EDGAR 10-K Filing

Company CIK: 1766352
Filing Year: 2022
Filename: 1766352_10-K_2022_0001553350-22-000052.json

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ITEM 1. BUSINESS
Item 1. Business.
Overview
Our business was initially created to provide unbanked and financially underserved individuals in emerging markets mobile access to financial services. On September 11, 2018 Airfox entered into a services agreement, as amended on June 7, 2019 (the “Services Agreement”) with Via Varejo S.A., a corporation organized under the laws of the Federative Republic of Brazil ("Via Varejo") whereby, among other things, Airfox was provided with an exclusive agreement with Via Varejo’s Casas Bahia, a Brazilian retailer that specializes in furniture and home appliances, to digitize their parcelas (portions) program, where the retailer allows customers to pay for large purchases through monthly installments. banQi enables customers to make their payments digitally rather than traveling to a store, negotiating paperwork, and paying in cash. Our partnership with Via Varejo enabled users to make cash deposits into their banQi (defined below) balance at any of Via Varejo’s Casas Bahia stores across Brazil.
As a result of the events described below, we are now supporting the development, management and operation of a software technology platform consisting of two applications, a digital wallet application and an alternative credit scoring and lending application. The software technology platform was designed and built as a Software as Service or (SaaS) offering. The platform is currently operated in Brazil through banQi Instituição de Pagamento Ltda (“banQi”), a limited liability company organized under the laws of the Federative Republic of Brazil, which is part of the Via Varejo Group.
The wallet application, banQi is a digital banking application capable of leveraging machine learning capabilities to build alternative, smartphone-based credit risk models. banQi, available on Android and iOS, aims to eliminate the need for traditional financial institutions allowing those without bank accounts or credit cards to more easily and quickly make many everyday transactions using a smartphone. banQi will also create an alternative credit scoring system for use in connection with an alternative credit scoring and lending application.
We operate through Carrier EQ, LLC d/b/a Airfox, a Delaware limited liability company. CarrierEQ, Inc. d/b/a Airfox was incorporated on January 19, 2016 and on May 21, 2020, CarrierEQ, Inc. converted to a Delaware limited liability company and all shares of its common stock were converted into limited liability company interests. CarrierEQ, Inc. now exists as Carrier EQ, LLC. Unless the context otherwise requires, all references to “Airfox” “Company,” “we,” “our” or “us” and other similar terms means Carrier EQ, LLC d/b/a Airfox. Carrier EQ, LLC is a wholly-owned subsidiary of Lake Niassa Empreendimentos e Participacões Ltda., a limited liability company duly organized under the laws of the Federative Republic of Brazil ("Lake Niassa") that is, in turn, wholly-owned by Via Varejo.. Our Company operates as part of the Via Varejo Group.
On June 14, 2021, the Company, Lake Niassa and banQi entered into the 7th Amendment and Consolidation of the Articles of Association of banQi (the “7th Amendment”). Pursuant to the terms of the 7th Amendment, the Company and Lake Niassa (i) increased banQi 's share capital from BRL 1,000,000.00 (one million reais) to BRL 69,870,000.00 (sixty-nine million, eight hundred and seventy thousand reais), which represents an increase of BRL 68,870,000.00 (sixty-eight million, eight hundred and seventy thousand reais); and (ii) issued 68,870,000 (sixty-eight million, eight hundred and seventy thousand) new quotas, with par value of BRL 1.00 (one real) each, fully subscribed and paid up, in Brazilian currency, through the capitalization of Advances for Future Capital Increase ("AFAC") made by Lake Niassa.
Prior to entering into the 7th Amendment, our Company had a 99.99% ownership interest in banQi and Lake Niassa had a 0.01% ownership interest in banQi. Pursuant to the 7th Amendment, and the transfer of banQi’s share capital to Lake Niassa, our Company’s ownership interest in banQi decreased to 1.43% of the share capital of banQi, and Lake Niassa’s ownership interest in banQi increased to 98.57% of the share capital of banQi, which made Lake Niassa the controlling owner of banQi.
As a result of this change in control (the “Change in Control”), on June 14, 2021, the Company determined that it did not have a controlling interest over banQi, and banQi was deconsolidated from the Company's condensed consolidated financial statements and presented as discontinued operations in the Company’s consolidated financial information presented within this annual report. The presentation of the operations and results of banQi is further explained in Note 4 - Discontinued Operations in the notes to the audited consolidated financial statements appearing elsewhere in this Annual Report. No additional revenue has been recognized by our Company from June 14, 2021through September 30, 2021. On November 1, 2021 and December 14, 2021, Lake Niassa made a capital contribution to Airfox in the amount of $283,000 and $290,000 with no additional membership interests issued or ownership rights granted.
On June 30, 2021, Lake Niassa, the sole member of our Company, determined to discontinue the development of AirTokens and end the AirToken project related to the Company’s business. Lake Niassa made the determination that the Company does not have the ability to further develop AirTokens as part of its business plan in the absence of new laws or a definitive regulatory regime (in both the U.S. and Brazil) regarding the use and transferability of AirTokens (and other similar tokens issued on the Ethereum block chain that are classified as securities). Current laws and regulatory regimes do not provide for the Company to utilize the AirTokens as envisioned by the Company since AirTokens are no longer freely transferable and the previous market for AirTokens no longer exists. AirTokens were never fully developed and never gained full functionality. AirTokens are not currently freely transferable and no market exists for AirTokens. As a result of our Company discontinuing the development of AirTokens, AirTokens lost their functionality in full, and it is likely that no market for AirTokens will ever be re-created and that AirTokens will not again ever be freely transferable.
Currently, the Company's main functions and activities comprise of supporting banQi’s operation in Brazil, including assisting banQi with the management of the digital wallet application and the financial services provided to those without bank accounts or credit cards. Primarily due to the cancellation of the AirToken project and since the main features of the Company’s software and technology platform have been developed and funded to be applied in the Brazilian market,, as per the Services Agreement and related agreement, the Company's main functions and activities relating to the development and management of a software technology platform consisting of a digital wallet application and an alternative credit scoring and lending application have substantially migrated to banQi entity in Brazil, and our Company expects to continue transferring the remainder of its contracts with suppliers to Brazil, thereby reducing its activities in the U.S.
Our principal executive offices are located at 186 Lincoln Street, Third Floor, Boston, MA 02111, and our telephone number is: (617) 841-7207. Our website address is Airfox.com. No information found on our website is part of this report. Also, market data and certain industry forecasts used throughout this report were obtained from our internal analyses, market research, publicly available information, and industry publications. Industry publications generally provide that the information contained in such publications has been obtained from sources believed to be reliable, but that the accuracy and completeness of such information is not guaranteed.
Our Business Plan
Currently, our operations consist solely of supporting the development, management and operation of banQi’s software technology platform consisting of two applications, a digital wallet application and an alternative credit scoring and lending application. The software technology platform was designed and built as a Software as Service or (SaaS) offering. The platform is operated solely in Brazil through banQi, a company that is part of the Via Varejo Group. Our Company is also part of the Via Varejo Group.
On September 11, 2018 Airfox entered into the Services Agreement whereby, among other things, Airfox was provided with an exclusive agreement with Via Varejo’s Casas Bahia, a Brazilian retailer that specializes in furniture and home appliances, to digitize their parcelas (portions) program, where the retailer allows customers to pay for large purchases through monthly installments. Primarily due to the cancellation of the AirToken project and since the main features of the Company’s software and technology platform have been developed and funded to be applied in the Brazilian market, as per the Services Agreement and related agreements, the Company's main functions and activities relating to the development and management of a software technology platform consisting of a digital wallet application and an alternative credit scoring and lending application have substantially migrated to the banQi entity in Brazil, and our Company expects to continue transferring the remainder of its contracts with suppliers to Brazil; thereby reducing its activities in the U.S. Additionally, the parties are considering the termination of the Services Agreement. In the event the Services Agreement is terminated, it is likely that another agreement will not be entered into between Via Varejo and our Company.
As a result of the Change in Control, banQi is no longer a Company subsidiary and the intangible assets related to the capitalization of software developed within the scope of the Service Agreement have been written off. For additional information on this write off, See Note 4 - Discontinued Operations in the notes to the audited consolidated financial statements appearing elsewhere in this Annual Report.
Like banQi, Airfox is part of the Via Varejo Group. Airfox’s operations consist solely of supporting banQi in implementing banQi’s strategy described below and operationalizing banQi’s business. Airfox supports banQi’s teams in the design of banQi’s customer experience, its products and services and the development of its solutions and platforms. We are also responsible for hosting banQi's platform infrastructure and for managing all data information for banQi, including the Business Intelligence Systems.
Airfox is completely dependent on the success of banQi, and many aspects if our business are tied directly to banQi’s business. banQi is almost fully operational in Brazil, and most of banQi’s activities (including part of the software design and development) are migrating to Brazil. As the migration of Airfox's activities and operations to banQi is still being defined, there is presently no agreement between Airfox, banQi and Lake Niassa regarding current or future services to be provided to banQi by Airfox. Consequently, to date, Airfox has not been remunerated by banQi for services it has provided to banQi. Airfox has no other operations other than as described herein and currently has no source of revenue.
banQi
banQi, is a digital banking application that holds users’ cash and can be used to process a variety of consumer transactions. It is designed to meet the needs of those who primarily use cash because financial services are inaccessible to them. Airfox has partnered with some Brazilian payment processing companies which allow use of banQi at more than 300,000 physical locations throughout Brazil - including post offices and banks - that allow users to convert funds from Brazilian Reals to a banQi balance. Currently, users may deposit cash to banQi at these physical locations as a result of our current agreements with certain payment processing companies. To make a deposit to banQi through boletos, users need to issue a boleto in exchange for cash, and scan the bar code with their banQi app. Boletos are a means of payment that are processed in many locations, such as post offices, supermarket chains, convenience stores, and lottery ticket vendors throughout Brazil - they contain a barcode that serves as a unique routing number.
Once the deposit into banQi is processed, users can use banQi to engage in a variety of transactions directly through their mobile phone with merchants that accept banQi. For example, users can pay their monthly rent by scanning the barcode of boletos that relate to the rent bill directly into banQi. The banQi balance can also be transferred to other users of banQi - the transfer is instantaneous and is facilitated by Airfox’s backend system. Currently, transfers can be made to existing banQi users within banQi and to other banks. By allowing users to generate and pay boletos directly within banQi and initiate currency transfers digitally, banQi enables users to transfer the funds to the appropriate accounts in order to complete payment without having to go to a physical location or handle physical currency.
