0001493152-18-007597.txt : 20180521 0001493152-18-007597.hdr.sgml : 20180521 20180521171504 ACCESSION NUMBER: 0001493152-18-007597 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 66 CONFORMED PERIOD OF REPORT: 20180331 FILED AS OF DATE: 20180521 DATE AS OF CHANGE: 20180521 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Crypto Co CENTRAL INDEX KEY: 0001688126 STANDARD INDUSTRIAL CLASSIFICATION: WOMEN'S, MISSES', CHILDREN'S & INFANTS' UNDERGARMENTS [2340] IRS NUMBER: 464212405 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-55726 FILM NUMBER: 18850508 BUSINESS ADDRESS: STREET 1: 23805 STUART RANCH ROAD, STREET 2: SUITE 235 CITY: MALIBU STATE: CA ZIP: 90265 BUSINESS PHONE: (424) 228-9955 MAIL ADDRESS: STREET 1: 23805 STUART RANCH ROAD, STREET 2: SUITE 235 CITY: MALIBU STATE: CA ZIP: 90265 FORMER COMPANY: FORMER CONFORMED NAME: CROE, INC. DATE OF NAME CHANGE: 20161020 10-Q 1 form10-q.htm

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

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

 

For the quarterly period ended March 31, 2018

 

OR

 

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

 

For the transition period from ______________ to _______________

 

Commission File Number: 000-55726

 

THE CRYPTO COMPANY

(Exact name of registrant as specified in its charter)

 

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

 

23805 Stuart Ranch Road, Suite 235

Malibu, California 90265

(Address of principal executive offices)

(Zip Code)

 

(424) 228-9955

(Registrant’s telephone number, including area code)

 

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

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period than the registrant was required to submit and post such files). Yes [X] No [  ]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer,” and “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer [  ] Accelerated filer [  ]
   
Non-accelerated filer [  ] Smaller reporting company [X]
(Do not check if a smaller reporting company)  
   
Emerging growth company [  ]  

 

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

 

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

 

As of May 21, 2018 the issuer had 21,156,795 shares of common stock, par value $0.001 per share, outstanding.

 

 

 

 
 

 

TABLE OF CONTENTS

 

Note About Forward-Looking Statements

 

   

Page No.

PART I FINANCIAL INFORMATION  
     
Item 1. Condensed Consolidated Financial Statements 4
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 19
     
Item 3. Quantitative and Qualitative Disclosures About Market Risk 25
     
Item 4. Controls and Procedures 26
     
PART II OTHER INFORMATION
     
Item 1. Legal Proceedings 27
     
Item 1A. Risk Factors 27
     
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 28
     
Item 3. Defaults Upon Senior Securities 28
     
Item 4. Mine Safety Disclosures 28
     
Item 5. Other Information 29
     
Item 6. Exhibits 30
     
SIGNATURES 31

 

2
 

 

NOTE ABOUT FORWARD-LOOKING STATEMENTS

 

This Quarterly Report on Form 10-Q (the “Quarterly Report”) contains forward-looking statements. All statements contained in this Quarterly Report other than statements of historical fact, including statements regarding our future results of operations and financial position, our business strategy and plans, and our objectives for future operations, are forward-looking statements. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” and similar expressions are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the period from March 9, 2017 (“Inception”), through December 31, 2017, filed with the Securities and Exchange Commission on April 2, 2018. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the future events and trends discussed in this Quarterly Report may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

 

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

 

Unless expressly indicated or the context requires otherwise, the terms “Crypto”, the “Company”, “we”, “us” and “our” in this document refer The Crypto Company, a Nevada corporation, and, where appropriate, its wholly owned subsidiaries, Crypto Sub, Inc., a Nevada corporation, and CoinTracking, LLC, a Nevada limited liability company.

 

3
 

 

PART I. FINANCIAL INFORMATION

 

ITEM 1. Financial Statements

 

THE CRYPTO COMPANY

CONDENSED CONSOLIDATED BALANCE SHEET

 

   March 31, 2018   December 31, 2017 
   (Unaudited)   (Audited) 
ASSETS          
CURRENT ASSETS          
Cash and cash equivalents  $3,678,730   $8,950,244 
Accounts receivable, net   152,103    500 
Loan receivable, related party   194,380    - 
Investment in cryptocurrency          
The Crypto Company, at fair value (cost $ 2,331,326 and $1,131,885, respectively)   1,689,600    2,917,627 
CoinTracking, at fair value (cost $ 1,528,027)   1,054,753    - 
Prepaid expenses   48,854    33,294 
Contract asset for commissions and incentives, current portion   98,906    - 
Total Current Assets   6,917,326    11,901,665 
           
Equipment, net of accumulated depreciation   218,632    68,320 
Contract asset for commissions and incentives, net of current portion   27,234    - 
Goodwill   10,325,631    - 
Other assets   35,109    1,500 
           
TOTAL ASSETS  $17,523,932   $11,971,485 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY          
           
CURRENT LIABILITIES          
Accounts payable and accrued expenses  $1,128,373   $697,609 
Common stock payable   24,988    - 
Income tax payable   800    800 
Value-added taxes payable   116,608    - 
Contract liabilities, current portion   3,033,817    - 
Total Current Liabilities   4,304,586    698,409 
           
Contract liabilities, net of the current portion   1,433,858    - 
           
TOTAL LIABILITIES   5,738,444    698,409 
           
STOCKHOLDERS’ EQUITY          
Preferred stock, $0.001 par value; 10,000,000 shares authorized, none issued and outstanding   -    - 
Common stock, $0.001 par value; 50,000,000 shares authorized, 20,954,283 and 20,458,945 shares issued and outstanding, respectively   20,955    20,459 
Additional paid-in-capital   23,048,011    19,020,176 
Accumulated deficit   (10,926,505)   (7,767,559)
Accumulated other comprehensive income   5,828    - 
TOTAL CRYPTO COMPANY EQUITY   12,148,289    11,273,076 
Noncontrolling interests   (362,801)   - 
TOTAL STOCKHOLDERS’ EQUITY   11,785,488    11,273,076 
           
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY  $17,523,932   $11,971,485 

 

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

 

4
 

 

THE CRYPTO COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

 

       For the Period 
      from Inception 
   For the Three   March 9, 2017  
   Months Ended   through 
   March 31, 2018   March 31, 2017 
   (Unaudited)   (Unaudited) 
REVENUE          
Net realized gain on investment in cryptocurrency  $1,072,598   $- 
Subscription revenue, net   456,697    - 
Other income   295    - 
           
Total Revenue, net   1,529,590    - 
           
COST OF SUBSCRIPTION SALES   65,061    - 
           
GROSS PROFIT   1,464,529    - 
           
OPERATING EXPENSES          
General and administrative expenses   2,788,058    80,016 
Share-based compensation   (708,139)   580,000 
           
Total Operating Expenses   2,079,919    660,016 
           
OPERATING LOSS   (615,390)   (660,016)
           
NET CHANGE IN UNREALIZED DEPRECIATION ON INVESTMENT IN CRYPTOCURRENCY          
Net change in unrealized depreciation on investment in cryptocurrency   (2,905,557)   - 
           
LOSS BEFORE PROVISION FOR INCOME TAXES   (3,520,947)   (660,016)
           
PROVISION FOR INCOME TAXES   800    - 
           
NET LOSS   (3,521,747)   (660,016)
           
OTHER COMPREHENSIVE INCOME          
Foreign currency translation adjustment   5,828    - 
           
COMPREHENSIVE LOSS   (3,515,919)   (660,016)
           
COMPREHENSIVE LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS   (362,801)   - 
           
COMPREHENSIVE LOSS ATTRIBUTABLE TO THE CRYPTO COMPANY  $(3,153,118)  $(660,016)
           
Net loss per common share - basic and diluted  $(0.15)  $(0.06)
Weighted average common shares outstanding - basic and diluted   20,864,198    11,335,000 

 

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

 

5
 

 

THE CRYPTO COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

       For the Period 
       from Inception 
   For the Three   March 09, 2017 
   Months Ended   through 
   March 31, 2018   March 31, 2017 
   (Unaudited)   (Unaudited) 
CASH FLOWS FROM OPERATING ACTIVITIES          
Net loss  $(3,521,747)  $(660,016)
Adjustments to reconcile net loss to net cash used by operating activities:          
Net change in unrealized depreciation on investment in cryptocurrency   2,905,557    - 
Net realized gain on investment in cryptocurrency   (1,072,598)   - 
Customer payments received in cryptocurrency   (544,340)     
Depreciation   17,101    - 
Share-based compensation   (708,139)   580,000 
Changes in operating assets and liabilities:          
Accounts receivable   62,954    - 
Prepaid expenses   (71,581)   - 
Accounts payable and accrued liabilities   44,662    80,000 
Income tax payable   5,526    - 
Contract liabilities   850,951    - 
Net cash used by operating activities   (2,031,654)   (16)
           
CASH FLOWS FROM INVESTING ACTIVITIES          
Cash paid in acquisition of CoinTracking, net of cash acquired of $1,547,097   (3,189,303)   - 
Purchases of other asset   (23,843)   - 
Purchases of equipment   (32,612)   - 
Net cash used by investing activities   (3,245,758)   - 
           
CASH FLOWS FROM FINANCING ACTIVITIES          
Proceeds from common stock issuance   -    400,000 
Proceeds from exercised stock options   70    - 
           
Net cash provided by financing activities   70    400,000 
           
EFFECT OF FOREIGN EXCHANGE RATE CHANGES ON CASH   5,828    - 
           
NET CHANGE IN TOTAL CASH AND CASH EQUIVALENTS   (5,271,514)   399,984 
           
CASH AND CASH EQUIVALENTS, beginning of period   8,950,244    - 
           
CASH AND CASH EQUIVALENTS, end of period  $3,678,730   $399,984 
           
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION          
           
Cash paid for interest  $564   $- 
           
Noncash investment activities:          
Shares of common stock issued in exchange for investments in cryptocurrency  $-   $100,000 
           
Issues of common stock for acquisition of CoinTracking  $4,736,400   $- 

 

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

 

6
 

 

THE CRYPTO COMPANY

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 1 - THE COMPANY

 

The Crypto Company (the “Company”, “Crypto”, “we”, “us” or “our”) was incorporated in the State of Nevada on March 9, 2017 (“Inception”), and is engaged in the business of building technological infrastructure, a proprietary investment portfolio and strategic alliances to facilitate the exchange of value in the digital asset market and, specifically, to assist third parties with investing in, trading and managing digital assets. We also invest in technologies and tokens in a manner that diversifies exposure to the growing class of digital assets. From time to time, we may seek strategic acquisitions either by integrating third party teams and technology with our core business or by funding third party teams in which we may have interest.

 

On January 26, 2018, CoinTracking, LLC (“CoinTracking”), a Nevada limited liability company and wholly owned subsidiary of The Crypto Company, acquired 50.1% of CoinTracking GmbH, and the remaining 49.9% of CoinTracking GmbH is owned by Kachel Holding GmbH, a private limited liability company (Gesellschaft mit beschränkter Haftung) organized under the laws of the Federal Republic of Germany. CoinTracking, GmbH, was incorporated in December 2017, and operates as a SAAS platform, which allows users to track and manage value, profit, loss and other information regarding their investments in cryptocurrencies available via web-based or mobile application. Prior to December 2017, CoinTracking, GmbH operated as a sole proprietorship starting in 2013.

 

Technology

 

The Company is developing proprietary technology, including trading management and auditing software, tools and processes to assist both our own operations and traditional companies, from start-up businesses to well-established companies. We may consider using our technology to build additional units around our existing platform, or selling or licensing our technology to third party institutions for a fee.

 

Media and Ongoing Education

 

The Company also engages in public discourse on an ongoing basis and regularly host roundtable webinars to educate the public about the cryptocurrency market.

 

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of presentation - The included balance sheet as of December 31, 2017, was derived from audited financial statements and the accompanying unaudited condensed consolidated financial statements as March 31, 2018 and 2017 of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) for interim financial information and pursuant to the instructions to Form 10-Q and Article 8-03 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by US GAAP for complete financial statements. In the opinion of management, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation of the condensed consolidated financial statements have been included.

 

The results of operations for interim periods are not necessarily indicative of the results to be expected for future quarters or for the full year.

 

The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Annual Report on Form 10-K for the period from March 9, 2017 (“Inception”), through December 31, 2017, filed with the Securities and Exchange Commission on April 2, 2018.

 

Consolidation - The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Crypto Sub and CoinTracking, LLC and its 50.1% ownership of CoinTracking, GmbH. All significant intercompany accounts and transactions are eliminated in consolidation.

 

7
 

 

Liquidity - The Company had limited revenues during the three months ended March 31, 2018, or since inception of March 9, 2017, limited to realized gains on investments in cryptocurrency and software subscription revenue from their CoinTracking business acquisition. The Company has raised an aggregate of $12,281,997 in cash from common stock issuances from inception on March 9, 2017 through March 31, 2018, and had $3,678,730 in cash as of March 31, 2018 and working capital of $2,612,740. Management believes that the Company has adequate cash and liquid cryptocurrency holdings as of March 31, 2018 to meet its operating cash needs for the next 12-15 months. The Company has the ability to structure its variable and fixed costs to offset delays in raising additional capital in the private or public markets. However, the Company has a limited operating history and its prospects are subject to risks, expenses and uncertainties frequently encountered by early-stage companies. These risks include, but are not limited to, the uncertainties of availability of financing and achieving future profitability. Management anticipates that the Company will be dependent, for the near future, on investment capital to fund operating expenses. The Company intends to position itself so that it may be able to raise funds through the capital markets. There can be no assurance that such financing will be available at terms acceptable to the Company, if at all. Failure to generate sufficient cash flows from operations, raise capital or reduce certain discretionary spending could have a material adverse effect on the Company’s ability to achieve its intended business objectives.

 

Use of estimates - The preparation of these consolidated financial statements in conformity accounting principles generally accepted in the United States of America requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses and the related disclosure of contingent assets and liabilities. The Company bases its estimates on historical experience and on various other assumptions that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. The Company’s significant estimates and assumptions include but are not limited to the recoverability and useful lives of long-lived assets, allocation of revenue on software subscriptions, valuation of goodwill from business acquisitions, valuation and recoverability of investments, valuation allowances of deferred taxes, and stock-based compensation expenses. Actual results may differ from these estimates. In addition, any change in these estimates or their related assumptions could have an adverse effect on the Company’s operating results.

 

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

 

Investments - Investments are comprised of several cryptocurrencies and are reported at fair value as determined by digital asset markets with realized gains and losses calculated on a trade data basis as the difference between the fair value and cost of cryptocurrencies transferred. The Company recognizes the fair value changes in unrealized appreciation or depreciation on investment through the accompanying Statement of Operations. For the three-month period ended March 31, 2018, the Company had a consolidated balance of $2,744,353 in investments. The Company believes that it would be able to liquidate a majority of its portfolio into cash within 24 hours, if needed. As of the Balance Sheet date, the Company’s holdings represent on average ~0.28% of the total volume of trades on the specific exchanges where it would be able to convert its holdings to cash. The primary exchanges and principal markets the Company utilizes for its trading are Kraken, Bittrex, Poloniex and Bitstamp which, in the aggregate, account for approximately $105 million in Bitcoin/USD trades per day.

 

Equipment - Equipment is recorded at cost and depreciated using the straight line method over the estimated useful life ranging from three to five years. Normal repairs and maintenance are expensed as incurred. Expenditures that materially adapt, improve, or alter the nature of the underlying assets are capitalized. When equipment are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts, and the resulting gain or loss is credited or charged to income.

 

Impairment of long lived assets - The Company analyzes its long-lived assets for potential impairment. Impairment losses are recorded on long-lived assets when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the net carrying amount of the assets. In such cases, the carrying values of assets to be held and used are adjusted to their estimated fair value, less estimated selling expenses. For the three-month period ended March 31, 2018, the Company recognized no impairment losses on its long-lived assets.

 

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

 

Goodwill - The Company records the excess of purchase price over the fair value of the tangible and identifiable intangible assets acquired as goodwill. Goodwill and intangible assets with indefinite lives are tested for impairment at least annually and whenever events or circumstances occur indicating that a possible impairment may have been incurred. Intangible assets with finite lives are amortized over their useful lives.

 

8
 

 

The Company assesses whether goodwill impairment exists using both the qualitative and quantitative assessments. The qualitative assessment involves determining whether events or circumstances exist that indicate it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill. If based on this qualitative assessment the Company determines it is more likely than not that the fair value of a reporting unit is less than its carrying amount, or if the Company elects not to perform a qualitative assessment, a quantitative assessment is performed to determine whether a goodwill impairment exists at the reporting unit.

 

Based on its analysis, the Company’s management believes that no impairment of the carrying value of its goodwill existed at March 31, 2018. There can be no assurance however, that market conditions will not change or demand for the Company’s products and services will continue which could result in impairment of goodwill in the future.

 

Foreign Currency Translation - Results of foreign operations are translated into U.S. dollars using average rates prevailing throughout the period, while assets and liabilities are translated in U.S. dollars at period end foreign exchange rates. Transactions gains and losses resulting from exchange rate changes on transactions denominated in currencies other than the functional currency of the applicable subsidiary are included in the consolidated statements of operations, within other (income) expense, net, in the year in which the change occurs. The Company’s functional currency is U.S. dollars while the functional currency for CoinTracking is in Euros.

 

Income taxes - Deferred tax assets and liabilities are recognized for expected future consequences of events that have been included in the financial statements or tax returns. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized. The provision for income taxes represents the tax payable for the period and the change during the period in deferred tax assets and liabilities. For the three-month period ended March 31, 2018, the income tax payable of $800 reflects the minimum franchise tax for the State of California.

 

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

 

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

 

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

 

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

 

Revenue recognition – The Company has two streams of principal revenue segments as of March 31, 2018. The Company records the realized gain or loss on the investments on a trade date basis. The changes in unrealized appreciation or depreciation on the investments are measured to market on the last day of every month at 11:59 p.m., Pacific Time, based on publicly available cryptocurrency exchanges. The Company classifies investments in cryptocurrency as trading investments. Trading generally reflects active and frequent buying and selling, and is generally used with the objective of generating profits on short-term difference in price.

 

9
 

 

The Company also has subscription revenues through its subsidiary Coin Tracking LLC and significantly minimal amounts of consulting revenue. In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers. ASU No. 2014-09 supersedes nearly all existing revenue recognition guidance under GAAP. The Company adopted ASU No. 2014-09 as of January 1, 2018 using the modified retrospective transition method for contracts as of the date of initial application. There is no cumulative impact to the Company’s retained earnings at January 1, 2018. See “Note 5 - Revenue Recognition” for additional information on the impact to the Company.

 

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

 

Equity instruments (“instruments”) issued to non-employees are recorded on the basis of the fair value of the instruments, as required by ASC 718. ASC No. 505, Equity Based Payments to Non-Employees (“ASC 505”), defines the measurement date and recognition period for such instruments. In general, the measurement date is (a) when a performance commitment, as defined, is reached or (b) when the earlier of (i) the non-employee performance is complete and (ii) the instruments are vested. The compensation cost is remeasured at fair value at each reporting period when the award vests. As a result, stock option-based payments to non-employees can result in significant volatility in compensation expense.

 

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

 

Risks and uncertainties - The Company is subject to various risks including market risk, liquidity risk, and other risks related to its investments in cryptocurrency. Investing in cryptocurrency is currently unregulated, highly speculative, and volatile.

 

The prices of cryptocurrency could materially and adversely affect an investment in the shares of the Company. The prices of the cryptocurrencies have a limited history. During such history, the cryptocurrencies’ prices have been volatile and subject to influence by many factors including the levels of liquidity. If the cryptocurrency’s markets continue to experience significant price fluctuations, the Company may experience losses. Several factors may affect the prices of the cryptocurrencies, including, but not limited to, global cryptocurrency supply and demand, and competition from other forms of digital currency or payments services.

 

There is currently no clearing house for cryptocurrency, nor is there a central or major depository for the custody of cryptocurrency. There is a risk that some or all of the Company’s cryptocurrencies could be lost or stolen. The Company does not have insurance protection on its cryptocurrency which exposes the Company and its shareholders to the risk of loss of the Company’s cryptocurrency. Further, cryptocurrency transactions are irrevocable. Stolen or incorrectly transferred of cryptocurrency may be irretrievable. As a result, any incorrectly executed cryptocurrency transactions could adversely affect an investment in the Company.

 

To the extent private keys for the cryptocurrency’s addresses are lost, destroyed or otherwise compromised and no backup of the private keys are accessible, the Company may be unable to access the cryptocurrency held in the associated address and the private key will not be capable of being restored by the cryptocurrency network.

