Athena Bitcoin Global [ABIT] Filings

Table of Contents

As filed with the Securities and Exchange Commission on February 10, 2022

Registration No. 333-            

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

Athena Bitcoin Global

(Exact name of registrant as specified in its charter)

1332 N Halsted St Suite 403

Chicago, IL 60642

(312) 690-4466

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Eric Gravengaard

Chief Executive Officer

1332 N Halsted St Suite 403

Chicago, IL 60642

(312) 690-4466

(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies of all communications to:

Approximate date of commencement of the proposed sale to the public: As soon as practicable after this registration statement becomes effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act, check the following box: ☒

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

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.

If an emerging growth company, indicate by checkmark if the registrant has not elected to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

The information in this prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is declared effective. This prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

Subject to completion, dated February 10, 2022

[●] Shares of Common Stock

This prospectus relates to the resale or other disposition of up to [●] shares of Athena Bitcoin Global common stock, par value $0.001 per share (the “common stock” or “shares”), which may be offered for sale from time to time by the selling shareholders named in this prospectus (each a “Selling Shareholder” and, collectively, the “Selling Shareholders”). The shares of our common stock covered by this prospectus include: (i) 409,413,900 shares of common stock that were issued by us to the Selling Shareholders in the share exchange transaction or were purchased by the Selling Shareholders in private transactions, and (ii) up to [●] shares of common stock issued or issuable upon exercise of our outstanding 6% Convertible Debentures Due 2023 (the “Convertible Debentures”) which were issued in connection with a private placement financing in 2021. We are registering the resale of the shares of common stock underlying the Convertible Debentures as required by the Securities Purchase Agreement that we entered into with the Selling Shareholders as of June 22, 2021, which provided said Selling Shareholders with certain registration rights with respect to the common stock issuable upon conversion of the Convertible Debentures (the “Purchase Agreement”). We are not selling any shares of common stock under this prospectus and will not receive any proceeds from the sale of any shares of common stock by the Selling Shareholders. The Selling Shareholders will bear all commissions and discounts, if any, attributable to the sale or other disposition of the shares of common stock. We will bear all costs, expenses and fees in connection with the registration of the shares of common stock.

Our common stock is quoted on the OTC Pink Market (“OTC Pink”) operated by the OTC Markets Group, Inc. under the symbol “ABIT”. On [●], 2022, the last reported sale of our common stock was $[●]. There is a limited public trading market for our common stock. You are urged to obtain current market quotations for the common stock.

Until such time as our common stock is quoted on the OTCQB, the shares covered by this prospectus will be sold by the Selling Shareholders from time to time at a fixed price of $[●] per share, representing the average of the high and low prices as reported on the OTC Pink on [●], 2022 subject to the agreement between the Company and individual shareholders. No such agreements are currently in place. If and when our common stock is regularly quoted on the OTCQB, the Selling Shareholders may sell their respective shares of common stock, from time to time, at prevailing market prices or in privately negotiated transactions.

Our registration of the shares of common stock covered by this prospectus does not mean that the Selling Shareholders will offer or sell any of the shares. The Selling Shareholders may offer and sell or otherwise dispose of the shares of common stock described in this prospectus from time to time through public or private transactions at prevailing market prices, at prices related to prevailing market prices or at privately negotiated prices at varying prices. See “Plan of Distribution” which begins on page 87 of this prospectus for more information.

This offering will terminate on the earlier of (i) the date when all of the shares have been sold pursuant to this prospectus or Rule 144 under the Securities Act of 1933, as amended (the “Securities Act”), (ii) or the date that all of the securities may be sold pursuant to Rule 144 without volume or manner-of-sale restrictions, (iii) or we decide at any time to terminate the registration of the shares at our sole discretion.

We have made no written communications as defined under Rule 405 of the Securities Act to prospective investors or investors.

You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with information different from that contained in this prospectus. The information contained in this prospectus is accurate only as of the date of this prospectus.

Investing in our shares involves a high degree of risk. You should carefully consider the Risk Factors beginning on page 10 of this prospectus before you make an investment in our securities.

We are an “emerging growth company” as that term is used in the Jumpstart Our Business Startups Act (the “Jobs Act”) and defined under the federal securities laws and, as such, may elect to comply with certain reduced public company reporting requirements in future reports after the completion of this offering. See “Prospectus Summary—Implications of Being an Emerging Growth Company.”

We may amend or supplement this prospectus from time to time by filing amendments or supplements as required. You should carefully consider the risks and uncertainties described under the heading “Risk Factors” beginning on page 11 of this prospectus before you make an investment decision.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.

This Prospectus is dated [●], 2022.

TABLE OF CONTENTS

You should rely only on information contained in this prospectus. We have not authorized anyone to provide you with information other than that contained in this prospectus or in any free writing prospectus we may authorize to be delivered or made available to you. We take no responsibility for and cannot provide any assurance as to the reliability of any other information others may give you. The Selling Shareholders are not offering to sell or seeking offers to buy shares of common stock in jurisdictions where offers and sales are not permitted. The information in this prospectus or any free writing prospectus is accurate only as of its date, regardless of its time of delivery or of any sale of shares of our common stock. Our business, financial condition, results of operations, and prospects may have changed since that date. We are responsible for updating this prospectus to ensure that all material information is included and will update this prospectus to the extent required by law.

For investors outside of the United States: Neither we nor any of the Selling Shareholders have done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of common stock by the Selling Shareholders and the distribution of this prospectus outside of the United States.

ABOUT THIS PROSPECTUS

This prospectus is a part of a registration statement on Form S-1 that we filed with the Securities and Exchange Commission (the “SEC”) using a “shelf” registration or continuous offering process. Under this shelf process, the Selling Shareholders may, from time to time, sell the shares of common stock covered by this prospectus in the manner described in the section titled “Plan of Distribution.” Additionally, we may provide a prospectus supplement to add information to, or update or change information contained in, this prospectus (except for the section titled “Plan of Distribution,” which additions, updates, or changes that are material shall only be made pursuant to a post-effective amendment). You may obtain this information without charge by following the instructions under the section titled “Additional Information” appearing elsewhere in this prospectus. You should read this prospectus and any prospectus supplement before deciding to invest in our shares.

INDUSTRY AND MARKET DATA

Market data and certain industry data and forecasts used throughout this prospectus were obtained from internal Company surveys, market research, consultant surveys, publicly available information, reports of governmental agencies and industry publications and surveys. Industry surveys, publications, consultant surveys and forecasts generally state that the information contained therein has been obtained from sources believed to be reliable, but the accuracy and completeness of such information is not guaranteed. We have not independently verified any of the data from third party sources, nor have we ascertained the underlying economic assumptions relied upon therein. Similarly, internal surveys, industry forecasts and market research, which we believe to be reliable based on our management’s knowledge of the industry, have not been independently verified. Forecasts are particularly likely to be inaccurate, especially over long periods of time. Statements as to our market position are based on the most currently available data. While we are not aware of any misstatements regarding the industry data presented in this prospectus, our estimates involve risks and uncertainties and are subject to change based on various factors, including those discussed under the heading “Risk Factors” in this prospectus.

Glossary of Bitcoin and Crypto Terms

Prospectus Summary

This summary highlights selected information contained elsewhere in this prospectus. This summary does not contain all the information that you should consider before investing in our common stock. You should carefully read the entire Prospectus, including “Risk Factors”, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Financial Statements, before making an investment decision. Unless the context suggests otherwise, all references to “Athena”, “we”, “us”, “our”, or “the Company” refer to Athena Bitcoin Global, a Nevada corporation and all of its subsidiaries, and all references to “Athena Bitcoin” refer solely to Athena Bitcoin, Inc., a Delaware corporation and a wholly-owned subsidiary of the Company. As used below, Bitcoin with an uppercase “B” is used to describe the system as a whole that is involved in maintaining the ledger of bitcoin ownership and facilitating the transfer of bitcoin among parties. When referring to the digital asset within the Bitcoin network, bitcoin is written with a lower case “b” (except, of course, at the beginning of sentences or paragraph sections, as below). The name “Athena Bitcoin” and the Athena Bitcoin logo service mark appearing in this prospectus are the property of Athena Bitcoin, Inc., a wholly-owned subsidiary of the Company. Solely for convenience, the trademarks, servicemarks and trade names in this prospectus are referred to without the ^® and ^™ symbols, but such references should not be construed as any indicator that the owner of such trademarks, servicemarks and trade names will not assert, to the fullest extent under applicable law, their rights thereto. We do not intend the use or display of other companies’ trademarks and trade names to imply a relationship with, or endorsement or sponsorship of us by, any other companies.

Introduction

We are an early entrant in the crypto asset market and one of the first U.S. publicly traded companies using crypto assets and blockchain technologies in our business operations which include a global network of Athena Bitcoin ATMs.

Our management has determined that it is in our best interests to become a reporting company under the Securities and Exchange Act of 1934 as amended (“Exchange Act”), and endeavor to establish a public trading market for our common stock on the OTCQB or other trading systems. Currently our trading volume is limited and we are subject to the Alternative Reporting Standard of OTC Pink Market. Our management believes that establishing a public market on OTCQB or another exchange: (i) will increase our profile as a leading company in the international operation of Bitcoin ATMs, giving us greater identity and recognition, and (ii) will make it easier for us to attract additional equity capital, which we need to expand our business. There is no assurance that we will accomplish any of the foregoing goals and prospective investors are cautioned to carefully read the risk factors set forth herein prior to making an investment decision.

Athena Bitcoin connects the world’s
cash to the world of cryptocurrency.

Overview

Athena Bitcoin Global owns and operates a global network of Athena Bitcoin ATMs, which we refer to as our ATMs, that allow our customers to buy or sell Bitcoin and other major crypto assets in exchange for their local fiat currency, such as dollars or pesos. We are focused on making Bitcoin and other major crypto assets more easily accessible, functional and usable for ordinary people and small businesses. Bitcoin, blockchains, smart contracts and crypto assets are poised to transform the international financial order, however for billions of people, this new financial system is out of reach. They still rely on cash, either because they do not have a bank account or choose not to use one. For them, a connection between digital finance and paper currency is necessary.

Bitcoin is a system for decentralized digital value exchange that is designed to enable units of bitcoin to be transferred across borders without the need for currency conversion. Bitcoin is not legal tender, except recently in the country of El Salvador. The supply of bitcoin is not determined by a central government, but rather by an open-source software program that limits both the total amount of bitcoin that will be produced and the rate at which it is released into the network. The responsibility for maintaining the official ledger of who owns what bitcoin and for validating new bitcoin transactions is not entrusted to any single central entity. Instead, it is distributed among the network’s participants. As such, crypto assets are transferred entirely online, with no physical coins or bills. Instead of being held at a bank, crypto assets are held in one’s digital wallet, which is an online vault for holding public and private keys for crypto assets.  Instead of being transferred through banks, clearing houses and payment processors, crypto assets are transferred directly to the recipient online and transactions are recorded on a blockchain or public ledger. The value of each crypto asset is determined by trading among buyers and sellers all over the world. At the end of 2020, the overall market capitalization of crypto assets reached $782 billion, representing a compounded average growth rate (CAGR) of over 150% since 2012. The supply of Bitcoin is greater than the M1 money supplies of the Swiss Franc and the Russian Ruble. One challenge for Bitcoin and other crypto assets is that they typically cannot be used to pay for things like groceries, utility bills, or a house. When someone wants to spend their bitcoin, they will generally need to first convert it to their local currency. Crypto asset owners can use crypto exchanges like Coinbase and acquire U.S. dollars by selling their crypto asset(s). On Coinbase or other crypto asset exchanges, users can oftentimes sell their bitcoin or other crypto assets for up to 50,000 U.S. dollars a day which can be wired or otherwise sent directly to a bank account and typically usable after one or two business days. Crypto exchanges are well suited for larger, planned transactions but can be inconvenient or entirely unsuitable for smaller or more immediate transactional needs. They also do not offer the level of convenience that bank customers are accustomed to. Most people in the U.S. use bank ATMs rather than bank tellers to get spending cash due to the added convenience.

ATM Market

According to a University of Florida study, there were over 470,135 traditional ATMs operating in the United States in 2018. For Bitcoin owners, our ATMs play a similar role by providing cash conveniently and quickly. Someone that owns Bitcoin, Ethereum, Litecoin or BCH can visit our ATMs and get up to $2,000 in cash in a single transaction. While our ATMs dispense cash for Bitcoin owners like a typical ATM cash machine does for a bank customer, our ATMs function is more akin to currency exchange booths at international airports. Our ATMs are performing real-time exchange between major crypto assets and local fiat currency including dollars and pesos. Instead of exchanging across countries, we exchange between the legacy financial system and a new emerging digital financial system. The majority of our customers use our services to purchase Bitcoin with dollars. Although some of our ATMs in the United States support dispensing dollars in exchange for Bitcoin, only a small percentage of customers use this service. However, in Central and South America, there is a more even distribution between purchases and sales. Athena Bitcoin ATMs enable anyone to quickly buy or sell Bitcoin, Ethereum, Litecoin or BCH in exchange for local paper money. While our ATMs differ substantially in function from bank ATMs, they provide a similar level of convenience. In addition, our ATMs benefit from the public’s vast experience using bank ATMs, which greatly contributes to making our ATMs a very user-friendly method for anyone to buy or sell Bitcoin.

Company Summary

The Company is focused on developing, owning and operating a global network of Athena Bitcoin ATMs, which are free standing kiosks that permit customers to buy or sell crypto assets (including Bitcoin, Ethereum, Litecoin and BCH) in exchange for cash (banknotes) issued by sovereign governments and often referred to as fiat currencies. The Company places its machines in convenience stores, shopping centers, and other easily accessible locations. Our network presently includes Athena Bitcoin ATMs in 10 states and 3 countries in Central and South America. We seek to expand our network in the U.S. and globally, and to further develop Athena Bitcoin as a trusted and preferred brand for parties seeking to exchange currency for Bitcoin and other major crypto assets.

Customers can purchase as little as $1 of Bitcoin, but normally choose between $100 and $1,000 using Athena Bitcoin ATMs. The typical ATM that the Company operates is about 5-feet tall and features a large touchscreen for customer interaction. The customer typically needs to have a wallet app on his smart phone to buy or sell crypto assets on our ATM. In the process of the transaction, the customer will follow the steps prompted on the screen. When a customer is buying crypto assets, the machine will prompt the customer to insert cash since our ATMs do not accept debit or credit cards. When the customer is done, a receipt will print showing exactly how much crypto assets have been bought and the address they were sent to.

The Company’s ATMs do not contain any crypto assets or keys to crypto assets. The Company sells Bitcoin, Ethereum, Litecoin and BCH from cloud-based wallets in each country, enabling real-time supply of crypto assets to its customers. For the period ending September 30, 2021 and the fiscal years ending December 31, 2020 and December 31, 2019, the Company’s breakdown of volume of ATM transactions per crypto asset is as follows:

The Company buys most of its crypto assets through automated purchases on crypto exchanges, based on algorithms the Company has developed for balancing its holdings with anticipated demand. In addition to this automated buying program, the Company is active in the over-the-counter dealer market and has bilateral relationships with several large crypto asset trading desks. We replenish our supply of Bitcoin, Ethereum, Litecoin and BCH daily as needed, and hold them in our wallet to sell to users of our ATMs. On average, we sell our holdings of Bitcoin within 3 to 5 days of buying it, and within 7 to 10 days of buying our Ethereum, Litecoin, and BCH holdings. We strive to keep this period short to reduce the effect of changes in crypto assets/U.S. dollar exchange rates on our business and to maximize our working capital. We do not invest or have long term holdings of Bitcoin, Ethereum, Litecoin or BCH.

We charge a fee per crypto asset available through Athena Bitcoin ATM, equal to the prevailing price at U.S.- based exchanges plus a mark up that typically ranges between 5% and 20%. The prices shown to customers on our Bitcoin ATM are inclusive of this price spread and are calculated by multiplying the prevailing price level of crypto asset by one plus the mark up. The mark up varies from one crypto asset to another and by location. It is determined by a proprietary method that is maintained as a trade secret. Our revenues associated with our ATM transactions are recognized at the time when the crypto asset is delivered to the customer. By increasing our geographic service area, including our recent expansion of operations in El Salvador, we aim to make Athena into a global financial services company that can connect the world’s cash to the world of crypto assets.

