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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

☒ Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2022

☐ Transition Report pursuant to 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from ________ to __________

Commission File Number: 000-56170

Blockchain of Things, Inc.

(Exact name of registrant as specified in its charter)

Delaware	47-5080120
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)
3401 North Miami Avenue Suite 230 Miami, FL 33127
(Address of principal executive offices)

(646) 926-2268

(Registrant's telephone number)

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

Securities registered pursuant to Section 12(b) of the Act: None.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days  Yes  ☒  No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes  ☒  No  ☐

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

☐ Large accelerated filer	☐ Accelerated filer
☒ Non-accelerated filer	☒ Smaller reporting company
	☒ Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  ☐  No  ☒

State the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 4,789,834 common shares as of May 5, 2022.

	TABLE OF CONTENTS
		Page
PART I – FINANCIAL INFORMATION
Item 1:	Financial Statements (unaudited)	3
Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4
Item 3:	Quantitative and Qualitative Disclosures About Market Risk	10
Item 4:	Controls and Procedures	11
PART II – OTHER INFORMATION
Item 1:	Legal Proceedings	12
Item 1A:	Risk Factors	12
Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	12
Item 3:	Defaults Upon Senior Securities	12
Item 4:	Mine Safety Disclosure	12
Item 5:	Other Information	12
Item 6:	Exhibits	13

2

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Our condensed consolidated financial statements included in this Form 10-Q are as follows:

Page Number
F-1	Condensed Consolidated Balance Sheets as of March 31, 2022 (unaudited) and December 31, 2021;
F-2	Condensed Consolidated Statements of Income for the three months ended March 31, 2022 and 2021 (unaudited);
F-3	Condensed Consolidated Statements of Stockholders’ Deficit for the three months ended March 31, 2022 and 2021 (unaudited)
F-4	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2022 and 2021 (unaudited);
F-5	Notes to Condensed Consolidated Financial Statements (unaudited).

3

BLOCKCHAIN OF THINGS, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS

	March 31, 2022			December 31, 2021
	(Unaudited)			(Audited)
ASSETS
Current Assets:
Cash	$	47,903		$	12,353
Prepaid Expenses and Other Current Assets		40,007			19,000
Digital Assets		1,271,596			1,284,953
Total Current Assets		1,359,506			1,316,306
Non-current Assets:
Property and Equipment, net		74,776			—
Deferred Income Taxes		2,606,547			939,328
Total Assets	$	4,040,829		$	2,255,634
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities:
Accounts Payable and Accrued Expenses	$	107,160		$	38,268
Income Taxes Payable		1,597,790			—
Deferred Revenue		12,218,612			12,218,612
Sponsorship Loans Payable		20,000			20,000
Current Portion of Note Payable		9,546			—
Total Current Liabilities		13,953,108			12,276,880
Long-term Liabilities:
Note Payable, net of Current Portion		59,258			—
Total Liabilities		14,012,366			12,276,880
Stockholders' Equity (Deficit):
Preferred stock; par value $0.0001; 10,000,000 shares authorized; 0 shares issued and outstanding as of March 31, 2022 and December 31, 2021		—			—
Common stock; par value $0.0001; 50,000,000 shares authorized; 4,789,834 shares issued and outstanding as of March 31, 2022 and December 31, 2021		479			479
Additional Paid-in Capital		437			437
Accumulated Deficit		(9,972,453	)		(10,022,162	)
Total Stockholders' Deficit		(9,971,537	)		(10,021,246	)
Total Liabilities and Stockholders' Deficit	$	4,040,829		$	2,255,634

The accompanying notes are an integral part of these condensed consolidated financial statements.

F-1

BLOCKCHAIN OF THINGS, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(unaudited) 

	Three Months Ended March 31,
	2022			2021
Revenues, net	$	—		$	—
Operating Expenses:
Selling, General and Administrative		320,131			177,246
Loss From Operations		(320,131	)		(177,246	)
Other Income (Expense):
Other Income		—			537,300
Gain on Sale of Digital Assets		300,885			221,775
Gain on Extinguishment of Debt		—			42,900
Interest Expense		(549	)		(116	)
Other Income, net		300,336			801,859
Income (Loss) Before Income Taxes		(19,795	)		624,613
Income Tax Benefit		69,504			—
Net Income	$	49,709		$	624,613
NET INCOME PER SHARE
Net Income per share, basic	$	0.01		$	0.14
Net Income per share, diluted	$	0.01		$	0.13
Weighted average number of shares of common stock - basic		4,789,834			4,549,480
Weighted average number of shares of common stock - diluted		4,929,834			4,674,480

The accompanying notes are an integral part of these condensed consolidated financial statements. 

F-2

BLOCKCHAIN OF THINGS, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

(unaudited)  

	Common Stock
	Shares		Amount		Additional Paid-In Capital		Accumulated  Deficit			Total Stockholders' Deficit
Balance as of December 31, 2021	4,789,834	$	479	$	437	$	(10,022,162	)	$	(10,021,246	)
Exercise of stock options	—		—		—		—			—
Stock-based compensation	—		—		—		—			—
Net Income	—		—		—		49,709			49,709
Balance as of March 31, 2022	4,789,834	$	479	$	437	$	(9,972,453	)	$	(9,971,537	)

	Common Stock
	Shares		Amount		Additional Paid-In Capital		Accumulated  Deficit			Total Stockholders' Deficit
Balance as of December 31, 2020	4,542,126	$	454	$	437	$	(11,729,074	)	$	(11,728,183	)
Exercise of Stock Options	14,708		2		—		—			2
Net Income	—		—		—		624,613			624,613
Balance as of March 31, 2021	4,556,834	$	456	$	437	$	(11,104,461	)	$	(11,103,568	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

F-3

BLOCKCHAIN OF THINGS, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

	Three Months Ended March 31,
	2022			2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$	49,709		$	624,613
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation		1,847			427
Cancelation of Interest on BCOT Token Refund Liability		—			(537,300	)
Stock based Compensation		—			2
Gain on Extinguishment of Debt		—			(42,900	)
Realized Gain on Sale of Digital Assets		(300,885	)		(221,775	)
Deferred Income Taxes		(1,667,219	)		—
Changes in Assets and Liabilities:
Prepaids and Other Current Assets		(21,007	)		1,033
Accounts Payable and Accrued Expenses		68,892			(27,683	)
Income Taxes Payable		1,597,790			—
Net cash used in operating activities		(270,873	)		(203,583	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of Digital Assets		314,242			242,880
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of Note Payable		(7,819	)		—
Net Change in Cash		35,550			39,297
Cash, Beginning of Period		12,353			20,257
Cash, End of Period	$	47,903		$	59,554
Supplemental disclosure of cash flows information:
Cash paid during the period for interest	$	549		$	116
Noncash activity:
Reclassification of BCOT Token Refund Liability to Deferred Revenue	$	—		$	12,218,612
Acquisition of Property and Equipment via Note Payable	$	76,623		$	—

The accompanying notes are an integral part of these condensed consolidated financial statements.

F-4

Note 1 - Organization and Nature of Operations

Blockchain of Things, Inc. was incorporated in Delaware on July 15, 2015 with a principle place of business in New York, New York until February 2022 when it relocated its headquarters to Miami, Florida. Blockchain of Things, Inc. had a 100% ownership interest in BCOT Global Holdings (“BCOT GH”), a limited liability company organized on March 29, 2018 under the laws of the Cayman Islands. BCOT GH was dissolved on March 31, 2022. Blockchain of Things, Inc. and BCOT GH are collectively referred to as “BCoT” or the “Company.”