 

The processes by which cryptocurrency transactions are settled are dependent on the cryptocurrency peer-to-peer network, and as such, the Company is subject to operational risk. A risk also exists with respect to previously unknown technical vulnerabilities, which may adversely affect the value of the cryptocurrencies.

 

Net loss per common share - The Company reports earnings per share (“EPS”) with a dual presentation of basic EPS and diluted EPS. Basic EPS is computed as net income divided by the weighted average of common shares for the period. Diluted EPS reflects the potential dilution that could occur from common shares issued through stock options, or warrants. For the three-month period ended March 31, 2018, the Company had no potentially dilutive common stock equivalents. Therefore, the basic EPS and the diluted EPS are the same.

 

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Marketing expense - Marketing expenses are charged to operations, under general and administrative expenses. For the three-month period ended March 31, 2018 and for the period from Inception, March 9, 2017 through March 31, 2017, the Company incurred $48,699 and $0, respectively, in marketing expenses.

 

NOTE 3 - RECENT ACCOUNTING PRONOUNCEMENTS

 

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

 

In May 2017, the FASB issued ASU No. 2017-09, Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting, which provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. Essentially, an entity will not have to account for the effects of a modification if: (1) The fair value of the modified award is the same immediately before and after the modification; (2) the vesting conditions of the modified award are the same immediately before and after the modification; and (3) the classification of the modified award as either an equity instrument or liability instrument is the same immediately before and after the modification. The new standard became effective for us on January 1, 2018. The Company has evaluated the impact of Topic 718 on its financial statements and the adoption of this guidance will not have a material impact on the Company’s consolidated financial statements and related disclosures.

 

FASB ASU 2017-01 “Clarifying the Definition of a Business (Topic 805)” – In January 2017, the FASB issued 2017-1. The new guidance that changes the definition of a business to assist entities with evaluating when a set of transferred assets and activities is a business. The guidance requires an entity to evaluate if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets; if so, the set of transferred assets and activities is not a business. The guidance also requires a business to include at least one substantive process and narrows the definition of outputs by more closely aligning it with how outputs are described in ASC 606. The ASU is effective for annual reporting periods beginning after December 15, 2017, and for interim periods within those years. Adoption of this ASU did not have a significant impact on our consolidated results of operations, cash flows and financial position.

 

FASB ASU 2017-04 “Simplifying the Test for Goodwill Impairment (Topic 350)” – In January 2017, the FASB issued 2017-04. The guidance removes “Step Two” of the goodwill impairment test, which required a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The ASU is effective for annual reporting periods beginning after December 15, 2019, and for interim periods within those years, with early adoption permitted. We do not currently expect this ASU to have a significant impact on our consolidated financial statements and related disclosures.

 

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which, among other things, requires lessees to recognize most leases on their balance sheets related to the rights and obligations created by those leases. The new standard also requires new disclosures to help financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. The new standard becomes effective for us on January 1, 2019. Early adoption is permitted. The amendments in this update should be applied under a modified retrospective approach. We are evaluating the effect that ASU No. 2016-02 will have on our consolidated financial statements and related disclosures.

 

NOTE 4 - ACQUISITION

 

On January 26, 2018, CoinTracking LLC, a wholly-owned subsidiary of the Company, acquired 50.1% of the equity interest in CoinTracking GmbH, for (i) $4,736,400 in cash and (ii) 473,640 shares of common stock of the Company at $10 per share for total purchase price valued at $9,472,800. CoinTracking, with its newly acquired subsidiary, provides its customers with access to cryptocurrency token tracking, portfolio management, and tax calculation and reporting. The acquisition was to increase our presence in the digital asset industry and build strategic alliances.

 

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The combined statements of operations were prepared using the acquisition method of accounting in accordance with Financial Accounting Standards Board Accounting Standards Codification (“ASC”) Topic 805, Business Combinations, and have been included in the Company’s consolidated results as of acquisition date with Crypto Company considered as the accounting acquirer and Coin Tracking as the accounting acquiree.

 

Accordingly, consideration paid by the Company to complete the acquisition was allocated to the identifiable assets and liabilities of CoinTracking, GmbH based on estimated fair values as of the closing date. We made a preliminary allocation of the consideration transferred to the assets acquired and liabilities assumed based on the information available and preliminary valuation of the fair value of tangible and intangible assets acquired and liabilities assumed. Acquisition-related costs were expensed as incurred and were not considered to be significant. We expect to include the final purchase price allocation related to this acquisition in our Quarterly Report on Form 10-Q for the period ended June 30, 2018. Therefore, the valuation of certain assets and liabilities in the CoinTracking, GmbH acquisition is preliminary and subject to change.

 

The table below summarizes the fair values of the assets acquired and liabilities assumed at the date of acquisition:

 

   CoinTracking 
Cash and cash equivalents  $1,547,097 
Investment in cryptocurrency   1,115,345 
Other current assets   479,057 
Goodwill   10,325,631 
Other assets   144,566 
Total assets  $13,611,696 
      
Current liabilities  $522,172 
Contract liabilities, short term   2,686,858 
Contract liabilities, long term   929,866 
Total liabilities   4,138,896 
Net assets acquired  $9,472,800 

 

The purchase price was based on the expected financial performance of CoinTracking, GmbH and not on the value of the net identifiable assets at the time of acquisition. This resulted in a significant portion of the purchase price being attributed to goodwill. As a result, the Company recognized $10,325,631 of goodwill on the acquisition.

 

Based on its analysis, the Company’s management believes that no impairment of the carrying value of its goodwill existed at March 31, 2018. There can be no assurance however, that market conditions will not change or demand for the Company’s products and services will continue which could result in impairment of goodwill in the future.

 

Unaudited pro forma financial information

 

The unaudited pro forma financial information in the table below presents the combined results of the Company and Coin Tracking as if these acquisitions had occurred on January 1, 2018. The unaudited pro forma financial information includes adjustments required under the acquisition method of accounting and is presented for informational purposes only and is not necessarily indicative of the results that would have been achieved had the acquisitions actually occurred on January 1, 2018.

 

For the three months ended March 31, 2018:

 

Revenue  $1,645,260 
Net loss  $(3,229,423)
Basic and diluted loss per share:     
Basic  $(0.15)
Diluted  $(0.15)

 

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NOTE 5 – SUBSCRIPTION REVENUE RECOGNITION

 

Revenue Recognition

 

CoinTracking accounts for a contract when it has approval and commitment from all parties, the rights of the parties and payment terms are identified, the contract has commercial substance and collectability of consideration is probable. Revenue is recognized when control of the promised services is transferred to our customers, and in an amount that reflects the consideration the Company is contractually due in exchange for those services. Most of the Company’s contracts with customers are single, or have few distinct performance obligations, the transaction price is allocated to each performance obligation using the stand-alone selling price.

 

CoinTracking’s revenue is primarily derived directly from users in the form of subscriptions. Subscription revenue is presented net of credits and credit card chargebacks. Subscribers pay in advance, primarily by Paypal or cryptocurrencies, and, subject to certain conditions identified in our terms and conditions. Revenue is initially deferred and is recognized using the straight-line method over the terms of the applicable subscription period, which primarily range from one to three years.

 

Transaction Price

 

The objective of determining the transaction price is to estimate the amount of consideration the Company is due in exchange for services, including amounts that are variable. CoinTracking has a standalone sales price for each subscription service. Further, The Company excludes from the measurement of transaction price all taxes assessed by governmental authorities that are both (i) imposed on and concurrent with a specific revenue-producing transaction and (ii) collected from customers. Accordingly, such tax amounts are not included as a component of revenue or cost of revenue.

 

Estimates of certain revenue

 

Revenue collected in advance for subscriptions ranging 1 or 2 years or lifetime packages are deferred and recognized as revenue on a straight-line basis over the terms of the applicable subscription period or performance obligation period. For “lifetime” revenue packages, where the customer has access to the website for unlimited length of time, the Company has elected to recognize revenue on a straight-line basis over three years. We believe that based on the short history of customer data, customer relationship period, and number of available alternative providers, and anticipation of future changes to the blockchain industry, a measure of three years of performance obligation to our customers appears to be appropriate. The Company intends to re-evaluate the length of the performance obligation period for lifetime revenue packages periodically based on historical and industry data and adjust it as deemed necessary.

 

Net Revenue and Charge-back Reserves

 

CoinTracking does not maintain an allowance for doubtful accounts because the customer prepays for subscription in advance before access is provided to Coin Tracking’s website. The Company also maintains allowances to reserve for potential credits issued to consumers or other revenue adjustments primarily through Paypal reserves. We recorded a reserve of $160,436 at March 31, 2018 which is based primarily upon historical experience.

 

Contract Liabilities

 

Contract liabilities are recorded when payments are received or due in advance of performing our service obligations and is recognized over the service period, which primarily relates to prepayments of subscription revenue. At the acquisition date of Jan 26, 2018, CoinTracking’s total contract liabilities were $3,616,724, and we recognized revenue of $456,922 as of March 31, 2018. As of March 31, 2018, $3,033,817, of current contract liabilities were recorded and $1,433,858 of long term contract liabilities were recorded, respectively. As of December 31, 2017, we did not have consolidated contract liabilities.

 

Assets Recognized from the Costs to Obtain a Contract with a Customer

 

CoinTracking has determined that certain costs, primarily referral commissions or affiliate payments paid to customers pursuant to certain sales incentive programs, meet the requirements to be capitalized as a cost of obtaining a contract. Affiliate expenses are paid in Bitcoins, as a sales incentive programs and are amortized over the subscription period. For sales incentive programs where the subscription period is one year, the Company has elected the practical expedient to expense the costs as incurred. The Company generally capitalizes over the term of the applicable subscription.

 

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During the three months ended March 31, 2018, the Company recognized expense of $30,654 related to the amortization of these costs. The aggregate contract asset balance at March 31, 2018 is $126,140.

 

NOTE 6 - SEGMENT INFORMATION

 

The Company has organized its operations into two segments: trading in cryptocurrencies and subscription in CoinTracking’s, web-based platform.

 

The trading segment primarily consists of amounts earned through trading activities of cryptocurrencies and costs are operating expenses that consists of general and administrative costs in North America.

 

CoinTracking’s segment primarily consists of amounts earned through subscriptions to the CoinTracking website. Operating expense related to this segment is technology infrastructure and general administrative costs primarily incurred in Germany.

 

There are no intercompany internal revenue transactions between our reportable segments. These segments reflect the way our chief operating decision maker evaluates the Company’s business performance and manages its operations.

 

The following table summarizes the Company’s operating income by segment for the three-month period ended March 31, 2018:

 

   Three months ended 
   3/31/2018 
   Trading   Subscription   Total 
Revenue, net  $1,072,598   $456,992   $1,529,590 
Costs and Expenses   (1,439,020)   (705,960)   (2,144,980)
Operating Loss  $(366,422)  $(248,968)  $(615,390)

 

The trading segment’s costs and expenses were offset by a favorable impact of share-based compensation of $708,139 as of March 31, 2018. This $708,139 was recorded as an offset to operating expenses in the accompanying statement of operations and comprehensive loss for the quarter ended March 31, 2018 and was a result in the decline of the estimated value of the Company’s common stock during the three months ended March 31, 2018.

 

The following table summarizes the Company’s operating income by segment for the period from Inception, March 9, 2017 to March 31, 2017:

 

   Inception to 3/31/2017 
   Trading   Subscription   Total 
Revenue  $-   $             -   $- 
Costs and Expenses   (660,016)   -    (660,016)
Operating Income  $(660,016)  $-   $(660,016)

 

NOTE 7 - INVESTMENT IN CRYPTOCURRENCY

 

The investment in cryptocurrency is classified as a Level 2 asset because inputs are from cryptocurrency exchanges with price variability. The following table summarizes the Company’s investments at fair value for the three-month period ended March 31, 2018:

 

   Level 1   Level 2   Level 3 
Investment in cryptocurrency  $-   $2,426,724   $317,629 

 

The Company establishes processes and procedures to ensure that the valuation methodologies that are categorized within Level 3 are fair, consistent and verifiable. Valuation of the Company’s Level 3 investments are for Initial Coin Offerings (“ICO’s”) for which there is no active market at March 31, 2018. These ICO’s are valued at cost which approximates fair value at March 31, 2018. At the time that the ICO’s have an available market exchange, the investments will be reclassified to Level 2.

 

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The following table sets forth a summary of changes in the fair value of the Company’s Level 3 investments for the three-month period ended March 31, 2018:

 

   Level 3 
   Cryptocurrency 
     
Balance at December 31, 2017  $167,818 
Transfers to Level 2 investments   (50,189)
Purchases, sales, issuances, and settlement, net   200,000 
Balance, March 31, 2018  $317,629 

 

The following table summarizes the cryptocurrencies, other than ICO’s, held as of March 31, 2018:

 

Bitcoin  $1,344,914 
Ethereum   106,123 
Polymath   83,928 
Ripple   78,336 
Litecoin   69,244 
Bitcoin Cash   56,283 
blockVEE   48,495 
Cardano   37,955 
Dash   31,484 
EOS   35,858 
Various other currencies   534,104 
   $2,426,724 

 

NOTE 8 - EQUIPMENT

 

Equipment consists of the following:

 

   March 31, 2018   December 31, 2017 
Computer equipment  $225,241   $69,241 
Furniture equipment   15,167    3,754 
    240,408    72,995 
Less accumulated depreciation   (21,776)   (4,675)
   $218,632   $68,320 

 

NOTE 9 - SUMMARY OF COMMON STOCK TRANSACTIONS

 

On March 20, 2018, upon exercise of a stock option by a consultant of the Company, the Company issued 7,031 shares of common stock at an exercise price of $0.01 per share.

 

On January 31, 2018, upon partial exercise of a stock option by an employee of the Company, the Company issued 14,667 shares of common stock as a cashless exercise.

 

During the quarter ended March 31, 2018, an employee exercised a stock option for 12,494 shares of common stock at an exercise price of $2.00 per share. As of March 31, 2018, these shares have not yet been issued and, as a result, there is a common stock payable of $24,988 at March 31, 2018 in the accompanying balance sheet.

 

On January 16, 2018, pursuant to an Equity Purchase Agreement (the “Agreement”) entered into on December 22, 2017 by and among the Company, CoinTracking, LLC, a Nevada limited liability company and wholly-owned subsidiary of the Company (“CoinTracking”), Kachel Holding GmbH, an entity formed under the laws of the Republic of Germany (“Kachel Holding”), and Dario Kachel, an individual, CoinTracking purchased from Kachel Holding 12,525 shares of CoinTracking GmbH, an entity formed under the laws of Germany (“CoinTracking GmbH”), representing 50.1% of the equity interests in CoinTracking GmbH, for a purchase price which consisted, in part, of 473,640 shares of common stock of the Company (the “CoinTracking Acquisition”). The transaction closed on January 26, 2018 (see Note 4).

 

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NOTE 10 – WARRANTS FOR COMMON STOCK

 

For the three-month period ended March 31, 2018, no stock purchase warrants were issued. As of March 31, 2018, outstanding warrants to purchase shares of common stock were as follows:

 

               Number of Shares 
Issuance Date 

Exercisable

for

  

Expiration

Date

  

Exercise

Price

  

Outstanding

Under Warrants

 
             
September 2017  Common Shares   September 25, 2020   $2.00    168,125 

 

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

 

NOTE 11 - SUMMARY OF STOCK OPTIONS

 

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

 

5,000,000 shares of the Company’s common stock are reserved for issuance under the Plan. For the three-month period ended March 31, 2018, there are outstanding stock option awards issued from the Plan covering a total of 807,031 shares of the Company’s common stock and there remain reserved for future awards 4,171,271 shares of the Company’s common stock. The weighted average exercise price of the outstanding stock options is $3.46 per share, and the remaining contractual term is 9.45 years.

 

During the three-month period ended March 31, 2018, the Company granted 150,000 options to nonemployees.

 

           Weighted     
       Weighted   Average   Aggregate 
       Average   Remaining   Intrinsic 
   Number   Exercise   Contractual   Value 
   of Shares   Price   Term (years)   (in thousands) 
                 
Options outstanding, at December 31, 2017   644,531   $2.32    9.61   $11,421 
Options granted   150,000   $8.00    9.83    6,600 
Options exercised   37,858   $1.63    9.37    1,907 
Options outstanding, at March 31, 2018   756,668   $3.46    9.45   $36,729 
Vested and exercisable and expected to vest, end of period   160,834   $2.93    9.35   $7,892 

 

 

During the three-month period ended March 31, 2018 and the period from Inception, March, 9, 2017 through March 31, 2017 the Company had not granted any restricted stock awards.

 

As of March 31, 2018, approximately $118,094 of total unrecognized compensation costs related to stock options is expected to be recognized over a weighted average period of approximately 2 years.

 

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

 

The risk-free rate is based on implied yields in effect at the time of the grant on U.S. Treasury zero-coupon bonds with remaining terms equal to the expected term of the stock options. The expected dividend is based on the Company’s history and expectation of dividend payouts. Forfeitures are recognized when they occur.

 

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The range of assumptions used for the three-month period ended March 31, 2018 are as follows:

 

   March 31, 2018 
    Ranges 
Weighted-average volatility   36-75%
Expected dividends   0%
Expected term (in years)   5.71-10 years 
Risk-free rate   1.91-2.40%

 

During the three months ended March 31, 2018, there was a decline of the estimated value of the Company’s common stock. As a result, at March 31, 2018, the credit balance of $708,139 share based compensation represents an adjustment to offset the previously recorded stock compensation costs during 2017, as stock options issued to nonemployees are revalued at each vesting tranche and/or reporting date in accordance with ASC 505.

 

NOTE 12 - RELATED PARTY TRANSACTIONS

 

On March 9, 2017, Crypto Sub issued 125,000 shares of common stock of Crypto Sub to an employee of Crypto Sub, in exchange for an initial investment made in the form of cryptocurrency, valued at $100,000, based on the fair value of the investment on the date of such investment. In addition, based on the fair value of the shares of common stock of the Company at the time of issuance, the Company recorded an additional $100,000 of share based compensation expense related to the transaction.

 

On March 9, 2017, Crypto Sub issued 300,000 shares of common stock of Crypto Sub to James Gilbert, the Chairman, Chief Executive Officer and President of the Company, in exchange for $200,000. In addition, based on the fair value of the shares of common stock of the Company at the time of issuance, the Company recorded an additional $280,000 of share based compensation expense related to the transaction.

 

On March 9, 2017, Crypto Sub issued (i) 125,000 shares of common stock of Crypto Sub to Redwood Fund LP (“Redwood”) in exchange for $200,000; and (ii) 125,000 shares of common stock of Crypto Sub to Imperial Strategies, LLC (“Imperial Strategies”) in exchange for certain services rendered, valued at $200,000, as of the date of such issuance. Michael Poutre, the Chief Executive Officer of the Company, and Ron Levy, the Chief Operating Officer of the Company, are Chief Executive Officer and Chief Operating Officer, respectively, of Ladyface Capital, LLC, the General Partner of Redwood, and, as a result, had an indirect material interest in the shares owned by Redwood.

 

The Company has a services agreement with Full Stack Finance for CFO and Accounting outsource services. Ivan Ivankovich, CFO of the Company, is the Co- Managing Director of Full Stack Finance. Emad Boulos, an employee of Full Stack Finance, serves as The Crypto Company’s Controller. The Company paid a total of $138,259 in fees to Full Stack Finance during the three-month period ended March 31, 2018, and as of March 31, 2018, there was a balance of $68,000 due to Full Stack Finance, which is included in accounts payable and accrued expenses on the accompanying balance sheet.

 

The Company has a loan receivable from an officer of CoinTracking GmbH as of March 31, 2018 totaling $194,380. The loan is due upon demand and it bears interest at 2%. During the quarter ended March 31, 2018 and the period from March 9, 2017 to March 31, 2017 interest income accrued for this loan was $295 and $0, respectively, which is included in other income on the accompanying statement of operations.

 

NOTE 13 - BASIC AND DILUTED LOSS PER SHARE

 

The following is a reconciliation of the numerator and denominator of the basic and diluted loss per share computations for the three-month period ended March 31, 2018:

 

   For the three months ended March 31, 2018 
Numerator for basic and diluted income per share:     
Comprehensive loss attributable to The Crypto Company  $(3,153,118)
      
Denominator for basic and diluted income per share:     
Weighted average shares (basic)   20,864,198 
Common stock equivalents   - 
Weighted average shares (diluted)   20,864,198 
      
Basic and diluted income (loss) per share:     
Basic  $(0.15)
Diluted  $(0.15)

 

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NOTE 14 - COMMITMENTS AND CONTINGENCIES

 

Operating leases - On May 15, 2017, the Company entered into a lease agreement with Soba Living, LLC for the rental of office space. The agreement is a month to month lease, which requires monthly rents of $6,000 through September 30, 2018.

 

On January 18, 2018, the Company entered into a short-term lease agreement with Miramar Property Investment Co., for an office space on a month-to-month basis, requiring monthly rents of $3,024 expiring through September 30, 2018.

