Coro Global Inc. - Quarter Report: 2018 June (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended: June 30, 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: 033-25126D

Hash Labs Inc.

(Exact name of registrant as specified in its charter)

78 SW 7^th Street

Miami, FL 33130

(Address of principal executive offices)

888-879-8896

(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 past 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes   ☒   No  ☐

Indicate by check mark whether the registrant has submitted electronically 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 that the registrant was required to submit and post such files. Yes  ☒   No  ☐

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

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  ☒

As of August 13, 2018, there were 21,981,580 shares outstanding of the registrant’s Common Stock.

PART I FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS 

Hash Labs Inc

Consolidated Balance Sheets

(unaudited)

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

Hash Labs Inc.

Consolidated Statements of Operations

(unaudited)

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

Hash Labs Inc.

Consolidated Statements of Cash Flows

(unaudited)

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

HASH LABS INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2018

NOTE 1 – BASIS OF PRESENTATION & GOING CONCERN

Basis of Presentation

The accompanying unaudited consolidated financial statements of Hash Labs Inc., a Nevada corporation (the “Company”), have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete consolidated financial statements. These unaudited consolidated financial statements and related notes should be read in conjunction with the Company’s Form 10-K for the fiscal year ended December 31, 2017. In the opinion of management, these unaudited consolidated financial statements reflect all adjustments that are of a normal recurring nature and which are necessary to present fairly the financial position of the Company as of June 30, 2018, and the results of operations and cash flows for the six months ended June 30, 2018 and 2017. The results of operations for the six months ended June 30, 2018 are not necessarily indicative of the results that may be expected for the entire fiscal year.

Nature of Business Operations

Our Company was originally formed on November 1, 2005 when Bio-Solutions International, Inc. (“Bio-Solutions”) entered into an Agreement and Plan of Merger with OmniMed Acquisition Corp., a Nevada corporation and a wholly-owned subsidiary of Bio-Solutions, OmniMed International, Inc. (“OmniMed”) and the shareholders of OmniMed. Pursuant to the agreement, Bio-Solutions acquired all of the outstanding equity stock from the OmniMed shareholders. As a result, the OmniMed shareholders assumed control of Bio-Solutions and changed the name of the Company to OmniMed International, Inc., effective November 21, 2006. On January 17, 2006, OmniMed changed its name to MedeFile International, Inc. The Company’s business following the closing of this agreement was the sale of an Internet-enabled Personal Health Record (iPHR) system for gathering, digitizing, maintaining, accessing and sharing an individual’s medical records, and in connection therewith, providing a professional service specializing in HIPAA compliant retrieval, reproduction and release of information. Under this service, Company personnel go onsite to physicians’ offices weekly to reproduce the records requested by third parties.

In October 2017, the name of the Company was changed to Tech Town Holdings, Inc. to reflect a new business strategy centered on identifying and fostering new or early stage business opportunities being aggressively fueled by digital reinvention and innovation. To that end, our business-building platform was segmented into six focused categories, for which we planned to advance numerous technology development projects:

Following close scrutiny of emerging business opportunities, coupled with evaluation of market trends, the Company determined that a more prudent strategy was to narrow its focus. The Company has now concentrated its focus on dynamic global growth opportunities in the financial technology (“Fintech”) industry, with an emphasis on emerging Blockchain or distributed ledger technology (“DLT”). The Company is now developing financial technology solutions to operate on the world’s most advanced DLT, known as Hashgraph. As a result of this concentrated FinTech / DLT focus, the Company was renamed Hash Labs Inc. on January 9, 2018, 

Going Concern

The accompanying unaudited consolidated financial statements have been prepared contemplating a continuation of the Company as a going concern. However, the Company incurred a net loss of $2,157,270 for the six months ended June 30, 2018 and has negative working capital of $143,237 as of June 30, 2018.

The accompanying unaudited consolidated financial statements have been prepared assuming the Company will continue as a going concern. The operating losses and working capital deficit raise substantial doubt about the Company’s ability to continue as a going concern. The Company’s ability to obtain additional financing depends on the success of its growth strategy and its future performance, each of which is subject to general economic, financial, competitive, legislative, regulatory and other factors beyond the Company’s control. The unaudited consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue in existence.

We will need to raise additional capital in order to continue operations. Financing transactions may include the issuance of equity or debt securities, obtaining credit facilities, or other financing mechanisms. Additional financing may not be available on terms acceptable to the Company, or at all.

Further, if we issue additional equity or debt securities, stockholders may experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of our common stock. If additional financing is not available or is not available on acceptable terms, we will have to curtail or cease our operations.

Financial Accounting Pronouncements

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers.” ASU 2014-09 is a comprehensive revenue recognition standard that has superseded nearly all existing revenue recognition guidance under current U.S. GAAP and replaced it with a principle based approach for determining revenue recognition. ASU 2014-09 requires that companies recognize revenue based on the value of transferred goods or services as they occur in the contract. The ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. ASU 2014-09 is effective for interim and annual periods beginning after December 15, 2017.

