METAWORKS PLATFORMS, INC. - Quarter Report: 2022 September (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2022

☐ 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 000-55049

METAWORKS PLATFORMS, INC.

(Exact name of registrant as specified in its charter)

3250 Oakland Hills Court, Fairfield, CA 94534

(Address of principal executive offices) (Zip Code)

424.570.9446

(Registrant’s telephone number, including area code)

CURRENCYWORKS INC.

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

Securities registered pursuant to Section 12(b) of the Act

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 78,145,066 shares of common stock issued and outstanding as at November 10, 2022.

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

Our unaudited condensed interim consolidated financial statements are stated in United States dollars and are prepared in accordance with United States generally accepted accounting principles.

It is the opinion of management that the unaudited condensed interim consolidated financial statements for the nine-months ended September 30, 2022 include all adjustments necessary in order to ensure that the unaudited condensed interim consolidated financial statements are not misleading.

MetaWorks Platforms, Inc.

Condensed Consolidated Balance Sheets

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

MetaWorks Platforms, Inc.

Condensed Consolidated Statement of Operations

(Unaudited)

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

MetaWorks Platforms, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

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

MetaWorks Platforms, Inc.

Condensed Consolidated Statements of Cash Flows (cont’d)

(Unaudited)

SUPPLEMENTAL CASH FLOW INFORMATION

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

MetaWorks Platforms, Inc.

Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit)

(Unaudited)

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

MetaWorks Platforms, Inc.

Notes to Unaudited Condensed Interim Consolidated Financial Statements

As of September 30, 2022 and for the three and nine months ended September 30, 2022 and 2021

1. NATURE AND CONTINUANCE OF OPERATIONS

MetaWorks Platforms, Inc. (the “Company”) was incorporated under the laws of the State of Nevada on July 20, 2010, with an authorized capital of 400,000,000 common shares, having a par value of $0.001 per share. During the period ended December 31, 2010, the Company commenced operations by issuing shares and developing its publishing service business, focused on representing authors to publishers.

On June 22, 2021, we incorporated a new Delaware subsidiary, Motoclub LLC, to create a marketplace for digital automotive collectibles.

On June 22, 2021, we incorporated a new Delaware subsidiary, EnderbyWorks, LLC, to create a direct-to-consumer, feature-length film viewing and distribution platform delivering feature-length films and digital collectible entertainment content as Non-Fungible Tokens (“NFTs”).

On August 12, 2021, the Company’s subsidiary sBetOne, Inc. (“sBetOne”) entered into a business combination with a related party, VON Acquisition Inc. (“VON”) whereby MetaWorks exchanged its equity interest in sBetOne for shares in VON, resulting in the deconsolidation of sBetOne from the Company’s consolidated financial information. Please see Notes 6 and 17.

On August 24, 2022, the Company changed its name from CurrencyWorks Inc. to MetaWorks Platforms, Inc.

The Company’s business model is to provide a turnkey set of services to develop and integrate Web 3.0 / Metaverse technologies, NFT, blockchain, and cryptocurrency technologies. The Company’s services include strategic planning, project planning, structure development and administration, business plan modelling, technology development support, whitepaper preparation, due diligence reporting, governance planning and management, and movie distribution.

Going Concern

These unaudited condensed interim consolidated financial statements have been prepared on a going concern basis which assumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. The Company has incurred losses since inception resulting in an accumulated deficit of $38,360,653 and $35,248,384 as of September 30, 2022 and December 31, 2021, respectively. Further losses are anticipated in the pursuit of the Company’s new service business opportunity, raising substantial doubt about the Company’s ability to continue as a going concern. The ability to continue as a going concern is dependent upon the Company generating profits and/or obtaining the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they are due. Management intends to finance operating costs over the next twelve months with existing cash on hand, loans from directors and/or private placements.

The financial statements do not include any adjustments relating to the recoverability and classification of assets or the amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited condensed interim consolidated financial statements and related notes have been prepared in accordance with generally accepted accounting principles (“GAAP”) in the United States of America for interim financial information and the instructions to Form 10-Q under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited condensed interim consolidated financial statements reflect all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, necessary for a fair statement of its financial position as of September 30, 2022, and its results of operations and cash flows for the three and nine months ended September 30, 2022 and 2021. Unaudited interim results are not necessarily indicative of the results for the full fiscal year. These unaudited condensed interim consolidated financial statements should be read in conjunction with the financial statements of the Company for the year ended December 31, 2021 and notes thereto contained in the information as part of the Company’s Annual Report on Form 10-K, which was filed with the SEC on April 15, 2022.

Basis of Consolidation

The unaudited condensed interim consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, CurrencyWorks USA Inc. (formerly ICOx USA, Inc.), and its majority-owned subsidiaries, Motoclub LLC, and EnderbyWorks, LLC. All intercompany transactions and balances have been eliminated.

Use of Estimates

The preparation of unaudited condensed interim consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the interim consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates and these differences could be material.