 

Facility rent expense for the three-month period ended March 31, 2018 and the period from March 9, 2017 to March 31, 2017 was $25,023 and $0, respectively.

 

Legal - From time to time, the Company may become subject to legal proceedings, claims, and litigation arising in the ordinary course of business, none of which, in management’s opinion, will result in judgments that would have a material adverse effect on the financial position or results of operations of the Company. Please see a summary of legal proceedings in Item 1 of Part II of this Quarterly Report, all of which have been voluntarily dismissed as of the date of this Quarterly Report.

 

Indemnities and guarantees - During the normal course of business, the Company has made certain indemnities and guarantees under which it may be required to make payments in relation to certain transactions. These indemnities include certain agreements with the Company’s officers and directors, under which the Company may be required to indemnify such persons for liabilities arising out of their respective relationships. In connection with its facility lease, the Company has indemnified the lessor for certain claims arising from the use of the facility. The duration of these indemnities and guarantees varies and, in certain cases, is indefinite. The majority of these indemnities and guarantees do not provide for any limitation of the maximum potential future payments the Company could be obligated to make. Historically, the Company has not been obligated to make significant payments for these obligations and no liabilities have been recorded for these indemnities and guarantees in the accompanying balance sheet.

 

NOTE 15 – SUBSEQUENT EVENTS

 

On April 3, 2018, CoinTracking, LLC, a Nevada limited liability company and a wholly-owned subsidiary of the Company (“Borrower”), entered into a Loan Agreement (the “Loan Agreement”) with CoinTracking GmbH, a private limited liabilty company organized under the laws of the Federal Republic of Germany (“Lender”), pursuant to which Lender may provide a loan (the “CoinTracking Loan”) of up to $3,000,000 to Borrower, to be advanced to Borrower in one or more tranches, at such times and in such amounts as may be requested by Borrower from time to time, on or before the tenth anniversary of the Loan Agreement. The Company is deemed obligor of Borrower’s obligations under the Loan Agreement for United States Federal income tax purposes. Interest on the CoinTracking Loan will accrue at a rate per annum of the greater of (i) three percent (3%), or (ii) the interest rates published monthly by the United States Internal Revenue Service and in effect under section 1274(d) of the Internal Revenue Code in effect as of the date of issuance of any promissory note under the CoinTracking Loan, and will be payable quarterly. On April 3, 2018, pursuant to the Loan Agreement, Lender advanced $1,000,000 to Borrower in exchange for a promissory note (the “CoinTracking Note”) of equal principal amount. The CoinTracking Note will mature on the second anniversary thereof. The Borrower and Lender are consolidating entities, as such, the loan and advances are considered to be intercompany transactions and will be eliminated in consolidation.

 

Effective as of April 17, 2018, Jeffrey Berman and Holly Ruxin were appointed directors of the Company, each for a term of six months from the effective date of appointment or until his or her earlier death, resignation or removal. The Company entered into a Director Services Agreement with each of Mr. Berman and Ms. Ruxin, pursuant to which each of Mr. Berman and Ms. Ruxin will be entitled to receive (i) a fee of $80,000 per annum, payable quarterly, and (ii) a ten-year option to purchase 100,000 shares of common stock of the Company at an exercise price of $10.00 per share, which option shall be fully vested on the six-month anniversary of the date of grant.

 

Effective as of April 18, 2018, Anthony Strickland, Jeffrey Berman, and Holly Ruxin were appointed to the Audit Committee and Compensation Committee, with Ms. Ruxin serving as Chairperson of the Audit Committee and Mr. Strickland Serving as Chairperson of the Compensation Committee.

 

On April 18, 2018, the Company issued to James Gilbert 202,512 shares of common stock of the Company, immediately vested, for certain services performed on behalf of the Company.

 

Effective May 14, 2018, Michael Poutre, former Chief Executive Officer and a director of the Company, resigned from all of his current roles with the Company effective immediately. Mr. Poutre will remain as a consultant to the Company until November 2018. In connection with Mr. Poutre’s resignation from the Company, the Company entered into a Separation and Consulting Agreement and General Mutual Release (the “Separation and Consulting Agreement”), which was executed on May 9, 2018 and approved by the Board of Directors on May 14, 2018. The Separation and Consulting Agreement was not effective until May 17, 2018, following the end of the revocation period.

 

The Separation and Consulting Agreement provides that the Company will pay Mr. Poutre a lump-sum cash payment of (i) his earned but unpaid base salary, (ii) his accrued but unpaid vacation time, and (iii) any outstanding requests for expense reimbursements that are approved pursuant to Company policy. Mr. Poutre will serve as a consultant of the Company for six months at a rate of $30,000 per month, payable in two separate tranches, though the Company may terminate his services for any reason. The Separation and Consulting Agreement contains other standard provisions contained in agreements of this nature including non-disparagement and a general release of any and all claims.

 

Effective May 14, 2018, James Gilbert, the President of the Company, was appointed Chairman of the Company’s Board of Directors and Chief Executive Officer. The Company did not enter into any new employment agreement with Mr. Gilbert, and Mr. Gilbert has no family relationship with any director or executive officer of the Company.

 

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

 

You should read the following discussion of our financial condition and results of operations in conjunction with the condensed consolidated financial statements and the related notes included elsewhere in this Quarterly Report and with our audited consolidated financial statements included in our Annual Report on Form 10-K for the period from inception, March 9, 2017, through December 31, 2017, filed with the Securities and Exchange Commission on April 2, 2018. In addition to historical condensed consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Quarterly Report, particularly in Part II, Item 1A. “Risk Factors.”

 

Overview of Our Business

 

In the discussion below, when we use the terms “we”, “us” and “our”, we are referring to The Crypto Company and its wholly-owned subsidiaries, Crypto Sub, Inc. and CoinTracking, LLC.

 

We are engaged in the business of building technological infrastructure, a proprietary investment portfolio and strategic alliances to facilitate the exchange of value in the digital asset market and, specifically, to assist third parties with investing in, trading and managing digital assets. We also invest in technologies and tokens in a manner that diversifies exposure to the growing class of digital assets. From time to time, we may seek strategic acquisitions either by integrating third party teams and technology with our core business or by funding third party teams in which we may have interest.

 

On January 16, 2018, pursuant to an Equity Purchase Agreement (the “Agreement”) entered into on December 22, 2017 by and among the Company, CoinTracking, LLC, a Nevada limited liability company and wholly-owned subsidiary of the Company (“CoinTracking”), Kachel Holding GmbH, an entity formed under the laws of the Republic of Germany (“Kachel Holding”), and Dario Kachel, an individual, CoinTracking purchased from Kachel Holding 12,525 shares of CoinTracking GmbH, an entity formed under the laws of Germany (“CoinTracking GmbH”), representing 50.1% of the equity interests in CoinTracking GmbH, for a purchase price of (i) $4,736,400 in cash, and (ii) 473,640 shares of common stock of the Company, par value $0.001 per share, subject to adjustment as provided in the Agreement (the “CoinTracking Acquisition”). Following administrative procedures as required under applicable German laws, the CoinTracking Acquisition was consummated on January 26, 2018. CoinTracking GmbH operates as SAAS platform, which allows users to track and manage value, profit, loss and other information regarding their investments in cryptocurrencies, available via web-based or mobile application.

 

Technology

 

We are developing proprietary technology, including trading management and auditing software, tools and processes, to assist both our own operations and traditional companies, from start-up businesses to well-established companies. We may use our technology or license technology from third parties to build additional units around our existing platform, or sell or license our technology to third party institutions for a fee.

 

We have developed and are marketing and licensing algorithmic indices that track digital tokens and represent specific market segments, such that one can more efficiently monitor and track trends and events in the digital token asset class. We have also developed and launched a proprietary trading floor and operations related to the governance and management of professional trading operations.

 

Investment Portfolio

 

In addition to the Company’s ordinary operations, we also utilize a significant portion of our assets to trade a diversified proprietary portfolio of digital assets. We do not accept or manage any investor, client, or other third party assets. We invest solely the Company’s assets and incur no management fees.

 

Our portfolio strictly adheres to proprietary investment strategies based on proprietary algorithms, processes and standards relating to our trading and analysis, including our investments in coin offerings, developed and implemented by in-house traders, analysts, researchers and other personnel experienced in trading cryptocurrencies who evaluate our investments

 

Strategic Acquisitions

 

From time to time, we may seek strategic acquisitions of majority and minority equity interests in entities and technology that demonstrate (i) established, protectable and scalable revenues; (ii) substantial market share; (iii) established brand equity and customer loyalty; (iv) proprietary technology with competitive advantages; (v) quality personnel; and (vi) strategic access to international markets.

 

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Media Opportunities

 

We engage in public discourse on an ongoing basis and regularly host roundtable webinars to educate the public about the cryptocurrency market and intend to expand our presence at industry conferences to develop and expand our community and content network.

 

Recent Events

 

Stock Sale

 

On June 7, 2017, the Company entered into (i) a Share Purchase Agreement (the “Restricted Share Purchase Agreement”) with Crypto Sub and John B. Thomas P.C., in its sole capacity as representative for certain shareholders of the Company; and (ii) a Share Purchase Agreement (the “Free Trading Share Purchase Agreement”, and together with the Restricted Share Purchase Agreement, the “Share Purchase Agreements”) with Crypto Sub, Uptick Capital, LLC (“Uptick Capital”) and John B. Thomas P.C., in its sole capacity as representative for certain shareholders of the Company. Pursuant to the Share Purchase Agreements, the shareholders of the Company sold an aggregate of 11,235,000 shares of common stock of the Company to Crypto Sub and 100,000 shares of common stock of the Company to Uptick Capital, representing an aggregate of 100% of the issued and outstanding common stock of the Company as of such date, for aggregate proceeds of $411,650, including escrow and other transaction related fees to the selling shareholders (the “Stock Sale”). A portion of the acquisition cost equal to $399,300 is expensed as a general and administrative expense in the accompanying consolidated statement of operations.

 

10,000,000 shares held by Deborah Thomas, the former Chief Executive Officer, principal accounting and financial officer and director of the Company, representing approximately 88.22% of the outstanding common stock of the Company immediately prior to the Stock Sale, were sold at a price of $0.031 per share, and an aggregate of 1,335,000 shares held by the remaining shareholders of the Company were sold at a price of $0.075 per share.

 

In connection with the Stock Sale, effective as of June 7, 2017, (i) Deborah Thomas resigned as Chief Executive Officer, principal accounting officer and director of the Company and Elliott Polatoff resigned as Secretary and director of the Company; and (ii) Michael Poutre was appointed Chief Executive Officer and sole director of the Company, James Gilbert was appointed President of the Company and Ron Levy was appointed Chief Operating Officer of the Company.

 

Stock Dividend

 

On June 7, 2017, Crypto Sub issued to its shareholders a stock dividend (the “Stock Dividend”) of 10,918,007 shares of common stock of the Company acquired through the Stock Sale, distributed on a pro-rata basis, such that the shareholders of Crypto Sub received fifteen shares of common stock of the Company for each share of common stock of Crypto Sub held as of June 6, 2017.

 

Immediately following the consummation of the Stock Sale and the distribution of the Stock Dividend, Crypto Sub held 316,993 shares, representing 4.26% of the issued and outstanding shares of common stock of the Company, and the shareholders of Crypto Sub, collectively, held 10,918,007 shares, representing 94.40% of the issued and outstanding shares of common stock of the Company. Of the 316,993 shares held by Crypto Sub, 129,238 shares were transferred to certain officers and consultants of Crypto Sub in exchange for their services related to the Transaction, and the remaining shares were retired in June 2017.

 

Share Exchange

 

On June 7, 2017, the Company, entered into a Share Exchange Agreement (the “Exchange Agreement”) with Michael Poutre, in his sole capacity as representative for the shareholders of Crypto Sub, pursuant to which each issued and outstanding share of common stock of Crypto Sub was exchanged for shares of common stock of the Company (the “Share Exchange”), resulting in the aggregate issuance of 7,026,614 shares of common stock of the Company, on a pro-rata basis, as provided on the Exchange Agreement, to the shareholders of Crypto Sub, in exchange for 727,867 shares of common stock of Crypto Sub.

 

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The Stock Sale, the Stock Dividend and the Share Exchange are collectively referred to as the “Acquisition”. Immediately following the Acquisition, (i) Crypto Sub became a wholly owned subsidiary of the Company; (ii) all of the former shareholders of Crypto Sub became shareholders of the Company, on a pro-rata basis; and (iii) the operations of the Company solely consisted of the operations of Crypto Sub.

 

Proposed Stock Split

 

On December 12, 2017, the Company’s Board and a majority of its stockholders approved a forward split of the Company’s Common Stock at a ratio of 10-for-1 (the “Stock Split”) such that each share of Common Stock issued and outstanding as of December 12, 2017 shall, immediately following the effective time of the Stock Split, automatically be converted into and exchanged for 10 shares of Common Stock. The Company filed a Definitive Information Statement on Schedule 14C with the SEC on January 5, 2018. On January 12, 2018, the Company submitted an Issuer Company-Related Action Form to the Financial Industry Regulatory Authority (“FINRA”) for approval of the Stock Split. On March 1, 2018, we received a letter from FINRA rejecting the Stock Split on the basis of deficiency and in the interest of the protection of investors, the public interest and to maintain fair and orderly markets. On March 8, 2018, the Company submitted an appeal to FINRA pursuant to FINRA Rule 6490, which was reviewed by FINRA’s Uniform Practice Code Committee on April 27, 2018, and affirmed, in part, the deficiency determination. The Company has a right to appeal this decision to the Securities and Exchange Commission, but it has not made a final determination as to whether it will proceed with the appeal.

 

We are subject to risks, expenses and uncertainties frequently encountered by companies in the cryptocurrency and digital asset market. These risks include, but are not limited to, volatility and high speculation, developing regulations and unforeseeable risks which we may not anticipate. We cannot be certain that any additional required financing will be available when needed or on terms which are favorable to us. Our operations to date have been primarily funded through the sales of our securities. Various factors, including our limited operating history with minimal revenues to date, have resulted in limited working capital available to fund our operations. There are no assurances that we will be successful in securing additional financing in the future to fund our operations going forward. Failure to generate sufficient cash flows from operations, raise additional capital or reduce certain discretionary spending could have a material adverse effect on our ability to achieve our intended business objectives.

 

Results of Operations

 

For the three months ended March 31, 2018


Revenue

 

Cryptocurrency Investment Segment

 

We recorded revenue of $1,072,598 for the three months ended March 31, 2018, which was primarily from our net realized gains on sales of cryptocurrencies. For the period from March 9, 2017 to March 31, 2017, the Company had only no revenues from investment in cryptocurrencies as we had just begun operations.

 

Software Subscription Segment

 

We recorded software subscription revenue of $456,697 for the three months ended March 31, 2018, which was primarily from the acquired CoinTracking business as of January 26, 2018. This segment had no revenues for the period from March 9, 2017 to March 31, 2017 as the segment was not acquired until January 26, 2018.

 

General and administrative expenses

 

Cryptocurrency Investment Segment

 

For the three months ended March 31, 2018, we incurred an aggregate total of $1,439,020 of general and administrative expenses, which primarily consisted of costs relating to professional fees, and payroll and payroll related expenses. Other operating expenses of $708,139 represents an adjustment to offset the previously recorded stock compensation costs during 2017, as a result of a decline of the estimated value of the Company’s common stock during the three months ended March 31, 2018. For the period of March 9, 2017 to March 31, 2017 the operating expenses of $660,016 consisted primarily of $580,000 of stock compensation expense and an additional $80,000 for professional services.

 

Professional services included in the general and administrative expenses consisted primarily of contracting fees, consulting fees, accounting fees, and legal costs. These fees are associated with our source code development, consulting and advising and educational developments.

 

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Software Subscription Segment

 

For the three months ended March 31, 2018, we incurred $640,899 in general and administrative expenses, which primarily consisted of costs relating to professional fees, and payroll and payroll related expenses from the acquired cointracking business on January 26, 2018. This segment had no operations for the period from March 9, 2017 to March 31, 2017.

 

Net unrealized appreciation/depreciation on investment

 

Cryptocurrency Investment Segment

 

We recorded an unrealized depreciation of $2,427,468 on our investment in cryptocurrency for the three months ended March 31, 2018. In addition to the unrealized loss/gains, we recognized realized gains on investment in cryptocurrency of $1,072,598 for the three months ended March 31, 2017. For the period March 9, 2017 to March 31 2017 there was no unrealized/appreciation/depreciation due to limited investments in cryptocurrencies and as the Company had just begun operation in this segment at this time.

 

Software Subscription Segment

 

We recorded an unrealized depreciation of $478,089 on our investment in cryptocurrency since the acquisition of CoinTracking, January 26, 2018 to March 31, 2018.

 

The value of holdings depreciated for reasons such as the decline in values from prior over-speculation, the introduction of shorting in the futures market, new social media advertising restrictions and increased global regulatory concerns.

 

Unrealized and realized appreciation and depreciation of our holding in cryptocurrency are driven primarily by fluctuations in the market prices of our holdings as well as the mix in the various cryptocurrency that comprises our portfolio.

 

Liquidity and Capital Resources

 

For the three months ended March 31, 2018

 

Liquidity is our ability to generate sufficient cash flows from operating activities to meet our obligations and commitments. In addition, liquidity includes the ability to obtain appropriate financing or to raise capital. We have funded our operations since inception through the sale of our securities. We expect that our cash will be sufficient to fund our activities for the next twelve months, however, we will continue to require funds to fully implement our plan of operation.

 

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

 

   Three months ended March 31, 2018 
     
Net cash used in operating activities  $(2,031,654)
Net cash used in investing activities   (3,245,758)
Net cash provided by financing activities   70 
Net decrease in cash and cash equivalents  $(5,277,342)

 

Operating Activities

 

We have incurred, and expect to continue to incur, significant expenses in the areas of professional fees and contracting services.

 

Operating activities used $2,031,654 for the three months ended March 31, 2018. The primary use of our cash was to fund general and administrative expenses, which consisted of wages and professional fees, including consulting costs and legal fees in relation to the day-to-day operations. Net cash used during the three months ended March 31, 2018 consisted of a net loss of $3,521,747 adjusted for net change in unrealized depreciation on investment in cryptocurrency of $2,905,557, net realized gain on sales of cryptocurrency of $1,072,598, customer payments received in cryptocurrency of $544,340, depreciation of $17,101, reversal of stock based compensation expense of $708,139, accounts receivable of $62,954, prepaid expenses of $71,581, contract liabilities of $850,951, value-added tax payable of $5,526 and accounts payable and accrued liabilities of $44,662.

 

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Investing Activities

 

Net cash used in investing activities for the three months ended March 31, 2018 was primarily for an acquisition in CoinTracking, of $4,736,400 which was offset by the $1,547,097 of cash acquired in the acquisition. We expect to continue to acquire majority and minority ownership of strategic business partners in the normal course of our business. The amount and timing of these purchases and the related cash outflows in future periods is difficult to predict and is dependent on a number of factors including, but not limited to, any increase in the number of our employees and any developments in our operating plan.

 

Financing Activities

 

Net cash provided by financing activities for the three months ended March 31, 2018 was $70, which was the result of proceeds upon an exercise of stock options.

 

Critical Accounting Policies and Estimates

 

The discussion and analysis of the financial condition and results of operations of the Company is based upon our condensed consolidated financial statements, which have been prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”). Certain accounting policies and estimates are particularly important to the understanding of our financial position and results of operations and require the application of significant judgment by our management or can be materially affected by changes from period to period by economic factors or conditions that are outside of our control. As a result, they are subject to an inherent degree of uncertainty. In applying these policies, management uses its judgment to determine the appropriate assumptions to be used in the determination of certain estimates. Those estimates are based on our historical operations, our future business plans and projected financial results, the terms of existing contracts, observance of trends in the industry, information provided by our customers and information available from other outside sources, as appropriate.

 

Business Segments

 

The Company has two streams of principal revenue segments as of March 31, 2018:

 

Trading Segment primarily consists of amounts earned through trading activities of cryptocurrencies. The Company records the realized gain or loss on the investments on a trade date basis. The changes in unrealized appreciation or depreciation on the investments are measured to market on the last day of every month at 11:59 p.m., Pacific Time, based on publicly available cryptocurrency exchanges. The Company classifies investment in cryptocurrency as trading investments. Trading generally reflects active and frequent buying and selling, and is generally used with the objective of generating profits on short-term difference in price.and costs are operating expenses that consists of general and administrative costs in North America.

 

The Company also has subscription revenues through its wholly-owned subsidiary CoinTracking, LLC and significantly minimal amounts of consulting revenue. CoinTracking’s segment primarily consists of amounts earned through subscriptions to the CoinTracking website. Operating expenses related to this segment are technology infrastructure and general administrative costs primarily incurring in Germany.

