ebi_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended July 31, 2024

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

For the transition period from _______________ to _______________.

Commission file number: 000-56142

Everything Blockchain, Inc.

(Exact name of registrant as specified in its charter)

Florida	82-1091922
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
12574 Flagler Center Blvd, Suite 101 Jacksonville, FL	32258
(Address of principal executive offices)	(Zip Code)

(904) 454-2111

Registrant's telephone number, including area code

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

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

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated Filer	☐	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of August 31, 2024, the Company had 22,468,297 shares of common stock, $0.0001 par value outstanding.

Transitional Small Business Disclosure Format Yes ☐ No ☒

Everything Blockchain, Inc.

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)		3
	Consolidated Balance Sheets		4
	Consolidated Statements of Operations		5
	Consolidated Statements of Stockholders' Equity		6
	Consolidated Statements of Cash Flows		7
	Notes to Consolidated Financial Statements		8
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations		18
Item 3.	Quantitative and Qualitative Disclosures about Market Risk		22
Item 4.	Controls and Procedures		23
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings		24
Item 1A.	Risk Factors		24
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		24
Item 3.	Defaults Upon Senior Securities		24
Item 4.	Mine Safety Disclosures		24
Item 5.	Other Information		24
Item 6.	Exhibits		25
SIGNATURES		26

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PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Interim Consolidated Financial Statements and Notes to Interim Financial Statements

The accompanying unaudited consolidated interim financial statements have been prepared in accordance with the instructions to Form 10-Q. Therefore, they do not include all information and footnotes necessary for a complete presentation of financial position, results of operations, cash flows, and stockholders' equity in conformity with generally accepted accounting principles. In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have been included and all such adjustments are of a normal recurring nature. Operating results for the three and six months ended July 31, 2024, are not necessarily indicative of the results that can be expected for the year ending January 31, 2025 or any other reporting period. The information included in this Form 10-Q should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended January 31, 2024 filed with the Securities and Exchange Commission (the "SEC") on May 15, 2024 (the "Annual Report").

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Everything Blockchain, Inc.
Consolidated Balance Sheets (Amounts in thousands, except share and per share data)
ASSETS
		As of
		July 31,			January 31,
		2024			2024
		(unaudited)
Current assets
Cash		$	4			$	60
Prepaid expenses			172				189
Other assets			298				207
Total current assets		$	474			$	456
Property, plant and equipment, net			1				2
Goodwill			16,504				16,504
Intangible assets, net			4,612				5,017
Other assets			221				221
Total assets		$	21,812			$	22,200
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses		$	2,143			$	1,843
Current portion of long-term debt			1,627				215
Reserve for legal settlements			154				154
Deferred revenue			250				250
Total current liabilities		$	4,174			$	2,462
Long-term liabilities
Debt			-				1,132
Total long-term liabilities		$	-			$	1,132
Total liabilities		$	4,174			$	3,594
Stockholders' equity
Series A Preferred stock, $0.0001 par value: 1,000,000 shares authorized; 150,000 shares issued and outstanding as of July 31, 2024 and January 31, 2024			-				-
Series C Preferred stock, $0.0001 par value: 10,000,000 shares authorized; 300,000 shares issued and outstanding as of July 31, 2024; 1,352,632 shares issued and outstanding as of January 31, 2024			-				-
Common stock, $0.0001 par value, 200,000,000 shares authorized; 22,193,616 shares issued and outstanding as of July 31, 2024; 16,902,546 shares issued and outstanding as of January 31, 2024			2				1
Additional paid-in capital			88,471				86,991
Accumulated deficit			(70,835	)			(68,386	)
Total stockholders' equity		$	17,638			$	18,606
Total liabilities and stockholders' equity		$	21,812			$	22,200

See accompanying notes to consolidated financial statements.

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Everything Blockchain, Inc.

Consolidated Statements of Operations (Amounts in thousands, except share and per share data)

For the Three Months Ended	For the Six Months Ended
July 31,	July 31,
2024	2023	2024	2023
(unaudited)
Revenue	$	63	$	66	$	126	$	127
Cost of sales	-	-	-	-
Gross profit	63	66	126	127
Selling, general, and administrative	512	776	1,294	1,618
Stock based compensation	373	650	803	1,366
Depreciation and amortization	203	30	406	61
Total operating expenses	1,088	1,456	2,503	3,045
Loss from operations	(1,025	)	(1,390	)	(2,377	)	(2,918	)
Other expense, net	(40	)	(1,314	)	(72	)	(1,315	)
Loss continuing operations before income taxes	(1,065	)	(2,704	)	(2,449	)	(4,233	)
Income tax expense	-	-	-	7
Loss from continuing operations	(1,065	)	(2,704	)	(2,449	)	(4,240	)
Loss from discontinued operations, net of tax	-	(388	)	-	(670	)
Net loss	$	(1,065	)	$	(3,092	)	$	(2,449	)	$	(4,910	)
Basic and diluted loss per share:
Continuing operations	$	(0.05	)	$	(0.27	)	$	(0.13	)	$	(0.43	)
Discontinued operations	$	-	$	(0.04	)	$	-	$	(0.07	)
Basic and diluted loss per share	$	(0.05	)	$	(0.31	)	$	(0.13	)	$	(0.49	)
Weighted average shares outstanding - basic and diluted	21,174,297	9,923,904	19,105,817	9,923,304

See accompanying notes to consolidated financial statements.

