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 December 14, 2022, there were shares of common stock, par value $0.0001, issued and outstanding.
Table of Contents
| 2 |
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 Annual Report on Form 10-K for the year ended July 31, 2022, filed with the Securities and Exchange Commission on October 31, 2022, 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.
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PART I—FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
OpenLocker Holdings, Inc. (f/k/a Descrypto Holdings, Inc.) and Subsidiary
| 4 |
OpenLocker Holdings, Inc. (f/k/a Descrypto Holdings, Inc.) and Subsidiary
Consolidated Balance Sheets
| October 31, 2022 | July 31, 2022 | |||||||
| Assets | ||||||||
| Current Assets | ||||||||
| Cash | $ | $ | ||||||
| Total Current Assets | ||||||||
| Website - net | ||||||||
| Other Assets | ||||||||
| Operating lease - right-of-use asset - related party | ||||||||
| Investment | ||||||||
| Intangible asset - net | ||||||||
| Goodwill | ||||||||
| Total Other Assets | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current Liabilities | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Operating lease liability - related party | ||||||||
| Total Current Liabilities | ||||||||
| Operating lease liability - related party | ||||||||
| Total Liabilities | ||||||||
| Commitments and Contingencies | ||||||||
| Stockholders’ Equity | ||||||||
| Series A, preferred stock - $ par value shares authorized, and shares issued and outstanding, respectively | ||||||||
| Common stock - $ par value, shares authorized and shares issued and outstanding, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Equity | ||||||||
| Total Liabilities and Stockholders’ Equity | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements
| 5 |
OpenLocker Holdings, Inc. (f/k/a Descrypto Holdings, Inc.) and Subsidiary
Consolidated Statements of Operations
(Unaudited)
| For the Three Months Ended October 31, | ||||||||
| 2022 | 2021 | |||||||
| Revenues | $ | $ | ||||||
| Operating expenses | ||||||||
| Research and development | ||||||||
| General and administrative expenses | ||||||||
| Total operating expenses | ||||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Other income (expense) | ||||||||
| Interest expense - related party | ( | ) | ||||||
| Total other income (expense) - net | ( | ) | ||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Loss per share - basic and diluted | $ | ( | ) | $ | ( | ) | ||
| Weighted average number of shares outstanding - basic and diluted | ||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements
| 6 |
OpenLocker Holdings, Inc. (f/k/a Descrypto Holdings, Inc.) and Subsidiary
Consolidated Statements of Changes in Stockholders’ Equity
For the Three Months Ended October 31, 2022
(Unaudited)
| Series A, Preferred Stock | Common Stock | Additional Paid-in |
Accumulated | Total Stockholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||||||||
| July 31, 2022 | $ | | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||
| Stock issued for cash - preferred stock - related parties | - | |||||||||||||||||||||||||||
| Stock issued for cash - common stock | - | |||||||||||||||||||||||||||
| Stock issued for services | - | |||||||||||||||||||||||||||
| Recognition of stock based compensation | - | - | ||||||||||||||||||||||||||
| Contributed capital - related parties | - | - | ||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| October 31, 2022 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements
| 7 |
OpenLocker Holdings, Inc. (f/k/a Descrypto Holdings, Inc.) and Subsidiary
Consolidated Statements of Changes in Stockholders’ Deficit
For the Three Months Ended October 31, 2021
(Unaudited)
| Common Stock | Additional Paid-in |
Accumulated | Total Stockholders’ | |||||||||||||||||
| Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||
| July 31, 2021 | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||
| Recognition of stock based compensation | - | |||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| October 31, 2021 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements
| 8 |
OpenLocker Holdings, Inc. (f/k/a Descrypto Holdings, Inc.) and Subsidiary
Consolidated Statements of Cash Flows
(Unaudited)
| For the Three Months Ended October 31, | ||||||||
| 2022 | 2021 | |||||||
| Operating activities | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operations | ||||||||
| Amortization - intangible asset (intellectual property) | ||||||||
| Amortization - website | ||||||||
| Amortization of operating lease right-of-use asset - related party | ||||||||
| Recognition of stock based compensation | ||||||||
| Stock issued for services | ||||||||
| Changes in operating assets and liabilities | ||||||||
| Increase (decrease) in | ||||||||
| Accounts payable and accrued expenses | ||||||||
| Accounts payable and accrued expenses - related parties | ||||||||
| Operating lease liability - related party | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Financing activities | ||||||||
| Stock issued for cash - preferred stock - related parties | ||||||||
| Stock issued for cash - common stock | ||||||||
| Contributed capital | ||||||||
| Net cash provided by financing activities | ||||||||
Net decrease in cash | ( | ) | ( | ) | ||||
| Cash - beginning of period | ||||||||
| Cash - end of period | $ | $ | ||||||
| Supplemental disclosure of cash flow information | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for income tax | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements
| 9 |
OPENLOCKER HOLDINGS, INC. (F/K/A DESCRYPTO HOLDINGS, INC.) AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2022
(UNAUDITED)
Note 1 – Organization, Nature of Operations and Going Concern
Organization and Nature of Operations
OpenLocker Holdings, Inc., formerly known as Descrypto Holdings, Inc., and Subsidiary (collectively, “we,” “us,” “our” or the “Company”) is a holding company that plans to identify and acquire uniquely positioned blockchain technology companies and digital assets with a focus on assets 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.
The parent (OpenLocker Holdings, Inc., formerly known as Descrypto Holdings, Inc.) and subsidiary are organized as follows:
| Company Name | Incorporation Date | State of Incorporation | ||
| OpenLocker Holdings, Inc. | ||||
| Descrypto, Inc. | * | |||
| Descrypto Studio, LLC | ||||
| Open Locker, Inc. | ** |
| * | ||
| ** |
| *** |
Reverse Merger
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 OpenLocker, Inc.
| 10 |
OPENLOCKER HOLDINGS, INC. (F/K/A DESCRYPTO HOLDINGS, INC.) AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2022
(UNAUDITED)
Going Concern and Management’s Plans
These consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business.
As reflected in the accompanying consolidated financial statements, for the three months ended October 31, 2022, the Company had:
| ● | Net
loss of $ |
| ● | Net
cash used in operations of $ |
Additionally, at October 31, 2022, the Company had:
| ● | Accumulated
deficit of $ |
| ● | Stockholders’
equity of $ |
| ● | Working
capital of $ |
We
manage liquidity risk by reviewing, on an ongoing basis, our sources of liquidity and capital requirements. The Company has cash on hand
of $
The Company has incurred significant losses since its inception and has not demonstrated an ability to generate sufficient revenues to achieve profitable operations. There can be no assurance that profitable operations will ever be achieved, or if achieved, could be sustained on a continuing basis. In making this assessment we performed a comprehensive analysis of our current circumstances including: our financial position, our cash flows and cash usage forecasts for the twelve months ended October 31, 2023, and our current capital structure including equity-based instruments and our obligations and debts.
The Company has satisfied its obligations from the issuance of common stock; however, there is no assurance that such successful efforts will continue during the twelve months subsequent to the date these consolidated financial statements are issued.
If the Company does not obtain additional capital, the Company will be required to reduce the scope of its business development activities or cease operations. The Company continues to explore obtaining additional capital financing and the Company is closely monitoring its cash balances, cash needs, and expense levels.
| 11 |
OPENLOCKER HOLDINGS, INC. (F/K/A DESCRYPTO HOLDINGS, INC.) AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2022
(UNAUDITED)
These factors create substantial doubt about the Company’s ability to continue as a going concern within the twelve-month period subsequent to the date that these consolidated financial statements are issued. The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. Accordingly, the consolidated financial statements have been prepared on a basis that assumes the Company will continue as a going concern and which contemplates the realization of assets and satisfaction of liabilities and commitments in the ordinary course of business.
Management’s strategic plans include the following:
| ● | Pursuing additional capital raising opportunities, |
| ● | Continuing to explore and execute prospective partnering or distribution opportunities; |
| ● | Identifying strategic acquisitions; and |
| ● | Identifying unique market opportunities that represent potential positive short- term cash flow. |
During the three months ended October 31, 2022, the Company’s financial results and operations were not materially adversely impacted by the COVID-19 pandemic. The extent to which the Company’s future financial results could be impacted by the COVID-19 pandemic depends on future developments that are highly uncertain and cannot be predicted at this time. The Company is not aware of any specific event or circumstance that would require an update to its estimates or judgments or a revision of the carrying value of its assets or liabilities.
These estimates may change, as new events occur, and additional information is obtained. Actual results could differ materially from these estimates under different assumptions or conditions.
To date, the Company has not experienced any significant economic impact due to COVID- 19.
| 12 |
OPENLOCKER HOLDINGS, INC. (F/K/A DESCRYPTO HOLDINGS, INC.) AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2022
(UNAUDITED)
Note 2 - Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial statements (“U.S. GAAP”) and with the instructions to Form 10-Q and Article 8 of Regulation S-X of the United States Securities and Exchange Commission (“SEC”). Accordingly, they do not contain all information and footnotes required by accounting principles generally accepted in the United States of America for annual financial statements.
In the opinion of the Company’s management, the accompanying unaudited consolidated financial statements contain all of the adjustments necessary (consisting only of normal recurring accruals) to present the financial position of the Company as of October 31, 2022 and the results of operations and cash flows for the periods presented. The results of operations for the three months ended October 31, 2022 are not necessarily indicative of the operating results for the full fiscal year or any future period.
These unaudited consolidated financial statements should be read in conjunction with the financial statements and related notes thereto included in the Company’s Annual Report on Form 10-K for the period ended July 31, 2022 filed with the SEC on October 31, 2022.
Management acknowledges its responsibility for the preparation of the accompanying unaudited consolidated financial statements which reflect all adjustments, consisting of normal recurring adjustments, considered necessary in its opinion for a fair statement of its consolidated financial position and the consolidated results of its operations for the periods presented.
Principles of Consolidation
These consolidated financial statements have been prepared in accordance with U.S. GAAP and include the accounts of the Company and its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated.
| 13 |
OPENLOCKER HOLDINGS, INC. (F/K/A DESCRYPTO HOLDINGS, INC.) AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2022
(UNAUDITED)
Business Combinations
The Company accounts for business combinations using the acquisition method in accordance with Accounting Standards Codification, ASC 805, Business Combinations which requires recognition of assets acquired and liabilities assumed, including contingent assets and liabilities, at their respective fair values on the date of acquisition.
Business Segments and Concentrations
The Company uses the “management approach” to identify its reportable segments. The management approach requires companies to report segment financial information consistent with information used by management for making operating decisions and assessing performance as the basis for identifying the Company’s reportable segments. The Company manages its business as a single operating segment.
Use of Estimates
Preparing financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reported period. Actual results could differ from those estimates, and those estimates may be material.
Fair Value of Financial Instruments
The Company accounts for financial instruments under Financial Accounting Standards Board (“FASB”) ASC 820, Fair Value Measurements. ASC 820 provides a framework for measuring fair value and requires disclosures regarding fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, based on the Company’s principal or, in absence of a principal, most advantageous market for the specific asset or liability.
| 14 |
OPENLOCKER HOLDINGS, INC. (F/K/A DESCRYPTO HOLDINGS, INC.) AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2022
(UNAUDITED)
The Company uses a three-tier fair value hierarchy to classify and disclose all assets and liabilities measured at fair value on a recurring basis, as well as assets and liabilities measured at fair value on a non-recurring basis, in periods subsequent to their initial measurement. The hierarchy requires the Company to use observable inputs when available, and to minimize the use of unobservable inputs, when determining fair value.
The three tiers are defined as follows:
| ● | Level 1 —Observable inputs that reflect quoted market prices (unadjusted) for identical assets or liabilities in active markets; | |
| ● | Level 2—Observable inputs other than quoted prices in active markets that are observable either directly or indirectly in the marketplace for identical or similar assets and liabilities; and | |
| ● | Level 3—Unobservable inputs that are supported by little or no market data, which require the Company to develop its own assumptions. |
The determination of fair value and the assessment of a measurement’s placement within the hierarchy requires judgment. Level 3 valuations often involve a higher degree of judgment and complexity. Level 3 valuations may require the use of various cost, market, or income valuation methodologies applied to unobservable management estimates and assumptions. Management’s assumptions could vary depending on the asset or liability valued and the valuation method used. Such assumptions could include estimates of prices, earnings, costs, actions of market participants, market factors, or the weighting of various valuation methods. The Company may also engage external advisors to assist us in determining fair value, as appropriate.
Although the Company believes that the recorded fair value of our financial instruments is appropriate, these fair values may not be indicative of net realizable value or reflective of future fair values.
The Company’s financial instruments, including cash, and accounts payable and accrued expenses, are carried at historical cost. At July 31, 2022 and 2021, respectively, the carrying amounts of these instruments approximated their fair values because of the short-term nature of these instruments.
ASC 825-10 “Financial Instruments” allows entities to voluntarily choose to measure certain financial assets and liabilities at fair value (“fair value option”). The fair value option may be elected on an instrument-by-instrument basis and is irrevocable unless a new election date occurs. If the fair value option is elected for an instrument, unrealized gains and losses for that instrument should be reported in earnings at each subsequent reporting date. The Company did not elect to apply the fair value option to any outstanding financial instruments.
| 15 |
OPENLOCKER HOLDINGS, INC. (F/K/A DESCRYPTO HOLDINGS, INC.) AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2022
(UNAUDITED)
Cash and Cash Equivalents
For purposes of the consolidated statements of cash flows, the Company considers all highly liquid instruments with a maturity of three months or less at the purchase date and money market accounts to be cash equivalents.
At October 31, 2022 and July 31, 2022, respectively, the Company did not have any cash equivalents.
The
Company is exposed to credit risk on its cash and cash equivalents in the event of default by the financial institutions to the extent
account balances exceed the amount insured by the FDIC, which is $
Investment
The
Company owns shares of iGrow Systems Inc. The shares are valued at cost $
Goodwill and Impairment
In financial reporting, goodwill is not amortized, but is tested for impairment annually or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Events that result in an impairment review include significant changes in the business climate, declines in our operating results, or an expectation that the carrying amount may not be recoverable. We assess potential impairment by considering present economic conditions as well as future expectations. All assessments of goodwill impairment are conducted at the individual reporting unit level.
The Company uses qualitative factors according to ASC 350-20-35-3 to determine whether it is more likely than not that the fair value of goodwill is less than its carrying amount. During the three months ended October 31, 2022 and 2021, the Company determined there were no impairments of goodwill.
| 16 |
OPENLOCKER HOLDINGS, INC. (F/K/A DESCRYPTO HOLDINGS, INC.) AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2022
(UNAUDITED)
Intangible Assets and Impairment
Definite-lived intangible assets are amortized on a straight-line basis over their estimated useful lives. Indefinite-lived intangible assets are reviewed for impairment annually. The Company reviews definite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
There were no impairment losses for the three months ended October 31, 2022 and 2021, respectively.
