UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the quarterly period ended
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
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
(Address of principal executive offices) | (Zip Code) |
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
N/A | 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.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
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.
Large accelerated filer | ☐ | 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 ☐
As of March 21, 2022, there were shares of common stock, par value $0.0001, issued and outstanding.
Table of Contents
1 |
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report includes “forward-looking statements” within the meaning of the federal securities laws that involve risks and uncertainties. Forward-looking statements include statements we make concerning our plans, objectives, goals, strategies, future events, future revenues or performance, capital expenditures, financing needs and other information that is not historical information. When used in this quarterly report, the words “estimates,” “expects,” “anticipates,” “projects,” “forecasts,” “plans,” “intends,” “believes,” “foresees,” “seeks,” “likely,” “may,” “might,” “will,” “should,” “goal,” “target” or “intends” and variations of these words or similar expressions (or the negative versions of any such words) are intended to identify forward-looking statements. All forward-looking statements are based upon information available to us on the date of this quarterly report.
These forward-looking statements are subject to risks, uncertainties and other factors, many of which are outside of our control, that could cause actual results to differ materially from the results discussed in the forward-looking statements. These risks and uncertainties are discussed in the “Risk Factors” section of our Transition Report on Form 10-KT for the transition period from January 1, 2021 to July 31, 2021, filed with the Securities and Exchange Commission on November 15, 2021, as the same may be updated from time to time.
All forward-looking statements attributable to us in this quarterly report apply only as of the date of this quarterly report and are expressly qualified in their entirety by the cautionary statements included in this quarterly report. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. We undertake no obligation to publicly update or revise forward-looking statements to reflect events or circumstances after the date made or to reflect the occurrence of unanticipated events, except as required by law.
2 |
PART I—FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DESCRYPTO HOLDINGS, INC.
(formerly W Technologies, Inc.)
INDEX TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
F-1 |
DESCRYPTO HOLDINGS, Inc.
(formerly W Technologies, Inc.)
CONSOLIDATED Balance Sheets
(Unaudited)
January 31, 2022 | July 31, 2021 | |||||||
Assets | ||||||||
Current Assets: | ||||||||
Cash | $ | $ | ||||||
Total Current Assets | ||||||||
Property and equipment, net | ||||||||
Other Assets | ||||||||
Investment - Related Party | ||||||||
Total Assets | $ | $ | ||||||
Liabilities and Stockholders’ Deficit | ||||||||
Accounts payable | ||||||||
Accrued expenses – related party | $ | |||||||
Notes payable - related party | ||||||||
Total Current Liabilities | ||||||||
Total Liabilities | $ | $ | ||||||
Stockholders’ Deficit | ||||||||
Undesignated Preferred Stock, $ | par value per share: Authorized shares, issued and outstanding as of January 31, 2022, and as of July 31, 2021- | - | ||||||
Series A Preferred Stock, $ | par value per share: Authorized shares, and shares issued and outstanding at January 31, 2022 and July 31, 2021, respectively- | |||||||
Common Stock, $ | par value per share: Authorized shares, , issued and outstanding as of January 31, 2022, and as of July 31, 2021||||||||
Additional Paid-in Capital | ( | ) | ||||||
Stock payable | - | |||||||
Subscription receivable | ( | ) | - | |||||
Accumulated Deficit | ( | ) | ( | ) | ||||
Total Stockholders’ Deficit | ( | ) | ( | ) | ||||
Total Liabilities and Stockholders’ Deficit | $ | $ |
The accompanying notes are an integral part of the financial statements.
F-2 |
DESCRYPTO HOLDINGS, INC.
(formerly W Technologies, Inc.)
Statements of Operations
(Unaudited)
Three Months Ended January 31, 2022 | Three Months Ended January 31, 2021 | Six Months Ended January 31, 2022 | Six Months Ended January 31, 2021 | |||||||||||||
(Consolidated) | (Consolidated) | |||||||||||||||
Revenue | $ | $ | $ | $ | ||||||||||||
General and administrative expenses | ||||||||||||||||
Total Operating Expenses | ||||||||||||||||
Other Income and Expenses | ||||||||||||||||
Interest income - related party | ||||||||||||||||
Interest expense - related party | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Total Other Income and Expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Net Loss | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||
Weighted average Number of Common Shares Outstanding-Basic and Diluted | ||||||||||||||||
Net Loss per share - Basic and Diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) |
The accompanying notes are an integral part of the financial statements.
F-3 |
DESCRYPTO HOLDINGS, INC.
(formerly W Technologies, Inc.)
Statements of Changes in Stockholders’ Deficit
(Unaudited)
Additional | Total | |||||||||||||||||||||||||||||||||||
Preferred shares | Common shares | paid in | Stock | Stock | Accumulated | stockholders’ | ||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Receivable | Payable | deficit | deficit | ||||||||||||||||||||||||||||
Balance July 31, 2021 (Consolidated) | ( | ) | $ | ( | ) | ( | ) | |||||||||||||||||||||||||||||
Stock based Compensation | - | - | ||||||||||||||||||||||||||||||||||
Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
Balance October 31, 2021 (Consolidated) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
Share Redemption | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||
Shares Issued for Financing | - | ( | ) | |||||||||||||||||||||||||||||||||
Share Exchange | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
Stock-Based Compensation | - | - | ||||||||||||||||||||||||||||||||||
Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
Balance January 31,2022 (Consolidated) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
Balance July 31, 2020 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
Net Loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
Balance October 31, 2021 | - | ( | ) | ( | ) | ( | ||||||||||||||||||||||||||||||
Net Loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
Balance January 31, 2021
| - | ( | ) | ( | ) | ( | ) |
The accompanying notes are an integral part of the financial statements.
F-4 |
DESCRYPTO HOLDINGS, INC.
(formerly W Technologies, Inc.)
Statements of Cash Flows
(Unaudited)
Six Months Ended January 31, 2021 | Six Months Ended January 31, 2021 | |||||||
(Consolidated) | ||||||||
Cash Flows from Operating Activities | ||||||||
Net Loss | $ | ( | ) | $ | ( | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities | ||||||||
Amortization | ||||||||
Stock based compensation | - | |||||||
Change in Operating Assets and Liabilities: | ||||||||
Interest Receivable from Related Party | ( | ) | ||||||
Accrued expenses – related party | ||||||||
Net Cash Used in Operating Activities | ( | ) | ( | ) | ||||
Net Cash Provided by Financing Activities | ||||||||
Proceeds from sale of stock | - | |||||||
Net Cash Provided from Financing Activities | - | |||||||
Net Change in Cash | ( | ) | ||||||
Cash at beginning of the Year | ||||||||
Cash at end of the Year | $ | $ | ||||||
Supplemental disclosure of cash flow information: | ||||||||
Cash paid for interest | $ | $ | ||||||
Cash paid for income taxes | $ | $ | ||||||
Supplemental disclosure for non-cash investing and financing activities: | ||||||||
Share Exchange | $ | $ | ||||||
Share Redemption | $ | - |
The accompanying notes are an integral part of the financial statements.
F-5 |
DESCRYPTO HOLDINGS, INC.
(formerly W Technologies, Inc.)
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JANUARY 31, 2022 AND 2021
Note 1 – Business Organization and Nature of Operations
Descrypto Holdings, Inc. (the “Company”) was originally incorporated in Nevada in 1986. The Company reincorporated in Massachusetts in 1987 and reincorporated in Delaware in 1996 as IMSCO Technologies, Inc. In 2001, the Company changed its name to Global Sports and Entertainment, Inc. In 2002, the Company changed its name to GWINN, Inc. The Company changed its name to Winning Edge International, Inc. in 2006 and in 2007, the Company changed its name to W Technologies. On November 2, 2021, the Company filed with the Delaware Secretary of State a certificate of amendment to certificate of incorporation in order to change its corporate name, effective December 31, 2021, from W Technologies, Inc. to Descrypto Holdings, Inc. (the “Name Change”). The Name Change will not be effective for trading purposes, however, until it is cleared by the Financial Industry Regulatory Authority (FINRA).
On July 29, 2021, the Company entered into a share exchange agreement with KryptoBank Co. (“KryptoBank”) and its stockholders, pursuant to which the Company issued common stock representing % (shares) of the Company’s total issued and outstanding common stock in exchange for % interest in KryptoBank. KryptoBank was incorporated in Delaware on December 27, 2017. Pursuant to the terms of the exchange agreement, previous note holders were issued shares of common stock as settlement of the outstanding notes payable. As a result, KryptoBank became a wholly owned subsidiary of the Company and assumed net liabilities of $. This transaction was accounted for as a reverse merger by which KrytoBank is deemed to be the accounting acquirer. Consequently, the assets, liabilities and historical operations are those of KryptoBank. In November 2021, KryptoBank’s name was changed to Descrypto, Inc.
Subsequently, the Company entered into that certain Redemption Agreement (the “Redemption Agreement”), dated as of November 18, 2021, by and among the Company and the following stockholders of the Company: Balance Labs, Inc. (“Balance Labs”), Lyons Capital, LLC (“Lyons Capital”), Jessica Beren, 2018 Investor Trust, Aros, LLC, Rachel Jacobs and Avon Road Associates, LLC (collectively, the “Redeeming Stockholders”). Pursuant to the terms of the Redemption Agreement, the Redeeming Stockholders agreed to sell, and the Company agreed to purchase, an aggregate of shares of the Company’s common stock, representing % of the shares of common stock held by the Redeeming Stockholders, at a purchase price of $ per share (the “Redemption”).