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Everything Blockchain, Inc.

Consolidated Statements of Stockholders' Equity (Amounts in thousands)

		Preferred Stock			Common Stock			Treasury			Additional Paid-in			Receivable from			Accumulated			Total Stockholders'
		Shares			Amount			Shares			Amount			Stock			Capital			Shareholder			Deficit			Equity
		(unaudited)
Balance -January 31, 2023			1,600			$	-				9,923			$	1			$	(1,691	)		$	85,975			$	(200	)		$	(60,535	)		$	23,550
Warrant exercise			-				-				-				-				-				-				200				-				200
Stock based compensation			-				-				-				-				-				1,215				-				-				1,215
Net loss			-				-				-				-				-				-				-				(4,910	)			(4,910	)
Balance -July 31, 2023			1,600			$	-				9,923			$	1			$	(1,691	)		$	87,190			$	-			$	(65,445	)		$	20,055
Balance -January 31, 2024			1,503			$	-				16,903			$	1			$	-			$	86,991			$	-			$	(68,386	)		$	18,606
Conversion of Series C Preferred into common stock			(1,053	)			-				4,096				-				-				-				-				-				-
Issuance of common stock			-				-				953				1				-				528				-				-				529
Stock issued in exchange for accounts payable			-				-				242				-				-				186				-				-				186
Stock based compensation			-				-				-				-				-				766				-				-				766
Net loss			-				-				-				-				-				-				-				(2,449	)			(2,449	)
Balance -July 31, 2024			450			$	-				22,194			$	2			$	-			$	88,471			$	-			$	(70,835	)		$	17,638

See accompanying notes to consolidated financial statements.

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Everything Blockchain, Inc.
Consolidated Statements of Cash Flows (Amounts in thousands)
		For the Six Months Ended July 31,
		2024			2023
		(unaudited)
Cash flows from operating activities:
Net Loss		$	(2,449	)		$	(4,910	)
Adjustments to reconcile net loss to net
cash used in operating activities:
Loss from discontinued operations			-				670
Stock based compensation			803				1,366
Realized net gain on investment in cryptocurrency			-				(9	)
Fair value adjustment to cryptocurrency			-				1,302
Amortization and depreciation			406				61
Changes in operating assets and liabilities:
Prepaid expenses			(20	)			(148	)
Other assets			(90	)			150
Accounts payable to related party			-				591
Accounts payable and accrued expenses			486				671
Cash used in operating activities of continuing operations			(864	)			(256	)
Cash used in operating activities of discontinued operations			-				(348	)
Net cash used in operating activities			(864	)			(604	)
Cash flows from investing activities:
Proceeds from cryptocurrencies, net			-				170
Capital expenditures			-				(510	)
Cash used in investing activities of continuing operations			-				(340	)
Cash used in investing activities of discontinued operations			-				(50	)
Net cash used in investing activities			-				(390	)
Cash flows from financing activities:
Proceeds from debt - related party			163				-
Proceeds from debt			227				-
Payment of debt			(111	)			(9	)
Proceeds from issuance of common stock			529				-
Proceeds from exercise of warrants			-				200
Net cash provided by financing activities			808				191
Net Change in Cash			(56	)			(803	)
Cash, beginning of period - continuing operations			60				657
Cash, beginning of period - discontinued operations			-				167
Cash, end of period			4				21
Cash from discontinuing operations, end of period			-				20
Cash from continuing operations, end of period		$	4			$	1
Supplemental Disclosure of Cash Flows Information:
Cash paid for interest		$	43			$	54
Non-cash Investing and Financing Activities:
Issuance of common stock for services		$	186			$	-
Acquisition of cryptocurrency			-				2,242

See accompanying notes to consolidated financial statements.

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Everything Blockchain, Inc.

Notes to Consolidated Financial Statements

(Unaudited)

Note 1. Organization and Basis of Presentation

The accompanying unaudited consolidated financial statements of Everything Blockchain, Inc. ("EBI") and its consolidated subsidiaries (collectively, the "Company", "we", "our") have been prepared in accordance with generally accepted accounting principles in the United States of America ("GAAP") and the rules of the Securities and Exchange Commission (the "SEC"). All significant intercompany accounts and transactions have been eliminated in consolidation.

Description of Business

The Company is primarily engaged in the business of consulting and developing data management, blockchain and cybersecurity related solutions.

Subsidiaries of the Company

The subsidiaries of the Company are Render Payment Corp., DataStone, Inc., Vengar Technologies, Inc., Everything Blockchain Technology Corporation, and EBI International, Inc.

Note 2. Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements include the accounts of EBI and its wholly owned subsidiaries.