 

Stock Based Compensation

 

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

 

Equity instruments (“instruments”) issued to non-employees are recorded on the basis of the fair value of the instruments, as required by ASC 718. ASC No. 505, Equity Based Payments to Non-Employees (“ASC 505”), defines the measurement date and recognition period for such instruments. In general, the measurement date is (a) when a performance commitment, as defined, is reached or (b) when the earlier of (i) the non-employee performance is complete and (ii) the instruments are vested. The compensation cost is remeasured at fair value at each reporting period when the award vests. As a result, stock option-based payments to non-employees can result in significant volatility in compensation expense.

 

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

 

Fair Value Measurements

 

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

 

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

 

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

 

Revenue Recognition

 

The Company has two streams of principal revenue segments as of March 31, 2018. The Company records the realized gain or loss on the investments on a trade date basis. The changes in unrealized appreciation or depreciation on the investments are measured to market on the last day of every month at 11:59 p.m., Pacific Time, based on publicly available cryptocurrency exchanges. The Company classifies investment in cryptocurrency as trading investments. Trading generally reflects active and frequent buying and selling, and is generally used with the objective of generating profits on short-term difference in price.

 

The Company also has subscription revenues through its subsidiary Coin Tracking LLC and significantly minimal amounts of consulting revenue. In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers. ASU No. 2014-09 supersedes nearly all existing revenue recognition guidance under GAAP. The Company adopted ASU No. 2014-09 as of January 1, 2018 using the modified retrospective transition method for contracts as of the date of initial application. There is no cumulative impact to the Company’s retained earnings at January 1, 2018. See “Note 5 - Revenue Recognition” for additional information on the impact to the Company.

 

Income Taxes

 

Deferred tax assets and liabilities are recognized for expected future consequences of events that have been included in the financial statements or tax returns. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized. The provision for income taxes represents the tax payable for the period and the change during the period in deferred tax assets and liabilities. The Income tax payable of $800 reflects the minimum franchise tax for the State of California.

 

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

 

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Impairment of long lived assets

 

The Company analyzes its long-lived assets for potential impairment. Impairment losses are recorded on long-lived assets when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the net carrying amount of the assets. In such cases, the carrying values of assets to be held and used are adjusted to their estimated fair value, less estimated selling expenses. For the three months ended March 31, 2018, the Company recognized no impairment losses on its long-lived assets.

 

Off-Balance Sheet Transactions

 

We do not have any off-balance sheet transactions.

 

Trends, Events and Uncertainties

 

The Company is subject to various risks including market risk, liquidity risk, and other risks related to its concentration in cryptocurrency. Investing in cryptocurrency is currently unregulated, highly speculative, and volatile. The cryptocurrency and digital assets market is, by its nature, unpredictable. Although we will undertake compliance efforts, including efforts with commercially reasonable diligence, there can be no assurance that there will not be a new or unforeseen law, regulation or risk factor which will materially impact our ability to continue our business as currently operated or raise additional capital to foster our continued growth.

 

The prices of cryptocurrency could materially and adversely affect an investment in the shares of the Company. The prices of the cryptocurrencies have a limited history. During such history, the cryptocurrencies’ prices have been volatile and subject to influence by many factors including the levels of liquidity. If the cryptocurrency’s markets continue to experience significant price fluctuations, the Company may experience losses. Several factors may affect the prices of the cryptocurrencies, including, but not limited to, global cryptocurrency supply and demand, and competition from other forms of digital currency or payments services.

 

There is currently no clearing house for cryptocurrency, nor is there a central or major depository for the custody of cryptocurrency. There is a risk that some or all of the Company’s cryptocurrencies could be lost or stolen. The Company does not have insurance protection on its cryptocurrency which exposes the Company and its shareholders to the risk of loss of the Company’s cryptocurrency. Further, cryptocurrency transactions are irrevocable. Stolen or incorrectly transferred of cryptocurrency may be irretrievable. As a result, any incorrectly executed cryptocurrency transactions could adversely affect an investment in the Company.

 

To the extent private keys for the cryptocurrency’s addresses are lost, destroyed or otherwise compromised and no backup of the private keys are accessible, the Company may be unable to access the cryptocurrency held in the associated address and the private key will not be capable of being restored by the cryptocurrency network.

 

The processes by which cryptocurrency transactions are settled are dependent on the cryptocurrency peer-to-peer network, and as such, the Company is subject to operational risk. A risk also exists with respect to previously unknown technical vulnerabilities, which may adversely affect the value of the cryptocurrencies.

 

Other than as discussed above and elsewhere in this Quarterly Report or in our Annual Report on Form 10-K for the period from Inception through December 31, 2017, filed with the Securities and Exchange Commission on April 2, 2018, we are not aware of any trends, events or uncertainties that are likely to have a material effect on our financial condition.

 

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk.

 

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

 

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ITEM 4. Controls and Procedures.

 

Evaluation of Disclosure Controls and Procedures

 

We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed in our reports filed under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial and accounting officer, as appropriate, to allow timely decisions regarding required disclosure.

 

We carried out an evaluation under the supervision and with the participation of management, including our principal executive officer and principal financial and accounting officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2018, the end of the period covered by this Quarterly Report. Based upon the evaluation of our disclosure controls and procedures as of March 31, 2018, our Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial and accounting officer) concluded that, as of such date, management identified certain deficiencies that were determined to be material weaknesses.

 

A material weakness is a deficiency, or a combination of deficiencies, in disclosure controls and procedures, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. Because of the material weaknesses described below, management concluded that our disclosure controls and procedures were ineffective as of end of the period covered by this report to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules.

 

The specific material weaknesses identified by the Company’s management as of end of the period covered by this report include the following:

 

  we have not performed a risk assessment and mapped our processes to control objectives;
     
  we have not implemented comprehensive entity-level internal controls;
     
  we have not implemented adequate system and manual controls; and
     
  we do not have sufficient segregation of duties.

 

Despite the material weaknesses reported above, our management believes that our financial statements included in this report fairly present in all material respects our financial condition, results of operations and cash flows for the periods presented and that this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report. In an effort to remedy any material deficiencies, management intends to segregate duties and controls among different officers and other key employees, whereby each officer is expected to have distinct responsibilities implementing checks and balances over the control of assets to protect the Company against any possibility of misstatement.

 

Assessment of Internal Control over Financial Reporting

 

Our management assessed the effectiveness of our internal control over financial reporting as of March 31, 2018. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control - Integrated Framework (2013). Based on management’s assessment, management concluded that the above material weaknesses have not been remediated and, accordingly, our internal control over financial reporting was not effective as of March 31, 2018.

 

Changes in Internal Control over Financial Reporting

 

No changes in the Company’s internal control over financial reporting have come to management’s attention during the Company’s last fiscal quarter that have materially affected, or are likely to materially affect, the Company’s internal control over financial reporting.

 

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PART II-OTHER INFORMATION

 

ITEM 1. Legal Proceedings.

 

On December 21, 2017, a class action complaint was filed in the United States District Court, Central District of California, by Monika Shepherdson, individually and on behalf of all others similarly situated, as the plaintiff, against the Company, Michael Poutre and Ivan Ivankovich, as the defendants, alleging violation of Section 10(b) of the Exchange Act and Rule 10b-5 in the form of false or misleading statements or omissions and a scheme to manipulate the price of the Company’s common stock. (Case No. 2:17-cv-09157-CAS-FFM). On February 15, 2018, the Shepherdson Matter was voluntarily dismissed in its entirety by the plaintiff, without any payment by the Company, in exchange for an agreement by the Company to forego seeking sanctions against plaintiff and her counsel for the filing of a frivolous lawsuit.

 

On February 20, 2018, a motion was filed by Paul Van Loon and Hassan Yahfoufi for appointment as lead plaintiffs and approval of selection of lead counsel on the Shepherdson Matter pursuant to the Private Securities Litigation Reform Act. On February 27, 2018, counsel for Monika Shepherdson filed a Letter with the court stating that “Ms. Shepherdson no longer wishes to pursue the claims against the Defendants set forth in her complaint.” On February 28, 2018, the Court denied the motion and upheld the dismissal.

 

On January 24, 2018, a verified shareholder derivative complaint was filed in the United States District Court, Central District of California, by Sylvain Hamel, on behalf of The Crypto Company, as the plaintiff, against Michael Poutre, James Gilbert and Anthony Strickland, containing the same factual allegations as the Shepherdson Matter and alleging, among other things, claims for breach of fiduciary duty as directors and/or officers of the Company. (Case No. l 8-cv-00616). On March 5, 2018, the action was voluntarily dismissed in its entirety by the plaintiff, without any payment by the Company.

 

On February 7, 2018, a verified shareholder derivative complaint was filed in the United States District Court, Central District of California, by Michel Blais, on behalf of The Crypto Company, as the plaintiff, against Michael Poutre, Ivan Ivankovich, James Gilbert and Anthony Strickland, also based upon the same factual allegations as the Shepherdson Matter and alleging similar claims for breach of fiduciary duty as directors and/or officers of the Company. (Case No. l 8-cv-01072). On March 2, 2018, the action was voluntarily dismissed in its entirety by the plaintiff, without any payment by the Company.

 

Item 1A. Risk Factors.

 

Reference is made to our Annual Report on Form 10-K for the period from March 9, 2017 (“Inception”), through December 31, 2017, filed with the Securities and Exchange Commission on April 2, 2018. At the time of this filing, there have been no material changes to our risk factors that were included in our 2017 Annual Report other than as described below.

 

Risks Related to Blockchain Technologies and Digital Assets The Company is subject to various risks including market risk, liquidity risk, and other risks related to its investments in Digital Assets, such as cryptocurrencies. Investing in Digital Assets is currently unregulated, highly speculative, and volatile.

 

The prices of cryptocurrency could materially and adversely affect an investment in the shares of the Company. The prices of the cryptocurrencies have a limited history. During such history, the cryptocurrencies’ prices have been volatile and subject to influence by many factors including the levels of liquidity. If the cryptocurrency’s markets continue to experience significant price fluctuations, the Company may experience losses. Several factors may affect the prices of the cryptocurrencies, including, but not limited to, global cryptocurrency supply and demand, and competition from other forms of digital currency or payments services.

 

There is currently no clearing house for cryptocurrency, nor is there a central or major depository for the custody of cryptocurrency. There is a risk that some or all of the Company’s cryptocurrencies could be lost or stolen. The Company does not have insurance protection on its cryptocurrency which exposes the Company and its shareholders to the risk of loss of the Company’s cryptocurrency. Further, cryptocurrency transactions are irrevocable. Stolen or incorrectly transferred of cryptocurrency may be irretrievable. As a result, any incorrectly executed cryptocurrency transactions could adversely affect an investment in the Company.

 

To the extent private keys for the cryptocurrency’s addresses are lost, destroyed or otherwise compromised and no backup of the private keys are accessible, the Company may be unable to access the cryptocurrency held in the associated address and the private key will not be capable of being restored by the cryptocurrency network.

 

The processes by which cryptocurrency transactions are settled are dependent on the cryptocurrency peer-to-peer network, and as such, the Company is subject to operational risk. A risk also exists with respect to previously unknown technical vulnerabilities, which may adversely affect the value of the cryptocurrencies.

 

27
 

 

ITEM 2. Unregistered Sales of Equity Securities and Use Of Proceeds.

 

Unregistered Sales of Securities

 

On January 3, 2018, the Company issued a stock option to purchase 25,000 shares of its common stock in payment of fees to one of its professional service providers. 12,500 shares vest six months from the grant date, 6,250 shares vest 12 months from the grant date and the remaining 6,250 shares vest 18 months from the grant date. The option will expire on January 3, 2028 and the exercise price of the stock option was established on the grant date at $7.00 per share.

 

On January 16, 2018, pursuant to an Equity Purchase Agreement (the “Agreement”) entered into on December 22, 2017 by and among the Company, CoinTracking, LLC, a Nevada limited liability company and wholly-owned subsidiary of the Company (“CoinTracking”), Kachel Holding GmbH, an entity formed under the laws of the Republic of Germany (“Kachel Holding”), and Dario Kachel, an individual, CoinTracking purchased from Kachel Holding 12,525 shares of CoinTracking GmbH, an entity formed under the laws of Germany (“CoinTracking GmbH”), representing 50.1% of the equity interests in CoinTracking GmbH, for a purchase price which consisted, in part, of 473,640 shares of common stock of the Company (the “CoinTracking Acquisition”). The transaction closed on January 26, 2018 (see Note 4).

 

On January 19, 2018, the Company issued a stock option to purchase 25,000 shares of its common stock in payment of fees to one of its professional service providers. 12,500 shares vest six months from the grant date, 6,250 shares vest 12 months from the grant date and the remaining 6,250 shares vest 18 months from the grant date. The option will expire on January 19, 2028 and the exercise price of the stock option was established on the grant date at $10.00 per share.

 

On January 19, 2018, the Company issued a stock option to purchase 75,000 shares of its common stock in payment of fees to one of its professional service providers. 27,500 shares vest three months from the grant date and the remaining 37,500 shares vest six months from the grant date. The option will expire on [January 19, 2028] and the exercise price of the stock option was established on the grant date at $7.00 per share.

 

On March 14, 2018, the Company issued a stock option to purchase 25,000 shares of its common stock in payment of fees to one of its professional service providers. 12,500 shares vest six months from the grant date, 6,250 shares vest 12 months from the grant date and the remaining 6,250 shares vest 18 months from the grant date. The option will expire on March 14, 2028 and the exercise price of the stock option was established on the grant date at $10.00 per share.

 

The shares issued above were issued in transactions that were exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), pursuant to Section 4(a)(2) of the Securities Act inasmuch as the securities were offered and sold solely to sophisticated investors and the Company did not engage in any form of general solicitation or general advertising in making the offering.

 

Item 3. Defaults Upon Senior Securities.

 

Not applicable.

 

Item 4. Mine Safety Disclosures.

 

Not applicable.

 

28
 

 

Item 5. Other Information.

 

On April 3, 2018, CoinTracking, LLC, a Nevada limited liability company and a wholly-owned subsidiary of the Company (“Borrower”), entered into a Loan Agreement (the “Loan Agreement”) with CoinTracking GmbH, a private limited liabilty company organized under the laws of the Federal Republic of Germany (“Lender”), pursuant to which Lender may provide a loan (the “CoinTracking Loan”) of up to $3,000,000 to Borrower, to be advanced to Borrower in one or more tranches, at such times and in such amounts as may be requested by Borrower from time to time, on or before the tenth anniversary of the Loan Agreement. The Company is deemed obligor of Borrower’s obligations under the Loan Agreement for United States Federal income tax purposes. Interest on the CoinTracking Loan will accrue at a rate per annum of the greater of (i) three percent (3%), or (ii) the interest rates published monthly by the United States Internal Revenue Service and in effect under section 1274(d) of the Internal Revenue Code in effect as of the date of issuance of any promissory note under the CoinTracking Loan, and will be payable quarterly. On April 3, 2018, pursuant to the Loan Agreement, Lender advanced $1,000,000 to Borrower in exchange for a promissory note (the “CoinTracking Note”) of equal principal amount. The CoinTracking Note will mature on the second anniversary thereof. The Borrower and Lender are consolidating entities, as such, the loan and advances are considered to be intercompany transactions and will be eliminated in consolidation.

 

Effective as of April 17, 2018, Jeffrey Berman and Holly Ruxin were appointed directors of the Company, each for a term of six months from the effective date of appointment or until his or her earlier death, resignation or removal. The Company entered into a Director Services Agreement with each of Mr. Berman and Ms. Ruxin, pursuant to which each of Mr. Berman and Ms. Ruxin will be entitled to receive (i) a fee of $80,000 per annum, payable quarterly, and (ii) a ten-year option to purchase 100,000 shares of common stock of the Company at an exercise price of $10.00 per share, which option shall be fully vested on the six-month anniversary of the date of grant.

 

Effective as of April 18, 2018, Anthony Strickland, Jeffrey Berman, and Holly Ruxin were appointed to the Audit Committee and Compensation Committee, with Ms. Ruxin serving as Chairperson of the Audit Committee and Mr. Strickland Serving as Chairperson of the Compensation Committee.

 

On April 18, 2018, the Company issued to James Gilbert 202,512 shares of common stock of the Company, immediately vested, for certain services performed on behalf of the Company.

 

Effective May 14, 2018, Michael Poutre, former Chief Executive Officer and a director of the Company, resigned from all of his current roles with the Company effective immediately. Mr. Poutre will remain as a consultant to the Company until November 2018. In connection with Mr. Poutre’s resignation from the Company, the Company entered into a Separation and Consulting Agreement and General Mutual Release (the “Separation and Consulting Agreement”), which was executed on May 9, 2018 and approved by the Board of Directors on May 14, 2018. The Separation and Consulting Agreement was not effective until May 17, 2018, following the end of the revocation period.

 

The Separation and Consulting Agreement provides that the Company will pay Mr. Poutre a lump-sum cash payment of (i) his earned but unpaid base salary, (ii) his accrued but unpaid vacation time, and (iii) any outstanding requests for expense reimbursements that are approved pursuant to Company policy. Mr. Poutre will serve as a consultant of the Company for six months at a rate of $30,000 per month, payable in two separate tranches, though the Company may terminate his services for any reason. The Separation and Consulting Agreement contains other standard provisions contained in agreements of this nature including non-disparagement and a general release of any and all claims.

 

Effective May 14, 2018, James Gilbert, the President of the Company, was appointed Chairman of the Company’s Board of Directors and Chief Executive Officer. The Company did not enter into any new employment agreements with Mr. Gilbert, and Mr. Gilbert has no family relationship with any director or executive officer of the Company.

 

29
 

 

Item 6. Exhibits.

 

Exhibit Number   Document
     
3.1   Articles of Conversion (Utah) (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on October 11, 2017)
     
3.2   Articles of Conversion (Nevada) (incorporated by reference to Exhibit 3.2 to the Registrant’s Current Report on Form 8-K filed on October 11, 2017)
     
3.3   Articles of Incorporation of The Crypto Company (incorporated by reference to Exhibit 3.3 to the Registrant’s Current Report on Form 8-K filed on October 11, 2017)
     
3.4   Certificate of Amendment to Articles of Incorporation of Crypto Sub, Inc. (incorporated by reference to Exhibit 3.4 to the Registrant’s Current Report on Form 8-K filed on October 11, 2017)
     
3.5   Amended and Restated Bylaws of the Crypto Company (incorporated by reference to Exhibit 3.4 to the Registrant’s Current Report on Form 8-K filed on February 28, 2018)
     
10.1   Separation and Consulting Agreement and General Mutual Release (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on [May 17, 2018]
     
31.1   Certification of the Company’s Principal Executive Officer pursuant to Rule 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
     
31.2   Certification of the Company’s Principal Financial and Accounting Officer pursuant to Rule 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
     
32.1+   Certification of the Company’s Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
     
32.2+   Certification of the Company’s Principal Financial and Accounting Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
     
101 INS   XBRL Instance Document
     
101.SCH   XBRL Taxonomy Extension Schema Document
     
101.CAL   XBRL Taxonomy Extension Calculation Linkbase Document
     
101.DEF   XBRL Taxonomy Extension Definition Linkbase Document
     
101.LAB   XBRL Taxonomy Extension Label Linkbase Document
     
101.PRE   XBRL Taxonomy Extension Presentation Linkbase Document

 

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

 

30
 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

Dated: May 21, 2018 THE CRYPTO COMPANY
  (Registrant)
     
  By: /s/ James Gilbert
    James Gilbert
   

Chairman, Chief Executive Officer and President

Principal Executive Officer

     
  By: /s/ Ivan Ivankovich
    Ivan Ivankovich
   

Chief Financial Officer

Principal Financial and Accounting Officer

 

31
 

 

EX-31.1 2 ex31-1.htm

 

Exhibit 31.1

 

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT

 

I, James Gilbert, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q for the period ended March 31, 2018 of The Crypto Company;

 

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

 

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

 

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

 

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

 

b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my 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 small business issuer’s disclosure controls and procedures and presented in this report my 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 small business issuer’s internal control over financial reporting that occurred during the small business issuer’s most recent fiscal quarter (the small business issuer’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer’s internal control over financial reporting; and

 

5. I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the small business issuer’s auditors and the audit committee of small business issuer’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 small business issuer’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 small business issuer’s internal controls over financial reporting.

 

Date: May 21, 2018  
   
/s/ James Gilbert  
James Gilbert  
Chairman, Chief Executive Officer and President  
(Principal Executive Officer)  

 

 
 

 

EX-31.2 3 ex31-2.htm

 

Exhibit 31.2

 

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT

 

I, Ivan Ivankovich, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q for the period ended March 31, 2018 of The Crypto Company;

 

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

 

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

 

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

 

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

 

b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my 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 small business issuer’s disclosure controls and procedures and presented in this report my 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 small business issuer’s internal control over financial reporting that occurred during the small business issuer’s most recent fiscal quarter (the small business issuer’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer’s internal control over financial reporting; and

 

5. I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the small business issuer’s auditors and the audit committee of small business issuer’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 small business issuer’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 small business issuer’s internal controls over financial reporting.

