BLOCKCHAIN INDUSTRIES, INC.
(Formerly Omni Global Technologies, Inc.)
Balance Sheets
As of January 31, 2018 and April 30, 2017
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ASSETS
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Current
assets
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Cash & cash
equivalents
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$
2,712,799
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$
–
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Available-for-sale
securities
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2,533,286
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–
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Other current
assets
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51,519
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–
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Total current
assets
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5,297,604
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–
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Non-current
assets
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Property, plant
& equipment, net of accumulated depreciation
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108,675
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–
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Other non-current
assets
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11,317
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–
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Total non-current
assets
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119,992
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–
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Total
assets
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$
5,417,596
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$
–
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LIABILITIES
AND SHAREHOLDERS' DEFICIT
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Current
liabilities
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Accounts payable
and accrued expenses
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$
110,315
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$
493,596
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Deferred
revenue
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1,953,694
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–
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Due to related
parties
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27,289
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3,981,423
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Note
payable
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–
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501,112
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Convertible
note
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–
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53,000
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Total
liabilities
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2,091,298
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5,029,131
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Shareholders'
Deficit
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Preferred stock,
$0.001 par value, 5,000,000 authorized. 328,616.50 shares and zero
shares issued and outstanding as of January 31, 2018 and April 30,
2017, respectively
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329
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–
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Common stock;
$0.001 par value; 400,000,000 shares authorized 36,159,446 and
737,406 shares issued and outstanding as of January 31, 2018 and
April 30, 2017, respectively
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17,769
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20,368
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Additional paid-in
capital
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10,611,198
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6,179,489
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Accumulated
deficit
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(7,302,998
)
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(11,228,988
)
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Total shareholders'
equity (deficit)
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3,326,298
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(5,029,131
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Total liabilities
and shareholders' equity
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$
5,417,596
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$
–
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The
Accompanying Notes Are An Integral Part Of These Financial
Statements.
BLOCKCHAIN INDUSTRIES, INC.
(Formerly Omni Global Technologies, Inc.)
Statements of Operations (unaudited)
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Three
Months
Ended
January
31,
2018
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Three
Months
Ended
January
31,
2017
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Nine
Months
Ended
January
31,
2018
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Nine
Months
Ended
January
31,
2017
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Sales
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$
108,194
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$
–
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$
108,194
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$
–
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Operating
expenses:
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Professional
fees
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480,994
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5,400
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500,184
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35,690
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Advertising and
marketing expense
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16,069
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16,069
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–
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General and
administrative expense
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129,459
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10
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138,367
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1,628
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Total operating
expenses
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$
626,522
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$
5,410
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$
654,620
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$
37,318
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Income (loss) from
operations
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(518,328
)
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(5,410
)
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(546,426
)
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(37,318
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Other income
(expense)
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Debt
forgiveness
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20,000
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5,023,192
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Interest
expense
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(441
)
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250
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(1,323
)
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543
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Unrealized gain
(loss) of equity securities
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(555,957
)
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–
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(555,957
)
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–
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Exchange gain
(loss)
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(12,246
)
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–
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(12,246
)
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–
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Total other income
(expense)
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(548,644
)
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(250
)
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4,453,666
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(543
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Income (loss)
before income taxes
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(1,066,972
)
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(5,660
)
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3,907,240
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(37,861
)
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Provision for
income taxes (benefit)
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–
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–
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–
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–
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Net income
(loss)
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$
(1,066,972
)
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(5,660
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$
3,907,240
)
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(37,861
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Basic earnings
(loss) per common share
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$
(0.03
)
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$
(0.01
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$
0.10
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$
(0.05
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Diluted earnings
(loss) per common share
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$
(0.02
)
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$
(0.01
)
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$
0.09
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$
(0.05
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Weighted-average
number of common shares outstanding:
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Basic
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32,883,186
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737,406
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38,119,333
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737,406
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Diluted
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39,738,384
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737,406
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43,770,835
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737,406
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The
Accompanying Notes Are An Integral Part Of These Financial
Statements.
BLOCKCHAIN INDUSTRIES, INC.
(Formerly Omni Global Technologies, Inc.)