On
November 18, 2021, pursuant to the terms of the Redemption Agreement, the Company paid an aggregate of $
Also on November 18, 2021, following the Redemption:
(i) | Pursuant
to a subscription agreement dated November 18, 2021 (the “MACA Subscription Agreement”),
MACA purchased |
(ii) | Pursuant
to a subscription agreement dated November 18, 2021 (the “Leone Subscription Agreement”),
Leone purchased |
(iii) | Pursuant
to a subscription agreement dated November 18, 2021 (the “ACV Subscription Agreement”),
ACV purchased |
In addition, on November 18, 2021, the Board of Directors (the “Board”) of the Company increased the size of the Board from two members to four members and named Laura Anthony and Howard Gostfrand as directors of the Company to fill the newly created vacancies, to serve in such positions until their earlier respective death, resignation or removal from office. Ms. Anthony was also appointed Chairman of the Board. Ms. Anthony is the sole owner of Leone. Mr. Gostfrand is the sole owner of ACV. At the same time, the Board also appointed (i) Mr. Gostfrand to serve as Chief Executive Officer and Principal Financial Officer of the Company; and (ii) Ms. Anthony to serve as President and Secretary of the Company. Immediately thereafter, Aleksandr Rubin and Meir Wexler resigned as members of the Board and Mr. Rubin resigned from all officer positions with the Company.
As a result of the Redemption and the Share Purchases:
● | Each
of ACV and Leone owns |
● | Balance
Labs owns |
● | MACA
owns |
● | Lyons
Capital owns |
The Redemption, the Share Purchases and the officer and director changes discussed above resulted in a change in control of the Company.
We are a holding company that plans to identify and acquire uniquely positioned blockchain technology companies and digital assets with a focus on assets that that promote environmental, social and governance (“ESG”) policies. We are focused on digital financial services, NFTs and tokenization of assets which combined provide for a robust ecosystem providing our shareholders an opportunity to invest in an emerging industry with exponential growth opportunity. We aim to partner with best in-class teams and develop collaborative relationships to help execute their vision, drive sustainable growth, and ultimately create long-term value.
Note 2 – Going Concern
The
financial statements have been prepared assuming the Company will continue as a going concern. The Company has experienced net losses
since inception and used $
Note 3 – Summary of Significant Accounting Policies
Basis of presentation
The Company’s unaudited consolidated financial statements and related disclosures for the six months ended January 31, 2022 and January 31, 2021, have been prepared using the accounting principles generally accepted in the United States (“GAAP”).
Reclassification
Certain prior year amounts have been reclassified to conform to the current period presentation. These reclassifications had no impact on net earnings and the financial position of the Company.
Principles of Consolidation
The accompanying financial statements reflect the consolidation of the individual financial statements of Descrypto Holdings, Inc. (formerly W Technologies, Inc.) and KryptoBank Co. All significant intercompany accounts and transactions have been eliminated.
Cash and Cash Equivalents
The
Company considers all highly liquid temporary cash investments with an original maturity of six months or less to be cash equivalents.
At January 31, 2022, and January 31, 2021 the Company had $
F-6 |
DESCRYPTO HOLDINGS, INC.
(formerly W Technologies, Inc.)
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JANUARY 31, 2022 AND 2021
Use of Estimates
The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Estimates may include those pertaining to valuation and useful life of intangible assets and deferred tax assets. Actual results could materially differ from those estimates.
Revenue Recognition
The Company accounts for its revenues under the Financial Accounting Standards Board’s Accounting Standards Codification (“ASC”) 606, that requires revenue to be recognized in a manner to depict the transfer of goods or services to a customer at an amount that reflects the consideration expected to be received in exchange for those goods or services. The Company considers revenue realized or realizable and earned when all the five following criteria are met: (1) Identify the Contract with a Customer, (2) Identify the Performance Obligations in the Contract, (3) Determine the Transaction Price, (4) Allocate the Transaction Price to the Performance Obligations in the Contract, and (5) Recognize Revenue When (or As) the Entity Satisfies a Performance Obligation.
Income Taxes
The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of items that have been included or excluded in the financial statements or tax returns. Deferred tax assets and liabilities are determined on the basis of the difference between the tax basis of assets and liabilities and their respective financial reporting amounts (“temporary differences”) at enacted tax rates in effect for the years in which the temporary differences are expected to reverse.
The Company adopted the provisions of ASC Topic 740-10, which prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.
Management has evaluated and concluded that there are no material tax positions requiring recognition in the Company’s financial statements as of January 31, 2022, and 2021. The Company’s 2017, 2018, 2019 and 2020 tax returns are filed as part of consolidated tax returns of Balance Labs, Inc., a majority shareholder which remain open for audit for Federal and State taxing authorities.
The Company’s policy is to classify assessments, if any, for tax related interest as interest expense and penalties as general and administrative expenses in the statement of operations.
Investments
Financial instruments that potentially subject the Company to concentrations of credit risk primarily consist of cash, cash equivalents and marketable securities.
F-7 |
DESCRYPTO HOLDINGS, INC.
(formerly W Technologies, Inc.)
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JANUARY 31, 2022 AND 2021
Basic and diluted loss per common share is computed by dividing net loss by the weighted average number of common shares and common share equivalents outstanding during the periods. As of January 31, 2022, and January 31, 2021, there were common share equivalents outstanding, respectively.
Fair Value of Financial Instruments
The Company measures its financial assets and liabilities in accordance with GAAP. For certain of our financial instruments, including cash, accounts payable, and the short-term debt, the carrying amounts approximate fair value due to their short maturities.
We adopted accounting guidance for financial and non-financial assets and liabilities (ASC 820). This standard defines fair value, provides guidance for measuring fair value and requires certain disclosures. This standard does not require any new fair value measurements, but rather applies to all other accounting pronouncements that require or permit fair value measurements. This guidance does not apply to measurements related to share-based payments. This guidance discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost). The guidance utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:
● | Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities. | |
● | Level 2: Inputs other than quoted prices that are observable, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active. | |
● | Level 3: Unobservable inputs in which little or no market data exists, therefore developed using estimates and assumptions developed by us, which reflect those that a market participant would use. |
Advertising, Marketing and Promotional Costs
Advertising,
marketing, and promotional expenses are expensed as incurred and are included in selling, general and administrative expenses on the
accompanying statement of operations. For the six months ended January 31, 2022 and January 31, 2021 marketing, advertising and promotion
expense was $
Property and equipment
Property and equipment consist of a website the Company developed in order to market its services.
Expenditures for repairs and maintenance of equipment are charged to expense as incurred. Major replacements and betterments are capitalized and depreciated over the remaining useful lives of the related assets.
Property and equipment as of January 31, 2022 and July 31, 2021 consisted of the following:
January 31, 2022 | July 31, 2021 | |||||||
Website | $ | $ | ||||||
Less Accumulated Amortization | $ | ( | ) | ( | ) | |||
Property and Equipment, net | $ | $ |
There
were
F-8 |
DESCRYPTO HOLDINGS, INC.
(formerly W Technologies, Inc.)
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JANUARY 31, 2022 AND 2021
Note 4 – Stockholders’ Equity
Preferred Stock
The
Company has authorized
The
Company has designated an authorized
During the three months ended January 31, 2022, two board members and officers of the Company exchanged shares of common stock for shares of Series A Preferred shares.
Common Stock
The Company has authorized common shares with a par value of $ per share. Each common share entitles the holder to one vote on any matter on which action of the stockholders of the corporation is sought.
On
November 18, 2021, the Company entered into a Redemption Agreement (the “Redemption Agreement”), dated as of November 18,
2021, by and among the Company and the following stockholders of the Company: Balance Labs, Lyons Capital, Jessica Beren, 2018 Investor
Trust, Aros, LLC, Rachel Jacobs and Avon Road Associates, LLC (collectively, the “Redeeming Stockholders”). Pursuant to the
terms of the Redemption Agreement, the Redeeming Stockholders agreed to sell, and the Company agreed to purchase, an aggregate of
During
the three months ended January 31, 2022, the Company sold
On
July 30, 2021, the Company entered into an employment agreement with an officer of the Company to grant
On
July 30, 2021, the Company entered into an employment agreement with an officer of the Company to grant
Total stock compensation expense for the six months ended January 31, 2022, and 2021 was $ and $ , respectively.
F-9 |
DESCRYPTO HOLDINGS, INC.
(formerly W Technologies, Inc.)
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JANUARY 31, 2022 AND 2021
Note 5 – Related Party Transactions
During
fiscal year 2018, the Company loaned $
During
the twelve months ended July 31, 2021, a shareholder of the Company advanced a total of $
Note 6 – Commitments and Contingencies
Litigation, Claims and Assessments
In the normal course of business, the Company may be involved in legal proceedings, claims and assessments arising in the ordinary course of business. Such matters are subject to many uncertainties, and outcomes are not predictable with assurance. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Company’s financial position or results of operations.
COVID-19
The coronavirus pandemic may adversely impact our operations and demand for our products and services and our ability to find new clients. This is due in part to restrictions such as: social distancing requirements; stay at home orders and the shutdown of non-essential businesses and the impact these restrictions have on small businesses and their ability to generate revenues which effects their ability to afford our services.
Note 7 – Notes Payable – Related Party
The
Company, as part of its initial funding, borrowed a total of $
On
June 29, 2021, the Company issued an unsecured promissory note in the amount of $
On
July 9, 2021, the Company issued an unsecured promissory note in the amount of $
During
the six months ended January 31, 2022 and 2021, the Company accrued interest of $
F-10 |
DESCRYPTO HOLDINGS, INC.
(formerly W Technologies, Inc.)