Additionally, banQi users can convert their banQi balance into cash by 1) transferring their banQi balance to their bank account (for the subset of banQi users who have a bank account) then withdrawing the funds at a bank branch location or any ATM within the bank’s network, or by 2) performing a cash withdrawal at Via Varejo’s Casas Bahia stores. To perform a cash withdraw at Casas Bahia, users would go to any cashier at Casas Bahia, initiate a cash withdraw in their banQi app, enter the employee code displayed on the cashier’s name tag, then present a government issued ID to the cashier for identity verification. The development of the bank transfer feature is complete, and the ability to withdraw cash at Casas Bahia stores is available in the Via Varejo’s Casas Bahia network.
As of September 30, 2021, banQi had 483 thousand active users (defined as those registered users who have made at least one transaction during the last 30 days) generating a total payment volume (TPV) of R$1.38 billion from October 1, 2020 to September 30, 2021. As of September 30, 2020, banQi had 143,000 active users generating a total payment volume (TPV) of R$100.4 million from October 1, 2019 to September 30, 2020.
banQi generates revenue from fixed recurring fees and transaction fees negotiated with merchant partners like Casas Bahia. banQi also generates revenue from transaction fees (and interchange fees from MasterCard debit card transactions) charged to a customer when conducting a wallet transaction for top-ups, boleto and utility payments so that its revenue will be a percentage of TPV. Additionally, banQi also generates revenue from interest income on the cash balances users maintain in banQi and from interchange fees from MasterCard prepaid card transactions.
banQi is also developing additional capabilities that expand its usability, and it is worth mentioning especially the development of a Credit Card with the extension of the partnership with Mastercard and the start of the Personal Loan operation for users of the banQi App with the partnership of a Financial Institution in Brazil and with the resources (funding) of Via Varejo.
banQi is becoming an alternative lending application that provides Via Varejo’s ecosystem significant growth opportunity. banQi’s ability to grow revenue is affected by, among other things, consumer spending patterns, merchant and consumer adoption of virtual and electronic payment methods, the expansion of commerce channels, the growth of mobile devices and merchant and consumer applications on those devices, the growth of consumers globally with internet and mobile access, the pace of transition from cash and checks to virtual and electronic forms of payment, banQi’s share of the virtual and electronic payments market, the acceptance of cryptocurrency and associated regulatory developments, and banQi’s ability to innovate new methods of payment that merchants and consumers value. The strategy to drive growth in the banQi app and alternative credit scoring and lending application includes the following:
· Extending through strategic partnerships: by building strategic partnerships to acquire new customers and establish banQi’s role in the virtual and electronic payment processing and lending communities.
· Growing userbase: through expanding banQi’s customer base and scale, increasing customers’ use of products and services by better addressing their everyday needs related to accessing, managing and moving money and expanding the adoption of banQi’s solutions by new merchants and consumers.
· Offering of new products and services: development of new products, such as the credit card and personal loan, mentioned above, will make it possible for users of the banQi app to expand possibilities of access to credit and financial inclusion.
Industry Trends - FinTech
In pursuing banQi’s growth strategy, Via Varejo’s Group intends to capitalize on the growth of the financial technology industry (“FinTech”).
FinTech, which is built on the merging of financial services with communications technology, is a growing industry for a variety of reasons. Developments in technology, including big data analytics, artificial intelligence, and mobile development, are combining to give FinTech companies and the services they offer, also referred to as FinTech platforms, an increasing advantage over traditional financial platforms. Faster payment networks typically reduce the time required to move money between accounts. banQi’s management believes that as it accumulates customer data, it will be possible to increase product sales by combining analytics and marketing to bring new products to market, improve service offerings, and make FinTech processes more efficient and transparent.
Brazil has continued to define itself as a leader in FinTech throughout Latin America. Regulation and technology are breaking down barriers to entry related to distribution, clearing the way for new entrants that could shrink asset and liability spreads and increase penetration. Larger, more-established financial service providers, particularly banks, must now comply with additional regulatory and capital requirements that are, at present, not required for payment institutions (a category of FinTech company). A lack of such requirements may pave the way for challenger banks, FinTech companies leveraging technology and software to digitize and streamline retail banking, to target underserved and unserved demographics. Mobile technology allows challenger banks to offer competitive retail banking services such as current accounts, savings accounts, loans, insurance, and credit cards to those who want to be able to bank from their phones instead of visiting a retail location. Additionally, Brazilians have historically had limited tools with which to manage personal finances, which has led to greater usage of expensive loans and a poor allocation of resources, and companies are using internet-based solutions to help users manage accounts and renegotiate loans, as well as to provide marketplaces for new loans and savings products.
Strategic Partnership
banQi, with the support of Airfox, is actively developing channel partners to leverage the scale, brand recognition, and strategic synergies that these partnerships bring to accelerate the acquisition of end-users and increase the value to them.
Mastercard Brasil
On June 12, 2019, banQi entered into a Strategic Alliance and Incentive Program Agreement (the “Program Agreement”) with Mastercard Brasil Soluções de Pagamento Digital Ltda. (“Mastercard Brasil”) and Via Varejo. As a licensee of MasterCard International, Inc. and a business partner of Mastercard Brasil, and it launched its prepaid card (the “Pre-paid Card”) and entered into an Incentive Program (as defined in the Program Agreement) in order to issue, expand and boost the Pre-paid Card base in Brazil as well as the number of transactions and turnover (sales revenue) generated by MasterCard Cards. As an incentive to support the launching of the Pre-paid Card, on December 16, 2019, Mastercard Brasil made to banQi in Brazil an incentive prepayment per sales revenue (the “Sales Revenue Incentive Prepayment”) totaling R$65 million (approximately U.S.$16 million in December 2019). The Sales Revenue Incentive Prepayment constituted the creation of a direct financial obligation on banQi since it constituted prepaid sales revenue from Mastercard Brasil. Via Varejo agreed to act as a guarantor of the Sales Revenue Incentive Prepayment obligations to Mastercard Brasil pursuant to the Program Agreement and a guaranty letter.
As a result of the deconsolidation of banQi, the Sales Revenue Incentive Prepayment is now reported in banQi's financial statements and no longer consolidated with Airfox's financial results.
For additional information on the Program Agreement, including information with regard to specific termination rights, See Note 5 - Mastercard Program Agreement in the notes to the audited consolidated financial statements appearing elsewhere in this Annual Report.
Geographic Markets
banQi’s geographic market is Brazil. The plan is to continue to focus efforts on expanding it to additional Casas Bahia locations throughout Brazil. The idea is to increase engagement, gain consumer trust, and enhance user understanding of banQi’s general functionality.
Competition
On a global scale, Latin America has the greatest opportunity for applications such as banQi. Within Brazil, numerous companies have produced applications with competing functionalities, however, Via Varejo believes few applications currently compete with the suite of solutions that banQi will eventually offers its users.
Brazilian Competitors
banQi currently faces at least two types of competitors in Brazil, payment application providers and digital banks.
· Payment Application Providers: In this category, banQi’s largest competitors in Brazil are RecargaPay, PicPay, Ame Digital, Celcoin, Neon and MercadoPago. These applications directly compete with the banQi app functionalities. All of these competitors allow for bill pay, boleto pay, mobile recharge, money transfer, and various deposit methods. Many of these competitors’ payment applications are targeted towards more affluent Brazilians.
· Digital Banks: In this category, banQi’s largest competitors in Brazil are Nubank, Banco Inter, and PagBank. These digital banks are indirect competitors with banQi, as they bring competitive technology but a much greater variety in features. As with any bank, this allows for easy means to pay boletos, transfer and save money. Many of these digital banks preposition savings accounts, credit/debit cards, and direct integrations with the Central Bank in Brazil.
Regulations That Affect banQi’s Business in Brazil
banQi is subject to a number of laws and regulations in Brazil, many of which are still evolving and could be interpreted in ways that could materially affect our business. While it is difficult to fully ascertain the extent to which new developments in the field of law will affect our business, there has been a trend towards increased consumer and data privacy protection.
Banking Regulations - Payment Institution
banQi is currently licensed with the Brazilian Central Bank per applicable regulations, as a payment institution.
Regulation of Business Activities in Brazil
Our business activities in Brazil are subject to Brazilian laws and regulations relating to payment schemes and payment institutions.
Regulation of Payment Institution and Payment Scheme Settlors.
banQi performs activities that are in particular subject to Law No. 12,865/13 and regulations from the Brazilian Central Bank and the CMN. In addition, Law No. 12,865/2013 prohibits payment institutions from performing activities that are restricted to financial institutions, which are regulated by Law No. 4,595/1964.
Licenses and Agreements
As a result of the Change in Control, the primary agreements related to banQi’s business operations and product offerings were migrated to banQi, and any related revenues, obligations and rights were transferred to banQi's financial statements and deconsolidated from Airfox's financial statements.
Technology & Technology Suppliers
banQi software technology platform was, and continues to be, developed “internally” by employees in the U.S., but mainly in Brazil. As of September 30, 2021, part of the development of the banQi technology platform takes place in Brazil, with Airfox providing some integrations with other technology platforms, as well as support for the hosting and infrastructure for the banQi platform and the development of specific modules, such as data intelligence.
banQi’s platforms are hosted in third party data centers on virtual cloud-based infrastructure (such as Digital Ocean, Google Cloud Computing and AWS). These data centers use a mixture of biometric access controls, redundant power, environmental controls and secure internet connection points to ensure uptime and data security. Machine learning technology is a key part of the application, and we rely on a third party to deliver banQi’s platform’s credit assessment capabilities. Our Company continuously monitors banQi’s services for availability, performance and security. We rely on our data center and service providers to maintain peak operating conditions in their businesses and to quickly address issues related to their service as they arise.
Intellectual Property
Our Company does not have any patents, and we do not have any patents in progress.
We registered “Airfox” and AirToken” and their related logos and certain other marks as trademarks in the United States.
We are the registered holder of a variety of domestic and international domain names that include “airfox”, “airfoxapp”, “airtoken” and similar variations.
Employees
As of September 30, 2021, we have 5 employees in our Boston office.