BCoT is a technology company established to develop and implement blockchain technology, specifically by providing a platform, or web services layer, designed to improve upon existing blockchain technology, including its security and ease of use. From December 2017 through July 2018, BCoT offered and sold $12,473,200 of digital tokens (“BCOT Security Tokens” or “Tokens”; the “Offering”) for use of the Company’s blockchain platform and technology, called “Catenis Enterprise” and “Catenis Flow” (collectively, “Catenis”). BCoT intended to use the proceeds to continue to implement its business plan, which includes further developing and maintaining Catenis. Catenis is an integration layer to the global bitcoin blockchain. It allows companies to rapidly build blockchain based applications or simply integrate with existing systems. To date, the proceeds were used to fund the operations of the Company, which includes the payment of salaries to software developers and to pay for expenses associated with the settlement agreement with the SEC, further discussed in Note 9.

Note 2 - Financial Condition and Management’s Plans

The Company has experienced recurring losses and negative cash flows from operations. As of March 31, 2022, the Company had cash of $47,903, a working capital deficit of $12,593,602, total stockholders' deficit of $9,971,537 and an accumulated deficit of $9,972,453. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

Further, the outbreak of the Coronavirus Disease 2019, or COVID-19, which has been declared a global pandemic by the World Health Organization, has spread across the globe and is impacting worldwide economic activity. A public health epidemic, including COVID-19, poses the risk that we or our employees, contractors, and other partners may be prevented from conducting business for an indefinite period of time, including due to shutdowns and quarantines that may be requested or mandated by governmental authorities. While at this time, COVID-19 has not had a significant impact on the Company, it is not possible to estimate the impact that COVID-19 could have on our business in the future. The continued spread of COVID-19 and the measures taken by the governments of countries affected, particularly the United States, could disrupt the planned commercial activities of the Company and have a material impact on our business, financial condition or results of operations. The extent to which the COVID-19 outbreak impacts our results will depend on future developments that are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of the virus and the actions to contain its impact.

The accompanying condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates, among other things, the realization of assets and satisfaction of liabilities in the ordinary course of business. The Company believes that its ability to continue operations depends on its ability to generate revenues and obtain funding that will be sufficient to sustain its operations until it markets its core product offerings and achieve profitability and positive cash flows from operating activities. The Company continues to fund its operations through the sale of its Digital Assets. As of March 31, 2022, the Company held 263.3 Bitcoin and 2,227.4 Ethereum, with quoted market value of approximately $19.3 million based on market prices of approximately $45,539 and $3,282, respectively, and the market value of these Digital Assets exceeds twelve months of the Company’s capital requirements. However, the market value of Digital Assets is subject to extreme market volatility.

F-5

The Company’s management has taken several actions in an effort to secure funding and generate revenue streams including:

· Added two additional offerings to the product line making the platform more robust and giving more options to the marketplace.

· Added NFT functionality to its product to attract new market segmentation.

· Relaunched a new website and marketed to various different segments of the industry verticals.

· Prepared offering documents for a potential offshore offering under Regulation S, promulgated under the Securities Act of 1933, as amended (the “Securities Act”).

· Added a Director to the Company’s Board of Directors with fundraising experience to lead our efforts.

· Discussed with broker ways to raise additional capital.

· Hired a marketing manager and launched a marketing campaign to acquire customers.

· Added an additional development language to Catenis to facilitate the programming of integration

· Hired a VP of Business Development.

· Appointed a New Board Member with Financial and Business M&A Experiences.

· Hired Landmark Ventures as a Sales Arm for the Company.

· Identified a lead generating company to help with the sales efforts.

· Presented our products to potential clients from the leads generated from our sales efforts.

· Increased efforts for quarterly sign ups to our free account and follow-up strategies to increase exposure.

· Coordinated efforts for upcoming industry tradeshows with Booths and participation in interviews with industry leading news outlets

Any securities offered will not be or have not been registered under the Securities Act and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. There is no assurance that the Company will be successful in obtaining funding or generating revenues sufficient to fund operations.

The condensed consolidated financial statements do not include any adjustments related to this uncertainty and as to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should the Company be unable to continue as a going concern.

Further, fulfilment of the Company’s obligations to its customers in order to realize the Deferred Revenue will require an insignificant amount of additional expense.

Note 3 - Summary of Significant Accounting Policies

Basis of Presentation

In the opinion of management, the accompanying unaudited interim Condensed Consolidated Financial Statements of BCoT and its subsidiary, reflect all adjustments, including normal recurring accruals, necessary for a fair presentation. All significant intercompany balances and transactions have been eliminated in consolidation. Certain information and footnote disclosure normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to instructions, rules and regulations prescribed by the Securities and Exchange Commission (“SEC”). The Company believes that the disclosures provided herein are adequate to make the information presented not misleading when these unaudited Condensed Consolidated Financial Statements are read in conjunction with the audited Consolidated Financial Statements contained in the Company’s Form 10-K for the year ended December 31, 2021. The results of operations for the period ended March 31, 2022 are not necessarily indicative of the results to be expected for the full year. The Consolidated Financial Statements as of December 31, 2021 are derived from audited financial statements included in the Company’s Form 10-K for the year ended December 31, 2021.

F-6

Use of Estimates

The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the balance sheet and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ significantly from those estimates. The most significant accounting estimates inherent in the preparation of the Company's condensed consolidated financial statements includes the fair values of the Digital Assets, including the impairment assessments, as well as estimates related to stock-based compensation.

BCOT Security Tokens Revenue Recognition

The Company issued BCOT Security Tokens for use by customers in Catenis. From December 2017 through early July 2018, the Company obtained Ether, Bitcoin, Bitcoin Cash and Tether from customers totaling approximately $11,863,530 and cash of $609,670 in exchange for the BCOT Security Tokens.

The BCOT Security Tokens are issued on the Bitcoin blockchain and are used as independent programmable units of power that directly convert to Catenis credits which power the virtual devices and ultimately the entire Catenis system. These security tokens can be independently purchased, held, traded, and used on Catenis. Using the administrative interface, the customer can send BCOT Security Tokens to their account and they will be converted on a one-to-one basis into Catenis credits for their account. Each BCOT Security Token value is taken into account when calculating the amount of Catenis Credits required to pay for a given Catenis service when that service is consumed.

The Company evaluated the terms of sale of the BCOT Security Tokens and determined that, when sold, a BCOT Security Token represents an obligation of the Company with counterparties that were determined to be customers. Therefore, the Company determined that BCOT Security Tokens, when sold by the Company, are akin to prepayments of future services and are treated as deferred revenue in accordance with ASC 606, Revenue from Contracts with Customers (“ASC 606”).

Pursuant to the terms of the BCOT Security Tokens, there is no form of partnership, joint venture, agency or any similar relationship between a holder of a BCOT Security Token and the Company. Except as noted below, BCOT Security Tokens are non-refundable and do not pay interest and have no maturity date. BCOT Security Tokens confer only the right to be used to power the Catenis platform, BCoT’s product, and confer no other rights of any form with respect to the Company, including, but not limited to, any voting, distribution, redemption, liquidation, proprietary (including all forms of intellectual property), or other financial or legal rights. Subsequent to the distribution of BCOT Security Tokens to customers, the associated liability to deliver the BCOT Security Tokens was satisfied. No additional BCOT Security Tokens were sold by the Company since this distribution.