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JANUARY 31, 2022 AND 2021
Note 8 – Income Taxes
The Company files its tax returns as part of Balance Labs’ consolidated tax returns. The Company has the following net deferred tax asset:
As
of January 31, 2022, the Company had $
As of January 31, 2022 | As of January 31, 2021 | |||||||
Net operating loss carryforward | ||||||||
Valuation allowance | ( | ) | ( | ) | ||||
Net deferred tax assets | $ | $ |
A reconciliation of the statutory federal income tax rate to the Company’s effective tax rate is as follows:
For the Three Months Ended January 31, 2022 | For the Three Months Ended January 31, 2021 | |||||||
Expected federal statutory rate | ( | )% | ( | )% | ||||
State Effect on tax rate, net of federal benefit | ( | )% | ( | )% | ||||
Change in valuation allowance | % | % | ||||||
Income tax provision (benefit) |
The Company, after considering all available evidence, fully reserved its deferred tax assets since it is more likely than not that such benefits may be realized in future periods. The Company has not yet established that it can generate taxable income. The Company will continue to evaluate its deferred tax assets to determine whether any changes in circumstances could affect the realization of their future benefit. If it is determined in future periods that portions of the Company’s deferred tax assets satisfy the realization standards, the valuation allowance will be reduced accordingly.
Note 9 – Subsequent Events
In
February 2022, the Company received $
In February 2022, the Company redeemed shares of common stock from shareholders for an aggregate purchase price of $ .
F-11 |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the financial condition and results of operations of Descrypto Holdings (f/k/a W Technologies, Inc.) and its subsidiary (together, the “Company”) should be read in conjunction with our consolidated financial statements and the accompanying notes thereto included elsewhere in this Quarterly Report on Form 10-Q. References in this Management’s Discussion and Analysis of Financial Condition and Results of Operations to “us,” “we,” “our,” and similar terms refer to the Company. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth under the Risk Factors section of our Transition Report on Form 10-KT for the transition period from January 1, 2021 to July 31, 2021, filed with the Securities and Exchange Commission (the “SEC”) on November 15, 2021, as the same may be updated from time to time. We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions to identify forward-looking statements
Overview
We are a holding company that plans to identify and acquire uniquely positioned blockchain technology companies and digital assets with a focus on assets that that promote environmental, social and governance (“ESG”) policies. We are focused on digital financial services, NFTs and tokenization of assets which combined provide for a robust ecosystem providing our shareholders an opportunity to invest in an emerging industry with exponential growth opportunity. We aim to partner with best in-class teams and develop collaborative relationships to help execute their vision, drive sustainable growth, and ultimately create long-term value.
We intend to acquire companies with:
● | ESG policies and priorities, | |
● | proven value propositions, | |
● | identifiable growth opportunities or operational improvements, and | |
● | paths to sustainable competitive advantages. |
We expect to provide strategic guidance through a network of experienced executives with operational and industry expertise, as well as financing support and other resources necessary to drive value.
On November 2, 2021, we filed with the Delaware Secretary of State a certificate of amendment to certificate of incorporation in order to change our corporate name, effective December 31, 2021, from W Technologies, Inc. to Descrypto Holdings, Inc. (the “Name Change”). The Name Change will not be effective for trading purposes, however, until it is cleared by the Financial Industry Regulatory Authority (FINRA).
3 |
Recent Developments
Change of Control
On November 18, 2021, we entered into that certain Redemption Agreement (the “2021 Redemption Agreement”), dated as of November 18, 2021, by and among us and the following stockholders of Descrypto: Balance Labs, Inc. (“Balance Labs”), Lyons Capital, LLC (“Lyons Capital”), Jessica Beren, 2018 Investor Trust, Aros, LLC, Rachel Jacobs and Avon Road Associates, LLC (“Avon Road”) (collectively, the “2021 Redeeming Stockholders”). Pursuant to the terms of the 2021 Redemption Agreement, on November 18, 2021, the 2021 Redeeming Stockholders sold to us an aggregate of 163,432,468 shares of our common stock (the “2021 Redeemed Shares”), representing 70% of the shares of common stock held by the 2021 Redeeming Stockholders, for a purchase price of $163 (representing a purchase price of $0.000001 per share) (the “2021 Redemption”). The 2021 Redemption closed on November 18, 2021. As a result of the 2021 Redemption, the 2021 Redeemed Shares were cancelled and returned to the status of authorized and unissued shares of common stock.
Also on November 18, 2021, following the 2021 Redemption:
(iv) | Pursuant to a subscription agreement dated November 18, 2021 (the “MACA Subscription Agreement”), Mid Atlantic Capital Associates, Inc. (“MACA”) purchased 17,321,268 shares of common stock from us for a purchase price of $1,732 (representing a $0.0001 purchase price per share) (the “MACA Purchase”); | |
(v) | Pursuant to a subscription agreement dated November 18, 2021 (the “Leone Subscription Agreement”), Leone Group, LLC (“Leone”) purchased 81,716,234 shares of our common stock from us for a purchase price of $8,172 (representing a $0.0001 purchase price per share) (the “Leone Purchase”); and | |
(vi) | Pursuant to a subscription agreement dated November 18, 2021 (the “ACV Subscription Agreement”), American Capital Ventures, Inc. (“ACV”) purchased 81,716,234 shares of common stock from us for a purchase price of $8,172 (representing a $0.0001 purchase price per share) (the “ACV Purchase” and collectively with the MACA Purchase and the ACV Purchase, the “Share Purchases”). |
As a result of the 2021 Redemption and the Share Purchases:
(vi) | Balance Labs’ percentage ownership of our outstanding common stock decreased from 46.1% to 13.0%; | |
(vii) | Lyons Capital’s percentage ownership of our outstanding common stock decreased from 22.0% to 6.2%; | |
(viii) | MACA’s percentage ownership of our outstanding common stock increased from 3.0% to 9.0%; | |
(ix) | Leone’s percentage ownership of our outstanding common stock increased from 2.7% to 32.1%; and | |
(x) | ACV’s percentage ownership of our outstanding common stock increased from 2.7% to 32.1%. |
In addition, on November 18, 2021, our Board of Directors (the “Board”) increased the size of the Board from two members to four members and named Laura Anthony and Howard Gostfrand as directors to fill the newly created vacancies, to serve in such positions until their earlier respective death, resignation or removal from office. Ms. Anthony was also appointed Chairman of the Board. Ms. Anthony is the sole owner of Leone. Mr. Gostfrand is the sole owner of ACV. At the same time, the Board also appointed (i) Mr. Gostfrand to serve as our Chief Executive Officer and Principal Financial Officer; and (ii) Ms. Anthony to serve as our President, Chairperson and Secretary. Immediately thereafter, Aleksandr Rubin and Meir Wexler resigned as members of the Board and Mr. Rubin resigned from all officer positions with us.
The 2021 Redemption, the Share Purchases and the officer and director changes discussed above resulted in a change in control of Descrypto.
Series A Preferred Stock
On January 10, 2022, we filed a Certificate of Designations of Preferences and Rights of Series A Preferred Stock (the “Series A Certificate”) with the Delaware Secretary of State, creating the Series A preferred stock (the “Series A Preferred”), with 200,000 shares authorized for issuance.
Each share of Series A Preferred is initially convertible into 1,000 shares of common stock at the election of the holder at any time. On any matter submitted to the holders of common stock for a vote or on which the holders of common stock have a right to vote, each share of Series A Preferred will have a number of votes equal to the number of shares of common stock into which the Series A Preferred is convertible and the Series A Preferred will vote together with the common stock as one class.
The Series A Preferred will participate in any dividends, distributions or payments to the holders of the common stock on an as-converted basis. Series A Preferred is not entitled to receive any distribution of the Company’s assets or surplus funds upon a liquidation, merger or similar event.
4 |
Share Exchange Agreement
On January 13, 2022, we entered into a Share Exchange Agreement (the “ACV Agreement”) by and between the Company and ACV. Pursuant to the terms of the ACV Agreement, the Company agreed to acquire from ACV 88,800,191 shares of common stock owned by ACV in exchange for the issuance of 88,800 shares of Series A Preferred by the Company to ACV. Such shares were issued to ACV on January 13, 2022.
Also on January 13, 2022, the Company entered into a Share Exchange Agreement (the “Leone Agreement”) by and between the Company and Leone. Pursuant to the terms of the Leone Agreement, the Company agreed to acquire from Leone 88,800,191 shares of common stock owned by Leone in exchange for the issuance of 88,800 shares of Series A Preferred by the Company to Leone. Such shares were issued to Leone on January 13, 2022.
2022 Common Stock Redemption Agreements
On February 18, 2022, we entered into certain Redemption Agreements (each, a “2022 Redemption Agreement” and collectively, the “2022 Redemption Agreements”), dated as of February 18, 2022, by and among the Company and each of the following holders of the Company’s common stock: Balance Labs, Aleksandr Rubin, Ronald Cons, Avon Road, 2018 Investor Trust, Congregation Boro Minyan, Rachel Jacobs, Jessica Beren, Aros, LLC, Lyons Capital, MACA, and J and K Ventures, LLC (collectively, the “2022 Redeeming Stockholders”). Pursuant to the terms of the 2022 Redemption Agreements, each of the 2022 Redeeming Stockholders agreed to sell, and the Company agreed to purchase, 80% of such 2022 Redeeming Stockholders’ common stock holdings at a purchase price of $0.00001 per share.
On February 18, 2022, pursuant to the terms of the 2022 Redemption Agreements, the Company paid an aggregate of $773.82 to the 2022 Redeeming Stockholders in exchange for the transfer of a total of 77,382,494 shares of common stock (the “2022 Redeemed Shares”), representing 80% of the shares of common stock held by the 2022 Redeeming Stockholders (the “2022 Redemption”). As a result of the 2022 Redemption, the 2022 Redeemed Shares were returned to the status of authorized and unissued shares of common stock.