Emerging Growth Company
We are and we will remain an “emerging growth company” as defined under The Jumpstart Our Business Startups Act, or the JOBS Act, until the earliest to occur of (i) the last day of the fiscal year during which our total annual revenues equal or exceed $1.07 billion, (ii) the last day of the fiscal year following the fifth anniversary of our initial public offering, (iii) the date on which we have, during the previous three-year period, issued more than $1 billion in non-convertible debt securities, or (iv) the date on which we are deemed a “large accelerated filer” (with at least $700 million in public float) under the Exchange Act.
As an “emerging growth company”, we may take advantage of specified reduced disclosure and other requirements that are otherwise applicable generally to public companies. These provisions include:
· only two years of audited financial statements in addition to any required unaudited interim financial statements with correspondingly reduced “Management’s Discussion and Analysis” disclosure;
· reduced disclosure about our executive compensation arrangements;
· no requirement that we hold non-binding advisory votes on executive compensation or golden parachute arrangements; and
· exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting.
We have taken advantage of some of these reduced burdens, and thus the information we provide you may be different from what you might receive from other public companies in which you hold securities.
In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies.
Notwithstanding the above, we are also currently a “smaller reporting company,” meaning that we are not an investment company, an asset-backed issuer, or a majority-owned subsidiary of a parent company that is not a smaller reporting company and that had a public float of less than $250 million or annual revenues of less than $100 million during the most recently completed fiscal year. In the event that we are still considered a smaller reporting company, at such time as we cease being an emerging growth company, the disclosure we will be required to provide in our SEC filings will increase, but it will still be less than it would be if we were not considered either an emerging growth company or a smaller reporting company. Specifically, similar to emerging growth companies, smaller reporting companies are able to provide simplified executive compensation disclosures in their filings; are exempt from the provisions of Section 404(b) of the Sarbanes-Oxley Act requiring that independent registered public accounting firms provide an attestation report on the effectiveness of internal control over financial reporting; and have certain other decreased disclosure obligations in their SEC filings, including, among other things, only being required to provide two years of audited financial statements in annual reports.

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ITEM 1A. RISK FACTORS
Item 1A. Risk Factors.
Not Required.

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ITEM 1B. UNRESOLVED STAFF COMMENTS
Item 1B. Unresolved Staff Comments.
Not Applicable.

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ITEM 2. PROPERTIES
Item 2. Properties.
Our corporate headquarters is a leased office facility located at 186 Lincoln Street, Third Floor, Boston, MA 02111 that consists of approximately 6,651 square feet. We also lease approximately 880 square feet of office space in Brazil. We believe that our office facilities are suitable and adequate for our business operations. Our annual base rent during our next fiscal year is approximately $0.33 million.

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ITEM 3. LEGAL PROCEEDINGS
Item 3. Legal Proceedings.
We are not aware of any pending or threatened claims that our Company violated any federal or state securities laws. However, we cannot assure you that any such claim will not be asserted in the future or that the claimant in any such action will not prevail. For additional information, see Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources, and also see Note 16 - Commitments and Contingencies - Legal Proceedings in the notes to the audited consolidated financial statements appearing elsewhere in this Annual Report.

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ITEM 4. MINE SAFETY DISCLOSURE
Item 4. Mine Safety Disclosures.
Not Applicable.
PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
Item 5. Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases Of Equity Securities.
Lake Niassa, a wholly owned subsidiary of Via Varejo, is the sole member of our Company.

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ITEM 6. SELECTED FINANCIAL DATA
Item 6. Selected Financial Data.
Not Applicable.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following discussion and analysis should be read in conjunction with our consolidated financial statements and related notes appearing elsewhere in this Annual Report.” The following discussion includes forward-looking statements about our business, financial condition and results of operations, including discussions about management’s expectations for our business. These statements represent projections, beliefs and expectations based on current circumstances and conditions and in light of recent events and trend and should not be construed either as assurances of performance or as promises of a given course of action. Instead, various known and unknown factors are likely to cause our actual performance and management’s actions to vary, and the results of these variances may be both material and adverse. See the section titled “Forward-Looking Statements.”
OVERVIEW
Beginning in February 2017, the Company began exploring consumer applications of its legacy prepaid mobile applications. The Company initiated a business plan to introduce a mobile application that would allow users to earn digital tokens, exchange them for free or discounted mobile data and, ultimately, other goods and services in South America as part of a new international business and ecosystem (the “AirToken Project”). The AirToken Project included the issuance of digital tokens (“AirTokens”). The AirToken is an ERC-20 token issued on the Ethereum blockchain.
The Company obtained Ether and Bitcoin (collectively referred therein as the “Digital Assets”) in August 2017 through early October 2017 from those interested in obtaining AirTokens. The Company raised approximately $15.4 million for the purpose of developing the AirToken Project.
Subsequent to the distribution of AirTokens to those parties who contributed towards the funding of the AirToken Project, no AirTokens were sold by the Company.
On June 30, 2021, the Company discontinued the AirToken project as a result of the absence of new laws or a definitive regulatory regime (in both the U.S. and Brazil) regarding the use and transferability of AirTokens (and other similar tokens issued on the Ethereum block chain that are classified as securities), as necessary to gain functionality for their application in the Company’s legacy prepaid mobile application As a result of the discontinuation of the development of AirTokens, AirTokens lost their functionality in full.
The Company has experienced recurring losses and negative cash flows from operations. At September 30, 2021 and September 30, 2020, the Company had cash and cash equivalents of $0.5 million and $1.6 million, a working capital deficit of $4.6 million and $734 thousand, total member's deficit/stockholders' deficit $4.0 million and $10 million, respectively. To date, the Company has in large part, relied on debt and equity financing to fund its operations. The Company expects to continue to incur losses from operations.
On November 16, 2018, the Company entered into a settlement agreement with the SEC (the “SEC Settlement Agreement”). Initially with the Commonwealth of Massachusetts and ultimately pursuant to the SEC Settlement Agreement, the Company agreed to the certain actions including a) payment of a penalty, b) offer to refund consideration paid for AirTokens on or before October 5, 2017 in exchange for AirTokens, plus interest, c) filing a Form 10 to register the AirTokens as a class of securities and maintain timely filings of all reports required by Section 13(a) of the Exchange Act for at least one year from the date the Form 10 becomes effective (the “Effective Date”) and continue these filings until the Company is eligible to terminate its registration, and d) submit to the SEC a final report of its handling of all claims received within seven months from the Effective Date of the Form 10 registration statement filing. See Liquidity and Capital Resources for further details. The Company’s Form 10 registration statement is now effective, and we need to ensure that we will have the ability to prepare, on a timely basis, financial statements that comply with SEC reporting requirements.
In conjunction with the Settlement Agreement, AirToken claimants are entitled to return their AirTokens to our Company and receive a refund in the amount of consideration paid, plus interest, less the amount of any income received thereon. Pursuant to the Settlement Agreement, as modified in May 2019, our Company timely distributed the claim forms on June 28, 2019. The claims period closed on September 28, 2019. All forms were processed in accordance with the terms and provisions set forth by the Settlement Agreement. We received claim forms from 174 potential AirToken claimants during the claims period and we determined to approve payment on 163 out of the 174 claims, which is approximately 93% of the claim forms received during the claims period. On December 11, 2019 we commenced the process of notifying, via email only, all 174 Potential AirToken Claimants of our resolution of their claim.
On or before December 28, 2019 the Company paid all approved claims to approved claimants who returned their AirTokens to the Company (approximately 93.5% of the total dollar amount of all approved claim refunds). All amounts were refunded in cash and paid through the Company’s existing cash and cash equivalent reserves. The total claim amounts including interest, totaled $3.3 million on December 28, 2019. Certain approved claimants did not return their AirTokens to the Company. The Company did not pay approved claims to approved claimants who did not return their AirTokens to the Company. As of September 30, 2021, the amount that was not paid to claimants who had valid claims but failed to return their AirTokens was approximately $0.1 million. All unpaid approved claims are expected to be paid upon return to the Company of approved claimants’ AirTokens.
Since the Company is no longer continuing with the AirToken project, the Company should not recognize any revenue related to the research and development of the AirToken project, and the deferred revenue is no longer appropriate to be recorded on the balance sheet. The liability, Deferred revenue - AirToken Project, of approximately $12.5 million was extinguished and charged to Other Income in the Condensed Consolidated Statements of Comprehensive Loss.
In September 2018, the Company entered into the Services Agreement and related convertible notes agreement with Via Varejo whereby the Company could receive up to $10,256,000 by issuing convertible notes in connection with the Company’s software design and development services provided to Via Varejo. The Company has received the full $10,256,000 in cash and issued convertible notes for $2,500,000 on February 14, 2019, $3,500,000 on June 10, 2019, and $4,000,000 on September 6, 2019 under these agreements. See Note 10 - Via Varejo Services Agreement and Convertible Notes in the notes to the audited consolidated financial statements appearing elsewhere in this Annual Report. Additionally, the Company started recognizing revenue in January 2020 from the Upfront Payment of $256,000 related to the Via Varejo Services Agreement. On May 21, 2020, the convertible notes in the aggregate principal amount of $10,000,000 were converted into 13,339,510 shares of the Company’s common stock.
On June 12, 2019, banQi entered into a Program Agreement with Mastercard Brasil and Via Varejo. As a licensee of MasterCard International, Inc. and a business partner of Mastercard Brasil, we launched our prepaid card and entered into an Incentive Program (as defined in the Program Agreement) in order to issue, expand and boost the Pre-paid Card base in Brazil as well as the number of transactions and turnover (sales revenue) generated by MasterCard Cards. As an incentive to support the launching of our Pre-paid Card, on December 16, 2019 Mastercard Brasil made to our Company a Sales Revenue Incentive Prepayment totaling R$65 million (approximately $16 million in December 2019). The Sales Revenue Incentive Prepayment constitutes the creation of a direct financial obligation on our Company since it constitutes prepaid sales revenue from Mastercard Brasil to our Company. Via Varejo has agreed to act as a guarantor of our Sales Revenue Incentive Prepayment obligations to Mastercard Brasil pursuant to the Program Agreement and a guaranty letter.
As a Mastercard prepaid card issuer, banQi be entitled to receive Sales Revenue Incentive (as defined in the Program Agreement) pursuant to the Program Agreement. As a result, the Sales Revenue Incentive will be used to amortize the Sales Revenue Incentive Prepayment. Upon complete amortization of the Sales Revenue Incentive Prepayment, Mastercard will make quarterly payments of the Sales Revenue Incentive, calculated according to the value of transactions completed with the prepaid cards issued by banQi. banQi no minimum commitment of transaction volumes to be completed with the Prepaid Cards.