The most significant estimates made by management in the preparation of the financial statements relate to the estimates used to calculate the fair value of certain liabilities and stock-based compensation, and impairment assessments for investments and long-lived assets. Management bases its estimates on historical experience and on other various 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. Actual results could differ materially from such estimates under different assumptions and conditions.

Cash and Cash Equivalents

Cash and cash equivalents include short-term, highly liquid investments, such as certificates of deposit or money market funds that are readily convertible to known amounts of cash and have original maturities of three months or less. All cash balances are held by major banking institutions.

Contingent Liabilities

The Company accounts for its contingent liabilities in accordance with ASC 450 “Contingencies”. A provision is recorded when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated.

With respect to legal matters, provisions are reviewed and financial information is adjusted to reflect the impact of negotiations, estimated settlements, legal rulings, advice of legal counsel and other information and events pertaining to a particular matter. As of September 30, 2022 and December 31, 2021, the Company was not a party to any litigation that could have a material adverse effect on the Company’s business, financial position, results of operations or cash flows.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)

Accounts Receivable

In considering the collectability of accounts receivable, the Company takes into account the legal obligation for payment by the customer, as well as the financial capacity of the customer to fund its obligation to the Company. The carrying amount of accounts receivable represents the maximum credit exposure on this balance.

Accounts receivable balances relate to the consulting services business and are reported at their net realizable value. From management’s best estimate there is no allowance for doubtful accounts at September 30, 2022 and December 31, 2021. Management individually reviews all delinquent accounts receivable balances and based on an assessment of current creditworthiness, estimates the portion, if any, of the balance that will not be collected and would directly write-off these balances. Management considers a number of factors, including the age of the receivables, which is often less than 60 days, current economic conditions and other information management obtains regarding the financial condition of customers. The policy for determining the past due status is based on the contractual payment terms of each customer. Once collection efforts by the Company are exhausted, the determination for directly writing off uncollectible receivables is made.

Earnings per Share

The Company computes earnings (loss) per share (“EPS”) in accordance with ASC 260, “Earnings per Share” which requires presentation of both basic and diluted EPS on the face of the statement of operations. Basic EPS is computed by dividing net income (loss) available to common shareholders by the weighted average number of shares outstanding during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of warrants or stock options (Note 8 and Note 15 respectively). Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive.

At September 30, 2022, common shares from the conversion of outstanding stock options, and outstanding warrants have been excluded as their effects are anti-dilutive. At September 30, 2021, common shares from the conversion of outstanding stock options (2,204,529 shares), and outstanding warrants (1,846,075 shares) have been included as their effects are dilutive.

Stock-Based Compensation

The Company has adopted FASB guidance on stock-based compensation. Under ASC 718-10-30-2 Stock Compensation, all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. The fair value of the options is calculated based off the Black Scholes valuation model (Note 15).

The Company has issued stock options to employees and non-employees. Stock options granted to non-employees for services or performance not yet rendered would be expensed over the service period or until the goals had been reached. Stock options granted to employees are expensed over the vesting period of the options. The fair value calculation is valued as at the grant date.

Forfeitures of options are recognized as they occur. Compensation cost previously recognized is reversed on the date of forfeiture for any options that are forfeited prior to the completion of the requisite service period or vesting period,

When options are cancelled before the completion of the service period or vesting period, the Company accounts for the cancellation as an acceleration of vesting and any previously unrecognized compensation costs is recognized at the date of cancellation.

Fair Value of Financial Instruments

Fair value is an exit price representing the amount that would be received to sell an asset or required to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability.

A three-tier fair value hierarchy is established as a base for considering such assumptions and for inputs used in the valuation methodologies in measuring fair value:

The Company’s financial instruments consist of cash and cash equivalents and payables. The carrying amount of cash and cash equivalents and payables approximates fair value because of the short-term nature of these items.

When determining fair value, whenever possible, the Company uses observable market data, and relies on unobservable inputs only when observable market data is not available. As of September 30, 2022, and September 30, 2021, the Company did not have any level 1 or 2 financial instruments.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)

Derivative Liabilities

When the Company issues warrants, it evaluates the proper balance sheet classification of the warrant to determine whether the warrant should be classified as equity or as a derivative liability on the consolidated balance sheet. In accordance with ASC 815-40, Derivatives and Hedging – Contracts in the Entity’s Own Equity (ASC 815-40), the Company classifies a warrant as equity if it is indexed to the Company’s equity and several specific conditions for equity classification are met. A warrant is not considered indexed to the Company’s equity in general when it contains certain types of exercise contingencies or adjustments to exercise price. If a warrant is not indexed to the Company’s equity or it has net cash settlement that results in the warrants to be accounted for under ASC 480, Distinguishing Liabilities from Equity, or ASC 815-40, it is classified as a derivative liability which is carried on the consolidated balance sheet at fair value with any changes in its fair value recognized currently in the statement of operations. As of September 30, 2022 and December 31, 2021, the Company had warrants that were classified as liabilities and warrants that were classified as equity.