The Company’s primary source of revenue is from providing a professional service that specializes in HIPAA compliant retrieval, reproduction and release of information. Orders are fulfilled as requested, then invoiced. Once payment is received, revenue is recognized when records are delivered.

During the fourth quarter of 2017, the Company finalized its assessment related to the new standard and determined that the timing of revenue recognition related to the Company’s revenues will remain consistent between the new standard and the previous standard.

The Company adopted ASU 2014-09 effective January 1, 2018 using the modified retrospective method, and there was no cumulative adjustment to retained earnings.

Fair Value of Financial Instruments

Cash and Equivalents, Deposits In-Transit, Receivables, Prepaid and Other Current Assets, Accounts Payable, Accrued Salaries and Wages and Other Current Liabilities

The carrying amounts of these items approximated fair value.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To increase the comparability of fair value measures, Financial Accounting Standards Board (“FASB”) ASC Topic 820-10-35 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurements).

Level 1—Valuations based on quoted prices for identical assets and liabilities in active markets.

Level 2—Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.

Level 3—Valuations based on unobservable inputs reflecting our own assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment.

The application of the three levels of the fair value hierarchy under Topic 820-10-35 to our assets and liabilities as of June 30, 2018 and December 31, 2017 are described below:  

Derivative liability as of June 30, 2018 was $0, compared to $19,406 as of December 31, 2017.

2. NOTES PAYABLE – RELATED PARTY

On March 21, 2018, the Company, entered into an unsecured 7% Promissory Note with a significant shareholder in the amount of $15,000. On April 13, 2018 the significant shareholder entered into another promissory loan in amount of $10,000 with the similar terms. On May 4, 2018 the significant shareholder entered into another promissory loan in amount of $25,000 with the similar terms. On June 6, 2018 the significant shareholder entered into another promissory loan in amount of $32,000 with the similar terms. The notes have a term of 6 months and are unsecured. The note includes interest calculated for the 6 month ended June 30, 2018, from another note owned by the same shareholder.

On July 15, 2016, the Company entered into an unsecured 7% Promissory Notes with a significant shareholder in the amount of $100,000. The note has a one-year term and was in default as of June 30, 2018.

The changes in these notes payable to related party consisted of the following during the six months ended June 30, 2018:

During the year ended December 31, 2017, the Company entered into five unsecured 7% Promissory Notes with a terms ranging from four to six months.

During the year ended December 31, 2017, the Company borrowed a total of $4,275 from the former CEO of the Company, repaid $4,330 to the CEO, and the amount due to the CEO was $3,145 as of December 31, 2017. The CEO loaned an additional $25 during the six months ended June 30, 2018. The total amount due on June 30, 2018 is $3,170. The advance carries 0% interest rate, is unsecured, and is due on demand.

Other Related Party Transaction

Michael Delin, a former director of the Company, provided accounting services to the Company through an entity he owns. During the six month ended June 30, 2018, the Company paid Mr. Delin $3,500 for such services.

3. DEFFERED STOCK-BASED COMPENSATION - RELATED PARTY

On May 18, 2018, the Company appointed Mark Goode as the new President and Chief Executive Officer of the Company, effective May 18. 2018. He was also appointed a member and Chairman of the Board of Directors of the Company (the “Board”).

The Company has entered into an employment agreement on May 18, 2018 (the “Employment Agreement”) with Mr. Goode, which provides for an annual salary and certain other benefits. Pursuant to the Employment Agreement, Mr. Goode’s annual base salary is $96,000, which may increase to up to $216,000 upon Mr. Goode meeting certain milestones set forth in the Employment Agreement related to the Company’s performance and is subject to increases as set from time to time by the Board. Upon the execution of the Employment Agreement, Mr. Goode shall receive 500,000 shares of common stock of the Company valued at $1,250,000 ($2.50 per share). After one year of employment by the Company as the Chief Executive Officer, the Company shall issue to Mr. Goode additional shares of common stock of the Company equal to 1% of the outstanding shares of the Company at the time of such issuance; after two years of employment by the Company as the Chief Executive Officer, the Company shall issue to Mr. Goode additional shares of common stock of the Company equal to 1% of the outstanding shares of the Company at the time of such issuance; and after three years of employment by the Company as the Chief Executive Officer, the Company shall issue to Mr. Goode additional shares of common stock of the Company equal to 1% of the outstanding shares of the Company at the time of such issuance. As of June 30, 2018 the Company accrued $157,820 in accordance with ASC 718-10-55-65 for the portion earned as the terms of such an award do not establish an ownership relationship because the extent to which (or whether) the employee benefits from the award depends on something other than changes in the entity’s share price. Therefore, the awards should be accounted for as a liability award. ASC 718 requires that public companies measure share-based awards classified as liabilities at fair value at each reporting date. In accordance with 718-30-35-3, a public entity shall measure a liability award under a share-based payment arrangement based on the award’s fair value re-measured at each reporting date until the date of settlement. Compensation cost for each period until settlement shall be based on the change (or a portion of the change, depending on the percentage of the requisite service that has been rendered at the reporting date) in the fair value of the instrument for each reporting period.