Impairment of Long-lived Assets
Management evaluates the recoverability of the Company’s identifiable intangible assets and other long-lived assets when events or circumstances indicate a potential impairment exists, in accordance with the provisions of ASC 360-10-35-15 “Impairment or Disposal of Long-Lived Assets.”
If impairment is indicated based on a comparison of the assets’ carrying values and the undiscounted cash flows, the impairment to be recognized is measured as the amount by which the carrying amount of the assets exceeds the fair value of the assets.
There were no impairment losses for the three months ended October 31, 2022 and 2021, respectively.
Property and Equipment
Property and equipment is stated at cost less accumulated depreciation. Depreciation is provided on the straight-line basis over the estimated useful lives of the assets.
Expenditures for repair and maintenance which do not materially extend the useful lives of property and equipment are charged to operations. When property or equipment is sold or otherwise disposed of, the cost and related accumulated depreciation are removed from the respective accounts with the resulting gain or loss reflected in operations.
Management reviews the carrying value of its property and equipment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable.
There were no impairment losses for the three months ended October 31, 2022 and 2021, respectively.
| 17 |
OPENLOCKER HOLDINGS, INC. (F/K/A DESCRYPTO HOLDINGS, INC.) AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2022
(UNAUDITED)
Operating Lease
From time to time, we may enter into operating lease or sub-lease agreements, including our corporate headquarters. We account for leases in accordance with ASC Topic 842: Leases, which requires a lessee to utilize the right-of-use model and to record a right- of-use asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases are classified as either financing or operating, with classification affecting the pattern of expense recognition in the statement of operations. In addition, a lessor is required to classify leases as either sales-type, financing or operating. A lease will be treated as a sale if it transfers all of the risks and rewards, as well as control of the underlying asset, to the lessee. If risks and rewards are conveyed without the transfer of control, the lease is treated as financing. If the lessor does not convey risk and rewards or control, the lease is treated as operating. We determine if an arrangement is a lease, or contains a lease, at inception and record the lease in our financial statements upon lease commencement, which is the date when the underlying asset is made available for use by the lessor.
Right-of-use assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments over the lease term. Lease right- of-use assets and liabilities at commencement are initially measured at the present value of lease payments over the lease term. We generally use our incremental borrowing rate based on the information available at commencement to determine the present value of lease payments except when an implicit interest rate is readily determinable. We determine our incremental borrowing rate based on market sources including relevant industry data.
We may have lease agreements with lease and non-lease components and have elected to utilize the practical expedient to account for lease and non-lease components together as a single combined lease component, from both a lessee and lessor perspective with the exception of direct sales-type leases and production equipment classes embedded in supply agreements. From a lessor perspective, the timing and pattern of transfer are the same for the non-lease components and associated lease component and, the lease component, if accounted for separately, would be classified as an operating lease.
We have elected not to present short-term leases on the balance sheet as these leases have a lease term of 12 months or less at lease inception and do not contain purchase options or renewal terms that we are reasonably certain to exercise. All other lease assets and lease liabilities are recognized based on the present value of lease payments over the lease term at commencement date. Because most of our leases do not provide an implicit rate of return, we used our incremental borrowing rate based on the information available at lease commencement date in determining the present value of lease payments.
| 18 |
OPENLOCKER HOLDINGS, INC. (F/K/A DESCRYPTO HOLDINGS, INC.) AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2022
(UNAUDITED)
Our leases, where we are the lessee, do not include an option to extend the lease term. Our lease does not include an option to terminate the lease prior to the end of the agreed upon lease term. For purposes of calculating lease liabilities, lease term would include options to extend or terminate the lease when it is reasonably certain that we will exercise such options.
Lease expense for operating leases is recognized on a straight-line basis over the lease term as an operating expense, included as a component of general and administrative expenses, in the accompanying consolidated statements of operations.
Certain operating leases provide for annual increases to lease payments based on an index or rate, our lease has no stated increase, payments were fixed at lease inception. We calculate the present value of future lease payments based on the index or rate at the lease commencement date. Differences between the calculated lease payment and actual payment are expensed as incurred.
See Note 9.
Revenue Recognition
OpenLocker generates revenue from two main sources, primary sales of NFTs on its online store and commissions collected from sales on the secondary marketplace.
Revenue is recognized in accordance with FASB Topic ASC No. 606, “Revenue from Contracts with Customers”. The Company recognizes revenue when its performance obligations are complete, which occurs at a point in time related to the transfer of an NFT to its customer. Currently, all sales contain a single performance obligation.
| 19 |
OPENLOCKER HOLDINGS, INC. (F/K/A DESCRYPTO HOLDINGS, INC.) AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2022
(UNAUDITED)
All payments are received from third-party payment processing providers. The Company receives payments from sales on its primary marketplace (Shopify site) as well as two other sources. Each of these sources of payment relate to the completion of a single performance obligation completed at a point in time, which occurs upon the transfer of an NFT and where no further performance obligations are required:
| ● | Shopify payouts from credit/debit cards transactions typically occur 2-3 days after date of sale, |
| ● | PayPal payments are received same day; and |
| ● | Cryptocurrency payments are deposited immediately into OpenLocker’s Coin Payments account. |
The Company also recognizes revenues generated from the 5% commission fee collected on secondary marketplace sales transacted on the OpenLocker Trading Portal site, operated by Mint Blockchain Solutions, which is deposited into a blocto wallet. The platform uses FUSD (1:1 USD-backed stablecoin) as the fungible token on the Flow network. Conversion from FUSD to USD and transfers to company bank account will be made on a monthly basis.
Shipping fees collected from customers for physical collectibles are included with revenues received from Shopify payouts. The majority of those collectibles have not yet been shipped due to a delay in receiving the goods from our vendor. Prior to the product shipping, any amounts received in advance are accounted for as contract liabilities (deferred revenue).
Software Development Costs
Internal-use software development costs are accounted for in accordance with ASC 350- 40, “Internal-Use Software”. The costs incurred in the preliminary stages of development are expensed as research and development costs as incurred.
Once an application has reached the development stage, internal and external costs incurred to develop internal-use software are capitalized and amortized on a straight-line basis over the estimated useful life of the software (typically three to five years).
| 20 |
OPENLOCKER HOLDINGS, INC. (F/K/A DESCRYPTO HOLDINGS, INC.) AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2022
(UNAUDITED)
Maintenance and enhancement costs, including those costs in the post- implementation stages, are typically expensed as incurred, unless such costs relate to substantial upgrades and enhancements to the software that result in added functionality, in which case the costs are capitalized and amortized on a straight-line basis over the estimated useful life of the software.
The Company reviews the carrying value for impairment whenever facts and circumstances exist that would suggest that assets might be impaired or that the useful lives should be modified. Amortization expense related to capitalized internal-use software development costs will be included in cost of goods sold in the statements of operations.
For
the three months ended October 31, 2022 and 2021, the Company expensed $
Income Taxes
The Company accounts for income tax using the asset and liability method prescribed by ASC 740, “Income Taxes”. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in effect in the year in which the differences are expected to reverse. The Company records a valuation allowance to offset deferred tax assets if based on the weight of available evidence, it is more-likely-than-not that some portion, or all, of the deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rates is recognized as income or loss in the period that includes the enactment date.
The Company follows the accounting guidance for uncertainty in income taxes using the provisions of ASC 740 “Income Taxes”. Using that guidance, tax positions initially need to be recognized in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. As of October 31, 2022 and July 31, 2022, respectively, the Company had no uncertain tax positions that qualify for either recognition or disclosure in the financial statements.
The Company recognizes interest and penalties related to uncertain income tax positions in other expense. No interest and penalties related to uncertain income tax positions were recorded for the three months ended October 31, 2022 and 2021, respectively.
| 21 |
OPENLOCKER HOLDINGS, INC. (F/K/A DESCRYPTO HOLDINGS, INC.) AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2022
(UNAUDITED)
Advertising Costs
Advertising costs are expensed as incurred. Advertising costs are included as a component of general and administrative expense in the consolidated statements of operations.
The
Company recognized $
Stock-Based Compensation
The Company accounts for our stock-based compensation under ASC 718 “Compensation – Stock Compensation” using the fair value-based method. Under this method, compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period. This guidance establishes standards for the accounting for transactions in which an entity exchanges it equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments.
When determining fair value of stock options, the Company considers the following assumptions in the Black-Scholes model:
| ● | Exercise price, |
| ● | Expected dividends, |
| ● | Expected volatility, |
| ● | Risk-free interest rate; and |
| ● | Expected life of option |
Pursuant to ASC 260-10-45, basic earnings (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding for the periods presented.
Diluted earnings per share is computed by dividing net income by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during the period. Potentially dilutive common shares may consist of common stock issuable for stock options and warrants (using the treasury stock method), convertible notes and common stock issuable. These common stock equivalents may be dilutive in the future. In the event of a net loss, diluted loss per share is the same as basic loss per share since the effect of the potential common stock equivalents upon conversion would be anti-dilutive.
| 22 |
OPENLOCKER HOLDINGS, INC. (F/K/A DESCRYPTO HOLDINGS, INC.) AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2022
(UNAUDITED)
The Company effected a reverse merger and recapitalization on July 29, 2021, as a result, all share and per share amounts have been retroactively restated to the earliest period presented (for the period ended July 31, 2021).
| October 31, 2022 | October 31, 2021 | |||||||
| Series A, convertible preferred stock ( to into common stock) | ||||||||
| Stock options (exercise prices $ - $/share) | ||||||||
Total common stock equivalents | ||||||||
Related Parties
Parties are considered to be related to the Company if the parties, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal with if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests.
Recent Accounting Standards
Changes to accounting principles are established by the FASB in the form of ASU’s to the FASB’s Codification. We consider the applicability and impact of all ASU’s on our consolidated financial position, results of operations, stockholders’ deficit, cash flows, or presentation thereof. Management has evaluated all recent accounting pronouncements as issued by the FASB in the form of Accounting Standards Updates (“ASU”) through the date these financial statements were available to be issued and found no recent accounting pronouncements issued, but not yet effective accounting pronouncements, when adopted, will have a material impact on the consolidated financial statements of the Company.
| 23 |
OPENLOCKER HOLDINGS, INC. (F/K/A DESCRYPTO HOLDINGS, INC.) AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2022
(UNAUDITED)
Note 3 – Property and Equipment
Property and Equipment consisted of the following:
| Estimated Useful | ||||||||||||
| October 31, 2022 | July 31, 2022 | Lives (Years) | ||||||||||
| Website | $ | $ | | |||||||||
| Accumulated amortization | ||||||||||||
| Website - net | $ | $ | ||||||||||
Amortization
expense for the three months ended October 31, 2022 and 2021, was $
These amounts are included as a component of general and administrative expenses in the accompanying consolidated statements of operations.
| 24 |
OPENLOCKER HOLDINGS, INC. (F/K/A DESCRYPTO HOLDINGS, INC.) AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2022
(UNAUDITED)
Note 4 – Notes Payable – Related Parties and Debt Forgiveness
The following represents a summary of the Company’s notes payable – related parties, key terms, and outstanding balances at October 31, 2022 and July 31, 2022:
Terms |
Note Payable Related Parties | Note Payable Related Party | Note Payable Related Party | |||||||||||||||||||||||
| Issuance date of notes | ||||||||||||||||||||||||||
| Maturity date | A | A | ||||||||||||||||||||||||
| Interest rate | ||||||||||||||||||||||||||
| Collateral | ||||||||||||||||||||||||||
|
|
Total | In-Default | ||||||||||||||||||||||||
| Balance - July 31, 2021 | $ | $ | $ | $ | $ | |||||||||||||||||||||
| Forgiveness of note payable | ( |
) | B | ( |
) | |||||||||||||||||||||
| Stock issued in conversion of note payable | ( |
) | C | ( |
) | C | ( |
) | ||||||||||||||||||
| Balance - July 31, 2022 | $ | |||||||||||||||||||||||||
A
Due on the earlier of June 28, 2022, or the date which the Company raises at least $
B
These notes were forgiven by the debt holders in February 2022. Total principal and accrued interest totaled $
C
The Company issued shares of common stock, having a fair value of $
| 25 |
OPENLOCKER HOLDINGS, INC. (F/K/A DESCRYPTO HOLDINGS, INC.) AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2022
(UNAUDITED)
Note 5 – Stockholders’ Equity
The Company has two (2) classes of stock:
Class A Common Stock
| - | shares authorized | |
| - | Par value - $ | |
| - |
Series A Preferred Stock
| - | shares authorized | |
| - | Par value - $ | |
| - | Conversion ratio – share of Series A converts into shares of common stock | |
| - | Voting
on an if converted basis of | |
| - | Eligible for dividends/distributions if declared by the Board of Directors | |
| - | Liquidation
preference - |
Equity Transactions for the Three Months Ended October 31, 2022
Stock Issued for Cash – Related Parties
The
Company issued shares of preferred stock to certain officers and directors for $
Stock Issued for Cash
The
Company issued shares of common stock for $
Stock Issued for Services
The
Company issued shares of common stock for services rendered for $
Contributed Capital – Related Parties
Certain
officers and directors contributed $
| 26 |
OPENLOCKER HOLDINGS, INC. (F/K/A DESCRYPTO HOLDINGS, INC.) AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2022
(UNAUDITED)
Equity Transactions for the Year Ended July 31, 2022
Preferred Stock Share Redemptions
The Company agreed to repurchase common stock from certain shareholders. The Company redeemed shares at $/share for a net amount of $. The shares were cancelled and are available for future issuances.
Common Stock Share Redemptions
The Company agreed to repurchase common stock from certain shareholders. The Company redeemed shares ranging from $ - $/share for a net amount of $. The shares were cancelled and are available for future issuances.
Stock Issued in Conversion of Notes Payable and Accrued Interest – Related Parties
The
Company issued shares of common stock, having a fair value of $
Stock Issued for Cash
The
Company issued shares of common stock for $
Forgiveness of Notes Payable and Accrued Interest – Related Parties
Certain
debt holders forgave notes payable and related accrued interest totaling $
Share Exchange Agreement – Related Parties
In
January 2022, the Company issued
In
January 2022, the Company issued
| 27 |
OPENLOCKER HOLDINGS, INC. (F/K/A DESCRYPTO HOLDINGS, INC.) AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2022
(UNAUDITED)
Stock Issued for Services
Period Ended July 31, 2021
On July 30, 2021, the Company entered into an employment agreement with an officer of the Company to grant % 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.
On July 30, 2021, the Company entered into an employment agreement with an officer of the Company to grant % of the outstanding common stock on that date ( shares) to be earned over the following six-month period beginning on August 1st. These shares were fully earned as of January 31, 2022.