Some of the warrants issued by the Company are denominated in Canadian dollars (“CAD”) at issuance. The Company’s functional currency is USD. In accordance with ASC 815 and EITF Issue No. 07-5, when the strike price of warrants is denominated in a currency other than an entity’s functional currency, the warrants would not be considered indexed to the entity’s own stock and would consequently be evaluated for a derivative liability under the conditions that the strike price is indexed to a foreign currency. The derivative liability associated with these warrants was valued on the date of issuance and is revalued at each reporting period.

Revenue Recognition

Revenue is recognized in accordance with ASC 606, Revenue from Contracts with Customers. The Company recognizes revenue when persuasive evidence of an arrangement exists, the related services are rendered, or delivery has occurred.

The Company generates revenues from three main sources, NFT sales, consulting services, and movie distribution.

Consulting Services

Consulting Service revenue is derived from providing professional knowledge and skills to third-party customers. The contract and performance obligations are created based on the needs of the customer and abilities of the Company to provide the required services. The allocation of the transaction price to the individual performance obligations in the contract may be specified by task or by phases depending on the work being done. Revenue is recognized upon completion of the performance obligations.

NFT Revenue

NFT revenue is derived from the sale of NFTs. These NFTs are created by the Company’s subsidiaries and are sold through an online sales platform or through an auction. Revenue is recognized when the Company transfers the ownership of the NFT to the customer.

Movie Distribution Revenue

Movie distribution revenue is derived from the use of the Company’s intangible asset (Note 5). Revenues earned to date are from the minimum guarantee of distribution sales. Future revenues may be recognized from additional distribution sales.

Funds received for unearned revenue are recognized as deferred revenue on the consolidated balance sheet and are recognized as revenue upon completion of milestones or specified tasks.

Accounting Guidance Not Yet Adopted

In October 2021, the FASB issued ASU 2021-08, “Business Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers”, to improve the accounting for acquired revenue contracts with customers in a business combination by addressing diversity in practice and inconsistency related to recognition of an acquired contract liability and payment terms and their effect on subsequent revenue recognized by the acquirer. The guidance will be effective for the Company on January 1, 2023. The Company is currently evaluating the impact that the adoption of this standard will have on its condensed consolidated financial statements in connection with any future business combinations.

In June 2016, the FASB issued new guidance on measurement of credit losses (ASU 2016-13, “Measurement of Credit Losses on Financial Instruments”) with subsequent amendments issued in November 2018 (ASU 2018-19) and April 2019 (ASU 2019-04). This update changes the accounting for credit losses on loans and held-to-maturity debt securities and requires a current expected credit loss (CECL) approach to determine the allowance for credit losses. It is applicable to trade accounts receivable. The guidance will be effective for the Company on January 1, 2023 with a cumulative-effect adjustment, if any, to retained earnings as of the beginning of the year of adoption. The Company is in the process of evaluating the impact of the adoption of ASU 2016-13 on the Company’s condensed consolidated financial statements and disclosures.

3. ACCOUNTS RECEIVABLE

As at September 30, 2022, the Company had outstanding accounts receivables of $25,918 compared to $nil as at December 31, 2021. As at September 30, 2022, we have reviewed our outstanding accounts and determined no allowance for doubtful accounts is necessary.

4. NOTES RECEIVABLE – RELATED PARTY

Effective as of May 5, 2021, we loaned $400,000 to Fogdog Energy Solutions Inc. (“Fogdog”) pursuant to convertible promissory note. The note bears interest at a rate of 4% per annum and was due on May 5, 2022. The loan was not repaid nor converted by the Company as at the reporting date and is now payable on demand. Under certain conditions as outlined in the promissory note, the Company may convert the outstanding loan into common shares.

Effective as of August 20, 2021, we loaned an additional $850,000 to Fogdog pursuant to convertible promissory note. The note bears interest at a rate of 10% per annum and comes due on August 20, 2027. The note may not be prepaid without the written consent of our company. Our chief financial officer, secretary and treasurer, Swapan Kakumanu, is a director, chief financial officer and a shareholder of Fogdog. Accrued interest on the total loan as at September 30, 2022 is $117,036 (December 31, 2021 - $24,773).

5. INTANGIBLE ASSET

On July 6, 2021, the Company, through one of its subsidiaries, acquired the rights to a movie for a period of 10 years for $3,000,000. This acquisition is linked to one of the Company’s subsidiary projects for movie-related NFTs and movie distribution. This asset is being amortized on a straight-line basis over the 10-year life of the asset.

 SCHEDULE OF INTANGIBLE ASSETS

6. INVESTMENTS, RELATED PARTY

On August 12, 2021, the Company’s subsidiary sBetOne entered into a business combination with a related party, VON Acquisition Inc. (“VON”) whereby the Company exchanged its equity interest in sBetOne for equity interest in VON. The Company received 5,902,174 common shares or 6.31% of the total outstanding common shares of VON as at the date of the business combination. The transition from having a 59.02% ownership in sBetOne to having a 6.31% ownership in VON has led the Company to deconsolidate sBetOne from the Company’s financial statements and record the ownership of VON as an investment. The common shares were valued at $0.10 CAD per share based on the most recent sales of VON’s stock. During the period ended September 30, 2022, the change in fair value of the investment is related to the foreign currency exchange rate fluctuations.