4. CONVERTIBLE DEBENTURE – RELATED PARTY

During the year ended December 31, 2016, the Company entered into eight unsecured 7% Promissory Notes with a significant shareholder. During the year ended December 31, 2017, the Company entered into additional unsecured 7% Promissory Notes totaling $215,500. During the first quarter 2018, the Company entered into five additional notes totaling $41,000 with an interest rate of 7%. The notes mature four to 12 months from issuance. On April 3, 2018, the Company entered into an exchange agreement with The Vantage Group Ltd. (“Vantage”). Pursuant to the exchange agreement, Vantage exchanged outstanding promissory notes of the Company in the aggregate principal amount of $518,225 (including accrued interest) held by Vantage for a new convertible promissory note of the Company in the principal amount of $518,225. The convertible note bears interest at the rate of 7% per year and is convertible into shares of common stock of the Company at a conversion price of $0.027.  The Company recorded a debt discount of $518,225 for the fair value of the beneficial conversion feature. As of June 30, 2018 the Company amortized $492,745 of the debt discount.

The Company evaluated the modification under ASC 470-50 and concluded the addition of the conversion qualifies for debt modification which triggered debt extinguishment; however, there was no impact to the income statement as there was no unamortized discounts or other fees paid on the under the prior debt terms.

The Company analyzed the conversion option in the notes for derivative accounting treatment under ASC Topic 815, “Derivatives and Hedging” and determined that the instrument does not qualify for derivative accounting.

The Company therefore performed an analysis to determine if the conversion option was subject to a beneficial conversion feature and determined that the instrument does have a beneficial conversion feature equivalent. The intrinsic value of a beneficial conversion feature inherent to a convertible note payable, which is not bifurcated and accounted for separately from the convertible note payable and may not be settled in cash upon conversion, is treated as a discount to the convertible note payable. This discount is amortized over the period from the date of issuance to the date the note is due using the effective interest method. If the note payable is retired prior to the end of its contractual term, the unamortized discount is expensed in the period of retirement to interest expense. In general, the beneficial conversion feature is measured by comparing the effective conversion price, after considering the relative fair value of detachable instruments included in the financing transaction, if any, to the fair value of the common shares at the commitment date to be received upon conversion.

On April 3, 2018, the Company issued an aggregate of 9,300,000 shares of common stock to Vantage upon the conversion of (i) $241,650 of Vantage’s convertible note and (ii) 7,000 shares of Series C Preferred Stock. In connection with the conversion, Vantage waived any dividends owed to Vantage as the holder of the Series C Preferred Stock.

On April 6, 2018, the Company issued an aggregate of 9,000,000 shares of common stock upon the conversion of a convertible note in the principal amount (including accrued interest) of $243,000.

The balance of notes payable to related party as of June 30, 2018

During the year ended December 31, 2017, the Company entered into five unsecured 7% Promissory Notes with a significant shareholder totaling $65,500. On April 3, 2018, the Company entered into an exchange agreement with Lyle Hauser. Pursuant to the exchange agreement, Mr. Hauser exchanged outstanding promissory notes of the Company in the aggregate principal amount of $68,969 (including accrued interest) held by Mr. Hauser for a new convertible promissory note of the Company in the principal amount of $68,969. The convertible note bears interest at the rate of 7% per year and is convertible into shares of common stock of the Company at a conversion price of $0.0005. Lyle Hauser (directly and through Vantage, which he owns) is the Company’s largest stockholder. The Company recorded a debt discount of $68,696 for the fair value of the beneficial conversion feature. As of June 30, 2018 the Company amortized $16,562 of the debt discount.

The Company evaluated the modification under ASC 470-50 and concluded the addition of the conversion qualifies for debt modification which triggered debt extinguishment; however, there was no impact to the income statement as there was no unamortized discounts or other fees paid on the under the prior debt terms.

The Company analyzed the conversion option in the notes for derivative accounting treatment under ASC Topic 815, “Derivatives and Hedging” and determined that the instrument does not qualify for derivative accounting.

The Company therefore performed an analysis to determine if the conversion option was subject to a beneficial conversion feature and determined that the instrument does have a beneficial conversion feature equivalent. The intrinsic value of a beneficial conversion feature inherent to a convertible note payable, which is not bifurcated and accounted for separately from the convertible note payable and may not be settled in cash upon conversion, is treated as a discount to the convertible note payable. This discount is amortized over the period from the date of issuance to the date the note is due using the effective interest method. If the note payable is retired prior to the end of its contractual term, the unamortized discount is expensed in the period of retirement to interest expense. In general, the beneficial conversion feature is measured by comparing the effective conversion price, after considering the relative fair value of detachable instruments included in the financing transaction, if any, to the fair value of the common shares at the commitment date to be received upon conversion.

The changes in these notes payable to related party consisted of the following during the six months ended June 30, 2018:

The Company entered into two 10% Secured Convertible Debentures with a significant shareholder in the amount of $50,000 on November 4, 2013 and $60,000 on December 17, 2013. The debentures carry a one-year term and are convertible into common stock at conversion price equal to the lower of $400 or 80% of the previous day’s closing price. On June 29, 2018 the significant shareholder forgave the amounts owed, which was effective as of April 3, 2018. The Company recorded a capital contribution of $19,999 during the six months ended June 30, 2018.