Subsequent to the distribution noted above, and pursuant to the Settlement Agreement (as defined and described further in Note 9), the Company was obligated to refund amounts raised from the sale of BCOT Security Tokens for valid claims submitted and may incur other fines and penalties. The Rescission Offer (as defined and described further in Note 9) deadline was February 21, 2021. Accordingly, as of March 31, 2022, all valid claims have been submitted and the Company issued refunds to claimants of $226,258, which includes $10,553 of accrued interest. In February 2021, accrued interest of $537,300 previously accrued was released upon the conclusion of the Rescission Offer and is recorded in Other Income on the Condensed Consolidated Statements of Operations.

In the first quarter of 2021, subsequent to the receipt of all valid Rescission Offer claims, the Company recognized the remaining amount of $12,218,612 received from the issuance of BCOT Security Tokens as Deferred Revenue, until such time that customers convert the BCOT Security Tokens into Catenis credits and redeem for Catenis services (see Note 8).

Deferred Revenue

Deferred revenue represents BCOT Security Tokens that have been purchased by customers but not yet redeemed and utilized as Catenis credits for Catenis services.

F-7

Concentrations of Credit Risk and Off-Balance Sheet Risk

The Company is subject to concentration of risk with respect to the Digital Assets which are held in digital wallets. Private keys, which provide access to the Digital Assets, are held in secured vaults at banking institutions and a limited number of digital wallets. The Digital Assets are exchanged for United States Dollars (USD) in the normal course of business so that the Company may meet its operational needs. The Digital Assets are not insured and the exchange rate of the digital assets to USD experiences significant volatility.

Software Development Costs

The Company capitalizes costs related to software developed or obtained for internal use in accordance with the ASC 350-40, Internal-Use Software (“ASC 350-40”). The following illustrates the various stages and related processes of computer software development in accordance with ASC 350-40:

Preliminary project stage: (a) conceptual formulation of alternatives; (b) evaluation of alternatives; (c) determination of existence of needed technology; and (d) final selection of alternatives. Internal and external costs incurred during the preliminary project stage are expensed as incurred. Application development stage: (a) design of chosen path, including software configuration and software interfaces; (b) coding; installation to hardware; and (c) testing, including parallel processing phase. Internal and external costs incurred to develop internal-use computer software during the application development stage are capitalized. Post-implementation-operation stage: (a) training; and (b) application maintenance. Internal and external costs incurred during the post-implementation-operation stage are expensed as incurred.

Certain costs incurred are considered enhancements, modifications to existing internal-use software that result in additional functionality. Enhancements normally require new software specifications and may also require a change to all or part of the existing software specifications. When this additional functionality is determinable, the related costs are capitalized. Otherwise, costs are expensed as incurred. Capitalization of internal-use software costs ceases when a computer software project is substantially complete and ready for its intended use.

The Company has developed and continues to enhance Catenis, a platform, or web services layer, designed to improve upon existing blockchain technology, including its security and ease of use. The technology primarily assists with four blockchain-based services: 1) message transmission, 2) message logging, 3) digital asset generation, and 4) digital asset transfer. Due to the significant hurdles during development and launch of Catenis, market adoption and recovery of the development costs is uncertain. Accordingly, the Company expensed $78,437 and $66,194 of software development costs during the three months ended March 31, 2022 and 2021, respectively.

Income Taxes

Income taxes are recorded in accordance with ASC 740, Income Taxes (“ASC 740”), which provides for deferred taxes using an asset and liability approach. The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities and net operating and capital loss carryforwards using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are provided, if based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. The valuation allowance is reduced when it is determined that it is more likely than not that the deferred tax asset will be realized.

The Company accounts for uncertain tax positions in accordance with the provisions of ASC 740. When uncertain tax positions exist, the Company recognizes the tax benefit of tax positions to the extent that the benefit would more likely than not be realized assuming examination by the taxing authority. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances. The Company recognizes any interest and penalties accrued related to unrecognized tax benefits as income tax expense.

The Company files a consolidated tax return, which incorporates the limited liability company subsidiary.

F-8

Stock-based Compensation

The Company accounts for stock-based compensation to employees and non-employees in conformity with the provisions of ASC 718, Stock Based Compensation. The Company expenses stock-based compensation to employees and non-employees over the requisite service period based on the estimated grant-date fair value of the awards. The Company accounts for forfeitures as they occur. Stock-based awards are recognized on a straight-line basis over the requisite service period.

Common shares issued to third parties for services provided are valued based on the estimated fair value of the Company’s common shares. All stock-based compensation costs are recorded in selling, general and administrative expenses in the condensed consolidated statements of operations.

To date, stock-based compensation is immaterial to the condensed consolidated financial statements.

Fair Value Measurement

The valuation hierarchy is composed of three levels. The classification within the valuation hierarchy is based on the lowest level of input that is significant to the fair value measurement. The levels within the valuation hierarchy under ASC 820 are described below:

Level 1 — Assets and liabilities with unadjusted, quoted prices listed on active market exchanges. Inputs to the fair value measurement are observable inputs, such as quoted prices in active markets for identical assets or liabilities.

Level 2 — Inputs to the fair value measurement are determined using prices for recently traded assets and liabilities with similar underlying terms, as well as direct or indirect observable inputs, such as interest rates and yield curves that are observable at commonly quoted intervals.

Level 3 — Inputs to the fair value measurement are unobservable inputs, such as estimates, assumptions, and valuation techniques when little or no market data exists for the assets or liabilities.

The Company’s financial instruments include cash, accounts payable, sponsorship agreements, and note payable. The fair values of cash, accounts payable, and sponsorship agreements approximate their stated amounts because of the short maturity of these financial instruments from the balance sheet date. The fair value of note payable approximates its stated amount based on the interest rates currently available to the Company. Our sponsorship agreements are carried at fair value and based on Level 2 inputs.

Intangible Assets

Digital Assets held by the Company consist of Ethers, Bitcoins and Bitcoin Cash and are included in current assets in the Condensed Consolidated Balance Sheets. Digital assets such as Bitcoins, Ethers, and Bitcoin Cash are digital currencies considered cryptocurrencies that are not fiat currencies (i.e., a currency that is backed by a central bank or a national, supra- national or quasi-national organization) and are not backed by hard assets or other credits. Digital currencies are not financial assets because they are not an ownership interest in a company, or a contract establishing a right or obligation to deliver or receive cash or another financial instrument. Since they lack physical substance and have no limit on the useful life, digital currencies are considered to be indefinite-lived intangible assets under ASC 350, Intangibles–Goodwill and Other (“ASC 350”).

Indefinite-lived intangible assets are not subject to amortization. Instead, they are tested for impairment on an annual basis and more frequently if events or circumstances change that indicate that it’s more likely than not that the asset is impaired. As a result, the Company will only recognize decreases in the value of its Digital Assets, and any increase in value will be recognized upon disposition. Ether, Bitcoin, Bitcoin Cash are traded on exchanges in which there are observable prices in an active market, the Company views a decline in the quoted price below the cost to be an impairment indicator. The quoted price and observable prices for Ether, Bitcoin, and Bitcoin Cash are determined by the Company using a principal market analysis in accordance with ASC 820, Fair Value Measurement.