Prior to, and after giving effect to, the 2022 Redemption, there were three greater than 5% common stockholders of the Company: Balance Labs, Lyons Capital and MACA. Following the 2022 Redemption, such stockholders’ ownership of the common stock was as follows:
Name of Stockholder | No. of Shares of Common Stock Owned Following Redemption | Percentage of Outstanding Common Stock Held Following Redemption | ||||||
Balance Labs | 7,175,084 | 30.23 | % | |||||
Lyons Capital | 2,016,707 | 8.50 | % | |||||
MACA | 5,000,000 | 21.06 | % |
Pursuant to the terms of the 2022 Redemption Agreements, the 2022 Redemption Agreements will be null and void and the 2022 Redeemed Shares will be reissued to the respective 2022 Redeeming Stockholders if the Company does not raise at least $1.5 million in financing and enter into a definitive agreement for the acquisition of a blockchain based company within 12 months of February 18, 2022.
5 |
Series A Preferred Redemption Agreements
Also on February 18, 2022, we entered into certain Redemption Agreements (each, a “Series A Redemption Agreement” and together, the “Series A Redemption Agreements”), dated as of February 18, 2022, by and between the Company and each of the following holders of the Series A Preferred: ACV and Leone Group (together, the “Redeeming Series A Stockholders”). Pursuant to the terms of the Series A Redemption Agreements, each of the Redeeming Series A Stockholders agreed to sell, and the Company agreed to purchase, 80% of such Redeeming Series A Stockholders’ holdings of Series A Preferred, for a purchase price of $1.00 in total to each Redeeming Series A Stockholder.
On February 18, 2022, pursuant to the terms of the Series A Redemption Agreements, the Company paid an aggregate of $2.00 to the Redeeming Series A Stockholders in exchange for the transfer of a total of 142,080 shares of Series A Preferred (the “Redeemed Series A Shares”). As a result of the Series A Redemption, the Redeemed Series A Shares were returned to the status of authorized and unissued shares of Series A Preferred Stock.
Following the Series A Redemption, such stockholders’ ownership of the Series A Preferred was as follows:
Name of Stockholder | No. of Shares of Series A Preferred Stock Owned Following Redemption | Percentage of Outstanding Series A Preferred Stock Held Following Redemption | ||||||
ACV | 17,760 | 50.00 | % | |||||
Leone | 17,760 | 50.00 | % |
Pursuant to the terms of the Series A Redemption Agreements, the Series A Redemption Agreements will be null and void and the Redeemed Series A Shares will be reissued to the respective Redeeming Series A Stockholders if the Company does not raise at least $1.5 million in financing and enter into a definitive agreement for the acquisition of a blockchain based company within 12 months of February 18, 2022.
Plan of Operations
Over the next 12 months, we expect to require approximately $3,000,000 in operating funds to carry out our intended plan of operations.
We are planning to obtain the funds necessary to execute our plan of operations from various capital raises, including potentially through private placements or our common stock or the issuance and sales of convertible notes, as well as potentially through a registration statement or an offering statement filed with the SEC.
There can be no assurance that we will be able to obtain the necessary funds for our foregoing operations on terms that are acceptable to us or at all, and there can be no assurance that our plan of operations can be executed as planned, or at all.
RESULTS OF OPERATIONS
During the three and six months ended January 31, 2022 and 2021, we generated no revenue. During this period, we have been working diligently to pursue our business plans and expect to generate revenue within the next quarter.
Operating expenses during the three months ended January 31, 2022 and 2021 were $576,795 and $490, respectively. The increase in expenses was due to an increase in fixed general administrative expenses. Operating expenses during the six months ended January 31, 2022 and 2021 were $3,136,602 and $535, respectively. The increase in expenses was primarily due to an increase in stock-based compensation expenses.
Operating expenses for the three months ended January 31, 2022 were $576,795 and consisted of stock-based compensation expenses of $542,651, professional fees of $30,073, and general and administrative fees of $4,051. Operating expenses for the three months ended January 31, 2021 were $490 and consisted of general and administrative fees. Expenses increased during the three months ended January 31, 2022 due to higher stock-based compensation expenses, professional fees, and general and administrative expenses during this period.
6 |
Operating expenses for the six months ended January 31, 2022 were $3,136,602 and consisted of stock-based compensation expenses of $542,651, professional fees of $30,073, and general and administrative fees of $4,051. Operating expenses for the six months ended January 31, 2021 were $535 and consisted of general and administrative fees. Expenses increased during the six months ended January 31, 2022 due to higher stock-based compensation expenses, professional fees, and general and administrative expenses during this period.
There is significant uncertainty projecting future profitability or revenues due to our history of losses and development stage of our business.
Liquidity and Capital Resources
As of January 31, 2022, we had $107,827 in cash and did not have any other cash equivalents. The following table provides detailed information about our net cash flow for all financial statement periods presented in this Quarterly Report on Form 10-Q. To date, we have financed our operations through the issuance of stock and borrowings.
The following table sets forth a summary of our cash flows for the six months ended January 31, 2022 and 2021:
Six Months Ended January 31, | ||||||||
2022 | 2021 | |||||||
Net cash used in operating activities | $ | (63,447 | ) | $ | (90 | ) | ||
Net cash used in investing activities | - | - | ||||||
Net cash provided by financing activities | 118,096 | (90 | ) | |||||
Net increase (decrease) in cash | 54,649 | (90 | ) | |||||
Cash, beginning | 53,178 | 523 | ||||||
Cash, ending | $ | 107,827 | $ | 433 |
Since inception, we have financed our cash flow requirements through issuance of common stock and debt financing. As we expand our activities, we may, continue to experience net negative cash flows from operations. We anticipate obtaining additional financing to fund operations through additional common stock offerings, to the extent available, or to obtain additional financing to the extent necessary to augment our working capital.
We anticipate that we will incur operating losses in the next 12 months. Our lack of operating history makes predictions of future operating results difficult to ascertain. Our prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies in their early stage of development, particularly companies in new and rapidly evolving markets. Such risks for us include, but are not limited to, an evolving and unpredictable business sector and the management of growth. To address these risks, we must, among other things, obtain a customer base, implement and successfully execute our business and marketing strategy, continually develop and upgrade our website, provide national and regional industry participants with an effective, efficient and accessible infrastructure on which to promote their products and services through the Internet and blockchain technology, respond to competitive developments, and attract, retain and motivate qualified personnel. There can be no assurance that we will be successful in addressing such risks, and the failure to do so can have a material adverse effect.
Effects of Coronavirus on the Company
If the current recurring outbreak of the coronavirus continues and its variations, the effects of such a widespread infectious disease and epidemic may inhibit our ability to conduct our business and operations and could materially harm our Company. The coronavirus may cause us to have to reduce operations as a result of various lock-down procedures enacted by the local, state or federal governments. The continued coronavirus outbreak may also restrict our ability to raise funding when needed and may cause an overall decline in the economy as a whole. The specific and actual effects of the spread of coronavirus are difficult to assess at this time as the actual effects will depend on many factors beyond the control and knowledge of the Company. However, the spread of the coronavirus, if it continues, may cause an overall decline in the economy as a whole and as such may materially harm our Company.
7 |
Critical Accounting Policies and Estimates
Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reported period. In accordance with GAAP, we base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
A smaller reporting company is not required to provide the information required by this Item.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in company reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Principal Financial Officer, to allow timely decisions regarding required disclosure.
As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer and Principal Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of January 31, 2022. Based upon their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of January 31, 2022, our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were effective.
We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
Changes in Internal Control over Financial Reporting
During the three months ended January 31, 2022, there has been no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
8 |
PART II—OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, we are involved in ordinary routine litigation typical for companies engaged in our line of business. As of the date of this Quarterly Report on Form 10-Q, we are not involved in any pending legal proceedings that we believe would be likely, individually or in the aggregate, to have a material adverse effect on our financial condition or results of operations.
ITEM 1A. RISK FACTORS
There have been no material changes to our risk factors as disclosed in our Transition Report on Form 10-KT for the transition period from January 1, 2021 to July 31, 2021, as filed with the SEC on November 15, 2021.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
On November 18, 2021, pursuant to the MACA Subscription Agreement, MACA purchased 17,321,268 shares of common stock from us for a purchase price of $1,732 (representing a $0.0001 purchase price per share). Also on November 18, 2021, pursuant to the Leone Subscription Agreement, Leone purchased 81,716,234 shares of our common stock from us for a purchase price of $8,172 (representing a $0.0001 purchase price per share). In addition, on November 18, 2021, pursuant to the ACV Subscription Agreement, ACV purchased 81,716,234 shares of common stock from us for a purchase price of $8,172 (representing a $0.0001 purchase price per share).
On January 13, 2022, the Company issued 88,800 Series A Preferred shares to ACV in exchange for 88,800,191 shares of common stock. Also on January 13, 2022, the Company issued 88,800 Series A Preferred shares to Leone in exchange for 88,800,191 shares of common stock.
During the three months ended January 31, 2022, the Company sold 181,266,236 shares of common stock for total proceeds of $143,095. $25,000 of the total proceeds from the sales of common stock was received subsequent to the period end and is recorded as a subscription receivable as of January 31, 2022.
The above securities issuances were exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”), in reliance on the exemptions provided by Regulation D and Section 4(a)(2), as applicable under the Securities Act.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
(a) None.
(b) There have been no material changes to the procedures by which security holders may recommend nominees to our Board of Directors since we last provided disclosure in response to the requirements of Item 407(c)(3) of Regulation S-K promulgated under the Exchange Act.
9 |
ITEM 6. EXHIBITS
* | Filed herewith. |
** | Furnished herewith. |
10 |
SIGNATURES
Pursuant to 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.
DESCRYPTO HOLDINGS, INC. | ||
Date: March 22, 2022 | By: | /s/ Howard Gostfrand |
Howard Gostfrand | ||
Chief Executive Officer (principal executive officer, principal financial officer and principal accounting officer) |
11 |
Exhibit 31.1
CERTIFICATIONS
I, Howard Gostfrand, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q for the quarterly period ended January 31, 2022 of Descrypto Holdings, Inc.;
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 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 periods presented in this report;
4. The registrant’s other certifying officer(s) and I are 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 us 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.