The changes in these outstanding convertible notes payable to related party consisted of the following during the three months ended June 30, 2018:

5. DERIVATIVE LIABILITIES

As noted above, the Company entered into two 10% Secured Convertible Debentures with a significant shareholder, one in the amount of $50,000 on November 4, 2013 and the other in the amount of $60,000 on December 17, 2013. The debentures carry a one-year term and are convertible into common stock at a conversion price equal to the lower of $400 or 80% of the previous day’s closing price. On June 29, 2018 the significant shareholder forgave the accrued interest, which was effective as of April 3, 2018. The Company recorded a capital contribution of $25,494 during the six months ended June 30, 2018.

The Company assesses the fair value of the convertible debenture using the Black Scholes pricing model and records a derivative liability for the value. The Company then assesses the fair value quarterly based on the Black Scholes Model and increases or decreases the liability to the new value and records a corresponding gain or loss (see below for variables used in assessing the fair value).

Due to the variable conversion rates, the Company treats the convertible debenture as a derivative liability in accordance with the provisions of ASC 815 “Derivatives and Hedging” (ASC 815). ASC 815 applies to any freestanding financial instruments or embedded features that have the characteristics of a derivative and to any freestanding financial instruments that potentially settle in an entity’s own common stock. The fair value of the conversion options was determined using the Black-Scholes Option Pricing Model and the following significant assumptions during the six months ended June 30, 2018.

The change in fair value of the conversion option derivative liability consisted of the following during the year ended December 31, 2017:

Change in fair market value of conversion option liability resulted in a loss of $6,088 for the six months ended June 30, 2018 and $6,839 for the year ended December 31, 2017.

6. EQUITY

On September 29, 2017, the Company filed a Certificate of Designation of Series C Preferred Stock with the Secretary of State of Nevada. The Company authorized 7,000 shares of preferred stock as Series C Preferred Stock. The Company has issued 7,000 shares of Series C Preferred Stock. Each holder of outstanding shares of Series C Preferred Stock shall be entitled to cast the number of votes equal to the number of whole shares of common stock into which the shares of Series C Preferred Stock held by such holder are convertible as of the record date for determining stockholders entitled to vote on such matter. The Series C Preferred Stock is convertible into common stock at a conversion ratio determined by dividing the Series C Original Issue Price of $100 per share by the conversion price of $2.00 (such that each share of Series C Preferred Stock is convertible into 50 shares of common stock). The Series C Preferred Stock will vote on an as-converted basis with the common stock, and in the event any dividends are paid on the common stock, the Series C Preferred Stock will be entitled to dividends on an as-converted basis. If a Distribution Event (as defined in the Series C Certificate of Designation) occurs, the Company will pay to the holders of Series C Preferred Stock $30,000 for every $120,000 received from such Distribution Event, and the number of outstanding shares of Series C Preferred Stock will be reduced by an amount determined by dividing the amount of such payment by the Series C Original Issue Price. A Distribution Event is defined as the receipt by the Company of $120,000 in proceeds from a financing not involving any holder of Series C Preferred Stock, or any fiscal period in which the Company generated gross profits of $120,000 or more. In the event the Corporation shall at any time after the Series C Original Issue Date issue Additional Shares of Common Stock, without consideration or for a consideration per share less than the Series C Conversion Price in effect immediately prior to such issue, then the Series C Conversion Price shall be reduced, concurrently with such issue.

On September 29, 2017, the Company issued 7,000 shares of Series C Preferred Shares in connection with an Asset Purchase Agreement. The value of the shares issued amount to $820,451. The valuation of the Preferred Shares was determined by an independent financial analyst.

On October 25, 2017, the Company filed a Certificate of Amendment to its Articles of Incorporation with the Secretary of State of Nevada, pursuant to which a one-for-200 reverse split of its common stock was effected and the Company changed its name to Tech Town Holdings Inc, effective November 2, 2017. All share and per share amounts herein retroactively reflect the split.

On May 18, 2018, the Company appointed Mark Goode as the new President and Chief Executive Officer of the Company, effective May 18. 2018. He was also appointed a member and Chairman of the Board of Directors of the Company (the “Board”). The Company has entered into an employment agreement on May 18, 2018 (the “Employment Agreement”) with Mr. Goode, which provides for an annual salary and certain other benefits. Pursuant to the Employment Agreement, Mr. Goode’s annual base salary is $96,000, which may increase to up to $216,000 upon Mr. Goode meeting certain milestones set forth in the Employment Agreement related to the Company’s performance and is subject to increases as set from time to time by the Board. Upon the execution of the Employment Agreement, Mr. Goode shall receive 500,000 shares of common stock of the Company valued at $1,250,000 ($2.50 per share).