Corporate History and Other Information

The Company was incorporated in the state of Nevada in 1991 under the name “GamePlan, Inc.” for the sole purpose of merging with Sunbeam Solar, Inc., a Utah corporation, which merger occurred as of December 31, 1991 with GamePlan, Inc. as a sole surviving entity. The Company was involved in various businesses, including, gaming and other consulting services, prior to becoming a company seeking acquisitions (a “shell company” as defined in Rule 405 of the Securities Act). The Company was a reporting issuer under the Securities and Exchange Act of 1934 (the “Exchange Act”) from 1999 until 2015 when it filed Form 15 pursuant to Rule 12g-4(a)(1) with the Commission and ceased to be a reporting company.

On January 14, 2020 the Company entered into a Share Exchange Agreement (the “Agreement”), by and among the Company, Athena Bitcoin, Inc., a Delaware corporation (“Athena Bitcoin”) incorporated in 2015, and certain shareholders of Athena Bitcoin. The Agreement provides for the reorganization of Athena Bitcoin, with and into the Company, resulting in Athena Bitcoin becoming a wholly-owned subsidiary of the Company. The agreement is for the exchange of 100% shares of the outstanding common stock of Athena, for 3,593,644,680 shares of GamePlan, Inc. common stock (an exchange rate of 1,244.69 shares of common stock of GamePlan, Inc. for each share of Athena Bitcoin common stock). The closing of the transaction occurred as of January 30, 2020. Subsequently, in May, 2020, the Company filed its amended and restated articles of incorporation authorizing a total of 4,409,605,000 shares of common stock.

The Company approved the name change from “GamePlan, Inc.” to “Athena Bitcoin Global” on March 10, 2021 by the unanimous consent of its Board of Directors and a majority consent of its shareholders. The Company filed an amendment to its Articles of Incorporation with the Secretary of State of the state of Nevada on April 6, 2021, with the effective date of April 15, 2021. The Company’s name change and trading symbol change to “ABIT” was declared effective by FINRA on OTC Pink Market as of June 9, 2021.

The Company, Athena Bitcoin Global, is a Nevada corporation which owns 100% of our operating subsidiary, Athena Bitcoin, Inc., a Delaware corporation. Our domestic business operations are conducted by Athena Bitcoin, Inc. We have operating subsidiaries in the specific countries where we operate, as more fully described in the following:

⁽¹⁾ Athena Bitcoin Inc. owns 99% of Athena Holdings El Salvador SA de CV and Eric Gravengaard holds 1% on behalf of the Company.

⁽²⁾ Athena Bitcoin Inc. beneficially owns and controls Athena Holdings SAS which is nominally owned by Eric Gravengaard 95% and Matias Goldenhörn 5%.

⁽³⁾ Athena Bitcoin Inc. beneficially owns and controls Athena Holding Company SRL which is nominally owned by Eric Gravengaard 45%, Gilbert Valentine 45%, and Matias Goldenhörn 10%.

⁽⁴⁾ Athena Bitcoin Inc. owns 2,999 Shares of Athena Bitcoin SRL de CV and Eric Gravengaard owns 1 Share on behalf of the Company.

Our corporate office is located at 1332 N Halsted St., Suite 403, Chicago, IL 60642, and our telephone number is 312-690-4466. Our website is www.athenabitcoin.com. The information on, or that can be accessed through, our website is not part of this prospectus and is not incorporated by reference herein.

Industry Summary

The Company is an active participant in the operation of Bitcoin ATMs in the U.S. and Latin America. More broadly we operate in the market of retail sales of bitcoin facilitating small purchases of Bitcoin, Ethereum, Litecoin, and BCH. There are many ways that retail consumers, individuals purchasing small amounts from one dollar to a few thousand dollars’ worth, can purchase or dispose of crypto assets.

The Birth of Bitcoin ATMs

In the earliest days of Bitcoin, most transactions were done in person - often facilitated by websites. These sites matched prospective buyers with sellers and facilitated communications and wallet coordination, allowing them to meet in public places like coffee shops and street corners, and exchange bitcoin for envelopes of cash. The first Bitcoin ATMs began appearing in 2014. These ATMs were an instant hit with retail customers who were accustomed to in-person transactions because they offered instantaneous access to bitcoin in a familiar and safe method.

According to Reuters in a March, 2021 article titled “Bitcoin ATMs are coming to a gas station near you”, the industry has grown from a handful of machines operated by hobbyists to more than 15,000 kiosks worldwide primarily operated by increasingly larger organizations. There are many operators of Bitcoin ATM networks, from crypto businesses to major corporate and conventional kiosk companies including Coinstar.

Some Bitcoin ATMs offer one-way exchange, allowing customers to only buy crypto assets. Others offer two-way exchange, so customers can buy crypto assets for cash, or sell some of their crypto assets and receive cash. Athena Bitcoin ATMs, serve clients with the following types of crypto assets: Bitcoin, Ethereum, Litecoin, and BCH in either one-way or two-way exchanges, depending on the functionality of each ATM machine.

Bitcoin Exchanges

Parties that want to use their bank accounts to buy Bitcoin can do so without an ATM. These transactions are the domain of exchanges and specialty apps including services from Coinbase, Gemini, Kraken, and Square. These services generally accept U.S. dollar transfers from bank accounts and do not accept physical currency. These services may or may not, depending on several factors including method of deposit, allow the purchaser of a crypto asset on their platforms to immediately transfer the crypto asset into their own wallet. These services cater to larger purchasers and investors in crypto assets. Users of exchanges may use ATMs as a convenient method to get spending cash, similar to how bank account and credit card holders use bank ATMs.

The growth of businesses and services that accept Bitcoin and make it more functional is contributing to increasing Bitcoin usage. In October of 2020, PayPal and Venmo announced they will accept Bitcoin, thus enabling PayPal and Venmo customers to use their Bitcoin to make online purchases and online payments. In 2020 and 2021, with little promotion and advertising, we have experienced a significant increase in transaction volumes and average transaction sizes (see “Management’s Discussion and Analysis of Financial Condition and Results of Operations”). We believe this trend is due in part to an increase in companies and online service providers that are helping to make Bitcoin more widely and easily usable. We believe that the use of Bitcoin ATMs will continue to rise as the Bitcoin and crypto industry and its many interconnected service providers expand.

Business Strategies

We seek to grow and distinguish Athena Bitcoin services based on our method of location selection, our global expansion, operational efficiencies, and our authenticity as a crypto industry forerunner with respect to Bitcoin ATMs.

We are an efficient operator.

We are focused on placing our ATMs in optimal locations that maximize both current income and future potential. Our ATMs are in urban, suburban, and rural locations. Our site selection criteria and metrics are a closely guarded proprietary aspect of our business. In placing our ATMs, we employ a data driven strategy based on factors we have learned over the years. In addition to data metrics, our placement strategy includes analysis of immediate trends, as we are in a dynamic business where usage is widening dramatically and often in unpredicted ways. Each location is chosen to complement the rest of the fleet and offer customers of diverse backgrounds access to convenient crypto assets transactions.

We are constantly improving our operational efficiency. Our ATMs serve as remote tellers that connect to our centralized cloud-based crypto trading operation. We have proprietary systems and methods of managing our currency exchange operation. Our founders have a deep understanding of high-frequency trading and were some of the first to electronically trade Bitcoin on multiple exchanges simultaneously. The objective of our purchasing algorithms is to frequently re-balance our crypto holdings to meet the dynamic demand of our many customers. Over-buying of any crypto asset can result in inefficiency and currency risk, while under-buying may temporarily prevent us from selling crypto assets at our ATMs. We strive to improve the efficiency of our currency exchange operations to maximize our profits, manage risk and facilitate growth.

We are a global business.

We placed our first ATM outside the U.S. in Mexico in 2017. According to the CIA World Factbook, the median age in the United States is 38. In South America it is 31, and Africa has a median age of only 18. As the digital generation accumulate their wealth, they are far more likely to embrace crypto assets than their predecessors. Bitcoin is poised to quickly become a part of the lives of a huge percentage of the developing world’s population. This “global south” offers a large green field expansion opportunity for us because it combines high usage of physical currency with low median age and reduced access to quality banking.

On June 8, 2021, El Salvador became the first and remains the only country to officially adopt the cryptocurrency as legal tender when its congress passed the Bitcoin Law proposed by President Nayib Bukele. On September 7, 2021, the Bitcoin Law was implemented and Bitcoin became legal tender in El Salvador, alongside the U.S. dollar, the country’s other official currency. Under the new law, Salvadorans can pay taxes in Bitcoin and businesses are obliged to accept Bitcoin as payment for goods and services, in addition to the U.S. dollar. Given that more than 70% of the adult population of El Salvador does not have access to the traditional banking system, the government of El Salvador believes that Bitcoin will greatly help the unbanked get access to electronic payments.

The Company began working with the government of El Salvador in late June 2021 to support the implementation of its Bitcoin Law. In August 2021, we entered into certain agreements for services to be rendered by the Company to the Department of Treasury (Ministerio De Hacienda) of El Salvador, pursuant to which we have installed and are operating 200 Chivo Bitcoin ATMs in El Salvador, 10 Chivo Bitcoin ATMs at El Salvador consulates in the U.S., 45 Chivo Bitcoin ATMs in other U.S. locations, and importing and delivering 950 Chivo point-of-sale (“POS”) terminals for local businesses in El Salvador to transact with Bitcoin. As of December 31, 2021, all Chivo Bitcoin ATMs are installed and operational and all 950 point-of-sale terminals have been delivered and subsequently distributed to end-users as per above. The Company is responsible for maintaining the existing software infrastructure supporting the operation of the ATMs, the hardware maintenance of the ATM, cash logistics and customer support. Currently, there are no on-going obligations with respect to the POS terminals.

In addition, we will also develop and maintain a Bitcoin platform (Chivo Ecosystem) designed to support the Chivo digital wallet. The Company was obligated to provide the software for the Chivo digital wallet, comprising both the software that runs on mobile smartphones, which we refer to as the App, and the software that runs on servers, which together comprise the Chivo Digital Wallet. The Chivo Digital Wallet has the following functions: (i) storing and displaying USD and Bitcoin balances; (ii) sending and receiving USD and Bitcoin between users of the Chivo digital wallet and (iii) sending and receiving Bitcoin using on-chain and Lightning Network transaction.

The delivery of the software was initially completed on September 7, 2021, with subsequent improvements delivered continuously throughout the quarter. The usage of the software and the operation of the Chivo Wallet is done by Chivo S.A. de C.V., a government-controlled entity. Through the period ended September 30, 2021, the Company booked expenses related to the Chivo Ecosystem in the amount of $121,000. The government of El Salvador discontinued use of the platform on or about December 15, 2021, but has not terminated its contract with the Company while the Company assists the government’s secondary provider. However, the government of El Salvador has indicated that it may resume utilizing the Company’s software, and therefore our estimation of anticipated costs related to the development of the Chivo Ecosystem platform are uncertain.

The government of El Salvador owns the software (which we refer to as the “IP Software”) and the Company has a perpetual, royalty-free license under its Master Services Agreement to market the IP Software elsewhere.

Subsequent to executing the Master Services Agreement, the Company implemented branding of its “Athena Ruru” suite of services, with such brand comprising of the three services the Company offers: Bitcoin ATMs, POS terminals and merchant services, and the wallet solution, based on the App. To date, the Company has not completed the sale of a license to its bitcoin platform, marketed under the Athena Ruru brand, to any other person, including without limitation any government entity or bank.

The Company’s El Salvador Contracts have the following ongoing obligations:

See also Business – Operations in El Salvador- Material Contracts on page 60.

Our strategy is to become a global financial services company that can connect the world’s cash to the world of Bitcoin, Ethereum, Litecoin, and BCH. We have spent years learning how to expand our business across borders. We have assembled the people, processes, and technologies to enable us to continue to grow our global footprint we believe is unmatched by our competition.

Competitive Strengths

When comparing Bitcoin ATMs to other methods of transacting, the primary advantage of an ATM is its ability to complete a transaction from payment to delivery of crypto assets quickly. In the context of a purchase transaction, our ATM only accept physical currency, which is an immediate and permanent form of payment, and which facilitates the immediate delivery of crypto assets, also an immediate and permanent form of transaction. Apps and services that rely on ACH or other bank mechanisms for the delivery of fiat currency in a transaction often cannot deliver the crypto asset quickly because the funding mechanism is neither immediate nor permanent.

Risk Factors Associated with Our Business

Investing in our shares of common stock involves significant risks. You should carefully consider the risks described in “Risk Factors” before deciding to invest in our shares. If we are unable to successfully address these risks and challenges, our business, financial condition, results of operations, or prospects could be materially adversely affected. In any of such cases, the trading price of our common stock would likely decline, and you may lose all or part of your investment. Below is a summary of some of the risks we face.

Impact from COVID-19

The significant global outbreak of COVID-19 has resulted in a widespread health crisis that has adversely affected the economies and financial markets worldwide and has affected our business in several ways. First, we have been unable to ship our ATMs freely between countries. Second, it has restricted the movement of our employees and their ability to both collaborate in-person, and to do some field-service and installation work.

We are responding to the global outbreak of COVID-19 by taking steps to mitigate the potential risks to us posed by its spread and the impact of the restrictions put in place by governments to protect the population. Our employees and service providers have transitioned to work-from-home. This subjects us to heightened operational risks. For example, technologies in our employees’ and service providers’ homes may not be as robust as in our offices and could cause the networks, information systems, applications, and other tools available to employees and service providers to be more limited or less reliable than in our offices. Further, the security systems in place at our employees’ and service providers’ homes may be less secure than those used in our offices, and we may be subject to increased cybersecurity risk, which could expose us to risks of data or financial loss, and could disrupt our business operations. There is no guarantee that the data security and privacy safeguards we have put in place will be completely effective or that we will not encounter risks associated with employees and service providers accessing company data and systems remotely.

In addition, the continued spread of COVID-19 and the imposition of related public health measures have resulted in, and is expected to continue to result in, increased volatility and uncertainty in the crypto-economy. We also rely on third party service providers to perform certain functions. Any disruptions to a service providers’ business operations resulting from business restrictions, quarantines, or restrictions on the ability of personnel to perform their jobs could have an adverse impact on our service providers’ ability to provide services to us. The continued spread of COVID-19 and efforts to contain the virus could adversely impact our strategic business plans and growth strategy, reduce demand for our products and services, reduce the availability and productivity of our employees, service providers, and third-party resources, cause us to experience an increase in costs due to emergency measures, and otherwise adversely impact our business.

Offering Summary

We are registering the resale of [●] shares of our common stock that include: (i) 409,413,900 shares of common stock that were issued by us to the Selling Shareholders in the share exchange transaction or were purchased by the Selling Shareholders in private transactions, and (ii) up to [●] shares of common stock issued or issuable upon exercise of our outstanding 6% Convertible Debentures Due 2023 (the ”Convertible Debentures”) which were issued in connection with a private placement financing in 2021.

Implications of Being an Emerging Growth Company and Smaller Reporting Company

We are an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”). For as long as we continue to be an emerging growth company, we may take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in this prospectus and our periodic reports and proxy statements and exemptions from the requirements of holding nonbinding advisory votes on executive compensation and stockholder approval of any golden parachute payments not previously approved. We could remain an emerging growth company for up to five years after the effective date of this Registration Statement, although circumstances could cause us to lose that status earlier, including if the market value of our common stock held by non-affiliates exceeds $700 million as of any December 31 before that time or if we have total annual gross revenue of $1.07 billion or more during any fiscal year before that time, in which cases we would no longer be an emerging growth company as of the following December 31 or, if we issue more than $1.07 billion in non-convertible debt during any three-year period before that time, we would cease to be an emerging growth company immediately. Even after we no longer qualify as an emerging growth company, we may still qualify as a “smaller reporting company” which would allow us to take advantage of many of the same exemptions from disclosure requirements, including reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements. Additionally, even if we no longer qualify as an emerging growth company, as long as we are neither a “large accelerated filer” nor an “accelerated filer,” we would not be required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act. We cannot predict if investors will find our securities less attractive because we may rely on these exemptions, which could result in a less active trading market for our securities and increased volatility in the price of our securities.