5. The registrant’s other certifying officer(s) and 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 the 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 control over financial reporting.
Date: March 22, 2022
/s/ Howard Gostfrand | |
Howard Gostfrand | |
Chief Executive Officer (principal executive officer and principal financial officer) |
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 on Form 10-Q of Descrypto Holdings, Inc. (the “Company”) for the quarterly period ended January 31, 2022 as filed with the Securities and Exchange Commission (the “Report”), I, Howard Gostfrand, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
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.
Date: March 22, 2022 | /s/ Howard Gostfrand |
Howard Gostfrand | |
Chief Executive Officer (principal executive officer and principal financial officer) |
This certification accompanies this Quarterly Report on Form 10-Q pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by such Act, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the Company specifically incorporates it by reference.
Balance Sheets (Unaudited) (Parenthetical) - $ / shares |
Jan. 31, 2022 |
Jul. 31, 2021 |
---|---|---|
Preferred stock, par value | $ 0.0001 | $ 0.0001 |
Preferred stock, shares authorized | 50,000,000 | 50,000,000 |
Preferred stock, shares outstanding | 177,600 | 0 |
Preferred stock, shares issued | 177,600 | 0 |
Common stock, par value | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized | 10,000,000,000 | 10,000,000,000 |
Common stock, shares issued | 99,610,006 | 259,376,620 |
Common stock, shares outstanding | 99,610,006 | 259,376,620 |
Series A Preferred Stock [Member] | ||
Preferred stock, par value | $ 0.0001 | $ 0.0001 |
Preferred stock, shares authorized | 200,000 | 200,000 |
Preferred stock, shares outstanding | 177,600 | 0 |
Preferred stock, shares issued | 177,600 | 0 |
Statements of Operations (Unaudited) - USD ($) |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jan. 31, 2022 |
Jan. 31, 2021 |
Jan. 31, 2022 |
Jan. 31, 2021 |
|
Income Statement [Abstract] | ||||
Revenue | ||||
General and administrative expenses | 576,795 | 490 | 3,136,602 | 535 |
Total Operating Expenses | 576,795 | 490 | 3,136,602 | 535 |
Other Income and Expenses | ||||
Interest income - related party | 651 | 1,302 | ||
Interest expense - related party | (4,845) | (2,664) | (9,723) | (6,892) |
Total Other Income and Expenses | (4,845) | (2,013) | (9,723) | (5,590) |
Net Loss | $ (581,640) | $ (2,503) | $ (3,146,325) | $ (6,125) |
Weighted average Number of Common Shares Outstanding-Basic and Diluted | 238,808,190 | 233,474,958 | 249,092,405 | 233,474,958 |
Net Loss per share - Basic and Diluted | $ (0.00) | $ (0.00) | $ (0.01) | $ (0.00) |
Statements of Changes in Stockholders'Deficit - USD ($) |
Preferred Stock [Member] |
Common Stock [Member] |
Additional Paid-in Capital [Member] |
Stock Receivable [Member] |
Stock Payable [Member] |
Retained Earnings [Member] |
Total |
---|---|---|---|---|---|---|---|
Beginning balance, value at Jul. 31, 2020 | $ 23,347 | $ (12,097) | $ (118,651) | $ (107,401) | |||
Beginning balance, shares at Jul. 31, 2020 | 233,474,958 | ||||||
Net Loss | (3,622) | (3,622) | |||||
Ending balance, value at Oct. 31, 2020 | $ 23,347 | (12,097) | (122,273) | (111,023) | |||
Ending balance, shares at Oct. 31, 2020 | 233,474,958 | ||||||
Beginning balance, value at Jul. 31, 2020 | $ 23,347 | (12,097) | (118,651) | (107,401) | |||
Beginning balance, shares at Jul. 31, 2020 | 233,474,958 | ||||||
Net Loss | (6,125) | ||||||
Ending balance, value at Jan. 31, 2021 | $ 23,347 | (12,097) | (124,776) | (113,526) | |||
Ending balance, shares at Jan. 31, 2021 | 233,474,958 | ||||||
Beginning balance, value at Oct. 31, 2020 | $ 23,347 | (12,097) | (122,273) | (111,023) | |||
Beginning balance, shares at Oct. 31, 2020 | 233,474,958 | ||||||
Net Loss | (2,503) | (2,503) | |||||
Ending balance, value at Jan. 31, 2021 | $ 23,347 | (12,097) | (124,776) | (113,526) | |||
Ending balance, shares at Jan. 31, 2021 | 233,474,958 | ||||||
Beginning balance, value at Jul. 31, 2021 | $ 25,937 | (30,993) | (151,441) | (156,497) | |||
Beginning balance, shares at Jul. 31, 2021 | 259,376,620 | ||||||
Stock-Based Compensation | 2,528,922 | 2,528,922 | |||||
Net Loss | (2,564,685) | (2,564,685) | |||||
Ending balance, value at Oct. 31, 2021 | $ 25,937 | 2,497,929 | (2,712,024) | (192,260) | |||
Ending balance, shares at Oct. 31, 2021 | 259,376,620 | ||||||
Beginning balance, value at Jul. 31, 2021 | $ 25,937 | (30,993) | (151,441) | (156,497) | |||
Beginning balance, shares at Jul. 31, 2021 | 259,376,620 | ||||||
Net Loss | (3,146,325) | ||||||
Ending balance, value at Jan. 31, 2022 | $ 18 | $ 9,961 | 2,656,983 | (25,000) | 268 | (2,751,006) | (113,316) |
Ending balance, shares at Jan. 31, 2022 | 177,600 | 99,610,006 | |||||
Beginning balance, value at Oct. 31, 2021 | $ 25,937 | 2,497,929 | (2,712,024) | (192,260) | |||
Beginning balance, shares at Oct. 31, 2021 | 259,376,620 | ||||||
Stock-Based Compensation | 542,283 | 268 | 268 | ||||
Net Loss | (581,640) | (581,640) | |||||
Share Redemption | $ (16,343) | 16,180 | (163) | ||||
Share Redemption, shares | (163,432,468) | ||||||
Shares Issued for Financing | $ 18,127 | 124,969 | (25,000) | 118,095 | |||
Shares issued for Financing, shares | 181,266,236 | ||||||
Share Exchange | $ 18 | $ (17,760) | 17,742 | ||||
Share Exchange, shares | 177,600 | (177,600,382) | |||||
Ending balance, value at Jan. 31, 2022 | $ 18 | $ 9,961 | $ 2,656,983 | $ (25,000) | $ 268 | $ (2,751,006) | $ (113,316) |
Ending balance, shares at Jan. 31, 2022 | 177,600 | 99,610,006 |
Statements of Cash Flows (Unaudited) - USD ($) |
6 Months Ended | |
---|---|---|
Jan. 31, 2022 |
Jan. 31, 2021 |
|
Cash Flows from Operating Activities | ||
Net Loss | $ (3,146,325) | $ (6,125) |
Adjustments to reconcile net loss to net cash used in operating activities | ||
Amortization | 1,583 | 445 |
Stock based compensation | 3,071,573 | |
Change in Operating Assets and Liabilities: | ||
Interest Receivable from Related Party | (1,302) | |
Accrued expenses – related party | 9,722 | 6,892 |
Net Cash Used in Operating Activities | (63,447) | (90) |
Net Cash Provided by Financing Activities | ||
Proceeds from sale of stock | 118,096 | |
Net Cash Provided from Financing Activities | 118,096 | |
Net Change in Cash | 54,649 | (90) |
Cash at beginning of the Year | 53,178 | 523 |
Cash at end of the Year | 107,827 | 433 |
Supplemental disclosure of cash flow information: | ||
Cash paid for interest | ||
Cash paid for income taxes | ||
Supplemental disclosure for non-cash investing and financing activities: | ||
Share Exchange | 17,760 | |
Share Redemption | $ 163 |
Business Organization and Nature of Operations |
6 Months Ended | |||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jan. 31, 2022 | ||||||||||||||||||||||
Accounting Policies [Abstract] | ||||||||||||||||||||||
Business Organization and Nature of Operations | Note 1 – Business Organization and Nature of Operations
Descrypto Holdings, Inc. (the “Company”) was originally incorporated in Nevada in 1986. The Company reincorporated in Massachusetts in 1987 and reincorporated in Delaware in 1996 as IMSCO Technologies, Inc. In 2001, the Company changed its name to Global Sports and Entertainment, Inc. In 2002, the Company changed its name to GWINN, Inc. The Company changed its name to Winning Edge International, Inc. in 2006 and in 2007, the Company changed its name to W Technologies. On November 2, 2021, the Company filed with the Delaware Secretary of State a certificate of amendment to certificate of incorporation in order to change its corporate name, effective December 31, 2021, from W Technologies, Inc. to Descrypto Holdings, Inc. (the “Name Change”). The Name Change will not be effective for trading purposes, however, until it is cleared by the Financial Industry Regulatory Authority (FINRA).
On July 29, 2021, the Company entered into a share exchange agreement with KryptoBank Co. (“KryptoBank”) and its stockholders, pursuant to which the Company issued common stock representing % (shares) of the Company’s total issued and outstanding common stock in exchange for % interest in KryptoBank. KryptoBank was incorporated in Delaware on December 27, 2017. Pursuant to the terms of the exchange agreement, previous note holders were issued shares of common stock as settlement of the outstanding notes payable. As a result, KryptoBank became a wholly owned subsidiary of the Company and assumed net liabilities of $. This transaction was accounted for as a reverse merger by which KrytoBank is deemed to be the accounting acquirer. Consequently, the assets, liabilities and historical operations are those of KryptoBank. In November 2021, KryptoBank’s name was changed to Descrypto, Inc.