During the year ended December 31, 2021, the sBetOne carrying amount in liabilities of $824,041 and loss in NCI of $350,942 were removed from the Company and converted into shares of VON, resulting in a gain of $120,478 upon deconsolidation of sBetOne recorded in other income.

 SCHEDULE OF INVESTMENTS IN RELATED PARTY

7. DERIVATIVE LIABILITIES

On June 12, 2022, 2,108,750 warrants expired. The derivative liabilities related to expiring warrants were revalued at USD $34,530 on June 11, 2022, resulting in a loss of $135,978, related to the change in fair market value of the derivative liabilities. The derivative liabilities were revalued using the Black-Scholes option pricing model with the following assumptions: an average exercise price of CAD $0.10, our stock price on the date of valuation of CAD $0.12, expected dividend yield of 0%, expected volatility of 25.81%, risk-free interest rate of 1.10%, an expected term of 0.00 years and foreign exchange rate of 1.2777. Upon expiry, the derivative liabilities were written off against additional paid-in capital.

The derivative liabilities were revalued at USD $nil, resulting in a gain of $440,065 for the nine months ended September 2022, related to the change in fair market value of the derivative liabilities. The derivative liabilities were revalued using the Black-Scholes option pricing model with the following assumptions: an exercise price of CAD $0.75, our stock price on the date of valuation of CAD $0.08, expected dividend yield of 0%, average expected volatility of 57.01%, average risk-free interest rate of 3.63%, an average expected term of 0.35 years, and foreign exchange rate of 1.3707 compared to December 31, 2021 where the assumptions were an exercise price of CAD $0.61, stock price of CAD $0.34, expected dividend yield of 0%, average expected volatility of 54.03%, average risk-free interest rate of 0.34%, an expected term of 0.9 years, and foreign exchange rate of 1.2678. The changes in the assumptions from December 31, 2021 to September 30, 2022 resulted in the gain.

8. WARRANTS

For the nine months ended September 30, 2022, the Company issued 3,813,593 warrants.

A portion of outstanding warrants are denominated in a currency other than the Company’s functional currency. The fair value of each of these warrants is estimated using the Black-Scholes valuation method. Assumptions used in calculating the fair value at September 30, 2022 were as follows:

 SCHEDULE OF ASSUMPTIONS OF FAIR VALUE OF WARRANT

Since the expected life of the warrants was greater than the Company’s historical stock information available, the Company determined the expected volatility based on price fluctuations of comparable public companies.

The issuances, exercises and pricing re-sets during the nine months ended September 30, 2022, are as follows:

 SCHEDULE OF ISSUANCES, EXERCISES AND PRICING RE-SETS

9. NOTES PAYABLE

On June 14, 2022, the Company issued a promissory note payable for $117,000. The promissory note is unsecured, payable on demand, and was set to mature on August 13, 2022. The promissory note bears interest at a rate per annum equal to the Bank of Canada’s Prime rate. On August 9, 2022, a promissory note extension was signed, extending the maturity date of the note payable to February 14, 2023.

10. DEFERRED REVENUE

As at September 30, 2022, funds of $124,250 had been received from customers as deposits for work to be performed. At the end of the period, the products had not been delivered to the customers, therefore the deposits have been recorded as deferred revenue. The amount recognized as deferred revenue as at December 31, 2021 was $nil. Please see Note 2 for additional information on our revenue recognition policy.

11. COMMITMENTS AND CONTINGENCIES

Litigation

From time to time, the Company may be subject to legal proceedings, claims, and liabilities that arise in the ordinary course of business. The Company is not aware of any pending litigation as of the date of this report, and therefore, in the opinion of management and based upon the advice of its outside counsels, the liability, if any, from any pending litigation is not expected to have a material effect in the Company’s financial position, result or operations, and cash flows.

12. RELATED PARTY TRANSACTIONS

On January 22, 2018, the Company appointed James Geiskopf as Lead Director. As of September 30, 2022, the Company had accounts payable and accrued expenses owing to this related party of $nil (December 31, 2021 - $nil).

On April 1, 2021, the Company appointed Cameron Chell as Executive Chairman. As of September 30, 2022, the Company had accounts payable and accrued expenses owing to this related party of $nil (December 31, 2021 - $30,000).

On August 1, 2022, the Company appointed Scott Gallagher as President. As of September 30, 2022, the Company had accounts payable and accrued expenses owing to this related party of $7,500 (December 31, 2021 - $nil).

On December 4, 2018, the Company appointed Swapan Kakumanu as Chief Financial Officer. As of September 30, 2022, the Company had accounts payable and accrued expenses owing to this related party of $nil (December 31, 2021 - $20,000).

On October 9, 2017, the Company signed an agreement with a company owned by Swapan Kakumanu to complete the accounting functions of the Company. As of September 30, 2022, the Company had accounts payable and accrued expenses of $12,500 (December 31, 2021 - $25,000).