Finally, we are a “smaller reporting company” (and may continue to qualify as such even after we no longer qualify as an emerging growth company) and accordingly may provide less public disclosure than larger public companies, including the inclusion of only two years of audited financial statements and only two years of management’s discussion and analysis of financial condition and results of operations disclosure. As a result, the information that we provide to our stockholders may be different than you might receive from other public reporting companies in which you hold equity interests.

Summary Consolidated Financial Data

The following tables set forth a summary of our historical consolidated financial data as of and for the periods indicated. The summary consolidated statements of operations data for the periods ended December 31, 2020 and December 31, 2019 have been derived from our audited consolidated financial statements and related notes thereto included elsewhere in this prospectus. The summary consolidated statements of operations data for the periods ended September 30, 2021 and September 30, 2020 have been derived from our unaudited consolidated financial statements and related notes thereto included elsewhere in this prospectus. Our historical results are not necessarily indicative of the results to be expected in the future. When you read this summary consolidated financial data, it is important that you read it together with the historical consolidated financial statements and the related notes thereto included elsewhere in this prospectus, which qualify this summary consolidated financial data in their entirety, as well as the sections of this prospectus titled “Selected Consolidated Financial Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The summary financial data in this section are not intended to replace our audited consolidated financial statements and the related notes, and are qualified in their entirety by such financial statements and related notes included elsewhere in this prospectus.

The Offering

The number of shares of common stock to be outstanding immediately after this offering is based on 4,049,392,879 shares of common stock outstanding as of January [●], 2022 and excludes:

Risk Factors

Investing in the Shares involves a high degree of risk. You should carefully consider the risks and uncertainties described below, together with all of the other information in this prospectus, before deciding to invest in the Shares. If any of the risks occur, our business, results of operations, financial condition, and prospects could be harmed. In that event, the trading price of the Shares could decline, and you could lose part or all your investment. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations.

The Most Material Risks Related to Our Business and Financial Position

Our business is in a new consumer product segment, which is difficult to forecast.

Our industry segment is new and is constantly evolving. As a result, there is a lack of available information with which to forecast industry trends or patterns. There is no assurance that sustainable industry trends or preferences will develop that will lead to predictable growth or earnings forecasts for individual companies or the industry segment. We are also unable to determine what impact future governmental regulation may have on trends and preferences or patterns within our industry segment. See “Risk Factors Related to Current and Future Regulations and other Law Enforcement Actions” for a discussion of the risks associated with governmental regulation.

Our total revenue is substantially dependent on the volume of transactions conducted by our customers. If such volume declines, our business, operating results, and financial position would be adversely affected.

We generate substantially all our revenue from the sale of crypto assets to our customers, either using our Bitcoin ATMs or over the phone. Revenue is based on the prices that we charge our customers based on prevailing market prices. This revenue may fluctuate based on the price of crypto assets. As such, any declines in the volume of transactions, the price of crypto assets, or market liquidity for crypto assets generally may result in lower total revenue to us.

The price of crypto assets and associated demand for buying, selling, and trading crypto assets have historically been subject to significant volatility. The price and trading volume of any crypto asset is subject to significant uncertainty and volatility, depending on several factors, including:

There is no assurance that any supported crypto asset will maintain its value or that there will be meaningful levels of interest from customers. If the demand for purchasing or selling crypto assets declines, our business, operating results, and financial condition would be adversely affected.

The future development and growth of crypto assets and protocols is subject to a variety of factors that are difficult to predict and evaluate. If the future does not develop and grow as we expect, our business, operating results, and financial condition could be adversely affected.

Blockchain technology was only introduced in 2008 and remains in the early stages of development. In addition, different protocols are designed for different purposes. Bitcoin, for instance, was designed to serve as a peer-to-peer electronic cash system, while Ethereum was designed to be a smart contract and decentralized application platform. Many other protocol networks—ranging from cloud computing to tokenized securities networks—have only recently been established. The further growth and development of any crypto assets and their underlying networks and other cryptographic and algorithmic protocols governing the creation, transfer, and usage of crypto assets represent a new and evolving paradigm that is subject to a variety of factors that are difficult to evaluate, including:

Loss of a banking relationship could adversely impact our business, operating results, and financial condition.

Athena depends on having regular and normalized access to a bank checking account for normal business purposes and also for taking deposits of the cash received from the ATM fleet. As a money services business registered with the Financial Crimes Enforcement Network (“FinCEN”) under the Bank Secrecy Act, as amended by the USA PATRIOT Act of 2001, and its implementing regulations enforced by FinCEN, our banking partners view us as a higher risk customer for purposes of their anti-money laundering programs. We may face difficulty establishing or maintaining banking relationships due to our banking partners’ policies and some prior bank partners have terminated their relationship with Athena. The loss of these banking partners or the imposition of operational restrictions by these banking partners and the inability for us to utilize other redundant financial institutions may result in a disruption of business activity as well as regulatory risks. In addition, financial institutions in the United States and globally may, because of the myriad of regulations or the perceived risks of crypto assets, decide to not provide accounts, payments other financial services to us. Such events could negatively affect an investment in the Shares.

The Company may be forced to cease operations.

It is possible that, due to any number of reasons, including, but not limited to, an unfavorable fluctuation in the value of cryptographic and fiat currencies, the inability by the Company, whether in the United States or globally, to obtain clients, the failure of commercial relationships, the failure of development of the necessary technical environment, the failure of government actors to provide needed regulatory clarity, the failure of technology development by third parties, or intellectual property ownership challenges, the Company may no longer be viable to operate and the Company may dissolve, either in whole or part, or take actions that result in a dissolution event. During the past six years there have been several rumors that regulation specifically aimed at terminating the practice of selling crypto assets via kiosks, such as the Company’s fleet of Bitcoin ATMs, would be forthcoming. While the regulations hypothesized by these rumors have never been enacted, it remains a risk to the Company’s principal operations and could be detrimental to an investment in the Shares.

Other Risk Factors Related to Our Business Operations and Financial Position

Currently, there is a small use of Bitcoin in the retail and commercial marketplace in comparison to relatively large use by speculators, thus contributing to price volatility that could adversely affect an investment in the Shares.

Bitcoin and the Bitcoin Network have only recently become accepted as a means of payment for goods and services by certain major retail and commercial outlets, and the use of Bitcoin by consumers to pay such retail and commercial outlets remains limited. Conversely, a significant portion of Bitcoin demand is generated by speculators and investors seeking to profit from the short- or long-term holding of Bitcoin. A lack of expansion by Bitcoin or other crypto assets into retail and commercial markets, or a contraction of such use, may result in decreased demand for the Company’s services or increased demand for services the Company is not able to provide, either of which could adversely affect an investment in the Shares.

The Company’s assets could be stolen and would be difficult to recover due to the nature of cash and crypto assets.

It is possible that, due to any number of reasons, including, but not limited to, a robbery by either a general malcontent or an employee of the Company could adversely affect the Company’s operations and assets. From time to time, the Company has been the victim of vandalism and targeted attacks on our ATMs, which have resulted in loss of cash and equipment. The Company has also been the target of cyberattacks and has suffered security breaches of its websites, email, cellphones, and other systems related to the operations of the business. On March 31, 2021, we suffered a security breach which resulted in a loss of 29 bitcoin (approximately $1.7 million of market value). We have initiated two independent investigations of the attack with the assistance of law enforcement and outside counsel. See also Management Discussion and Analysis of Financial Condition and Results of Operations on page 30. Historically, stolen Bitcoin, crypto assets of multiple types, and cash have been difficult to recover by law enforcement or other means due to their fundamental nature as fungible instruments of value. At this time, we have no information if the stolen crypto assets can be recovered. The Company’s losses may negatively affect an investment in the Company’s shares.

Crypto assets and funds that the Company holds on Bitcoin exchanges could be lost, stolen, or otherwise impaired.

From time to time and for customary reasons of procuring crypto assets, the Company holds assets including dollar deposits, Bitcoin, Ethereum, Litecoin, and BCH on crypto asset exchanges. The Company carefully selects the platforms that it chooses to do business with, however this may not be sufficient to avoid losses if those exchanges suffer losses or other impairments. In 2018, the Company had assets of less than $10,000 on the Quadriga Exchange in Canada when Quadriga filed for bankruptcy protection following the death of its Chief Executive Officer and subsequent discovery of its insolvency. In addition, while not applicable to the Company’s operations, several other well-known and highly regarded exchanges have suffered similar fates. For example, in February 2014, Mt. Gox, then the largest Bitcoin exchange worldwide, filed for bankruptcy protection in Japan after an estimated 700,000 bitcoin were stolen from its wallets. In May 2019, Binance, one of the world’s largest exchanges was hacked, resulting in losses of approximately $40 million. Any such losses by an exchange could have a negative impact on the financial position of the Company and adversely impact an investment in the Shares.

Our lack of insurance protection could adversely impact our business, operating results, and financial condition.

The crypto assets held by us are not insured. We also do not rely on insurance carriers to insure losses resulting from a breach of our physical security, cyber security, or by employee or service provider theft since we do not carry crime and specie insurance. We only maintain a general liability insurance which does not cover crypto assets or breaches described above. Therefore, we may suffer a loss which is not covered by insurance in damages. Such a loss could cause a substantial business disruption of our operations, adverse reputational impact, inability to compete with our competitors, regulatory scrutiny, and consequently, it could adversely impact an investment in our shares of common stock.

The Company operates in locations outside of the United States and, as such, is subject additional risks with respect to enforcement of its contractual rights.

We currently operate and intend to grow our operations in a number of jurisdictions outside of the United States. Laws and business practices that favor local competitors or prohibit or limit foreign ownership of certain businesses, or our failure to adapt our practices, systems, processes, and business models effectively to the traveler and supplier preferences (as well as the regulatory and tax landscapes) of each country into which we expand, could impede our ability to enter into, negotiate or enforce contracts in those markets. In addition to the other risks described in this prospectus, our company’s international operations would be subject to numerous other risks, including, but not limited to, weaker enforcement of our company’s contractual rights, longer payment cycles, and difficulties in collecting accounts receivable.

The countries, we operate in, may or may not have stable economies, stable banking sectors, or stable governments which may or may not permit us from repatriating profits, maintaining ownership of our business or its assets, or continuing operations.

From time to time, certain governments have seized foreign companies, their assets, and or their operations. It is possible for us to face significant losses if such an event occurs, either specific to us or broadly across the entire country or industry in which we operate. We may, for example no longer be permitted to purchase additional crypto assets, or operate our machines, or return capital or profits to our parent company in the United States. This may result in a total and complete loss of our assets within that country as well as further costs to continue to pay our existing liabilities within that country.

The countries we operate in may not have stable governments or may face significant political, social, or civil unrest.

The countries where the Company operates, or may choose to operate in the future, may face significant periods of political, military, social, or civil unrest. This may result in the destruction of the Company’s property, the destruction of the Company’s other assets, or other harm to the Company and its personnel, which may cause losses or for the Company to incur significant liabilities. Nationalization of certain industries has occurred in some of the countries where Athena currently operates. The loss of access to those nationalized assets may adversely impact an investment in the Shares.

Fluctuations in currency exchange rates could harm our operating results and financial condition.

Revenue generated and expenses incurred from our international operations are often denominated in the currencies of the local countries. Accordingly, changes in the value of foreign currencies relative to the U.S. dollar can affect our revenue and operating results reflected in our U.S. dollar-denominated consolidated financial statements. Our financial results are also subject to changes in exchange rates that impact the settlement of transactions in non-local currencies. As a result, it could be more difficult to detect underlying trends in our business and operating results. To the extent that fluctuations in currency exchange rates cause our operating results to differ from the expectations of investors, the market price of the Shares could be adversely impacted. To date, we have not engaged in currency hedging activities to limit the risk of exchange fluctuations. Even if we use derivative instruments to hedge exposure to fluctuations in foreign currency exchange rates, the use of such hedging activities may not offset any or more than a portion of the adverse financial effects of unfavorable movements in foreign exchange rates over the limited time the hedges are in place and may introduce additional risks if we are unable to structure effective hedges with such instruments.

Adverse economic conditions may affect our business.

Our performance is subject to general economic conditions, and their impact on the digital currency markets and our customers. The United States and other international economies have experienced cyclical downturns from time to time in which economic activity declined resulting in lower consumption rates, restricted credit, reduced profitability, weaknesses in financial markets, bankruptcies, and overall uncertainty with respect to the economy. The impact of general economic conditions on the Company is highly uncertain and dependent on a variety of factors, including global adoption of cryptocurrencies, central bank monetary policies, and other events beyond our control. Geopolitical developments, such as trade wars and foreign exchange limitations can also increase the severity and levels of unpredictability globally and increase the volatility of global financial and digital currency markets. To the extent that conditions in the general economic and digital currency markets materially deteriorate, our ability to attract and retain customers may suffer. 

The COVID-19 pandemic could have an adverse effect on our business, operating results, and financial condition.

We are responding to the global outbreak of COVID-19 by taking steps to mitigate the potential risks to us posed by its spread and the impact of the restrictions put in place by governments to protect their populations. Our employees and service providers have transitioned to work-from-home. This subjects us to heightened operational risks. For example, technologies in our employees’ and service providers’ homes may not be as robust as in our offices and could cause the networks, information systems, applications, and other tools available to employees and service providers to be more limited or less reliable than in our offices. Further, the security systems in place at our employees’ and service providers’ homes may be less secure than those used in our offices, and while we have implemented technical and administrative safeguards to help protect our systems as our employees and service providers work from home, we may be subject to increased cybersecurity risk, which could expose us to risks of data or financial loss, and could disrupt our business operations. There is no guarantee that the data security and privacy safeguards we have put in place will be completely effective or that we will not encounter risks associated with employees and service providers accessing company data and systems remotely. We also face challenges due to the need to operate with the remote workforce and are addressing those challenges to minimize the impact on our ability to operate.

In addition, the continued spread of COVID-19 and the imposition of related public health measures have resulted in, and is expected to continue to result in, increased difficulty in retail or in-store operations, including our ability to ship, install, and maintain our Bitcoin ATM fleet. Some of the retail locations, such as shopping malls, where we have placed our Bitcoin ATMs have closed either permanently or temporarily due to the spread of COVID-19 and the subsequent response by governments and businesses. We also rely on third party service providers, including our armored car services, to perform certain functions. Any disruptions to a service providers’ business operations resulting from business restrictions, quarantines, or restrictions on the ability of personnel to perform their jobs could have an adverse impact on our service providers’ ability to provide services to us. The continued spread of COVID-19 and efforts to contain the virus could result in the death of our customers or employees, adversely impact our strategic business plans and growth strategy, reduce demand for or availability of our products and services, reduce the availability and productivity of our employees, service providers, and third-party resources, cause us to experience an increase in costs due to emergency measures, and otherwise adversely impact our business.

Risk Factors Related to Our Operations in El Salvador

Expansion of business operations in El Salvador may not produce the positive results as planned.

We have established significant operations in El Salvador to support the country’s efforts to use Bitcoin as legal tender. However, there are many factors that could disrupt the implementation of Bitcoin Law in El Salvador, and as a result, our operations in El Salvador. Any of such disruptions can have a negative impact on the financial position of the Company. They could jeopardize our expansion plan and be detrimental to our business.

Those risks, as summarized below include:

Political and economic developments in El Salvador may adversely affect Bitcoin Law.

El Salvador's Bitcoin Law has been greeted with skepticism from both Salvadorans and international financial institutions. The population might not fully embrace Bitcoin. Requiring every business to accept Bitcoin for goods and services without adequate access to technology, may be a difficult obstacle to overcome and Bitcoin Law can be changed if it remains unpopular under successor administration. Any of these concerns could disrupt our operations in El Salvador and have a negative impact on the financial position of the Company. Although several political leaders around the globe have voiced support for the Bitcoin Law enacted by El Salvador, and cryptocurrencies such as Bitcoin are widely used and accepted as forms of payment in many countries, no other governments have taken official steps to adopt cryptocurrency as legal tender.