Subsequently, the Company entered into that certain Redemption Agreement (the “Redemption Agreement”), dated as of November 18, 2021, by and among the Company and the following stockholders of the Company: Balance Labs, Inc. (“Balance Labs”), Lyons Capital, LLC (“Lyons Capital”), Jessica Beren, 2018 Investor Trust, Aros, LLC, Rachel Jacobs and Avon Road Associates, LLC (collectively, the “Redeeming Stockholders”). Pursuant to the terms of the Redemption Agreement, the Redeeming Stockholders agreed to sell, and the Company agreed to purchase, an aggregate of shares of the Company’s common stock, representing % of the shares of common stock held by the Redeeming Stockholders, at a purchase price of $ per share (the “Redemption”).
On November 18, 2021, pursuant to the terms of the Redemption Agreement, the Company paid an aggregate of $163 to the Redeeming Stockholders in exchange for the transfer of a total of shares of common stock (the “Redeemed Shares”). As a result of the Redemption, the Redeemed Shares were cancelled and returned to the status of authorized and unissued shares of common stock.
Also on November 18, 2021, following the Redemption:
In addition, on November 18, 2021, the Board of Directors (the “Board”) of the Company increased the size of the Board from two members to four members and named Laura Anthony and Howard Gostfrand as directors of the Company to fill the newly created vacancies, to serve in such positions until their earlier respective death, resignation or removal from office. Ms. Anthony was also appointed Chairman of the Board. Ms. Anthony is the sole owner of Leone. Mr. Gostfrand is the sole owner of ACV. At the same time, the Board also appointed (i) Mr. Gostfrand to serve as Chief Executive Officer and Principal Financial Officer of the Company; and (ii) Ms. Anthony to serve as President and Secretary of the Company. Immediately thereafter, Aleksandr Rubin and Meir Wexler resigned as members of the Board and Mr. Rubin resigned from all officer positions with the Company.
As a result of the Redemption and the Share Purchases:
The Redemption, the Share Purchases and the officer and director changes discussed above resulted in a change in control of the Company.
We are a holding company that plans to identify and acquire uniquely positioned blockchain technology companies and digital assets with a focus on assets that that promote environmental, social and governance (“ESG”) policies. We are focused on digital financial services, NFTs and tokenization of assets which combined provide for a robust ecosystem providing our shareholders an opportunity to invest in an emerging industry with exponential growth opportunity. We aim to partner with best in-class teams and develop collaborative relationships to help execute their vision, drive sustainable growth, and ultimately create long-term value.
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Going Concern |
6 Months Ended |
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Jan. 31, 2022 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Going Concern | Note 2 – Going Concern
The financial statements have been prepared assuming the Company will continue as a going concern. The Company has experienced net losses since inception and used $63,447 of cash in operating activities for the six months ended January 31, 2022. The Company has an accumulated deficit of $3,297,766 and a working capital deficit of $136,179 as of January 31, 2022. The Company has relied on loans from founders to fund its operations. There is substantial doubt about the Company’s ability to continue as a going concern. The Company’s current operations cannot be sustained without additional funds. Management plans to raise additional capital within the next year ended that will sustain its operations going forward. In addition, the Company will begin an active marketing campaign to market its services. There can be no assurance that such a plan will be successful. The accompanying financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.
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Summary of Significant Accounting Policies |
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Jan. 31, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Significant Accounting Policies | Note 3 – Summary of Significant Accounting Policies
Basis of presentation
The Company’s unaudited consolidated financial statements and related disclosures for the six months ended January 31, 2022 and January 31, 2021, have been prepared using the accounting principles generally accepted in the United States (“GAAP”).
Reclassification
Certain prior year amounts have been reclassified to conform to the current period presentation. These reclassifications had no impact on net earnings and the financial position of the Company.
Principles of Consolidation
The accompanying financial statements reflect the consolidation of the individual financial statements of Descrypto Holdings, Inc. (formerly W Technologies, Inc.) and KryptoBank Co. All significant intercompany accounts and transactions have been eliminated.
Cash and Cash Equivalents
The Company considers all highly liquid temporary cash investments with an original maturity of six months or less to be cash equivalents. At January 31, 2022, and January 31, 2021 the Company had $107,827, and $433 in cash equivalents, respectively.
DESCRYPTO HOLDINGS, INC. (formerly W Technologies, Inc.) NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JANUARY 31, 2022 AND 2021
Use of Estimates
The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Estimates may include those pertaining to valuation and useful life of intangible assets and deferred tax assets. Actual results could materially differ from those estimates.
Revenue Recognition
The Company accounts for its revenues under the Financial Accounting Standards Board’s Accounting Standards Codification (“ASC”) 606, that requires revenue to be recognized in a manner to depict the transfer of goods or services to a customer at an amount that reflects the consideration expected to be received in exchange for those goods or services. The Company considers revenue realized or realizable and earned when all the five following criteria are met: (1) Identify the Contract with a Customer, (2) Identify the Performance Obligations in the Contract, (3) Determine the Transaction Price, (4) Allocate the Transaction Price to the Performance Obligations in the Contract, and (5) Recognize Revenue When (or As) the Entity Satisfies a Performance Obligation.
Income Taxes
The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of items that have been included or excluded in the financial statements or tax returns. Deferred tax assets and liabilities are determined on the basis of the difference between the tax basis of assets and liabilities and their respective financial reporting amounts (“temporary differences”) at enacted tax rates in effect for the years in which the temporary differences are expected to reverse.
The Company adopted the provisions of ASC Topic 740-10, which prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.
Management has evaluated and concluded that there are no material tax positions requiring recognition in the Company’s financial statements as of January 31, 2022, and 2021. The Company’s 2017, 2018, 2019 and 2020 tax returns are filed as part of consolidated tax returns of Balance Labs, Inc., a majority shareholder which remain open for audit for Federal and State taxing authorities.
The Company’s policy is to classify assessments, if any, for tax related interest as interest expense and penalties as general and administrative expenses in the statement of operations.
Investments
When the fair value of an investment is indeterminable, the Company accounts for its investments that are under 20% of the total equity outstanding using the cost method. For investments in which the Company holds between 20-50% equity and is non-controlling are accounted for using the equity method. For any investments in which the Company holds over 50% of the outstanding stock, the Company consolidates those entities into their financial statements herein. The Company holds one investment which it accounts for under the cost method. On November 9, 2018, the Company loaned $15,000 to iGrow Systems Inc, a related party. On October 15, 2019, the Company converted the note into shares of iGrow Systems Inc.’s common stock at a price of $ per share. This investment is recorded on our balance sheet using the cost method as of January 31, 2022 and January 31, 2021.
Financial instruments that potentially subject the Company to concentrations of credit risk primarily consist of cash, cash equivalents and marketable securities.
DESCRYPTO HOLDINGS, INC. (formerly W Technologies, Inc.) NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JANUARY 31, 2022 AND 2021
Basic and diluted loss per common share is computed by dividing net loss by the weighted average number of common shares and common share equivalents outstanding during the periods. As of January 31, 2022, and January 31, 2021, there were common share equivalents outstanding, respectively.
Fair Value of Financial Instruments
The Company measures its financial assets and liabilities in accordance with GAAP. For certain of our financial instruments, including cash, accounts payable, and the short-term debt, the carrying amounts approximate fair value due to their short maturities.
We adopted accounting guidance for financial and non-financial assets and liabilities (ASC 820). This standard defines fair value, provides guidance for measuring fair value and requires certain disclosures. This standard does not require any new fair value measurements, but rather applies to all other accounting pronouncements that require or permit fair value measurements. This guidance does not apply to measurements related to share-based payments. This guidance discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost). The guidance utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:
Advertising, Marketing and Promotional Costs
Advertising, marketing, and promotional expenses are expensed as incurred and are included in selling, general and administrative expenses on the accompanying statement of operations. For the six months ended January 31, 2022 and January 31, 2021 marketing, advertising and promotion expense was $0 and $0, respectively.
Property and equipment
Property and equipment consist of a website the Company developed in order to market its services.
Expenditures for repairs and maintenance of equipment are charged to expense as incurred. Major replacements and betterments are capitalized and depreciated over the remaining useful lives of the related assets.
Property and equipment as of January 31, 2022 and July 31, 2021 consisted of the following:
There were no additions during the six months ended January 31, 2022 and 2021, respectively. Amortization expense during the six months ended January 31, 2022, and 2021 were $1,583 and $445, respectively.
DESCRYPTO HOLDINGS, INC. (formerly W Technologies, Inc.) NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JANUARY 31, 2022 AND 2021
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Stockholders’ Equity |
6 Months Ended |
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Jan. 31, 2022 | |
Equity [Abstract] | |
Stockholders’ Equity | Note 4 – Stockholders’ Equity
Preferred Stock
The Company has authorized 48,800,000 shares of preferred stock remain undesignated. shares of preferred stock, $ par value per share. Of this amount,
The Company has designated an authorized Each share of Series A Preferred Stock is convertible at the election of the holder at any time into 1,000 shares of common stock; has the right to vote on as converted basis (1,000 votes per share); and will receive dividends and distributions to common shareholders on an as converted basis. shares of the preferred stock as Series A.
During the three months ended January 31, 2022, two board members and officers of the Company exchanged shares of common stock for shares of Series A Preferred shares.
Common Stock
The Company has authorized common shares with a par value of $ per share. Each common share entitles the holder to one vote on any matter on which action of the stockholders of the corporation is sought.