Statement of Cash Flows (unaudited)
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For the nine
months ended January 31,
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Cash flows from
operating activities:
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Net income
(loss)
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$
3,907,240
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$
(37,861
)
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Adjustments to
reconcile net income to net cash provided by (used in) operating
activities:
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Depreciation and
amortization
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125
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–
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Share-based
compensation
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166,603
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–
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Unrealized
(gain)/loss of equity securities
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555,957
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Unrealized currency
translation (gains)/losses
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12,246
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–
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Changes in
operating assets and liabilities:
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Prepaid expenses
and other assets
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(62,836
)
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–
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Non-cash
compensation (marketable securities)
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(1,800,000
)
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Accounts payable
and accrued expenses
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(383,281
)
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(5,936
)
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Deferred
revenue
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1,953,694
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–
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Decrease in related
party liabilities
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(3,954,574
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–
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Decrease in notes
payable
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(501,112
)
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–
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Decrease in
convertible notes
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(53,000
)
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–
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Net cash provided
by (used in) operating activities
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(159,477
)
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(43,797
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Cash flows from
investing activities:
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Purchases of
marketable securities
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(1,289,243
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–
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Purchases of fixed
assets
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(108,800
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–
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Net cash provided
by (used in) investing activities
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(1,398,043
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–
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Cash flows from
financing activities:
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Loans and
advances
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441
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43,843
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Sale of common and
preferred stock
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4,282,125
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–
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Net cash provided
by financing activities
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4,282,566
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43,843
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Net change in
cash
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2,725,045
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46
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Cash, beginning of
the period
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–
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–
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Effects of currency
translation on cash and cash equivalents
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(12,246
)
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–
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Cash, end of the
period
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$
2,712,799
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$
46
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The
Accompanying Notes Are An Integral Part Of These Financial
Statements.
Notes to Unaudited Financial Statements
For the Three and Nine Month Interim Periods Ended January 31,
2018
(Unaudited)
NOTE 1. ORGANIZATION AND DESCRIPTION OF BUSINESS
Blockchain
Industries, Inc. (“BCII”, “Blockchain”, the
“Company”, “we”, “our” or
“us”) was originally formed under the laws of the State
of Nevada on September 15, 1995 as Interactive Processing, Inc. to
market high-tech consumer electronics through television
home-shopping networks, retail stores, catalog companies and their
website remotecontrols.com. In March 1999, the Company changed its
name to Worldtradeshow.com, Inc. (“WTS”). In April
1999, the Company acquired intellectual property rights to a
database from Chaiisai Tora, Inc., an unaffiliated third party, and
significantly changed its business plan to develop tradeshow
software and market both physical and virtual tradeshow space
through the Company's website.
The
Company’s business involved the operation of Hotels.com.vn,
tour companies and restaurants and marketing of the WTS Discount
Card in Vietnam in order to serve as an online vehicle for
Vietnamese companies to promote themselves, using the largest
travel and tourism online website in, as well as being recognized
as the official travel/tourism website of, Vietnam.
On
March 26, 2007, the Company acquired assets from Business.com.vn, a
Vietnamese company, which assets consisted of a database of 300,000
Vietnamese companies, marketing software, trademarks and
intellectual property, with the intention of developing a directory
of companies. The plan included offering such companies
opportunities to market themselves through domain registration,
website development, and online marketing expertise to help these
Vietnamese companies market themselves directly and/or on the
Company’s BVNI web portal. In June 2007, the Company changed
its name to Business.vn, Inc.
However,
from October 2008 through early 2016, the Company’s
operations were limited as a result of limited capital resources.