There is a political discontent in El Salvador with President Bukele's ouster of Supreme Court judges and the potential for the president to seek a second consecutive term. The presidential period is five years in El Salvador. Consecutive re-election is not permitted, though previously elected presidents may run for a second, non-consecutive term. Recently, El Salvador’s top court and its election authority have removed what seemed to be a constitutional ban on consecutive presidential reelection, setting the stage for President Nayib Bukele to potentially seek a second term in 2024. If there is a change in El Salvador’s administration after 2024, it may negatively affect Bitcoin Law and our operations in El Salvador.

Our contracts with the El Salvador government may be negatively impacted

We have entered into agreements with El Salvador's Treasury department, pursuant to which we have installed and are operating 200 Chivo Bitcoin ATMs in El Salvador, 10 Chivo Bitcoin ATMs at El Salvador consulates in the U.S., 45 Chivo Bitcoin ATMs in other U.S. locations, and importing and delivering 950 Chivo POS terminals for local businesses in El Salvador to transact with Bitcoin. Each obligation comes with its own set of operational risks in addition to risks set forth herein, including but not limited to the volatile nature of crypto assets, data breach and crypto hacks, changes in U.S. and foreign laws and regulations, talent acquisition and retention, and general economic conditions. If we fail to fulfil our contractual obligations, our agreements may be terminated which may negatively impact our financial standing and reputation. Our current agreements may also be modified or terminated by El Salvador’s Department of Treasury for any reason including but not limited to regime change, additional competition, and loss of political support. Any such unfavorable change in our business operations in El Salvador, including the termination of any contracts with the government of El Salvador, would adversely affect our revenues and profitability, and could negatively affect an investment in our shares of common stock.

Risk Factors Related to the Bitcoin Network, Wallets, Bitcoin, and Crypto Assets

Bitcoin, and most other crypto assets based on public key cryptography, are controllable only by the possessor of both the unique public key and private key relating to the local or online digital wallet in which the bitcoin are held.

While the Bitcoin Network, and similar blockchain protocol networks, require a public key relating to a digital wallet to be published when used in a spending transaction, private keys must be safeguarded and kept private in order to prevent a third party from accessing the bitcoin held in such wallet. To the extent a private key is lost, destroyed, or otherwise compromised and no backup of the private key is accessible, Athena will be unable to access the Bitcoin, or other digital currency, held in the related digital wallet. Any loss of private keys relating to digital wallets used to store Athena’s Bitcoin, or other crypto assets, could adversely affect an investment in the Shares.

The future and development of the Bitcoin Protocol and other blockchain technologies are subject to a variety of factors that are difficult to evaluate.

The further development and acceptance of the Bitcoin Network and other cryptographic and algorithmic protocols governing the issuance of transactions in bitcoin and other crypto asset, which represent a new and rapidly changing industry, are subject to a variety of factors that are difficult to evaluate. Athena does not participate in the development of the Bitcoin Network and has little to no influence over the software developers who write the code or the miners who run the Bitcoin Network. The slowing or stopping of the development or acceptance of the Bitcoin Network may adversely affect an investment in the Shares.

A temporary or permanent blockchain “fork” to any supported crypto asset could adversely affect our business.

Blockchain protocols, including Bitcoin, Ethereum, and Litecoin, are open source. Any user can download the software, modify it, and then propose that Bitcoin, Ethereum, Litecoin, or other blockchain protocols users and miners adopt the modification. When a modification is introduced and a substantial majority of users and miners consent to the modification, the change is implemented and the Bitcoin, Ethereum, Litecoin, or other blockchain protocol networks, as applicable, remain uninterrupted. However, if less than a substantial majority of users and miners consent to the proposed modification, and the modification is not compatible with the software prior to its modification, the consequence would be what is known as a “fork” (i.e., “split”) of the impacted blockchain protocol network and respective blockchain, with one prong running the pre-modified software and the other running the modified software. The effect of such a fork would be the existence of two parallel versions of the Bitcoin, Ethereum, Litecoin, or other blockchain protocol network, as applicable, running simultaneously, but with each split network’s crypto asset lacking interchangeability.

Both Bitcoin and Ethereum protocols have been subject to “forks” that resulted in the creation of new networks, including Bitcoin Cash ABC, Bitcoin Cash SV, Bitcoin Diamond, Bitcoin Gold, Ethereum Classic, and others. Some of these forks have caused fragmentation among platforms as to the correct naming convention for forked crypto assets. Due to the lack of a central registry or rulemaking body, no single entity can dictate the nomenclature of forked crypto assets, causing disagreements and a lack of uniformity among platforms on the nomenclature of forked crypto assets, and which results in further confusion to customers as to the nature of assets they hold on platforms. In addition, several of these forks were contentious and as a result, participants in certain communities may harbor ill will towards other communities. As a result, certain community members may take actions that adversely impact the use, adoption, and price of Bitcoin, Ethereum, Litecoin, or any of their forked alternatives.

Furthermore, hard forks can lead to new security concerns. For instance, when the Ethereum and Ethereum Classic networks split in July 2016, replay attacks, in which transactions from one network were rebroadcast on the other network to achieve “double-spending”, plagued platforms that traded Ethereum through at least October 2016, resulting in significant losses to some crypto asset platforms. Similar replay attacks occurred in connection with the Bitcoin Cash and Bitcoin Cash SV network split in November 2018. Another result of a hard fork is an inherent decrease in the level of security due to the splitting of some mining power across networks, making it easier for a malicious actor to exceed 50% of the mining power of that network, thereby making crypto assets that rely on proof-of-work more susceptible to attack, as has occurred with Ethereum Classic.

Future forks may occur at any time. A fork can lead to a disruption of networks and our information technology systems, cybersecurity attacks, replay attacks, or security weaknesses, any of which can further lead to temporary or even permanent loss of our assets.

From time to time, we may encounter technical issues in connection with the integration of supported crypto assets and changes and upgrades to their underlying networks, which could adversely affect our business.

To support any crypto asset or blockchain token, a variety of front and back-end technical and development work is required to implement our wallet, custody, pricing, transfer, accounting, and other solutions for our Bitcoin ATM fleet, and to integrate such supported crypto asset with our existing infrastructure. For certain crypto assets, a significant amount of development work is required and there is no guarantee that we will be able to integrate successfully with any existing or future crypto asset, token, or stable coin. In addition, such integration may introduce software errors or weaknesses into our platform, including our existing infrastructure. Even if such integration is initially successful, any number of technical changes, software upgrades, soft or hard forks, cybersecurity incidents, or other changes to the underlying blockchain network may occur from time to time, causing incompatibility, technical issues, disruptions, or security weaknesses to our platform. If we are unable to identify, troubleshoot and resolve any such issues successfully, we may no longer be able to support such crypto assets, our assets may be frozen or lost, the security of our crypto asset wallets may be compromised, and technical infrastructure may be affected, all of which could adversely impact our business.

If miners or validators of any crypto asset network, either that we provide to customers or hold for other reasons, demand high transaction fees, our operating results may be adversely affected.

We pay miner fees when transmitting crypto assets including Bitcoin to customers upon completion of their purchase. In addition, we also pay miner fees when we move crypto assets for various operational purposes, such as when we transfer Bitcoin between our regional wallets. However, miner fees can be unpredictable. For instance, in 2017, Bitcoin miner fees increased from approximately $0.35 per transaction in January 2017 to over $50 per transaction in December 2017. Even though Bitcoin’s miner fees have since decreased to $18 per transaction as of March 4, 2021, if the demand for Bitcoin remains at current levels, we could experience high costs in excess of our historical performance. Although we attempt to adjust our pricing to pass through these expenses to our customers, we have in the past incurred, and expect to incur from time to time, losses associated with the payment of miner fees in excess of what we charge our customers, resulting in adverse impacts on our operating results.

We are subject to an extensive and rapidly evolving regulatory environment, and if a particular crypto asset we transact or transacted in is characterized as a “security”, we may be subject to regulatory scrutiny, investigations, fines, and other penalties, which may adversely affect our business, operating results, and financial condition.

The SEC and its staff have taken the position that certain crypto assets fall within the definition of a “security” under the U.S. federal securities laws. The legal test for determining whether any given crypto asset is a security is a highly complex, fact-driven analysis that evolves over time, and the outcome is difficult to predict. The SEC generally does not provide advance guidance or confirmation on the status of any particular crypto asset as a security. Furthermore, the SEC’s views in this area have evolved over time and it is difficult to predict the direction or timing of any continuing evolution. It is also possible that a change in the governing administration or the appointment of new SEC commissioners could substantially impact the views of the SEC and its staff. Public statements by senior officials at the SEC indicate that the SEC does not intend to take the position that Bitcoin or Ether are securities (in their current form). Bitcoin and Ether are the only crypto assets as to which senior officials at the SEC have publicly expressed such a view. Moreover, such statements are not official policy statements by the SEC and reflect only the speakers’ views, which are not binding on the SEC or any other agency or court and cannot be generalized to any other crypto asset. With respect to all other crypto assets, there is currently no certainty under the applicable legal test that such assets are not securities, notwithstanding the conclusions we may draw based on our risk-based assessment regarding the likelihood that a particular crypto asset could be deemed a “security” under applicable laws. Similarly, though the SEC’s Strategic Hub for Innovation and Financial Technology published a framework for analyzing whether any given crypto asset is a security in April 2019, this framework is also not a rule, regulation or statement of the SEC and is not binding on the SEC.

We currently offer only Bitcoin, Ethereum, Litecoin, and BCH for sale at all our ATM machines. We also operate an over-the-counter (“OTC”) desk for private clients and trade customers of the Company. Since 2019, we have been typically buying and selling Bitcoin through our OTC desk, but we have also facilitated transactions in Ethereum, Litecoin, and in some cases, Ankr (1 transaction in 2021), Monero (1 transaction in 2019), Bitcoin SV (1 transaction in each 2019 and 2020), Ripple (1 transaction in 2019), Siacoin (3 transactions in 2019), Tether (5 transactions in 2021), and Tron (1 transaction in 2019). As of September 30, 2021, we do not anticipate transacting in any other crypto assets except Bitcoin, Ethereum, Litecoin, and BCH.

The classification of a crypto asset as a security under applicable law has wide-ranging implications for the regulatory obligations that flow from the offer, sale, trading, and clearing of such assets. For example, a crypto asset that is a security in the United States may generally only be offered or sold in the United States pursuant to a registration statement filed with the SEC or in an offering that qualifies for an exemption from registration. Persons that effect transactions in crypto assets that are securities in the United States may be subject to registration with the SEC as a “broker” or “dealer.” Platforms that bring together purchasers and sellers to trade crypto assets that are securities in the United States are generally subject to registration as national securities exchanges, or must qualify for an exemption, such as by being operated by a registered broker-dealer as an alternative trading system, or ATS, in compliance with rules for ATSs. Persons facilitating clearing and settlement of securities may be subject to registration with the SEC as a clearing agency. If Bitcoin, Ether, Litecoin, and BCH or any other crypto asset we transacted in the past as listed above, is deemed to be a security under any U.S. federal, state, or foreign jurisdiction, or in a proceeding in a court of law or otherwise, it may have adverse consequences for such supported crypto asset (if it is still being used in our transactions) or for our Company if it is determined that certain securities laws were violated and we may be subject to regulatory scrutiny, investigation and penalties. Moreover, the networks on which such supported crypto assets are utilized may be required to be regulated as securities intermediaries, and subject to applicable rules, which could effectively render the network impracticable for its existing purposes. Further, it could draw negative publicity and a decline in the general acceptance of the crypto asset. Also, it may make it difficult for such supported crypto asset to be traded, cleared, and custodied as compared to other crypto asset that are not considered to be securities. Additionally, new laws, regulations, or interpretations may result in litigation, regulatory investigations, and enforcement or other actions, including preventing or delaying us from offering certain products or services, or could impact how we offer such products and services. Foreign jurisdictions may have similar regulations and licensing, registration, and qualification requirements.

Risk Factors Related to Current and Future Regulations and Other Law Enforcement Actions

The regulations that govern our primary business operations are in flux and could change in unpredictable ways that negatively affect our business operations, demand for our services, or our financial position.

Current regulations acknowledge and allow for companies to sell Bitcoin and other crypto assets in the United States and other countries where Athena operates. If regulations change to disallow the sale of Bitcoin or other crypto assets such a change could have a negative impact on revenues and adversely affect an investment in the Shares. Current regulations require Know Your Customer (“KYC”) information be collected as part of a Customer Information Program (“CIP”). If regulations change and require significantly more information to be collected from customers, this change may have a negative impact on customer behavior and could adversely affect an investment in the Shares.

Sanctions could cause us to cease operations in foreign countries or dealings with foreign citizens.

Sanctions, such as those promulgated by the U.S. Department of Treasury, could be brought against countries where the Company operates, or against citizens of certain countries regardless of where they reside. Ceasing operations in such a country would have a negative impact on revenues and the Company may also incur extraordinary costs which may adversely impact an investment in the Shares.

Heightened scrutiny by regulators could be detrimental to the operations of the Company or its brand image.

Our existing operations and any future operations or investments may become the subject of heightened scrutiny by regulators, stock exchanges and other authorities in the United States or globally. As a result, we may be subject to significant direct and indirect interaction with public officials. There can be no assurance that this heightened scrutiny will not in turn lead to the imposition of certain restrictions on our ability to operate or invest in the United States or any other jurisdiction, in addition to those described herein. Further any negative connotations directed at the Company by such public officials could be detrimental to the Company’s brand image and adversely impact an investment in the Shares.

We or our assets may become subject to federal and state asset forfeiture laws which could negatively impact our business operations or financial position.

Violations of any federal laws and regulations could result in significant fines, penalties, administrative sanctions, convictions, or settlements arising from civil proceedings conducted by either the federal government or private citizens, or criminal charges, including, but not limited to, seizure of assets, disgorgement of profits, cessation of business activities or divestiture.

As an entity that conducts business in cash (physical currency), we are potentially subject to federal and state forfeiture laws (criminal and civil) that permit the government to seize the proceeds of suspected criminal activity. Civil forfeiture laws could provide an alternative for the federal government or any state (or local police force) that wants to discourage residents from conducting transactions with crypto asset related businesses. Also, an individual can be required to forfeit property suspected to be the proceeds of a crime even if the individual is not charged or convicted of a crime. Many law enforcement agencies consider large amounts of cash to be suspicious of criminal activity and have been known to seize such property when discovered. Any seizure or forfeiture of the Company’s assets, even if only temporary, could disrupt its normal operations or financial position and negatively affect an investment in the Shares.

Regulators and payment processors have historically taken actions relating to access to banking services, which could materially adversely affect our business.

Actions by the U.S. Department of Justice (the “Justice Department”), the Federal Deposit Insurance Corporation, (“FDIC”), and certain state regulators beginning in 2013, referred to as “Operation Choke Point,” appear to have been intended to discourage banks and payment processors from providing access to banking for certain businesses that are considered high-risk. This heightened regulatory scrutiny by the Justice Department, the FDIC and other regulators has caused various banks and payment processors to cease doing business with Bitcoin ATM companies or companies who do business with Bitcoin ATM companies, without consideration of the actual risk to the banks or processors, simply to avoid heightened federal and state regulatory scrutiny. The operation was officially ended in August 2017; however, future discouragement by the Justice Department, the FDIC, or the Office of the Comptroller of the Currency (“OCC”) could cause the Company, or its service providers including locations where the Company places its fleet of Bitcoin ATMs, to have restricted access to the U.S. financial system as provided by banks, payment providers, or other financial intermediaries, and that could have a negative impact on the Company’s operations, its ability to perform its contractual obligations, or its financial position.

If the Company is unable to satisfy data protection, security, privacy, and other government- and industry-specific requirements, its growth could be harmed.

There are several data protections, security, privacy, and other government and industry-specific requirements, including those that require companies to notify individuals of data security incidents involving certain types of personal data, enacted across various jurisdictions globally. Security compromises or cyberattacks could harm the Company’s reputation, erode market confidence in the effectiveness of its security measures and reliability of its endorsements, negatively impact its ability to attract new clients, or cause clients to stop using the Company’s services.