Year Ended July 31, 2022
During
the three months ended April 30, 2022, the Company issued shares of common stock for services rendered in settling the above
stock grants to the former officers having a fair value of $
In order to reflect the proper compensation related to these arrangements, the Company adjusted general and administrative expense by $ to reflect the total fair value of the shares issued.
| 28 |
OPENLOCKER HOLDINGS, INC. (F/K/A DESCRYPTO HOLDINGS, INC.) AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2022
(UNAUDITED)
Note 6 – Acquisition and Pro Forma Financial Information for Open Locker, Inc.
OpenLocker, Inc. (“OL”)
On May 31, 2022, the Company entered into a share exchange agreement with OL and issued shares of common stock, having a fair value of $ ($/share), based upon recent cash offering prices in third party sales, to purchase % of OL’s, outstanding stock in a transaction treated as a business combination.
The cash price paid by third parties was the best evidence of fair value given the Company is thinly traded on OTC markets and had more sales of stock sold for cash than stock traded on the open market at the time of the transaction.
We made an initial allocation of the purchase price at the date of acquisition based on our understanding of the fair value of assets acquired and liabilities assumed. The allocation of the purchase price consideration was finalized as of July 31, 2022, with the excess purchase price allocated to an intangible asset, which consisted of intellectual property and goodwill.
The acquisition of OL was reflected in the consolidated financial statements at July 31, 2022
See Form 8-K filed with the U.S. Securities and Exchange Commission on June 6, 2022 for a complete discussion of the transaction.
| 29 |
OPENLOCKER HOLDINGS, INC. (F/K/A DESCRYPTO HOLDINGS, INC.) AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2022
(UNAUDITED)
The table below summarizes preliminary estimated fair value of the assets acquired and the liabilities assumed at the effective acquisition date during the year ended July 31, 2022.
| Consideration | ||||
| Common stock (shares of common stock ($/share)) (1) | $ | |||
| Fair value of consideration transferred | ||||
| Recognized amounts of identifiable assets acquired and liabilities assumed: | ||||
| Cash | ||||
| Total assets acquired | ||||
| Accounts payable and accrued expenses | ||||
| Total liabilities assumed | ||||
| Total identifiable net liabilities | ( | ) | ||
| Amount to allocate to intangible asset and goodwill | ||||
| Less: allocation for identifiable intangible asset (intellectual property) | ||||
| Less: allocation for goodwill | ||||
| $ |
| (1) |
In connection with the purchase of OL, there were no additional transaction costs incurred.
The
goodwill of $
Goodwill is not deductible for tax purposes.
| 30 |
OPENLOCKER HOLDINGS, INC. (F/K/A DESCRYPTO HOLDINGS, INC.) AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2022
(UNAUDITED)
Note 7 – Intangible Asset
In connection with the acquisition of OL, the Company recognized an intangible asset related to intellectual property. The Company believes the intellectual property is critical to the success of the business going forward and believes that the fair value ascribed is fully recoverable.
The Company’s intangible asset is as follows:
| October 31, 2022 | July 31, 2022 | Estimated
Useful Life (Years) | ||||||||||
| Gross carrying amount | $ | $ | ||||||||||
| Accumulated amortization | $ |
| ||||||||||
| Net carrying amount | $ | $ | ||||||||||
Amortization
expense for the three months ended October 31, 2022 and 2021 was $
Estimated amortization expense for each of the five (5) succeeding years and thereafter is as follows:
| For the Year Ended July 31, | ||||
| 2023 (9 months) | $ | |||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| Thereafter | ||||
| Total | $ | |||
| 31 |
OPENLOCKER HOLDINGS, INC. (F/K/A DESCRYPTO HOLDINGS, INC.) AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2022
(UNAUDITED)
Note 8 – Stock Options
Stock option transactions under the Company’s Plan for the three months ended October 31, 2022 and the year ended July 31, 2022 are summarized as follows:
Stock Options | Number
of Options | Weighted | Weighted | Aggregate Intrinsic Value | Weighted | |||||||||||||||
| Outstanding - July 31, 2021 | $ | - | $ | $ | ||||||||||||||||
| Exercisable - July 31, 2021 | $ | - | $ | $ | ||||||||||||||||
| Granted | $ | - | $ | |||||||||||||||||
| Exercised | $ | - | $ | |||||||||||||||||
| Cancelled/Forfeited | $ | - | $ | |||||||||||||||||
| Outstanding - July 31, 2022 | $ | $ | $ | |||||||||||||||||
| Exercisable - July 31, 2022 | $ | $ | $ | |||||||||||||||||
| Granted | $ | - | $ | |||||||||||||||||
| Exercised | $ | - | $ | |||||||||||||||||
| Cancelled/Forfeited | $ | - | $ | |||||||||||||||||
| Outstanding - October 31, 2022 | $ | $ | $ | |||||||||||||||||
| Exercisable - October 31, 2022 | $ | $ | $ | |||||||||||||||||
| Unvested - October 31, 2022 | $ | $ | $ | |||||||||||||||||
In September 2022, the Company granted , ten-year () options to an employee for services to be rendered during the period September 2022 - August 2023. These options vest ratably over a twelve-month () period. These options had an exercise price of $/share.
Using the Black-Scholes option pricing model, the Company determined that the fair value of these options granted was $.
| 32 |
OPENLOCKER HOLDINGS, INC. (F/K/A DESCRYPTO HOLDINGS, INC.) AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2022
(UNAUDITED)
| Year Ended July 31, 2023 | |||
| Expected term (years) | |||
| Expected volatility | % | ||
| Expected dividends | % | ||
| Risk free interest rate | % |
During the year ended July 31, 2022, the Company granted , ten-year () options to various employees. These options were fully vested upon issuance. These options had exercise prices ranging from $ to $/share.
Using the Black-Scholes option pricing model, the Company determined that the fair value of these options granted was $.
For the year ended July 31, 2022, fair value was based upon the following management estimates:
| Year Ended July 31, 2022 | |||
| Expected term (years) | |||
| Expected volatility | % - | % | |
| Expected dividends | % | ||
| Risk free interest rate | % - | % |
Compensation expense recorded for stock-based compensation is as follows for the three months ended October 31, 2022 and 2021, $ and $, respectively.
Note 9 – Commitments and Contingencies
Right-of-Use Operating Lease – Related Party
In
connection with the acquisition of OL on May 31, 2022, the Company acquired an existing Right-of-Use operating lease for office space.
The lease is for an initial term of two (
| 33 |
OPENLOCKER HOLDINGS, INC. (F/K/A DESCRYPTO HOLDINGS, INC.) AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2022
(UNAUDITED)
During
the period September 1, 2021 through May 31, 2022 no rent was due. The Company is required to pay a total of $
The Company is leasing the office space from a family member of OL’s Chief Executive Officer.
At October 31, 2022 and July 31, 2022, the Company has no financing leases as defined in ASC 842, “Leases.”
The tables below present information regarding the Company’s operating lease assets and liabilities at October 31, 2022 and July 31, 2022:
| October 31, 2022 | July 31, 2022 | |||||||
| Assets | ||||||||
| Operating lease - right-of-use asset - non-current | $ | $ | ||||||
Liabilities | ||||||||
| Operating lease liability | $ | $ | ||||||
| Weighted-average remaining lease term (years) | ||||||||
| Weighted-average discount rate | % | % | ||||||
| The components of lease expense were as follows: | ||||||||
| Operating lease costs | ||||||||
| Amortization of right-of-use operating lease asset | $ | $ | ||||||
| Lease liability expense in connection with obligation repayment | ||||||||
| Total operating lease costs | $ | $ | ||||||
| Supplemental cash flow information related to operating leases was as follows: | ||||||||
| Operating cash outflows from operating lease (obligation payment) | $ | $ | ||||||
| Right-of-use asset obtained in exchange for new operating lease liability | $ | $ | ||||||
| 34 |
OPENLOCKER HOLDINGS, INC. (F/K/A DESCRYPTO HOLDINGS, INC.) AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2022
(UNAUDITED)
Future minimum lease payments required under leases that have initial or remaining non- cancelable lease terms in excess of one year at October 31, 2022:
| 2023 (6 Months) | $ | |||
| 2024 | ||||
| Total undiscounted cash flows | ||||
| Less: amount representing interest | ( | ) | ||
| Present value of operating lease liability | ||||
| Less: current portion of operating lease liability | ( | ) | ||
| Long-term operating lease liability | $ |
Student Athlete Licensing Agreements
The Company has entered into several agreements with student athletes related to the sale of NFT’s and related collectibles.
There may be initial sales as well as resales of these products. The Company and the student athlete have agreed to split the revenue from the initial sale. Additionally, the Company will pay the student athlete a commission for any resales.
At October 31, 2022 and July 31, 2022, the Company owed a nominal amount to various student athletes, which has been included as a component of accounts payable and accrued expenses in the consolidated balance sheets.
| 35 |
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 OpenLocker Holdings, Inc.(f/k/a Descrypto Holdings, Inc.) and its subsidiary (together, the “Company” or “OpenLocker”) should be read in conjunction with our unaudited 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 Annual Report on Form 10-K for the year ended July 31, 2022, filed with the Securities and Exchange Commission (the “SEC”) on October 31, 2022, 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
Established on August 25, 2021, OpenLocker is dedicated to offering marketing solutions for collegiate and professional sports organizations and athletes using blockchain technology to create more immersive experiences for fans. The OpenLocker platform is designed to offer a seamless user experience for individuals who have no prior experience buying or trading digital tokens. Utilizing Flow, a fast, scalable and reliable blockchain, we are able to reduce energy consumption which is better for the environment.
The OpenLocker mission is to empower athletes to monetize their fan engagement with innovative physical and digital collectibles and to create meaningful experiences by using our technology to build communities and deliver benefits. Each digital token is authenticated on the blockchain with a unique serial number which is assigned to the fan upon completing a transaction on the OpenLocker platform. To further engage super fans and boosters, as well as increase an athlete’s earning potential, a one-of-one digital token with the athlete’s Name, Image and Likeness (NIL) may also be offered for sale or by auction. OpenLocker also offers physical collectibles including autographed collectibles and personalized experiences (meet-and-greet or customized activity) with the athlete, arranged by OpenLocker with the athlete’s input and approval. OpenLocker connects the digital and physical worlds by creating unique wallet sized physical collectibles with the digital art printed on one side with a “QR” (quick response) code that directs to the fan community website. Each of these platinum card collectibles is laser-engraved with a unique serial number and hand-signed by the athlete.
OpenLocker launched its initial fan community at the University of Connecticut in February 2022, during the first season following the National Collegiate Athletic Association (NCAA) policy change allowing student-athletes to receive compensation for their NIL. The company deliberately included all 14 eligible members of the men’s basketball team to galvanize the fan base and named the fan community the Bone Yard Huskyz Club (BYHC). The OpenLocker design team created the BYHC logo and Huskyz avatar to play off of the university’s Huskies mascot with an edgy feel. A Huskyz avatar was created in the likeness of each of the athletes and selected super fans for branding and awareness campaigns. A website with a project roadmap outlining the perks and rewards of club membership was activated two weeks prior to the release date, which was strategically timed around the basketball team’s season schedule. A comprehensive marketing campaign included digital programmatic advertising, organic and paid social media strategy (including pre- and post-drop Twitter spaces conversations with fans, blockchain experts, athletes and parents of athletes), podcasts, email blasts and gorilla marketing at several home basketball games. The OpenLocker athlete liaison also provided the athletes with graphics and talking points they could use to leverage their social media followings and promote sales of their collectibles by word-of-mouth.
A majority of the revenue from the BYHC project was generated on the first day of sales of the digital collectibles. The first two hours were the busiest as fans were incentivized by the free autographed “Platinum card” that was included with purchase for the first 25 digital collectibles sold per athlete. This unique collectible is a metal, wallet-sized card hand-signed by the athlete with the digital art printed on the front and a QR code that directs to boneyardhuskyzclub.com. Customer behavior and feedback confirmed that the physical collectible was very well received by the majority of fans, especially those who had little to no experience with blockchain technology. Sales were also directly impacted by the team’s postseason tournament performance in March 2022, as would be expected for all categories of sport collectibles and memorabilia.
| 36 |
As of December 2022, the company has activated communities at Pennsylvania State University (Lionz Club), University of Florida (Gatorverse), Radford University (Rowdy Redz) and anticipates launching several more in the first half of 2023, including Coastal Carolina University (Peoplez Club) and Florida Atlantic University (Prowlerz Club).
OpenLocker entered into a Strategic Partnership Agreement with Student Athlete NIL, LLC in September 2022 which operates the Success With Honor (SWH) Collective at Penn State University. Collaboration with SWH, whose primary aim is to help maximize student-athletes’ NIL opportunities, has enabled OpenLocker to sign NIL contracts with several of the top collegiate athletes in the country, including nationally ranked and NCAA championship wrestlers. The company also has access to the SWH’s large database of fans with a track record of giving to the university and making direct contributions to its student-athletes.
OpenLocker launched the Brave Heartz Lacrosse Club (BHLC) in September 2022 featuring two of the top lacrosse players in the Premier Lacrosse League which offers unparalleled access to training, mentoring and opportunities for fans to attend a game and meet the athletes in person. OpenLocker has been in discussions with professional athletes in a variety of sports including golf, race car driving, e-sports, and beyond.
OpenLocker aims to pay athletes a majority of the revenue generated from sales of their collectibles and compensate them for fan engagement; therefore, it does not currently have licensing agreements with any universities, conferences, leagues or other entities. OpenLocker believes that licensing the NIL directly with each athlete allows OpenLocker to retain more revenue, while giving the athlete a larger percentage of such revenue, which is an important differentiating factor for OpenLocker in the sports collectibles and NIL space.
OpenLocker’s current revenue model includes (i) profit sharing of primary sales on the OpenLocker platform with partners and athletes, (ii) collecting transaction fees from transactions on OpenLocker’s trading portal, (iii) sponsorship and advertising, and (4) fees for additional creative design work, development and product fulfillment services.
OpenLocker launched the OpenStable marketplace in April 2022 to engage the next generation of thoroughbred racing enthusiasts. Through its relationships with owners, trainers and influencers in the racing industry, OpenStable gives fans access to exclusive information, real life experiences, and memorabilia so that they may engage in a truly immersive journey covering a racehorse’s career.
The launch strategy for the OpenStable marketplace involved reaching the largest audience of racing fans (both casual and committed) by creating a collection of collectibles featuring the leading contenders in the Kentucky Derby and Kentucky Oaks, scheduling their release on the weekend prior to each of those two prominent races. Per a Memorandum of Understanding (MOU) dated April 15, 2022, OpenLocker and Horse Races Now established terms for a marketing collaboration, whereby Horse Races Now agreed to drive traffic from its app and e-mail marketing campaigns targeted at its existing user base of racing fans, in exchange for OpenLocker paying Horse Races Now 12.5% of its retained revenues (after transaction fees) generated from sales of all collections on OpenStable.