The Program Agreement has a term of ten years, unless earlier terminated by either party in accordance with specific provisions of the Program Agreement.
On February 7, 2020, pursuant to a written Call Exercise Notice (“Call Exercise Notice”), Via Varejo notified the Company and the Option Stockholders of Via Varejo’s intention to exercise the Call Right pursuant to the Call Option Agreement, through Lake Niassa Empreendimentos e Participações Ltda., a limited liability company duly organized under the laws of the Federative Republic of Brazil and 100% owned by Via Varejo (the “Buyer”), whereby (i) the Notes in the aggregate principal amount of $10,000,000 will be converted into shares of the Company’s common stock (the “Primary Shares”) and (ii) $6,000,000 of shares of the Company’s common stock will be purchased directly from the Option Stockholders (the “Secondary Shares”), such that Via Varejo shall own 80% of the Company’s common stock on a fully diluted basis (the “Transaction”). The agreed upon valuation of the Company for the purposes of the Transaction is $20 million.
Pursuant to the Call Exercise Notice, Via Varejo’s exercise of the Call Right, and its obligation to consummate the Transaction, is subject to and conditioned upon the satisfaction by the Company or the Option Stockholders of certain conditions (or waiver of such conditions by Via Varejo) prior to the consummation of the Transaction, which closed on May 21, 2020. These conditions include, among other things, (a) the Company amending its certificate of incorporation to provide for (i) a single class of common stock (and automatic conversion of any and all outstanding shares of preferred stock into common stock) and (ii) no preferential rights in favor of any person other than Via Varejo, (b) obtaining preemptive rights waivers’ from certain Option Stockholders and (c) the acceleration of vesting of all stock options issued under the Company’s 2016 Equity Incentive Plan, as amended whereby upon the consummation of the Transaction, all stock options then issued and outstanding under the Plan are cancelled in exchange for a cash payment (calculated based on the per share price in the form of the Second Amendment to Stock Purchase Agreement, dated as of May 18, 2020 entered into by the Buyer and certain employees of the Company (the “Employee SPAs”) funded by Via Varejo and made to the holders of such stock options. Additionally, the execution and delivery of a stock purchase agreement, substantially in the form contemplated by the Call Option Agreement, by each of Via Varejo, the Company and the Option Stockholders, is a condition to closing the Transaction.
On May 21, 2020, all 1,404,227 stock options then issued and outstanding under the Plan were cancelled in exchange for a cash payment of $3,331,255 (calculated based on the per share price in the Employee SPAs) funded by Via Varejo and made to the holders of such stock options.
On June 14, 2021, the Company, Lake Niassa and banQi entered into the 7th Amendment and Consolidation of the Articles of Association of banQi (the “7th Amendment”). Pursuant to the terms of the 7th Amendment, the Company and Lake Niassa (i) increased banQi's share capital from BRL 1,000,000.00 (one million reais) to BRL 69,870,000.00 (sixty-nine million, eight hundred and seventy thousand reais), which represents an increase of BRL 68,870,000.00 (sixty-eight million, eight hundred and seventy thousand reais); and (ii) issued 68,870,000 (sixty-eight million, eight hundred and seventy thousand) new quotas, with par value of BRL 1.00 (one real) each, fully subscribed and paid up, in Brazilian currency, through the capitalization of Advances for Future Capital Increase ("AFAC") made by Lake Niassa.
Prior to entering into the 7th Amendment, our Company had a 99.99% ownership interest in banQi and Lake Niassa had a 0.01% ownership interest in banQi. Pursuant to the 7th Amendment, and the transfer of banQi’s share capital to Lake Niassa, our Company’s ownership interest in banQi decreased to 1.43% of the share capital of banQi, and Lake Niassa’s ownership interest in banQi increased to 98.57% of the share capital of banQi, which made Lake Niassa the controlling owner of banQi.
As a result of the Change in Control, on June 14, 2021, the Company determined that it did not have a controlling interest over banQi, and banQi was deconsolidated from the Company's condensed consolidated financial statements and presented as discontinued operations in the Company’s consolidated financial information presented within this annual report. The presentation of the operations and results of banQi is further explained in Note 4 - Discontinued Operations in the notes to the audited consolidated financial statements appearing elsewhere in this Annual Report. No additional revenue has been recognized by our Company from June 14, 2021 through September 30, 2021. On November 1, 2021 and December 14, 2021, Lake Niassa made a capital contribution to Airfox in the amount of $283,000 and $290,000 with no additional membership interests issued or ownership rights granted.
As of June 30, 2021, banQi met all the conditions to be classified as discontinued operations, and because we consider the loss of the controlling interest of banQi to be a strategic shift that will have a major effect on our operations and financial results, represented a discontinued operation. All assets and liabilities associated with banQi were therefore classified as assets and liabilities of discontinued operations in our condensed consolidated balance sheets for the periods presented.
On June 30, 2021, Lake Niassa, the sole member of our Company, determined to discontinue the development of AirTokens and end the AirToken project related to the Company’s business. Lake Niassa made the determination that the Company does not have the ability to further develop AirTokens as part of its business plan in the absence of new laws or a definitive regulatory regime (in both the U.S. and Brazil) regarding the use and transferability of AirTokens (and other similar tokens issued on the Ethereum block chain that are classified as securities). Current laws and regulatory regimes do not provide for the Company to utilize the AirTokens as envisioned by the Company since AirTokens are no longer freely transferable and the previous market for AirTokens no longer exists. AirTokens were never fully developed and never gained full functionality. AirTokens are not currently freely transferable and no market exists for AirTokens. As a result of our Company discontinuing the development of AirTokens, AirTokens lost their functionality in full, and it is likely that no market for AirTokens will ever be re-created and that AirTokens will not again ever be freely transferable.
Currently, the Company's main functions and activities comprise of supporting banQi’s operation in Brazil, including assisting banQi with the management of the digital wallet application and the financial services provided to those without bank accounts or credit cards. Primarily due to the cancellation of the AirToken project and since the main features of the Company’s software and technology platform have been developed and funded to be applied in the Brazilian market, as per the Services Agreement and related agreement, the Company's main functions and activities relating to the development and management of a software technology platform consisting of a digital wallet application and an alternative credit scoring and lending application have substantially migrated to banQi entity in Brazil, and our Company expects to continue transferring the remainder of its contracts with suppliers to Brazil, thereby reducing its activities in the U.S.
banQi met the criteria within Accounting Standards Codification (“ASC”) 205-20, Presentation of Financial Statements to be reported as discontinued operations because the transaction was a strategic shift in business that had a major effect on our operations and financial results. Therefore, we have reported the historical results of banQi including the results of operations and cash flows as discontinued operations, and related assets and liabilities were retrospectively reclassified as assets and liabilities of discontinued operations for all periods presented herein. Unless otherwise noted, applicable amounts in the prior year have been recast to conform to this discontinued operations presentation. Refer to Note 3, “Summary of Significant Accounting Policies” of our consolidated financial statements included in this Annual Report on Form 10-K for additional information. Unless otherwise indicated, the following information relates to our continuing operations following the deconsolidation of banQi.
COVID-19
During this uncertain time, our critical priorities are the health and safety of our employees and contractors, all of whom began working from home and reduced travel to essential business needs. We currently have a Company-wide work-from-home program. We will continue to actively monitor the situation and may take further actions that alter our business operations as may be required by federal, state, local authorities, or that we determine are in the best interests of our employees. Our offices in Boston are open on a limited basis subject to certain state mandated safety standards.
In December 2019, a novel strain of coronavirus, COVID-19, was identified in Wuhan, China. This new coronavirus has caused a global health emergency and was declared a pandemic by the World Health Organization in March 2020 (“COVID-19 Outbreak”). We are continually monitoring the impacts the COVID-19 Outbreak could have on our business.
The COVID-19 pandemic has had and continues to have a significant impact on local, state, national and global economies. The actions taken by governments, as well as businesses and individuals, to limit the spread of the disease has significantly disrupted the Company’s normal activities. Numerous businesses, including our contractors, collaborative partners and suppliers have either shut down or are operating on a limited basis, employees have been furloughed or laid off and social distancing has been mandated through stay-in-place orders. The Company expects these actions to have a significant impact on the Company’s results of operations, particularly with respect to user acquisition marketing efforts, Total Payment Volume growth, research and development, and financial position.
We are subject to the risks arising from the COVID-19 Outbreak’s social and economic impacts. Our management believes that the social and economic impacts, which include but are not limited to the following, could have a significant impact on future financial condition, liquidity, and results of operations: (i) the duration and scope of the pandemic; (ii) governmental, business and individual actions that have been and continue to be taken in response to the pandemic, including travel restrictions, quarantines, social distancing, work-from-home and shelter-in-place orders and shut-downs; (iii) the impact on U.S. and global economies and the timing and rate of economic recovery; (iv) potential adverse effects on the financial markets and access to capital; (v) potential goodwill or other impairment charges; (vi) increased cybersecurity risks as a result of pervasive remote working conditions; and (vii) our ability to effectively carry out our operations due to any adverse impacts on the health and safety of our employees and their families.
In response to the COVID-19 Outbreak, our employees have been required to work from home. The significant increase in remote working, particularly for an extended period of time, could exacerbate certain risks to our business, including an increased risk of cybersecurity events and improper dissemination of personal or confidential information. We do not believe these circumstances have, or will, materially adversely impact our internal controls or financial reporting systems.
While the Company believes it is well positioned in the marketplace to navigate difficult market conditions in times of economic uncertainty, the Company believes this pandemic has adversely affected and has the potential to further adversely affect, its results of operations, financial condition, or liquidity for the year ending September 30, 2021 and beyond.
RESULTS OF OPERATIONS
Results of Operations for Fiscal 2021 and Fiscal
The following comparative analysis of results of operations for Fiscal 2021 and Fiscal 2020 is based on the comparative audited consolidated financial statements, footnotes, and related information for the periods identified. This analysis should be read in conjunction with the consolidated financial statements and the notes to those statements that are included elsewhere in this Annual Report.
The following table shows our results of operations for the periods indicated. The historical results presented below are not necessarily indicative of the results that may be expected for any future period.