Nevertheless, the Company continued operations of the Hotel.vn
website. On May 15, 2016, the Company was placed under the control
of a Receiver in Nevada’s Eighth Judicial District. From May
15, 2016 through March 22, 2017, while under the control of the
Receiver, the Company continued to incur expenses to maintain its
corporate existence as a public company and maintain its
web-related business. On November 18, 2016, the Company changed its
name to Omni Global Technologies, Inc. and on May 23, 2017, the
Company entered into a Share Purchase Agreement with JOJ Holdings,
LLC (“JOJ”), pursuant to which JOJ: (i) purchased
40,000,000 restricted shares of common stock, $0.001 par value (the
“Control Shares”) from the Company by the authority of
the Receiver; (ii) assumed the liabilities of a judgement creditor
in the amount of approximately $25,000; and (iii) paid the Receiver
$150,000 which monies were used to cover the Receiver’s and
other company expenses. Additionally, and concurrent with the
execution of the Share Purchase Agreement, the Receiver resigned,
and Olivia Funk was appointed as the sole officer and director of
the Company.
On
November 13, 2017, the Company filed Certificate of Amendment to
its Articles of Incorporation with the State of Nevada for the
purpose of changing its name from Omni Global Technologies, Inc. to
Blockchain Industries, Inc. On November 15, 2017, Mr. Patrick
Moynihan was appointed as the Company’s Chief Executive
Officer, Chief Financial Officer and Chairman/sole director and, on
the same date, Ms. Funk resigned all positions as an executive
officer and director of the Company. On December 1, 2017, the
Company announced Mr. Zack Pontgrave as President, although a
formal agreement was never signed, and Mr. Bryan Larkin as Chief
Technology Officer, respectively, joining Mr. Moynihan as part of
the Company’s management team. As of April 2018, the Company
has withdrawn the offer to Mr. Pontgrave, and the Company is
currently negotiating a separation
agreement.
While
we initially purchased a new domain, hotelsinvietnam.net, which the
Company used for marketing Vietnamese travel businesses (the
“Legacy Business”) to be monetized through our newly
established blockchain technology, we are discontinuing that
business to focus on our broader business model related to the
blockchain technologies market, within the blockchain technology
market and intend to target and acquire or build a broad portfolio
of virtual currencies, digital coin and tokens, and other
blockchain assets (the “Digital Assets”) within four
business verticals:
●
Digital Asset
Bank & Investment Management
●
Initial Coin
Offerings (“ICOs”) and Ventures
The
Company discontinued the Legacy Business as of April 30,
2018.
Recent Share Recapitalization
On
January 16, 2018, the Company executed a 2-for-1 forward stock
split. Accordingly, all references to the numbers of common shares
and per share data in the accompanying financial statements have
been adjusted to reflect these splits, on a retroactive basis,
unless indicated otherwise. The Company previously implemented a 1
for 15 reverse stock split effective November 18,
2016.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
Management’s Representation of Interim Financial
Statements
The
accompanying unaudited consolidated financial statements have been
prepared by the Company without audit pursuant to the rules and
regulations of the SEC. Certain information and disclosures
normally included in financial statements prepared in accordance
with US GAAP have been condensed or omitted as allowed by such
rules and regulations, and management believes that the disclosures
are adequate to make the information presented not misleading.
These consolidated financial statements include all of the
adjustments, which in the opinion of management are necessary to a
fair presentation of financial position and results of operations.
All such adjustments are of a normal and recurring nature. Interim
results are not necessarily indicative of results for a full year.
These consolidated financial statements should be read in
conjunction with the audited consolidated financial statements at
April 30, 2017 as presented in the Company’s Annual Report on
Form 10-K filed on August 30, 2017 with the SEC, and as amended on
May 21, 2018.
Revenue Recognition
The
Company recognizes revenue when the following criteria are met: (1)
persuasive evidence of an arrangement exists; (2) delivery has
occurred or services are rendered; (3) the price to the buyer is
fixed or determinable; and (4) collectability is reasonably
assured. Amounts collected before these criteria are met are
recorded as deferred revenue.
Currently,
the Company’s revenue is in the form of consulting services
provided to customers. Revenue is recognized prorata on a monthly
basis over the term of the contractual agreement.
At the time of the filing, the Company was unable to determine the
percentage of completion for the one project it was contracted to
perform and, as such, felt that using a pro rata method of
accounting was most appropriate at this time. If and when the
services and deliverables have been completed, we will immediately
record the remaining portion of the Deferred Revenue.