The MOU has provided OpenLocker with access to the Horse Races Now’s database of 600,000 users and placement in their app. OpenLocker executed a weeklong digital promotion in the Daily Racing Form and conducted media interviews, as well as social media campaigns. While the racing season was at its height, OpenLocker benefited from significant traffic to its website and generated some sales of gear, including apparel, hats, pins, and other items featuring each racehorse’s unique brand (also featuring the OpenStable logo).
| 37 |
OpenLocker has also entered into a partnership agreement with In the Money Media to produce podcasts featuring interviews with owners, trainers and jockeys with a connection to the horses in the OpenStable family. An episode included a conversation with an OpenStable fan who won exclusive access to the paddock and winner’s circle at the 2022 Travers Stakes at the Saratoga Race Course in August 2022 allowing him to see Epicenter before and after the race. OpenLocker also has an agreement with horse racing analyst and Fox Sports announcer, Jonathon Kinchen, to provide promotional support and strategic planning for additional projects in the collegiate sports and horse racing industries. The Company collaborated with Old Smoke Clothing Company to create a one-of-a-kind Winchell/Epicenter button-up shirt for racing fans. A limited edition shirt featuring a gold OpenStable tag on the sleeve is available exclusively on the OpenStable platform for Epicenter digital collectibles holders only and may be purchased as a bundle with Epicenter collectibles.
The user-friendly interface that OpenLocker created for college sports fans and emphasis on fan community building is an important differentiator for OpenStable as it seeks to position itself as the next-generation marketing solution within the thoroughbred racing space. Offering ownership of digital tokens along with rewards and experiences, both in the virtual and physical realms, makes OpenStable products attractive to a younger audience with a goal to develop a next generation younger fan engagement around the thoroughbred racing sport.
The company has been in discussions with retailers and brands who are interested in applying the fan engagement model to build customer loyalty and drive foot traffic to their brick-and-mortar locations.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.
OpenLocker believes that it has found a unique and attractive market for the application of blockchain technology by focusing on the college athlete market. In September 2022, OpenLocker rolled out an enhanced Web3 environment that allows fans to access their digital collectibles with a Dapper wallet. Fans that currently held assets purchased on the OpenLocker platform prior to the rollout were given instructions on how to transition to the new environment in a few simple steps. The Dapper wallet, developed by Dapper Labs, has become a trusted partner in blockchain development with millions of users benefiting from its integration with some of the largest sports NFT ventures including NBA Top Shot, NFL All Day and other large-scale consumer offerings.
OpenLocker expects to announce additional enhancements and smartphone integrations to create even more seamless delivery of physical rewards and experiences in early 2023.
Recent Developments
Following the Company’s uplisting to the OTCQB Venture Market in October 2022, the Company filed an application with the Financial Industry Regulatory Associate (“FINRA”) to change its name to “OpenLocker Holdings, Inc.” and to change its ticker symbol. In connection therewith, on December 5, 2022, the Company filed with the Delaware Secretary of State a certificate of amendment to certificate of incorporation (the “Amendment”) in order to change its corporate name from OpenLocker Holdings, Inc. to OpenLocker Holdings, Inc. (the “Name Change”). The Name Change will not be effective for trading purposes until it is cleared by FINRA. The Company expects that FINRA will clear the Name Change in the near future.
Plan of Operations
Over the next 12 months, we expect to require approximately $2,000,000 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.
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In addition, as we grow, we seek to acquire companies with:
| ● | defensible barriers to entry, | |
| ● | proven value propositions, | |
| ● | identifiable growth opportunities or operational improvements, and | |
| ● | paths to sustainable competitive advantages. |
RESULTS OF OPERATIONS
Revenue
During the three months ended October 31, 2022 and 2021, we generated revenue of $5,140 and $0, respectively. The increase in revenue was due to OpenLocker’s NFT related sales. The Company’s prior year operations did not include OpenLocker, Inc., which was acquired on May 31, 2022.
Operating Expenses
Operating expenses during the three months ended October 31, 2022 and 2021 were $570,846 and $2,559,808, respectively. The decrease in operating expenses was primarily due to stock-based compensation decreasing from $2,528,923 to $167,167, respectively.
Net Loss
For the three months ended October 31, 2022 and 2021, we had net loss of $565,706 and $2,564,685, respectively. The decrease in net loss was primarily due to stock-based compensation decreasing from $2,528,923 to $167,167, respectively.
Other Income (Expense)—Net
Other income (expense)—net for the three months ended October 31, 2022 and 2021 was $0 and $(4,877), respectively. For the three months ended October 31, 2021, other expense—net consisted of interest expense—related party of $4,877.
There is significant uncertainty projecting future profitability or revenues due to our history of losses and early stage of our business operations.
LIQUIDITY AND CAPITAL RESOURCES
As of October 31, 2022, we had $405,615 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 primarily through the issuance of debt and equity sourced capital.
The following table sets forth a summary of our cash flows for the three months ended October 31, 2022 and 2021:
Three Months Ended October 31, | ||||||||
| 2022 | 2021 | |||||||
| Net cash used in operating activities | $ | (259,636 | ) | $ | (30,093 | ) | ||
| Net cash used in investing activities | - | - | ||||||
| Net cash provided by financing activities | 58,116 | - | ||||||
| Net decrease in cash | (201,520 | ) | (30,093 | ) | ||||
| Cash, beginning of period | 607,135 | 53,178 | ||||||
| Cash, end of period | $ | 405,615 | $ | 23,085 | ||||
Since inception, we have financed our cash flow requirements primarily 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.
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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.
Critical Accounting Policies and Estimates
Our management’s discussion and analysis of our financial condition and results of operations is based on our unaudited consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). The preparation of our unaudited consolidated 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.
Going Concern and Management’s Plans
The unaudited consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business.
As reflected in the accompanying unaudited consolidated financial statements, for the three months ended October 31, 2022, the Company had:
| ● | Net loss of $565,706; and |
| ● | Net cash used in operations of $259,636. |
Additionally, at October 31, 2022, the Company had:
| ● | Accumulated deficit of $3,273,861 |
| ● | Stockholders’ equity of $5,430,686; and |
| ● | Working capital of $301,096. |
We manage liquidity risk by reviewing, on an ongoing basis, our sources of liquidity and capital requirements. The Company has cash on hand of $405,615 at October 31, 2022. Although the Company intends to raise additional debt or equity capital, the Company expects to continue to incur significant losses from operations and have negative cash flows from operating activities for the near-term. These losses could be significant as operations ramp up along with continuing expenses related to compensation, professional fees, and regulatory are incurred.
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The Company has incurred significant losses since its inception and has not demonstrated an ability to generate sufficient revenues to achieve profitable operations. There can be no assurance that profitable operations will ever be achieved, or if achieved, could be sustained on a continuing basis. In making this assessment we performed a comprehensive analysis of our current circumstances including: our financial position, our cash flows and cash usage forecasts for the twelve months ending October 31, 2023, and our current capital structure including equity-based instruments and our obligations and debts.
The Company has satisfied its obligations from the issuance of common stock; however, there is no assurance that such successful efforts will continue during the twelve months subsequent to the date these unaudited consolidated financial statements are issued.
If the Company does not obtain additional capital, the Company will be required to reduce the scope of its business development activities or cease operations. The Company continues to explore obtaining additional capital financing and the Company is closely monitoring its cash balances, cash needs, and expense levels.
These factors create substantial doubt about the Company’s ability to continue as a going concern within the twelve-month period subsequent to the date that these consolidated financial statements are issued. The unaudited consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. Accordingly, the consolidated financial statements have been prepared on a basis that assumes the Company will continue as a going concern and which contemplates the realization of assets and satisfaction of liabilities and commitments in the ordinary course of business.
Management’s strategic plans include the following:
| ● | Pursuing additional capital raising opportunities, |
| ● | Continuing to explore and execute prospective partnering or distribution opportunities; |
| ● | Identifying strategic acquisitions; and |
| ● | Identifying unique market opportunities that represent potential positive short-term cash flow. |
During the three months ended October 31, 2022, the Company’s financial results and operations were not materially adversely impacted by the COVID-19 pandemic. The extent to which the Company’s future financial results could be impacted by the COVID-19 pandemic depends on future developments that are highly uncertain and cannot be predicted at this time. The Company is not aware of any specific event or circumstance that would require an update to its estimates or judgments or a revision of the carrying value of its assets or liabilities.
These estimates may change, as new events occur, and additional information is obtained. Actual results could differ materially from these estimates under different assumptions or conditions.
Use of Estimates
Preparing financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reported period. Actual results could differ from those estimates, and those estimates may be material.
Income Taxes
The Company accounts for income tax using the asset and liability method prescribed by the Financial Accounting Standards Board’s Accounting Standards Codification (“ASC”) 740, “Income Taxes”. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in effect in the year in which the differences are expected to reverse. The Company records a valuation allowance to offset deferred tax assets if based on the weight of available evidence, it is more-likely-than-not that some portion, or all, of the deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rates is recognized as income or loss in the period that includes the enactment date.
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The Company follows the accounting guidance for uncertainty in income taxes using the provisions of ASC 740 “Income Taxes”. Using that guidance, tax positions initially need to be recognized in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. As of October 31, 2022 and July 31, 2022, respectively, the Company had no uncertain tax positions that qualify for either recognition or disclosure in the financial statements.
The Company recognizes interest and penalties related to uncertain income tax positions in other expense. No interest and penalties related to uncertain income tax positions were recorded for the three months ended October 31, 2022 and 2021, respectively.
Basic and Diluted Earnings (Loss) per Share
Pursuant to ASC 260-10-45, basic earnings (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding for the periods presented.
Diluted earnings per share is computed by dividing net income by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during the period. Potentially dilutive common shares may consist of common stock issuable for stock options and warrants (using the treasury stock method), convertible notes and common stock issuable. These common stock equivalents may be dilutive in the future. In the event of a net loss, diluted loss per share is the same as basic loss per share since the effect of the potential common stock equivalents upon conversion would be anti-dilutive.
The Company effected a reverse merger and recapitalization on July 29, 2021, as a result, all share and per share amounts have been retroactively restated to the earliest period presented (for the period ended July 31, 2021).
For the three months ended October 31, 2022 and 2021, the Company had the following potentially dilutive equity securities:
| October 31, 2021 | October 31, 2021 | |||||||
| Series A, convertible preferred stock (1 to 1,000 into common stock) | 44,520,000 | 35,520,000 | ||||||
| Stock options (exercise prices $0.12 - $0.70/share) | 1,110,830 | - | ||||||
| Total common stock equivalents | 45,630,830 | 35,520,000 | ||||||
Related Parties
Parties are considered to be related to the Company if the parties, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal with if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests.
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.
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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 Securities Exchange Act of 1934, as amended (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 October 31, 2022. Based upon their evaluation, our Chief Executive Officer and Principal Financial Officer concluded that, as of October 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 October 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.
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 Annual Report on Form 10-K for the year ended July 31, 2022, as filed with the SEC on October 31, 2022.
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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
During the three months ended October 31, 2022, the Company issued unregistered equity securities as follows:
| ● | The Company issued 9,000 shares of Series A preferred stock to certain officers and directors of the Company for an aggregate purchase price of $6,000 (equal to a per share purchase price of $0.6666). |
| ● | The Company issued 125,000 shares of common stock to third parties for an aggregate purchase price of $7,500 (equal to a per share purchase price of $0.40). |
| ● | The Company issued 130,000 shares of common stock to third parties for services rendered with a value of $52,000. |
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.
ITEM 6. EXHIBITS
| * | Filed herewith. |
| ** | Furnished herewith. |
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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.
| OPENLOCKER HOLDINGS, INC. | ||
| Date: December 14, 2022 | By: | /s/ Howard Gostfrand |
| Howard Gostfrand | ||
| Chief Executive Officer (principal executive officer, principal financial officer and principal accounting officer) | ||
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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 October 31, 2022 of OpenLocker 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: December 14, 2022
| /s/ Howard Gostfrand | |
| Howard Gostfrand | |
Chief Executive Officer (principal executive officer) |
Exhibit 31.2
CERTIFICATIONS
I, Howard Gostfrand, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q for the quarterly period ended October 31, 2022 of OpenLocker 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: December 14, 2022
| /s/ Howard Gostfrand | |
| Howard Gostfrand | |
Chief Executive Officer (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 OpenLocker Holdings, Inc. (the “Company”) for the quarterly period ended October 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: December 14, 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.
Consolidated Balance Sheets (Parenthetical) - $ / shares |
Oct. 31, 2022 |
Jul. 31, 2022 |
|---|---|---|
| Common stock, par value | $ 0.0001 | $ 0.0001 |
| Common stock, shares authorized | 10,000,000,000 | 10,000,000,000 |
| Common stock, shares issued | 38,637,506 | 38,382,506 |
| Common stock, shares outstanding | 38,637,506 | 38,382,506 |
| Series A Preferred Stock [Member] | ||
| Preferred stock, par value | $ 0.0001 | $ 0.0001 |
| Preferred stock, shares authorized | 200,000 | 200,000 |
| Preferred stock, shares issued | 44,920 | 35,520 |
| Preferred stock, shares outstanding | 44,920 | 35,520 |
Consolidated Statements of Operations (Unaudited) - USD ($) |
3 Months Ended | |
|---|---|---|
Oct. 31, 2022 |
Oct. 31, 2021 |
|
| Income Statement [Abstract] | ||
| Revenues | $ 5,140 | |
| Operating expenses | ||
| Research and development | 72,522 | |
| General and administrative expenses | 498,324 | 2,559,808 |
| Total operating expenses | 570,846 | 2,559,808 |
| Loss from operations | (565,706) | (2,559,808) |
| Other income (expense) | ||
| Interest expense - related party | (4,877) | |
| Total other income (expense) - net | (4,877) | |
| Net loss | $ (565,706) | $ (2,564,685) |
| Loss per share - basic and diluted | $ (0.01) | $ (0.01) |
| Weighted average number of shares outstanding - basic and diluted | 38,527,805 | 259,376,620 |
Organization, Nature of Operations and Going Concern |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Oct. 31, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Organization, Nature of Operations and Going Concern | Note 1 – Organization, Nature of Operations and Going Concern
Organization and Nature of Operations
OpenLocker Holdings, Inc., formerly known as Descrypto Holdings, Inc., and Subsidiary (collectively, “we,” “us,” “our” or the “Company”) is a holding company that plans to identify and acquire uniquely positioned blockchain technology companies and digital assets with a focus on assets 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.
The parent (OpenLocker Holdings, Inc., formerly known as Descrypto Holdings, Inc.) and subsidiary are organized as follows:
Reverse Merger
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 OpenLocker, Inc.
OPENLOCKER HOLDINGS, INC. (F/K/A DESCRYPTO HOLDINGS, INC.) AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OCTOBER 31, 2022 (UNAUDITED)
Going Concern and Management’s Plans
These consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business.