On May 5, 2021, the Company loaned Fogdog $400,000 of which our CFO is a director, chief financial officer and shareholder (Note 4). Effective as of August 20, 2021, we loaned an additional $850,000 to Fogdog pursuant to convertible promissory note (Note 4). As at September 30, 2022, the Company had total outstanding notes receivable from Fogdog of $1,250,000 (December 31, 2021 - $1,250,000). Accrued interest on the total loan as at September 30, 2022 is $117,036 (December 31, 2021 - $24,773).

The Company has an investment in a related party, VON, please refer to Note 6.

13. REVENUE

The majority of revenue streams in 2022 relates to the movie distribution revenue and 2021 mainly related to NFT sales with the remainder related to consulting revenue. Please refer to Note 2 for the Company’s revenue recognition policies.

14. SHARE CAPITAL

On January 28, 2022, the Company completed a private placement where 244,139 common shares were issued at a price of $0.2048 USD for total gross proceeds of $27,000 USD and services of $23,000 USD for a total value of $50,000 USD.

On January 28, 2022, the Company completed a debt conversion where 488,281 common shares were issued at a price of $0.2048 USD for a total value of $100,000 USD.

On January 28, 2022, the Company completed a private placement where 1,221,001 common shares were issued at a price of $0.1638 USD for total gross proceeds of $200,000 USD.

On February 11, 2022, the Company completed a private placement where 47,614 common shares were issued in consideration for services rendered to the Company. The common shares were issued at a deemed price of $0.21 USD, for a total value of $9,999 USD.

On February 28, 2022, the Company completed a private placement where 2,592,592 common shares were issued at a price of $0.135 USD for total gross proceeds of $350,000 USD.

On May 9, 2022, the Company completed a private placement where 83,325 common shares were issued in consideration for services rendered to the Company. The common shares were issued at a deemed price of $0.12 USD, for a total value of $9,999 USD.

On August 31, 2022, the Company completed a debt conversion where 108,684 common shares were issued in at a price of $0.092 USD, for a total value of $9,999 USD.

During the nine months ended September 30, 2022, there were nil warrants exercised and nil options exercised for common shares. During the year ended December 31, 2021, there were 11,221,250 warrants and 325,000 options exercised for common shares.

15. STOCK-BASED COMPENSATION

The Company has adopted the 2017 Equity Incentive Plan (“the Plan”) under which non-transferable options to purchase common shares of the Company may be granted to directors, officers, employees, or consultants of the Company. The terms of the Plan provide that our board of directors may grant options to acquire common shares of the Company at not less than 100% of the greater of: (i) the fair market value of the shares underlying the options on the grant date and (ii) the fair market value of the shares underlying the options on the date preceding the grant date at terms of up to ten years. No amounts are paid or payable by the recipient on receipt of the options. On April 26, 2021, the maximum number of options available for grant was increased to 13,300,000 shares. As of September 30, 2022, there are 12,730,000 stock options issued (September 30, 2021 – 8,301,666) and 570,000 stock options unissued (September 30, 2021 – 4,998,334).

The Company has also granted stock options to non-employees. These stock options were granted to consultants who have provided their services for cash compensation below cost, with the stock options providing additional compensation in lieu of cash.

On February 10, 2021, the Company granted a total of 2,200,000 stock options to officers and directors of the Company. The stock options are exercisable at the exercise price of $1.17 per share for a period of ten years from the date of grant. The stock options have a fair value of $1.09 and are exercisable as follows:

On March 19, 2021, the Company granted a total of 180,000 stock options to a consultant of the Company. The stock options are exercisable at the exercise price of $3.19 per share for a period of ten years from the date of grant. The stock options have a fair value of $2.87 and are exercisable as follows:

On May 5, 2021, the Company granted a total of 180,000 stock options to a consultant. The stock options are exercisable at the exercise price of $1.78 per share for a period of ten years from the date of grant. The stock options have a fair value of $1.6520 and are exercisable as follows:

On June 15, 2021, the Company granted a total of 2,900,000 stock options to officers and directors of the Company. The stock options are exercisable at the exercise price of $1.16 per share for a period of ten years from the date of grant. The stock options have a fair value of $1.0720 and are exercisable as follows:

On July 22, 2022, the Company cancelled 4,475,000 stock options held by directors and officers.

On August 26, 2022, the Company granted a total of 830,000 stock options to officers and directors of the Company. The stock options are exercisable at the exercise price of $0.09 per share for a period of ten years from the date of grant. The stock options have a fair value of $0.0780 and are exercisable as follows:

On August 26, 2022, the Company granted a total of 1,000,000 stock options to an officer of the Company. The stock options are exercisable at the exercise price of $0.09 per share for a period of ten years from the date of grant. The stock options have a fair value of $0.0780 and are exercisable as follows:

15. STOCK-BASED COMPENSATION (CONT’D)

Stock-based compensation expense recognized for the three and nine months ended September 30, 2022 were $747,898 and $1,677,834 respectively and for the three and nine months ended September 30, 2021 were $828,010 and $3,795,139 respectively. Stock options granted are valued at the fair value calculation based off the Black-Scholes valuation model. The weighted average assumptions used in the calculation are as follows:

 SCHEDULE OF WEIGHTED AVERAGE ASSUMPTIONS USED

SCHEDULE OF STOCK OPTION ACTIVITY

16. FINANCIAL INSTRUMENTS

Warrants

Derivative liabilities determined for outstanding warrants would be classified in level 3 of the fair value hierarchy.