Marketable Securities
The
Company determines the appropriate classification of its marketable
securities, which consist primarily of investments in Digital
Assets, such as Bitcoin and Ethereum, at the time of purchase and
reevaluates such designation at each balance sheet date. All of the
Company’s marketable securities are considered
available-for-sale and carried at estimated fair values and
reported as available-for-sale securities on the balance sheet. The
Company has adopted ASU 2016-01, and now records unrealized gains
and losses on available-for-sale securities in net income and
reported as “Unrealized gain (loss) of equity
securities” on the income statement. Other income includes
realized gains and losses on sales of securities and
other-than-temporary declines in the fair value of securities, if
any. The cost of securities sold is based on the specific
identification method. The Company regularly reviews all of its
investments for other-than-temporary declines in fair value. The
Company’s review includes the consideration of the cause of
the impairment, including the creditworthiness of the security
issuers, the number of securities in an unrealized loss position,
the severity and duration of the unrealized losses, whether the
Company has the intent to sell the securities and whether it is
more likely than not that it will be required to sell the
securities before the recovery of their amortized cost basis. If
the Company were to determine that the decline in fair value of an
investment is below its accounting basis and the decline is
other-than-temporary, the Company would reduce the carrying value
of the security and record a loss for the amount of such
decline.
Going Concern
The
Company has an accumulated deficit of approximately $26 million
from its inception on September 15, 1995 to date. We will need
additional working capital for ongoing operations, which raises
substantial doubt about our ability to continue as a going concern.
Management of the Company is working on a strategy to meet future
operational goals which may include equity funding, short term or
long-term financing or debt financing, to enable the Company
to reach profitable operations, however, there can be no
assurances that the plan will succeed, nor that the Company will be
able to execute its plans.
Stock-based compensation
The Company follows the provisions of ASC 718, “Share-Based
Payment” and ASC 505-50 “Equity-Based Payments to
Non-Employees”. Under this guidance compensation cost
generally is recognized at fair value on the date of the grant and
amortized over the respective vesting periods. The fair value of
options at the date of grant is estimated using the Black-Scholes
option pricing model. The expected option life is derived from
assumed exercise rates based upon historical exercise patterns and
represents the period of time that options granted are expected to
be outstanding. The expected volatility is based upon historical
volatility of the Company’s shares using weekly price
observations over an observation period that approximates the
expected life of the options. The risk-free rate approximates the
U.S. Treasury yield curve rate in effect at the time of grant for
periods similar to the expected option life. Due to limited history
of forfeitures, the estimated forfeiture rate included in the
option valuation was zero.
While ASC 505-50 does not specifically indicate which period
expenses should be recognized, the guidance does indicate that the
expenses should be recognized in the same period as when the
services were performed. The stock-based compensation, that are
expensed at fair value, accrue over the service period (vesting
period) and are re-measured every period until they are settled if
the services are to be performed over a period of time. On the
vesting date, a final adjustment is made to reconcile the prior
expenses. Note that if the performance requirements have been met
but grant has expired, the expenses are not reversed. However, if
the performance requirements have not been met then the expenses
are reversed.
Many of the assumptions require significant judgment and any
changes could have a material impact in the determination of
stock-based compensation expense.
Fair Value Measurements
The
Financial Accounting Standards Board (“FASB”)
Accounting Standards Codification (“ASC”) 820
“Fair Value Measurements and Disclosures” (“ASC
820”) defines fair value as the exchange price that would be
received for an asset or paid to transfer a liability (an exit
price) in the principal or most advantageous market for the asset
or liability in an orderly transaction between market participants
on the measurement date. ASC 820 also establishes a fair value
hierarchy which requires an entity to maximize the use of
observable inputs and minimize the use of unobservable inputs when
measuring fair value. The standard describes three levels of inputs
that may be used to measure fair value:
Level 1
- Quoted prices in active markets for identical
assets or liabilities;
Level 2
- Inputs other than quoted prices included
within Level 1 that are either directly or indirectly observable;
and
Level 3
- Unobservable inputs that are supported by
little or no market activity, therefore requiring an entity to
develop its own assumptions about the assumptions that market
participants would use in pricing.