 

Date: May 21, 2018  
   
/s/ Ivan Ivankovich  
Ivan Ivankovich  
Chief Financial Officer  
(Principal Accounting Officer)  

 

 
 

 

EX-32.1 4 ex32-1.htm

 

Exhibit 32.1

 

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

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report of The Crypto Company. (the “Company”) on Form 10-Q for the period ended March 31, 2018 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, James Gilbert, Chairman, Chief Executive Officer and President of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to ss.906 of the Sarbanes-Oxley Act of 2002, that:

 

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

 

IN WITNESS WHEREOF, the undersigned has executed this certification as of May 21, 2018.

 

/s/ James Gilbert  
James Gilbert  
Chairman, Chief Executive Officer and President  

(Principal Executive Officer)

 

 

A signed original of this written statement, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement, has been provided to The Crypto Company, and will be retained by The Crypto Company, and furnished to the Securities and Exchange Commission or its staff upon request.

 

 
 

EX-32.2 5 ex32-2.htm

 

Exhibit 32.2

 

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

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report of The Crypto Company (the “Company”) on Form 10-Q for the period ended March 31, 2018 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Ivan Ivankovich, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to ss.906 of the Sarbanes-Oxley Act of 2002, that:

 

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

 

IN WITNESS WHEREOF, the undersigned has executed this certification as of May 21, 2018.

 

/s/ Ivan Ivankovich  
Ivan Ivankovich  
Chief Financial Officer  

(Principal Accounting Officer)

 

A signed original of this written statement, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement, has been provided to The Crypto Company, and will be retained by The Crypto Company, and furnished to the Securities and Exchange Commission or its staff upon request.

 

 
 

 

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technological infrastructure, a proprietary investment portfolio and strategic alliances to facilitate the exchange of value in the digital asset market and, specifically, to assist third parties with investing in, trading and managing digital assets. 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Document and Entity Information - shares
3 Months Ended
Mar. 31, 2018
May 21, 2018
Document And Entity Information    
Entity Registrant Name Crypto Co  
Entity Central Index Key 0001688126  
Document Type 10-Q  
Document Period End Date Mar. 31, 2018  
Amendment Flag false  
Current Fiscal Year End Date --12-31  
Entity Filer Category Smaller Reporting Company  
Entity Common Stock, Shares Outstanding   21,156,795
Trading Symbol CRCW  
Document Fiscal Period Focus Q1  
Document Fiscal Year Focus 2018  
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Condensed Consolidated Balance Sheet - USD ($)
Mar. 31, 2018
Dec. 31, 2017
CURRENT ASSETS    
Cash and cash equivalents $ 3,678,730 $ 8,950,244
Accounts receivable, net 152,103 500
Loan receivable, related party 194,380
Investment in cryptocurrency at fair value 1,689,600 2,917,627
Prepaid expenses 48,854 33,294
Contract asset for commissions and incentives, current portion 98,906
Total Current Assets 6,917,326 11,901,665
Equipment, net of accumulated depreciation 218,632 68,320
Contract asset for commissions and incentives, net of current portion 27,234
Goodwill 10,325,631
Other assets 35,109 1,500
TOTAL ASSETS 17,523,932 11,971,485
CURRENT LIABILITIES    
Accounts payable and accrued expenses 1,128,373 697,609
Common stock payable 24,988
Income tax payable 800 800
Value-added taxes payable 116,608
Contract liabilities, current portion 3,033,817
Total Current Liabilities 4,304,586 698,409
Contract liabilities, net of the current portion 1,433,858
TOTAL LIABILITIES 5,738,444 698,409
STOCKHOLDERS’ EQUITY    
Preferred stock, $0.001 par value; 10,000,000 shares authorized, none issued and outstanding
Common stock, $0.001 par value; 50,000,000 shares authorized, 20,954,283 and 20,458,945 shares issued and outstanding, respectively 20,955 20,459
Additional paid-in-capital 23,048,011 19,020,176
Accumulated deficit (10,926,505) (7,767,559)
Accumulated other comprehensive income 5,828
TOTAL CRYPTO COMPANY EQUITY 12,148,289 11,273,076
Noncontrolling interests (362,801)
TOTAL STOCKHOLDERS’ EQUITY 11,785,488 11,273,076
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY 17,523,932 11,971,485
CoinTracking [Member]    
CURRENT ASSETS    
Investment in cryptocurrency at fair value $ 1,054,753
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Condensed Consolidated Balance Sheet (Parenthetical) - USD ($)
Mar. 31, 2018
Dec. 31, 2017
Investment cost $ 2,331,326 $ 1,131,885
Preferred stock, par value $ 0.001 $ 0.001
Preferred stock, shares authorized 10,000,000 10,000,000
Preferred Stock, shares issued
Preferred Stock, shares outstanding
Common stock, par value $ 0.001 $ 0.001
Common stock, shares authorized 50,000,000 50,000,000
Common Stock, shares issued 20,954,283 20,458,945
Common Stock, shares outstanding 20,954,283 20,458,945
CoinTracking [Member]    
Investment cost $ 1,528,027  
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Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) - USD ($)
1 Months Ended 3 Months Ended
Mar. 31, 2017
Mar. 31, 2018
REVENUE    
Net realized gain on investment in cryptocurrency $ 1,072,598
Subscription revenue, net 456,697
Other income 295
Total Revenue, net 1,529,590
COST OF SUBSCRIPTION SALES 65,061
GROSS PROFIT 1,464,529
OPERATING EXPENSES    
General and administrative expenses 80,016 2,788,058
Share-based compensation 580,000 (708,139)
Total Operating Expenses 660,016 2,079,919
OPERATING LOSS (660,016) (615,390)
NET CHANGE IN UNREALIZED DEPRECIATION ON INVESTMENT IN CRYPTOCURRENCY    
Net change in unrealized depreciation on investment in cryptocurrency (2,905,557)
LOSS BEFORE PROVISION FOR INCOME TAXES (660,016) (3,520,947)
PROVISION FOR INCOME TAXES 800
NET LOSS (660,016) (3,521,747)
OTHER COMPREHENSIVE INCOME    
Foreign currency translation adjustment 5,828
COMPREHENSIVE LOSS (660,016) (3,515,919)
COMPREHENSIVE LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS (362,801)
COMPREHENSIVE LOSS ATTRIBUTABLE TO THE CRYPTO COMPANY $ (660,016) $ (3,153,118)
Net loss per common share - basic and diluted $ (0.06) $ (0.15)
Weighted average common shares outstanding - basic and diluted 11,335,000 20,864,198
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Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)
1 Months Ended 3 Months Ended
Mar. 31, 2017
Mar. 31, 2018
CASH FLOWS FROM OPERATING ACTIVITIES    
Net loss $ (660,016) $ (3,521,747)
Adjustments to reconcile net loss to net cash used by operating activities:    
Net change in unrealized depreciation on investment in cryptocurrency 2,905,557
Net realized gain on investment in cryptocurrency (1,072,598)
Customer payments received in cryptocurrency (544,340)
Depreciation 17,101
Share-based compensation 580,000 (708,139)
Changes in operating assets and liabilities:    
Accounts receivable 62,954
Prepaid expenses (71,581)
Accounts payable and accrued liabilities 80,000 44,662
Income tax payable 5,526
Contract liabilities 850,951
Net cash used by operating activities (16) (2,031,654)
CASH FLOWS FROM INVESTING ACTIVITIES    
Cash paid in acquisition of CoinTracking, net of cash acquired of $1,547,097 (3,189,303)
Purchases of other asset (23,843)
Purchases of equipment (32,612)
Net cash used by investing activities (3,245,758)
CASH FLOWS FROM FINANCING ACTIVITIES    
Proceeds from common stock issuance 400,000
Proceeds from exercised stock options 70
Net cash provided by financing activities 400,000 70
EFFECT OF FOREIGN EXCHANGE RATE CHANGES ON CASH 5,828
NET CHANGE IN TOTAL CASH AND CASH EQUIVALENTS 399,984 (5,271,514)
CASH AND CASH EQUIVALENTS, beginning of period 8,950,244
CASH AND CASH EQUIVALENTS, end of period 399,984 3,678,730
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION    
Cash paid for interest 564
Noncash investment activities:    
Shares of common stock issued in exchange for investments in cryptocurrency 100,000
Issues of common stock for acquisition of CoinTracking $ 4,736,400
XML 17 R6.htm IDEA: XBRL DOCUMENT v3.8.0.1
Condensed Consolidated Statements of Cash Flows (Unaudited) (Parenthetical)
3 Months Ended
Mar. 31, 2018
USD ($)
Statement of Cash Flows [Abstract]  
Cash acquired from acquisition $ 1,547,097
XML 18 R7.htm IDEA: XBRL DOCUMENT v3.8.0.1
The Company
3 Months Ended
Mar. 31, 2018
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
The Company

NOTE 1 - THE COMPANY

 

The Crypto Company (the “Company”, “Crypto”, “we”, “us” or “our”) was incorporated in the State of Nevada on March 9, 2017 (“Inception”), and is engaged in the business of building technological infrastructure, a proprietary investment portfolio and strategic alliances to facilitate the exchange of value in the digital asset market and, specifically, to assist third parties with investing in, trading and managing digital assets. We also invest in technologies and tokens in a manner that diversifies exposure to the growing class of digital assets. From time to time, we may seek strategic acquisitions either by integrating third party teams and technology with our core business or by funding third party teams in which we may have interest.

 

On January 26, 2018, CoinTracking, LLC (“CoinTracking”), a Nevada limited liability company and wholly owned subsidiary of The Crypto Company, acquired 50.1% of CoinTracking GmbH, and the remaining 49.9% of CoinTracking GmbH is owned by Kachel Holding GmbH, a private limited liability company (Gesellschaft mit beschränkter Haftung) organized under the laws of the Federal Republic of Germany. CoinTracking, GmbH, was incorporated in December 2017, and operates as a SAAS platform, which allows users to track and manage value, profit, loss and other information regarding their investments in cryptocurrencies available via web-based or mobile application. Prior to December 2017, CoinTracking, GmbH operated as a sole proprietorship starting in 2013.

 

Technology

 

The Company is developing proprietary technology, including trading management and auditing software, tools and processes to assist both our own operations and traditional companies, from start-up businesses to well-established companies. We may consider using our technology to build additional units around our existing platform, or selling or licensing our technology to third party institutions for a fee.

 

Media and Ongoing Education

 

The Company also engages in public discourse on an ongoing basis and regularly host roundtable webinars to educate the public about the cryptocurrency market.

XML 19 R8.htm IDEA: XBRL DOCUMENT v3.8.0.1
Summary of Significant Accounting Policies
3 Months Ended
Mar. 31, 2018
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of presentation - The included balance sheet as of December 31, 2017, was derived from audited financial statements and the accompanying unaudited condensed consolidated financial statements as March 31, 2018 and 2017 of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) for interim financial information and pursuant to the instructions to Form 10-Q and Article 8-03 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by US GAAP for complete financial statements. In the opinion of management, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation of the condensed consolidated financial statements have been included.

 

The results of operations for interim periods are not necessarily indicative of the results to be expected for future quarters or for the full year.

 

The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Annual Report on Form 10-K for the period from March 9, 2017 (“Inception”), through December 31, 2017, filed with the Securities and Exchange Commission on April 2, 2018.

 

Consolidation - The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Crypto Sub and CoinTracking, LLC and its 50.1% ownership of CoinTracking, GmbH. All significant intercompany accounts and transactions are eliminated in consolidation.

  

Liquidity - The Company had limited revenues during the three months ended March 31, 2018, or since inception of March 9, 2017, limited to realized gains on investments in cryptocurrency and software subscription revenue from their CoinTracking business acquisition. The Company has raised an aggregate of $12,281,997 in cash from common stock issuances from inception on March 9, 2017 through March 31, 2018, and had $3,678,730 in cash as of March 31, 2018 and working capital of $2,612,740. Management believes that the Company has adequate cash and liquid cryptocurrency holdings as of March 31, 2018 to meet its operating cash needs for the next 12-15 months. The Company has the ability to structure its variable and fixed costs to offset delays in raising additional capital in the private or public markets. However, the Company has a limited operating history and its prospects are subject to risks, expenses and uncertainties frequently encountered by early-stage companies. These risks include, but are not limited to, the uncertainties of availability of financing and achieving future profitability. Management anticipates that the Company will be dependent, for the near future, on investment capital to fund operating expenses. The Company intends to position itself so that it may be able to raise funds through the capital markets. There can be no assurance that such financing will be available at terms acceptable to the Company, if at all. Failure to generate sufficient cash flows from operations, raise capital or reduce certain discretionary spending could have a material adverse effect on the Company’s ability to achieve its intended business objectives.

 

Use of estimates - The preparation of these consolidated financial statements in conformity accounting principles generally accepted in the United States of America requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses and the related disclosure of contingent assets and liabilities. The Company bases its estimates on historical experience and on various other assumptions that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. The Company’s significant estimates and assumptions include but are not limited to the recoverability and useful lives of long-lived assets, allocation of revenue on software subscriptions, valuation of goodwill from business acquisitions, valuation and recoverability of investments, valuation allowances of deferred taxes, and stock-based compensation expenses. Actual results may differ from these estimates. In addition, any change in these estimates or their related assumptions could have an adverse effect on the Company’s operating results.

 

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

 

Investments - Investments are comprised of several cryptocurrencies and are reported at fair value as determined by digital asset markets with realized gains and losses calculated on a trade data basis as the difference between the fair value and cost of cryptocurrencies transferred. The Company recognizes the fair value changes in unrealized appreciation or depreciation on investment through the accompanying Statement of Operations. For the three-month period ended March 31, 2018, the Company had a consolidated balance of $2,744,353 in investments. The Company believes that it would be able to liquidate a majority of its portfolio into cash within 24 hours, if needed. As of the Balance Sheet date, the Company’s holdings represent on average ~0.28% of the total volume of trades on the specific exchanges where it would be able to convert its holdings to cash. The primary exchanges and principal markets the Company utilizes for its trading are Kraken, Bittrex, Poloniex and Bitstamp which, in the aggregate, account for approximately $105 million in Bitcoin/USD trades per day.

 

Equipment - Equipment is recorded at cost and depreciated using the straight line method over the estimated useful life ranging from three to five years. Normal repairs and maintenance are expensed as incurred. Expenditures that materially adapt, improve, or alter the nature of the underlying assets are capitalized. When equipment are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts, and the resulting gain or loss is credited or charged to income.

 

Impairment of long lived assets - The Company analyzes its long-lived assets for potential impairment. Impairment losses are recorded on long-lived assets when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the net carrying amount of the assets. In such cases, the carrying values of assets to be held and used are adjusted to their estimated fair value, less estimated selling expenses. For the three-month period ended March 31, 2018, the Company recognized no impairment losses on its long-lived assets.

 

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

 

Goodwill - The Company records the excess of purchase price over the fair value of the tangible and identifiable intangible assets acquired as goodwill. Goodwill and intangible assets with indefinite lives are tested for impairment at least annually and whenever events or circumstances occur indicating that a possible impairment may have been incurred. Intangible assets with finite lives are amortized over their useful lives.

  

The Company assesses whether goodwill impairment exists using both the qualitative and quantitative assessments. The qualitative assessment involves determining whether events or circumstances exist that indicate it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill. If based on this qualitative assessment the Company determines it is more likely than not that the fair value of a reporting unit is less than its carrying amount, or if the Company elects not to perform a qualitative assessment, a quantitative assessment is performed to determine whether a goodwill impairment exists at the reporting unit.

 

Based on its analysis, the Company’s management believes that no impairment of the carrying value of its goodwill existed at March 31, 2018. There can be no assurance however, that market conditions will not change or demand for the Company’s products and services will continue which could result in impairment of goodwill in the future.

 

Foreign Currency Translation - Results of foreign operations are translated into U.S. dollars using average rates prevailing throughout the period, while assets and liabilities are translated in U.S. dollars at period end foreign exchange rates. Transactions gains and losses resulting from exchange rate changes on transactions denominated in currencies other than the functional currency of the applicable subsidiary are included in the consolidated statements of operations, within other (income) expense, net, in the year in which the change occurs. The Company’s functional currency is U.S. dollars while the functional currency for CoinTracking is in Euros.

 

Income taxes - Deferred tax assets and liabilities are recognized for expected future consequences of events that have been included in the financial statements or tax returns. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized. The provision for income taxes represents the tax payable for the period and the change during the period in deferred tax assets and liabilities. For the three-month period ended March 31, 2018, the income tax payable of $800 reflects the minimum franchise tax for the State of California.

 

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

 

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

 

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

 

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

 

Revenue recognition – The Company has two streams of principal revenue segments as of March 31, 2018. The Company records the realized gain or loss on the investments on a trade date basis. The changes in unrealized appreciation or depreciation on the investments are measured to market on the last day of every month at 11:59 p.m., Pacific Time, based on publicly available cryptocurrency exchanges. The Company classifies investments in cryptocurrency as trading investments. Trading generally reflects active and frequent buying and selling, and is generally used with the objective of generating profits on short-term difference in price.

 

The Company also has subscription revenues through its subsidiary Coin Tracking LLC and significantly minimal amounts of consulting revenue. In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers. ASU No. 2014-09 supersedes nearly all existing revenue recognition guidance under GAAP. The Company adopted ASU No. 2014-09 as of January 1, 2018 using the modified retrospective transition method for contracts as of the date of initial application. There is no cumulative impact to the Company’s retained earnings at January 1, 2018. See “Note 5 - Revenue Recognition” for additional information on the impact to the Company.

 

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

 

Equity instruments (“instruments”) issued to non-employees are recorded on the basis of the fair value of the instruments, as required by ASC 718. ASC No. 505, Equity Based Payments to Non-Employees (“ASC 505”), defines the measurement date and recognition period for such instruments. In general, the measurement date is (a) when a performance commitment, as defined, is reached or (b) when the earlier of (i) the non-employee performance is complete and (ii) the instruments are vested. The compensation cost is remeasured at fair value at each reporting period when the award vests. As a result, stock option-based payments to non-employees can result in significant volatility in compensation expense.

 

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

 

Risks and uncertainties - The Company is subject to various risks including market risk, liquidity risk, and other risks related to its investments in cryptocurrency. Investing in cryptocurrency is currently unregulated, highly speculative, and volatile.

 

The prices of cryptocurrency could materially and adversely affect an investment in the shares of the Company. The prices of the cryptocurrencies have a limited history. During such history, the cryptocurrencies’ prices have been volatile and subject to influence by many factors including the levels of liquidity. If the cryptocurrency’s markets continue to experience significant price fluctuations, the Company may experience losses. Several factors may affect the prices of the cryptocurrencies, including, but not limited to, global cryptocurrency supply and demand, and competition from other forms of digital currency or payments services.

 

There is currently no clearing house for cryptocurrency, nor is there a central or major depository for the custody of cryptocurrency. There is a risk that some or all of the Company’s cryptocurrencies could be lost or stolen. The Company does not have insurance protection on its cryptocurrency which exposes the Company and its shareholders to the risk of loss of the Company’s cryptocurrency. Further, cryptocurrency transactions are irrevocable. Stolen or incorrectly transferred of cryptocurrency may be irretrievable. As a result, any incorrectly executed cryptocurrency transactions could adversely affect an investment in the Company.

 

To the extent private keys for the cryptocurrency’s addresses are lost, destroyed or otherwise compromised and no backup of the private keys are accessible, the Company may be unable to access the cryptocurrency held in the associated address and the private key will not be capable of being restored by the cryptocurrency network.

 

The processes by which cryptocurrency transactions are settled are dependent on the cryptocurrency peer-to-peer network, and as such, the Company is subject to operational risk. A risk also exists with respect to previously unknown technical vulnerabilities, which may adversely affect the value of the cryptocurrencies.

 

Net loss per common share - The Company reports earnings per share (“EPS”) with a dual presentation of basic EPS and diluted EPS. Basic EPS is computed as net income divided by the weighted average of common shares for the period. Diluted EPS reflects the potential dilution that could occur from common shares issued through stock options, or warrants. For the three-month period ended March 31, 2018, the Company had no potentially dilutive common stock equivalents. Therefore, the basic EPS and the diluted EPS are the same.

  

Marketing expense - Marketing expenses are charged to operations, under general and administrative expenses. For the three-month period ended March 31, 2018 and for the period from Inception, March 9, 2017 through March 31, 2017, the Company incurred $48,699 and $0, respectively, in marketing expenses.