The nature of our business requires the application of complex financial accounting rules, and there is limited guidance from accounting standard setting bodies. If financial accounting standards undergo significant changes, our operating results could be adversely affected.

The accounting rules and regulations that we must comply with are complex and subject to interpretation by the Financial Accounting Standards Board (the “FASB”), the SEC, and various bodies formed to promulgate and interpret appropriate accounting principles. In addition to the United States, the Company operates in several Latin American countries that may or may not offer similar accounting treatments to some of the Company’s transactions. This could have a significant effect on the ability of the Company to offer comparable results segmented by country in the future. A change in these principles or interpretations could have a significant effect on our reported financial results and may even affect the reporting of transactions completed before the announcement or effectiveness of a change. Recent actions and public comments from the FASB and the SEC have focused on the integrity of financial reporting and internal controls. In addition, many companies’ accounting policies are being subject to heightened scrutiny by regulators and the public. Further, there has been limited precedents for the financial accounting of crypto assets and related valuation and revenue recognition, and no official guidance has been provided by the FASB or the SEC. As such, there remains significant uncertainty on how companies can account for crypto asset transactions, crypto asset balances, derivatives and liabilities denominated in crypto asset tokens, and related revenue and expense. Uncertainties in or changes to regulatory or financial accounting standards could result in the need to change our accounting methods and restate our financial statements and impair our ability to provide timely and accurate consolidated financial information, which could adversely affect our financial statements, result in a loss of investor confidence, and more generally impact our business, operating results, and financial position.

Risk Factors Related to Intellectual Property

Our intellectual property rights are valuable, and any inability to protect them could adversely impact our business, operating results, and financial condition.

Our business depends in large part on our proprietary technology and our brand. We rely on, and expect to continue to rely on, a combination of trademark, trade dress, domain name, copyright, and trade secret and laws, as well as confidentiality and license agreements with our employees, contractors, consultants, and third parties with whom we have relationships, to establish and protect our brand and other intellectual property rights. However, our efforts to protect our intellectual property rights may not be sufficient or effective. Our proprietary technology and trade secrets could be lost through misappropriation or breach of our confidentiality and license agreements, and any of our intellectual property rights may be challenged, which could result in them being narrowed in scope or declared invalid or unenforceable. There can be no assurance that our intellectual property rights will be sufficient to protect against others offering products, services, or technologies that are substantially like ours and that compete with our business.

We may in the future be sued by third parties for alleged infringement of their proprietary rights.

In recent years, there has been considerable patent, copyright, trademark, domain name, trade secret and other intellectual property development activity in the crypto economy, as well as litigation, based on allegations of infringement or other violations of intellectual property, including by large financial institutions. Furthermore, individuals and groups (collectively “patent trolls”) can purchase patents and other intellectual property assets for the purpose of making claims of infringement to extract settlements from companies like ours. Our use of third-party intellectual property rights also may be subject to claims of infringement or misappropriation. We cannot guarantee that our internally developed or acquired technologies and content do not or will not infringe the intellectual property rights of others. From time to time, our competitors or other third parties may claim that we are infringing upon or misappropriating their intellectual property rights, and we may be found to be infringing upon such rights. Any claims or litigation could cause us to incur significant expenses and, if successfully asserted against us, could require that we pay substantial damages or ongoing royalty payments, prevent us from offering our products or services or using certain technologies, force us to implement expensive workarounds, or impose other unfavorable terms. We expect that the occurrence of infringement claims is likely to grow as the market grows and matures. Accordingly, our exposure to damages resulting from infringement claims could increase and this could further exhaust our financial and management resources. Further, during any litigation, we may make announcements regarding the results of hearings and motions, and other interim developments. If securities analysts and investors regard these announcements as negative, the market price of our common stock may decline. Even if intellectual property claims do not result in litigation or are resolved in our favor, these claims, and the time and resources necessary to resolve them, could divert the resources of our management and require significant expenditures. Any of the foregoing could prevent us from competing effectively and could have an adverse effect on our business, operating results, and financial condition and negatively affect an investment in the Shares.

Risk Factors Related to Our Employees and Other Service Providers

Our management team has limited experience managing a public company.

Our management team has limited experience managing a publicly traded company, interacting with public company investors, and complying with the increasingly complex laws pertaining to public companies. Our management team may not successfully or efficiently manage our transition to being a public company subject to significant regulatory oversight and reporting obligations under the federal securities laws and the continuous scrutiny of securities analysts, Reddit commenters, Twitter posters, and investors. These new obligations and constituents will require significant attention from our senior management and could divert their attention away from the day-to-day management of our business, which could adversely affect our business, operating results, and financial position.

The loss of one or more of our key personnel, or our failure to attract and retain other highly qualified personnel in the future, could adversely impact our business, operating results, and financial position.

We operate in a new industry that is not widely understood and requires highly skilled and technical personnel. We believe that our future success is highly dependent on the talents and contributions of our senior management team, including Eric Gravengaard, our co-founder and Chief Executive Officer, members of our executive team, and other key employees across operations, customer support, finance, and compliance. Our future success depends on our ability to attract, develop, motivate, and retain highly qualified and skilled employees. Due to the nascent nature of the Bitcoin ATM market, the pool of qualified talent is extremely limited, particularly with respect to executive talent, engineering, cross-border operations, risk management, and financial regulatory expertise. We face intense competition for qualified individuals from numerous software, finance and other technology companies. To attract and retain key personnel, we incur significant costs, including salaries, benefits and equity incentives. Even so, these measures may not be enough to attract and retain the personnel we require to operate our business effectively. The loss of even a few qualified employees, or an inability to attract, retain and motivate additional highly skilled employees required for the planned expansion of our business could adversely impact our operating results and impair our ability to grow.

We currently rely and are dependent on one third-party service provider for certain aspects of our operations, and any interruptions in services provided by that third party may impair our ability to support our customers.

We rely on and are dependent on one third party, Genesis Coin, in connection with many aspects of our business operations, including primarily the supply of our Bitcoin ATMs and the development of related software systems that provide advanced security protections, which are critical to our operations. Although we use other suppliers of Bitcoin ATMs, primarily outside the U.S., our main income is generated by the ATMs that we purchase from Genesis Coin. Because we rely heavily on one third party to provide these services and to facilitate certain of our business activities, we face increased operational risks. We do not control the operation of that third party. That third party may be subject to financial, legal, regulatory, and labor issues, cybersecurity incidents, break-ins, computer viruses, denial-of-service attacks, sabotage, acts of vandalism, privacy breaches, service terminations, disruptions, interruptions, and other misconduct. They may also be vulnerable to damage or interruption from human error, power loss, telecommunications failures, fires, floods, earthquakes, hurricanes, tornadoes, pandemics (including the COVID-19 pandemic) and similar events. In addition, we do not have a written contract with that third party and our relationship is based on oral agreement and previous working relationship. That third party may breach such oral agreement with us, refuse to continue to provide their services to us, take actions that degrade the functionality of our services, impose additional costs or requirements on us, or give preferential treatment to competitors. There can be no assurance that such third party that provides services to us will continue to do so on acceptable terms, or at all. If such a third party does not adequately or appropriately provide its services or perform its responsibilities to us, we may be unable to procure alternatives in a timely and efficient manner and on acceptable terms, or at all, and we may be subject to business disruptions, losses or costs to remediate any of the deficiencies, customer dissatisfaction, reputational damage, legal or regulatory proceedings, or other adverse consequences which could harm our business.

In the event of employee or service provider misconduct or error, our business may be adversely impacted.

Employee or service provider misconduct or error could subject us to legal liability, financial losses, and regulatory sanctions and could seriously harm our reputation and negatively affect our business. Such misconduct could include engaging in improper or unauthorized transactions or activities, misappropriation of funds, identity theft, misappropriation of information, failing to supervise other employees or service providers, and improperly using confidential information. Employee or service provider errors, including mistakes in executing, recording, or processing transactions for customers, could expose us to the risk of material losses even if the errors are detected. Although we have implemented processes and procedures and provide trainings to our employees and service providers to reduce the likelihood of misconduct and error, these efforts may not be successful. Moreover, the risk of employee or service provider error or misconduct may be even greater for novel products and services. It is not always possible to deter misconduct, and the precautions we take to prevent and detect such activities may not be effective in all cases. If we were found to have not met our regulatory oversight, compliance and other obligations, we could be subject to regulatory sanctions, financial penalties, and restrictions on our activities for failure to properly identify, monitor and respond to potentially problematic activity and seriously damage our reputation. Our employees, contractors, and agents could also commit errors that subject us to financial claims for negligence, as well as regulatory actions, or result in financial liability. Further, allegations by regulatory or criminal authorities of improper trading activities could affect our brand and reputation.

Our officers, directors, employees, and large shareholders may encounter potential conflicts of interests with respect to their positions or interests in certain crypto assets, projects, entities, and other initiatives, which could adversely affect our business and reputation.

We frequently engage in a wide variety of transactions and maintain relationships with a significant number of other firms in the broad economy surrounding Bitcoin, blockchain and crypto assets. These transactions and relationships could create potential conflicts of interests in management decisions that we make. For instance, certain of our officers, directors, and employees are active investors in crypto projects themselves, and may make investment decisions that favor projects that they have personally invested in. Many of our large shareholders also make investments in these crypto projects.

Similarly, certain of our directors, officers, employees, and large shareholders may hold crypto assets or have other beneficial ownership of sponsors of such crypto assets, tokens, or stable coins that we are considering supporting with our Bitcoin ATM fleet and may be more supportive of such listing notwithstanding legal, regulatory, and other issues associated with such crypto assets. If we fail to manage these conflicts of interests, our business may be harmed and the brand, reputation and credibility of our company may be adversely affected.

Risk Factors Related to Ownership of Our Common Stock

Our founders, officers and directors control, and will continue to control, our Company for the foreseeable future, including the outcome of matters requiring shareholder approval.

Our founders, officers and directors collectively beneficially own approximately 69% of our outstanding shares of common stock. As a result, such individuals will, for the foreseeable future, have the ability, acting together, to control the election of our directors and the outcome of corporate actions requiring shareholder approval, such as: (i) a merger or a sale of our company, (ii) a sale of all or substantially all of our assets, and (iii) amendments to our articles of incorporation and bylaws. This concentration of voting power and control could have a significant effect in delaying, deferring, or preventing an action that might otherwise be beneficial to our other shareholders and be disadvantageous to our shareholders with interests different from those entities and individuals. Certain of these individuals also have significant control over our business, policies and affairs as officers or directors of our Company. In addition, Messrs. Gravengaard and Komaransky, have ability to control who is elected to our board of directors pursuant to the voting agreement, as amended, they entered into. See “Management and Certain Security Holders” for further discussion of the board of directors’ structure and principal shareholders’ agreements. Therefore, you should not invest in reliance on your ability to have any control over our Company.

Our securities may be treated as “Penny Stocks” that may make them less desirable or accessible by investors or potential investors.

Rule 15g-9 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) establishes the definition of a “penny stock,” for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require: (a) that a broker or dealer must approve a person’s account for transactions in penny stocks; and (b) the broker or dealer must receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.

In order to approve a person’s account for transactions in penny stocks, the broker or dealer must: (a) obtain financial information and investment experience objectives of the person and (b) make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.

The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which, in highlight form: (a) sets forth the basis on which the broker or dealer made the suitability determination; and (b) confirms that the broker or dealer received a signed, written agreement from the investor prior to the transaction. Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult for investors to dispose of our common stock and cause a decline in the market value of our common stock.

Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker or dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks. Management believes that the penny stock rules could discourage investor interest in and limit the marketability of our Shares.

Changes in accounting principles and guidance, or their interpretation, could result in unfavorable accounting charges or effects, including changes to our previously filed financial statements, which could cause our stock price to decline.

We prepare our consolidated financial statements in accordance with U.S. generally accepted accounting principles (“GAAP”). These principles are subject to interpretation by the SEC and various bodies formed to interpret and create appropriate accounting principles and guidance. A change in these principles or guidance, or in their interpretations, may have a significant effect on our reported results and retroactively affect previously reported results.

Our Shares are subject to FINRA sales practice requirements that may make them less desirable or accessible by investors or potential investors.

The U.S. Financial Industry Regulatory Authority (“FINRA”) has adopted rules that require a broker-dealer to have reasonable grounds for believing that an investment is suitable for a customer before recommending an investment to a customer. Prior to recommending speculative, low priced securities to non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer's financial status, tax status, investment objectives, and other information. Pursuant to the interpretation of these rules, FINRA believes that there is a high probability that speculative, low priced securities will not be suitable for at least some customers. Thus, the FINRA requirements make it more difficult for broker-dealers to recommend the Common Shares to customers which may limit an investor's ability to buy and sell the Common Shares, have an adverse effect on the market for the Common Shares, and thereby negatively impact the price of the Common Shares.

Our Shares may be subject to dilution.

We may make future acquisitions or enter financings or other transactions involving the issuance of securities of the Company which may be dilutive to the other shareholders and any new equity securities issued could have rights, preferences, and privileges superior to those of holders of Common Shares.

We have never paid dividends on our common stock and have no plans to do so in the future.

Holders of shares of our common stock are entitled to receive such dividends as may be declared by our board of directors. To date, we have paid no cash dividends on our shares of common stock and we do not expect to pay cash dividends on our common stock in the foreseeable future. We intend to retain future earnings, if any, to provide funds for operations of our business. Therefore, any return investors in our common stock may have, will be in the form of appreciation, if any, in the market value of their shares of common stock. See “Dividend Policy.”

We will indemnify and hold harmless our officers and directors to the maximum extent permitted by Nevada law.

Our bylaws provide that we will indemnify and hold harmless our officers and directors against claims arising from our activities, to the maximum extent permitted by Nevada law. In addition, if we are called upon to perform under our indemnification agreements entered into with each one of our directors, then the portion of our assets expended for such purpose would reduce the amount otherwise available for our business.

We may engage in acquisitions, mergers, strategic alliances, joint ventures, and divestures that could result in results that are different than expected.

In the normal course of business, we engage in discussions relating to acquisitions, equity investments, mergers, strategic alliances, joint ventures, and divestitures. Such transactions are accompanied by a number of risks, including the use of significant amounts of cash, potentially dilutive issuances of equity securities, incurrence of debt on potentially unfavorable terms, accruement of impairment expenses related to goodwill and amortization expenses related to other intangible assets, the possibility that we overpay for an acquisition relative to the economic benefits that we ultimately derive from such acquisition, and various potential difficulties involved in integrating acquired businesses into our operations.

We might require additional capital to support business growth, and this capital might not be available.

We have funded our operations since inception primarily through debt and equity financings and revenue generated by our services. We cannot be certain when or if our operations will generate sufficient cash to fully fund our ongoing operations or the growth of our business. We intend to continue to make investments in our business to respond to business challenges, including deploying more Bitcoin ATMs both in the United States and globally, enhancing our operating infrastructure, expanding our international operations to include additional regions and countries, and acquiring complementary businesses and technologies, all of which may require us to secure additional funds. Additional financing may not be available on terms favorable to us, if at all. If we incur additional debt, the debt holders would have rights senior to holders of our common stock to make claims on our assets, and the terms of any debt could restrict our operations, including our ability to pay dividends on our common stock.

The trading prices for our common stock may be highly volatile, which may reduce our ability to access capital on favorable terms or at all. In addition, a slowdown or other sustained adverse downturn in the general economic or crypto markets could adversely affect our business and the value of our common stock. Because our decision to raise capital in the future will depend on numerous considerations, including factors beyond our control, we cannot predict or estimate the amount, timing, or nature of any future issuances of securities. As a result, our shareholders bear the risk of future issuances of debt or equity securities reducing the value of our common stock and diluting their interests. Our inability to obtain adequate financing or financing on terms satisfactory to us, when we require it, could significantly limit our ability to continue supporting our business growth and responding to business challenges.

Our Common Shares are subject to liquidity risks.