On April 3, 2018, the Company entered into an exchange agreement with The Vantage Group Ltd. (“Vantage”). Pursuant to the exchange agreement, Vantage exchanged outstanding promissory notes of the Company in the aggregate principal amount of $518,225 (including accrued interest) held by Vantage for a new convertible promissory note of the Company in the principal amount of $518,225. The convertible note bears interest at the rate of 7% per year and is convertible into shares of common stock of the Company at a conversion price of $0.027.  The Company recorded a debt discount of $518,225 for the fair value of the beneficial conversion feature.

On April 3, 2018, the Company entered into an exchange agreement with Lyle Hauser. Pursuant to the exchange agreement, Mr. Hauser exchanged outstanding promissory notes of the Company in the aggregate principal amount of $68,969 (including accrued interest) held by Mr. Hauser for a new convertible promissory note of the Company in the principal amount of $68,969. The convertible note bears interest at the rate of 7% per year and is convertible into shares of common stock of the Company at a conversion price of $0.0005. Lyle Hauser (directly and through Vantage, which he owns) is the Company’s largest stockholder. The Company recorded a debt discount of $68,696 for the fair value of the beneficial conversion feature.

On April 3, 2018, the Company issued an aggregate of 9,300,000 shares of common stock to Vantage upon the conversion of (i) $241,650 of Vantage’s convertible note and (ii) 7,000 shares of Series C Preferred Stock. In connection with the conversion, Vantage waived any dividends owed to Vantage as the holder of the Series C Preferred Stock.

On April 6, 2018, the Company issued an aggregate of 9,000,000 shares of common stock upon the conversion of a convertible note in the principal amount (including accrued interest) of $243,000.

On June 25, 2018, the Company entered into a subscription agreement with an accredited investor pursuant to which the Company agreed to sell, and the Investor agreed to purchase, an aggregate of 1,010,101 shares of the Company’s common stock, for an aggregate purchase price equal to $333,333. The closing of this subscription agreement has occurred.

On June 29, 2018 the significant shareholder forgave the amounts owed. The Company recorded a capital contribution of $19,999. See Note 4. The Company recorded a capital contribution of $35,294 during the six months ended June 30, 2018 for the extinguishment of the derivative. See Note 5.

On June 29, 2018, two related parties forgave a total of $239,000 of accrued compensation. The amounts have been recorded as a capital contribution.

7. SUBSEQUENT EVENT

Subsequent to June 30, 2018, the Company entered into a subscription agreement with an accredited investor pursuant to which the Company sold to the investor an aggregate of 2,020,202 shares of the Company’s common stock, for an aggregate purchase price equal to $666,667.

Subsequent to June 30, 2018, the Company’s attorney forgave legal fees in the amount of $52,020.

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

This report may contain forward-looking statements. Investors are cautioned that such forward-looking state to all comments are based on our management's beliefs and assumptions and on information currently available to our management and involve risks and uncertainties. Forward-looking statements include statements regarding our plans, strategies, objectives, expectations and intentions, which are subject to change at any time at our discretion. Forward-looking statements include our assessment, from time to time of our competitive position, the industry environment, potential growth opportunities and the effects of regulation. Forward-looking statements include all statements that are not historical facts and can be identified by terms such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “hopes,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “will,” “would” or similar expressions.

Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. We discuss many of these risks in greater detail in “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2017. Also, forward-looking statements represent our management's beliefs and assumptions only as of the date of this report. Our actual future results may be materially different from what we expect. Except as required by law, we assume no obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future. 

Corporate Overview

Our Company was originally formed on November 1, 2005 when Bio-Solutions International, Inc. entered into an Agreement and Plan of Merger with OmniMed Acquisition Corp., a Nevada corporation and a wholly-owned subsidiary of Bio-Solutions, OmniMed International, Inc. (“OmniMed”) and the shareholders of OmniMed. Pursuant to the Agreement, Bio-Solutions acquired all of the outstanding equity stock from the OmniMed shareholders. As a result, the OmniMed shareholders assumed control of Bio-Solutions and changed the name of the Company to OmniMed International, Inc., effective November 21, 2006. On January 17, 2006, OmniMed changed its name to MedeFile International, Inc. In October 2017, the name of the Company was changed to Tech Town Holdings, Inc. to reflect a new business strategy centered on identifying and fostering new or early stage business opportunities fueled by digital reinvention and innovation.

Following close scrutiny of emerging business opportunities, coupled with evaluation of market trends, the Company determined that a more prudent strategy was to narrow its focus. The Company has now concentrated its focus on dynamic global growth opportunities in the financial technology (“Fintech”) industry, with an emphasis on emerging Blockchain or distributed ledger technology (“DLT”). The Company is now developing financial technology solutions to operate on the world’s most advanced DLT, known as Hashgraph. As a result of this concentrated FinTech / DLT focus, the Company was renamed Hash Labs Inc. on January 9, 2018,

New Business Focus

Hash Labs Inc. (“HLAB”) is a financial technology (“FinTech”) company.  The business of HLAB is exclusively focused on the development of next generation financial solutions based on a revolutionary DLT, known as Hashgraph.  Our initial financial solution, branded CXAU, will be a technology platform based on a mobile application that will digitize gold on the Hashgraph distributed ledger.