XML 20 R9.htm IDEA: XBRL DOCUMENT v3.8.0.1
Recent Accounting Pronouncements
3 Months Ended
Mar. 31, 2018
New Accounting Pronouncements and Changes in Accounting Principles [Abstract]  
Recent Accounting Pronouncements

NOTE 3 - RECENT ACCOUNTING PRONOUNCEMENTS

 

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

 

In May 2017, the FASB issued ASU No. 2017-09, Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting, which provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. Essentially, an entity will not have to account for the effects of a modification if: (1) The fair value of the modified award is the same immediately before and after the modification; (2) the vesting conditions of the modified award are the same immediately before and after the modification; and (3) the classification of the modified award as either an equity instrument or liability instrument is the same immediately before and after the modification. The new standard became effective for us on January 1, 2018. The Company has evaluated the impact of Topic 718 on its financial statements and the adoption of this guidance will not have a material impact on the Company’s consolidated financial statements and related disclosures.

 

FASB ASU 2017-01 “Clarifying the Definition of a Business (Topic 805)” – In January 2017, the FASB issued 2017-1. The new guidance that changes the definition of a business to assist entities with evaluating when a set of transferred assets and activities is a business. The guidance requires an entity to evaluate if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets; if so, the set of transferred assets and activities is not a business. The guidance also requires a business to include at least one substantive process and narrows the definition of outputs by more closely aligning it with how outputs are described in ASC 606. The ASU is effective for annual reporting periods beginning after December 15, 2017, and for interim periods within those years. Adoption of this ASU did not have a significant impact on our consolidated results of operations, cash flows and financial position.

 

FASB ASU 2017-04 “Simplifying the Test for Goodwill Impairment (Topic 350)” – In January 2017, the FASB issued 2017-04. The guidance removes “Step Two” of the goodwill impairment test, which required a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The ASU is effective for annual reporting periods beginning after December 15, 2019, and for interim periods within those years, with early adoption permitted. We do not currently expect this ASU to have a significant impact on our consolidated financial statements and related disclosures.

 

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which, among other things, requires lessees to recognize most leases on their balance sheets related to the rights and obligations created by those leases. The new standard also requires new disclosures to help financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. The new standard becomes effective for us on January 1, 2019. Early adoption is permitted. The amendments in this update should be applied under a modified retrospective approach. We are evaluating the effect that ASU No. 2016-02 will have on our consolidated financial statements and related disclosures.

XML 21 R10.htm IDEA: XBRL DOCUMENT v3.8.0.1
Acquisition
3 Months Ended
Mar. 31, 2018
Business Combinations [Abstract]  
Acquisition

NOTE 4 - ACQUISITION

 

On January 26, 2018, CoinTracking LLC, a wholly-owned subsidiary of the Company, acquired 50.1% of the equity interest in CoinTracking GmbH, for (i) $4,736,400 in cash and (ii) 473,640 shares of common stock of the Company at $10 per share for total purchase price valued at $9,472,800. CoinTracking, with its newly acquired subsidiary, provides its customers with access to cryptocurrency token tracking, portfolio management, and tax calculation and reporting. The acquisition was to increase our presence in the digital asset industry and build strategic alliances.

  

The combined statements of operations were prepared using the acquisition method of accounting in accordance with Financial Accounting Standards Board Accounting Standards Codification (“ASC”) Topic 805, Business Combinations, and have been included in the Company’s consolidated results as of acquisition date with Crypto Company considered as the accounting acquirer and Coin Tracking as the accounting acquiree.

 

Accordingly, consideration paid by the Company to complete the acquisition was allocated to the identifiable assets and liabilities of CoinTracking, GmbH based on estimated fair values as of the closing date. We made a preliminary allocation of the consideration transferred to the assets acquired and liabilities assumed based on the information available and preliminary valuation of the fair value of tangible and intangible assets acquired and liabilities assumed. Acquisition-related costs were expensed as incurred and were not considered to be significant. We expect to include the final purchase price allocation related to this acquisition in our Quarterly Report on Form 10-Q for the period ended June 30, 2018. Therefore, the valuation of certain assets and liabilities in the CoinTracking, GmbH acquisition is preliminary and subject to change.

 

The table below summarizes the fair values of the assets acquired and liabilities assumed at the date of acquisition:

 

    CoinTracking  
Cash and cash equivalents   $ 1,547,097  
Investment in cryptocurrency     1,115,345  
Other current assets     479,057  
Goodwill     10,325,631  
Other assets     144,566  
Total assets   $ 13,611,696  
         
Current liabilities   $ 522,172  
Contract liabilities, short term     2,686,858  
Contract liabilities, long term     929,866  
Total liabilities     4,138,896  
Net assets acquired   $ 9,472,800  

 

The purchase price was based on the expected financial performance of CoinTracking, GmbH and not on the value of the net identifiable assets at the time of acquisition. This resulted in a significant portion of the purchase price being attributed to goodwill. As a result, the Company recognized $10,325,631 of goodwill on the acquisition.

 

Based on its analysis, the Company’s management believes that no impairment of the carrying value of its goodwill existed at March 31, 2018. There can be no assurance however, that market conditions will not change or demand for the Company’s products and services will continue which could result in impairment of goodwill in the future.

 

Unaudited pro forma financial information

 

The unaudited pro forma financial information in the table below presents the combined results of the Company and Coin Tracking as if these acquisitions had occurred on January 1, 2018. The unaudited pro forma financial information includes adjustments required under the acquisition method of accounting and is presented for informational purposes only and is not necessarily indicative of the results that would have been achieved had the acquisitions actually occurred on January 1, 2018.

 

For the three months ended March 31, 2018:

 

Revenue   $ 1,645,260  
Net loss   $ (3,229,423 )
Basic and diluted loss per share:        
Basic   $ (0.15 )
Diluted   $ (0.15 )

XML 22 R11.htm IDEA: XBRL DOCUMENT v3.8.0.1
Subscription Revenue Recognition
3 Months Ended
Mar. 31, 2018
Subscription Revenue Recognition  
Subscription Revenue Recognition

NOTE 5 – SUBSCRIPTION REVENUE RECOGNITION

 

Revenue Recognition

 

CoinTracking accounts for a contract when it has approval and commitment from all parties, the rights of the parties and payment terms are identified, the contract has commercial substance and collectability of consideration is probable. Revenue is recognized when control of the promised services is transferred to our customers, and in an amount that reflects the consideration the Company is contractually due in exchange for those services. Most of the Company’s contracts with customers are single, or have few distinct performance obligations, the transaction price is allocated to each performance obligation using the stand-alone selling price.

 

CoinTracking’s revenue is primarily derived directly from users in the form of subscriptions. Subscription revenue is presented net of credits and credit card chargebacks. Subscribers pay in advance, primarily by Paypal or cryptocurrencies, and, subject to certain conditions identified in our terms and conditions. Revenue is initially deferred and is recognized using the straight-line method over the terms of the applicable subscription period, which primarily range from one to three years.

 

Transaction Price

 

The objective of determining the transaction price is to estimate the amount of consideration the Company is due in exchange for services, including amounts that are variable. CoinTracking has a standalone sales price for each subscription service. Further, The Company excludes from the measurement of transaction price all taxes assessed by governmental authorities that are both (i) imposed on and concurrent with a specific revenue-producing transaction and (ii) collected from customers. Accordingly, such tax amounts are not included as a component of revenue or cost of revenue.

 

Estimates of certain revenue

 

Revenue collected in advance for subscriptions ranging 1 or 2 years or lifetime packages are deferred and recognized as revenue on a straight-line basis over the terms of the applicable subscription period or performance obligation period. For “lifetime” revenue packages, where the customer has access to the website for unlimited length of time, the Company has elected to recognize revenue on a straight-line basis over three years. We believe that based on the short history of customer data, customer relationship period, and number of available alternative providers, and anticipation of future changes to the blockchain industry, a measure of three years of performance obligation to our customers appears to be appropriate. The Company intends to re-evaluate the length of the performance obligation period for lifetime revenue packages periodically based on historical and industry data and adjust it as deemed necessary.

 

Net Revenue and Charge-back Reserves

 

CoinTracking does not maintain an allowance for doubtful accounts because the customer prepays for subscription in advance before access is provided to Coin Tracking’s website. The Company also maintains allowances to reserve for potential credits issued to consumers or other revenue adjustments primarily through Paypal reserves. We recorded a reserve of $160,436 at March 31, 2018 which is based primarily upon historical experience.

 

Contract Liabilities

 

Contract liabilities are recorded when payments are received or due in advance of performing our service obligations and is recognized over the service period, which primarily relates to prepayments of subscription revenue. At the acquisition date of Jan 26, 2018, CoinTracking’s total contract liabilities were $3,616,724, and we recognized revenue of $456,922 as of March 31, 2018. As of March 31, 2018, $3,033,817, of current contract liabilities were recorded and $1,433,858 of long term contract liabilities were recorded, respectively. As of December 31, 2017, we did not have consolidated contract liabilities.

 

Assets Recognized from the Costs to Obtain a Contract with a Customer

 

CoinTracking has determined that certain costs, primarily referral commissions or affiliate payments paid to customers pursuant to certain sales incentive programs, meet the requirements to be capitalized as a cost of obtaining a contract. Affiliate expenses are paid in Bitcoins, as a sales incentive programs and are amortized over the subscription period. For sales incentive programs where the subscription period is one year, the Company has elected the practical expedient to expense the costs as incurred. The Company generally capitalizes over the term of the applicable subscription.

  

During the three months ended March 31, 2018, the Company recognized expense of $30,654 related to the amortization of these costs. The aggregate contract asset balance at March 31, 2018 is $126,140.

XML 23 R12.htm IDEA: XBRL DOCUMENT v3.8.0.1
Segment Information
3 Months Ended
Mar. 31, 2018
Segment Reporting [Abstract]  
Segment Information

NOTE 6 - SEGMENT INFORMATION

 

The Company has organized its operations into two segments: trading in cryptocurrencies and subscription in CoinTracking’s, web-based platform.

 

The trading segment primarily consists of amounts earned through trading activities of cryptocurrencies and costs are operating expenses that consists of general and administrative costs in North America.

 

CoinTracking’s segment primarily consists of amounts earned through subscriptions to the CoinTracking website. Operating expense related to this segment is technology infrastructure and general administrative costs primarily incurred in Germany.

 

There are no intercompany internal revenue transactions between our reportable segments. These segments reflect the way our chief operating decision maker evaluates the Company’s business performance and manages its operations.

 

The following table summarizes the Company’s operating income by segment for the three-month period ended March 31, 2018:

 

    Three months ended  
    3/31/2018  
    Trading     Subscription     Total  
Revenue, net   $ 1,072,598     $ 456,992     $ 1,529,590  
Costs and Expenses     (1,439,020 )     (705,960 )     (2,144,980 )
Operating Loss   $ (366,422 )   $ (248,968 )   $ (615,390 )

 

The trading segment’s costs and expenses were offset by a favorable impact of share-based compensation of $708,139 as of March 31, 2018. This $708,139 was recorded as an offset to operating expenses in the accompanying statement of operations and comprehensive loss for the quarter ended March 31, 2018 and was a result in the decline of the estimated value of the Company’s common stock during the three months ended March 31, 2018.

 

The following table summarizes the Company’s operating income by segment for the period from Inception, March 9, 2017 to March 31, 2017:

 

    Inception to 3/31/2017  
    Trading     Subscription     Total  
Revenue   $ -     $              -     $ -  
Costs and Expenses     (660,016 )     -       (660,016 )
Operating Income   $ (660,016 )   $ -     $ (660,016 )

XML 24 R13.htm IDEA: XBRL DOCUMENT v3.8.0.1
Investment in Cryptocurrency
3 Months Ended
Mar. 31, 2018
Investments [Abstract]  
Investment in Cryptocurrency

NOTE 7 - INVESTMENT IN CRYPTOCURRENCY

 

The investment in cryptocurrency is classified as a Level 2 asset because inputs are from cryptocurrency exchanges with price variability. The following table summarizes the Company’s investments at fair value for the three-month period ended March 31, 2018:

 

    Level 1     Level 2     Level 3  
Investment in cryptocurrency   $ -     $ 2,426,724     $ 317,629  
                         

 

The Company establishes processes and procedures to ensure that the valuation methodologies that are categorized within Level 3 are fair, consistent and verifiable. Valuation of the Company’s Level 3 investments are for Initial Coin Offerings (“ICO’s”) for which there is no active market at March 31, 2018. These ICO’s are valued at cost which approximates fair value at March 31, 2018. At the time that the ICO’s have an available market exchange, the investments will be reclassified to Level 2.

 

The following table sets forth a summary of changes in the fair value of the Company’s Level 3 investments for the three-month period ended March 31, 2018:

 

    Level 3  
    Cryptocurrency  
       
Balance at December 31, 2017   $ 167,818  
Transfers to Level 2 investments     (50,189 )
Purchases, sales, issuances, and settlement, net     200,000  
Balance, March 31, 2018   $ 317,629  

 

The following table summarizes the cryptocurrencies, other than ICO’s, held as of March 31, 2018:

 

Bitcoin   $ 1,344,914  
Ethereum     106,123  
Polymath     83,928  
Ripple     78,336  
Litecoin     69,244  
Bitcoin Cash     56,283  
blockVEE     48,495  
Cardano     37,955  
Dash     31,484  
EOS     35,858  
Various other currencies     534,104  
    $ 2,426,724  

XML 25 R14.htm IDEA: XBRL DOCUMENT v3.8.0.1
Equipment
3 Months Ended
Mar. 31, 2018
Property, Plant and Equipment [Abstract]  
Equipment

NOTE 8 - EQUIPMENT

 

Equipment consists of the following:

 

    March 31, 2018     December 31, 2017  
Computer equipment   $ 225,241     $ 69,241  
Furniture equipment     15,167       3,754  
      240,408       72,995  
Less accumulated depreciation     (21,776 )     (4,675 )
    $ 218,632     $ 68,320  

XML 26 R15.htm IDEA: XBRL DOCUMENT v3.8.0.1
Summary of Common Stock Transactions
3 Months Ended
Mar. 31, 2018
Equity [Abstract]  
Summary of Common Stock Transactions

NOTE 9 - SUMMARY OF COMMON STOCK TRANSACTIONS

 

On March 20, 2018, upon exercise of a stock option by a consultant of the Company, the Company issued 7,031 shares of common stock at an exercise price of $0.01 per share.

 

On January 31, 2018, upon partial exercise of a stock option by an employee of the Company, the Company issued 14,667 shares of common stock as a cashless exercise.

 

During the quarter ended March 31, 2018, an employee exercised a stock option for 12,494 shares of common stock at an exercise price of $2.00 per share. As of March 31, 2018, these shares have not yet been issued and, as a result, there is a common stock payable of $24,988 at March 31, 2018 in the accompanying balance sheet.

 

On January 16, 2018, pursuant to an Equity Purchase Agreement (the “Agreement”) entered into on December 22, 2017 by and among the Company, CoinTracking, LLC, a Nevada limited liability company and wholly-owned subsidiary of the Company (“CoinTracking”), Kachel Holding GmbH, an entity formed under the laws of the Republic of Germany (“Kachel Holding”), and Dario Kachel, an individual, CoinTracking purchased from Kachel Holding 12,525 shares of CoinTracking GmbH, an entity formed under the laws of Germany (“CoinTracking GmbH”), representing 50.1% of the equity interests in CoinTracking GmbH, for a purchase price which consisted, in part, of 473,640 shares of common stock of the Company (the “CoinTracking Acquisition”). The transaction closed on January 26, 2018 (see Note 4).

XML 27 R16.htm IDEA: XBRL DOCUMENT v3.8.0.1
Warrants for Common Stock
3 Months Ended
Mar. 31, 2018
Warrants For Common Stock  
Warrants for Common Stock

NOTE 10 – WARRANTS FOR COMMON STOCK

 

For the three-month period ended March 31, 2018, no stock purchase warrants were issued. As of March 31, 2018, outstanding warrants to purchase shares of common stock were as follows:

 

                      Number of Shares  
Issuance Date  

Exercisable

for

   

Expiration

Date

   

Exercise

Price

   

Outstanding

Under Warrants

 
                         
September 2017   Common Shares     September 25, 2020     $ 2.00       168,125  
                             

 

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

XML 28 R17.htm IDEA: XBRL DOCUMENT v3.8.0.1
Summary of Stock Options
3 Months Ended
Mar. 31, 2018
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Summary of Stock Options

NOTE 11 - SUMMARY OF STOCK OPTIONS

 

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

 

5,000,000 shares of the Company’s common stock are reserved for issuance under the Plan. For the three-month period ended March 31, 2018, there are outstanding stock option awards issued from the Plan covering a total of 807,031 shares of the Company’s common stock and there remain reserved for future awards 4,171,271 shares of the Company’s common stock. The weighted average exercise price of the outstanding stock options is $3.46 per share, and the remaining contractual term is 9.45 years.

 

During the three-month period ended March 31, 2018, the Company granted 150,000 options to nonemployees.

 

                Weighted        
          Weighted     Average     Aggregate  
          Average     Remaining     Intrinsic  
    Number     Exercise     Contractual     Value  
    of Shares     Price     Term (years)     (in thousands)  
                         
Options outstanding, at December 31, 2017     644,531     $ 2.32       9.61     $ 11,421  
Options granted     150,000     $ 8.00       9.83       6,600  
Options exercised     37,858     $ 1.63       9.37       1,907  
Options outstanding, at March 31, 2018     756,668     $ 3.46       9.45     $ 36,729  
Vested and exercisable and expected to vest, end of period     160,834     $ 2.93       9.35     $ 7,892  

 

During the three-month period ended March 31, 2018 and the period from Inception, March, 9, 2017 through March 31, 2017 the Company had not granted any restricted stock awards.

 

As of March 31, 2018, approximately $118,094 of total unrecognized compensation costs related to stock options is expected to be recognized over a weighted average period of approximately 2 years.

 

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

 

The risk-free rate is based on implied yields in effect at the time of the grant on U.S. Treasury zero-coupon bonds with remaining terms equal to the expected term of the stock options. The expected dividend is based on the Company’s history and expectation of dividend payouts. Forfeitures are recognized when they occur.

 

The range of assumptions used for the three-month period ended March 31, 2018 are as follows:

 

    March 31, 2018  
      Ranges  
Weighted-average volatility     36-75 %
Expected dividends     0 %
Expected term (in years)     5.71-10 years  
Risk-free rate     1.91-2.40 %

 

During the three months ended March 31, 2018, there was a decline of the estimated value of the Company’s common stock. As a result, at March 31, 2018, the credit balance of $708,139 share based compensation represents an adjustment to offset the previously recorded stock compensation costs during 2017, as stock options issued to nonemployees are revalued at each vesting tranche and/or reporting date in accordance with ASC 505.

XML 29 R18.htm IDEA: XBRL DOCUMENT v3.8.0.1
Related Party Transactions
3 Months Ended
Mar. 31, 2018
Related Party Transactions [Abstract]  
Related Party Transactions

NOTE 12 - RELATED PARTY TRANSACTIONS

 

On March 9, 2017, Crypto Sub issued 125,000 shares of common stock of Crypto Sub to an employee of Crypto Sub, in exchange for an initial investment made in the form of cryptocurrency, valued at $100,000, based on the fair value of the investment on the date of such investment. In addition, based on the fair value of the shares of common stock of the Company at the time of issuance, the Company recorded an additional $100,000 of share based compensation expense related to the transaction.

 

On March 9, 2017, Crypto Sub issued 300,000 shares of common stock of Crypto Sub to James Gilbert, the Chairman, Chief Executive Officer and President of the Company, in exchange for $200,000. In addition, based on the fair value of the shares of common stock of the Company at the time of issuance, the Company recorded an additional $280,000 of share based compensation expense related to the transaction.

 

On March 9, 2017, Crypto Sub issued (i) 125,000 shares of common stock of Crypto Sub to Redwood Fund LP (“Redwood”) in exchange for $200,000; and (ii) 125,000 shares of common stock of Crypto Sub to Imperial Strategies, LLC (“Imperial Strategies”) in exchange for certain services rendered, valued at $200,000, as of the date of such issuance. Michael Poutre, the Chief Executive Officer of the Company, and Ron Levy, the Chief Operating Officer of the Company, are Chief Executive Officer and Chief Operating Officer, respectively, of Ladyface Capital, LLC, the General Partner of Redwood, and, as a result, had an indirect material interest in the shares owned by Redwood.

 

The Company has a services agreement with Full Stack Finance for CFO and Accounting outsource services. Ivan Ivankovich, CFO of the Company, is the Co- Managing Director of Full Stack Finance. Emad Boulos, an employee of Full Stack Finance, serves as The Crypto Company’s Controller. The Company paid a total of $138,259 in fees to Full Stack Finance during the three-month period ended March 31, 2018, and as of March 31, 2018, there was a balance of $68,000 due to Full Stack Finance, which is included in accounts payable and accrued expenses on the accompanying balance sheet.