As reflected in the accompanying consolidated financial statements, for the three months ended October 31, 2022, the Company had:
Additionally, at October 31, 2022, the Company had:
We manage liquidity risk by reviewing, on an ongoing basis, our sources of liquidity and capital requirements. The Company has cash on hand of $405,615 at October 31, 2022. Although the Company intends to raise additional debt or equity capital, the Company expects to continue to incur significant losses from operations and have negative cash flows from operating activities for the near-term. These losses could be significant as operations ramp up along with continuing expenses related to compensation, professional fees, and regulatory are incurred.
The Company has incurred significant losses since its inception and has not demonstrated an ability to generate sufficient revenues to achieve profitable operations. There can be no assurance that profitable operations will ever be achieved, or if achieved, could be sustained on a continuing basis. In making this assessment we performed a comprehensive analysis of our current circumstances including: our financial position, our cash flows and cash usage forecasts for the twelve months ended October 31, 2023, and our current capital structure including equity-based instruments and our obligations and debts.
The Company has satisfied its obligations from the issuance of common stock; however, there is no assurance that such successful efforts will continue during the twelve months subsequent to the date these consolidated financial statements are issued.
If the Company does not obtain additional capital, the Company will be required to reduce the scope of its business development activities or cease operations. The Company continues to explore obtaining additional capital financing and the Company is closely monitoring its cash balances, cash needs, and expense levels.
OPENLOCKER HOLDINGS, INC. (F/K/A DESCRYPTO HOLDINGS, INC.) AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OCTOBER 31, 2022 (UNAUDITED)
These factors create substantial doubt about the Company’s ability to continue as a going concern within the twelve-month period subsequent to the date that these consolidated financial statements are issued. The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. Accordingly, the consolidated financial statements have been prepared on a basis that assumes the Company will continue as a going concern and which contemplates the realization of assets and satisfaction of liabilities and commitments in the ordinary course of business.
Management’s strategic plans include the following:
During the three months ended October 31, 2022, the Company’s financial results and operations were not materially adversely impacted by the COVID-19 pandemic. The extent to which the Company’s future financial results could be impacted by the COVID-19 pandemic depends on future developments that are highly uncertain and cannot be predicted at this time. The Company is not aware of any specific event or circumstance that would require an update to its estimates or judgments or a revision of the carrying value of its assets or liabilities.
These estimates may change, as new events occur, and additional information is obtained. Actual results could differ materially from these estimates under different assumptions or conditions.
To date, the Company has not experienced any significant economic impact due to COVID- 19.
OPENLOCKER HOLDINGS, INC. (F/K/A DESCRYPTO HOLDINGS, INC.) AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OCTOBER 31, 2022 (UNAUDITED)
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Summary of Significant Accounting Policies |
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| Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Summary of Significant Accounting Policies | Note 2 - Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial statements (“U.S. GAAP”) and with the instructions to Form 10-Q and Article 8 of Regulation S-X of the United States Securities and Exchange Commission (“SEC”). Accordingly, they do not contain all information and footnotes required by accounting principles generally accepted in the United States of America for annual financial statements.
In the opinion of the Company’s management, the accompanying unaudited consolidated financial statements contain all of the adjustments necessary (consisting only of normal recurring accruals) to present the financial position of the Company as of October 31, 2022 and the results of operations and cash flows for the periods presented. The results of operations for the three months ended October 31, 2022 are not necessarily indicative of the operating results for the full fiscal year or any future period.
These unaudited consolidated financial statements should be read in conjunction with the financial statements and related notes thereto included in the Company’s Annual Report on Form 10-K for the period ended July 31, 2022 filed with the SEC on October 31, 2022.
Management acknowledges its responsibility for the preparation of the accompanying unaudited consolidated financial statements which reflect all adjustments, consisting of normal recurring adjustments, considered necessary in its opinion for a fair statement of its consolidated financial position and the consolidated results of its operations for the periods presented.
Principles of Consolidation
These consolidated financial statements have been prepared in accordance with U.S. GAAP and include the accounts of the Company and its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated.
OPENLOCKER HOLDINGS, INC. (F/K/A DESCRYPTO HOLDINGS, INC.) AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OCTOBER 31, 2022 (UNAUDITED)
Business Combinations
The Company accounts for business combinations using the acquisition method in accordance with Accounting Standards Codification, ASC 805, Business Combinations which requires recognition of assets acquired and liabilities assumed, including contingent assets and liabilities, at their respective fair values on the date of acquisition.
Business Segments and Concentrations
The Company uses the “management approach” to identify its reportable segments. The management approach requires companies to report segment financial information consistent with information used by management for making operating decisions and assessing performance as the basis for identifying the Company’s reportable segments. The Company manages its business as a single operating segment.
Use of Estimates
Preparing financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reported period. Actual results could differ from those estimates, and those estimates may be material.
Fair Value of Financial Instruments
The Company accounts for financial instruments under Financial Accounting Standards Board (“FASB”) ASC 820, Fair Value Measurements. ASC 820 provides a framework for measuring fair value and requires disclosures regarding fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, based on the Company’s principal or, in absence of a principal, most advantageous market for the specific asset or liability.
OPENLOCKER HOLDINGS, INC. (F/K/A DESCRYPTO HOLDINGS, INC.) AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OCTOBER 31, 2022 (UNAUDITED)
The Company uses a three-tier fair value hierarchy to classify and disclose all assets and liabilities measured at fair value on a recurring basis, as well as assets and liabilities measured at fair value on a non-recurring basis, in periods subsequent to their initial measurement. The hierarchy requires the Company to use observable inputs when available, and to minimize the use of unobservable inputs, when determining fair value.
The three tiers are defined as follows:
The determination of fair value and the assessment of a measurement’s placement within the hierarchy requires judgment. Level 3 valuations often involve a higher degree of judgment and complexity. Level 3 valuations may require the use of various cost, market, or income valuation methodologies applied to unobservable management estimates and assumptions. Management’s assumptions could vary depending on the asset or liability valued and the valuation method used. Such assumptions could include estimates of prices, earnings, costs, actions of market participants, market factors, or the weighting of various valuation methods. The Company may also engage external advisors to assist us in determining fair value, as appropriate.
Although the Company believes that the recorded fair value of our financial instruments is appropriate, these fair values may not be indicative of net realizable value or reflective of future fair values.
The Company’s financial instruments, including cash, and accounts payable and accrued expenses, are carried at historical cost. At July 31, 2022 and 2021, respectively, the carrying amounts of these instruments approximated their fair values because of the short-term nature of these instruments.
ASC 825-10 “Financial Instruments” allows entities to voluntarily choose to measure certain financial assets and liabilities at fair value (“fair value option”). The fair value option may be elected on an instrument-by-instrument basis and is irrevocable unless a new election date occurs. If the fair value option is elected for an instrument, unrealized gains and losses for that instrument should be reported in earnings at each subsequent reporting date. The Company did not elect to apply the fair value option to any outstanding financial instruments.
OPENLOCKER HOLDINGS, INC. (F/K/A DESCRYPTO HOLDINGS, INC.) AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OCTOBER 31, 2022 (UNAUDITED)
Cash and Cash Equivalents
For purposes of the consolidated statements of cash flows, the Company considers all highly liquid instruments with a maturity of three months or less at the purchase date and money market accounts to be cash equivalents.
At October 31, 2022 and July 31, 2022, respectively, the Company did not have any cash equivalents.
The Company is exposed to credit risk on its cash and cash equivalents in the event of default by the financial institutions to the extent account balances exceed the amount insured by the FDIC, which is $250,000. At October 31, 2022 and July 31, 2022, the Company did not experience any losses on cash balances in excess of FDIC insured limits.
Investment
The Company owns shares of iGrow Systems Inc. The shares are valued at cost $15,000 ($/share). The investment is recorded on the Company’s balance sheet using the cost method of accounting.
Goodwill and Impairment
In financial reporting, goodwill is not amortized, but is tested for impairment annually or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Events that result in an impairment review include significant changes in the business climate, declines in our operating results, or an expectation that the carrying amount may not be recoverable. We assess potential impairment by considering present economic conditions as well as future expectations. All assessments of goodwill impairment are conducted at the individual reporting unit level.
The Company uses qualitative factors according to ASC 350-20-35-3 to determine whether it is more likely than not that the fair value of goodwill is less than its carrying amount. During the three months ended October 31, 2022 and 2021, the Company determined there were no impairments of goodwill.
OPENLOCKER HOLDINGS, INC. (F/K/A DESCRYPTO HOLDINGS, INC.) AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OCTOBER 31, 2022 (UNAUDITED)
Intangible Assets and Impairment
Definite-lived intangible assets are amortized on a straight-line basis over their estimated useful lives. Indefinite-lived intangible assets are reviewed for impairment annually. The Company reviews definite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
There were no impairment losses for the three months ended October 31, 2022 and 2021, respectively.
Impairment of Long-lived Assets
Management evaluates the recoverability of the Company’s identifiable intangible assets and other long-lived assets when events or circumstances indicate a potential impairment exists, in accordance with the provisions of ASC 360-10-35-15 “Impairment or Disposal of Long-Lived Assets.”
If impairment is indicated based on a comparison of the assets’ carrying values and the undiscounted cash flows, the impairment to be recognized is measured as the amount by which the carrying amount of the assets exceeds the fair value of the assets.
There were no impairment losses for the three months ended October 31, 2022 and 2021, respectively.
Property and Equipment
Property and equipment is stated at cost less accumulated depreciation. Depreciation is provided on the straight-line basis over the estimated useful lives of the assets.
Expenditures for repair and maintenance which do not materially extend the useful lives of property and equipment are charged to operations. When property or equipment is sold or otherwise disposed of, the cost and related accumulated depreciation are removed from the respective accounts with the resulting gain or loss reflected in operations.
Management reviews the carrying value of its property and equipment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable.
There were no impairment losses for the three months ended October 31, 2022 and 2021, respectively.
OPENLOCKER HOLDINGS, INC. (F/K/A DESCRYPTO HOLDINGS, INC.) AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OCTOBER 31, 2022 (UNAUDITED)
Operating Lease
From time to time, we may enter into operating lease or sub-lease agreements, including our corporate headquarters. We account for leases in accordance with ASC Topic 842: Leases, which requires a lessee to utilize the right-of-use model and to record a right- of-use asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases are classified as either financing or operating, with classification affecting the pattern of expense recognition in the statement of operations. In addition, a lessor is required to classify leases as either sales-type, financing or operating. A lease will be treated as a sale if it transfers all of the risks and rewards, as well as control of the underlying asset, to the lessee. If risks and rewards are conveyed without the transfer of control, the lease is treated as financing. If the lessor does not convey risk and rewards or control, the lease is treated as operating. We determine if an arrangement is a lease, or contains a lease, at inception and record the lease in our financial statements upon lease commencement, which is the date when the underlying asset is made available for use by the lessor.
Right-of-use assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments over the lease term. Lease right- of-use assets and liabilities at commencement are initially measured at the present value of lease payments over the lease term. We generally use our incremental borrowing rate based on the information available at commencement to determine the present value of lease payments except when an implicit interest rate is readily determinable. We determine our incremental borrowing rate based on market sources including relevant industry data.
We may have lease agreements with lease and non-lease components and have elected to utilize the practical expedient to account for lease and non-lease components together as a single combined lease component, from both a lessee and lessor perspective with the exception of direct sales-type leases and production equipment classes embedded in supply agreements. From a lessor perspective, the timing and pattern of transfer are the same for the non-lease components and associated lease component and, the lease component, if accounted for separately, would be classified as an operating lease.
We have elected not to present short-term leases on the balance sheet as these leases have a lease term of 12 months or less at lease inception and do not contain purchase options or renewal terms that we are reasonably certain to exercise. All other lease assets and lease liabilities are recognized based on the present value of lease payments over the lease term at commencement date. Because most of our leases do not provide an implicit rate of return, we used our incremental borrowing rate based on the information available at lease commencement date in determining the present value of lease payments.
OPENLOCKER HOLDINGS, INC. (F/K/A DESCRYPTO HOLDINGS, INC.) AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OCTOBER 31, 2022 (UNAUDITED)
Our leases, where we are the lessee, do not include an option to extend the lease term. Our lease does not include an option to terminate the lease prior to the end of the agreed upon lease term. For purposes of calculating lease liabilities, lease term would include options to extend or terminate the lease when it is reasonably certain that we will exercise such options.
Lease expense for operating leases is recognized on a straight-line basis over the lease term as an operating expense, included as a component of general and administrative expenses, in the accompanying consolidated statements of operations.
Certain operating leases provide for annual increases to lease payments based on an index or rate, our lease has no stated increase, payments were fixed at lease inception. We calculate the present value of future lease payments based on the index or rate at the lease commencement date. Differences between the calculated lease payment and actual payment are expensed as incurred.
See Note 9.
Revenue Recognition
OpenLocker generates revenue from two main sources, primary sales of NFTs on its online store and commissions collected from sales on the secondary marketplace.
Revenue is recognized in accordance with FASB Topic ASC No. 606, “Revenue from Contracts with Customers”. The Company recognizes revenue when its performance obligations are complete, which occurs at a point in time related to the transfer of an NFT to its customer. Currently, all sales contain a single performance obligation.
OPENLOCKER HOLDINGS, INC. (F/K/A DESCRYPTO HOLDINGS, INC.) AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OCTOBER 31, 2022 (UNAUDITED)
All payments are received from third-party payment processing providers. The Company receives payments from sales on its primary marketplace (Shopify site) as well as two other sources. Each of these sources of payment relate to the completion of a single performance obligation completed at a point in time, which occurs upon the transfer of an NFT and where no further performance obligations are required:
The Company also recognizes revenues generated from the 5% commission fee collected on secondary marketplace sales transacted on the OpenLocker Trading Portal site, operated by Mint Blockchain Solutions, which is deposited into a blocto wallet. The platform uses FUSD (1:1 USD-backed stablecoin) as the fungible token on the Flow network. Conversion from FUSD to USD and transfers to company bank account will be made on a monthly basis.
Shipping fees collected from customers for physical collectibles are included with revenues received from Shopify payouts. The majority of those collectibles have not yet been shipped due to a delay in receiving the goods from our vendor. Prior to the product shipping, any amounts received in advance are accounted for as contract liabilities (deferred revenue).
Software Development Costs
Internal-use software development costs are accounted for in accordance with ASC 350- 40, “Internal-Use Software”. The costs incurred in the preliminary stages of development are expensed as research and development costs as incurred.
Once an application has reached the development stage, internal and external costs incurred to develop internal-use software are capitalized and amortized on a straight-line basis over the estimated useful life of the software (typically three to five years).