Fair
value estimates discussed herein are based upon certain market
assumptions and pertinent information available to management as of
January 31, 2018 and April 30, 2017. The Company uses the market
approach to measure fair value for its Level 1 financial assets and
liabilities. The market approach uses prices and other relevant
information generated by market transactions involving identical or
comparable assets or liabilities. The respective carrying value of
certain balance sheet financial instruments approximates its fair
value. These financial instruments include cash, marketable
securities, related party payables, accounts payable and accrued
liabilities. Fair values were estimated to approximate carrying
values for these financial instruments since they are short term in
nature and they are receivable or payable on demand.
The
estimated fair value of assets and liabilities acquired in business
combinations and reporting units and long-lived assets used in the
related asset impairment tests utilize inputs classified as Level 3
in the fair value hierarchy.
Stock Purchase Warrants
The
Company accounts for warrants issued to purchase shares of its
Common Stock as equity in accordance with FASB ASC
480,
Accounting for
Derivative Financial Instruments Indexed to, and Potentially
Settled in, a Company’s Own Stock, Distinguishing Liabilities
from Equity.
Cash and cash equivalents
The
Company considers all highly liquid investments with a maturity of
three months or less at the date of purchase to be cash
equivalents. Cash and cash equivalents consist of cash on deposit
with banks and money market funds, the fair value of which
approximates cost. The Company maintains its cash balances with a
high-credit-quality financial institution. At times, such cash may
be in excess of the Federal Deposit Insurance Corporation-insured
limit of $250,000. The Company has not experienced any losses in
such accounts, and management believes the Company is not exposed
to any significant credit risk on its cash and cash
equivalents.
The
Company classifies certain accounts holding Bitcoin and Ethereum to
be cash equivalents and records them at their initial cost, and
subsequently re-measures the carrying amounts it owns at each
reporting date based on their current fair value. The changes in
the fair value are included as a component of income or loss from
operations. The Company considers certain accounts holding Bitcoin
and Ethereum as cash because they are readily convertible to U.S.
Dollars and the Company has used these currencies to receive and
make payments for services.
The
Company obtains the equivalency rate of Bitcoins and Ethereum to
U.S. Dollars by using the historical values from Coin Market Cap
(https://coinmarketcap.com). The equivalency rate obtained
represents a generally well recognized quoted price in an active
market for Bitcoin and Ethereum, which website is accessible to the
Company on an ongoing basis. The Company may maintain its Bitcoin
and Ethereum in wallets of an online exchange or in a cold storage
wallet.
Property and equipment
Property
and equipment are stated at cost or fair value if acquired as part
of a business combination. Depreciation is computed by the
straight-line method and is charged to operations over the
estimated useful lives of the assets. Maintenance and repairs are
charged to expense as incurred. The carrying amount and accumulated
depreciation of assets sold or retired are removed from the
accounts in the year of disposal and any resulting gain or loss is
included in results of operations. The Company currently is in the
process of building a mining facility for Digital Assets. All cost
associated with that project, including the architectural, designs,
and planning cost are being capitalized until the completion of the
project.
The
estimated useful lives of property and equipment are as
follows:
|
Computer
software and office equipment
|
1-5
years
|
|
Furniture
and fixtures
|
5-10
years
|
|
Mining
Facility
|
No
depreciation is taken until the project is completed and placed
into service
|
Basic and Diluted Net Loss Per Share
Net
earnings or loss per share is calculated in accordance with SFAS
No. 128,
Earnings Per Share
for the period presented. Basic earnings, net loss per share is
based upon the weighted average number of common shares
outstanding. Fully diluted earnings per share is based on the
assumption includes dilutive equivalents such as warrants stock
options, and convertible preferred stock.
Use of Estimates
The
preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America
requires management to make certain estimates and assumptions that
affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenue and
expenses during the periods presented. Actual results could differ
from those estimates.
Significant
estimates made by management are, among others, realizability of
long-lived assets, deferred taxes and stock option valuation.
Management reviews its estimates on a quarterly basis and, where
necessary, makes adjustments prospectively.