When the Company evaluates Ethers, Bitcoins, and Bitcoin Cash for impairment under ASC 350, each acquisition of Ether, Bitcoin, and Bitcoin Cash is considered a separate unit of account. The Company tracks the cost of each unit of Ether, Bitcoin, and Bitcoin Cash when received or purchased, when performing impairment testing and upon disposition either through sale or exchanged for goods or services. The realized gain or loss on sale of Digital Assets is included in a separate financial statement line item in the Condensed Consolidated Statements of Operations, while impairment of Digital Assets is included in operating expenses because of the nature of the assets.

The Company obtains the equivalency rate of the digital currencies to USD based on a global exchange rate from public exchange Gemini.

As of March 31, 2022 and December 31, 2021, the Company’s adjusted cost basis was $1,271,596 and $1,284,953, respectively. During the three months ended March 31, 2022 and 2021, the Company recognized no impairment losses. Please refer to Note 4 for additional information about Digital Assets.

F-9

Income (loss) per common share

Basic income (loss) per share (“Basic EPS”) is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the reporting period. Diluted income (loss) per share (“Diluted EPS”) is computed by dividing the net income (loss) by the weighted average number of common shares outstanding during the reporting period while also giving effect to all potentially dilutive common shares that were outstanding during the reporting period.

For the three months ended March 31, 2022 and 2021, the Company reported net income. Therefore, for purposes of calculating Diluted EPS, the weighted average number of common stock includes all potentially dilutive common shares.

Adoption of Recent Accounting Pronouncements

The Company's accounting policies are the same as those described in Note 3 to the Company's Consolidated Financial Statements in its Annual Report on Form 10-K for the year ended December 31, 2021.

The Company has reviewed recent accounting pronouncements and concluded they are either not applicable to the business, or no material effect is expected on the condensed consolidated financial statements as a result of future adoption.

Note 4 - Digital Assets

Changes in Digital Assets were as follows:

	Ether			Bitcoin		Bitcoin Cash		Total
Balance at December 31, 2021	$	298,060		$	985,634	$	1,259	$	1,284,953
Sale of Digital Assets		(13,357	)		—		—		(13,357	)
Balance at March 31, 2022	$	284,703		$	985,634	$	1,259	$	1,271,596
Balance at December 31, 2020	$	375,173		$	985,634	$	1,259	$	1,362,066
Sale of Digital Assets		(21,105	)		—		—		(21,105	)
Balance at March 31, 2021	$	354,068		$	985,634	$	1,259	$	1,340,961

The Company recognized $300,885 and $221,775 as a net gain on sale of digital assets during the three months ended March 31, 2022 and 2021, respectively.

On June 25, 2018 the Company created 553,262,386 BCOT Security Tokens which are not recognized on the balance sheet and have zero carrying value. As of March 31, 2022 and December 31, 2021, the Company distributed 68,776,541 BCOT Security Tokens to third party wallets or smart contracts and was holding 484,485,845 BCOT Security Tokens. A total of 397,088 BCOT Security Tokens were returned to the Company during the rescission period. A total of 387,111 BCOT Security Tokens were returned to the Company during the three months ended March 31, 2021.

F-10

Note 5 – Accounts Payable and Accrued Expenses

Accounts Payable and Accrued Expenses consisted of the following as of:

	March 31,		December 31,
	2022		2021
Legal and professional services	$	16,904	$3,685
Software development		11,505	11,515
Salaries and benefits		24,896	-
Credit card payable		24,199	7,667
Other accrued liabilities		29,656	15,401
Total Accounts Payable and Accrued Expenses	$	107,160	$38,268

Note 6 – Debt

Sponsorship Agreement

The Company has one remaining financial sponsorship agreement (“Sponsorship Agreement”) with a counterparty (“Sponsor”). Pursuant to the Sponsorship Agreement, the Company received contributions in the form of cash or Bitcoin. In return, the Sponsor is eligible to receive repayment in the form of cash and cryptographic tokens that provide usability in our Catenis Enterprise product. The cash payment associated with the remaining Sponsorship Agreement was variable and based on the amount of proceeds raised by the Company through the crowd sale campaign, in which the Company sold the cryptographic tokens in exchange for cash or cryptocurrency. The number of cryptographic tokens to be issued to the Sponsor is calculated as half of the Sponsor’s contribution amount divided by a price per cryptographic token equal to 65% of the crowd sale issuance price of a cryptographic token on the day of the crowd sale launch. Such obligation was contingent on the completion of the crowd sale. The crowd sale campaign began on June 27, 2018 and was completed on August 1, 2018 and raised $1,875. The Company was obligated to pay down the Sponsorship loan upon the completion of the crowd sale campaign.

The liability associated with the one outstanding Sponsorship Agreement as of March 31, 2022 and December 31, 2021 was determined to be $20,000 and was determined based on the ongoing legal matter (see Note 9 for further details).

U.S. Small Business Administration Loan and Advance

On April 16, 2020, the Company received a loan under the U.S. Small Business Administration’s Paycheck Protection Program from Citibank, N.A. related to the COVID-19 crisis in the amount of $40,900 (the “PPP loan”). Under the PPP loan, the loan has a fixed interest rate of 1% per annum, a maturity date two years from the date of the funding of the loan, and deferral of payments for six months. Pursuant to the terms of the PPP loan, the Company applied for forgiveness of the loan in an amount equal to the sum of the following costs incurred by the Company during period beginning on the date of first disbursement of the loan and ending on the earlier of (a) the date that is 24 weeks after the date of funding or b) December 31, 2020: payroll costs, any payment of interest on a covered mortgage obligation, payment on a covered rent obligation, and any covered utility payment. The amount of PPP loan forgiveness was calculated in accordance with the requirements of the Paycheck Protection Program, including the provisions of Section 1106 of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), although no more than 40% of the amount forgiven can be attributable to non-payroll costs. The Company used the proceeds for purposes consistent with the PPP and the loan was forgiven effective March 18, 2021. The Company has elected the policy to recognize the Gain on the extinguishment of debt upon notification that the loan was forgiven. The forgiveness of the loan is recorded as Gain on Extinguishment of Debt on the accompanying Condensed Consolidated Statement of Operations.

In addition to the SBA Loan, the Company received an advance of $2,000 ($1,000 per eligible employee). This advance was from the Small Business Administration Economic Injury Disaster Loans (“EIDL Advance”). The Company used the proceeds for purposes consistent with the PPP loan and the EIDL advance was forgiven effective March 18, 2021. The Company has elected the policy to recognize the Gain on the extinguishment of debt upon notification that the loan was forgiven. The forgiveness of the EIDL advance is recorded as Gain on Extinguishment of Debt on the accompanying Condensed Consolidated Statement of Operations.

F-11

Note Payable

In February 2022, the Company entered into a vehicle note payable for $76,623, secured by the vehicle. The loan is repayable over 6 years maturing March 31, 2028, and repayable at $1,104 per month including principal and interest of 4.39% per annum. During the three months ended March 31, 2022, the Company made a $7,000 up-front payment against the loan, applied to the principal balance, in addition to the first monthly payment of $1,104, applied to principal and interest. The outstanding principal as of March 31, 2022 is $68,804 and is split between Note Payable, net of Current Portion and Current Portion of Note Payable on the accompanying Condensed Consolidated Balance Sheets. Additionally, the aggregate amount of outstanding principal due for the each of the five years subsequent to March 31, 2022 has been presented in the table below.