OPENLOCKER HOLDINGS, INC. (F/K/A DESCRYPTO HOLDINGS, INC.) AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OCTOBER 31, 2022 (UNAUDITED)
Maintenance and enhancement costs, including those costs in the post- implementation stages, are typically expensed as incurred, unless such costs relate to substantial upgrades and enhancements to the software that result in added functionality, in which case the costs are capitalized and amortized on a straight-line basis over the estimated useful life of the software.
The Company reviews the carrying value for impairment whenever facts and circumstances exist that would suggest that assets might be impaired or that the useful lives should be modified. Amortization expense related to capitalized internal-use software development costs will be included in cost of goods sold in the statements of operations.
For the three months ended October 31, 2022 and 2021, the Company expensed $72,522 and $0, respectively, in software development costs.
Income Taxes
The Company accounts for income tax using the asset and liability method prescribed by ASC 740, “Income Taxes”. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in effect in the year in which the differences are expected to reverse. The Company records a valuation allowance to offset deferred tax assets if based on the weight of available evidence, it is more-likely-than-not that some portion, or all, of the deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rates is recognized as income or loss in the period that includes the enactment date.
The Company follows the accounting guidance for uncertainty in income taxes using the provisions of ASC 740 “Income Taxes”. Using that guidance, tax positions initially need to be recognized in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. As of October 31, 2022 and July 31, 2022, respectively, the Company had no uncertain tax positions that qualify for either recognition or disclosure in the financial statements.
The Company recognizes interest and penalties related to uncertain income tax positions in other expense. No interest and penalties related to uncertain income tax positions were recorded for the three months ended October 31, 2022 and 2021, respectively.
OPENLOCKER HOLDINGS, INC. (F/K/A DESCRYPTO HOLDINGS, INC.) AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OCTOBER 31, 2022 (UNAUDITED)
Advertising Costs
Advertising costs are expensed as incurred. Advertising costs are included as a component of general and administrative expense in the consolidated statements of operations.
The Company recognized $44,048 and $0 in marketing and advertising costs during the three months ended October 31, 2022 and 2021, respectively.
Stock-Based Compensation
The Company accounts for our stock-based compensation under ASC 718 “Compensation – Stock Compensation” using the fair value-based method. Under this method, compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period. This guidance establishes standards for the accounting for transactions in which an entity exchanges it equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments.
When determining fair value of stock options, the Company considers the following assumptions in the Black-Scholes model:
Pursuant to ASC 260-10-45, basic earnings (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding for the periods presented.
Diluted earnings per share is computed by dividing net income by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during the period. Potentially dilutive common shares may consist of common stock issuable for stock options and warrants (using the treasury stock method), convertible notes and common stock issuable. These common stock equivalents may be dilutive in the future. In the event of a net loss, diluted loss per share is the same as basic loss per share since the effect of the potential common stock equivalents upon conversion would be anti-dilutive.
OPENLOCKER HOLDINGS, INC. (F/K/A DESCRYPTO HOLDINGS, INC.) AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OCTOBER 31, 2022 (UNAUDITED)
The Company effected a reverse merger and recapitalization on July 29, 2021, as a result, all share and per share amounts have been retroactively restated to the earliest period presented (for the period ended July 31, 2021).
Related Parties
Parties are considered to be related to the Company if the parties, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal with if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests.
Recent Accounting Standards
Changes to accounting principles are established by the FASB in the form of ASU’s to the FASB’s Codification. We consider the applicability and impact of all ASU’s on our consolidated financial position, results of operations, stockholders’ deficit, cash flows, or presentation thereof. Management has evaluated all recent accounting pronouncements as issued by the FASB in the form of Accounting Standards Updates (“ASU”) through the date these financial statements were available to be issued and found no recent accounting pronouncements issued, but not yet effective accounting pronouncements, when adopted, will have a material impact on the consolidated financial statements of the Company.
OPENLOCKER HOLDINGS, INC. (F/K/A DESCRYPTO HOLDINGS, INC.) AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OCTOBER 31, 2022 (UNAUDITED)
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| Property and Equipment | Note 3 – Property and Equipment
Property and Equipment consisted of the following:
Amortization expense for the three months ended October 31, 2022 and 2021, was $792 and $792, respectively.
These amounts are included as a component of general and administrative expenses in the accompanying consolidated statements of operations.
OPENLOCKER HOLDINGS, INC. (F/K/A DESCRYPTO HOLDINGS, INC.) AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OCTOBER 31, 2022 (UNAUDITED)
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| Notes Payable – Related Parties and Debt Forgiveness | Note 4 – Notes Payable – Related Parties and Debt Forgiveness
The following represents a summary of the Company’s notes payable – related parties, key terms, and outstanding balances at October 31, 2022 and July 31, 2022:
A Due on the earlier of June 28, 2022, or the date which the Company raises at least $200,000 from investors.
B These notes were forgiven by the debt holders in February 2022. Total principal and accrued interest totaled $155,743. Since these transactions occurred with related parties, gain on debt forgiveness was recorded as an increase to additional paid-in capital. See Note 5.
C The Company issued shares of common stock, having a fair value of $106,274, to settle the outstanding principal and related accrued interest of $54,180 on these notes payable - related parties, resulting in a loss on debt extinguishment of $52,094. See Note 5.
OPENLOCKER HOLDINGS, INC. (F/K/A DESCRYPTO HOLDINGS, INC.) AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OCTOBER 31, 2022 (UNAUDITED)
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| Stockholders’ Equity | Note 5 – Stockholders’ Equity
The Company has two (2) classes of stock:
Class A Common Stock
Series A Preferred Stock
Equity Transactions for the Three Months Ended October 31, 2022
Stock Issued for Cash – Related Parties
The Company issued shares of preferred stock to certain officers and directors for $6,000 ($/share).
Stock Issued for Cash
The Company issued shares of common stock for $7,500 ($/share).
Stock Issued for Services
The Company issued shares of common stock for services rendered for $52,000 ($/share), based upon recent cash offerings to third parties.
Contributed Capital – Related Parties
Certain officers and directors contributed $2,116 on behalf of the Company for operating expenses.
OPENLOCKER HOLDINGS, INC. (F/K/A DESCRYPTO HOLDINGS, INC.) AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OCTOBER 31, 2022 (UNAUDITED)
Equity Transactions for the Year Ended July 31, 2022
Preferred Stock Share Redemptions
The Company agreed to repurchase common stock from certain shareholders. The Company redeemed shares at $/share for a net amount of $. The shares were cancelled and are available for future issuances.
Common Stock Share Redemptions
The Company agreed to repurchase common stock from certain shareholders. The Company redeemed shares ranging from $ - $/share for a net amount of $. The shares were cancelled and are available for future issuances.
Stock Issued in Conversion of Notes Payable and Accrued Interest – Related Parties
The Company issued shares of common stock, having a fair value of $106,274 ($ - $/share), based upon the quoted closing trading price, in connection with the conversion of notes payable and related accrued interest totaling $54,180, resulting in a loss on debt extinguishment of 52,094. See Note 4.
Stock Issued for Cash
The Company issued shares of common stock for $828,096 ($ – $/share).
Forgiveness of Notes Payable and Accrued Interest – Related Parties
Certain debt holders forgave notes payable and related accrued interest totaling $155,743 (principal of $112,167 and accrued interest of $43,576). The Company recorded an increase to additional paid in capital related to the debt forgiveness.
Share Exchange Agreement – Related Parties
In January 2022, the Company issued 88,800 shares of Series A preferred stock to ACV in exchange for shares of common stock, having a fair value of $8,880 ($/share).
In January 2022, the Company issued 88,800 shares of Series A preferred stock to Leone in exchange for shares of common stock, having a fair value of $8,880 ($/share).
OPENLOCKER HOLDINGS, INC. (F/K/A DESCRYPTO HOLDINGS, INC.) AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OCTOBER 31, 2022 (UNAUDITED)
Stock Issued for Services
Period Ended July 31, 2021
On July 30, 2021, the Company entered into an employment agreement with an officer of the Company to grant % 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.
On July 30, 2021, the Company entered into an employment agreement with an officer of the Company to grant % of the outstanding common stock on that date ( shares) to be earned over the following six-month period beginning on August 1st. These shares were fully earned as of January 31, 2022.
Year Ended July 31, 2022
During the three months ended April 30, 2022, the Company issued shares of common stock for services rendered in settling the above stock grants to the former officers having a fair value of $1,525,637 based upon the quoted closing trading price on the modified grant dates.
In order to reflect the proper compensation related to these arrangements, the Company adjusted general and administrative expense by $ to reflect the total fair value of the shares issued.
OPENLOCKER HOLDINGS, INC. (F/K/A DESCRYPTO HOLDINGS, INC.) AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OCTOBER 31, 2022 (UNAUDITED)
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Acquisition and Pro Forma Financial Information for Open Locker, Inc. |
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| Business Combination and Asset Acquisition [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Acquisition and Pro Forma Financial Information for Open Locker, Inc. | Note 6 – Acquisition and Pro Forma Financial Information for Open Locker, Inc.
OpenLocker, Inc. (“OL”)
On May 31, 2022, the Company entered into a share exchange agreement with OL and issued shares of common stock, having a fair value of $ ($/share), based upon recent cash offering prices in third party sales, to purchase % of OL’s, outstanding stock in a transaction treated as a business combination.
The cash price paid by third parties was the best evidence of fair value given the Company is thinly traded on OTC markets and had more sales of stock sold for cash than stock traded on the open market at the time of the transaction.
We made an initial allocation of the purchase price at the date of acquisition based on our understanding of the fair value of assets acquired and liabilities assumed. The allocation of the purchase price consideration was finalized as of July 31, 2022, with the excess purchase price allocated to an intangible asset, which consisted of intellectual property and goodwill.
The acquisition of OL was reflected in the consolidated financial statements at July 31, 2022
See Form 8-K filed with the U.S. Securities and Exchange Commission on June 6, 2022 for a complete discussion of the transaction.
OPENLOCKER HOLDINGS, INC. (F/K/A DESCRYPTO HOLDINGS, INC.) AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OCTOBER 31, 2022 (UNAUDITED)
The table below summarizes preliminary estimated fair value of the assets acquired and the liabilities assumed at the effective acquisition date during the year ended July 31, 2022.
In connection with the purchase of OL, there were no additional transaction costs incurred.
The goodwill of $2,943,874 is primarily related to factors such as synergies and market share.
Goodwill is not deductible for tax purposes.
OPENLOCKER HOLDINGS, INC. (F/K/A DESCRYPTO HOLDINGS, INC.) AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OCTOBER 31, 2022 (UNAUDITED)
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Intangible Asset |
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| Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Intangible Asset | Note 7 – Intangible Asset
In connection with the acquisition of OL, the Company recognized an intangible asset related to intellectual property. The Company believes the intellectual property is critical to the success of the business going forward and believes that the fair value ascribed is fully recoverable.
The Company’s intangible asset is as follows:
Amortization expense for the three months ended October 31, 2022 and 2021 was $82,126 and $, respectively.
Estimated amortization expense for each of the five (5) succeeding years and thereafter is as follows:
OPENLOCKER HOLDINGS, INC. (F/K/A DESCRYPTO HOLDINGS, INC.) AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OCTOBER 31, 2022 (UNAUDITED)
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Stock Options |
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| Stock Options | Note 8 – Stock Options
Stock option transactions under the Company’s Plan for the three months ended October 31, 2022 and the year ended July 31, 2022 are summarized as follows:
In September 2022, the Company granted , ten-year () options to an employee for services to be rendered during the period September 2022 - August 2023. These options vest ratably over a twelve-month () period. These options had an exercise price of $/share.
Using the Black-Scholes option pricing model, the Company determined that the fair value of these options granted was $.
OPENLOCKER HOLDINGS, INC. (F/K/A DESCRYPTO HOLDINGS, INC.) AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OCTOBER 31, 2022 (UNAUDITED)
During the year ended July 31, 2022, the Company granted , ten-year () options to various employees. These options were fully vested upon issuance. These options had exercise prices ranging from $ to $/share.
Using the Black-Scholes option pricing model, the Company determined that the fair value of these options granted was $.
For the year ended July 31, 2022, fair value was based upon the following management estimates:
Compensation expense recorded for stock-based compensation is as follows for the three months ended October 31, 2022 and 2021, $ and $, respectively.
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Commitments and Contingencies |
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| Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commitments and Contingencies | Note 9 – Commitments and Contingencies
Right-of-Use Operating Lease – Related Party
In connection with the acquisition of OL on May 31, 2022, the Company acquired an existing Right-of-Use operating lease for office space. The lease is for an initial term of two (2) years at $500 per month. The lease does not contain any renewal options.
OPENLOCKER HOLDINGS, INC. (F/K/A DESCRYPTO HOLDINGS, INC.) AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OCTOBER 31, 2022 (UNAUDITED)
During the period September 1, 2021 through May 31, 2022 no rent was due. The Company is required to pay a total of $7,500 over a fifteen-month (15) period from June 1, 2022 through August 31, 2023.
The Company is leasing the office space from a family member of OL’s Chief Executive Officer.
At October 31, 2022 and July 31, 2022, the Company has no financing leases as defined in ASC 842, “Leases.”
The tables below present information regarding the Company’s operating lease assets and liabilities at October 31, 2022 and July 31, 2022:
OPENLOCKER HOLDINGS, INC. (F/K/A DESCRYPTO HOLDINGS, INC.) AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OCTOBER 31, 2022 (UNAUDITED)
Future minimum lease payments required under leases that have initial or remaining non- cancelable lease terms in excess of one year at October 31, 2022:
Student Athlete Licensing Agreements
The Company has entered into several agreements with student athletes related to the sale of NFT’s and related collectibles.
There may be initial sales as well as resales of these products. The Company and the student athlete have agreed to split the revenue from the initial sale. Additionally, the Company will pay the student athlete a commission for any resales.
At October 31, 2022 and July 31, 2022, the Company owed a nominal amount to various student athletes, which has been included as a component of accounts payable and accrued expenses in the consolidated balance sheets. |
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Summary of Significant Accounting Policies (Policies) |
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| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||
| Basis of Presentation | Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial statements (“U.S. GAAP”) and with the instructions to Form 10-Q and Article 8 of Regulation S-X of the United States Securities and Exchange Commission (“SEC”). Accordingly, they do not contain all information and footnotes required by accounting principles generally accepted in the United States of America for annual financial statements.
In the opinion of the Company’s management, the accompanying unaudited consolidated financial statements contain all of the adjustments necessary (consisting only of normal recurring accruals) to present the financial position of the Company as of October 31, 2022 and the results of operations and cash flows for the periods presented. The results of operations for the three months ended October 31, 2022 are not necessarily indicative of the operating results for the full fiscal year or any future period.
These unaudited consolidated financial statements should be read in conjunction with the financial statements and related notes thereto included in the Company’s Annual Report on Form 10-K for the period ended July 31, 2022 filed with the SEC on October 31, 2022.