For the Year Ending
September 30, Change
Dollars Percentage
Revenue $ - $ - $ - -
Cost of revenue - - - -
Selling, general and administrative 7,543,086 14,863,557 (7,320,471 ) (49 %)
Impairment of capitalized cost and other assets 4,092,055 - 4,092,055 (100 %)
Operating expenses (11,635,141 ) (14,863,557 ) 3,228,416 22 %
Other (expense) income, net 13,161,768 1,164,307 11,997,461 1030 %
Income (loss) from continuing operations before income taxes 1,526,637 (13,699,250 ) 15,225,877 (111 %)
Income tax benefit (234,404 ) 207,410 (441,814 ) (213 %)
Net income (loss) from continuing operations 1,292,223 (13,491,840 ) (14,784,063 ) (110 %)
Net income (loss) from discontinued operations (10,851,961 ) (7,825,153 ) (3,026,808 ) 39 %
Net loss $ (9,559,738 ) $ (21,316,993 ) $ 11,757,255 (55 %)
Revenue
Airfox has no other operations other than as described herein and currently has no source of revenue. As the migration of Airfox's activities and operations to banQi is still being defined, there is presently no agreement between Airfox, banQi and Lake Niassa regarding current or future services to be provided to banQi by Airfox. Consequently, to date, Airfox has not been remunerated by banQi for services it has provided to banQi. Airfox has no other operations other than as described herein and currently has no source of revenue.
Operating expenses
Selling, General, and Administrative Expenses
Selling, general, and administrative expenses for September 30, 2021 was $7.5 million representing a decrease of $7.3 million or a 54% decrease, as compared to $14 million for September 30, 2020. The primary component of the net decrease is due to the overall decrease of our operating activities as depreciation & amortization, Legal & Professional Fees and Salaries and wages. This decrease of our operating activities is attributed to the migration of activities to Brazil.
Other income, net
Other income, net for Fiscal 2021 and Fiscal 2020 was $13 million and $1 million, respectively. The increase in other (expense) income, net was primarily attributable to write off AirToken Project (discontinued).
Income Tax Benefit
Income tax benefit for Fiscal 2021 and Fiscal 2020 was $(234) thousand and $207 thousand, respectively.
Discontinued Operations
Primarily due to the cancellation of the AirToken project, among other reasons, the Company's main functions and activities relating to support the development and management of a software technology platform consisting of a digital wallet application and an alternative credit scoring and lending application are migrating to the banQi entity in Brazil.
In connection with the above strategy, the Company is transferring contracts with some suppliers to Brazil.
So, certain new features and enhancements for the VV digital wallet and for the personal loan product have been developed in Brazil.
Summary of Cash Flows Fiscal 2021 and Fiscal
For the Year Ended
September 30, Change
Dollars
Net cash used in operating activities $ 4,771,555 $ 5,792,775 $ (1,021,220 )
Net cash used in investing activities $ (1,980,976 ) $ (3,392,979 ) $ 1,412,003
Net cash provided by financing activities $ 4,853,672 $ 7,851,508 $ (2,997,836 )
Operating Activities
Net cash used in operating activities was $4.7 million for Fiscal 2021. Cash was consumed from operations by the loss of $4 million of Impairment write-off, non-cash items consisting primarily of amortization totaling $1.2 million, Transfer out of cash and restricted cash as part of deconsolidation totaling $6 million, stock-based compensation totaling $0.3 million, additional stock-based compensation due to cancellation of stock options totaling $3.1 million, net of recognizing $0.2 million of a deferred gain on AirTokens and the reversal of accrued interest related to conversion of convertible notes of $0.1 million. Changes in other working capital accounts had a positive impact of $6.4 million on cash, including deferred revenue - Mastercard Program Agreement of $12.5 million, offset by $1.5 million in AirToken refund liability.
Net cash used in operating activities for Fiscal 2020 was $5.7 million. Cash was consumed from operations by the loss of $10 million, less non-cash items of $2 million consisting principally of amortization of $0.8 million, stock-based compensation totaling $3 million and a realized loss on the sale of Digital Assets of $0.1 million. Changes in working capital accounts had a negative impact of $0.7 million on cash.
Investing Activities
Net cash used in investing activities during Fiscal 2021 was $1.9 million which substantially consisted of the acquisition of capitalized software costs relating to the Via Varejo Services Agreement.
Financing Activities
Net cash provided by financing activities was $4.8 million during Fiscal 2021, consisting primarily to capital contributions from Via Varejo of $4.8 million
Net cash provided by financing activities related primarily to capital contributions from Via Varejo of $5.8 million, and $1.7 million in proceeds from a related party in Fiscal 2020.
Liquidity and Capital Resources
The following table summarizes total current assets, liabilities and working capital deficit for the periods indicated:
September 30,
September 30,
Change
Dollars Change
Percentage
Current assets $ 684,793 $ 2,741,555 $ (2,056,762 ) (75 )%
Current liabilities 5,657,851 2,007,546 3,650,035 (182 )%
Working capital deficit $ (4,972,788 ) $ 734,009 $ (4,238,779 ) (577 )%
We have experienced recurring losses and negative cash flows from operations. At September 30, 2021 and 2020, we had a working capital deficit of $5 million and $734 thousand, respectively. The Company had cash and cash equivalents of $0.5 million and $1.6 million as of September 30, 2021 and 2020, respectively.
On November 16, 2018, the Company entered into a settlement agreement with the SEC (the “SEC Settlement Agreement”). Initially with the Commonwealth of Massachusetts and ultimately pursuant to the SEC Settlement Agreement, the Company agreed to the certain actions including a) payment of a penalty, b) offer to refund consideration paid for AirTokens on or before October 5, 2017 in exchange for AirTokens, plus interest, c) filing a Form 10 to register the AirTokens as a class of securities and maintain timely filings of all reports required by Section 13(a) of the Exchange Act for at least one year from the date the Form 10 becomes effective (the “Effective Date”) and continue these filings until the Company is eligible to terminate its registration, and d) submit to the SEC a final report of its handling of all claims received within seven months from the Effective Date of the Form 10 registration statement filing. See Liquidity and Capital Resources for further details. The Company’s Form 10 registration statement is now effective, and we need to ensure that we will have the ability to prepare, on a timely basis, financial statements that comply with SEC reporting requirements.
In conjunction with the Settlement Agreement, potential AirToken claimants are entitled to return their AirTokens to our Company and receive a refund in the amount of consideration paid, plus interest, less the amount of any income received thereon. Pursuant to the Settlement Agreement, as modified in May 2019, our Company timely distributed the claim forms on June 28, 2019. The claims period closed on September 28, 2019. All forms were processed in accordance with the terms and provisions set forth by the Settlement Agreement. We received claim forms from 174 potential AirToken claimants during the claims period and we determined to approve payment on 163 out of the 174 claims, which is approximately 93% of the claim forms received during the claims period. On December 11, 2019 we commenced the process of notifying, via email only, all 174 potential AirToken claimants of our resolution of their claim.
On or before December 28, 2019 the Company paid all approved claims to approved claimants who returned their AirTokens to the Company (approximately 93.5% of the total dollar amount of all approved claim refunds). All amounts were refunded in cash and paid through the Company’s existing cash and cash equivalent reserves. The total claim amounts including interest, totaled $3.3 million on December 28, 2019. Certain approved claimants did not return their AirTokens to the Company. The Company did not pay approved claims to approved claimants who did not return their AirTokens to the Company. As of September 30, 2021, the amount that was not paid to claimants who had valid claims but failed to return their AirTokens was approximately $0.1 million. All unpaid approved claims are expected to be paid upon return to the Company of approved claimants’ AirTokens.
In addition, if certain holders of AirTokens affirmatively rejected or failed to accept our 2019 rescission offer, they may continue to have a right of rescission under the Securities Act even though the rescission offer has expired. Consequently, if any offerees rejected the rescission offer, expressly or by failing to timely return a claim, we may continue to be potentially liable under the Securities Act for the purchase price or for certain losses if the AirTokens have been sold. It may also be possible that by not disclosing that the AirTokens were unregistered, and that they may face resale or other limitations, we may face contingent liability for noncompliance with applicable federal and state securities laws. Additionally, the Company may be required to pay additional fines, penalties or other amounts in other jurisdictions.
Financial Condition and Management’s Plans
The accompanying consolidated financial statements have been prepared assuming that we will continue as a going concern, which contemplates, among other things, the realization of assets and satisfaction of liabilities in the ordinary course of business. The Company believes that its ability to continue operations depends on its ability to generate revenues and obtain funding that will be sufficient to sustain its operations until it rolls out its core product offerings and achieve profitability and positive cash flows from operating activities.
The successful outcome of future activities cannot be determined at this time and there is no assurance that, if achieved, we will have sufficient funds to generate positive operating results. The consolidated financial statements do not include any adjustments related to this uncertainty and as to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should we be unable to continue as a going concern.
In the event the Company is unable to raise additional debt or equity financing, it may:
1. Have to cease operations, in which case the Company may file a petition for bankruptcy in U.S. Bankruptcy Court under Chapter 7, whereby a trustee will be appointed to sell off the Company’s assets, and the money will be used to pay off the Company’s debts in order of their priority. Or
2. File a petition for bankruptcy in U.S. Bankruptcy Court under Chapter 11 to restructure the Company’s debt.
Further, the Company’s management can implement expense reductions, as necessary. However, there is no assurance that the Company will be successful in obtaining funding or generating revenues sufficient to fund operations.
Recently issued and adopted accounting pronouncements:
The Company continually assesses any new accounting pronouncements to determine their applicability. When it is determined that a new accounting pronouncement affects the Company's financial reporting, the Company undertakes a study to determine the consequences of the change to its consolidated financial statements and assures that there are proper controls in place to ascertain that the Company's consolidated financial statements properly reflect the change.
In February 2016, the FASB established Topic 842, Leases, by issuing ASU No. 2016-02 (“ASU 2016-02”), which requires lessees to recognize leases on the balance sheet and disclose key information about leasing arrangements. Topic 842 was subsequently amended by ASU No. 2018-01, Land Easement Practical Expedient for Transition to Topic 842; ASU No. 2018-10, Codification Improvements to Topic 842, Leases; ASU No. 2018-11, Targeted Improvements; and ASU No. 2018-20, Narrow-Scope Improvements for Lessors. The new standard establishes a right-of-use model (“ROU”) that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months. Leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement.