Unaudited Interim Financial Information

The Company's unaudited consolidated financial statements have been prepared in accordance with GAAP and pursuant to the rules and regulations of the SEC. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted from this report, as is permitted by such rules and regulations. Accordingly, these consolidated financial statements should be read in conjunction with the audited financial statements as of and for the year ended January 31, 2024, and the notes thereto included in the Company's Annual Report on Form 10-K for the year ended January 31, 2024, filed with the SEC on May 15, 2024 (the "2024 Annual Report"). The results for any interim period are not necessarily indicative of results for any future period.

The unaudited consolidated financial statements have been prepared on the same basis as the audited financial statements. In the opinion of the Company's management, the accompanying unaudited consolidated financial statements contain all adjustments that are necessary to present fairly the Company's financial position and results of operations for the interim periods presented. The results for the three and six months ended July 31, 2024, are not necessarily indicative of the results for the year ending January 31, 2025, or for any future period.

As of July 31, 2024, there have been no material changes in the Company's significant accounting policies from those that were disclosed in the 2024 Annual Report.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and disclosures of contingent assets and liabilities as of the date of the consolidated financial statements and reported amounts of revenues and expenses during the reporting period. Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. The most significant estimates and judgments relate to revenue recognition; allowance for doubtful accounts; valuation of long-lived assets and finite-lived intangible assets; recoverability of goodwill; acquisition method of accounting; contingencies; and income taxes.

On a regular basis, management reviews its estimates utilizing currently available information, changes in facts and circumstances, historical experience, and reasonable assumptions. After such reviews, and if deemed appropriate, those estimates are adjusted accordingly. Actual results could differ from those estimates.

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Revenue Recognition Policies

Our revenue is derived from the subscription, non-software related hosted services, term-based and perpetual licensing of software products, associated software maintenance and support plans, consulting services, training, and technical support. Most of our customer arrangements involve multiple solutions and various license rights, bundled with post-contract customer support and other meaningful rights that together provide a complete end-to-end solution to the customer.

Services revenue. We generate services revenue via consulting services and software development. The Company is engaged in developing, engineering, and designing blockchain projects.

We recognize revenue when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.

We determine revenue recognition through the following steps:

	·	identification of the contract, or contracts, with a customer;
	·	identification of the performance obligations in the contract;
	·	determination of the transaction price;
	·	allocation of the transaction price to the performance obligations in the contract; and
	·	recognition of revenue when, or as, we satisfy a performance obligation.

Concentration of Credit Risk and Significant Customers

Financial instruments which potentially subject the Company to a concentration of credit risk consist principally of temporary cash investments and accounts receivable.

The Company establishes an allowance for doubtful accounts when events and circumstances regarding the collectability of its receivables or the selling of its commodities warrant based upon factors such as the credit risk of specific customers, historical trends, other information, and past bad debt history. The outstanding balances are stated net of an allowance for doubtful accounts.

Our cash balances are maintained in accounts held by major banks and financial institutions located in the United States. The Company may occasionally maintain amounts on deposit with a financial institution that are in excess of the federally insured limit of $250,000. The risk is managed by maintaining all deposits in high-quality financial institutions. The Company had $0 in excess of federally insured limits on July 31, 2024 and January 31, 2024.

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Cash and Cash Equivalents

The Company includes in cash and cash equivalents all short-term, highly liquid investments that mature within three months of the date of purchase. Cash equivalents consist principally of investments in interest-bearing demand deposit accounts and liquidity funds with financial institutions and are stated at cost, which approximates fair value. The Company had no cash equivalents as of July 31, 2024 and January 31, 2024.

Basic and Diluted Net Earnings (Loss) Per Share

The Company follows ASC Topic 260 - Earnings Per Share, and FASB 2015-06, Earnings Per Share to account for earnings per share. Basic earnings per share ("EPS") calculations are determined by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. Diluted EPS calculations are determined by dividing net income (loss) by the weighted average number of common shares outstanding plus the dilutive effect, calculated using (i) the "treasury stock" method for warrants and (ii) the "if converted" method for the preferred stock if their inclusion would not have been anti-dilutive.

Fair Value Measurements

The Company measures assets and liabilities at fair value based on an expected exit price as defined by the authoritative guidance on fair value measurements, which represents the amount that would be received on the sale of an asset or paid to transfer a liability, as the case may be, in an orderly transaction between market participants. As such, fair value may be based on assumptions that market participants would use in pricing an asset or liability. The authoritative guidance on fair value measurements establishes a consistent framework for measuring fair value on either a recurring or nonrecurring basis whereby inputs, used in valuation techniques, are assigned a hierarchical level.

The following are the hierarchical levels of inputs to measure fair value:

- Level 1:	Quoted prices in active markets for identical instruments;
- Level 2:	Other significant observable inputs (including quoted prices in active markets for similar instruments);
- Level 3:	Significant unobservable inputs (including assumptions in determining the fair value of certain investments).

The carrying values for cash and cash equivalents, accounts receivable, other current assets, accounts payable and accrued liabilities, and deferred revenue approximate their fair value due to their short maturities.