SCHEDULE OF DERIVATIVE LIABILITIES AT FAIR VALUE 

Please see Note 7 for additional information on the related observable inputs.

17. NON-CONTROLLING INTEREST

On April 1, 2019, the Company transferred 2,000,000 of its shares in sBetOne to a third-party and cancelled 1,097,826 of its shares. Additionally, 2,097,826 shares of sBetOne were issued to third-parties, reducing the Company’s ownership in this subsidiary to 59.02%.

On August 12, 2021, the Company’s subsidiary sBetOne entered into a business combination with a related party, VON Acquisition Inc. (“VON”) whereby the Company exchanged its equity interest in sBetOne for equity interest in VON. The Company received 5,902,174 common shares or 6.31% of the total outstanding common shares of VON as at the date of the business combination. The transition from having a 59.02% ownership in sBetOne to having a 6.31% ownership in VON has led the Company to deconsolidate sBetOne in 2021, eliminate the related non-controlling interest from the Company’s financial statements, and record the equity investment in VON as of December 31, 2021.

On June 22, 2021, the Company incorporated a new Delaware subsidiary, EnderbyWorks, LLC, in which the Company owns 51%. The Company also has an 80% ownership of Motoclub LLC.

The following table sets forth a summary of the changes in non-controlling interest:

 SUMMARY OF CHANGES IN NON-CONTROLLING INTEREST

18. SUBSEQUENT EVENTS

On November 8, 2022, the Company entered into a promissory note (the “Note”) agreement to raise $116,760. The Note has a discount of $12,510 and fees of $4,250, resulting in net proceeds of $100,000. The Note is unsecured, has a one-time interest charge of $14,011, and matures on November 8, 2023. The Note total of $130,771 (including principal, interest, and fees) will be repaid in ten payments, each in the amount of $13,077 with the first payment due on December 30, 2022, and nine subsequent payments each month thereafter with a five-day grace period with respect to each payment.

In the event of a default, the Note is convertible into shares of common stock of the Company. In a default situation, the holder of the Note shall have the right to convert all or any part of the unpaid balance of the Note into shares of common stock of the Company, at a conversion price that is equal to the lowest trading price for the shares of common stock during the twenty-five trading days prior to the conversion date. Upon the occurrence and during the continuation of any event of default, the Note would immediately become due and payable and, if the Company wishes to repay the Note in cash, the Company shall pay an amount equal to 200% of the then outstanding unpaid amounts owed.

The Company has evaluated events occurring subsequent to September 30, 2022 through the date these financial statements were issued and noted no additional items requiring disclosure.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Forward-Looking Statements

This quarterly report contains forward-looking statements. Forward-looking statements are projections of events, revenues, income, future economic performance or management’s plans and objectives for future operations. In some cases, forward-looking statements can be identified by the use of terminology such as “may”, “should”, “expect”, “plan”, “anticipate”, “believe”, “estimate”, “predict”, “potential” or “continues” or the negative of these terms or other comparable terminology. Examples of forward-looking statements made in this quarterly report include or may include, among others, statements about:

The material assumptions supporting these forward-looking statements include, among other things:

Although management considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect.

These forward-looking statements are only predictions and involve known and unknown risks, uncertainties and other factors, including:

any of which may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Further, although we have attempted to identify factors that could cause actual results, levels of activity, performance or achievements to differ materially from those described in forward-looking statements, there may be other factors that cause results, levels of activity, performance or achievements not to be as anticipated, estimated or intended.

While these forward-looking statements and any assumptions upon which they are based are made in good faith and reflect management’s current judgment regarding the direction of our business, actual results may vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested herein. Accordingly, readers should not place undue reliance on forward-looking statements. Except as required by applicable law, including the securities laws of the United States and Canada, we do not intend to update any of the forward-looking statements to conform these statements to actual results. All forward-looking statements in this quarterly report are qualified by this cautionary statement.

All financial information contained herein is shown in United States dollars unless otherwise stated. Our financial statements are prepared in accordance with United States generally accepted accounting principles. Unless otherwise stated, “$” refers to United States dollars.

In this quarterly report, unless otherwise specified, all references to “shares” refer to shares of common stock in the capital of our company.

As used in this quarterly report, the terms “we”, “us”, “the Company”, “our” and “MetaWorks” mean MetaWorks Platforms, Inc. and its wholly-owned subsidiary, CurrencyWorks USA Inc., and its majority-owned subsidiaries EnderbyWorks LLC, and Motoclub LLC, unless otherwise specified.

Overview

MetaWorks aims to build and operate a full-service blockchain platform for Non Fungible Tokens (NFTs), digital currencies, digital assets and security tokens.

Since 2017, our services and development business provide a turnkey set of services for companies to develop and integrate blockchain and payment technologies into their business operations. We intend to offer Fintech (financial technology) services and infrastructure offerings in key categories, including: digital currencies; digital assets including Non Fungible Tokens (NFTs); and, digital securities.

