Overview
On July 29, 2021, pursuant to the closing of a share exchange, W Technologies, Inc. (“W Technologies”) acquired Krypto Ventures, Inc., f/k/a KryptoBank Co., Inc. (“Krypto Ventures”), Krypto Ventures thereafter became a wholly owned subsidiary of W Technologies, and the business of Krypto Ventures became our business going forward. Unless the context indicates otherwise, any references to the “Company,” “we,” “us,” “our” or words of similar import refer to W Technologies and Krypto Ventures on a combined basis after the closing of the Share Exchange (as hereinafter defined).
Krypto Ventures is a holding company that plans to identify and acquire uniquely positioned blockchain technology companies and digital assets though acquiring minority positions in newly issued and listed coins and/or tokens. We aim to partner with best in-class teams and develop collaborative relationships to help execute their vision, drive sustainable growth, and ultimately create long-term value.
We seek to invest in companies with:
We expect to provide strategic guidance through a network of experienced executives with operational and industry expertise, as well as financing support and other resources necessary to drive value.
Krypto Ventures Share Exchange
On June 15, 2021, W Technologies entered into a share exchange agreement (the “Share Exchange Agreement”) with (i) Krypto Ventures, (ii) each of the stockholders of Krypto Ventures (the “Krypto Ventures Stockholders”) and (iii) Aleksandr Rubin as the representative of the Krypto Ventures Stockholders (the “Stockholders’ Representative”).
Among other conditions to the closing of the transactions contemplated by the Share Exchange Agreement, pursuant to the terms of the Share Exchange Agreement, the parties agreed that W Technologies would acquire 100% of Krypto Ventures’ issued and outstanding common stock in exchange for the issuance to the Krypto Ventures Stockholders of a number of shares of W Technologies’ common stock representing 90% of the issued and outstanding shares of W Technologies’ common stock (the “Share Exchange”).
The Share Exchange closed on July 29, 2021. Pursuant to the terms of the Share Exchange Agreement, the W Technologies acquired 102,500,000 shares of Krypto Ventures common stock, representing 100% of the issued and outstanding capital stock of Krypto Ventures, in exchange for the issuance to the Krypto Ventures Stockholders of 233,474,958 shares of W Technologies’ common stock. As a result of the Share Exchange, Krypto Ventures became a wholly owned subsidiary of W Technologies and the business of Krypto Ventures became the business of the Company.
In addition, at the closing of the Share Exchange:
In addition, at the closing, W Technologies issued 14,267,914 shares of its common stock to certain advisors and service providers to the Company, representing a total of 5.5% of W Technologies’ issued and outstanding shares of common stock as of the closing.
Also at the closing of the Share Exchange, two greater than 5% stockholders of W Technologies (Lyons Capital, LLC and Balance Labs, Inc.) and each of the advisors and service providers (two in total) that were issued shares of W Technologies common stock at the closing entered into lock-up agreements with W Technologies (each, a “Lock-Up Agreement”), pursuant to which such persons agreed, among other things, that they will not sell or transfer (subject to certain customary exceptions) any shares of W Technologies’ common stock for a period of 12 months following the closing.
On July 13, 2021, prior to the closing of the Share Exchange, pursuant to a Securities Exchange Agreement between W Technologies and Mid Atlantic Capital Associates, Inc. (“MACA”), W Technologies issued 7,678,732 shares of common stock to MACA in exchange for the extinguishment of an amount owed to MACA pursuant to a promissory note of $161,841, and the transfer to the Company of 1,000,000 shares of W Technologies Series F convertible preferred stock (the “Series F Stock”) held by MACA. The Company redeemed the Series F Stock and returned the shares to authorized but unissued shares of Series F Stock. As a result, there were no outstanding shares of Series F Stock, and the debt owed by the Company to MACA was satisfied and forgiven as of the date of the closing of the Share Exchange. In addition, on July 15, 2021, the Company filed a Certificate of Withdrawal with the Secretary of State of the State of Delaware to withdraw the Certificate of Designations for the Series F Stock. The Certificate of Withdrawal was effective upon filing, and no shares of Series F Stock were outstanding at the time the Certificate of Withdrawal was filed. As such, W Technologies has no classes of stock authorized, issued or outstanding other than common stock.