Note 3. Going Concern

The Company's consolidated financial statements are prepared in accordance with GAAP, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. Because the business is new and has a limited history, no certainty of continuation can be stated. The accompanying financial statements for the three and six months ended July 31, 2024 and 2023 have been prepared to assume that we will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.

The Company has had historically negative cash flow and net losses. Though the year ended January 31, 2022 resulted in positive cash flow and net income, there are no assurances the Company will generate a profit or obtain positive cash flow in the future. The Company has sustained its solvency through the support of its shareholder and chairman, Michael Hawkins, or companies controlled by Michael Hawkins, which raise substantial doubt about its ability to continue as a going concern.

Management is taking steps to raise additional funds to address its operating and financial cash requirements to continue operations in the next twelve months. Management has devoted a significant amount of time to the raising of capital from additional debt and equity financing. However, the Company's ability to continue as a going concern is dependent upon raising additional funds through debt and equity financing and generating revenue. There are no assurances the Company will receive the funding or generate the revenue necessary to fund operations. The financial statements contain no adjustments for the outcome of this uncertainty.

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Note 4. Discontinued Operations

On October 31, 2023, the Board of Directors approved, and the Company completed, the sale of Mercury to Chris Carter, founder and CEO of Mercury.

In the consolidated statements of cash flows, the cash flows of discontinued operations were separately classified or aggregated under operating and investing activities.

The remaining notes to the consolidated financial statements were updated to reflect the impact of these discontinued operations. All discussions and amounts in the consolidated financial statements and related notes for all periods presented relate to continuing operations, unless otherwise noted.

The following table summarizes the results of discontinued operations (in thousands).

		For the Three Months Ended July 31, 2023			For the Six Months Ended July 31, 2023
Revenue		$	404			$	605
Cost of sales			80				131
Gross profit			324				474
Selling, general, and administrative			662				1,050
Depreciation and amortization			29				57
Total operating expenses			691				1,107
Loss from operations			(367	)			(633	)
Other expense, net			(21	)			(37	)
Loss before income taxes			(388	)			(670	)
Income tax benefit			-				-
Net loss		$	(388	)		$	(670	)

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Note 5. Intangible Assets

Intangible assets consist of the following:

		As of July 31, 2024
		Gross Amount			Accumulated Amortization			Net Carrying Amount
		(in thousands)
IP/Technology		$	5,163			$	551			$	4,612

		As of January 31, 2024
		Gross Amount			Accumulated Amortization			Net Carrying Amount
		(in thousands)
IP/Technology		$	5,163			$	146			$	5,017

The Company's IP/Technology is amortized over five years.

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Note 6. Property, Plant and Equipment

Property, plant and equipment consisted of the following (in thousands):

		As of
		July 31, 2024			January 31, 2024
Computer equipment and computer software		$	19			$	19
Less: Accumulated depreciation			(18	)			(17	)
Total property, plant and equipment, net		$	1			$	2

Note 7. Debt

On July 14, 2023, a board director of the Company loaned it $55,000, representing half of the Company's employee retention credit refund, which the Company expects to receive this year. The note calls for the payment of the principal sum of $55,000 plus interest of $12,500 for a total of $67,500. During the six months ended July 31, 2024, the director lent the Company additional funds, which increased the outstanding balance to $85,364. The maturity date of the note is upon receipt of the employee retention credit refund.

On September 7, 2023, Epic Industry Corp ("Epic"), a wholly owned company of Michael Hawkins the Company's Chairman, formalized its loans to the Company in a $1.0 million note. The note includes a mechanism to increase the amount of the note with the mutual consent of Epic and the Company. As of July 31, 2024, the note balance is $1.3 million. Monthly interest only payments at an annual rate of 4% will be made through the maturity date of February 1, 2025. If interest payments are made late after the cure period, the interest due shall be recalculated at the highest rate authorized by Florida law, which is 18% per annum. Epic in its sole discretion, at any time prior to the maturity date, may convert the principal, partial principal, and/or interest due into shares of the Company's common stock at a static price of $1.00 per share.

On November 27, 2023, the Company entered into a note for $149,500 with a net payment to the Company of $125,000 after an original issue discount of $19,500 and expenses of $5,000. There is a one-time interest charge of 11% which is paid back along with principal over nine monthly payments beginning with the first payment due on December 30, 2023. The maturity date of the note is August 30, 2024.

On March 21, 2024, the Company entered into a note for $83,300 with a net payment to the Company of $65,000 after an original issue discount of $13,300 and expenses of $5,000. There is a one-time interest charge of 14% which is paid back along with principal over the term of the note beginning with the first payment due on September 30, 2024. The maturity date of the note is December 30, 2024.

On July 26, 2024, the Company entered into a note for $120,000 with a net payment to the Company of $95,000 after an original issue discount of $20,000 and expenses of $5,000. There is a one-time interest charge of 10% which is paid back along with principal over the term of the note beginning with the first payment due on August 30, 2024. The maturity date of the note is April 30, 2025.