The Company adopted ASU 2016-02 effective October 1, 2019 using the modified retrospective approach whereby the Company will continue to present prior period financial statements and disclosures under ASC 840. In addition, the Company elected the transition package of three practical expedients permitted within the standard, which eliminates the requirements to reassess prior conclusions about lease identification, lease classification and initial direct costs. Further, the Company adopted a short-term lease exception policy, permitting the Company to not apply the recognition requirements of this standard to short-term leases (i.e. leases with terms of 12 months or less) and an accounting policy to account for lease and non-lease components as a single component for certain classes of assets.
Adoption of the new standard resulted in the recording of right-of-use assets and lease liabilities related to the Company’s operating leases. The standard did not materially affect the Company's consolidated net earnings or cash flows.
The Company has evaluated all recently issued accounting pronouncements and believes such pronouncements do not have a material effect on the Company's financial statements. See Note 3 of the Consolidated Financial Statements at September 30, 2021 and 2020.
Off-Balance Sheet Arrangements
We do not have any outstanding derivative financial instruments, off-balance sheet guarantees, interest rate swap transactions or foreign currency forward contracts. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in an unconsolidated entity that provides financing, liquidity, market risk or credit support to us or that engages in leasing, hedging or research and development services with us.
Critical Accounting Policies and Estimates
The preparation of financial statements and related disclosures in conformity with U.S. GAAP, and our discussion and analysis of its financial condition and operating results require our management to make judgments, assumptions and estimates that affect the amounts reported in its consolidated financial statements and accompanying notes. Note 3, “Summary of Significant Accounting Policies” of the Notes to the Consolidated Financial Statements appearing elsewhere in this Annual Report, describes the significant accounting policies and methods used in the preparation of our consolidated financial statements. Management bases it estimates on historical experience and on various other assumptions it believes to be reasonable under the circumstances, the results of which form the basis for making judgements about the carrying values of the asset and liabilities. Actual results may differ from these estimates and such differences may be material.
Revenue Recognition
The Company recognizes revenue under ASC 606, Revenue from Contracts with Customers (“ASC 606”). The core principle of this standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services.
ASC 606 prescribes a 5-step process to achieve its core principle:
Step 1: Identify the contract with the customer
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the performance obligations in the contract
Step 5: Recognize revenue when the Company satisfies a performance obligation
Display Advertising Services
The Company’s revenue historically was derived from display advertising services. The Company historically engaged in a business line known as Airfox Wireless related to technology that the Company developed that generates display advertising revenue for U.S. advertising networks. Pursuant to the Airfox Wireless model, the Company partnered with U.S. mobile telecommunications companies to have advertisers display advertisements on the lock screens of mobile devices and paid its partners a share of the ad revenue generated. The Company recognizes revenue, net of amounts retained by the third-party partners, pursuant to revenue sharing agreements. The form of the agreements was such that the Company provided services in exchange for a fee. The Company recognizes only the fee for providing its services as it has no latitude in establishing prices with third party advertisers.
In January 2019, the Company decided to no longer pursue the display advertising services as a part of the business plan as the revenue did not represent a significant portion of the Company operations. Additionally, the Company discontinued the Airfox Wireless business line earlier in 2019.
AirToken Project Development Services (Non ASC 606 Revenue)
The Company has obtained Ether and Bitcoin totaling approximately $15.3 million towards the development of the AirToken Project. Pursuant to the terms of the AirTokens, there is no form of partnership, joint venture, agency or any similar relationship between a holder of an AirToken and the Company and/or other individuals or entities involved with the AirToken Project. AirTokens are non-refundable and do not pay interest and have no maturity date. AirTokens confer only the right to services in the AirToken Project and confer no other rights of any form with respect to the Company, including, but not limited to, any voting, distribution, redemption, liquidation, proprietary (including all forms of intellectual property), or other financial or legal rights. Subsequent to the distribution of AirTokens to those parties who contributed towards the funding of the AirToken Project, no AirTokens were sold by the Company.
Pursuant to the Settlement Agreement (as defined and described further in Note 16), the Company was obligated to refund amounts raised for the purpose of developing the AirToken Project if valid claims were timely and properly submitted, subject to other fines and penalties.
On or before December 28, 2019, the Company paid all approved claims to approved claimants who returned their AirTokens to the Company (approximately 93.5% of the total dollar amount of all approved claim refunds). All amounts were refunded in cash and paid through the Company’s existing cash and cash equivalent reserves. The total claim amounts including interest, totaled $3.3 million on December 28, 2019. Certain approved claimants did not return their AirTokens to the Company. The Company did not pay approved claims to approved claimants who did not return their AirTokens to the Company. As of September 30, 2021, the amount that was not paid to claimants who had valid claims but failed to return their AirTokens was approximately $0.1 million. All unpaid approved claims are expected to be paid during next months upon return to the Company of approved claimants’ AirTokens. Refer to Note 16 for further information on the rescission offer.
Since the Company is no longer continuing with the AirToken project, the Company will not recognize any revenue related to the research and development of the AirToken project, and the deferred revenue is no longer recorded on the balance sheet. The liability, Deferred revenue - AirToken Project, of approximately $12.5 million was extinguished and charged to Other Income in the Condensed Consolidated Statements of Comprehensive Loss.
Via Varejo Services Agreement Revenue (ASC 606 Revenue)
The Company entered into a Services Agreement (the “Services Agreement”) as of September 11, 2018 (“the Agreement Effective Date”) with Via Varejo (the “Client”).
The Company has been engaged to support the design and development of a mobile software module and application programming interface that will provide the banQi’s customers with access to certain mobile payment functionality. The Company provides certain services, including hosting, maintenance and operation of banQi.
During Phase 1, there was a payment of $0.3 million (“Upfront Payment”) from the Client to be recognized as revenue commencing when the product was ready for its intended use and ratably over the remaining term of the Services Agreement through the duration of the Services Agreement.
Now the agreement as it was conceived is no longer being executed, as many activities and operations are migrating to Brazil. So, the total revenue recognized for the years ended September 30, 2021 and 2020 totaled $0 and $0, respectively.
Stock-based Compensation
The Company accounts for stock-based compensation to employees and non-employees in conformity with the provisions of ASC 718, Compensation - Stock Based Compensation. The Company expenses stock-based compensation to employees and non-employees over the requisite service period based on the estimated grant-date fair value of the awards. The Company accounts for forfeitures as they occur. Stock-based awards are recognized on a straight-line basis over the requisite service period. For stock-based employee compensation, cost recognized at any date will be at least equal to the amount attributable to share-based compensation that is vested at that date. The Company estimates the fair value of stock option grants using the Black-Scholes option-pricing model and the assumptions used in calculating the fair value of stock-based awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment.
Common shares issued to third parties for services provided are valued based on the estimated fair value of the Company’s common shares.
All stock-based compensation costs are recorded in Selling, General and Administrative Expenses in the Condensed Consolidated Statements of Operations. All stock-based compensation awards were cancelled as pursuant to the Transaction which occurred on May 21, 2020 (see Note 12).
In August 2020, the Company established the Share Based Payment Program with Cash Settlement - Phantom Shares of Via Varejo S.A. (the "Plan"). Pursuant to the Plan, the Company's Board of Directors may grant cash-settled shares, referred to as "Phantom Shares," to the Company's employees as part of the employees' remuneration package. Each Phantom Share will represent the employee's right to receive the full amount corresponding to the average quotation of 3 (three) common shares of Via Varejo S.A. in the 20 (twenty) trading sessions at B3 - Brazil, Bolsa, Balcão immediately prior to vesting, as established in the Plan. The Phantom Shares vest over a service period of five years.
As of June 14, 2021, there is no liability reported related to the Phantom Shares due the deconsolidation of banQi. No Phantom Shares have vested as of September 30, 2021.
Income Taxes
Income taxes are recorded in accordance with ASC 740, Income Taxes (“ASC 740”), which provides for deferred taxes using an asset and liability approach. The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are provided, if based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.
The Company accounts for uncertain tax positions in accordance with the provisions of ASC 740. When uncertain tax positions exist, the Company recognizes the tax benefit of tax positions to the extent that the benefit would more likely than not be realized assuming examination by the taxing authority. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances. The Company recognizes any interest and penalties accrued related to unrecognized tax benefits as income tax expense.
The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. The Company has incurred net operating loss for financial-reporting and tax-reporting purposes. Accordingly, for Federal and State income tax purposes, the benefit for income taxes has been offset entirely by a valuation allowance against the related federal and state deferred tax asset for the years ended September 30, 2021 and 2020.
Software Development Costs
Due to the discontinuity of the AirToken Project, the Company does not capitalize costs related to software developed or obtained for internal use in accordance with the ASC 350-40, Internal-Use Software (“ASC 350-40”). The following illustrates the various stages and related processes of computer software development in accordance with ASC 350-40:
· Preliminary project stage: (a) conceptual formulation of alternatives; (b) evaluation of alternatives; (c) determination of existence of needed technology; and (d) final selection of alternatives. Internal and external costs incurred during the preliminary project stage are expensed as incurred.
· Application development stage: (a) design of chosen path, including software configuration and software interfaces; (b) coding; (c) installation to hardware; and (d) testing, including parallel processing phase. Internal and external costs incurred to develop internal-use computer software during the application development stage are capitalized.
· Post-implementation-operation stage: (a) training; and (b) application maintenance. Internal and external costs incurred during the post-implementation-operation stage are expensed as incurred.
Certain costs incurred are considered enhancements, modifications to existing internal-use software that result in additional functionality. Enhancements normally require new software specifications and may also require a change to all or part of the existing software specifications. When this additional functionality is determinable, the related costs can be capitalized. Otherwise, costs are expensed as incurred. Capitalization of internal-use software costs ceases when a computer software project is substantially complete and ready for its intended use. The Company would begin amortization when the product is available for general release or use if it is applicable.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Not Applicable.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Item 8. Financial Statements and Supplementary Data
Our Financial Statements of are attached as Appendix A (following Exhibits) and included as part of this Form 10-K Report. A list of our Financial Statements is provided in response to Item 15 of this Form 10-K Report.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Item 9. Changes In And Disagreements With Accountants On Accounting and Financial Disclosure
Not Applicable.

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ITEM 9A. CONTROLS AND PROCEDURES
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this Annual Report on Form 10-K, our Company evaluated the effectiveness and design and operation of its disclosure controls and procedures. Our Company’s disclosure controls and procedures are the controls and other procedures that we designed to ensure that our Company records, processes, summarizes, and reports in a timely manner the information that it must disclose in reports that our Company files with or submits to the Securities and Exchange Commission. Our principal executive officer and principal financial officer reviewed and participated in this evaluation. Based on this evaluation, our Company made the determination that as of the end of the period covered by this Annual Report on Form 10-K its disclosure controls and procedures were not effective at the reasonable assurance level.