Recent Accounting Pronouncements
In May 2017, the FASB issued ASU 2017-09, Compensation - Stock
Compensation (Topic 718): Scope of Modification Accounting. The new
standard provides guidance about which changes to the terms or
conditions of a share-based payment award require an entity to
apply modification accounting in Topic 718. This pronouncement is
effective for annual reporting periods beginning after December 15,
2017 but early adoption is permitted. The Company is currently
evaluating the impact of adopting this guidance.
In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash
Flows (Topic 230): Classification of Certain Cash Receipts and Cash
Payments (“ASU 2016-15”). ASU 2016-15 addresses eight
specific cash flow issues with the objective of reducing diversity
in practice regarding how certain cash receipts and cash payments
are presented in the statement of cash flows. The standard provides
guidance on the classification of the following items: (1) debt
prepayment or debt extinguishment costs, (2) settlement of
zero-coupon debt instruments, (3) contingent consideration payments
made after a business combination, (4) proceeds from the settlement
of insurance claims, (5) proceeds from the settlement of
corporate-owned life insurance policies, (6) distributions received
from equity method investments, (7) beneficial interests in
securitization transactions, and (8) separately identifiable cash
flows. The Company is required to adopt ASU 2016-15 for fiscal
years, and for interim periods within those fiscal years, beginning
after December 15, 2017 on a retrospective basis. Early adoption is
permitted, including adoption in an interim period. The Company is
currently evaluating the impact of adoption of ASU
2016-15.
In March 2016, the Financial Accounting Standards Board
(“FASB”) issued Accounting Standards Update
(“ASU”) 2016-09, “Compensation – Stock
Compensation: Improvements to Employee Share-Based Payment
Accounting,” which relates to the accounting for employee
share-based payments. This standard addresses several aspects of
the accounting for share-based payment award transactions,
including: (a) income tax consequences; (b) classification flows of
awards as either equity or liabilities; and (c) classification on
the statement of cash flows. This standard will be effective for
fiscal years beginning after December 15, 2016, including interim
periods within those fiscal years. The Company is in the process of
evaluating the impact of the adoption of ASU 2016-09 on its
consolidated financial statements. The adoption of ASU No. 2016-09
is not expected to have a material impact on the Company's
consolidated financial statements or related
disclosures.
All other accounting standards that have been issued or proposed by
the FASB that do not require adoption until a future date are not
expected to have a material impact on the consolidated financial
statements upon adoption.
NOTE 3. PROVISION FOR INCOME TAXES
As of
January 31, 2018, the Company has a federal net operating loss
carry forwards of $ $6,264,744 that can be utilized to reduce
future taxable income. The net operating loss carry forward will
expire through 2023 if not utilized. Utilization of the net
operating loss and tax credit carry forward may be subject to
substantial annual limitations due to the ownership change
limitations provided by the Internal Revenue Code of 1986, as
amended, and similar state provisions. The annual limitation may
result in the expiration of net operating loss and tax credit carry
forwards before utilization. The Company has provided a full
valuation allowance on the deferred tax asset because of
uncertainty regarding realizability.
Management
expects to perform an analysis of the net operating loss carry
forwards and the impact of the recent changes in equity, which will
provide certainty over the limitations of the net operating
loss.
NOTE 4. AVAILABLE-FOR-SALE SECURITIES
The
following table sets forth the components of the Company’s
marketable securities at January 31, 2018 and April 30,
2017:
|
|
|
Description
|
|
Gross
Unrealized gain (loss)
|
|
|
Chimes - Equity
Token
|
$
200,000
|
$
–
|
$
200,000
|
|
Chimes - Utility
Token
|
50,000
|
–
|
50,000
|
|
Video Coin -
Utility Token
|
50,000
|
–
|
50,000
|
|
Lottery.com -
Utility Token
|
250,000
|
–
|
250,000
|
|
Academy - Utility
Token
|
250,000
|
–
|
250,000
|
|
Coral Health -
Utility Token
|
250,000
|
–
|
250,000
|
|
Kinerjay Pay Common
Stock
|
1,800,000
|
(550,000
)
|
1,250,000
|
|
BTC
Wallet
|
26,928
|
(2,179
)
|
24,749
|
|
EOS
Wallet
|
20,323
|
(2,651
)
|
17,672
|
|
NEO
Wallet
|
101,523
|
(1,698
)
|
99,825
|
|
OMG
Wallet
|
20,870
|
(429
)
|
20,441
|
|
QTUM
Wallet
|
14,480
|
1,858
|
16,338
|
|
REP
Wallet
|
55,119
|
(858
)
|
54,261
|
|
Total
available-for-sale securities
|
$
3,089,243
|
$
(555,957
)
|
$
2,533,286
|
There
were no marketable securities as of April 30, 2017.
