Member] | Tranches Two [Member]              
Related Party Transaction [Line Items]              
Consultant fee payable to CFO, per month   $ 30,000          
Full Stack Finance [Member]              
Related Party Transaction [Line Items]              
Legal fees     78,130 $ 133,834      
CoinTracking GmbH [Member] | CoinTracking [Member]              
Related Party Transaction [Line Items]              
Repayment of outstanding loan $ 1,200,000            
CoinTracking GmbH [Member] | Loan Agreement [Member]              
Related Party Transaction [Line Items]              
Borrowings amount         $ 3,000,000   $ 3,000,000
Loan interest rate         3.00%   3.00%
Borrowings amount outstanding         $ 1,500,000    
Remaining balance of outstanding     $ 300,000        
CoinTracking GmbH [Member] | Loan Agreement [Member] | Promissory Note One [Member]              
Related Party Transaction [Line Items]              
Borrowings amount outstanding         300,000    
CoinTracking GmbH [Member] | Loan Agreement [Member] | Promissory Note Two [Member]              
Related Party Transaction [Line Items]              
Borrowings amount outstanding         700,000    
CoinTracking GmbH [Member] | Loan Agreement [Member] | Promissory Note Three [Member]              
Related Party Transaction [Line Items]              
Borrowings amount outstanding         $ 500,000    
XML 41 R32.htm IDEA: XBRL DOCUMENT v3.20.2
Discontinued Operations (Details Narrative) - USD ($)
3 Months Ended
Jan. 02, 2019
Jan. 16, 2018
Mar. 31, 2020
Mar. 31, 2019
Income loss on discontinued operations     $ 14,166
CoinTracking GmbH [Member]        
Equity interests, percentage   50.10% 50.10%  
Payments to acquire businesses in cash   $ 4,736,400    
Loan Agreement and Compensation Agreement [Member] | CoinTracking GmbH [Member]        
Number of shares sold during period 12,525      
Equity interests, percentage 50.10%      
Payments to acquire businesses in cash $ 1,000,000      
Loan Agreement and Compensation Agreement [Member] | CoinTracking GmbH [Member] | Coin Tracking Note [Member]        
Debt, outstanding loan 1,500,000      
Loan Agreement and Compensation Agreement [Member] | CoinTracking GmbH [Member] | Towards Repayments of Oustanding Loan [Member]        
Purchase price 1,200,000      
Loan Agreement and Compensation Agreement [Member] | Kachel Holdings [Member]        
Purchase price $ 2,200,000      
XML 42 R33.htm IDEA: XBRL DOCUMENT v3.20.2
Discontinued Operations - Schedule of Reconciliation of Operations and Balance Sheet of Cryptocurrency Investment (Details) - USD ($)
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Discontinued Operations and Disposal Groups [Abstract]    
Net realized gain on investment in cryptocurrency $ 14,166
Net income/(loss) 14,166
Income attributable to Crypto Company $ 14,166
XML 43 R34.htm IDEA: XBRL DOCUMENT v3.20.2
Commitments and Contingencies (Details Narrative) - USD ($)
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Facility rent expense $ 837 $ 1,501
Regus Management Group, LLC [Member]    
Monthly rent $ 344  
XML 44 R35.htm IDEA: XBRL DOCUMENT v3.20.2
Subsequent Events (Details Narrative) - Subsequent Event [Member] - USD ($)
Jun. 10, 2020
May 08, 2020
Apr. 28, 2020
SBA Loan [Member]      
Proceeds from loan $ 12,100    
Debt interest rate, percentage 3.75%    
Debt instrument, description Payable over 30 years with all payments of principal and interest deferred for the first 12 months.    
Promissory Note [Member] | PPP Loan [Member]      
Proceeds from loan   $ 53,492  
Debt interest rate, percentage   1.00%  
Connection with Notes [Member]      
Proceeds from notes     $ 22,500
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