On November 18, 2021, the Company entered into a Redemption Agreement (the “Redemption Agreement”), dated as of November 18, 2021, by and among the Company and the following stockholders of the Company: Balance Labs, Lyons Capital, Jessica Beren, 2018 Investor Trust, Aros, LLC, Rachel Jacobs and Avon Road Associates, LLC (collectively, the “Redeeming Stockholders”). Pursuant to the terms of the Redemption Agreement, the Redeeming Stockholders agreed to sell, and the Company agreed to purchase, an aggregate of 163 owed to the former shareholders is recorded in accrued liabilities. shares of the Company’s common stock (the “Redeemed Shares”), representing % of the shares of common stock held by the Redeeming Stockholders, at a purchase price of $ per share (the “Redemption”). The redemption closed on November 18, 2021. As a result of the redemption, the redeemed shares were cancelled and returned to the status of authorized and unissued shares of common stock. The $
During the three months ended January 31, 2022, the Company sold 143,095. $ of the total proceeds from the sales of common stock was received subsequent to the period end and is recorded as a subscription receivable as of January 31, 2022. shares of common stock for total proceeds of $
On July 30, 2021, the Company entered into an employment agreement with an officer of the Company to grant 1% of the outstanding common stock on that date ( shares) to be earned over the following six-month period beginning on August 1st. In November 2021, the officer resigned his position with the Company and executed a termination agreement granting him shares in place of the shares granted in the employment agreement. As the shares were issued subsequent January 31, 2022, the shares were recorded as a stock payable.
On July 30, 2021, the Company entered into an employment agreement with an officer of the Company to grant 0.5% of the outstanding common stock on that date ( shares) to be earned over the following six-month period beginning on August 1st. As the shares were not issued as of January 31, 2022 but were fully earned as of that date, the shares were recorded as a stock payable.
Total stock compensation expense for the six months ended January 31, 2022, and 2021 was $ and $ , respectively.
DESCRYPTO HOLDINGS, INC. (formerly W Technologies, Inc.) NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JANUARY 31, 2022 AND 2021
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Related Party Transactions |
6 Months Ended |
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Jan. 31, 2022 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | Note 5 – Related Party Transactions
During fiscal year 2018, the Company loaned $15,000 to iGrow Systems Inc., a related party, as part of its initial funding. On July 15, 2019, the Company converted the $15,000 note into shares of iGrow Systems Inc.’s common stock at a price of $ per share. The investment is recorded on the Company’s balance sheet using the cost method of accounting.
During the twelve months ended July 31, 2021, a shareholder of the Company advanced a total of $16,306 in order to fund operations.
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Commitments and Contingencies |
6 Months Ended |
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Jan. 31, 2022 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Note 6 – Commitments and Contingencies
Litigation, Claims and Assessments
In the normal course of business, the Company may be involved in legal proceedings, claims and assessments arising in the ordinary course of business. Such matters are subject to many uncertainties, and outcomes are not predictable with assurance. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Company’s financial position or results of operations.
COVID-19
The coronavirus pandemic may adversely impact our operations and demand for our products and services and our ability to find new clients. This is due in part to restrictions such as: social distancing requirements; stay at home orders and the shutdown of non-essential businesses and the impact these restrictions have on small businesses and their ability to generate revenues which effects their ability to afford our services.
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Notes Payable – Related Party |
6 Months Ended |
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Jan. 31, 2022 | |
Debt Disclosure [Abstract] | |
Notes Payable – Related Party | Note 7 – Notes Payable – Related Party
The Company, as part of its initial funding, borrowed a total of $100,000 from its founders during the years ended December 31, 2018 and 2017. The notes have a stated interest rate of 12% compounded annually and are due on demand. The balance outstanding as of July 31, 2021 and January 31, 2022 is $112,167 and $112,167, respectively.
On June 29, 2021, the Company issued an unsecured promissory note in the amount of $25,000 to Balance Labs, Inc., a shareholder. The note carries an interest rate of 12% per annum and is due on the earlier of June 28, 2022 or the date on which the Company raises at least $200,000 from investors.
On July 9, 2021, the Company issued an unsecured promissory note in the amount of $25,000 to Lyons Capital LLC, a shareholder. The note carries an interest rate of 12% per annum and is due on the earlier of June 28, 2022, or the date on which the Company raises at least $200,000 from investors.
During the six months ended January 31, 2022 and 2021, the Company accrued interest of $9,722 and $6,892, respectively.
DESCRYPTO HOLDINGS, INC. (formerly W Technologies, Inc.) NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JANUARY 31, 2022 AND 2021
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Income Taxes | Note 8 – Income Taxes
On December 22, 2017, then-President Trump signed into law the Tax Cuts and Jobs Act (the “TCJA”) that significantly reformed the Internal Revenue Code of 1986, as amended. The TCJA, among other things, contains significant changes to corporate taxation, including reduction of the corporate tax rate from a top marginal rate of 35% to a flat rate of 21%, effective as of January 1, 2018; limitation of the tax deduction for interest expense; limitation of the deduction for net operating losses to 80% of current year taxable income and elimination of net operating loss carrybacks, in each case, for losses arising in taxable years beginning after December 31, 2017 (though any such tax losses may be carried forward indefinitely); modifying or repealing many business deductions and credits, including reducing the business tax credit for certain clinical testing expenses incurred in the testing of certain drugs for rare diseases or conditions generally referred to as “orphan drugs”; and repeal of the federal alternative minimum tax.
The Company files its tax returns as part of Balance Labs’ consolidated tax returns. The Company has the following net deferred tax asset:
As of January 31, 2022, the Company had $2,751,006 of net operating loss carryovers, which will be carried forward indefinitely subject to limitations. The valuation allowance increased by approximately $34,920 for the three months ended January 31, 2022, and $2,503 for the three months ended January 31, 2021.
A reconciliation of the statutory federal income tax rate to the Company’s effective tax rate is as follows:
The Company, after considering all available evidence, fully reserved its deferred tax assets since it is more likely than not that such benefits may be realized in future periods. The Company has not yet established that it can generate taxable income. The Company will continue to evaluate its deferred tax assets to determine whether any changes in circumstances could affect the realization of their future benefit. If it is determined in future periods that portions of the Company’s deferred tax assets satisfy the realization standards, the valuation allowance will be reduced accordingly.
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Subsequent Events |
6 Months Ended |
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Jan. 31, 2022 | |
Subsequent Events [Abstract] | |
Subsequent Events | Note 9 – Subsequent Events
In February 2022, the Company received $25,000 from an investor relieving the subscription receivable.
In February 2022, the Company redeemed shares of common stock from shareholders for an aggregate purchase price of $ . |
Summary of Significant Accounting Policies (Policies) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||
Basis of presentation | Basis of presentation
The Company’s unaudited consolidated financial statements and related disclosures for the six months ended January 31, 2022 and January 31, 2021, have been prepared using the accounting principles generally accepted in the United States (“GAAP”).
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Reclassification | Reclassification
Certain prior year amounts have been reclassified to conform to the current period presentation. These reclassifications had no impact on net earnings and the financial position of the Company.
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Principles of Consolidation | Principles of Consolidation
The accompanying financial statements reflect the consolidation of the individual financial statements of Descrypto Holdings, Inc. (formerly W Technologies, Inc.) and KryptoBank Co. All significant intercompany accounts and transactions have been eliminated.
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Cash and Cash Equivalents | Cash and Cash Equivalents
The Company considers all highly liquid temporary cash investments with an original maturity of six months or less to be cash equivalents. At January 31, 2022, and January 31, 2021 the Company had $107,827, and $433 in cash equivalents, respectively.
DESCRYPTO HOLDINGS, INC. (formerly W Technologies, Inc.) NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JANUARY 31, 2022 AND 2021
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Use of Estimates | Use of Estimates
The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Estimates may include those pertaining to valuation and useful life of intangible assets and deferred tax assets. Actual results could materially differ from those estimates.
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Revenue Recognition | Revenue Recognition
The Company accounts for its revenues under the Financial Accounting Standards Board’s Accounting Standards Codification (“ASC”) 606, that requires revenue to be recognized in a manner to depict the transfer of goods or services to a customer at an amount that reflects the consideration expected to be received in exchange for those goods or services. The Company considers revenue realized or realizable and earned when all the five following criteria are met: (1) Identify the Contract with a Customer, (2) Identify the Performance Obligations in the Contract, (3) Determine the Transaction Price, (4) Allocate the Transaction Price to the Performance Obligations in the Contract, and (5) Recognize Revenue When (or As) the Entity Satisfies a Performance Obligation.
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Income Taxes | Income Taxes
The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of items that have been included or excluded in the financial statements or tax returns. Deferred tax assets and liabilities are determined on the basis of the difference between the tax basis of assets and liabilities and their respective financial reporting amounts (“temporary differences”) at enacted tax rates in effect for the years in which the temporary differences are expected to reverse.
The Company adopted the provisions of ASC Topic 740-10, which prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.
Management has evaluated and concluded that there are no material tax positions requiring recognition in the Company’s financial statements as of January 31, 2022, and 2021. The Company’s 2017, 2018, 2019 and 2020 tax returns are filed as part of consolidated tax returns of Balance Labs, Inc., a majority shareholder which remain open for audit for Federal and State taxing authorities.
The Company’s policy is to classify assessments, if any, for tax related interest as interest expense and penalties as general and administrative expenses in the statement of operations.
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Investments | Investments
When the fair value of an investment is indeterminable, the Company accounts for its investments that are under 20% of the total equity outstanding using the cost method. For investments in which the Company holds between 20-50% equity and is non-controlling are accounted for using the equity method. For any investments in which the Company holds over 50% of the outstanding stock, the Company consolidates those entities into their financial statements herein. The Company holds one investment which it accounts for under the cost method. On November 9, 2018, the Company loaned $15,000 to iGrow Systems Inc, a related party. On October 15, 2019, the Company converted the note into shares of iGrow Systems Inc.’s common stock at a price of $ per share. This investment is recorded on our balance sheet using the cost method as of January 31, 2022 and January 31, 2021.