The Share Exchange is intended to be a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”), and the Share Exchange Agreement is intended to be a “plan of reorganization” within the meaning of the regulations promulgated under Section 368(a) of the Code and for the purpose of qualifying as a tax-free transaction for federal income tax purposes.
Industry Overview and Market Opportunity
We believe one of the most notable developments in financial markets during 2021 was the rally in digital assets and the changing of the public perspective on digital assets, as well as increased institutional interest. In April 2021, CNBC reported that the total market capitalization of the cryptocurrency space had eclipsed $2 trillion for the first time. We believe this evidences that the digital asset phenomenon has deeper roots and, not withstanding its unpredictability, we expect it is here to stay for the long run.
In our opinion, the issue is no longer whether digital assets will survive, but rather how they will evolve. While the cryptocurrency market is often volatile at this time, we believe this could be a phase preceding broader acceptance of a fairly new asset class.
We believe many digital assets are built on a technological foundation that grants them a unique and lasting advantage over traditional assets. However, we believe it is far too early to predict which cryptocurrencies will actually survive the ongoing shifts that are likely to redefine the future digital asset landscape. Therefore, we plan for our Company not to be structured based on any one cryptocurrency to succeed. Instead, we plan to provide our stockholders the opportunity to diversify their digital asset portfolio with an investment in our Company.
2021 has been a significant year for digital assets and as the market continues to develop, the world’s financial institutions, policymakers, and investors are watching carefully. Whatever the future holds for digital assets, we believe that we will be the digital asset investment platform that many investors are looking for.
Principal Products and Services
We plan to: (i) own, develop, consult on, and provide funding for new and existing digital assets; (ii) hold digital assets for the benefit of our stockholders; and (iii) be founders of new digital assets.
We believe that our value will grow if the digital assets we invest in succeed. We live in a world that is increasingly global - digital natives control a growing share of the world’s wealth, and each year we see more commerce happening online. We feel that with proper execution of our business plan and the success of our digital asset portfolio, we will provide value to our stockholders. More importantly, we feel we have a tremendous opportunity to actively drive our business by:
As of November 15, 2021, we have not yet commenced any of our principal planned of operations detailed above, having focused primarily on fundraising and other organizational matters.
Competition
Our competitors include other companies focused on investments in, development of, and provision of consulting services to, digital assets and digital asset companies. Venture funds such as Pantera Capital, Blockchain Capital and Union Square Ventures invest in and advise the cryptocurrency space in similar ways that we intend to do, and have significantly greater resources than us for such endeavors. However, we believe we have a number of key strengths that will allow us to compete effectively against other participants in this space. We believe the following advantages set us apart from our competitors:
Customers
As of November 15, 2021, we do not have any customers.
Government Regulation
Our anticipated business activities are not currently subject to any particular regulation by government agencies other than those routinely imposed on corporate and/or publicly traded businesses.
Notwithstanding the above, as digital assets have grown in both popularity and market size, the U.S. Congress and a number of U.S. federal and state agencies (including FinCEN, SEC, CFTC, FINRA, the Consumer Financial Protection Bureau (CFPB), the Department of Justice, the Department of Homeland Security, the Federal Bureau of Investigation, the IRS and state financial institution regulators) have been examining the operations of digital asset networks, digital asset users and the digital asset exchange markets, with particular focus on the extent to which digital assets can be used to launder the proceeds of illegal activities or fund criminal or terrorist enterprises and the safety and soundness of exchanges or other service-providers that hold digital assets for users. Many of these state and federal agencies have issued consumer advisories regarding the risks posed by digital assets to investors. In addition, federal and state agencies, and other countries, have issued rules or guidance about the treatment of digital asset transactions or requirements for businesses engaged in digital asset activity.
In addition, the SEC, U.S. state securities regulators and several foreign governments have issued warnings that digital assets sold in initial coin offerings (“ICOs”) may be classified as securities and that both those digital assets and ICOs may be subject to securities regulations. Ongoing and future regulatory actions may alter, perhaps to a materially adverse extent, the nature of an investment in us or our ability to continue to operate. Additionally, U.S. state and federal, and foreign regulators and legislatures have taken action against virtual currency businesses or enacted restrictive regimes in response to adverse publicity arising from hacks, consumer harm, or criminal activity stemming from virtual currency activity.