Our Common Stock is quoted on the OTC Pink Market Tier of the OTC Markets under the symbol “ABIT”. On [●], 2022, the last reported sale of our Common Stock was $[●] per share. As of the date of this prospectus, our Common Stock is quoted on the OTC Pink, and it is not otherwise regularly quoted on any other over-the-counter market or exchange. We intend for our shares to trade on the OTCQB, an inter-dealer, over-the-counter market that provides significantly less liquidity than other national or regional exchanges. However, there is no guarantee that our shares will be listed on the OTCQB, or any other "over- the- counter" marketplace. Moreover, securities traded on the OTCQB are usually thinly traded, highly volatile, have fewer market makers and are not followed by analysts. The SEC's order handling rules, which apply to NASDAQ-listed securities, do not apply to securities quoted on the OTCQB. Quotes and other important information for stocks listed on the OTCQB are not listed in newspapers and may be incorrectly listed by prominent financial websites. Therefore, prices for securities traded solely on the OTCQB may be difficult to obtain and holders of our securities may be unable to resell their securities at or near their original acquisition price, or at any price.

We cannot predict at what prices the common shares of the Company will trade and there can be no assurance that an active trading market will develop or be sustained. There is a significant liquidity risk associated with an investment in the Company.

The shares of our common stock we may issue in the future and the options we may issue in the future may have an adverse effect on the market price of our common stock and cause dilution to investors.

We may issue shares of common stock and warrants to purchase common stock pursuant to private offerings and we may issue options to purchase common stock to our executive officers and employees pursuant to their employment agreements. The sale, or even the possibility of sale, of shares pursuant to a separate offering or to executive officers and employees could have an adverse effect on the market price of our common stock or on our ability to obtain future financing.

We do not anticipate paying any cash dividends on our capital stock in the foreseeable future.

We have never declared or paid cash dividends on our capital stock. We currently intend to retain all of our future earnings, if any, to finance the growth and development of our business, and we do not anticipate paying any cash dividends on our capital stock in the foreseeable future. In addition, the terms of any future debt agreements may preclude us from paying dividends.

We will incur increased costs as a result of operating as a public company, and our management will be required to devote substantial time to compliance with our public company responsibilities and corporate governance practices.

As a public company, we will incur significant legal, accounting, and other expenses that we did not incur as a private company, which we expect to further increase after we are no longer an “emerging growth company.” The Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, and other applicable securities rules and regulations impose various requirements on public companies. Our management and other personnel devote a substantial amount of time to compliance with these requirements. Moreover, these rules and regulations will increase our legal and financial compliance costs and will make some activities more time-consuming and costly. We cannot predict or estimate the amount of additional costs we will incur as a public company or the specific timing of such costs.

Being a public company results in additional expenses, diverts management’s attention and could also adversely affect our ability to attract and retain qualified directors.

As a public reporting company, we are subject to the reporting requirements of the Exchange Act. These requirements generate significant accounting, legal and financial compliance costs and make some activities more difficult, time consuming or costly and may place significant strain on our personnel and resources. The Exchange Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. In order to establish the requisite disclosure controls and procedures and internal control over financial reporting, significant resources and management oversight are required.

As a result, management’s attention may be diverted from other business concerns, which could have an adverse and even material effect on our business, financial condition and results of operations. These rules and regulations may also make it more difficult and expensive for us to obtain director and officer liability insurance. If we are unable to obtain appropriate director and officer insurance, our ability to recruit and retain qualified officers and directors, especially those directors who may be deemed independent, could be adversely impacted.

We are an emerging growth company and a smaller reporting company within the meaning of the Securities Act, and if we take advantage of certain exemptions from disclosure requirements available to “emerging growth companies” or “smaller reporting companies,” this could make our securities less attractive to investors and may make it more difficult to compare our performance with other public companies.

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012, or JOBS Act, and, for as long as we continue to be an “emerging growth company,” we intend to take advantage of certain exemptions from various reporting requirements applicable to other public companies but not to “emerging growth companies,” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We could be an “emerging growth company” for up to five years following the effectiveness of this registration statement, or until the earliest of (i) the last day of the first fiscal year in which our annual gross revenues exceed $1.07 billion, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, or (iii) the date on which we have issued more than $1.0 billion in non-convertible debt during the preceding three year period.

Because we are not subject to compliance with rules requiring the adoption of certain corporate governance measures, our stockholders have limited protection against interested director transactions, conflicts of interest and similar matters.

The Sarbanes-Oxley Act of 2002, as well as rule changes proposed and enacted by the SEC, the New York and American Stock Exchanges and the Nasdaq Stock Market, as a result of Sarbanes-Oxley, require the implementation of various measures relating to corporate governance. These measures are designed to enhance the integrity of corporate management and the securities markets and apply to securities that are listed on those exchanges or the Nasdaq Stock Market. Because we are not presently required to comply with many of the corporate governance provisions and because we chose to avoid incurring the substantial additional costs associated with such compliance any sooner than legally required, we have not yet adopted these measures.

Because none of our directors (currently five persons) are independent directors, we do not currently have an independent audit or a compensation committee. As a result, directors have the ability, among other things, to determine each other’s level of compensation. Until we comply with such corporate governance measures, regardless of whether such compliance is required, the absence of such standards of corporate governance may leave our stockholders without protections against interested director transactions, conflicts of interest, if any, and similar matters and investors may be reluctant to provide us with funds necessary to expand our operations.

We intend to comply with all corporate governance measures relating to director independence as and when required. However, we may find it very difficult or be unable to attract and retain qualified officers, directors and members of board committees required to provide for our effective management as a result of Sarbanes-Oxley Act of 2002. The enactment of the Sarbanes-Oxley Act of 2002 has resulted in a series of rules and regulations by the SEC that increase responsibilities and liabilities of directors and executive officers. The perceived increased personal risk associated with these recent changes may make it costlier or deter qualified individuals from accepting these roles.

In addition to the above risks, businesses are often subject to risks not foreseen or fully appreciated by management. In reviewing this Prospectus, potential investors should keep in mind other risks that could be important.

SPECIAL NOTE REGARDING Forward-Looking Statements

This prospectus contains “forward-looking statements.” Forward-looking statements reflect the current view about future events. When used in this prospectus, the words “anticipate,” “believe,” “estimate,” “expect,” “future,” “intend,” “plan,” or the negative of these terms and similar expressions, as they relate to us or our management, identify forward-looking statements. Such statements include, but are not limited to, statements contained in this prospectus relating to our business strategy, our future operating results and liquidity and capital resources outlook. Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Our actual results may differ materially from those contemplated by the forward-looking statements. They are neither statements of historical fact nor guarantees of assurance of future performance. We caution you therefore against relying on any of these forward-looking statements.

Important factors that could cause actual results to differ materially from those in the forward-looking statements include, without limitation, market acceptance of our products; our ability to protect our intellectual property rights; the impact of any infringement actions or other litigation brought against us; competition from other providers and products; our ability to develop and commercialize new and improved products and services and successfully pursue innovation; our ability to complete capital raising transactions; and other factors (including the risks contained in the section of this prospectus entitled “Risk Factors”) relating to our industry, our operations and results of operations. Actual results may differ significantly from those anticipated, believed, estimated, expected, intended, or planned. Important factors that could cause such differences include, but are not limited to:

In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue” or the negative of these terms or other comparable terminology. These statements are only predictions. You should not place undue reliance on forward-looking statements, because they involve known and unknown risks, uncertainties, and other factors, which are, in some cases, beyond our control and which could materially affect results. Actual events or results may vary significantly from those implied or projected by the forward-looking statements due to these risk factors. No forward-looking statement is a guarantee of future performance. You should read this prospectus and the documents that we reference in this prospectus and have filed with the SEC as exhibits to the registration statement of which this prospectus forms a part with the understanding that our actual future results, performance, and events and circumstances may be materially different from what we expect.

Forward-looking statements are made based on management’s beliefs, estimates and opinions on the date the statements are made and we undertake no obligation to update forward-looking statements if these beliefs, estimates and opinions or other circumstances should change, except as may be required by applicable law. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements.

Capitalization

The following table details the Company’s capitalization as of September 30, 2021:

In January 2020, the Company allowed its employees with vested stock options to exercise such options with the use of a non-recourse loan agreement. The Company’s employees exercised their respective stock options into a total of 157,635,309 shares of common stock at a weighted average exercise price of $0.0060 per share. The loan amount at exercise of such options was $945,812. The terms of the non-recourse loan agreement include a maturity date of 48 months from the date of exercise and an interest rate of 1.69%. As of September 30, 2021, the outstanding balance due from employees was $973,000. The amount receivable from employees is presented in the balance sheet as a deduction from stockholders' equity. This is generally consistent with Rule 5-02.30 of Regulation S-X which states that accounts or notes receivable arising from transactions involving the registrant's capital stock should be presented as deductions from stockholders' equity and not as assets. When the shares held by employees who have outstanding loans are sold, those loans will be paid in a pro-rata manner as described below.

A total of [●] shares of common stock held by employees (approximately 15% of each employees shares) are being registered in this offering. In the event the employees sell any or all of these shares before repaying the loan, an amount that bears the same proportion to the total loan including accrued interest thereon, as the registered number of shares bears to the total holding of the employee against which said loan has been given, will become due and payable to the Company. If all the registered shares are sold and using the outstanding balance due of $973,000 as of September 30, 2021, the loan will be reduced by $146,000.

The pro-forma capitalization would then have both cash and equity going up by the amount being repaid.

The purchasers of the Company's 8% Convertible Debentures have an option to convert the outstanding principal and accrued interest amount of their respective Convertible Debentures into shares of common stock of the Company at the lower of $0.012 per share or 20% discount to the next major financing or change in control. On conversion the purchasers of these convertible debentures will get shares issue of which will be recorded as increase in share capital of $260,000 and increase in additional paid in capital of $2,865,000. The pro forma basis as adjusted basis column in the table below gives effect to the conversion of the Convertible Debenture as well as the return of outstanding employee loans as described above. The Company expects that the Convertible Debentures will convert at $0.012 per share. If the conversion happens at a price lower than $0.012 per share the pro forma basis as adjusted numbers will change accordingly.

The pro forma and pro forma as adjusted information below is illustrative only, and our cash and cash equivalents and total capitalization following the completion of this offering will be adjusted based on several factors. You should read the following table together with the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and related notes thereto appearing elsewhere in this prospectus.

Management’s Discussion and Analysis OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of financial condition and results of operations should be read in conjunction with our historical financial statements and the notes to those statements that appear elsewhere in this prospectus. Certain statements in the discussion contain forward-looking statements based upon current expectations that involve risks and uncertainties, such as plans, objectives, expectations, and intentions. You should read the sections titled “Risk Factors” and “Special Note Regarding Forward-Looking Statements” for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Overview

The Company is focused on developing, owning, and operating a global network of Athena-branded Bitcoin ATM machines, which are free standing kiosks that permit customers to buy or sell crypto assets in exchange for cash (banknotes) issued by sovereign governments - often referred to as fiat currencies.

We place our machines in convenience stores, shopping centers, and other easily accessible locations. Our network presently includes Athena Bitcoin ATMs in 10 states and 3 countries in Central and South America. See table below for our ATMs breakdown, as of September 30, 2021.

We offer Bitcoin, Ethereum, Litecoin, and Bitcoin Cash (BCH) for sale at all our ATM machines. We also buy these crypto assets at some of our ATM machines (also known as two-way ATMs). The cash withdrawal limit from our two-way ATMs is $2,000 per transaction. We replenish our ATMs about twice a week or depending on usage, using bonded security companies.

We also operate an over-the-counter (“OTC”) desk for private clients and trade customers of the Company. Customers typically interact with the Company on the phone for transaction sizes in dollar terms greater than $10,000 and on some occasions, for crypto assets not included in our ATMs. Since 2019, we have been typically buying and selling Bitcoin through our OTC desk, but we have also executed transactions in Ethereum, Litecoin, and in some cases, altcoins such as Bitcoin SV, Ripple, Siacoin, Tether, and Tron. As of September 30, 2021, we do not anticipate transacting in any other crypto assets except Bitcoin, Ethereum, Litecoin, and BCH.

Additionally, we operate ATMs and point-of-sale (“POS”) terminals on behalf of certain customers, typically under their brand, which we refer to as “white label service”. This white label service is comprised of maintaining ATMs and POS terminals to facilitate the exchange of crypto assets for cash, and vice-versa, by our customers with their counterparties. We do not control the service in this case as we are not responsible for fulfilling the exchange contract or establishing pricing at these ATMs and POS terminals. Currently, the government of El Salvador is our only white label service customer. The Company has begun working with the government of El Salvador in late June 2021 to support the implementation of its Bitcoin Law. In August 2021, we entered into certain agreements for services to be rendered by the Company to the Department of Treasury (Ministerio De Hacienda) of El Salvador, pursuant to which we have installed and are operating 200 Chivo Bitcoin ATMs in El Salvador, 10 Chivo Bitcoin ATMs at El Salvador consulates in the U.S., 45 Chivo Bitcoin ATMs in other U.S. locations, and importing and delivering 950 Chivo point-of-sale (“POS”) terminals for local businesses in El Salvador to transact with Bitcoin. As of September 30, 2021, we were operating 201 white label ATMs in El Salvador for the Department of Treasury (Ministerio de Hacienda) of El Salvador. We were not operating any POS terminals on behalf of any clients as of September 30, 2021.

From time to time, we sell equipment such as POS terminals as well as software and corresponding intellectual property (“IP”) to customers, which we consider to be ancillary to our primary business. This activity is sporadic.

As of September 30, 2021, the Company has received an advance for sale of IP Software, pursuant to our contract with El Salvador, which, for accounting purposes, is being termed as a revenue contract until such time as the XPay acquisition has been finalized.

For installation, the Company received a one-time payment of $300,000 for the installation of 200 ATMs in El Salvador national territory. Although ASC 606-10-25-4 states that “A contract does not exist if the parties have unilateral enforceable rights to terminate”, in the Basis of Conclusion 50 (“BC 50”) in ASU 2014-09, FASB decided that this applies only if each party to the agreement has the unilateral enforceable right to terminate the contract without penalty. Those contracts would not affect an entity’s financial position or performance until either party performs.

In accordance with ASC 606-10-25-1 and 2, the first step in assessing revenue recognition is to identify the contract with the customer. As described below, the Company’s contract with Department of Treasury of El Salvador is cancelable by them with 30 days’ notice. The Company recognized one-time fee upfront since the installation of ATMs was a considered a distinct performance obligation and the Company has, in effect, a 30-day contract (the period not subject to cancellation), which rolls over into another 30-day contract if Department of Treasury of El Salvador does not cancel, as discussed below.

However, if only the customer (e.g., Department of Treasury of El Salvador) could terminate the agreement(s) without penalty, the entity is obliged to stand ready to perform at the discretion of the customer. Hence, there could be an effect on an entity’s financial position and performance if only one party could terminate a wholly unperformed contract without penalty.

As long as the Department of Treasury of El Salvador does not give notice to terminate, Athena has an enforceable obligation to provide services and an enforceable right to receive payment for those services for the next 30 days until the contractual termination date of the Master Services Agreement and the Service Addendum.

Each individual ATM is distinct and aside from integration to the Bitcoin Digital Platform, it is not dependent on other Services. The ATMs are delivered to the customer (El Salvador Consulates in the U.S. and throughout El Salvador national territory) at different points in time and are separately identifiable. Therefore, the single payment for installation of 200 ATMs in El Salvador national territory ($300,000) is considered a distinct performance obligation.

We seek to expand our network in the U.S. and globally, and to further develop Athena Bitcoin as a trusted and preferred brand for parties seeking to exchange fiat currency for Bitcoin, Ethereum, Litecoin, and BCH. By focusing on the Americas, we concentrate our customer service, technical, and management staff in overlapping time zones.

How We Generate Revenue

Through our Athena ATM machines, we buy and sell various crypto assets as described above at an offer price that changes according to the prevailing price. More specifically, we engage in the following transactional activities with respect to our sales of digital assets (i.e., our indefinite life intangible assets):

When we purchase crypto assets from a retail customer, we pay less than the prevailing price (referred to as markdown) and when we sell to retail customers, we sell more than the prevailing price (referred to as markup). Both mark up and markdown rates are determined based on a variety of commercial factors such as current price, price trend, category of host location, among others, and are calculated using a proprietary method.