Management acknowledges its responsibility for the preparation of the accompanying unaudited consolidated financial statements which reflect all adjustments, consisting of normal recurring adjustments, considered necessary in its opinion for a fair statement of its consolidated financial position and the consolidated results of its operations for the periods presented.
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| Principles of Consolidation | Principles of Consolidation
These consolidated financial statements have been prepared in accordance with U.S. GAAP and include the accounts of the Company and its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated.
OPENLOCKER HOLDINGS, INC. (F/K/A DESCRYPTO HOLDINGS, INC.) AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OCTOBER 31, 2022 (UNAUDITED)
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| Business Combinations | Business Combinations
The Company accounts for business combinations using the acquisition method in accordance with Accounting Standards Codification, ASC 805, Business Combinations which requires recognition of assets acquired and liabilities assumed, including contingent assets and liabilities, at their respective fair values on the date of acquisition.
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| Business Segments and Concentrations | Business Segments and Concentrations
The Company uses the “management approach” to identify its reportable segments. The management approach requires companies to report segment financial information consistent with information used by management for making operating decisions and assessing performance as the basis for identifying the Company’s reportable segments. The Company manages its business as a single operating segment.
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| Use of Estimates | Use of Estimates
Preparing financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reported period. Actual results could differ from those estimates, and those estimates may be material.
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| Fair Value of Financial Instruments | Fair Value of Financial Instruments
The Company accounts for financial instruments under Financial Accounting Standards Board (“FASB”) ASC 820, Fair Value Measurements. ASC 820 provides a framework for measuring fair value and requires disclosures regarding fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, based on the Company’s principal or, in absence of a principal, most advantageous market for the specific asset or liability.
OPENLOCKER HOLDINGS, INC. (F/K/A DESCRYPTO HOLDINGS, INC.) AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OCTOBER 31, 2022 (UNAUDITED)
The Company uses a three-tier fair value hierarchy to classify and disclose all assets and liabilities measured at fair value on a recurring basis, as well as assets and liabilities measured at fair value on a non-recurring basis, in periods subsequent to their initial measurement. The hierarchy requires the Company to use observable inputs when available, and to minimize the use of unobservable inputs, when determining fair value.
The three tiers are defined as follows:
The determination of fair value and the assessment of a measurement’s placement within the hierarchy requires judgment. Level 3 valuations often involve a higher degree of judgment and complexity. Level 3 valuations may require the use of various cost, market, or income valuation methodologies applied to unobservable management estimates and assumptions. Management’s assumptions could vary depending on the asset or liability valued and the valuation method used. Such assumptions could include estimates of prices, earnings, costs, actions of market participants, market factors, or the weighting of various valuation methods. The Company may also engage external advisors to assist us in determining fair value, as appropriate.
Although the Company believes that the recorded fair value of our financial instruments is appropriate, these fair values may not be indicative of net realizable value or reflective of future fair values.
The Company’s financial instruments, including cash, and accounts payable and accrued expenses, are carried at historical cost. At July 31, 2022 and 2021, respectively, the carrying amounts of these instruments approximated their fair values because of the short-term nature of these instruments.
ASC 825-10 “Financial Instruments” allows entities to voluntarily choose to measure certain financial assets and liabilities at fair value (“fair value option”). The fair value option may be elected on an instrument-by-instrument basis and is irrevocable unless a new election date occurs. If the fair value option is elected for an instrument, unrealized gains and losses for that instrument should be reported in earnings at each subsequent reporting date. The Company did not elect to apply the fair value option to any outstanding financial instruments.
OPENLOCKER HOLDINGS, INC. (F/K/A DESCRYPTO HOLDINGS, INC.) AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OCTOBER 31, 2022 (UNAUDITED)
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| Cash and Cash Equivalents | Cash and Cash Equivalents
For purposes of the consolidated statements of cash flows, the Company considers all highly liquid instruments with a maturity of three months or less at the purchase date and money market accounts to be cash equivalents.
At October 31, 2022 and July 31, 2022, respectively, the Company did not have any cash equivalents.
The Company is exposed to credit risk on its cash and cash equivalents in the event of default by the financial institutions to the extent account balances exceed the amount insured by the FDIC, which is $250,000. At October 31, 2022 and July 31, 2022, the Company did not experience any losses on cash balances in excess of FDIC insured limits.
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| Investment | Investment
The Company owns shares of iGrow Systems Inc. The shares are valued at cost $15,000 ($/share). The investment is recorded on the Company’s balance sheet using the cost method of accounting.
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| Goodwill and Impairment | Goodwill and Impairment
In financial reporting, goodwill is not amortized, but is tested for impairment annually or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Events that result in an impairment review include significant changes in the business climate, declines in our operating results, or an expectation that the carrying amount may not be recoverable. We assess potential impairment by considering present economic conditions as well as future expectations. All assessments of goodwill impairment are conducted at the individual reporting unit level.
The Company uses qualitative factors according to ASC 350-20-35-3 to determine whether it is more likely than not that the fair value of goodwill is less than its carrying amount. During the three months ended October 31, 2022 and 2021, the Company determined there were no impairments of goodwill.
OPENLOCKER HOLDINGS, INC. (F/K/A DESCRYPTO HOLDINGS, INC.) AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OCTOBER 31, 2022 (UNAUDITED)
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| Intangible Assets and Impairment | Intangible Assets and Impairment
Definite-lived intangible assets are amortized on a straight-line basis over their estimated useful lives. Indefinite-lived intangible assets are reviewed for impairment annually. The Company reviews definite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
There were no impairment losses for the three months ended October 31, 2022 and 2021, respectively.
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| Impairment of Long-lived Assets | Impairment of Long-lived Assets
Management evaluates the recoverability of the Company’s identifiable intangible assets and other long-lived assets when events or circumstances indicate a potential impairment exists, in accordance with the provisions of ASC 360-10-35-15 “Impairment or Disposal of Long-Lived Assets.”
If impairment is indicated based on a comparison of the assets’ carrying values and the undiscounted cash flows, the impairment to be recognized is measured as the amount by which the carrying amount of the assets exceeds the fair value of the assets.
There were no impairment losses for the three months ended October 31, 2022 and 2021, respectively.
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| Property and Equipment | Property and Equipment
Property and equipment is stated at cost less accumulated depreciation. Depreciation is provided on the straight-line basis over the estimated useful lives of the assets.
Expenditures for repair and maintenance which do not materially extend the useful lives of property and equipment are charged to operations. When property or equipment is sold or otherwise disposed of, the cost and related accumulated depreciation are removed from the respective accounts with the resulting gain or loss reflected in operations.
Management reviews the carrying value of its property and equipment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable.
There were no impairment losses for the three months ended October 31, 2022 and 2021, respectively.
OPENLOCKER HOLDINGS, INC. (F/K/A DESCRYPTO HOLDINGS, INC.) AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OCTOBER 31, 2022 (UNAUDITED)
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| Operating Lease | Operating Lease
From time to time, we may enter into operating lease or sub-lease agreements, including our corporate headquarters. We account for leases in accordance with ASC Topic 842: Leases, which requires a lessee to utilize the right-of-use model and to record a right- of-use asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases are classified as either financing or operating, with classification affecting the pattern of expense recognition in the statement of operations. In addition, a lessor is required to classify leases as either sales-type, financing or operating. A lease will be treated as a sale if it transfers all of the risks and rewards, as well as control of the underlying asset, to the lessee. If risks and rewards are conveyed without the transfer of control, the lease is treated as financing. If the lessor does not convey risk and rewards or control, the lease is treated as operating. We determine if an arrangement is a lease, or contains a lease, at inception and record the lease in our financial statements upon lease commencement, which is the date when the underlying asset is made available for use by the lessor.
Right-of-use assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments over the lease term. Lease right- of-use assets and liabilities at commencement are initially measured at the present value of lease payments over the lease term. We generally use our incremental borrowing rate based on the information available at commencement to determine the present value of lease payments except when an implicit interest rate is readily determinable. We determine our incremental borrowing rate based on market sources including relevant industry data.
We may have lease agreements with lease and non-lease components and have elected to utilize the practical expedient to account for lease and non-lease components together as a single combined lease component, from both a lessee and lessor perspective with the exception of direct sales-type leases and production equipment classes embedded in supply agreements. From a lessor perspective, the timing and pattern of transfer are the same for the non-lease components and associated lease component and, the lease component, if accounted for separately, would be classified as an operating lease.
We have elected not to present short-term leases on the balance sheet as these leases have a lease term of 12 months or less at lease inception and do not contain purchase options or renewal terms that we are reasonably certain to exercise. All other lease assets and lease liabilities are recognized based on the present value of lease payments over the lease term at commencement date. Because most of our leases do not provide an implicit rate of return, we used our incremental borrowing rate based on the information available at lease commencement date in determining the present value of lease payments.
OPENLOCKER HOLDINGS, INC. (F/K/A DESCRYPTO HOLDINGS, INC.) AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OCTOBER 31, 2022 (UNAUDITED)
Our leases, where we are the lessee, do not include an option to extend the lease term. Our lease does not include an option to terminate the lease prior to the end of the agreed upon lease term. For purposes of calculating lease liabilities, lease term would include options to extend or terminate the lease when it is reasonably certain that we will exercise such options.
Lease expense for operating leases is recognized on a straight-line basis over the lease term as an operating expense, included as a component of general and administrative expenses, in the accompanying consolidated statements of operations.
Certain operating leases provide for annual increases to lease payments based on an index or rate, our lease has no stated increase, payments were fixed at lease inception. We calculate the present value of future lease payments based on the index or rate at the lease commencement date. Differences between the calculated lease payment and actual payment are expensed as incurred.
See Note 9.
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| Revenue Recognition | Revenue Recognition
OpenLocker generates revenue from two main sources, primary sales of NFTs on its online store and commissions collected from sales on the secondary marketplace.
Revenue is recognized in accordance with FASB Topic ASC No. 606, “Revenue from Contracts with Customers”. The Company recognizes revenue when its performance obligations are complete, which occurs at a point in time related to the transfer of an NFT to its customer. Currently, all sales contain a single performance obligation.
OPENLOCKER HOLDINGS, INC. (F/K/A DESCRYPTO HOLDINGS, INC.) AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OCTOBER 31, 2022 (UNAUDITED)
All payments are received from third-party payment processing providers. The Company receives payments from sales on its primary marketplace (Shopify site) as well as two other sources. Each of these sources of payment relate to the completion of a single performance obligation completed at a point in time, which occurs upon the transfer of an NFT and where no further performance obligations are required:
The Company also recognizes revenues generated from the 5% commission fee collected on secondary marketplace sales transacted on the OpenLocker Trading Portal site, operated by Mint Blockchain Solutions, which is deposited into a blocto wallet. The platform uses FUSD (1:1 USD-backed stablecoin) as the fungible token on the Flow network. Conversion from FUSD to USD and transfers to company bank account will be made on a monthly basis.
Shipping fees collected from customers for physical collectibles are included with revenues received from Shopify payouts. The majority of those collectibles have not yet been shipped due to a delay in receiving the goods from our vendor. Prior to the product shipping, any amounts received in advance are accounted for as contract liabilities (deferred revenue).
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| Software Development Costs | Software Development Costs
Internal-use software development costs are accounted for in accordance with ASC 350- 40, “Internal-Use Software”. The costs incurred in the preliminary stages of development are expensed as research and development costs as incurred.
Once an application has reached the development stage, internal and external costs incurred to develop internal-use software are capitalized and amortized on a straight-line basis over the estimated useful life of the software (typically three to five years).
OPENLOCKER HOLDINGS, INC. (F/K/A DESCRYPTO HOLDINGS, INC.) AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OCTOBER 31, 2022 (UNAUDITED)
Maintenance and enhancement costs, including those costs in the post- implementation stages, are typically expensed as incurred, unless such costs relate to substantial upgrades and enhancements to the software that result in added functionality, in which case the costs are capitalized and amortized on a straight-line basis over the estimated useful life of the software.
The Company reviews the carrying value for impairment whenever facts and circumstances exist that would suggest that assets might be impaired or that the useful lives should be modified. Amortization expense related to capitalized internal-use software development costs will be included in cost of goods sold in the statements of operations.
For the three months ended October 31, 2022 and 2021, the Company expensed $72,522 and $0, respectively, in software development costs.
|
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| Income Taxes | Income Taxes
The Company accounts for income tax using the asset and liability method prescribed by ASC 740, “Income Taxes”. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in effect in the year in which the differences are expected to reverse. The Company records a valuation allowance to offset deferred tax assets if based on the weight of available evidence, it is more-likely-than-not that some portion, or all, of the deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rates is recognized as income or loss in the period that includes the enactment date.
The Company follows the accounting guidance for uncertainty in income taxes using the provisions of ASC 740 “Income Taxes”. Using that guidance, tax positions initially need to be recognized in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. As of October 31, 2022 and July 31, 2022, respectively, the Company had no uncertain tax positions that qualify for either recognition or disclosure in the financial statements.
The Company recognizes interest and penalties related to uncertain income tax positions in other expense. No interest and penalties related to uncertain income tax positions were recorded for the three months ended October 31, 2022 and 2021, respectively.
OPENLOCKER HOLDINGS, INC. (F/K/A DESCRYPTO HOLDINGS, INC.) AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OCTOBER 31, 2022 (UNAUDITED)
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| Advertising Costs | Advertising Costs
Advertising costs are expensed as incurred. Advertising costs are included as a component of general and administrative expense in the consolidated statements of operations.
The Company recognized $44,048 and $0 in marketing and advertising costs during the three months ended October 31, 2022 and 2021, respectively.
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| Stock-Based Compensation | Stock-Based Compensation
The Company accounts for our stock-based compensation under ASC 718 “Compensation – Stock Compensation” using the fair value-based method. Under this method, compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period. This guidance establishes standards for the accounting for transactions in which an entity exchanges it equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments.
When determining fair value of stock options, the Company considers the following assumptions in the Black-Scholes model:
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| Basic and Diluted Earnings (Loss) per Share |
Pursuant to ASC 260-10-45, basic earnings (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding for the periods presented.
Diluted earnings per share is computed by dividing net income by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during the period. Potentially dilutive common shares may consist of common stock issuable for stock options and warrants (using the treasury stock method), convertible notes and common stock issuable. These common stock equivalents may be dilutive in the future. In the event of a net loss, diluted loss per share is the same as basic loss per share since the effect of the potential common stock equivalents upon conversion would be anti-dilutive.
OPENLOCKER HOLDINGS, INC. (F/K/A DESCRYPTO HOLDINGS, INC.) AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OCTOBER 31, 2022 (UNAUDITED)
The Company effected a reverse merger and recapitalization on July 29, 2021, as a result, all share and per share amounts have been retroactively restated to the earliest period presented (for the period ended July 31, 2021).
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| Related Parties | Related Parties
Parties are considered to be related to the Company if the parties, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal with if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests.