Note 8. Commitments and Contingencies

The Company reports and accounts for its commitments and contingencies in accordance with ASC 440 - Commitments and ASC 450 - Contingencies. We recognize a loss on a contingency when it is probable a loss will be incurred and that the amount of the loss can be reasonably estimated. No loss contingencies have been recorded for the three and six months ended July 31, 2024 and 2023.

Note 9. Legal Proceedings

The Company may be subject to legal proceedings and claims arising from contracts or other matters from time to time in the ordinary course of business. Management is not aware of any pending or threatened litigation where the ultimate disposition or resolution could have a material adverse effect on the Company's financial position, results of operations or liquidity.

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Note 10. Related Parties and Related Party Transactions

Related party balance sheet items (in thousands)
		As of July 31, 2024			As of January 31, 2024
Accounts payable and accrued expenses		$	245			$	158
Loans payable			1,363				1,199

Related party income statement items (in thousands)
		For the Three Months Ended			For the Six Months Ended
		July 31,			July 31,
		2024			2023			2024			2023
Consulting expenses		$	66			$	66			$	164			$	132
Stock based compensation			354				650				728				1,300
Payroll expenses			146				120				236				239

Loans

On July 14, 2023, a board director of the Company loaned it $55,000, representing half of the Company's employee retention credit refund, which the Company expects to receive this year. The note calls for the payment of the principal sum of $55,000 plus interest of $12,500 for a total of $67,500. During the six months ended July 31, 2024, the director lent the Company additional funds, which increased the outstanding balance to $85,364. The maturity date of the note is upon receipt of the employee retention credit refund.

On September 7, 2023, Epic formalized its loans to the Company in a $1.0 million note. The note includes a mechanism to increase the amount of the note with the mutual consent of Epic and the Company. As of July 31, 2024, the note balance is $1.3 million. Monthly interest only payments at an annual rate of 4% will be made through the maturity date of February 1, 2025. If interest payments are made late after the cure period, the interest due shall be recalculated at the highest rate authorized by Florida law, which is 18% per annum. Epic in its sole discretion, at any time prior to the maturity date, may convert the principal, partial principal, and/or interest due into shares of the Company's common stock at a static price of $1.00 per share.

Equity

During the six months ended July 31, 2024, in a series of transactions, the Company sold a total of 903,387 shares of common stock for $0.5 million to OEM partner, Alamo City Engineering Services, Inc. ("ACES"), which is owned by our board member Craig Stephens.

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Note 11. Stockholders' Equity

Common Stock

As of July 31, 2024 and January 31, 2024, the Company had 200 million common shares authorized. As of July 31, 2024, the Company had 22,193,616 shares issued and outstanding. As of January 31, 2024, the Company had 16,902,546 common shares issued and outstanding.

On April 9, 2024, we sold 50,000 shares of common stock to a third party for $28,500.

On May 15, 2024, ACES elected to convert 1,052,632 shares of Series C Preferred Stock into 4,095,948 shares of common stock.

During the six months ended July 31, 2024, the Company issued 241,735 shares of common stock for services that totaled $0.2 million.

During the six months ended July 31, 2024, in a series of transactions, the Company sold a total of 903,387 shares of common stock for $0.5 million to ACES.

During the three and six months ended July 31, 2024, stock-based compensation expense related to stock grants was $0 and $37,000, respectively, from a grant to an employee. During the three and six months ended July 31, 2023, stock-based compensation expense related to stock grants was $75,000 and $150,000, respectively, from a grant to an employee.

Preferred Stock

Series A Preferred Stock

As of July 31, 2024 and January 31, 2024, the Company had one million Series A Preferred shares, par value $0.0001, authorized, with 150,000 Series A Preferred shares issued and outstanding. The Series A Preferred stock converts into common stock at the option of the holder of the Series A Preferred. The conversion rate for every one share of Series A Preferred stock is 50 shares of common stock. Each share of Series A Preferred stock entitles the holder to 1,000 votes. Holders of Series A Preferred are entitled to share ratably in dividends, if any are declared. There are no redemption rights. In the event of dissolution, the holders of Series A Preferred are entitled to share pro rata all assets remaining after payment in full of all liabilities.

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Series C Preferred Stock

As of July 31, 2024 and January 31, 2024, the Company had 10 million Series C Preferred shares, par value $0.0001, authorized. As of July 31, 2024, the Company had 300,000 shares issued and outstanding. As of January 31, 2024, the Company had 1,352,632 shares issued and outstanding. The Series C Preferred Stock shall rank senior to the Company's common stock and Series A Preferred Stock. Each holder of Series C Preferred Stock is entitled to one (1) vote for each share of Series C Preferred Stock held on all matters submitted to a vote of stockholders. Each share of Series C Preferred Stock shall be convertible, at the discretion of the holders, into shares of common stock. The number of common shares issued shall be at the rate of 30% less than the volume-weighted average price or $5.00 per share whichever is less.

On May 15, 2024, ACES elected to convert 1,052,632 shares of Series C Preferred Stock into 4,095,948 shares of common stock.