We apply different mark ups for crypto asset sales through our Athena ATM machines as compared to sales at our OTC desk (mark up for the ATMs is greater than at the OTC desk). This revenue is recognized on a gross basis.

We do not invest or have long term holdings of Bitcoin, Ethereum, Litecoin, or BCH. On average, we sell our holdings of Bitcoin within 3 to 5 days of buying it and within 7 to 10 days of buying our Ethereum, Litecoin, and BCH holdings. We strive to keep this period short to reduce the effect of changes in crypto asset/U.S. dollar exchange rates on our business and to minimize our working capital. In the past, we have held a higher level of Bitcoin as an economic hedge against liabilities for Bitcoin borrowed.

Our OTC desk is comprised of a single performance obligation to provide crypto assets to our customers shortly after the sale is made. We do not provide custodial services and/or wallets for our customers or third parties or otherwise hold any indefinite life intangible assets for these customers. Trades are cash settled on the same trading day. This revenue is recognized on a gross basis.

For our white label services in El Salvador, which include ATMs and POS terminals, we currently collect, and anticipate collecting from future white label service customers, a recurring monthly service and maintenance fee for ATMs and a one-time setup fee at the beginning of a contract. We provide the equipment and associated software functionality for our clients to complete ATM and POS transactions with their customers. We do not have control of the crypto assets or operations of each service. The Company recognizes the operating fee it receives for these services (and not the gross value of customer transactions) as revenue.

In our ancillary equipment business, we are paid on the sale of equipment such as POS terminals. In the case of software sales and corresponding IP, we collect a one-time fee and recurring monthly maintenance fees. This revenue is recognized on a gross basis.

BitQuick earns revenue from fees calculated as a percentage of the purchase value for facilitating a peer-to-peer exchange transaction between sellers and buyers that utilize this channel. This revenue is recognized on a net basis.

Purchase of Digital Assets

We engage in the following transactional activities with respect to our purchases of digital assets (i.e., our indefinite life intangible assets):

Impact of COVID-19

The significant global outbreak of COVID-19 has resulted in a widespread health crisis that has adversely affected the economies and financial markets worldwide and has affected our business in several ways. First, we have been unable to ship our ATMs freely between countries. Second, it has restricted the movement of our employees and their ability to both collaborate in-person, and to do some field-service and installation work. In addition, the continued spread of COVID-19 and the imposition of related public health measures have resulted in, and is expected to continue to result in, increased volatility and uncertainty in the crypto-economy. We also rely on third party service providers to perform certain functions. Any disruptions to a service providers’ business operations resulting from business restrictions, quarantines, or restrictions on the ability of personnel to perform their jobs could have an adverse impact on our service providers’ ability to provide services to us.

We are responding to the global outbreak of COVID-19 by taking steps to mitigate the potential risks to us posed by its spread and the impact of the restrictions put in place by governments to protect the population. Our employees and service providers have transitioned to work-from-home.

Trends and Uncertainties

Our business is subject to the following trends and uncertainties:

Components of Results of Operations

Revenue

Since 2019, the Company has derived approximately 95% of its revenue from the sale of Bitcoin through its network of ATM machines and its over-the-counter desk. As the Company expands its operations, the Company expects additional revenue from its white label and ancillary business lines. For the three months ended September 30, 2021, white label business operations in El Salvador that started during the quarter, generated almost 6.6% of total revenue while ancillary business activities contributed less than 0.5% of total revenue.

Cost of Revenue

Cost of revenues consists primarily of expenses related to the acquisition of crypto assets (including the costs to purchase crypto assets). The crypto asset is recorded at cost of acquisition, i.e., it is inclusive of the markdown. The Company assigns the costs of crypto assets sold in its revenue transactions on a first-in, first-out basis. The crypto asset acquired is included with other digital assets owned by the Company and the asset on hand at end of each period is subjected to the same impairment accounting policy.

Additionally, cost of revenues includes the cost of installing the ATMs (including shipping and handling expenses), the costs of operating the ATMs from which crypto assets are sold (including the associated rent expense, related incentives, ATM cash losses, software licensing fees for the ATMs, depreciation, general liability insurance, and utilities), fees paid to service the ATM machines and transport cash to the banks, and outsourced customer support staff for white label and ancillary services.

Operating Expenses

The Company's expenses consist of salaries and benefits, general and administrative expenses, sales and marketing expenses, and other operating expenses. The Company sees opportunities for growth as the economies of the countries it operates in recover from the COVID-19 pandemic and additional machines are deployed. As such, we expect our operating expenses to increase in future periods. As our ATM count and sales volume increase, we expect to see increases in direct salaries and benefits. As we invest in new opportunities, we expect to see increases in sales and marketing, and general and administrative expenses, including public company operating costs.

Salaries and Benefits

Cost of salaries and benefits includes all employee-related expenses. Employee-related costs recorded in salaries and benefits consist of salaries, taxes, benefits and equity-based compensation.

Sales and Marketing

Sales and marketing expenses consist primarily of costs of general marketing and promotional activities, advertising fees used to drive subscriber acquisition, commissions, the production costs to create our advertisements. The Company doesn’t have employees who solely manage our marketing and brand, and there are no expenses related to salaries and benefits of such employees and other allocated overhead costs.

General and Administrative

General and administrative expenses consist primarily of non-personnel costs, such as legal, accounting, and other professional fees, not expensed under salaries and benefits. In addition, general and administrative expenses include rent and travel costs, and all other supporting corporate expenses not allocated to other departments.

Interest Expense

Interest expense, net consists of interest expense, and includes amortization of debt discount and issuance costs.

Fees on Crypto Asset Borrowings

Fees on crypto asset borrowings is the fair value of fees payable, typically in the crypto asset borrowed, on the outstanding borrowings of crypto assets calculated as percentage of principal outstanding and current price of the crypto asset in which it is payable.

Provision for (Benefit from) Income Taxes

The Company was taxed as a partnership for U.S. federal and state income tax purposes for tax years prior to 2020. There is no provision for income taxes for those years. The Company accrues liabilities for uncertain tax positions that are not more likely than not to be sustained upon examination as of December 31, 2020 and 2019. Interest and penalties related to uncertain tax positions are recorded in accrued liabilities in the accompanying consolidated balance sheets. The Company had no unrecognized tax benefits at December 31, 2020 and 2019, that, if recognized, would affect its annual effective tax rate.

Results of Operations

The following table summarizes our results of operations for the periods presented (in thousands):

Components of Results of Operations

Note: n.m. defined as not meaningful.

Three Months Ended September 30, 2021 Compared with Three Months Ended September 30, 2020

Athena ATM revenue decreased $7,504,000 or 34%. Average transaction size for all crypto assets decreased from $730 to $699, or 4% while number of transactions decreased from 30,023 to 20,614, or 31%. Number of ATMs increased from 151 to 176, or 17%. The table below shows Bitcoin sales in Athena ATM.

Note: n.m. defined as not meaningful.

(1) Ethereum, Litecoin, and BCH accounted for the remaining revenue.

Over-the-counter revenue increased $487,000 or 15%. Average transaction size for all crypto assets increased from $30,964 to $112,246, or 263% while number of transactions decreased from 104 to 33, or 71%. The table below shows Bitcoin sales in Over-the-counter.

_________________ 

Note: n.m. defined as not meaningful.

(1) Litecoin accounted for the remaining revenue.

(2) Ethereum, Litecoin, and Tether accounted for the remaining revenue.

(3) Ethereum and Litecoin accounted for the remaining revenue.

The Company began operating and maintaining ATMs for the Department of Treasury (Ministerio de Hacienda) of El Salvador in September 2021 and recorded $1,278,000 of white label revenue of which $300,000 was attributed to a one-time fee installation of ATMs in El Salvador. There was no corresponding activity in the same period in the prior year.

Under ancillary revenue, the Company recorded $88,000 from the sale of POS terminals to customers. There was no corresponding activity in the same period in the prior year. This activity is sporadic and non-recurring.

BitQuick fees (for facilitating transactions in only Bitcoin, recognized on a net basis) and other revenue decreased $17,000 or 77%, due to changing customer preferences. The Company is evaluating options which include closing down this business line.

Nine Months Ended September 30, 2021 Compared with Nine Months Ended September 30, 2020 

Athena ATM revenue increased $10,048,000 or 27%. Average transaction size for all crypto assets increased from $485 to $639, or 32% while number of transactions decreased 4%. Number of ATMs increased from 133 to 172, or 29%.

Over-the-counter revenue increased $2,570,000 or 23%. Average transaction size for all crypto assets increased from $29,710 to $78,802, or 165% while number of transactions decreased from 375 to 174, or 54%

White label revenue, attributable to the services provided to the government of El Salvador, added $1,278,000 in September 2021 and there was no corresponding activity in the same period in the prior year.

Ancillary revenue recorded $88,000 and there was no corresponding activity in the same period in the prior year.

BitQuick fees (for facilitating transactions in only Bitcoin, recognized on a net basis) and other revenue decreased $32,000 or 45%, due to changing customer preferences.

Cost of Revenues and Gross Profit

Three Months Ended September 30, 2021 Compared with Three Months Ended September 30, 2020

Cost of revenues is comprised primarily of the expenses related to the acquisition of crypto assets sold and the costs of operating the ATMs from which the crypto assets are sold. For the three months ended September 30, 2021 and 2020, the expenses related to the acquisition of crypto assets sold were $16,249,000 and $21,560,000, respectively. The increase in expenses related to acquisition of crypto assets sold was primarily a result of the increased sales of crypto assets. For the three months ended September 30, 2021 and 2020, the costs of operating the ATMs were $1,043,000 and $1,067,000,, respectively. For the three months ended September 30, 2021, cost of revenues also included cost of white label ATM installations and software maintenance associated with the El Salvador Contracts of $933,000.

Gross profit decreased $1,265,000 or 50%, due to lower Athena ATM revenues. Gross profit percentage decreased due primarily to a higher contribution to revenue from OTC services as well as margin pressure on Athena ATM revenue for three months ended September 30, 2021 compared to three months ended September 30, 2020 when demand was exceptionally strong.

Nine Months Ended September 30, 2021 Compared with Nine Months Ended September 30, 2020

Cost of revenues is comprised primarily of the expenses related to the acquisition of crypto assets sold and the costs of operating the ATMs from which the crypto assets are sold. For the nine months ended September 30, 2021 and 2020, the expenses related to the acquisition of crypto assets sold were $54,349,000 and $42,860,000,, respectively. The increase in expenses related to acquisition of crypto assets sold was primarily a result of the increased sales of crypto assets. For the nine months ended September 30, 2021 and 2020, the costs of operating the ATMs were $2,720,000 and $2,265,000, respectively.

Gross profit increased $1,073,000 or 27%, due to growth in both Athena ATM and OTC revenues. Gross profit percentage increased slightly due primarily to incremental revenue from Athena ATM and favorable product mix.

Operating Expenses

Three Months Ended September 30, 2021 Compared with Three Months Ended September 30, 2020

Operating expenses increased $772,000 or 90%, primarily attributable to increased general and administrative cost associated with expansion into El Salvador. General and administrative cost increased $605,000; salaries and benefits increased $133,000; sales and marketing increased $35,000, and other operating expense decreased $1,000. Increased costs associated with expansion into El Salvador of $618,000 or 80% of the total increase, included salaries, wages, and other labor costs of $206,000, office expenses of $69,000, software subscriptions of $32,000, sales and marketing of $36,000, and travel, meals and lodging expense of $276,000. Through the period ended September 30, 2021, the Company booked expenses related to the Chivo Ecosystem in the amount of $121,000. The government of El Salvador discontinued use of the platform on or about December 15, 2021, but has not terminated its contract with the Company while the Company assists the government’s secondary provider. However, the government of El Salvador has indicated that it may resume utilizing the Company’s software, and therefore our estimation of anticipated costs related to the development of the Chivo Ecosystem platform are uncertain.

Nine Months Ended September 30, 2021 Compared with Nine Months Ended September 30, 2020

Operating expenses increased $2,178,000 or 80%, primarily attributable to the theft of 29 bitcoin with a cost basis of $1,600,000 in March 2021 and increased general and administrative cost associated with expansion into El Salvador. General and administrative cost increased $760,000, salaries and benefits decreased $195,000, sales and marketing increased $46,000, and other operating expense decreased $33,000. Increased costs associated with expansion into El Salvador of $652,000 or 30% of the total increase, included salaries, wages, and other labor costs of $219,000, office expenses of $70,000, software subscriptions of $32,000, sales and marketing of $45,000, and travel, meals and lodging expense of $288,000.

Salaries and Benefits

Three Months Ended September 30, 2021 Compared with Three Months Ended September 30, 2020

Salaries and benefits increased $133,000 or 23%, primarily due to expansion into El Salvador.

Nine Months Ended September 30, 2021 Compared with Nine Months Ended September 30, 2020

Salaries and benefits decreased $195,000 or 10%, primarily due to a decrease of $477,000 in stock-based compensation expense and partially offset by increase in headcount.

Fair Value Adjustment on Crypto Asset Borrowing Derivatives

Three Months Ended September 30, 2021 Compared with Three Months Ended September 30, 2020

Fair value adjustment on crypto asset borrowing derivatives decreased $130,000 or 42%. The net decrease is primarily due to a 71 bitcoin decrease in the principal balance outstanding from 80 bitcoin as of September 30, 2020 to 9 bitcoin as of September 30, 2021, partially offset by an increase in fair value of Bitcoin. See Note 7 to our condensed consolidated financial statements (unaudited) for the three months ended September 30, 2021 and 2020.

Nine Months Ended September 30, 2021 Compared with Nine Months Ended September 30, 2020

Loss on crypto asset borrowing derivatives decreased $153,000 or 29%. The net decrease is primarily due to a 71 bitcoin decrease in the principal balance outstanding from 80 bitcoin as of September 30, 2020 to 9 bitcoin as of September 30, 2021, partially offset by an increase in fair value of Bitcoin. See Note 7 to our condensed consolidated financial statements (unaudited) for the nine months ended September 30, 2021 and 2020.

Interest and Fees on Crypto Asset Borrowings

Three Months Ended September 30, 2021 Compared with Three Months Ended September 30, 2020

 Interest expense decreased $100,000 or 38%, as the Company paid off its long-term debt with a principal balance of $1,675,000 in May 3, 2021.

Fees on crypto asset borrowings decreased $196,000 or 89%, primarily due to the 15 Bitcoin reduction in fees due to the decreased in the principal balance outstanding from 80 bitcoin as of September 30, 2020 to 9 bitcoin as of September 30, 2021 and was partially offset by an increase in fair value of Bitcoin.

Nine Months Ended September 30, 2021 Compared with Nine Months Ended September 30, 2020

Interest expense decreased $283,000 or 38%, as the Company paid off its long-term debt with a principal balance of $1,675,000.

Fees on crypto asset borrowings decreased $190,000 or 63%, primarily due to the 16 Bitcoin reduction in fees due to the decreased in the principal balance outstanding from 80 bitcoin as of September 30, 2020 to 9 bitcoin as of September 30, 2021 and was partially offset by an increase in fair value of Bitcoin.

Income Tax Expense (Benefit)

Three Months Ended September 30, 2021 Compared with Three Months Ended September 30, 2020

Income tax benefit increased $447,000, as the Company recognized income tax benefit on losses incurred during the three months ended September 30, 2021.

Nine Months Ended September 30, 2021 Compared with Nine Months Ended September 30, 2020

Income tax benefit increased $301,000, as the Company recognized income tax benefit on losses incurred during the nine months ended September 30, 2021, primarily due to the theft of Bitcoin in March 2021.

Net Loss/Income Attributable to Common Stockholders

Three Months Ended September 30, 2021 Compared with Three Months Ended September 30, 2020

We realized a net loss attributable to common stockholders of $334,000, or 0.000083 cents per share, for the three months ended September 30, 2021, compared to a net income attributable to common stock shareholders of $739,000, or 0.00023 per share, during the three months ended September 30, 2020, representing an increase in net loss attributable to common stockholders of $1,073,000 or 145%.