Law enforcement agencies have often relied on the transparency of blockchains to facilitate investigations. Europol, the European Union’s law enforcement agency, released a report in October 2017 noting the increased use of privacy-enhancing digital assets like Zcash and Monero in criminal activity on the internet and in May 2018 it was reported that Japan’s Financial Service Agency has been pressuring Japanese digital asset exchanges to delist privacy-enhancing digital assets. Although no regulatory action has been taken to treat Zcash or other privacy-enhancing digital assets differently, this may change in the future.
Various foreign jurisdictions have, and may continue to, in the near future, adopt laws, regulations or directives that affect the digital asset markets and their users, particularly digital assets and their service providers that fall within such jurisdictions’ regulatory scope. For example, on March 5, 2020, South Korea voted to amend its Financial Information Act to require virtual asset service providers to register and comply with its AML and CFT framework. These measures also provide the government with the authority to close digital asset exchanges that do not comply with specified processes. The Chinese and South Korean governments have also banned ICOs and there are reports that Chinese regulators have taken action to shut down a number of China-based digital asset exchanges. Further, on January 19, 2018, a Chinese news organization reported that the People’s Bank of China had ordered financial institutions to stop providing banking or funding to “any activity related to cryptocurrencies.” Similarly, in April 2018, the Reserve Bank of India banned the entities it regulates from providing services to any individuals or business entities dealing with or settling digital assets. On March 5, 2020, this ban was overturned in the Indian Supreme Court, although the Reserve Bank of India is currently challenging this ruling. There remains significant uncertainty regarding the South Korean, Indian and Chinese governments’ future actions with respect to the regulation of digital assets and digital asset exchanges. Such laws, regulations or directives may conflict with those of the United States and may negatively impact the acceptance of digital assets by users, merchants and service providers outside the United States and may therefore impede the growth or sustainability of the digital asset economy in the European Union, China, Japan, Russia and the United States and globally, or otherwise negatively affect the value of digital assets.
In July 2019, the United Kingdom’s Financial Conduct Authority (the “FCA”) proposed rules to address harm to retail consumers deriving from the sale of derivatives and exchange traded notes (“ETNs”) that reference certain types of digital assets, contending that they are “ill-suited” to retail investors citing extreme volatility, valuation challenges and association with financial crime. In addition to ETNs, the proposed ban would affect financial products including contracts for difference, options and futures. Public consultation on the proposed restriction closed in October 2019. As of November 15, 2021, the FCA has not yet finalized its proposed ruling.
In January 2021, the United Kingdom’s Financial Conduct Authority (the “FCA”) banned the sale, marketing and distribution to all retail consumers of any derivatives (i.e. contract for difference – CFDs, options and futures) and exchange traded notes that reference unregulated transferable cryptoassets by firms acting in, or from, the UK. The FCA stated that the products cannot be reliably valued as these have a history of market abuse and financial crime, extreme volatility in cryptoasset price movements. The FCA also maintains that there is an inadequate understanding of cryptoassets by retail consumers and lack of legitimate investment need for retail consumers to invest.
The effect of any future regulatory change on us is impossible to predict, but such change could be substantial and adverse.
Securities Act of 1933
Certain regulatory considerations may exist under the Securities Act with respect to the digital assets we acquire. We have adopted a facts and circumstances-based policy for determining whether or not the digital assets considered for investment by our Company are securities, as the determination of an asset’s status as a security is a highly fact-specific determination.
1. First, we consider the facts and circumstances relative to each digital asset we are considering investing in.
2. Second, we will apply the Howey test when reviewing those unique facts and circumstances. Each of the prongs of Howey will result in discussion of the facts, depending on the level of complexity related to making the determination.
If this does not produce a result we feel confident in, we may also apply and consider each of the unique facts and circumstances questions related to each digital asset as described in the remarks of William Hinman, the Director of the SEC’s Division of Corporation Finance at the Yahoo Finance All Markets Summit: Crypto in June 2018.
Because an “investment contract,” pursuant to the terms of Howey, must satisfy all of the prongs of the test in order to be deemed to be an “investment contract,” if we think any digital asset fails one of the prongs of the Howey Test, the further tests need not be applied.