Note 12. Warrants

A summary of warrant activity for six months ended July 31, 2024 is as follows:

					Weighted
					Average
					Conversion
		Shares			Price
Warrants outstanding at January 31, 2024			2,611,000			$	1.09
Cancelled/Expired			(100,000	)			1.00
Warrants outstanding at July 31, 2024			2,511,000			$	1.10

During the three months ended July 31, 2024, stock-based compensation expense related to warrant grants was $373,000, which consisted of grants to employees of $250,000, directors of $104,000, and consultants of $19,000. During the six months ended July 31, 2024, stock-based compensation expense related to warrant grants was $766,000, which consisted of grants to employees of $499,000, directors of $229,000, and consultants of $38,000.

During the three months ended July 31, 2023, stock-based compensation expense related to warrant grants was $575,000, which consisted of grants to employees of $338,000 and directors of $237,000. During the six months ended July 31, 2023, stock-based compensation expense related to warrant grants was $1,215,000, which consisted of grants to employees of $675,000, directors of $474,000, and consultants of $66,000.

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Note 13. Income Taxes

Our consolidated effective income tax rate for the three and six months ended July 31, 2024 and 2023 was 0%.

Note 14. Net Loss Per Common Share

		For the Three Months Ended			For the Six Months Ended
		July 31,			July 31,
		2024			2023			2024			2023
		(in thousands, except per share data)
Numerator:
Loss from continuing operations		$	(1,065	)		$	(2,704	)		$	(2,449	)		$	(4,240	)
Numerator:
Loss from discontinued operations			-				(388	)			-				(670	)
Numerator:
Net loss		$	(1,065	)		$	(3,092	)		$	(2,449	)		$	(4,910	)
Denominator:
Weighted average common shares outstanding			21,174				9,924				19,106				9,923
Effect of dilutive securities:
Warrants			-				-				-				-
Preferred stock			-				-				-				-
Diluted shares outstanding			21,174				9,924				19,106				9,923
Basic and diluted:						$
Continuing operations		$	(0.05	)		$	(0.27	)		$	(0.13	)		$	(0.43	)
Discontinued operations		$	-			$	(0.04	)		$	-			$	(0.07	)
Basic and diluted loss per share		$	(0.05	)		$	(0.31	)		$	(0.13	)		$	(0.49	)

Note 15. Subsequent Events

In August 2024, the Company was unable to make a debt payment. The lender chose to take payment in the form of Company common stock. Therefore, the Company issued to the lender 249,031 shares of common stock in lieu of payment of $37,500.

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

You should read the following discussion and analysis of our financial condition, results of operations and cash flows in conjunction with our consolidated financial statements and the related notes presented in this report and in our Annual Report.

FORWARD-LOOKING STATEMENTS

Certain statements in this section contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. All statements contained in this report and not clearly historical in nature are forward-looking, and the words "may," "will," "should," "could," "would," "expects," "plans," "anticipates," "believes," "estimates," "projects," "predicts," "intends," "potential," and similar expressions (as well as other words or expressions referencing future events, conditions or circumstances) generally are intended to identify forward-looking statements. Any statements in this report that are not historical facts are forward-looking statements. Actual results may differ materially from those discussed from time to time in the Company's SEC filings. The Company undertakes no obligation to update or revise any forward-looking statement for events or circumstances after the date on which such statement is made except as required by law.

OVERVIEW

The overview of the MD&A highlights selected information and does not contain all of the information that is important to readers of this Quarterly Report on Form 10-Q.

The Company is primarily engaged in the business of consulting and developing data management, blockchain and cybersecurity related solutions. We are a technology company that is blending blockchain, zero-trust, and database management technology to create a platform to solve real world, practical business problems. Our business model is based on building recurring revenue through software subscriptions, licensing agreements, and transaction fees. Our patent-pending advances in blockchain engineering deliver the essential elements needed for real-world business use: speed, security, and energy efficiency. Currently, our lines of business are EB Advise, BuildDB and EB Control.

Our website can be found at www.everythingblockchain.io, which is not incorporated as part of this Form 10-Q.

EMPLOYEES

As of July 31, 2024, the Company has 5 employees.

Available Information

All reports of the Company filed with the SEC are available free of charge through the SEC's website at www.sec.gov. In addition, the public may read and copy materials filed by the Company at the SEC's Public Reference Room located at 100 F Street, N.E., Washington, D.C. 20549. The public may also obtain additional information on the operation of the Public Reference Room by calling the Commission at 1-800-SEC-0330.

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Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses. On an ongoing basis, we evaluate our estimates, including those related to uncollectible receivables, inventory valuation, deferred compensation, and contingencies.

We base our estimates on historical performance and on various other assumptions that we believe to be reasonable under the circumstances. These estimates allow us to make judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. If actual results or events differ materially from those contemplated by us in making these estimates, our reported financial condition, and results of operations for future periods could be materially affected.