Twelve Months Ended March 31,		Amount
	2023	$	9,546
	2024		10,861
	2025		11,347
	2026		11,856
	2027	$	12,387

Note 7 – Income Taxes

The Company’s effective tax rate("ETR") is calculated quarterly based upon current assumptions relating to the full year’s estimated operating results and various tax-related items. The Company’s ETR was (351)% and 0% for the three months ended March 31, 2022 and March 31, 2021. The difference between the effective tax rate of (351)% and the U.S. federal statutory rate of 21% for the three months ended March 31, 2022 was primarily due to recognition of deferred revenue as taxable income, utilization of net operating loss and capital loss carryforward and release of the valuation allowance. The difference between the effective tax rate of 0% and the U.S. federal statutory rate of 21% for the three months ended March 31, 2021 was primarily due to recognizing a full valuation allowance on deferred tax assets.

The Company has no uncertain tax positions related to federal and state income taxes. The 2018 and subsequent federal and state tax returns for the Company remain open for examination. In the event that the Company is assessed interest or penalties at some point in the future, it will be classified in the financial statements as tax expense.

Note 8 – BCOT Security Tokens and Deferred Revenue

As part of its private pre-sale and subsequent crowd sale of BCOT Security Tokens, the Company obtained Cash, Bitcoin, Ether, Tether, and Bitcoin Cash from November 2017 through early August 2018 totaling $12,445,318 for BCOT Security Tokens which was recorded as a liability (the “BCOT Token Delivery Obligation”) until such time as the BCOT Security Tokens were delivered in the first quarter of 2019.

The delivery of the Tokens prompted the SEC investigation, which resulted in the SEC settlement discussed in Note 9 and the BCOT Token Refund Liability. During the first quarter of 2021, subsequent to the receipt of the final Rescission Offer claims, the Company recognized the amounts received from the issuance of BCOT Security Tokens, less the refunds issued pursuant to the Rescission Offer, as Deferred Revenue until such time that customers convert the BCOT Security Tokens into Catenis credits and redeem for Catenis services.

F-12

Note 9 – Commitments and Contingencies

Legal Proceedings

The Company may be involved in various lawsuits, claims and proceedings incidental to the ordinary course of business. The Company accounts for such contingencies when a loss is considered probable and can be reasonably estimated.

SEC Settlement

On December 18, 2019, the Company entered into a settlement agreement with the SEC (the “Settlement Agreement”) related to the determination by the SEC that BCOT Tokens were “securities”.

Pursuant to the Settlement Agreement, the Company agreed to the following:

· File a Form 10 to register the BCOT Tokens as a class of securities and maintain timely filings of all reports required by Section 13(a) of the Securities Act of 1934 for at least one year from the date the Form 10 becomes effective (the “Effective Date”) and continue these filings until the Company is eligible to terminate its registration.

· Distribute a refund claim form to any person or entity that purchased BCOT Tokens in the ICO before and including July 31, 2018 to recover the consideration paid for the BCOT Tokens, including interest, as described below.

· Provide monthly reports to the SEC which include the amount of the claims paid, and any claims not paid as well as the reasons for non-payment.

· Pay a penalty of $250,000 to the SEC.

· Submit to the SEC a final report of its handling of all claims received within seven months from the Effective Date of the Form 10 filing.

In conjunction with the Settlement Agreement with the SEC, parties who obtained BCOT Tokens from the Company on or before July 31, 2018 (the “Potential BCOT Token Claimants”) were entitled to a refund in the amount of consideration paid, plus interest, less the amount of any income received thereon. The Company was required to distribute by electronic means claim forms to the Potential BCOT Token Claimants within 60 days of the filing (the “Rescission Offer”) of the Company’s registration statement on Form 10 or the date that the Form 10 becomes effective, whichever is sooner. The Form 10 became effective on July 31, 2020 and the Company was given an extension of 3 weeks to distribute the Notice & Claim Form. The Company distributed by electronic means the notice and claim form on August 21, 2020. The Potential BCOT Token Claimants were required to submit claims forms within three months of this date, February 21, 2021 (the “Claim Form Deadline”). The Company was required to settle all valid claims within three months of the Claim Form Deadline.

The Company approved twenty eligible claims and was obligated to return such amounts totaling $226,258, inclusive of interest of $10,553. These claims were refunded during April 2021.

The remaining amount payable as of February 21, 2021, totaling $12,218,612 has been reclassified to deferred revenue as it represents advances from customers to be utilized for services provided by the Company.

In addition, if certain holders of BCOT Tokens affirmatively reject or fail to accept the Rescission Offer, they may have a right of rescission under the Securities Act of 1933 (the “Securities Act”) after the expiration of the Rescission Offer.

F-13

Consequently, if any offerees rejected the Rescission Offer, expressly or by failing to timely return a claim, the Company may continue to be potentially liable under the Securities Act for the purchase price or for certain losses if the BCOT Security Tokens have been sold. It may also be possible that by not disclosing that the BCOT Tokens were unregistered, and that they may face resale or other limitations, the Company may face contingent liability for noncompliance with applicable federal and state securities laws. Additionally, the Company may pay additional fines or penalties or other amounts in other jurisdictions.

Although purchasers of BCOT Tokens may still bring a suit against the Company under the Securities Act of 1933, the Company believes an unfavorable outcome, as a result of conducting a formal Rescission Offer, is not probable.

Sponsor Litigation

The one remaining Sponsor who has a Sponsorship Agreement with the Company in the amount of $20,000 has filed suit against the Company asserting claims of breach of contract. The amount of monetary damages sought is unclear from the complaint. The Company believes the claims are without merit and seeks to dismiss the case and to contest the matter as may be required. The Company believes that the potential loss in this case is the $20,000 per the Sponsorship Agreement and continues to accrue the Sponsorship Liability.

Other than with respect to the matters described above, we are not aware of any pending or threatened claims that we violated any federal or state securities laws. However, we cannot assure you that any such claim will not be asserted in the future or that the claimant in any such action will not prevail. The possibility that such claims may be asserted in the future will continue until the expiration of the applicable federal and state statutes of limitations. If the payment of additional rescission claims or fines is significant, it could have a material adverse effect on our cash flow, financial condition or prospects and the value of the BCOT Security Tokens.

Note 10 – Related Party Transactions

In the ordinary course of business, the Company has contracted entities that are owned or operated by the Company’s officers for software development. During the three months ended March 31, 2022 and 2021, the Company incurred $34,509 and $34,519, respectively, of costs to a company owned by a relative of an officer of the Company, Hiades Technologia LTDA (“Hiades”), for software development services performed. As of March 31, 2022, and December 31, 2021, respectively, $11,505 and $11,515 was due to Hiades and is included in Accounts Payable and Accrued Expenses in the Condensed Consolidated Balance Sheets.

Note 11 – Subsequent Events

In accordance with ASC Topic 855-10, the Company has analyzed its operations subsequent to March 31, 2022 to the date these financial statements were issued and has determined that it does not have any material subsequent events to disclose in these financial statements.

F-14

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

Forward-Looking Statements

Certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.   These forward-looking statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions.  We intend such forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and are including this statement for purposes of complying with those safe-harbor provisions.  Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain.  Factors which could have a material adverse effect on our operations and future prospects on a consolidated basis include, but are not limited to: changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, cybersecurity, and generally accepted accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements.  We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.  Further information concerning our business, including additional factors that could materially affect our financial results, is included herein and in our other filings with the SEC.

Overview

We were originally incorporated as Blockchain of Things, Inc. in Delaware on July 15, 2015. We are a technology company established to develop and implement blockchain technology, specifically by providing a platform, or web services layer, designed to improve upon existing blockchain technology, including its security and ease of use.