 

The Company has a loan receivable from an officer of CoinTracking GmbH as of March 31, 2018 totaling $194,380. The loan is due upon demand and it bears interest at 2%. During the quarter ended March 31, 2018 and the period from March 9, 2017 to March 31, 2017 interest income accrued for this loan was $295 and $0, respectively, which is included in other income on the accompanying statement of operations.

XML 30 R19.htm IDEA: XBRL DOCUMENT v3.8.0.1
Basic and Diluted Loss Per Share
3 Months Ended
Mar. 31, 2018
Earnings Per Share [Abstract]  
Basic and Diluted Loss Per Share

NOTE 13 - BASIC AND DILUTED LOSS PER SHARE

 

The following is a reconciliation of the numerator and denominator of the basic and diluted loss per share computations for the three-month period ended March 31, 2018:

 

    For the three months ended March 31, 2018  
Numerator for basic and diluted income per share:        
Comprehensive loss attributable to The Crypto Company   $ (3,153,118 )
         
Denominator for basic and diluted income per share:        
Weighted average shares (basic)     20,864,198  
Common stock equivalents     -  
Weighted average shares (diluted)     20,864,198  
         
Basic and diluted income (loss) per share:        
Basic   $ (0.15 )
Diluted   $ (0.15 )

XML 31 R20.htm IDEA: XBRL DOCUMENT v3.8.0.1
Commitments and Contingencies
3 Months Ended
Mar. 31, 2018
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies

NOTE 14 - COMMITMENTS AND CONTINGENCIES

 

Operating leases - On May 15, 2017, the Company entered into a lease agreement with Soba Living, LLC for the rental of office space. The agreement is a month to month lease, which requires monthly rents of $6,000 through September 30, 2018.

 

On January 18, 2018, the Company entered into a short-term lease agreement with Miramar Property Investment Co., for an office space on a month-to-month basis, requiring monthly rents of $3,024 expiring through September 30, 2018.

 

Facility rent expense for the three-month period ended March 31, 2018 and the period from March 9, 2017 to March 31, 2017 was $25,023 and $0, respectively.

 

Legal - From time to time, the Company may become subject to legal proceedings, claims, and litigation arising in the ordinary course of business, none of which, in management’s opinion, will result in judgments that would have a material adverse effect on the financial position or results of operations of the Company. Please see a summary of legal proceedings in Item 1 of Part II of this Quarterly Report, all of which have been voluntarily dismissed as of the date of this Quarterly Report.

 

Indemnities and guarantees - During the normal course of business, the Company has made certain indemnities and guarantees under which it may be required to make payments in relation to certain transactions. These indemnities include certain agreements with the Company’s officers and directors, under which the Company may be required to indemnify such persons for liabilities arising out of their respective relationships. In connection with its facility lease, the Company has indemnified the lessor for certain claims arising from the use of the facility. The duration of these indemnities and guarantees varies and, in certain cases, is indefinite. The majority of these indemnities and guarantees do not provide for any limitation of the maximum potential future payments the Company could be obligated to make. Historically, the Company has not been obligated to make significant payments for these obligations and no liabilities have been recorded for these indemnities and guarantees in the accompanying balance sheet.

XML 32 R21.htm IDEA: XBRL DOCUMENT v3.8.0.1
Subsequent Events
3 Months Ended
Mar. 31, 2018
Subsequent Events [Abstract]  
Subsequent Events

NOTE 15 – SUBSEQUENT EVENTS

 

On April 3, 2018, CoinTracking, LLC, a Nevada limited liability company and a wholly-owned subsidiary of the Company (“Borrower”), entered into a Loan Agreement (the “Loan Agreement”) with CoinTracking GmbH, a private limited liabilty company organized under the laws of the Federal Republic of Germany (“Lender”), pursuant to which Lender may provide a loan (the “CoinTracking Loan”) of up to $3,000,000 to Borrower, to be advanced to Borrower in one or more tranches, at such times and in such amounts as may be requested by Borrower from time to time, on or before the tenth anniversary of the Loan Agreement. The Company is deemed obligor of Borrower’s obligations under the Loan Agreement for United States Federal income tax purposes. Interest on the CoinTracking Loan will accrue at a rate per annum of the greater of (i) three percent (3%), or (ii) the interest rates published monthly by the United States Internal Revenue Service and in effect under section 1274(d) of the Internal Revenue Code in effect as of the date of issuance of any promissory note under the CoinTracking Loan, and will be payable quarterly. On April 3, 2018, pursuant to the Loan Agreement, Lender advanced $1,000,000 to Borrower in exchange for a promissory note (the “CoinTracking Note”) of equal principal amount. The CoinTracking Note will mature on the second anniversary thereof. The Borrower and Lender are consolidating entities, as such, the loan and advances are considered to be intercompany transactions and will be eliminated in consolidation.

 

Effective as of April 17, 2018, Jeffrey Berman and Holly Ruxin were appointed directors of the Company, each for a term of six months from the effective date of appointment or until his or her earlier death, resignation or removal. The Company entered into a Director Services Agreement with each of Mr. Berman and Ms. Ruxin, pursuant to which each of Mr. Berman and Ms. Ruxin will be entitled to receive (i) a fee of $80,000 per annum, payable quarterly, and (ii) a ten-year option to purchase 100,000 shares of common stock of the Company at an exercise price of $10.00 per share, which option shall be fully vested on the six-month anniversary of the date of grant.

 

Effective as of April 18, 2018, Anthony Strickland, Jeffrey Berman, and Holly Ruxin were appointed to the Audit Committee and Compensation Committee, with Ms. Ruxin serving as Chairperson of the Audit Committee and Mr. Strickland Serving as Chairperson of the Compensation Committee.

 

On April 18, 2018, the Company issued to James Gilbert 202,512 shares of common stock of the Company, immediately vested, for certain services performed on behalf of the Company.

 

Effective May 14, 2018, Michael Poutre, former Chief Executive Officer and a director of the Company, resigned from all of his current roles with the Company effective immediately. Mr. Poutre will remain as a consultant to the Company until November 2018. In connection with Mr. Poutre’s resignation from the Company, the Company entered into a Separation and Consulting Agreement and General Mutual Release (the “Separation and Consulting Agreement”), which was executed on May 9, 2018 and approved by the Board of Directors on May 14, 2018. The Separation and Consulting Agreement was not effective until May 17, 2018, following the end of the revocation period.

 

The Separation and Consulting Agreement provides that the Company will pay Mr. Poutre a lump-sum cash payment of (i) his earned but unpaid base salary, (ii) his accrued but unpaid vacation time, and (iii) any outstanding requests for expense reimbursements that are approved pursuant to Company policy. Mr. Poutre will serve as a consultant of the Company for six months at a rate of $30,000 per month, payable in two separate tranches, though the Company may terminate his services for any reason. The Separation and Consulting Agreement contains other standard provisions contained in agreements of this nature including non-disparagement and a general release of any and all claims.

 

Effective May 14, 2018, James Gilbert, the President of the Company, was appointed Chairman of the Company’s Board of Directors and Chief Executive Officer. The Company did not enter into any new employment agreement with Mr. Gilbert, and Mr. Gilbert has no family relationship with any director or executive officer of the Company.

XML 33 R22.htm IDEA: XBRL DOCUMENT v3.8.0.1
Summary of Significant Accounting Policies (Policies)
3 Months Ended
Mar. 31, 2018
Accounting Policies [Abstract]  
Basis of Presentation

Basis of presentation - The included balance sheet as of December 31, 2017, was derived from audited financial statements and the accompanying unaudited condensed consolidated financial statements as March 31, 2018 and 2017 of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) for interim financial information and pursuant to the instructions to Form 10-Q and Article 8-03 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by US GAAP for complete financial statements. In the opinion of management, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation of the condensed consolidated financial statements have been included.

 

The results of operations for interim periods are not necessarily indicative of the results to be expected for future quarters or for the full year.

 

The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Annual Report on Form 10-K for the period from March 9, 2017 (“Inception”), through December 31, 2017, filed with the Securities and Exchange Commission on April 2, 2018.

Consolidation

Consolidation - The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Crypto Sub and CoinTracking, LLC and its 50.1% ownership of CoinTracking, GmbH. All significant intercompany accounts and transactions are eliminated in consolidation.

Liquidity

Liquidity - The Company had limited revenues during the three months ended March 31, 2018, or since inception of March 9, 2017, limited to realized gains on investments in cryptocurrency and software subscription revenue from their CoinTracking business acquisition. The Company has raised an aggregate of $12,281,997 in cash from common stock issuances from inception on March 9, 2017 through March 31, 2018, and had $3,678,730 in cash as of March 31, 2018 and working capital of $2,612,740. Management believes that the Company has adequate cash and liquid cryptocurrency holdings as of March 31, 2018 to meet its operating cash needs for the next 12-15 months. The Company has the ability to structure its variable and fixed costs to offset delays in raising additional capital in the private or public markets. However, the Company has a limited operating history and its prospects are subject to risks, expenses and uncertainties frequently encountered by early-stage companies. These risks include, but are not limited to, the uncertainties of availability of financing and achieving future profitability. Management anticipates that the Company will be dependent, for the near future, on investment capital to fund operating expenses. The Company intends to position itself so that it may be able to raise funds through the capital markets. There can be no assurance that such financing will be available at terms acceptable to the Company, if at all. Failure to generate sufficient cash flows from operations, raise capital or reduce certain discretionary spending could have a material adverse effect on the Company’s ability to achieve its intended business objectives.

Use of Estimates

Use of estimates - The preparation of these consolidated financial statements in conformity accounting principles generally accepted in the United States of America requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses and the related disclosure of contingent assets and liabilities. The Company bases its estimates on historical experience and on various other assumptions that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. The Company’s significant estimates and assumptions include but are not limited to the recoverability and useful lives of long-lived assets, allocation of revenue on software subscriptions, valuation of goodwill from business acquisitions, valuation and recoverability of investments, valuation allowances of deferred taxes, and stock-based compensation expenses. Actual results may differ from these estimates. In addition, any change in these estimates or their related assumptions could have an adverse effect on the Company’s operating results.

Cash and Cash Equivalents

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

Investments

Investments - Investments are comprised of several cryptocurrencies and are reported at fair value as determined by digital asset markets with realized gains and losses calculated on a trade data basis as the difference between the fair value and cost of cryptocurrencies transferred. The Company recognizes the fair value changes in unrealized appreciation or depreciation on investment through the accompanying Statement of Operations. For the three-month period ended March 31, 2018, the Company had a consolidated balance of $2,744,353 in investments. The Company believes that it would be able to liquidate a majority of its portfolio into cash within 24 hours, if needed. As of the Balance Sheet date, the Company’s holdings represent on average ~0.28% of the total volume of trades on the specific exchanges where it would be able to convert its holdings to cash. The primary exchanges and principal markets the Company utilizes for its trading are Kraken, Bittrex, Poloniex and Bitstamp which, in the aggregate, account for approximately $105 million in Bitcoin/USD trades per day.

Equipment

Equipment - Equipment is recorded at cost and depreciated using the straight line method over the estimated useful life ranging from three to five years. Normal repairs and maintenance are expensed as incurred. Expenditures that materially adapt, improve, or alter the nature of the underlying assets are capitalized. When equipment are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts, and the resulting gain or loss is credited or charged to income.

Impairment of Long Lived Assets

Impairment of long lived assets - The Company analyzes its long-lived assets for potential impairment. Impairment losses are recorded on long-lived assets when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the net carrying amount of the assets. In such cases, the carrying values of assets to be held and used are adjusted to their estimated fair value, less estimated selling expenses. For the three-month period ended March 31, 2018, the Company recognized no impairment losses on its long-lived assets.

Business Combination

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

Goodwill

Goodwill - The Company records the excess of purchase price over the fair value of the tangible and identifiable intangible assets acquired as goodwill. Goodwill and intangible assets with indefinite lives are tested for impairment at least annually and whenever events or circumstances occur indicating that a possible impairment may have been incurred. Intangible assets with finite lives are amortized over their useful lives.

  

The Company assesses whether goodwill impairment exists using both the qualitative and quantitative assessments. The qualitative assessment involves determining whether events or circumstances exist that indicate it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill. If based on this qualitative assessment the Company determines it is more likely than not that the fair value of a reporting unit is less than its carrying amount, or if the Company elects not to perform a qualitative assessment, a quantitative assessment is performed to determine whether a goodwill impairment exists at the reporting unit.

 

Based on its analysis, the Company’s management believes that no impairment of the carrying value of its goodwill existed at March 31, 2018. There can be no assurance however, that market conditions will not change or demand for the Company’s products and services will continue which could result in impairment of goodwill in the future.

Foreign Currency Translation

Foreign Currency Translation - Results of foreign operations are translated into U.S. dollars using average rates prevailing throughout the period, while assets and liabilities are translated in U.S. dollars at period end foreign exchange rates. Transactions gains and losses resulting from exchange rate changes on transactions denominated in currencies other than the functional currency of the applicable subsidiary are included in the consolidated statements of operations, within other (income) expense, net, in the year in which the change occurs. The Company’s functional currency is U.S. dollars while the functional currency for CoinTracking is in Euros.

Income Taxes

Income taxes - Deferred tax assets and liabilities are recognized for expected future consequences of events that have been included in the financial statements or tax returns. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized. The provision for income taxes represents the tax payable for the period and the change during the period in deferred tax assets and liabilities. For the three-month period ended March 31, 2018, the income tax payable of $800 reflects the minimum franchise tax for the State of California.

 

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

Fair Value Measurements

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

 

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

 

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

Revenue Recognition

Revenue recognition – The Company has two streams of principal revenue segments as of March 31, 2018. The Company records the realized gain or loss on the investments on a trade date basis. The changes in unrealized appreciation or depreciation on the investments are measured to market on the last day of every month at 11:59 p.m., Pacific Time, based on publicly available cryptocurrency exchanges. The Company classifies investments in cryptocurrency as trading investments. Trading generally reflects active and frequent buying and selling, and is generally used with the objective of generating profits on short-term difference in price.

 

The Company also has subscription revenues through its subsidiary Coin Tracking LLC and significantly minimal amounts of consulting revenue. In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers. ASU No. 2014-09 supersedes nearly all existing revenue recognition guidance under GAAP. The Company adopted ASU No. 2014-09 as of January 1, 2018 using the modified retrospective transition method for contracts as of the date of initial application. There is no cumulative impact to the Company’s retained earnings at January 1, 2018. See “Note 5 - Revenue Recognition” for additional information on the impact to the Company.

Stock-based Compensation

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

 

Equity instruments (“instruments”) issued to non-employees are recorded on the basis of the fair value of the instruments, as required by ASC 718. ASC No. 505, Equity Based Payments to Non-Employees (“ASC 505”), defines the measurement date and recognition period for such instruments. In general, the measurement date is (a) when a performance commitment, as defined, is reached or (b) when the earlier of (i) the non-employee performance is complete and (ii) the instruments are vested. The compensation cost is remeasured at fair value at each reporting period when the award vests. As a result, stock option-based payments to non-employees can result in significant volatility in compensation expense.

 

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

Risks and Uncertainties

Risks and uncertainties - The Company is subject to various risks including market risk, liquidity risk, and other risks related to its investments in cryptocurrency. Investing in cryptocurrency is currently unregulated, highly speculative, and volatile.

 

The prices of cryptocurrency could materially and adversely affect an investment in the shares of the Company. The prices of the cryptocurrencies have a limited history. During such history, the cryptocurrencies’ prices have been volatile and subject to influence by many factors including the levels of liquidity. If the cryptocurrency’s markets continue to experience significant price fluctuations, the Company may experience losses. Several factors may affect the prices of the cryptocurrencies, including, but not limited to, global cryptocurrency supply and demand, and competition from other forms of digital currency or payments services.

 

There is currently no clearing house for cryptocurrency, nor is there a central or major depository for the custody of cryptocurrency. There is a risk that some or all of the Company’s cryptocurrencies could be lost or stolen. The Company does not have insurance protection on its cryptocurrency which exposes the Company and its shareholders to the risk of loss of the Company’s cryptocurrency. Further, cryptocurrency transactions are irrevocable. Stolen or incorrectly transferred of cryptocurrency may be irretrievable. As a result, any incorrectly executed cryptocurrency transactions could adversely affect an investment in the Company.

 

To the extent private keys for the cryptocurrency’s addresses are lost, destroyed or otherwise compromised and no backup of the private keys are accessible, the Company may be unable to access the cryptocurrency held in the associated address and the private key will not be capable of being restored by the cryptocurrency network.

 

The processes by which cryptocurrency transactions are settled are dependent on the cryptocurrency peer-to-peer network, and as such, the Company is subject to operational risk. A risk also exists with respect to previously unknown technical vulnerabilities, which may adversely affect the value of the cryptocurrencies.

Net Loss Per Common Share

Net loss per common share - The Company reports earnings per share (“EPS”) with a dual presentation of basic EPS and diluted EPS. Basic EPS is computed as net income divided by the weighted average of common shares for the period. Diluted EPS reflects the potential dilution that could occur from common shares issued through stock options, or warrants. For the three-month period ended March 31, 2018, the Company had no potentially dilutive common stock equivalents. Therefore, the basic EPS and the diluted EPS are the same.

Marketing Expense

Marketing expense - Marketing expenses are charged to operations, under general and administrative expenses. For the three-month period ended March 31, 2018 and for the period from Inception, March 9, 2017 through March 31, 2017, the Company incurred $48,699 and $0, respectively, in marketing expenses.

XML 34 R23.htm IDEA: XBRL DOCUMENT v3.8.0.1
Acquisition (Tables)
3 Months Ended
Mar. 31, 2018
Business Combinations [Abstract]  
Schedule of Fair Value of Assets Acquired and Liabilities Assumed

The table below summarizes the fair values of the assets acquired and liabilities assumed at the date of acquisition:

 

    CoinTracking  
Cash and cash equivalents   $ 1,547,097  
Investment in cryptocurrency     1,115,345  
Other current assets     479,057  
Goodwill     10,325,631  
Other assets     144,566  
Total assets   $ 13,611,696  
         
Current liabilities   $ 522,172  
Contract liabilities, short term     2,686,858  
Contract liabilities, long term     929,866  
Total liabilities     4,138,896  
Net assets acquired   $ 9,472,800  

Schedule of Unaudited Pro Forma Financial Information

For the three months ended March 31, 2018:

 

Revenue   $ 1,645,260  
Net loss   $ (3,229,423 )
Basic and diluted loss per share:        
Basic   $ (0.15 )
Diluted   $ (0.15 )

XML 35 R24.htm IDEA: XBRL DOCUMENT v3.8.0.1
Segment Information (Tables)
3 Months Ended
Mar. 31, 2018
Segment Reporting [Abstract]  
Schedule of Operating Income (Loss) by Segment

The following table summarizes the Company’s operating income by segment for the three-month period ended March 31, 2018:

 

    Three months ended  
    3/31/2018  
    Trading     Subscription     Total  
Revenue, net   $ 1,072,598     $ 456,992     $ 1,529,590  
Costs and Expenses     (1,439,020 )     (705,960 )     (2,144,980 )
Operating Loss   $ (366,422 )   $ (248,968 )   $ (615,390 )

 

The following table summarizes the Company’s operating income by segment for the period from Inception, March 9, 2017 to March 31, 2017:

 

    Inception to 3/31/2017  
    Trading     Subscription     Total  
Revenue   $ -     $              -     $ -  
Costs and Expenses     (660,016 )     -       (660,016 )
Operating Income   $ (660,016 )   $ -     $ (660,016 )

XML 36 R25.htm IDEA: XBRL DOCUMENT v3.8.0.1
Investment in Cryptocurrency (Tables)
3 Months Ended
Mar. 31, 2018
Investments [Abstract]  
Schedule of Fair Value of Investments in Cryptocurrency

The following table summarizes the Company’s investments at fair value for the three-month period ended March 31, 2018:

 

    Level 1     Level 2     Level 3  
Investment in cryptocurrency   $ -     $ 2,426,724     $ 317,629  

 

The following table sets forth a summary of changes in the fair value of the Company’s Level 3 investments for the three-month period ended March 31, 2018:

 

    Level 3  
    Cryptocurrency  
       
Balance at December 31, 2017   $ 167,818  
Transfers to Level 2 investments     (50,189 )
Purchases, sales, issuances, and settlement, net     200,000  
Balance, March 31, 2018   $ 317,629  

Summary of Cryptocurrencies Held

The following table summarizes the cryptocurrencies, other than ICO’s, held as of March 31, 2018:

 

Bitcoin   $ 1,344,914  
Ethereum     106,123  
Polymath     83,928  
Ripple     78,336  
Litecoin     69,244  
Bitcoin Cash     56,283  
blockVEE     48,495  
Cardano     37,955  
Dash     31,484  
EOS     35,858  
Various other currencies     534,104  
    $ 2,426,724  

XML 37 R26.htm IDEA: XBRL DOCUMENT v3.8.0.1
Equipment (Tables)
3 Months Ended
Mar. 31, 2018
Property, Plant and Equipment [Abstract]  
Schedule of Equipment

Equipment consists of the following:

 

    March 31, 2018     December 31, 2017  
Computer equipment   $ 225,241     $ 69,241  
Furniture equipment     15,167       3,754  
      240,408       72,995  
Less accumulated depreciation     (21,776 )     (4,675 )
    $ 218,632     $ 68,320  

XML 38 R27.htm IDEA: XBRL DOCUMENT v3.8.0.1
Warrants for Common Stock (Tables)
3 Months Ended
Mar. 31, 2018
Warrants For Common Stock  
Schedule of Outstanding Warrants to Purchase Shares of Common Stock

As of March 31, 2018, outstanding warrants to purchase shares of common stock were as follows:

 

                      Number of Shares  
Issuance Date  

Exercisable

for

   

Expiration

Date

   

Exercise

Price

   

Outstanding

Under Warrants

 
                         
September 2017   Common Shares     September 25, 2020     $ 2.00       168,125  

XML 39 R28.htm IDEA: XBRL DOCUMENT v3.8.0.1
Summary of Stock Options (Tables)
3 Months Ended
Mar. 31, 2018
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Schedule of Stock Options Activity

During the three-month period ended March 31, 2018, the Company granted 150,000 options to nonemployees.