The matters involving internal controls and procedures that our management considered to be material weaknesses under the standards of the Public Company Accounting Oversight Board include the following:
For the year ended September 30, 2021, we did not effectively apply the Internal Control- Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, or the COSO framework, due primarily to an insufficient complement of personnel possessing the appropriate accounting and financial reporting knowledge and experience to determine the appropriate accounting for non-recurring transactions and transactions requiring more complex accounting judgment. The Company has not established an audit committee which led to ineffective oversight in the establishment and monitoring of required internal controls and procedures.
We did not maintain an appropriate level of evidence of the effectiveness of controls over the preparation and review of certain reconciliations utilized in the financial close processes to ensure that the information recorded in the general ledger was complete and accurate, including the stock-based compensation process. In addition, we did not maintain effective controls over the preparation and review of the consolidated financial statements to ensure that we identified and accumulated all required supporting information to ensure the completeness and accuracy of the information contained in the consolidated financial statements.
In addition, as a result of the foregoing errors, the Company has determined that there was a material weakness in internal control over financial reporting related to its ICO and AirToken Gains revenue recognition procedures. Our management has re-evaluated its assessment of our disclosure controls and procedures and internal control over financial reporting as of September 30, 2021 and concluded that each was ineffective as of that date due to the existence of the foregoing material weakness.
Lastly, we did not implement appropriate general information technology controls as the Company did not maintain effective logical access and program change controls over our third-party systems, including the general ledger system.
Management’s Remediation Initiatives:
In an effort to remediate the identified material weakness and enhance our internal controls, we have initiated the following measure:
· We will continue to utilize an accounting and financial reporting advisory firm with significant experience with publicly held companies to assist our management in evaluating significant transactions and conclusions reached regarding technical accounting matters and financial reporting disclosures for the foreseeable future.
Management's Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Under the supervision and with the participation of management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal controls over financial reporting based on the framework in Internal Control -Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO"). Based on this evaluation, management has concluded that our internal control over financial reporting was effective as of September 30, 2021.
The Company's internal control over financial reporting includes policies and procedures that (1) pertain to maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company's assets that could have a material effect on the financial statements.
Our management, including our principal executive officer and principal financial officer, does not expect that our disclosure controls or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system's objectives will be met. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. In addition, the design of any system of controls is based in part on certain assumptions about the likelihood of future events, and controls may become inadequate if conditions change. There can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
This annual report does not include an attestation report of our Company’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our Company’s registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit our Company to provide only management’s attestation in this annual report.
Changes in Internal Control Over Financial Reporting
No change in our Company’s internal control over financial reporting occurred during our fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitations on Effectiveness of Controls
Our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

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ITEM 9B. OTHER INFORMATION
Item 9B. Other Information
Not Applicable.
PART III

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Item 10. Directors, Executive Officers and Corporate Governance
Identity of executive officers
Name
Age
Position
Lisbeth Reimer
Principal Executive Officer and
Principal Financial Officer
Business experience of directors, executive officers, and significant employees
Ms. Reimer, age 48, has over twenty (20) years of management, finance, and accounting experience. Since November 2020, Ms. Reimer has been serving as the Finance Executive Officer of banQi Instituição de Pagamento Ltda, a limited liability company organized under the laws of the Federative Republic of Brazil (“banQi”) and 99,99% owned by the Company, where she is responsible for Treasury, Accounting and FP&A. She will continue in this position with banQi while performing her duties as the Company’s Principal Executive Officer and Principal Financial Officer. From September 2018 to November 2020, she served as an associated consultant at Symnetics, a business consulting firm in Sao Paulo, SP, Brazil, where she participated in strategic planning projects, and from April 2016 to May 2018, Ms. Reimer was the Finance Director at Autopass, an electronic ticket operator in Sao Paulo, SP, Brazil, where she was responsible for Treasury, Accounting and FP&A.
Our Company does not have a board of directors.
Our Company entered into a Limited Liability Company Agreement (the “LLCA”) and our Company is managed in accordance with, and the rights and obligations of the members of the Company are governed by, the LLCA. Lake Niassa is the Sole Member of our Company with sole authority to manage our Company or delegate management of our Company to one or more officers.
Delinquent Section 16(a) Reports
To the best of our knowledge, based solely upon a review of Forms 3 and 4 and amendments thereto furnished to our Company during its most recent fiscal year and Forms 5 and amendments thereto furnished to our Company with respect to its most recent fiscal year, and any written representation referred to in paragraph (b)(1) of Item 405 of Regulation S-K, all of our executive officers and greater-than-ten percent stockholders complied with all Section 16(a) filing requirements. with the following exceptions: Lisbeth Reimer filed late a Form 3 Initial Statement of Beneficial Ownership of Securities.
Code of Ethics
Our Company has adopted a Code of Ethics and Conduct that applies to all of the Company’s employees, including our principal executive officer and principal financial officer. A copy of our Code of Ethics and Conduct is available for review on our Company’s website Airfox.com. The Company intends to disclose any changes in or waivers from its Code of Ethics and Business Conduct by posting such information on its website.
We are responsible for creating paths that help to democratize financial services for thousands of people. We want to continue this journey of growth with integrity, ethics and respect for current legislation. In order to spread our culture of transparency, inclusion, diversity and honesty, we have adopted the same Code of Ethics and Conduct that applies to all employees who are based in Brazil. Our Code of Ethics and Conduct, which is in line of Brazilian regulation and the best practices of financial market, establishes the fundamental principles of professional ethics for all Brazilian employees and provides a conceptual framework that these professionals must follow. We also provide the same compliance training to employees in Brazil that we provide to our employees in the United States.
Audit Committee
Our Company does not have a separately designated standing audit committee in place; our Sole Manager, Lake Niassa, currently serves, in that capacity. This is due to our development stage and small executive management team. We will continue to evaluate, from time to time, whether a separately designated standing audit committee should be put in place. We do not have an audit committee financial expert as that term is defined by the rules promulgated by the Securities and Exchange Commission due to our smaller size, limited revenues and the fact that none of our securities currently trade on any exchange or other trading medium.

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ITEM 11. EXECUTIVE COMPENSATION
Item 11. Executive Compensation.
The table below summarizes all compensation awarded to, earned by, or paid to our Named Executive Officers for the fiscal year ended September 30, 2021.
Summary Compensation Table
Name and Principal Position Year Salary
($)
Bonus
($)
Total
($)
(a) (b) (c) (d)5 (f)
Lisbeth Reimer1 64,700 - 64,700
PEO, PFO
Victor Santos2 292,458 414,971 707,429
CSO
Douglas Lopes3 188,903 106,152 295,055
CFO
Emanuel Moecklin4 75,737 414,971 490,708
CTO
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1. Ms. Reimer was named as an executive officer on May 25, 2021. Ms. Reimer’s current written employee agreement with banQi includes her duties as the Company’s Principal Executive Officer and Principal Financial Officer, and Ms. Reimer is fully compensated by banQi in Brazil, including her base salary and annual bonuses, which are determined by banQi. The amounts were converted into US dollars using the monthly currency conversion from the Central Bank of Brazil.
2. Mr. Santos resigned from our Company on May 25, 2021. Mr. Santos received a salary of $200,000 per year plus guaranteed annual bonus payments pursuant to a written employment agreement effective May 21, 2020.
3. Mr. Lopes resigned from our Company on May 25, 2021. Mr. Lopes received a salary of $200,000 per year plus guaranteed annual bonus payments pursuant to a written employment agreement effective May 21, 2020.
4. Mr. Moecklin was named as an executive officer on May 21, 2020 and resigned from our Company on December 31, 2020. Mr. Moecklin received a salary of $200,000 per year plus guaranteed annual bonus payments pursuant to a written employment agreement effective May 21, 2020. Previously, Mr. Moecklin served as a non-executive officer where he received a salary of $200,000 per year pursuant to a written employment agreement effective July 15, 2016, which also provided him with eligibility to receive an annual discretionary bonus and other types of bonus compensation, in addition to option compensation.
5. The amounts in column (d) reflect annual bonus compensation paid to our named executive officers pursuant to their respective employee agreements in effect during FY2021.
Outstanding equity awards at fiscal year-end table.
Not Applicable
Compensation of Directors
Not Applicable
Employment Agreements
Other than as described in the footnotes to the Summary Compensation Table above, our Company does not have any written employment agreements with any of its executive officers.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Our Company entered into a Limited Liability Company Agreement (the “LLCA”) and our Company is managed in accordance with, and the rights and obligations of the members of the Company are governed by, the LLCA. Lake Niassa is the Sole Member of our Company with sole authority to manage our Company or delegate management of our Company to one or more officers. Pursuant to the LLCA, the limited liability company interests in our Company are represented by one class of interests. The limited liability company interests of the Sole Member, Lake Niassa, is 100%. Lake Niassa’s address is Rua Samuel Klein, #83, Centro, CEP 09510-125, na Cidade São Caetano do Sul, Estado de São Paulo.
Securities Authorized for Issuance under Equity Compensation Plans
Not Applicable.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Item 13. Certain Relationships and Related Transactions, and Director Independence.
For additional information related to this Item 13, See Note 18 - Related Party Transaction in the notes to the audited consolidated financial statements appearing elsewhere in this Annual Report.
Transactions with Related Persons
None. For other information related to this topic, See Note 18 - Related Party Transaction in the notes to the audited consolidated financial statements appearing elsewhere in this Annual Report.
Policies and Procedures for Related-Party Transactions
Our Company does not have any formal written policies or procedures for related party transactions. Lake Niassa, our Sole Member reviews and approves all related party transactions and other matters pertaining to the integrity of management, including potential conflicts of interest and adherence to standards of business conduct. See “Parent Company” below.
Parent Company
Our Company is a wholly-owned subsidiary of Lake Niassa that is, in turn, wholly-owned by Via Varejo. Our Company entered into a Limited Liability Company Agreement (the “LLCA”) and our Company is managed in accordance with, and the rights and obligations of the members of the Company are governed by, the LLCA. Lake Niassa is the Sole Member of our Company with sole authority to manage our Company or delegate management of our Company to one or more officers. Pursuant to the LLCA, the limited liability company interests in our Company are represented by one class of interests. The limited liability company interests of the Sole Member, Lake Niassa, is 100%. Lake Niassa’s address is Rua Samuel Klein, #83, Centro, CEP 09510-125, na Cidade São Caetano do Sul, Estado de São Paulo.