Our core product offering is Catenis Services, which acts as a platform on which third-party developers are able to build applications using Catenis’ core functionality (e.g., secure messaging, smart-assets, etc.) as a building block.

The Catenis platform makes it easier for third-party developers and tinkerers to build new software or integrate existing software with blockchain capabilities. This is done by using Catenis’ connectivity points called Application Programming Interfaces (APIs). Catenis’ core functionality is made available via these connectivity points. They are; peer-to-peer secure messaging, contents logging (files, movies, music, etc.) to the blockchain, creation, and transfer of smart-assets (commonly referred to as tokens), administrative rights management of both messaging and logging, and notification of interactions with the blockchain. All collectively called Catenis services. These services can be used to add additional functionality to new software or enhance existing software.

Catenis uses a credit system called “Catenis Service Credits” (Credits) to control the expense it incurs by using the bitcoin blockchain. It is an internal system of accounting for each customer’s account. Credits are not controlled via a central database for accounting as this would make the system centralized and vulnerable to a coordinated centralized attack rendering all connectivity points inoperable. To keep the system resilient and decentralized these credits are instead encoded (in binary) within the blockchain (in a technical part of the blockchain called inputs/outputs). They are specifically encoded on the address(s) assigned to the 3rd party software that is using the services Catenis provides. Standard Tokens on the bitcoin blockchain are created in the same way, they are also encoded (in binary) within the blockchain. BCOT Security Tokens are bitcoin blockchain tokens. BCOT Security Tokens, when accepted by the system, converts one-to-one to a Catenis credit for a given customer account. The distinction, while subtle, is significant, when a customer’s account receives a Catenis credit, this credit is now internal to the platform, used as a unit of account, gets consumed upon usage, and does not have the ability to leave the platform. In other words, they cannot be accessed or transferred in any way externally.

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Catenis service credits are consumed and used as a unit of account for when bitcoins are spent by the system to pay for a Catenis paid service (i.e.: logging to the blockchain, sending a transaction message, etc.). The cost of the service is expressed in bitcoins because the bitcoin blockchain fees are paid in bitcoins. These fees are not fixed and fluctuate based on the price of bitcoin and the fee market. The system takes the current BCOT Security Tokens price (in dollars) and the current bitcoin price (also in dollars) and calculates the amount of Catenis service credits required to pay the service cost. By using this proprietary technology, we can achieve decentralization for a system of accountability that typically requires a centrally vulnerable database.

When using Catenis to integrate with the bitcoin blockchain via its connectivity points (APIs) it significantly reduces the cost, difficulty, and time for developers. Developers need only send a message to the message API and Catenis will automatically encrypt the message, calculate the cost of the message, pay the cost, produce a message signature (Hash), place that signature into a bitcoin transaction for auditing, place the content of the message (file, Music, Video, etc.) into a globally distributed file system, log to the blockchain when the message was read and notify the sending party. Also, a developer never needs to buy, hold, or secure bitcoins reducing liability for our customers. Catenis does not only do this for message sending it does the same for recording of immutable data to the blockchain, creating digital assets (Tokens) and across the set of all our services. One call to our APIs and Catenis handles the difficult interactions with the blockchain on behalf of the developer.

Additionally, it improves upon the bitcoin blockchain by adding features across its 2^nd layer that the bitcoin blockchain does not natively support. These include, military grade encryption, permission rights, permission rights management, notifications of occurrences, message read receipts, cryptographic proofs of who recorded the immutable data, issuance of tokens, delivery of content to a globally distributed file system (IPFS), and off-chain message capabilities so transaction message fees are significantly reduced. Since the bitcoin blockchain lives everywhere through “nodes” on computers throughout the world, applications connected to Catenis are accessible at any location on the planet. You can even send a transaction message using a block stream satellite connection and receive a transaction message when your application is connected to Catenis service endpoints.

Our company’s products offer a broad range of functionality that enhances the underlying blockchain adding security services, encryption services, notification services, ability to log or send any type of content that gets anchored and recorded on the global bitcoin blockchain. We also provide consultative, education, and professional services around our product offering as value-added services. Our products and services are being offered to companies as an enterprise offering. We are providing self-service functionality allowing any developer, hobbyist, small company along with enterprise corporations to also take advantage of using the Catenis platform.

Plan of Operation

Our plan of operations is as follows:

Market Our Product and Website

Our website contains the 2 Product offerings: Developer and Enterprise. The Developer account is self-service registration that allows users to have access to the Catenis Platform in the TestNet environment with a limited quantity of credits at no charge. The Enterprise account is the full Catenis platform using the production environment requiring an annual license fee. The Startup offering is the same as the Enterprise offering with a special annual license pricing for startups, independent developers, and educational institutions with revenue under $3 million. Through these offerings, we will target different segments of the market and have a mix of customer that will give the company agility to mold as the industry matures.

We are now focusing our efforts on raising capital for the rest of 2022. Our operations will be limited due to the limited amount of funds on hand. Now that we have completed the Claims Process, our specific goal is to profitably sell our product and raise funds to continue our operations.

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Office Establishing, Furnishing and Accounting and Legal Fees (Duration 4^th – 12^th Month, Approximate Cost $1,700,000)

As we are at the initial stage of product relaunch and have been caught in the middle of the pandemic with our headquarters recently moved to Miami, Florida, we had to delay the plan to rent office space that can accommodate our CEO, staff, and some room to receive our customers and partners. As of February 15, 2022, however, we have located and leased office space in Florida which is now the new Headquarter.

Our new location at 3401 North Miami Avenue, Suite 230 in Miami Florida offers a professional environment to accommodate our relocation and afford us to plan for a new headquarters that will house our management and staff, and have added space to for customers and partners.

We have hired a Marketing Manager and a VP of Business Development. We will also need to bring on sales help: one employee for each role will be sufficient while continuing with our present staff. We will also need sufficient money for SEC compliance, which includes legal and accounting fees. We estimate these expenses will add an additional cost of $242,000 in the next 12 months.

We will also need to have funding for a marketing campaign that we estimate to be $44,000 and additionally travel, meal, events, and administrative expenses which would also add an additional $44,000 of expense. To meet this basic requirement, we will need to raise approximately $1,700,000 in equity or debt offerings. In case we succeed to raise $2,000,000 we may rent or obtain an office with better facilities, attend conventions and trade shows, expand our marketing reach to obtain diverse clients and partnerships. We would also increase our engineering team by an additional head count having a total of 6 employees and be able to add new features to our product offerings.

At the initial stage the Company is at now, we do not require any special equipment above the servers required to run both our sandbox and production environments. Both of these environments are externally hosted. Our basic needs are as follows: 3 servers for the sandbox environment and 5 servers for the production environment. Additionally, each staff member will need a computer and mobile phone. As we expect to expand our product offering to attract customers worldwide, we will have to rent or lease additional server to store website and platform and in-application data. As we expect business to grow, we might need additional data storage for the server and increased server footprint. To complete this stage, we need to sell at least $1,700,000 in funds. For far better operation we need to raise $2,000,000 to lease a more robust server environment and add additional engineering staff, which we expect to need as our customer base grows. Increasing our engineering team will also be a key component to staying competitive and addressing software functionality and bugs that will appear. With the money gained we can modestly increase our engineering team to two additional people.