 

                Weighted        
          Weighted     Average     Aggregate  
          Average     Remaining     Intrinsic  
    Number     Exercise     Contractual     Value  
    of Shares     Price     Term (years)     (in thousands)  
                         
Options outstanding, at December 31, 2017     644,531     $ 2.32       9.61     $ 11,421  
Options granted     150,000     $ 8.00       9.83       6,600  
Options exercised     37,858     $ 1.63       9.37       1,907  
Options outstanding, at March 31, 2018     756,668     $ 3.46       9.45     $ 36,729  
Vested and exercisable and expected to vest, end of period     160,834     $ 2.93       9.35     $ 7,892

Schedule of Stock Option Assumptions Used

The range of assumptions used for the three-month period ended March 31, 2018 are as follows:

 

    March 31, 2018  
      Ranges  
Weighted-average volatility     36-75 %
Expected dividends     0 %
Expected term (in years)     5.71-10 years  
Risk-free rate     1.91-2.40 %

XML 40 R29.htm IDEA: XBRL DOCUMENT v3.8.0.1
Basic and Diluted Loss Per Share (Tables)
3 Months Ended
Mar. 31, 2018
Earnings Per Share [Abstract]  
Schedule of Earnings Per Share Basic and Diluted

The following is a reconciliation of the numerator and denominator of the basic and diluted loss per share computations for the three-month period ended March 31, 2018:

 

    For the three months ended March 31, 2018  
Numerator for basic and diluted income per share:        
Comprehensive loss attributable to The Crypto Company   $ (3,153,118 )
         
Denominator for basic and diluted income per share:        
Weighted average shares (basic)     20,864,198  
Common stock equivalents     -  
Weighted average shares (diluted)     20,864,198  
         
Basic and diluted income (loss) per share:        
Basic   $ (0.15 )
Diluted   $ (0.15 )

XML 41 R30.htm IDEA: XBRL DOCUMENT v3.8.0.1
The Company (Details Narrative)
Mar. 31, 2018
Jan. 26, 2018
CoinTracking GmbH [Member]    
Ownership percentage 50.10% 50.10%
Kachel Holding GmbH [Member]    
Ownership percentage   49.90%
XML 42 R31.htm IDEA: XBRL DOCUMENT v3.8.0.1
Summary of Significant Accounting Policies (Details Narrative) - USD ($)
1 Months Ended 3 Months Ended 13 Months Ended
Mar. 31, 2017
Mar. 31, 2018
Mar. 31, 2018
Jan. 26, 2018
Dec. 31, 2017
Mar. 08, 2017
Proceeds from issuance of common stock $ 400,000 $ 12,281,997      
Cash balance 399,984 3,678,730 3,678,730   $ 8,950,244
Working capital   2,612,740 2,612,740      
Consolidated investments   $ 2,744,353 $ 2,744,353      
Percentage of volume of trades on exchanges   0.28% 0.28%      
Investment in trading exchange on Bitcoin/USD per day   $ 105,000,000        
Income tax payable   800 $ 800   $ 800  
Marketing expenses $ 0 $ 48,699        
Minimum [Member]            
Estimated useful life of equipment   3 years        
Maximum [Member]            
Estimated useful life of equipment   5 years        
CoinTracking GmbH [Member]            
Common stock ownership percentage   50.10% 50.10% 50.10%    
XML 43 R32.htm IDEA: XBRL DOCUMENT v3.8.0.1
Acquisition (Details Narrative) - USD ($)
1 Months Ended 3 Months Ended
Jan. 26, 2018
Mar. 31, 2017
Mar. 31, 2018
Dec. 31, 2017
Purchase price   $ 3,189,303  
Goodwill on acquisition     $ 10,325,631
CoinTracking GmbH [Member]        
Equity interests, percentage 50.10%   50.10%  
Payments to acquire businesses in cash $ 4,736,400      
Number of common stock shares purchased 473,640      
Business combination, purchase price per share $ 10      
Purchase price $ 9,472,800      
Goodwill on acquisition $ 10,325,631      
XML 44 R33.htm IDEA: XBRL DOCUMENT v3.8.0.1
Acquisition - Schedule of Fair Value of Assets Acquired and Liabilities Assumed (Details) - USD ($)
Mar. 31, 2018
Jan. 26, 2018
Dec. 31, 2017
Goodwill $ 10,325,631  
CoinTracking LLC [Member]      
Cash and cash equivalents   $ 1,547,097  
Investment in cryptocurrency   1,115,345  
Other current assets   479,057  
Goodwill   10,325,631  
Other assets   144,566  
Total assets   13,611,696  
Current liabilities   522,172  
Contract liabilities, short term   2,686,858  
Contract liabilities, long term   929,866  
Total liabilities   4,138,896  
Net assets acquired   $ 9,472,800  
XML 45 R34.htm IDEA: XBRL DOCUMENT v3.8.0.1
Acquisition - Schedule of Unaudited Pro Forma Financial Information (Details)
3 Months Ended
Mar. 31, 2018
USD ($)
$ / shares
Business Combinations [Abstract]  
Revenue | $ $ 1,645,260
Net loss | $ $ (3,229,423)
Basic and diluted loss per share: Basic | $ / shares $ (0.15)
Basic and diluted loss per share: Diluted | $ / shares $ (0.15)
XML 46 R35.htm IDEA: XBRL DOCUMENT v3.8.0.1
Subscription Revenue Recognition (Details Narrative) - USD ($)
1 Months Ended 3 Months Ended
Mar. 31, 2017
Mar. 31, 2018
Jan. 26, 2018
Dec. 31, 2017
Subscriptions of revenue, description   Revenue collected in advance for subscriptions ranging 1 or 2 years or lifetime packages are deferred and recognized as revenue on a straight-line basis over the terms of the applicable subscription period or performance obligation period. For “lifetime” revenue packages, where the customer has access to the website for unlimited length of time, the Company has elected to recognize revenue on a straight-line basis over three years.    
Paypal reserve   $ 160,436    
Subscription revenue 456,697    
Contract liabilities, current   3,033,817  
Contract liabilities, noncurrent   $ 1,433,858  
Sales incentive programs subscription period   1 year    
Amortization of sales incentive programs cost   $ 30,654    
Aggregate contract asset   $ 126,140    
CoinTracking LLC [Member]        
Contract liabilities     $ 3,616,724  
XML 47 R36.htm IDEA: XBRL DOCUMENT v3.8.0.1
Segment Information (Details Narrative)
3 Months Ended
Mar. 31, 2018
Segments
Segment Reporting [Abstract]  
Number of operating segments 2
XML 48 R37.htm IDEA: XBRL DOCUMENT v3.8.0.1
Segment Information - Schedule of Operating Income (Loss) by Segment (Details) - USD ($)
1 Months Ended 3 Months Ended
Mar. 31, 2017
Mar. 31, 2018
Revenue, net $ 1,529,590
Cost and Expenses (660,016) (2,144,980)
Operating Income Loss (660,016) (615,390)
Trading [Member]    
Revenue, net 1,072,598
Cost and Expenses (660,016) (1,439,020)
Operating Income Loss (660,016) (366,422)
Subscription [Member]    
Revenue, net 456,992
Cost and Expenses (705,960)
Operating Income Loss $ (248,968)
XML 49 R38.htm IDEA: XBRL DOCUMENT v3.8.0.1
Investment in Cryptocurrency - Schedule of Fair Value of Investments in Cryptocurrency (Details)
3 Months Ended
Mar. 31, 2018
USD ($)
Investment in cryptocurrency, ending balance $ 2,426,724
Level 1 [Member]  
Investment in cryptocurrency, ending balance
Level 2 [Member]  
Investment in cryptocurrency, ending balance 2,426,724
Level 3 [Member]  
Investment in cryptocurrency, beginning balance 167,818
Transfers to Level 2 investments (50,189)
Purchases, sales, issuances, and settlement, net 200,000
Investment in cryptocurrency, ending balance $ 317,629
XML 50 R39.htm IDEA: XBRL DOCUMENT v3.8.0.1
Investment in Cryptocurrency - Summary of Cryptocurrencies Held (Details)
Mar. 31, 2018
USD ($)
Investments $ 2,426,724
Bitcoin [Member]  
Investments 1,344,914
Ethereum [Member]  
Investments 106,123
Polymath [Member]  
Investments 83,928
Ripple [Member]  
Investments 78,336
Litecoin [Member]  
Investments 69,244
Bitcoin Cash [Member]  
Investments 56,283
Block VEE [Member]  
Investments 48,495
Cardano [Member]  
Investments 37,955
Dash [Member]  
Investments 31,484
EOS [Member]  
Investments 35,858
Various Other Currencies [Member]  
Investments $ 534,104
XML 51 R40.htm IDEA: XBRL DOCUMENT v3.8.0.1
Equipment - Schedule of Equipment (Details) - USD ($)
Mar. 31, 2018
Dec. 31, 2017
Equipment, gross $ 240,408 $ 72,995
Less accumulated depreciation (21,776) (4,675)
Equipment, net 218,632 68,320
Computer Equipment [Member]    
Equipment, gross 225,241 69,241
Furniture Equipment [Member]    
Equipment, gross $ 15,167 $ 3,754
XML 52 R41.htm IDEA: XBRL DOCUMENT v3.8.0.1
Summary of Common Stock Transactions (Details Narrative) - USD ($)
3 Months Ended
Mar. 20, 2018
Jan. 31, 2018
Jan. 26, 2018
Jan. 16, 2018
Mar. 31, 2018
Dec. 31, 2017
Number of common stock shares exercise of stock options         37,858  
Stock option exercise price per share         $ 1.63  
Common stock payable         $ 24,988
Kachel Holding GmbH [Member]            
Equity interests, percentage     49.90%      
CoinTracking GmbH [Member]            
Number shares purchased     473,640      
Equity interests, percentage     50.10%   50.10%  
Equity Purchase Agreement [Member] | Kachel Holding GmbH [Member]            
Number shares purchased       12,525    
Equity Purchase Agreement [Member] | CoinTracking GmbH [Member]            
Number shares purchased       473,640    
Equity interests, percentage       50.10%    
Employee [Member]            
Number of common stock shares exercise of stock options   14,667     12,494  
Stock option exercise price per share         $ 2.00  
Consultant [Member]            
Number of common stock shares exercise of stock options 7,031          
Stock option exercise price per share $ 0.01          
XML 53 R42.htm IDEA: XBRL DOCUMENT v3.8.0.1
Warrants for Common Stock (Details Narrative)
Mar. 31, 2018
shares
Warrant [Member]  
Number of stock purchase warrants issued
XML 54 R43.htm IDEA: XBRL DOCUMENT v3.8.0.1
Warrants for Common Stock - Schedule of Warrants Outstanding (Details) - Warrant [Member]
3 Months Ended
Mar. 31, 2018
$ / shares
shares
Issuance Date September 2017
Exercisable for Common Shares
Expiration Date Sep. 25, 2020
Exercise Price | $ / shares $ 2.00
Number of Shares Outstanding Under Warrants | shares 168,125
XML 55 R44.htm IDEA: XBRL DOCUMENT v3.8.0.1
Summary of Stock Options (Details Narrative) - USD ($)
1 Months Ended 3 Months Ended
Jul. 21, 2017
Mar. 31, 2017
Mar. 31, 2018
Dec. 31, 2017
Number of outstanding stock option awards     756,668 644,531
Stock options granted     150,000  
Weighted average exercise price of outstanding stock options     $ 8.00  
Stock option remaining contractual term     9 years 5 months 12 days  
Restricted stock awards granted    
Share based compensation   $ (580,000) $ 708,139  
Stock option [Member]        
Unrecognized compensation costs     $ 118,094  
Unrecognized compensation weighted average period     2 years  
Non Employees [Member]        
Stock options granted     150,000  
2017 Equity Incentive Plan [Member]        
Number of stock option remain reserved for future issuance     4,171,271  
Number of outstanding stock option awards     807,031  
Weighted average exercise price of outstanding stock options     $ 3.46  
Stock option remaining contractual term     9 years 5 months 12 days  
2017 Equity Incentive Plan [Member]        
Number of stock option remain reserved for future issuance 5,000,000      
2017 Equity Incentive Plan [Member] | Maximum [Member]        
Stock option award vesting period 10 years      
XML 56 R45.htm IDEA: XBRL DOCUMENT v3.8.0.1
Summary of Stock Options - Schedule of Stock Options Activity (Details)
3 Months Ended
Mar. 31, 2018
USD ($)
$ / shares
shares
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Number of Options Outstanding, Beginning Balance | shares 644,531
Number of Options Granted | shares 150,000
Number of Options Exercised | shares 37,858
Number of Options Outstanding, Ending Balance | shares 756,668
Number of Options Vested and Exercisable and Expected to Vest, End of Period | shares 160,834
Weighted Average Exercise Price, Options Outstanding, Beginning Balance | $ / shares $ 2.32
Weighted Average Exercise Price, Options Granted | $ / shares 8.00
Weighted Average Exercise Price, Options Exercised | $ / shares 1.63
Weighted Average Exercise Price, Options Outstanding, Ending Balance | $ / shares 3.46
Weighted Average Exercise Price, Vested and Exercisable and Expected to Vest, End of Period | $ / shares $ 2.93
Weighted Average Remaining Contractual Term, Options Outstanding, Beginning 9 years 7 months 10 days
Weighted Average Remaining Contractual Term, Options Granted 9 years 9 months 29 days
Weighted Average Remaining Contractual Term, Options Exercised 9 years 4 months 13 days
Weighted Average Remaining Contractual Term, Options Outstanding, Ending 9 years 5 months 12 days
Weighted Average Remaining Contractual Term, Vested and Exercisable and Expected to Vest, End of Period 9 years 4 months 6 days
Aggregate Intrinsic Value, Options Outstanding, Beginning Balance | $ $ 11,421
Aggregate Intrinsic Value, Options Granted | $ 6,600
Aggregate Intrinsic Value, Options Exercised | $ 1,907
Aggregate Intrinsic Value, Options Outstanding, Ending Balance | $ 36,729
Aggregate Intrinsic Value, Vested and Exercisable and Expected to Vest, End of Period | $ $ 7,892
XML 57 R46.htm IDEA: XBRL DOCUMENT v3.8.0.1
Summary of Stock Options - Schedule of Stock Option Assumptions Used (Details)
3 Months Ended
Mar. 31, 2018
Expected dividends 0.00%
Minimum [Member]  
Weighted-average volatility 36.00%
Expected term (in years) 5 years 8 months 16 days
Risk-free rate 1.91%
Maximum [Member]  
Weighted-average volatility 75.00%
Expected term (in years) 10 years
Risk-free rate 2.40%
XML 58 R47.htm IDEA: XBRL DOCUMENT v3.8.0.1
Related Party Transactions (Details Narrative) - USD ($)
1 Months Ended 3 Months Ended
Mar. 10, 2017
Mar. 31, 2017
Mar. 31, 2018
Dec. 31, 2017
Related Party Transaction [Line Items]        
Share based compensation expense   $ 580,000 $ (708,139)  
Loans receivable     194,380
Redwood Fund LP [Member]        
Related Party Transaction [Line Items]        
Common stock issued for services, shares 125,000      
Shares issued for service, value $ 200,000      
Imperial Strategies, LLC [Member]        
Related Party Transaction [Line Items]        
Common stock issued for services, shares 125,000      
Shares issued for service, value $ 200,000      
Full Stack Finance [Member]        
Related Party Transaction [Line Items]        
Legal fees     138,259  
Legal fees payable     68,000  
CoinTracking GmbH [Member]        
Related Party Transaction [Line Items]        
Loans receivable     $ 194,380  
Loan interest rate     2.00%  
Accrued interest income   $ 0 $ 295  
James Gilbert [Member]        
Related Party Transaction [Line Items]        
Common stock issued for services, shares 300,000      
Shares issued for service, value $ 200,000      
Share based compensation expense $ 280,000      
Employee [Member]        
Related Party Transaction [Line Items]        
Common stock issued for services, shares 125,000      
Shares issued for service, value $ 100,000      
Share based compensation expense $ 100,000      
XML 59 R48.htm IDEA: XBRL DOCUMENT v3.8.0.1
Basic and Diluted Loss Per Share - Schedule of Earnings Per Share Basic and Diluted (Details) - USD ($)
1 Months Ended 3 Months Ended
Mar. 31, 2017
Mar. 31, 2018
Earnings Per Share [Abstract]    
Numerator for basic and diluted income per share: Comprehensive loss attributable to The Crypto Company $ (660,016) $ (3,153,118)
Denominator for basic and diluted income per share: Weighted average shares (basic)   20,864,198
Denominator for basic and diluted income per share: Common stock equivalents  
Denominator for basic and diluted income per share: Weighted average shares (diluted)   20,864,198
Basic and diluted income (loss) per share: Basic   $ (0.15)
Basic and diluted income (loss) per share: Diluted   $ (0.15)
XML 60 R49.htm IDEA: XBRL DOCUMENT v3.8.0.1
Commitments and Contingencies (Details Narrative) - USD ($)
1 Months Ended 3 Months Ended
Jan. 18, 2018
May 15, 2017
Mar. 31, 2017
Mar. 31, 2018
Facility rent expense     $ 0 $ 25,023
Lease Agreement [Member] | Soba Living, LLC [Member]        
Monthly rent   $ 6,000    
Lease expiration date   Sep. 30, 2018    
Short-Term Lease Agreement [Member] | Miramar Property Investment Co. [Member]        
Monthly rent $ 3,024      
Lease expiration date Sep. 30, 2018      
XML 61 R50.htm IDEA: XBRL DOCUMENT v3.8.0.1
Subsequent Events (Details Narrative) - USD ($)
1 Months Ended 3 Months Ended
Apr. 18, 2018
Apr. 17, 2018
Apr. 03, 2018
Mar. 10, 2017
Mar. 31, 2017
Mar. 31, 2018
May 14, 2018
Directors fee         $ 580,000 $ (708,139)  
James Gilbert [Member]              
Directors fee       $ 280,000      
Common stock issued for services       300,000      
Subsequent Event [Member] | James Gilbert [Member]              
Common stock issued for services 202,512            
Subsequent Event [Member] | Loan Agreement [Member] | CoinTracking Loan [Member] | Maximum [Member]              
Loan     $ 3,000,000        
Subsequent Event [Member] | Loan Agreement [Member] | CoinTracking Loan [Member] | Minimum [Member]              
Debt interest rate, percentage     3.00%        
Subsequent Event [Member] | Loan Agreement [Member] | CoinTracking Note [Member]              
Advanced to related party exchange for promissory note     $ 1,000,000        
Subsequent Event [Member] | Director Services Agreement [Member] | Mr. Berman [Member]              
Directors fee   $ 80,000          
Option term   10 years          
Number of options granted to purchase common stock   100,000          
Option exercise price   $ 10.00          
Stock options vesting period   6 months          
Subsequent Event [Member] | Director Services Agreement [Member] | Ms. Ruxin [Member]              
Directors fee   $ 80,000          
Option term   10 years          
Number of options granted to purchase common stock   100,000          
Option exercise price   $ 10.00          
Stock options vesting period   6 months          
Subsequent Event [Member] | Separation and Consulting Agreement [Member] | Michael Poutre [Member]              
Deferred compensation amount             $ 30,000
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