Financial instruments that potentially subject the Company to concentrations of credit risk primarily consist of cash, cash equivalents and marketable securities.
DESCRYPTO HOLDINGS, INC. (formerly W Technologies, Inc.) NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JANUARY 31, 2022 AND 2021
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Net Loss Per Common Share |
Basic and diluted loss per common share is computed by dividing net loss by the weighted average number of common shares and common share equivalents outstanding during the periods. As of January 31, 2022, and January 31, 2021, there were common share equivalents outstanding, respectively.
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Fair Value of Financial Instruments | Fair Value of Financial Instruments
The Company measures its financial assets and liabilities in accordance with GAAP. For certain of our financial instruments, including cash, accounts payable, and the short-term debt, the carrying amounts approximate fair value due to their short maturities.
We adopted accounting guidance for financial and non-financial assets and liabilities (ASC 820). This standard defines fair value, provides guidance for measuring fair value and requires certain disclosures. This standard does not require any new fair value measurements, but rather applies to all other accounting pronouncements that require or permit fair value measurements. This guidance does not apply to measurements related to share-based payments. This guidance discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost). The guidance utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:
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Advertising, Marketing and Promotional Costs | Advertising, Marketing and Promotional Costs
Advertising, marketing, and promotional expenses are expensed as incurred and are included in selling, general and administrative expenses on the accompanying statement of operations. For the six months ended January 31, 2022 and January 31, 2021 marketing, advertising and promotion expense was $0 and $0, respectively.
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Property and equipment | Property and equipment
Property and equipment consist of a website the Company developed in order to market its services.
Expenditures for repairs and maintenance of equipment are charged to expense as incurred. Major replacements and betterments are capitalized and depreciated over the remaining useful lives of the related assets.
Property and equipment as of January 31, 2022 and July 31, 2021 consisted of the following:
There were no additions during the six months ended January 31, 2022 and 2021, respectively. Amortization expense during the six months ended January 31, 2022, and 2021 were $1,583 and $445, respectively.
DESCRYPTO HOLDINGS, INC. (formerly W Technologies, Inc.) NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JANUARY 31, 2022 AND 2021
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Summary of Significant Accounting Policies (Tables) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||
Schedule of Property, Plant and Equipment | Property and equipment as of January 31, 2022 and July 31, 2021 consisted of the following:
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Income Taxes (Tables) |
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Schedule of Deferred Tax Assets and Liabilities |
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Schedule of Effective Income Tax Rate Reconciliation | A reconciliation of the statutory federal income tax rate to the Company’s effective tax rate is as follows:
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Going Concern (Details Narrative) - USD ($) |
6 Months Ended | ||
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Jan. 31, 2022 |
Jan. 31, 2021 |
Jul. 31, 2021 |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||
Net Cash Provided by (Used in) Operating Activities | $ 63,447 | $ 90 | |
Retained Earnings (Accumulated Deficit) | 3,297,766 | $ 151,441 | |
Working capital | $ 136,179 |
Schedule of Property, Plant and Equipment (Details) - USD ($) |
Jan. 31, 2022 |
Jul. 31, 2021 |
---|---|---|
Accounting Policies [Abstract] | ||
Website | $ 10,836 | $ 10,836 |
Less Accumulated Amortization | (2,974) | (1,391) |
Property and Equipment, net | $ 7,862 | $ 9,445 |
Summary of Significant Accounting Policies (Details Narrative) - USD ($) |
6 Months Ended | 12 Months Ended | ||||
---|---|---|---|---|---|---|
Jul. 15, 2019 |
Nov. 09, 2018 |
Jan. 31, 2022 |
Jan. 31, 2021 |
Jul. 31, 2018 |
Oct. 15, 2019 |
|
Defined Benefit Plan Disclosure [Line Items] | ||||||
Cash equivalents | $ 107,827 | $ 433 | ||||
Investment, description | When the fair value of an investment is indeterminable, the Company accounts for its investments that are under 20% of the total equity outstanding using the cost method. For investments in which the Company holds between 20-50% equity and is non-controlling are accounted for using the equity method. For any investments in which the Company holds over 50% of the outstanding stock, the Company consolidates those entities into their financial statements herein | |||||
Anti-dilutive securities | 0 | 0 | ||||
Marketing and promotion expense | $ 0 | $ 0 | ||||
Property and equipment, additions | 0 | 0 | ||||
Amortization expense | $ 1,583 | $ 445 | ||||
I Grow Systems Inc [Member] | ||||||
Defined Benefit Plan Disclosure [Line Items] | ||||||
Investment owned, balance shares | $ 15,000 | $ 15,000 | $ 15,000 | |||
Investment owned, balance shares | 150,000 | 150,000 | ||||
Share price | $ 0.10 | $ 0.10 |
Related Party Transactions (Details Narrative) - USD ($) |
12 Months Ended | ||||
---|---|---|---|---|---|
Jul. 15, 2019 |
Nov. 09, 2018 |
Jul. 31, 2021 |
Jul. 31, 2018 |
Oct. 15, 2019 |
|
Related Party Transaction [Line Items] | |||||
Proceeds from related party | $ 16,306 | ||||
I Grow Systems Inc [Member] | |||||
Related Party Transaction [Line Items] | |||||
Payments to acquire notes receivable | $ 15,000 | $ 15,000 | $ 15,000 | ||
Investment owned, balance shares | 150,000 | 150,000 | |||
Share price | $ 0.10 | $ 0.10 |
Notes Payable – Related Party (Details Narrative) - USD ($) |
6 Months Ended | 12 Months Ended | |||||
---|---|---|---|---|---|---|---|
Jul. 09, 2021 |
Jun. 29, 2021 |
Jan. 31, 2022 |
Jan. 31, 2021 |
Dec. 31, 2018 |
Dec. 31, 2017 |
Jul. 31, 2021 |
|
Short-term Debt [Line Items] | |||||||
Proceeds from loan | $ 100,000 | $ 100,000 | |||||
Debt instrument, interest rate, stated percentage | 12.00% | ||||||
Notes payable related parties | $ 112,167 | $ 112,167 | |||||
Accrued interest | $ 9,722 | $ 6,892 | |||||
Unsecured promissory note [Member] | Balance labs [Member] | |||||||
Short-term Debt [Line Items] | |||||||
Debt instrument, interest rate, stated percentage | 12.00% | ||||||
Debt instrument, face amount | $ 25,000 | ||||||
Debt instrument, maturity date | Jun. 28, 2022 | ||||||
Proceeds from unsecured debt | $ 200,000 | ||||||
Unsecured promissory note [Member] | Lyons capital LLC [Member] | |||||||
Short-term Debt [Line Items] | |||||||
Debt instrument, interest rate, stated percentage | 12.00% | ||||||
Debt instrument, face amount | $ 25,000 | ||||||
Debt instrument, maturity date | Jun. 28, 2022 | ||||||
Proceeds from unsecured debt | $ 200,000 |
Schedule of Deferred Tax Assets and Liabilities (Details) - USD ($) |
Jan. 31, 2022 |
Jan. 31, 2021 |
---|---|---|
Income Tax Disclosure [Abstract] | ||
Net operating loss carryforward | $ 74,752 | $ 31,166 |
Valuation allowance | (74,752) | (31,166) |
Net deferred tax assets |
Schedule of Effective Income Tax Rate Reconciliation (Details) |
3 Months Ended | 6 Months Ended | |
---|---|---|---|
Jan. 31, 2022 |
Jan. 31, 2021 |
Jan. 31, 2022 |
|
Income Tax Disclosure [Abstract] | |||
Expected federal statutory rate | (21.00%) | (21.00%) | (21.00%) |
State Effect on tax rate, net of federal benefit | (4.35%) | (4.35%) | |
Change in valuation allowance | 25.35% | 25.35% | |
Income tax provision (benefit) | (0.00%) | (0.00%) |
Income Taxes (Details Narrative) - USD ($) |
3 Months Ended | 6 Months Ended | |
---|---|---|---|
Jan. 31, 2022 |
Jan. 31, 2021 |
Jan. 31, 2022 |
|
Income Tax Disclosure [Abstract] | |||
Income taxes, description | On December 22, 2017, then-President Trump signed into law the Tax Cuts and Jobs Act (the “TCJA”) that significantly reformed the Internal Revenue Code of 1986, as amended. The TCJA, among other things, contains significant changes to corporate taxation, including reduction of the corporate tax rate from a top marginal rate of 35% to a flat rate of 21%, effective as of January 1, 2018; limitation of the tax deduction for interest expense; limitation of the deduction for net operating losses to 80% of current year taxable income and elimination of net operating loss carrybacks, in each case, for losses arising in taxable years beginning after December 31, 2017 | ||
Effective federal statutory rate | 21.00% | 21.00% | 21.00% |
Operating loss carryforwards | $ 2,751,006 | $ 2,751,006 | |
Operating loss carryforwards, valuation allowance | $ 34,920 | $ 2,503 | $ 34,920 |
Subsequent Events (Details Narrative) - USD ($) |
1 Months Ended | 3 Months Ended | 12 Months Ended |
---|---|---|---|
Feb. 28, 2022 |
Jan. 31, 2022 |
Jul. 31, 2021 |
|
Subsequent Event [Line Items] | |||
Proceeds from related party debt | $ 16,306 | ||
Aggregate purchase price | $ (163) | ||
Subsequent Event [Member] | |||
Subsequent Event [Line Items] | |||
Proceeds from related party debt | $ 25,000 | ||
Subsequent Event [Member] | Shareholders [Member] | |||
Subsequent Event [Line Items] | |||
Number of common stock redeemed | 77,382,494 | ||
Aggregate purchase price | $ 774 |
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