Staff Recruiting (Duration 6^th -12^th Month, Approximate Cost $550,000-$ 947,000)

Our primary services are software sales and consulting of individuals, so our Company requires additional personnel only as it grows. At the initial stage, we expect that most of the jobs are due to be executed by our CEO, CFO and external consulting partners. To increase sales, we will need a VP of Business Development and a sales professional. If we hit our projection of raising $1,700,000, we might afford to hire, the VP of Sales and sales professional to run and maintain the sales operation. For operation of higher standard, we need to raise $2,000,000. We will use the additional funds to hire an additional engineer to build product enhancements and support maintenance of the product. To stay relevant and competitive we will need additional engineering staff. If we succeed in raising $1,700,000, we plan to hire 2 engineers to help on a regular basis as technicians to maintain the website, the server, and enhance the product.

Our President and CEO, Andre De Castro will be in charge of our web domain and front-end shopping cart system. An outside consulting firm Hiades Tecnologia LTDA, which we have been using for several years will take the lead on product enhancements until additional help is needed. Once we increase our sales, we plan to hire a web developer and a web designer to help us with the design and development of our website. We do not have any written agreements with any web developers or web designers at current time. Updating and improving our platform product and website will continue throughout the lifetime of our operations. We intend to employ the functions which we find useful, such as an automated system for our regular customers or subscribers, and product enhancements to stay competitive.

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Advertising and Marketing Strategy and Administration (Duration 4^th-12^th Month, Approximate Cost $ 188,000)

To get into focus of our potential customers we intend to use the marketing strategies, such as web advertisements, social web communities marketing, sponsoring of events, event speaking and having booths at major industry trade shows. The plan of our active marketing campaign to promote our platform services includes attending and speaking at various events, including blockchain and cryptocurrency events, webinars, and podcasts. Also, joining Associations that focuses on Blockchain verticals. Additionally, we will do online marketing via search engines and social media. Our market goes beyond domestic boarders, therefor marketing efforts for each country will be tailored to each individual market we decide to focus on.

Estimated Expenses for the Next 12 Months

The following provides an overview of our estimated expenses to fund our plan of operation over the next twelve months.

SEC reporting and compliance	$	242,000
Office conference room	$	30,800
Consulting services	$	254,000
Website Servers and Maintenance	$	38,200
Advertising Marketing Strategy, Events, Travel, Admin	$	188,000
Staff and additional Recruiting	$	947,000
Total	$	1,700,000

Results of Operations for the Three Months Ended March 31, 2022 and 2021

Revenues

We are a start-up company and have not generated any significant revenues for the three months ended March 31, 2022 and 2021. We can provide no assurance that we will generate sufficient revenues from our Catenis platform to sustain a viable business operation. In order to generate revenues, we must first continue to sell our platform and market our services.  

Operating Expenses

We incurred operating expenses in the amount of $320,131 for the three months ended March 31, 2022, as compared with $177,246 for the same period ended 2021. Our operating expenses for all periods consisted entirely of selling, general and administrative expenses. The detail by major category within selling, general and administrative expenses for the three months ended March 31, 2022 and 2021 is reflected in the table below.

		Three Months Ended March 31,
		2022			2021
Salaries, Wages & Benefits		$	150,445	$	95,839
Stock-based Compensation		$	—	$	2
Professional Fees		$	21,549	$	8,664
Board Fees		$	—	$	—
Investor Relations		$	—	$	—
Consultants		$	46,074	$	10,116
Advertising and promotion		$	17,819	$	8,505
Depreciation and amortization		$	1,847	$	426
Development and maintenance		$	34,509	$	34,519
Office, Facility, and other		$	31,750	$	12,693
Travel and entertainment		$	16,138	$	6,482
	Totals	$	320,131	$	177,246

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The increase of $142,885 in our selling, general and administrative expenses for the three months ended March 31, 2022 versus the same period ended 2021 is largely the result of increased spending across most of the above categories, but those most prominent are related to compensating management, consultants and professionals. These expenditures related to salaries, wages, and benefits and other human resource related costs is due to the expansion of our team to support additional growth and the added cost of legal and accounting compliance.

We expect our selling, general and administrative expenses to increase in future quarters as we continue with our reporting obligations with the SEC and the increased expenses associated with increased operational activity, which is expected for the balance of the year.

Other Income

We had other income of $300,336 for the three months ended March 31, 2022, as compared with other income of $801,859 for the same period ended 2021. Our other income for the three months ended March 31, 2022 is the result of a $300,885 gain on the sale of Digital Assets, offset by interest expense of $549.

As of December 31, 2020, the Company estimated the amount of refunds to be paid to claimants in our Claims Process at $12,982,170, which includes $547,853 of accrued interest that is included in Accounts Payable and Accrued Expenses. Accrued interest of $537,300 previously accrued was released upon the conclusion of the Rescission Offer and it, along with a $221,775 in the gain of Digital Assets, are the primary reasons for our other income for the three months ended March 31, 2021.

Net Income

We recorded net income in the amount of $49,709 for the three months ended March 31, 2022, as compared with net income of $624,613 for the same period ended 2021.

Liquidity and Capital Resources

As of March 31, 2022, we had total current assets of $1,359,506, mainly consisting of digital assets, compared with current liabilities of $13,953,108, mainly consisting of deferred revenue, resulting in a working capital deficit of $12,593,602. This represents a decrease from our working capital deficit of approximately $10,960,574 at December 31, 2021.

Operating activities used $270,873 in cash for the three months ended March 31, 2022, as compared with $203,583 used for the same period ended 2021. Our negative operating cash flow for 2022 was largely the result of the realized gain on the sale of Digital Assets offset by income taxes payable. Our negative operating cash flow for 2021 was the result of the realized gain on the sale of Digital Assets and the cancellation of interest on BCOT token refund liability offset by our net income for the period.

Investing activities provided $314,242 in cash for the three months ended March 31, 2022, as compared with $242,880 for the same period ended 2021. Our positive investing cash flow for both periods was the result of proceeds from the sale of Digital Assets.

Financing activities used $7,819 in cash for the three months ended March 31, 2022, as compared with no financing activities for the same period ended 2021. Our negative financing cash flows for 2022 was the result of repayments of notes payable.

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Financial Condition and Management’s Plans

We believe that our ability to continue operations depends on our ability to obtain funding that will be sufficient to sustain our operations until we have significant and sustainable revenues on our core product offerings with the goal of and achieving profitability and positive cash flows from operating activities.

The successful outcome of future activities cannot be determined at this time and there is no assurance that, if achieved, we will have sufficient funds to execute our intended business plan or generate positive operating results. The accompanying consolidated financial statements do not include any adjustments related to this uncertainty and as to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should we be unable to continue as a going concern.

The success of our business plan beyond the next 12 months is contingent upon us obtaining additional financing. We intend to fund operations through debt and/or equity financing arrangements, which may be insufficient to fund our capital expenditures, working capital, or other cash requirements. We do not have any formal commitments or arrangements for the sales of stock or the advancement or loan of funds at this time. There can be no assurance that such additional financing will be available to us on acceptable terms, or at all.