HLAB is dedicated to the highest standard of regulatory compliance. The cryptocurrency market has been volatile with a high incidence of fraud and market manipulation. We will never conduct a Coin Offering or Token Sale related to CXAU digital/crypto gold. The HLAB strategy is completely different.  Instead, the CXAU community of users will operate on a permission-based private network.  This will provide the highest level of crypto/IT security, with the ability to transact globally at speeds of hundreds of thousands per second.   No one will be able to join the CXAU community (User base) without completing an identity verification and stringent AML/KYC check. In this regard, bad actors will be prevented from joining the CXAU community. We believe CXAU will succeed because HLAB will have a fully compliant and secure crypto currency solution, operating on the world’s most advanced distributed ledger.

Equally important, CXAU will solve two important problems.  First, we believe there is a need for a decentralized cryptocurrency solution that offers true stability.  The leading cryptocurrencies are wildly volatile with speculation driving unpredictable swings in valuation.  CXAU will offer a completely stable, asset-backed digital currency.  The value of one CXAU unit will always correspond to the daily London spot price for 1 Troy Ounce of gold.   Each CXAU unit will be 100% backed by physical gold, held by an independent custodian within an insured vault.  CXAU gold reserves will be independently audited on a quarterly basis and the audit will be published for review by community members.  

CXAU will provide another important financial technology solution.  The CXAU technology will allow for tens of millions of global gold investors holding trillions of value in gold bars and coins to safely digitize their physical gold holdings.   In this regard, global gold investors (both private and institutional) will have the opportunity to efficiently hold and transact with a 100% gold-backed cryptocurrency.  Owners of physical gold will be able to conveniently convert their physical gold into CXAU crypto gold.   If the User ever wishes to liquidate their CXAU units, they can simply withdraw via conversion to physical gold or fiat currency.

HLAB will provide its CXAU community members the benefits of speed, security and peace of mind, while unlocking the opportunity to transact their digitized crypto gold at lightning fast speeds on the Hashgraph distributed ledger. The CXAU mobile application is already under development and we plan to launch it March 1, 2019. The CXAU revenue engine will include multiple income streams associated with the capitalization of the digital gold vault, transaction fees and annual storage fees.

While Bitcoin, Etherum and other popular Blockchain trading platforms continue to grab headlines, the Company believes that a next generation distributed ledger technology known as Hashgraph will disrupt and transform how commerce and the Internet work together. The Hashgraph distributed consensus algorithm was developed by Dr. Leemon Baird and is owned by Swirlds, Inc., for which Dr. Baird serves as Co-Founder and Chief Technology Officer. This DLT platform offers unparalleled speed, having capacity up to 500,000 transactions per second. By comparison, prevailing Blockchain ledger technology, made popular by Bitcoin, is slow by design. Its proof of work and digital mining protocol slow transaction volume to just four transactions per second.

In addition, the Hashgraph is ushering in an era of “smart contracts,” allowing for faster and safer commerce worldwide on a fair, secure and reliable basis. Other benefits include lower transaction costs, less documentation and bureaucracy, greater mitigation of fraud and errors in transaction processing, improved tracking and an increased ability to understand and utilize data (including “Big Data”) and analytics. The Company aims to be an industry trusted developer of highly advanced, secure and user friendly DLT -based solutions for the FinTech market.

Powered by its proprietary “gossip about gossip” protocol, Hashgraph is not a Blockchain, but a simple, elegant algorithm. Hashgraph is mathematically proven to achieve consensus and implemented in software. It is the only bank-grade consensus technology available in the market today. It is also widely viewed as the industry’s most secure, due to its decentralized (“leaderless”) distributed ledger which allows for “asynchronous byzantine” fault tolerance – the true gold standard for security in distributed systems. More specifically, this means that even if some members are malicious, then a definite consensus can still be reached so a transaction can be processed. In the Blockchain world, consensus is only a probability that increases over time. It is not guaranteed. Sometimes, no consensus is ever reached, resulting in conflicts. Hashgraph has overcome this issue. In addition, blockchain is a costly solution due to its massive need for computation power and voracious consumption of energy. Hashgraph eliminates this need for voluminous computing power, thus it costs substantially less to operate.

Argument for Gold-Backed Cryptocurrency

For nearly three millennia, gold has been the world’s primary and most stable exchange of value. Throughout history, this precious yellow metal has consistently been the champion among methods of store and payment of wealth across civilizations. Wars have been fought, new worlds have been discovered and empires have been conquered with gold as a pillar, and it has never tarnished with the passing of the years. Conversely, Pesetas, Marks and Cruzeiros have ceased to exist while Pesos and Rubles have been devalued. Only gold has survived and appreciated throughout history.

New Keynesian economists have developed the current global financial system leveraging central banks’ ability to shape monetary policy and print money at will to curb economic shocks and fend off recessions. Its supporters have praised this model as the antidote to the Great Recession of 2008. Others, witnessing the current prolonged bull run of the financial markets and a new period of irrational exuberance, are weary of the dangers posed by economic growth fueled by low interest rates and an inflated supply of money. Central banks have acted as the ultimate central authority on money matters for nation states. We believe top bankers have supported the backbone of an economic system that is inefficient at best. The Great Recession dropped the veil of faith in paper money and markets fled to gold as a safeguard against irresponsible bankers.