Results of Operations

Our operating results for the three and six months ended July 31, 2024 and 2023 are summarized as follows (in thousands):

		For the Three Months Ended July 31,			For the Six Months Ended July 31,
		2024			2023			2024			2023
		(in thousands)
Revenue		$	63			$	66			$	126			$	127
Cost of sales			-				-				-				-
Gross profit			63				66				126				127
Selling, general, administrative			512				776				1,294				1,618
Stock based compensation			373				650				803				1,366
Depreciation and amortization			203				30				406				61
Total operating expenses			1,088				1,456				2,503				3,045
Loss from operations			(1,025	)			(1,390	)			(2,377	)			(2,918	)
Other expense, net			(40	)			(1,314	)			(72	)			(1,315	)
Loss from continuing operations before income taxes			(1,065	)			(2,704	)			(2,449	)			(4,233	)
Income tax expense			-				-				-				7
Loss from continuing operations			(1,065	)			(2,704	)			(2,449	)			(4,240	)
Loss from discontinued operations, net of tax			-				(388	)			-				(670	)
Net loss		$	(1,065	)		$	(3,092	)		$	(2,449	)		$	(4,910	)

Revenue

Revenue for the three and six months ended July 31, 2024 and 2023 was $0.1 million from consulting services.

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Operating Expenses

Operating expenses primarily consist of selling, general and administrative expenses, stock-based compensation expense, and amortization and depreciation expense. Selling, general and administrative expenses primarily consist of personnel costs, consultant fees, professional fees, computer and internet expenses, marketing expenses, utilities expenses, meals and entertainment, office supplies, and reporting fees.

Operating expenses for the three months ended July 31, 2024 were $1.1 million compared to $1.5 million for the three months ended July 31, 2023. The primary reason for the decrease was due to decreases in stock-based compensation of $0.3 million and professional fees of $0.2 million, partially offset by an increase in depreciation and amortization of $0.2 million.

Operating expenses for the six months ended July 31, 2024 were $2.5 million compared to $3.0 million for the six months ended July 31, 2023. The primary reason for the decrease was due to decreases in stock-based compensation of $0.6 million and professional fees of $0.3 million, partially offset by an increase in depreciation and amortization of $0.3 million.

Loss from Operations

Loss from operations for the three months ended July 31, 2024 was $1.0 million compared to $1.4 million for the three months ended July 31, 2023. Loss from operations for the six months ended July 31, 2024 was $2.4 million compared to $2.9 million for the six months ended July 31, 2023. The primary reasons for the decrease in loss from operations were due to the decrease in operating expenses as discussed above.

Other Expense

Other income (expense) consists primarily of fair market value adjustments to cryptocurrency and interest income and expense.

Other expense, net for the three months ended July 31, 2024 was $0 million compared to $1.3 million for the three months ended July 31, 2023. Other expense, net for the three months ended July 31, 2023 consists primarily of fair market value expense adjustments related to cryptocurrency of $1.3 million.

Other expense, net for the six months ended July 31, 2024 was $0.1 million compared to $1.3 million for the six months ended July 31, 2023. Other expense, net for the six months ended July 31, 2023 consists primarily of fair market value expense adjustments related to cryptocurrency of $1.3 million.

Adjusted EBITDA

The Company reports all financial information required in accordance with GAAP. The Company believes, however, that evaluating its ongoing operating results will be enhanced if it also discloses certain non-GAAP information.

Adjusted EBITDA, which is a non-GAAP financial measure, is defined by the Company as net income (loss) plus net interest income, income tax (benefit) expense, depreciation and amortization, and stock-based compensation.

Adjusted EBITDA should not be considered an alternative to net income, operating income, net cash provided by operating activities, or any other measure of financial performance or liquidity presented in accordance with GAAP. In addition, Adjusted EBITDA presented by other companies may not be comparable to our presentation since each company may define these terms differently.

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The table below reconciles Adjusted EBITDA, which is a non-GAAP financial measure, to net loss.

		For the Three Months Ended July 31,			For the Six Months Ended July 31,
		2024			2023			2024			2023
		(in thousands)
Net loss		$	(1,065	)		$	(3,092	)		$	(2,449	)		$	(4,910	)
Add:
Income tax expense			-				-				-				7
Stock based compensation			373				650				803				1,366
Depreciation and amortization			203				59				406				118
Net interest expense			40				37				72				54
Adjusted EBITDA		$	(449	)		$	(2,346	)		$	(1,168	)		$	(3,365	)

Analysis of Cash Flows

Operating Activities

Net cash used in operating activities - continuing operations was $0.9 million for the six months ended July 31, 2024. We had net loss of $2.4 million from continuing operations, which included stock-based compensation of $0.8 million.

Net cash used in operating activities - continuing operations was $0.3 million for the six months ended July 31, 2023. We had net loss of $4.2 million from continuing operations, which included fair value adjustments to cryptocurrency of $1.3 million and stock-based compensation of $1.4 million.

Net cash used in operating activities - discontinued operations was $0.3 million for the six months ended July 31, 2023. We had net loss of $0.7 million from discontinued operations.

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Investing Activities

Net cash used in investing activities - continuing operations was $0 for the six months ended July 31, 2024, compared to $0.3 million for the six months ended July 31, 2023. During the six months ended July 31, 2023, we had capital expenditures of $0.5 million, partially offset by proceeds from cryptocurrencies of $0.2 million.