Through last year until now, the Company’s management has taken several actions in an effort to secure funding and generate revenue streams including:

§ Added two offerings to the product line making the platform more robust and providing diversified options to the marketplace;

§ Added NFT functionality to its product to attract new market segmentation;

§ Relaunched a new website and marketed to various different segments of the industry verticals;

§ Prepared offering documents for a potential offshore offering under Regulation S, promulgated under the Securities Act of 1933, as amended (the “Securities Act”);

§ Added a Director to the Company’s Board of Directors with fundraising experience to lead our efforts;

§ Discussed with broker ways to raise additional capital;

§ Hired a marketing manager and launched a marketing campaign to acquire customers;

§ Added an additional development language to Catenis to facilitate the programming of integration;

§ Hired a VP of Business Development;

§ Appointed a New Board Member with Financial and Business M&A Experiences;

§ Hired Landmark Ventures as a Sales Arm for the Company;

§ Identified a lead generating company to help with the sales efforts;

§ Presented our products to potential clients from the leads generated from our sales efforts;

§ Increased efforts for quarterly sign ups to our free account and follow-up strategies to increase exposure; and

§ Coordinated efforts for upcoming industry tradeshows with Booths and participation in interviews with industry leading news outlets

Any securities offered will not be or have not been registered under the Securities Act and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. There is no assurance that the Company will be successful in obtaining funding or generating revenues sufficient to fund operations.

As mentioned previously, we have estimated expenditures for the next 12 months will be approximate $1,700,000 without considering the expenditures related to the Claims Process. As of Q3 of 2021, we have concluded the Claims Process and paid out the claims. After our distribution of the notice and claim forms, twenty (20) eligible claimants responded and we provided each with a rescission payment plus interest. Eighteen (18) of these claims were paid in US Dollars totaling $196,272.53 and two (2) claims valued at $29,984.64 USD were paid with 13.05741 in Ethereum cryptocurrency, which amounted to $29,984.64 USD at the applicable rate.

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The conclusion of the Claims Process has been helpful in assessing our capital requirements going forward. As a result of the payouts made in the Claims Process, we have less assets available for current and future expenditures, and thus less available to meet expenditures, which in turn creates more urgency to raise capital. We plan to continue our efforts at raising capital and to sell our product offerings. However, there is no assurance that we will be successful in obtaining funding or generating revenues sufficient to fund operations. 

Off Balance Sheet Arrangements

As of March 31, 2022, there were no off-balance sheet arrangements.

Going Concern

The accompanying financial statements have been prepared in conformity with generally accepted accounting principle, which contemplate our continuation as a going concern. However, we have limited revenues from inception through March 31, 2022. We currently have negative working capital, and have not completed our efforts to establish a stabilized source of revenues sufficient to cover operating costs over an extended period of time.

Management anticipates that we will be dependent, for the near future, on additional investment capital to fund operating expenses. We intend to position the company so that we may be able to raise additional funds through the capital markets. In light of management’s efforts, there are no assurances that we will be successful in this or any of our endeavors or become financially viable and continue as a going concern.

Critical Accounting Policies

In December 2001, the SEC requested that all registrants list their most “critical accounting polices” in the Management Discussion and Analysis. The SEC indicated that a “critical accounting policy” is one which is both important to the portrayal of a company’s financial condition and results, and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.

Our critical accounting policies are set forth in Note 3 to the financial statements.

Recently Issued Accounting Pronouncements

The Company's accounting policies are the same as those described in Note 3 to the Company's Consolidated Financial Statements in its Annual Report on Form 10-K for the year ended December 31, 2021.

The Company has reviewed recent accounting pronouncements and concluded they are either not applicable to the business, or no material effect is expected on the condensed consolidated financial statements as a result of future adoption.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

We are not required to provide the information required by this Item.

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Item 4. Controls and Procedures

Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), as of the end of the period covered by this report (the “Evaluation Date”). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of March 31, 2022, our disclosure controls and procedures were not effective due to the presence of material weaknesses in internal control over financial reporting.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. Management identified the following material weaknesses which have caused management to conclude that our disclosure controls and procedures were not effective: (i) inadequate segregation of duties and effective risk assessment; and (ii) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both US GAAP and SEC guidelines.

Remediation Plan to Address the Material Weaknesses in Internal Control over Financial Reporting

Our company plans to take steps to enhance and improve the design of our internal controls over financial reporting. During the period covered by this quarterly report on Form 10-Q, we have not been able to remediate the material weaknesses identified above. To remediate such weaknesses, we plan to implement the following changes during our fiscal year ending December 31, 2022: (i) appoint additional qualified personnel to address inadequate segregation of duties and ineffective risk management; and (ii) adopt sufficient written policies and procedures for accounting and financial reporting. The remediation efforts set out are largely dependent upon our securing additional financing to cover the costs of implementing the changes required. If we are unsuccessful in securing such funds, remediation efforts may be adversely affected in a material manner.  

Limitations on the Effectiveness of Controls

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected.

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PART II – OTHER INFORMATION

Item 1. Legal Proceedings

Rahul Manchanda v. Blockchain of Things, Inc., Index No. 656523/2019, New York County, NY Supreme Court (filed November 5, 2019)

The Plaintiff, Rahul Manchanda, has alleged claims for breach of contract, the covenant of good faith and fair dealing, and requested an accounting from BCoT. The amount of monetary damages sought is unclear from the complaint, although it asserts that the Plaintiff invested $20,000 with BCoT to launch a crowdfunding campaign and that “defendant is required to pay to plaintiff his pro rata portion of the gains on his investment as set forth in the Contract.” BCoT contacted the insurance company about this litigation and coverage was rejected.

On December 3, 2019, BCoT filed a motion to dismiss the claims on the grounds of res judicata (the Plaintiff filed and voluntarily dismissed with prejudice the very same claims in a federal court action); lack of ripeness (the crowdfunding campaign has not been completed because of the SEC investigation); the amount in controversy (the $20,000 investment) does not meet the $25,000 jurisdictional threshold for the court in which the Plaintiff filed the case.

On January 2, 2020, the Plaintiff filed an opposition to the motion to dismiss and on January 6, 2020 BCoT filed a reply brief. This motion is thus fully briefed and awaiting a decision form the Court. The matter is in discovery and depositions have been completed in April of 2021. On June 19, 2021 Plaintiff’s lawyer dropped out of the case citing he was no longer able to work with his client.

On September 16, 2021, a new lawyer representing Plaintiff entered the case. On February 10, 2022 a NYS Note of Issue Notification: New York – Commercial Contract was issued, a document that lets the court know that all discovery has been completed and that the lawsuit is ready for trial. The case will sit on the trial calendar and await a trial date. It can take months for a case to receive a trial date.

BCoT believes that the Plaintiff’s claims are without merit and there is a high likelihood that the claims will be dismissed, or at the very least, stayed by the Court or go to trial by jury. BCoT intends to vigorously contest this matter and has no plans to settle out of court at this time.  

Item 1A: Risk Factors

See risk factors included in our Annual Report on Form 10-K filed with the SEC on March 31, 2022.

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

None

Item 3. Defaults upon Senior Securities

None

Item 4. Mine Safety Disclosure

N/A

Item 5. Other Information

None 

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Item 6. Exhibits

Exhibit Number	Description of Exhibit
31.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101**	The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2022 formatted in Extensible Business Reporting Language (XBRL).

 ** Provided herewith 

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SIGNATURES

In accordance with the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	Blockchain of Things, Inc.
Date: May 12, 2022
	By:	/s/ Andre De Castro
		Andre De Castro
	Title:	Chief Executive Officer, Principal Executive Officer, and Director
	Blockchain of Things, Inc.
Date: May 12, 2022
	By:	/s/ Deborah de Castro
		Deborah de Castro
	Title:	Chief Financial Officer, VP of Operations, Secretary, Treasurer Principal Financial Officer, Principal Accounting Officer and Director

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