Nine Months Ended September 30, 2021 Compared with Nine Months Ended September 30, 2020

We realized a net loss attributable to common stockholders of $572,000, or 0.00013 cents per share, for the nine months ended September 30, 2021, compared to a net loss attributable to common stock shareholders of $533,000, or 0.00014 per share, during the nine months ended September 30, 2020, representing a decrease in net loss attributable to common stockholders of $200,000 or 38%.

Comparison of the Years Ended December 31, 2020 and 2019

The table below sets forth, for the periods presented, certain historical financial information.

Revenue

Athena ATM revenue increased $40,995,000 or 287%. Average transaction size for all crypto assets increased from $175 to $523, or 199% while number of transactions increased from 81,631 to 105,500, or 29%. Number of ATMs increased from 53 to 132, or 149%. The table below shows Bitcoin sales in Athena ATM. 

____________________

Note: n.m. defined as not meaningful.

(1) Ethereum, Litecoin, and BCH accounted for the remaining revenue.

Over-the-counter revenue increased $5,324,000 or 64%. Average transaction size for all crypto assets increased from $59,196 to $32,381, or 45% while number of transactions increased 135 to 415, or 207%. The table below shows Bitcoin sales in Over-the-counter.

____________________

Note: n.m. defined as not meaningful.

(1) Ethereum and Litecoin accounted for the remaining revenue in 2020 and Ethereum, Litecoin, and Tron in 2019.

BitQuick and other revenue decreased $25,000 or 22%. due to changing customer preferences.

Cost of Revenues and Gross Profit

Cost of revenues is comprised primarily of the expenses related to the acquisition of crypto assets sold and the costs of operating the ATMs from which the crypto assets are sold. For the year ended December 31, 2020 and 2019, the expenses related to the acquisition of crypto assets sold were $59.5 million and $20.2 million, respectively. The increase in expenses related to acquisition of crypto assets sold was primarily a result of the increased sales of crypto assets. For the year ended December 31, 2020 and 2019, the costs of operating the ATMs were $2.9 million and $1.8 million, respectively. The increase in operating the ATMs was primarily driven by the 59% increase in ATMs installed.

Gross profit increased $5.9 million or 913%, due to Athena ATM revenue growth in the U.S. Gross profit percentage increased due primarily to higher margins from Athena ATM revenue.

Operating Expenses

Total operating expenses increased $622,000 or 23%, primarily attributable to increase in salaries and benefits offset in part by a decrease in general and administrative, sales and marketing, and other operating costs.

Salaries and benefits increase $918,000 or 56%, primarily due to increase in stock-based compensation expense.

General and administrative expenses decreased $225,000 or 21%, primarily due to tighter expense control.

Sales and marketing expenses decreased of $25,000 or 58%, due to reduced marketing activity as control cost measure.

Fair Value Adjustment on Crypto Asset Borrowing Derivatives

Fair value adjustment on crypto asset borrowing derivatives decreased $300,000 or 22%, due to decrease in principal outstanding amount of Bitcoin borrowed (host contract) in 2020. See Note 5 to our audited condensed consolidated financial statements for the year ended December 31, 2020 and 2019.

Interest and Fees on Crypto Asset Borrowings

Interest expense increased of $701,000 or 243%, due to interest on 8% Convertible Debenture issued in January 2020 and increased borrowings.

Fees on crypto asset borrowings decreased $35,000 or 9%. The net decrease is primarily due to a reduction of $211,000 in underlying fees due to a 20 bitcoin decrease in the principal balance outstanding (50 bitcoin as of December 31, 2019 and 30 bitcoin as of December 31, 2020). The $211,000 reduction due to the decreased principal balance was offset by an increase of $176,000 due to an increase in fair value of Bitcoin.

Income Tax Expense (Benefit)

Income tax expense increased $428,000, due to the Company converting its tax status from S corporation to C corporation.

Net Loss Attributable to Common Stockholders

We realized a net income attributable to common stockholders of $160,000, or 0.00004 cents per share, for the year ended December 31, 2020, compared to a net loss attributable to common stockholders of $3,805,000, or 0.00305 per share, during the year ended December 31, 2019, representing an increase in net income attributable to common stockholders of $3,965,000 or 104%.

Financial Condition

The table below sets forth certain financial information for the periods presented.

 _______________________

(1) Percentage change from December 31, 2019 to December 31, 2020.

As of September 30, 2021, we had total assets of $15,131,000 compared to total assets of $6,475,000 as of December 31, 2020. This increase was primarily due to an increase in accounts receivable of $2,204,000, restricted cash held for customers of $2,200,000, which is offset by a liability to customers of $2,504,000, and other advances of $780,000. The increase in accounts receivable was primarily due to revenue from our contracts with the Department of Treasury (Ministerio de Hacienda) of El Salvador. The Company has collected $1,577,000 of the amount due as of February 8, 2022, of the accounts receivable at September 30, 2021. There was an increase of$2,350,000 due to investments in property and equipment, primarily ATM machines in El Salvador and U.S. We had no balance for accounts receivable and restricted cash held for customers as of December 31, 2020.

Our crypto assets held was $585,000 as of September 30, 2021, as compared to $1,343,000 as of December 31, 2020. This decrease was due to lower levels of crypto assets held and not restocking to match the bitcoin borrowings after the theft of 29 bitcoin in March 2021. Crypto asset borrowings from a related party decreased from $881,000, fair value of 30 bitcoin, as of December 31, 2020, to $384,000, fair value of 8 bitcoin, as of September 30, 2021, as we continued to repay borrowed bitcoin. We do not intend to borrow additional crypto assets in the foreseeable future and intend to raise equity funds or debt capital to finance working capital and investment as needed. No assurances can be made that we will be successful in such efforts.

Our leased assets decreased from $2,067,000 as of December 31, 2020, to $1,915,000 as of September 30, 2021, primarily as we did not significantly increase the number of locations leased for ATMs. There was also an equivalent decrease in the Company’s lease liabilities (current and long-term). The current portion of the Company’s long-term debt increased from $1,354,000 as of December 31, 2020, to $1,496,000 as of September 30, 2021, due to additional debt of $1,541,000 becoming due within one year offset by a decrease of $1,399,000 debt repaid during the period using cash flows from operations.

The Company has had increasing capital resources in 2021 over the twelve months ended December 31, 2020. Our cash on hand went up by $ 2,085,000 compared to the balance on December 31, 2020, primarily due to increase in restricted cash held for customers of $2,200,000 offset by changes detailed below.

Operating activities used $2,375,000 in cash for the nine months ended September 30, 2021. The sources of cash from operating activities comprised primarily of advances for revenue contracts $3,500,000; restricted cash held for customers of $2,200,000 and $331,000 of non-cash charges. The fair value adjustment on derivatives provided $378,000 adjustment of operating cashflow cash but was offset by an increase in value of accounts receivable by $2,202,000 and a net loss of $778,000. The revenue contract above refers to the sale of IP Software to the government of El Salvador which, for accounting purposes, is being termed as a revenue contract until such time as the XPay acquisition has been finalized.

Our investing activities provided $2,093,000 in cash for the nine months ended September 30, 2021 which included a cash inflow of $61,584,000 from sale of crypto assets offset by $57,306,000 of cash outflow on purchase of crypto assets, $991,000 towards purchase of property and equipment to expand our fleet of ATMs and $1,194,000 as investment in our fleet of white label ATMs and other assets in El Salvador.

Our financing activities provided $3,586,000 in cash for the nine months ended September 30, 2021, primarily due to the issuance of $4,985,000 in convertible debt and the repayment of $1,399,000 in debt.

Liquidity and Capital Resources

As of September 30, 2021, we had current assets of $8,881,000 and current liabilities of $10,704,000, including the current portion of the long-term note held by Consolidated Trading of $1,490,000 and advances for revenue contracts of $3,500,000, rendering a deficit working capital of $1,823,000. The revenue contract above refers to the sale of IP Software to the government of El Salvador which, for accounting purposes, is being termed as a revenue contract until such time as the XPay acquisition has been finalized.

Our working capital needs are influenced by our level of business operations and generally increase with higher levels of revenue. We strive to minimize the amount of working capital deployed for better financial results. During the quarter, we raised $4,695,000 in 6% Convertible Debentures in addition to the $290,000 we raised in the second quarter of 2021. That has provided us sufficient working capital for current needs. The Company continues to make efforts to supplement financial resources through raising equity and debt capital as well as generating cash inflow from operations. No assurances can be made that we will be successful in our equity and/or debt fund raising efforts.

Our ATM business has two significant components of working capital – holdings of crypto assets and cash holdings in the machines and in transit, i.e., once it has been removed from the machines and it is the process of being counted and credited to our account with the appropriate banking institution. We must buy our holdings in cash and don’t get a credit from our counterparties. On average, we hold 3 to 5 days of anticipated sales of Bitcoin and 7 to 10 days of anticipated sales of Ethereum, Litecoin, and BCH holdings. We strive to keep this period short to reduce the effect of changes in crypto asset/U.S. dollar exchange rates on our business and to minimize our working capital. Our cash logistics contractors restock or remove cash from our machines periodically, the frequency of this service determined by a host of operational considerations like historical trend of sales, current levels of cash in the machines, route considerations, public holidays, and incremental cost of each removal etc. We employ a data driven strategy based on factors we have learned over the years to reduce the amount of cash deployed and to keep it as low as possible. It currently takes anywhere from 3 to 7 days from the time the cash is picked up from the machines to be credited to our account. An increase in this period or amount impacts our ability to restock our holdings of crypto assets in a timely manner to avoid a situation where there are insufficient amounts of crypto assets to fulfill customer orders.

The employees of the Company regularly, at intervals of 3-hours or less, monitor the balance of Digital Assets owned and controlled by the Company. When employees of the Company, using their professional discretion, believe that there are insufficient amounts of Digital Assets owned and controlled by the Company, they initiate the purchase of additional Digital Assets. There have been periods of time, each less than 24-hours, where there have not been sufficient amounts of Digital Assets owned and controlled by the Company to execute future customer transactions. During those times, no customer transactions are permitted. The employees of the Company use the working capital of the Company to purchase more Digital Assets, during times when banking transactions are permitted, and once those Digital Assets are delivered to the Company and owned and controlled by the Company, customer transactions are again permitted.

Our OTC desk (phone sales) has a lower level of capital required since we only function on days other market participants and banks are operating and our trades are cash settled every day. The Company does not separately hold crypto assets earmarked for ATM sales as opposed to phone sales and the Company holds approximately 3 or 4 days’ worth of crypto assets needed for transactions at its ATMs. We strive to minimize the amount of working capital deployed for better financial results.

On July 12, 2021, the Company signed a loan restructuring agreement for the remaining of outstanding Bitcoin balance as of that date. Under the agreement Mr. Komaransky, the Company’s director and majority shareholder, agreed to extend the maturity for the entire amount of the loan to May 31, 2022, and certain other modified terms which included the conversion of the borrowings into a U.S. dollar loan when the published exchange rate of Bitcoin for U.S. dollars is equal to or exceeds a ratio of 1 bitcoin: U.S. $75,000 at the first time and on the first date after June 30, 2021. The Company, under the agreement, created a first priority security interest and lien on all its property excluding property that has been given as collateral to Consolidated Trading Futures, LLC (“CTF”) until the repayment of the outstanding debt to CTF. Further, the Company agreed to pay accelerated weekly payments of $35,000 in bitcoin. As of December 31, 2021, there is no remaining balance under the loan restructuring agreement. We continue to make efforts to obtain additional resources to meet the financial needs of our business.

In the 2022 fiscal year, the Company has one materially significant debt due, the note held by CTF (the “Consolidated Note”). As of December 31, 2021, the principal balance of the Consolidated Note was $1,490,000. The Company makes monthly interest payments on the Consolidated Note, but as of the date of this prospectus, has not paid down the principal. To retire this debt in 2022, the Company expects to use cash inflow from operations and other working capital.

The Company has no material commitments for capital expenditures.

Loan Agreement with the Company’s Director and Shareholder

On August 22, 2018, the Company entered into a crypto asset borrowing agreement with Mr. Komaransky, one of the Company’s directors and a principal shareholder. Under this agreement, the Company borrowed 30 bitcoin initially due and payable on August 22, 2019. The borrowing fee on the loan as defined in the agreement, is 13.5% of the outstanding principal amount. On July 12, 2021, the Company and Mr. Komaransky entered into a borrowing restructuring agreement for the remaining outstanding Bitcoin balance as of that date. Under the terms of the agreement, the maturity of the borrowings was extended to May 31, 2022 and the Company agreed to make weekly repayments of $35,000 in Bitcoin. On a weekly basis, the Company intends to utilize cash flows from operations and other financings to obtain the Bitcoin necessary for the weekly repayments. As discussed in further detail in Notes 1 and 5 to our consolidated financial statements for the year ended December 31, 2020 and 2019, the crypto assets borrowings are accounted for as hybrid instruments, with a liability host contract that contains an embedded derivative based on the changes in the fair value of the underlying crypto asset. The host contract is not accounted for as a debt instrument because it is not a financial liability and is carried at the fair value of the assets acquired on the date acquired. The embedded derivative is accounted for at fair value (based on the underlying Bitcoin value), with changes in fair value recognized in other non-operating expenses in the consolidated statements of operations and comprehensive income. The host contract and embedded derivative are presented together in Related party crypto asset borrowings in the consolidated balance sheets.

The Company intends to utilize cash from operations to repay its related party crypto asset borrowing obligation (not directly related to the theft of Bitcoin). On July 12, 2021, the Company entered into a borrowing restructuring agreement for the remaining outstanding bitcoin balance as of that date. Under the terms of the agreement, the maturity of the borrowings was extended to May 31, 2022 and the Company agreed to make weekly repayments of $35,000 in Bitcoin.

Cash Flow

The following summarizes our cash flow for the nine months ended September 30, 2021 and 2020:

The following summarizes our cash flow for the year ended December 31, 2020 and 2019:

Cash flow from operating activities

Operating activities used $2,375,000 in cash for the nine months ended September 30, 2021, compared to $4,690,000 for the nine months ended September 30, 2020 representing a decrease in cash used of $2,315,000. The changes in sources of cash from operating activities for the nine months ended September 30, 2021, comprised primarily of an increase from advances for revenue contracts $3,500,000; increase from restricted cash held for customers of $2,504,000, increase of $467,000 of non-cash charges and increase in accounts payable and other liability of $604,000. This was offset by the increase of $1,130,000 in gain on sale of crypto assets, increase in value of accounts receivable by $2,202,000, increase in advances of $730,000, decrease in fair value adjustment on derivatives of $153,000, increase in prepaid expenses and other assets of $300,000, and an increase in net loss of $245,000. Operating activities used less cash in the nine months ended September 30, 2021, compared to the nine months ended September 30, 2020, primarily due to an increase in net income in the nine months ended September 30, 2021.

For the year ended December 31, 2020, net cash used in operating activities was $6,057,000, compared to $4,610,000 during the year ended December 31, 2019, representing an increase in cash used of $1,447,000, primarily due to the increase in net income of $3,965,000 and of $1,713,000 of non-cash charges offset by the increase of $6,657,000 in gain on sale of crypto assets, increase in accounts payable and other liability of $98,000, increase in prepaid expenses and other assets of $70,000 and decrease in fair value adjustment on derivatives of $300,000.

Cash flow from investing activities

Our investing activities provided $2,093,000 in cash for the nine months ended September 30, 2021 which included a cash inflow of $61,584,000 from sale of crypto assets offset by $57,306,000 of cash outflow on purchase of crypto assets, $991,000 towards purchase of property and equipment to expand our fleet of ATMs and $1,194,000 as investment in our fleet of white label ATMs and other assets in El Salvador. In the nine months ended September 30, 2020, investing activities provided $3,426,000 which included a cash inflow of $48,966,000 from sale of crypto assets offset by $44,977,000 of cash outflow on purchase of crypto assets, and $563,000 towards purchase of property and equipment to expand our fleet of ATMs.