Financing Activities

Net cash provided by financing activities was $0.8 million for the six months ended July 31, 2024, compared to $0.2 million for the six months ended July 31, 2023. During the six months ended July 31, 2024, we sold 953,387 shares of common stock for $0.5 million and borrowed an additional $0.4 million, which was partially offset by debt payments of $0.1 million. During the six months ended July 31, 2023, we received a $0.2 million receivable from a stockholder.

Liquidity and Capital Resources

We fund operations primarily through cash on hand, cash from sales of Common Stock and Series C Preferred Stock, debt, and exercises of warrants, and the support of Michael Hawkins.

On March 21, 2024, the Company entered into a note for $83,300 with a net payment to the Company of $65,000 after an original issue discount of $13,300 and expenses of $5,000. There is a one-time interest charge of 14% which is paid back along with principal over the term of the note beginning with the first payment due on September 30, 2024. The maturity date of the note is December 30, 2024.

On April 9, 2024, we sold 50,000 shares of common stock to a third party for $28,500.

On May 15, 2024, ACES elected to convert 1,052,632 shares of Series C Preferred Stock into 4,095,948 shares of common stock.

On July 26, 2024, the Company entered into a note for $120,000 with a net payment to the Company of $95,000 after an original issue discount of $20,000 and expenses of $5,000. There is a one-time interest charge of 10% which is paid back along with principal over the term of the note beginning with the first payment due on August 30, 2024. The maturity date of the note is April 30, 2025.

During the six months ended July 31, 2024, the Company issued 241,735 shares of common stock for services that totaled $0.2 million.

During the six months ended July 31, 2024, in a series of transactions, the Company sold a total of 903,387 shares of common stock for $0.5 million to ACES.

In August 2024, the Company was unable to make a debt payment. The lender chose to take payment in the form of Company common stock. Therefore, the Company issued to the lender 249,031 shares of common stock in lieu of payment of $37,500.

Off-Balance Sheet Arrangements

We did not have any material off-balance sheet arrangements as of July 31, 2024.

Going Concern

Our financial statements are prepared in accordance with GAAP, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. Because the business is relatively new and has a short history and relatively few sales, no certainty of continuation can be stated. The accompanying consolidated financial statements for the three and six months ended July 31, 2024 and 2023 have been prepared assuming that we will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

We are a smaller reporting company and therefore, we are not required to provide the information required by this Item of Form 10-Q.

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Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms. Disclosure controls and procedures are also designed to ensure that such information is accumulated and communicated to management, including the principal executive officer and principal financial officer, to allow timely decisions regarding required disclosures.

We carried out an evaluation, under the supervision and with the participation of management, including our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of January 31, 2024. In designing and evaluating the disclosure controls and procedures, management recognizes that there are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures.

Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their desired control objectives. Additionally, in evaluating and implementing possible controls and procedures, management is required to apply its reasonable judgment. Based on the evaluation described above, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this report because we did not document our Sarbanes-Oxley Act Section 404 internal controls and procedures.

As funds become available to us, we expect to implement additional measures to improve disclosure controls and procedures such as implementing and documenting our internal controls procedures.

Changes in internal controls over financial reporting

There have been no changes in our internal control over financial reporting during the quarter ended July 31, 2024 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Limitations on the Effectiveness of Controls

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. The Company's management, including its principal executive officer and its principal financial officer, do not expect that the Company's disclosure controls will prevent or detect all errors and all fraud. 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, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Controls can also 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 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 deterioration in the degree of compliance with associated policies or procedures. 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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PART II - OTHER INFORMATION

Item 1. Legal Proceedings

The Company is not involved in any legal proceedings which management believes will have a material effect upon the financial condition of the Company, nor are any such material legal proceedings anticipated.

Item 1A. Risk Factors

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

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

On April 9, 2024, we sold 50,000 shares of common stock to a third party for $28,500.

During the six months ended July 31, 2024, the Company issued 241,735 shares of common stock for services that totaled $0.2 million.

During the six months ended July 31, 2024, in a series of transactions, the Company sold a total of 903,387 shares of common stock for $0.5 million to ACES.

Item 3. Defaults Upon Senior Securities

There have been no events that are required to be reported under this Item.

Item 4. Mine Safety Disclosures

There have been no events that are required to be reported under this Item.

Item 5. Other Information

There have been no events that are required to be reported under this Item.

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Item 6. Exhibits

31.1		Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2		Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1		Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2		Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS		Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document).
101.SCH		Inline XBRL Taxonomy Extension Schema Document.
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB		Inline XBRL Taxonomy Extension Labels Linkbase Document.
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104		Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	Everything Blockchain, Inc.
Dated: September 16, 2024	By:	/s/ Toney Jennings
		Toney Jennings
	Its:	Chief Executive Officer (Principal Executive Officer)

Dated: September 16, 2024	By:	/s/ William Regan
		William Regan
	Its:	Chief Financial Officer (Principal Financial Officer)

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