We anticipate that we will enable companies to digitize, sell and manage new or existing asset classes on blockchain infrastructure, transact in digital/ cryptocurrencies (Payments, Rewards and Credit infrastructure), issue or create digital/crypto assets and/or manage their digital/crypto assets (Non Fungible Tokens, Fungible Cold Storage, Mining).

Our core revenue streams are expected to remain as consulting revenues and transaction fees. We may also earn equity stakes in payment for our services, to the extent permitted under applicable law.

Results of Operations

Three Months Ended September 30, 2022 Compared to the Three Months Ended September 30, 2021

Revenue

We recognized total revenue of $110,461, with $17,961 coming from the sale of NFTs and $92,500 from consulting services, for the three months ended September 30, 2022. We recognized total revenue of $168,870 for the three months ended September 30, 2021, consisting of $125,370 from the sale of NFTs and $43,500 from consulting services. The decrease in NFT sales revenue of $107,409 is a result of fewer NFT sales being made. The increase in consulting revenues of $49,000 is a result of more consulting contracts.

Operating Expenses

We incurred general and administrative expense of $1,329,902 and $1,247,389 for the three months ended September 30, 2022 and 2021, respectively, representing a net change of $82,513 between the two periods. These expenses consisted primarily of stock-based compensation expense for issuance of options, consulting fees, pre-licensing fees, professional fees, amortization, and other general and administrative costs. The decrease in consulting fees between the two periods from $470,710 in 2021 to a recovery of $4,488 in 2022 relates to decreases in compensation for our president, chief operating officer, and Board of Directors, as a forfeiture of stock options issued to consultants, for which the service requirement had not been fulfilled. Professional fees for the two periods decreased from $67,147 in 2021 to a recovery of $20,929 in 2022, which was mainly due to an over accrual of legal fees. The increase in other general and administrative expenses from $703,699 in 2021 to $1,326,634 in 2022 was mainly due to an acceleration of stock-based compensation expense on options that were cancelled prior to the completion of their vesting periods.

Net Income (Loss) from Operations

We incurred net losses from operations of $1,422,143 and $2,658,720 for the three months ended September 30, 2022 and 2021, respectively, representing a net change of $1,236,577, primarily attributable to the factors discussed above under the headings “Revenue” and “Operating Expenses”.

Other Income (Expense)

Other income includes $25,458 of note interest revenue for the three months ending September 30, 2022, compared to $12,170 of note interest revenue and $120,478 related to the deconsolidation of a subsidiary, in the same period in 2021. The change in derivative liability was $nil for the three months ending September 30, 2022 compared to a gain of $5,899,631for the same period in 2021.

Net Income (Loss)

We incurred net loss of $1,397,766 and net income of $3,397,487 for the three months ended September 30, 2022 and 2021, respectively, representing a net change of $4,795,263, primarily attributable to the factors discussed above under the headings “Revenue”, “Operating Expenses” and “Other Income (Expense)”.

Nine Months Ended September 30, 2022 Compared to the Nine Months Ended September 30, 2021

Revenue

We recognized total revenue of $1,563,512, with $1,250,000 from movie distribution revenues, $96,262 from the sale of NFTs and $217,250 from consulting services, for the nine months ended September 30, 2022. The movie distribution revenue relates to a minimum guarantee from a third party who the Company entered into an agreement with for the North American movie viewing revenues. We recognized total revenue of $274,770 for the nine months ended September 30, 2021, with $180,325 from the sale of NFTs, and $94,445 from consulting services. The decrease in NFT sales revenue of $84,063 is a result of fewer NFT sales being made. The increase in consulting revenues of $122,805 is a result of more consulting contracts.

Operating Expenses

We incurred general and administrative expenses of $4,099,950 and $6,263,360 for the nine months ended September 30, 2022 and 2021, respectively, representing a decrease of $2,163,410 between the two periods. These expenses consisted primarily of stock-based compensation expense for issuance of options, consulting fees, pre-licensing fees, professional fees, amortization, and other general and administrative costs. The decrease in consulting fees between the two periods from $1,910,213 in 2021 to $782,050 in 2022 relates to decreases in compensation for our president, chief operating officer, and Board of Directors, a decrease of stock option issuances for consultants, as well as a forfeiture of stock options issued to consultants, for which the service requirement had not been fulfilled. Professional fees for the two periods decrease from $288,164 in 2021 to $161,353 in 2022 as a result of decreased legal services. The decrease in other general and administrative expenses from $4,001,251 in 2021 to $3,117,709 in 2022 was mainly due to a decrease in marketing and platform development fees.

Net Loss from Operations

We incurred net losses from operations of $3,520,699 and $7,568,791 for the nine months ended September 30, 2022 and 2021, respectively, representing a net change of $4,048,092, primarily attributable to the factors discussed above under the headings “Revenue” and “Operating Expenses”.

Other Income (Expense)

Other income includes $92,263 of note interest revenue for the nine months ending September 30, 2022, compared to $12,170 of note interest revenue in the same period in 2021. The nine months ended September 30, 2021 included $65,499 interest expense on convertible notes payable The change in derivative liability was a gain of $440,065 for the nine months ending September 30, 2022 compared to a loss of $14,179,929 for the same period in 2021.