The advent of Blockchain technology has rattled the status quo and brought the debate back to the table, propelling thinkers to question the economic fundamentals that keep the global system intact. Digital currencies, such as Bitcoin and Litecoin, have been successful at leveraging Blockchain technology for the transfer of value across borders. However, the inherent volatility and low transaction speed of these emergent methods of crypto value transfer have made them a poor choice for real business to be executed through their networks. As with all nascent technologies, time is of the essence for meaningful applications to occur and right now the time may be ripe for real change to happen. After nearly ten years of development, many hurdles still exist that impede Blockchain from becoming a reliable method for exchange of value. Global commerce is still powered by fiat currency and primarily the US Dollar.

Moreover, taking a cue from history, Hash Labs believes the current economic and banking system is dysfunctional and that CXAU can provide a decentralized digital currency backed by gold. Very recent and dramatic technology advances in digital currencies are driving powerful change. The CXAU crypto gold solution will harness the awesome power of Hashgraph to process more than 500K transactions per second at bank grade security levels.

Our Revenue Model Hash Labs is currently in the early development stage of our Company’s evolution and is developing a defined business model that we believe will serve to profitably generate revenues upon CXAU’s digital vault “pre-sale” in the third quarter of 2018, followed by the launch of our CXAU Crypto Gold ledger in the second quarter of 2019. We plan to seek annual revenue growth through growth of our community members/digital vault holders and by increasing our CXAU gold reserves.

Expanded Leadership Team

Hash Labs has engaged several highly qualified and experienced business and technology executives, having the necessary skills and experience to guide and direct the execution of our new FinTech/DLT-focused growth strategy. With years of experience building and managing regulated financial businesses and designing complex financial structures our new leadership team is uniquely positioned for success and leadership in this rapidly emerging sector. On May 18, 2018, the Company reported that J. Mark Goode was appointed as the Company’s new Chief Executive Officer and a member and Chairman of the Company’s Board of Directors. Mr. Goode replaces our former Chairwoman, President and CEO, Niquana “Nikki” Noel who will remain as a Director on the Board and serve as our Chief Operating Officer. The Company will continue to recruit and expand its leadership team with the best available talent having expertise in the FinTech and DLT sector, and intends to announce additional appointments to our senior leadership team and Board of Directors as we advance through 2018.

Results of Operations for the Three Months Ended June 30, 2018 and 2017

Revenues

Revenues for the three months ended June 30, 2018 totaled $6,068 compared to revenues of $12,440 during three months ended June 30, 2017. The decrease of $6,372 is related to fewer requests for service. We generate revenues from professional service specializing in HIPAA compliant retrieval, reproduction and release of information. Under this service, Company personnel go onsite to physicians’ office weekly to reproduce the records requested by third parties.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the three months ended June 30, 2018 totaled $1,551,810, an increase of $1,442,614 or approximately 1321% compared to selling, general and administrative expenses of $109,196 for the three months ended June 30, 2017. The increase was due mainly to increased legal expense, consulting fees and compensation to our Chief Executive Officer.

Interest Expense

Interest expense on convertible debentures for the three months ended June 30, 2018 and 2017, was $512,044 and $8,239 respectively. The increase was mainly due to the expense incurred with the beneficial conversion feature added to existing notes payable during the quarter.

Other Expense

Loss on change in fair value of derivate liabilities for the three months ended June 30, 2018 and 2017 was $1,439 and $140 respectively.

Net Loss

For the reasons stated above, our net loss for the three months ended June 30, 2018 was $2,056,347 or $0.11 per share, an increase of $1,948,852, compared to net loss of $107,495, or $0.75 per share, during the three months ended June 30, 2017.

Results of Operations for the Six Months Ended June 30, 2018 and 2017

Revenues

Revenues for the six months ended June 30, 2018 totaled $12,967 compared to revenues of $22,149 during six months ended June 30, 2017. The decrease of $9,182 is related to fewer requests for service. We generate revenues from professional service specializing in HIPAA compliant retrieval, reproduction and release of information. Under this service, Company personnel go onsite to physicians’ office weekly to reproduce the records requested by third parties.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the six months ended June 30, 2018 totaled $1,641,997, an increase of $1,426,207 or approximately 661% compared to selling, general and administrative expenses of $215,790 for the six months ended June 30, 2017. The increase was due mainly to increased legal expense, consulting fees and compensation to our Chief Executive Officer.

Interest Expense

Interest expense on convertible debentures for the six months ended June 30, 2018 and 2017, was $522,152 and $15,192 respectively. The increase was mainly due to the expense incurred with the beneficial conversion feature added to existing notes payable during the six months.

Other Expense

Loss on change in fair value of derivate liabilities for the six months ended June 30, 2018 and 2017 was $6,088 and $3,622 respectively.