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| Recent Accounting Standards | Recent Accounting Standards
Changes to accounting principles are established by the FASB in the form of ASU’s to the FASB’s Codification. We consider the applicability and impact of all ASU’s on our consolidated financial position, results of operations, stockholders’ deficit, cash flows, or presentation thereof. Management has evaluated all recent accounting pronouncements as issued by the FASB in the form of Accounting Standards Updates (“ASU”) through the date these financial statements were available to be issued and found no recent accounting pronouncements issued, but not yet effective accounting pronouncements, when adopted, will have a material impact on the consolidated financial statements of the Company.
OPENLOCKER HOLDINGS, INC. (F/K/A DESCRYPTO HOLDINGS, INC.) AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OCTOBER 31, 2022 (UNAUDITED)
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Organization, Nature of Operations and Going Concern (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Oct. 31, 2022 | ||||||||||||||||||||||||||||||||||||||
| Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||
| Schedule of Subsidiary | The parent (OpenLocker Holdings, Inc., formerly known as Descrypto Holdings, Inc.) and subsidiary are organized as follows:
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Summary of Significant Accounting Policies (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Oct. 31, 2022 | |||||||||||||||||||||||||||||||||||||
| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||
| Schedule of Potentially Dilutive Equity Securities |
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Property and Equipment (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Oct. 31, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Property, Plant and Equipment [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Property, Plant and Equipment | Property and Equipment consisted of the following:
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Notes Payable – Related Parties and Debt Forgiveness (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Oct. 31, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Notes Payable Related Parties | The following represents a summary of the Company’s notes payable – related parties, key terms, and outstanding balances at October 31, 2022 and July 31, 2022:
A Due on the earlier of June 28, 2022, or the date which the Company raises at least $200,000 from investors.
B These notes were forgiven by the debt holders in February 2022. Total principal and accrued interest totaled $155,743. Since these transactions occurred with related parties, gain on debt forgiveness was recorded as an increase to additional paid-in capital. See Note 5.
C The Company issued shares of common stock, having a fair value of $106,274, to settle the outstanding principal and related accrued interest of $54,180 on these notes payable - related parties, resulting in a loss on debt extinguishment of $52,094. See Note 5. |
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Acquisition and Pro Forma Financial Information for Open Locker, Inc. (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Oct. 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Business Combination and Asset Acquisition [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Assets and Liabilities Effective on Acquisition | The table below summarizes preliminary estimated fair value of the assets acquired and the liabilities assumed at the effective acquisition date during the year ended July 31, 2022.
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Intangible Asset (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||
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Oct. 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Intangible Assets | The Company’s intangible asset is as follows:
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| Schedule of Intangible Asset, Estimated Amortization Expense | Estimated amortization expense for each of the five (5) succeeding years and thereafter is as follows:
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Stock Options (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Oct. 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock Options | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Stock Option | Stock option transactions under the Company’s Plan for the three months ended October 31, 2022 and the year ended July 31, 2022 are summarized as follows:
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| Schedule of Stock Option Fair Value |
For the year ended July 31, 2022, fair value was based upon the following management estimates:
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Commitments and Contingencies (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Oct. 31, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commitments and Contingencies Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Operating Lease Assets and Liabilities | The tables below present information regarding the Company’s operating lease assets and liabilities at October 31, 2022 and July 31, 2022:
|
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| Schedule of Minimum Lease Payments | Future minimum lease payments required under leases that have initial or remaining non- cancelable lease terms in excess of one year at October 31, 2022:
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Schedule of Subsidiary (Details) |
3 Months Ended | |||||
|---|---|---|---|---|---|---|
Oct. 31, 2022 | ||||||
| Entity incorporation, date of incorporation | 1996 | |||||
| Entity incorporation, state or country code | DE | |||||
| Subsidiaries [Member] | ||||||
| Entity incorporation, date of incorporation | 2017 | [1] | ||||
| Entity incorporation, state or country code | DE | [1] | ||||
| Subsidiaries One [Member] | ||||||
| Entity incorporation, date of incorporation | 2022 | |||||
| Entity incorporation, state or country code | WY | |||||
| Subsidiaries Two [Member] | ||||||
| Entity incorporation, date of incorporation | 2021 | [2] | ||||
| Entity incorporation, state or country code | DE | [2] | ||||
| ||||||
Organization, Nature of Operations and Going Concern (Details Narrative) - USD ($) |
1 Months Ended | 3 Months Ended | |||
|---|---|---|---|---|---|
Jul. 29, 2021 |
Oct. 31, 2022 |
Oct. 31, 2021 |
Jul. 31, 2022 |
Jul. 31, 2021 |
|
| Net loss | $ 565,706 | $ 2,564,685 | |||
| Net cash provided by used in operating activities | 259,636 | 30,093 | |||
| Accumulated deficit | 3,273,861 | $ 2,708,155 | |||
| Stockholders' equity | 5,430,686 | $ (192,260) | 5,719,109 | $ (156,497) | |
| Working capital | 301,096 | ||||
| Cash | $ 405,615 | $ 607,135 | |||
| Share Exchange Agreement [Member] | Krypto Bank [Member] | |||||
| Equity method investment, ownership percentage | 100.00% | ||||
| Share Exchange Agreement [Member] | Krypto Bank [Member] | |||||
| Percentage of common stock | 90.00% | ||||
| Number of shares issued | 233,474,958 | ||||
| Assumed net liabilities | $ 16,306 | ||||
Schedule of Potentially Dilutive Equity Securities (Details) - shares |
3 Months Ended | |
|---|---|---|
Oct. 31, 2022 |
Oct. 31, 2021 |
|
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
| Total common stock equivalents | 45,630,830 | 35,520,000 |
| Series A Convertible Preferred Stock [Member] | ||
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
| Total common stock equivalents | 44,520,000 | 35,520,000 |
| Share-Based Payment Arrangement, Option [Member] | ||
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
| Total common stock equivalents | 1,110,830 | |
Schedule of Potentially Dilutive Equity Securities (Details) (Parenthetical) - $ / shares |
3 Months Ended | 12 Months Ended |
|---|---|---|
Oct. 31, 2022 |
Jul. 31, 2022 |
|
| Property, Plant and Equipment [Line Items] | ||
| Stock option exercise price | ||
| Minimum [Member] | Share-Based Payment Arrangement, Option [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Stock option exercise price | 0.12 | |
| Maximum [Member] | Share-Based Payment Arrangement, Option [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Stock option exercise price | $ 0.70 | |
| Common Stock [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Preferred stock, convertible, shares issuable | 1,000 | |
| Series A Convertible Preferred Stock [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Preferred stock, convertible, shares issuable | 1 |
Summary of Significant Accounting Policies (Details Narrative) - USD ($) |
3 Months Ended | |
|---|---|---|
Oct. 31, 2022 |
Oct. 31, 2021 |
|
| Property, Plant and Equipment [Line Items] | ||
| FDIC amount | $ 250,000 | |
| Software development cost | 72,522 | |
| Marketing and advertising costs | 44,048 | 0 |
| Software and Software Development Costs [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Software development cost | $ 72,522 | $ 0 |
| iGrow Systems Inc [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Investment owned balance, shares | 150,000 | |
| Investment owned at cost | $ 15,000 | |
| Share price | $ 0.10 | |
Schedule of Property, Plant and Equipment (Details) - USD ($) |
3 Months Ended | 12 Months Ended |
|---|---|---|
Oct. 31, 2022 |
Jul. 31, 2022 |
|
| Property, Plant and Equipment [Abstract] | ||
| Website | $ 10,836 | $ 10,836 |
| Estimated Useful Lives (Years) | 3 years | 3 years |
| Accumulated amortization | $ 5,559 | $ 4,767 |
| Website - net | $ 5,277 | $ 6,069 |
Property and Equipment (Details Narrative) - USD ($) |
3 Months Ended | |
|---|---|---|
Oct. 31, 2022 |
Oct. 31, 2021 |
|
| Property, Plant and Equipment [Abstract] | ||
| Amortization expense | $ 792 | $ 792 |
Schedule of Assets and Liabilities Effective on Acquisition (Details) - USD ($) |
12 Months Ended | |||
|---|---|---|---|---|
Jul. 31, 2022 |
Oct. 31, 2022 |
|||
| Business Acquisition [Line Items] | ||||
| Less: allocation for goodwill | $ 2,943,874 | $ 2,943,874 | ||
| Open Locker Inc [Member] | ||||
| Business Acquisition [Line Items] | ||||
| Consideration Common stock | [1] | 5,142,001 | ||
| Fair value of consideration transferred | 5,142,001 | |||
| Cash | 13,328 | |||
| Total assets acquired | 13,328 | |||
| Accounts payable and accrued expenses | 114,725 | |||
| Total liabilities assumed | 114,725 | |||
| Total identifiable net liabilities | (101,397) | |||
| Amount to allocate to intangible asset and goodwill | 5,243,398 | |||
| Less: allocation for identifiable intangible asset (intellectual property) | 2,299,524 | |||
| Less: allocation for goodwill | 2,943,874 | $ 2,943,874 | ||
| Total intangible asset and goodwill | ||||
| ||||
Schedule of Assets and Liabilities Effective on Acquisition (Details) (Parenthetical) - Open Locker Inc [Member] |
12 Months Ended |
|---|---|
|
Jul. 31, 2022
$ / shares
shares
| |
| Business Acquisition [Line Items] | |
| Number of shares issued | shares | 12,500,002 |
| Stock price per share | $ / shares | $ 0.41 |
Acquisition and Pro Forma Financial Information for Open Locker, Inc. (Details Narrative) - USD ($) |
May 31, 2022 |
Oct. 31, 2022 |
Jul. 31, 2022 |
|---|---|---|---|
| Business Acquisition [Line Items] | |||
| Goodwill | $ 2,943,874 | $ 2,943,874 | |
| Open Locker Inc [Member] | |||
| Business Acquisition [Line Items] | |||
| Share price | $ 0.41 | ||
| Goodwill | $ 2,943,874 | $ 2,943,874 | |
| Share Exchange Agreement [Member] | Open Locker Inc [Member] | |||
| Business Acquisition [Line Items] | |||
| Stock issued during period shares acquisitions | 12,500,002 | ||
| Stock issued during period value acquisitions | $ 5,142,001 | ||
| Share price | $ 0.41 | ||
| Business acquisition percentage of voting interests acquired | 100.00% |
Schedule of Intangible Assets (Details) - USD ($) |
3 Months Ended | |
|---|---|---|
Oct. 31, 2022 |
Jul. 31, 2022 |
|
| Goodwill and Intangible Assets Disclosure [Abstract] | ||
| Gross carrying amount | $ 2,299,524 | |
| Estimated useful life (years) | 7 years | |
| Accumulated amortization | $ 136,878 | |
| Net carrying amount | $ 2,162,646 |
Schedule of Intangible Asset, Estimated Amortization Expense (Details) - USD ($) |
Oct. 31, 2022 |
Jul. 31, 2022 |
|---|---|---|
| Goodwill and Intangible Assets Disclosure [Abstract] | ||
| 2023 (9 months) | $ 246,378 | |
| 2024 | 328,503 | |
| 2025 | 328,503 | |
| 2026 | 328,503 | |
| 2027 | 328,503 | |
| Thereafter | 602,256 | |
| Total | $ 2,162,646 |
Intangible Asset (Details Narrative) - USD ($) |
3 Months Ended | |
|---|---|---|
Oct. 31, 2022 |
Oct. 31, 2021 |
|
| Goodwill and Intangible Assets Disclosure [Abstract] | ||
| Amortization expense | $ 82,126 | |
Schedule of Stock Option Fair Value (Details) |
3 Months Ended | 12 Months Ended |
|---|---|---|
Oct. 31, 2022 |
Jul. 31, 2022 |
|
| Stock Options | ||
| Expected term (years) | 5 years | 5 years |
| Expected volatility | 274.00% | |
| Expected dividends | 0.00% | 0.00% |
| Risk free interest rate | 2.98% | |
| Expected volatility, minimum | 275.00% | |
| Expected volatility, maximum | 276.00% | |
| Risk free interest rate, minimum | 2.85% | |
| Risk free interest rate, maximum | 2.98% |
Stock Options (Details Narrative) - USD ($) |
1 Months Ended | 3 Months Ended | 12 Months Ended | |
|---|---|---|---|---|
Sep. 30, 2022 |
Oct. 31, 2022 |
Oct. 31, 2021 |
Jul. 31, 2022 |
|
| Stock Options | ||||
| Granted, shares | 1,478,050 | 1,478,050 | 864,489 | |
| Option period | 10 years | 12 years | 10 years | |
| Exercise price, maximum | $ 0.40 | $ 0.40 | ||
| Fair value, options granted | $ 1,003,002 | $ 534,466 | ||
| Exercise price, minimum | $ 0.12 | |||
| Compensation expense | $ 167,167 | $ 0 | ||
Schedule of Operating Lease Assets and Liabilities (Details) - USD ($) |
3 Months Ended | 12 Months Ended |
|---|---|---|
Oct. 31, 2022 |
Jul. 31, 2022 |
|
| Commitments and Contingencies Disclosure [Abstract] | ||
| Operating lease - right-of-use asset - non-current | $ 2,792 | $ 3,630 |
| Operating lease liability | $ 4,822 | $ 6,207 |
| Weighted-average remaining lease term (years) | 9 months 29 days | 1 year 29 days |
| Weighted-average discount rate | 8.00% | 8.00% |
| Amortization of right-of-use operating lease asset | $ 838 | $ 559 |
| Lease liability expense in connection with obligation repayment | 115 | 92 |
| Total operating lease costs | 953 | 651 |
| Operating cash outflows from operating lease (obligation payment) | 1,385 | 908 |
| Right-of-use asset obtained in exchange for new operating lease liability | $ 4,189 |
Schedule of Minimum Lease Payments (Details) - USD ($) |
Oct. 31, 2022 |
Jul. 31, 2022 |
|---|---|---|
| Commitments and Contingencies Disclosure [Abstract] | ||
| 2023 (6 Months) | $ 4,500 | |
| 2024 | 500 | |
| Total undiscounted cash flows | 5,000 | |
| Less: amount representing interest | (178) | |
| Present value of operating lease liability | 4,822 | $ 6,207 |
| Less: current portion of operating lease liability | (4,822) | (5,710) |
| Long-term operating lease liability | $ 497 |
Commitments and Contingencies (Details Narrative) - USD ($) |
3 Months Ended | 12 Months Ended | 15 Months Ended | |
|---|---|---|---|---|
May 31, 2022 |
Oct. 31, 2022 |
Jul. 31, 2022 |
Aug. 31, 2023 |
|
| Lease initial term | 2 years | |||
| Lease expense | $ 500 | |||
| Operating lease payments | $ 1,385 | $ 908 | ||
| Forecast [Member] | ||||
| Operating lease payments | $ 7,500 |