Director Independence
We have no board of directors. None of our securities are listed or trade on any securities or currency exchange or other established public trading market. Lake Niassa is the Sole Member of our Company with sole authority to manage our Company or delegate management of our Company to one or more officers.
Our Company does not have a separately designated nominating or compensation committee or committee performing similar functions. Lake Niassa is the Sole Member of our Company with sole authority to manage our Company or delegate management of our Company to one or more officers.

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Item 14. Principal Accounting Fees and Services.
Audit Fees.
The aggregate fees billed for the years ended September 30, 2021 and September 30, 2020 for professional services rendered by Morison Cogen, LLP for the audit of the Company’s annual financial statements and review of financial statements included in the Company’s Form 10-Q or services that are normally provided by Morison Cogen, LLP in connection with statutory and regulatory filings or engagements were $190 thousand for the year ended September 30, 2021 and 176 thousand for the year ended September 30, 2020.
Audit-Related Fees.
Fees billed for the years ended September 30, 2021 and September 30, 2020 for assurance and related services rendered by Morison Cogen, LLP that are reasonably related to the performance of the audit or review of the Company’s financial statements and are not reported under the category Audit Fees described above were $0for the year ended September 30, 2021 and $0 for the year ended September 30, 2020.
Tax Fees.
Fees billed for the years ended September 30, 2021 and September 30, 2020 for tax compliance services rendered by Morison Cogen, LLP were $0 for the year ended September 30, 2021 and $0 for the year ended September 30, 2020.
All Other Fees.
Fees billed for the years ended September 30, 2021 and September 30, 2020 for products and services provided by Morison Cogen, LLP, other than the services reported in the Audit Fees, Audit-Related Fees, and Tax Fees categories above were $0for the year ended September 30, 2021 and $0 for the year ended September 30, 2020.
Audit Committee Pre-Approval Policies.
The Company’s audit committee currently does not have any pre-approval policies or procedures concerning services performed by Morison Cogen, LLP. All the services performed by Morison Cogen, LLP that are described above were pre-approved by the Company’s audit committee.
None of the hours expended on Morison Cogen, LLP’s engagement to audit the Company’s financial statements for the years ended September 30, 2021 and September 30, 2020 were attributed to work performed by persons other than Morison Cogen, LLP’s full-time, permanent employees.
PART IV

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Item 15. Exhibits, Financial Statement Schedules
(a) The following Audited Financial Statements are filed as part of this Form 10-K Report:
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of September 30, 2021 and 2020
Consolidated Statements of Operations and Comprehensive Loss for the Years Ended September 30, 2021 and 2020
Consolidated Statements of Member’s and Stockholders’ Deficit for the Years Ended September 30, 2021 and 2020
Consolidated Statements of Cash Flows for the Years Ended September 30, 2021 and 2020
Notes to Consolidated Financial Statements
(b) The following exhibits are filed as part of this report.
INDEX TO EXHIBITS
Incorporated by Reference
Filed or Furnished
Exhibit #
Exhibit Description
Form
Date Filed
Number
Herewith
2.1
Certificate of Ownership and Merger
8-K
5/28/20
2.1
3.1
Restated Certificate of Incorporation
8-K
5/28/20
3.1
3.2
Certificate of Conversion
8-K
5/28/20
3.2
3.3
Certificate of Formation
8-K
5/28/20
3.3
4.1
Limited Liability Company Agreement
8-K
5/28/20
4.1
4.2
Convertible Promissory Note, attached as Exhibit B to each of (i) Services Agreement dated September 11, 2018 between by and among the Company and Via Varejo, S.A. et. al., and (ii) Convertible Note Purchase and Call Option Agreement dated September 11, 2018 by and among the Company and Via Varejo, S.A. et. al.
3/15/19
4.2
4.3
Form of Additional Convertible Promissory Note attached as Exhibit B-1 to each of (i) Services Agreement Amendment dated June 7, 2019 by and among the Company and Via Varejo, S.A. et. al., and (ii) Convertible Note Purchase and Call Option Agreement Amendment dated June 7, 2019 by and among the Company and Via Varejo, S.A. et. al.
10/A
7/8/19
4.2
4.4
Amended and Restated AirToken Terms & Conditions
10/A
9/25/19
4.4
10.1
Services Agreement dated September 11, 2018 by and among the Company and Via Varejo, S.A. et. al.
3/15/19
10.1
10.2
Services Agreement Amendment dated June 7, 2019 by and among the Company and Via Varejo, S.A. et. al.
10/A
7/8/19
10.2
10.3
Convertible Note Purchase and Call Option Agreement dated September 11, 2018 by and among the Company and Via Varejo, S.A. et. al. attached as Exhibit A to Services Agreement dated September 11, 2018 between by and among the Company and Via Varejo, S.A. et. al.
3/15/19
10.2
10.4
Convertible Note Purchase and Call Option Agreement Amendment dated June 7, 2019 by and among the Company and Via Varejo, S.A. et. al.
10/A
7/8/19
10.4
10.5
Airfox Service Level Agreement attached as Exhibit C to Services Agreement dated September 11, 2018 between by and among the Company and Via Varejo, S.A. et. al.
3/15/19
10.3
10.6
Client Service Level Agreement attached as Exhibit D to Services Agreement dated September 11, 2018 between by and among the Company and Via Varejo, S.A. et. al.
3/15/19
10.4
10.7
Form of CarrierEQ, Inc. Stockholders Agreement attached as Exhibit D to Convertible Note Purchase and Call Option Agreement dated September 11, 2018 by and among the Company and Via Varejo, S.A. et. al.
3/15/19
10.5
10.8
Form of Stock Purchase Agreement attached as Exhibit E to Convertible Note Purchase and Call Option Agreement dated September 11, 2018 by and among the Company and Via Varejo, S.A. et. al.
3/15/19
10.6
10.9
Call Exercise Notice
8-K
2/13/20
10.9
10.10
Side Letter Agreement dated May 21, 2020
8-K
5/28/20
10.10
10.11
Stock Purchase Agreement - Employee -Victor Santos
8-K
2/13/20
10.10
10.12
Amendment to Stock Purchase Agreement dated April 17, 2020
8-K
5/28/20
10.12
10.13
Second Amendment to Stock Purchase Agreement dated May 18, 2020
8-K
5/28/20
10.13
10.14
Stock Purchase Agreement - Employee - Douglas Lopes
8-K
2/13/20
10.11
10.15
Amendment to Stock Purchase Agreement dated April 17, 2020
8-K
5/28/20
10.15
10.16
Second Amendment to Stock Purchase Agreement dated May 18, 2020
8-K
5/28/20
10.16
10.17
Stock Purchase Agreement - Employee - Emanuel Moecklin
8-K
2/13/20
10.12
10.18
Amendment to Stock Purchase Agreement dated April 17, 2020
8-K
5/28/20
10.18
10.19
Second Amendment to Stock Purchase Agreement dated May 18, 2020
8-K
5/28/20
10.19
10.20
Stock Purchase Agreement - Non-Employee - Chris McLean
8-K
2/13/20
10.13
10.21
Amendment to Stock Purchase Agreement dated February 7, 2020
8-K
5/28/20
10.21
10.22
Second Amendment to Stock Purchase Agreement dated May 18, 2020
8-K
5/28/20
10.22
10.23
Stock Purchase Agreement - Non-Employee - Tekoa Capital LLC
8-K
2/13/20
10.14
10.24
Amendment to Stock Purchase Agreement dated February 7, 2020
8-K
5/28/20
10.24
10.25
Second Amendment to Stock Purchase Agreement dated May 18, 2020
8-K
5/28/20
10.25
10.26
Stock Purchase Agreement - Non-Employee - Winsten Limited
8-K
2/13/20
10.15
10.27
Amendment to Stock Purchase Agreement dated February 7, 2020
8-K
5/28/20
10.27
10.28
Second Amendment to Stock Purchase Agreement dated May 18, 2020
8-K
5/28/20
10.28
10.29
Stock Purchase Agreement - Non-Employee - Andrew Wang
8-K
2/13/20
10.16
10.30
Amendment to Stock Purchase Agreement dated February 7, 2020
8-K
5/28/20
10.30
10.31
Second Amendment to Stock Purchase Agreement dated May 18, 2020
8-K
5/28/20
10.31
10.32
Victor Santos Employee Agreement dated 05/21/20
8-K
5/28/20
10.32
10.33
Douglas Lopes Employee Agreement dated 05/21/20
8-K
5/28/20
10.33
10.34
Emanuel Moecklin Employee Agreement dated 05/21/20
8-K
5/28/20
10.34
10.35
Contribution Agreement
8-K
5/28/20
10.35
10.34
Via Varejo Loan Agreement re: 11/1/19 loan
10-K
1/15/20
10.7
10.35*
Program Agreement between Mastercard Brasil, banQi and Via Varejo
8-K
12/26/19
10.1
10.36
Guaranty Letter - Via Varejo
8-K
12/26/19
10.2
10.37
CarrierEQ, Inc. 2016 Equity Incentive Plan
3/15/19
10.10
10.38
Amendment 2019-1 to CarrierEQ, Inc. 2016 Equity Incentive Plan
10-K
1/15/20
10.16
10.39
Office Lease Agreement with Brickman Lincoln LLC
10-K
1/15/20
10.25
10.40
Employee Agreement - Lisbeth Reimer
8-K
5/27/21
10.1
10.41
7th Amendment and Consolidation of the Articles of Association of banQi Instituição de Pagamento Ltda
8-K
6/17/21
10.1
14.1
Code of Ethics and Conduct
10-K
1/08/21
14.1
21.1
List of Subsidiaries
Filed
31.1
Certification pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, executed by the Principal Executive Officer of the Company
Filed
31.2
Certification pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, executed by the Principal Financial Officer of the Company
Filed
32.1
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, executed by the Principal Executive Officer of the Company
Furnished
32.2
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, executed by the Principal Financial Officer of the Company
Furnished
99.1
Amended and Restated Airfox Airtoken Creation Event Terms & Conditions
10/A
5/9/19
99.2
XBRL data files of Financial Statements and Notes contained in this Annual Report on Form 10-K
Furnished
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* Confidential portions of this exhibit have been omitted from the exhibit.