Net Loss

For the reasons stated above, our net loss for the six months ended June 30, 2018 was $2,157,270 or $0.24 per share, an increase of $1,942,175, compared to net loss of $215,095, or $1.50 per share, during the six months ended June 30, 2017.

Liquidity and Capital Resources

As of June 30, 2018, we had cash of $292,078, which compared to cash of $730 as of December 31, 2017. Net cash used in operating activities for the six months ended June 30, 2018 was $165,010. Our current liabilities as of June 30, 2018 of $440,252 consisted of: $55,718 for accounts payable and accrued liabilities, net convertible debenture – related party of $24,930, overdraft of 597, note payable – related party of $201,187, and derivative liability of $0. During the six months ended June 30, 2018 two related parties forgave accrued salary of $239,000. We have negative working capital of $143,237 as of June 30, 2018. During the six months ended June 30, 2018 investor agreed to purchase, an aggregate of 1,010,101 shares of the Company’s common stock, $0.0001 par value Common Stock, for an aggregate purchase price equal to $333,333 in addition a related party converted $484,651 of convertible notes, accrued interest and preferred stock into common stock.

Off Balance Sheet Arrangements

 We currently have no off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Critical Accounting Policies and Estimates

Revenue Recognition

The Company had historically generated revenue from licensing the right to utilize its proprietary software for the storage and distribution of healthcare information to individuals and affinity groups. For revenue from product sales, the Company recognized revenue on four basic criteria which must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and (4) are based on management’s judgments regarding the fixed nature of the selling prices of the products delivered and the collectability of those amounts. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded. The Company defers any revenue for which the product has not been delivered or is subject to refund until such time that the Company and the customer jointly determine that the product has been delivered or no refund will be required.

Stock-Based Compensation

The Company accounts for all compensation related to stock, options or warrants using a fair value-based method whereby compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period. The Company uses the Black-Scholes pricing model to calculate the fair value of options and warrants issued to both employees and non-employees. Stock issued for compensation is valued using the market price of the stock on the date of the related agreement.

Impairment of long-lived assets

The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the asset’s carrying amount may not be recoverable. The Company conducts its long-lived asset impairment analyses in accordance with ASC 360-10-15, “Impairment or Disposal of Long-Lived Assets.” ASC 360-10-15 requires the Company to group assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities and evaluate the asset group against the sum of the undiscounted future cash flows. If the undiscounted cash flows do not indicate the carrying amount of the asset is recoverable, an impairment charge is measured as the amount by which the carrying amount of the asset group exceeds its fair value based on discounted cash flow analysis or appraisals.

Recently Issued Accounting Pronouncements

There were various updated recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to have a material impact on the Company’s financial position, results of operations or cash flows.

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers.” ASU 2014-09 is a comprehensive revenue recognition standard that has superseded nearly all existing revenue recognition guidance under current U.S. GAAP and replaced it with a principle based approach for determining revenue recognition. ASU 2014-09 requires that companies recognize revenue based on the value of transferred goods or services as they occur in the contract. The ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. ASU 2014-09 is effective for interim and annual periods beginning after December 15, 2017.

The Company’s primary source of revenue is from providing a professional service that specializes in HIPAA compliant retrieval, reproduction and release of information. Orders are fulfilled as requested, then invoiced. Once payment is received, revenue is recognized when records are delivered.

During the fourth quarter of 2017, the Company finalized its assessment related to the new standard and determined that the timing of revenue recognition related to the Company’s revenues will remain consistent between the new standard and the previous standard. The Company adopted ASU 2014-09 effective January 1, 2018 using the modified retrospective method, and there was no cumulative adjustment to retained earnings.

Management does not believe that any other recently issued but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying financial statements.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Not required for a smaller reporting company.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act are recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file under the Exchange Act is accumulated and communicated to our management, including our principal executive and financial officers, as appropriate to allow timely decisions regarding required disclosure.

As of the end of the period covered by this Quarterly Report, we conducted an evaluation, under the supervision and with the participation of our Chief Executive Officer (Principal Executive and Financial Officer) of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act). Based upon this evaluation, our Chief Executive Officer (Principal Executive and Financial Officer) concluded that the Company’s disclosure controls and procedures are not effective to ensure that information required to be disclosed by the Company in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and also are not effective in ensuring that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including the Company’s Chief Executive Officer (Principal Executive and Financial Officer), to allow timely decisions regarding required disclosure.

Management concluded that the design and operation of our disclosure controls and procedures are not effective because the following material weaknesses exist:

To the extent reasonably possible given our limited resources, we intend to take measures to cure the aforementioned weaknesses, including, but not limited to, increasing the capacity of our qualified financial personnel to ensure that accounting policies and procedures are consistent across the organization and that we have adequate control over financial statement disclosures.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal controls over financial reporting (as such term is defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended June 30, 2018, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II OTHER INFORMATION

Item 1. Legal Proceedings

We are not party to any material legal proceedings.

Item 1A. Risk Factors

Not required for a smaller reporting company.

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

None.

Item 3. Defaults upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

* Filed herewith.

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.

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