Net Loss

We incurred net losses of $2,996,856 and $21,606,269 for the nine months ended September 30, 2022 and 2021, respectively, representing a net change of $18,609,413, primarily attributable to the factors discussed above under the headings “Revenue”, “Operating Expenses” and “Other Income (Expense)”.

Liquidity and Capital Resources

Working Capital

Current Assets

Current assets were $189,031 as at September 30, 2022 and $655,321 at December 31, 2021. The decrease in current assets is mainly due to decrease in cash accounts in the nine months ended September 30, 2022.

Current Liabilities

Current liabilities of $1,642,421 as at September 30, 2022 were attributable to accounts payable and accrued liabilities, deferred revenue, and current loans payable, compared to $1,249,904 in accounts payable and accrued expenses as at December 31, 2021.

Cash Flow

Operating Activities

Net cash used in operating activities was $1,098,027 for the nine-month period ended September 30, 2022, as compared to net cash used of $3,139,977 for the nine-month period ended September 30, 2021, a decrease of $2,041,950. The decrease in net cash used in operating activities was primarily due to a decreased net loss for the period.

Investing Activities

Net cash provided by investing activities was $4,900 for the nine-month period ended September 30, 2022, which was from the issuance of shares from the Company’s subsidiary EnderbyWorks, LLC. Net cash used in investing activities was $4,250,000 for the nine-month period ended September 30, 2022, relating to a loan the Company issued to a related party, and the purchase of an intangible asset.

Financing Activities

Financing activities provided cash of $635,499 for the nine months ended September 30, 2022 and $9,010,350 for the nine months ended September 30, 2021, a decrease of $8,374,851. This decrease is mainly due to less share issuances during the nine months ended September 30, 2022.

Cash Requirements

We expect that we will require $2,400,000, including our current working capital, to fund our operating expenditures for the next twelve months. Projected working capital requirements for the next twelve months are as follows:

Estimated Working Capital Expenditures During the Next Twelve Months

Our estimated general and administrative expenses for the next 12 months are $2,400,000 and are comprised of: consulting fees, accounting services, board of directors and our advisory board, investor relations consultants, and to our public relations and marketing consultants; legal and professional fees (including auditing fees); for insurance; marketing and advertising expenses; trade shows; travel expenses; office rent and miscellaneous and office expenses.

We will require additional cash resources to meet our planned capital expenditures and working capital requirements for the next 12 months. We expect to derive such cash through the sale of equity or debt securities or by obtaining a credit facility. The sale of additional equity securities will result in dilution to our stockholders. The incurrence of indebtedness will result in debt service obligations, could cause additional dilution to our stockholders, and could require us to agree to financial covenants that could restrict our operations or modify our plans to source a new business opportunity. Financing may not be available in amounts or on terms acceptable to us, if at all. Failure to raise additional funds could cause our company to fail.

Going Concern

Our unaudited condensed consolidated financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. We have not yet established a source of revenues sufficient to cover our operating costs and to allow us to continue as a going concern. We have incurred losses since inception resulting in an accumulated deficit of $38,360,653 as at September 30, 2022 (December 31, 2021 - $35,248,384). Our ability to operate as a going concern is dependent on obtaining adequate capital to fund operating losses until we become profitable.

In its report on our financial statements for the years ended December 31, 2021 and 2020, our independent registered public accounting firm included an explanatory paragraph regarding substantial doubt about our ability to continue as a going concern. Our unaudited condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Off-Balance Sheet Arrangements

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

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended, and are not required to provide the information under this item.

ITEM 4. CONTROLS AND PROCEDURES.

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 our company is recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the SEC. Our principal executive officer, who is our president, and our principal financial officer, who is our chief financial officer, are responsible for establishing and maintaining disclosure controls and procedures for our company.

Our management conducted an evaluation, with the participation of our principal executive officer and our principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) under the Securities Exchange Act of 1934, as of the end of the period covered by this quarterly report on Form 10-Q. Based upon that evaluation, our principal executive officer and our principal financial officer concluded that as a result of the material weaknesses in our internal control over financial reporting described in our annual report on Form 10-K for the fiscal year ended December 31, 2021, our disclosure controls and procedures were not effective as of September 30, 2022.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the fiscal quarter ended September 30, 2022, 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 know of no material pending legal proceedings to which our company is a party or of which any of our properties is the subject. In addition, we do not know of any such proceedings contemplated by any governmental authorities.

We know of no material proceedings in which any of our directors, officers or affiliates, or any registered or beneficial stockholder is a party adverse to our company or has a material interest adverse to our company.

ITEM 1A. RISK FACTORS.

As we are a smaller reporting company, we are not required to provide the information required by this item.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

Since the beginning of the fiscal quarter ended September 30, 2022, we have not sold any equity securities that were not registered under the Securities Act of 1933, as amended, that were not previously reported in a quarterly report on Form 10-Q or a current report on Form 8-K.

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.