The
KinerjaPay Common Stock was received as compensation and, as such,
the Company did not use cash to acquire the
securities.
We have an agreement with Chimes to purchase 500,000 tokens of
their Series T Preferred Equity Token “
Chimes Equity
Tokens
”. Chimes will
sell a total of 100,000,000 Chimes Equity Tokens. Chimes Equity
Tokens share the same economic value as commons shares of Chimes
expect the Chimes Equity Tokens are non-voting shares. For the
utility tokens, they will be similar to other tokens that trade on
alternative trading systems, and do not represent an equity
interest in the underlying issuer, but an investment in the
blockchain platform.
NOTE 5. PROPERTY AND EQUIPMENT
The
following table sets forth the components of the Company’s
property, plant and equipment at January 31, 2018 and April 30,
2017:
|
|
|
|
|
|
|
|
Capital assets
subject to depreciation:
|
|
|
|
|
Computers, software
and office equipment
|
7,527
|
(125
)
|
7,402
|
|
Mining Facility (in
progress)
|
101,273
|
–
|
101,273
|
|
Total
fixed assets
|
108,800
|
(125
)
|
108,675
|
There
was no property and equipment as of April 30, 2017.
NOTE 6. LIABILITIES DISCHARGED IN RECEIVERSHIP
The
Company was dormant from October 2008 through May 15, 2016 until it
was placed under the control of a Receiver in Nevada’s Eighth
Judicial District pursuant to Case #A14-715484-P (“the
Case”). On June 13, 2017, pursuant to an order by the judge
presiding over the Case, the Company emerged from receivership and
liabilities including accounts payable, accrued expenses, amounts
due to related parties, notes payable, and convertible notes
amounting to $5,023,192 that had been outstanding since 2009, were
officially discharged. As a result, the Company recorded other
income, “debt forgiveness” on its income statement for
the period ended July 31, 2017. The amount of debt discharged
represented substantially all of the Company’s liabilities
outstanding as of April 30, 2017.
NOTE 7. DEFERRED REVENUE
As of
January 31, 2018, deferred revenue amounted to $1,953,694 compared
to zero as of April 30, 2017. The deferred revenue was concentrated
in one customer with whom the Company had signed a one-year
consulting agreement with on January 11, 2018 (the
“Consulting Agreement”). Under the terms of the
Consulting Agreement with the customer, the value of the contract
was comprised of $250,000 in cash and 1,000,000 shares of stock
valued at $1.80 per share, or $1,800,000, and was paid in full to
the Company prior to the commencement of services. The total value
of the contract was $2,050,000. The Company or customer may cancel
the Consulting Agreement at any time for any reason whatsoever
without an obligation to return any of the consideration received.
In the event of such termination, the Company would immediately
record the entire deferred liability balance as service
revenue.
There
were no deferred revenue balances as of April 30,
2017.
NOTE 8. DUE TO RELATED PARTIES
As of
January 31, 2018, the balance due to related parties was $27,289.
As April 30, 2017, the balance due to related parties was
$3,981,423. This amount was written off as part of the discharge of
receivership described in Note 6. Liabilities Discharged in
Receivership. The amount of $27,289 relates to a liability assumed
by the Company related to the Share Purchase Agreement with JOJ
Holdings described in Note 1. Organization and Description of
Business.
NOTE 9. STOCKHOLDERS’ EQUITY
Common and Preferred Stock
The
Company has 400,000,000 shares of Common Stock authorized with a
par value of $0.001 per share and 5,000,000 shares of Preferred
Stock authorized, with a par value of $0.001 per
share.
As of
January 31, 2018, and April 30, 2017 there were 36,159,446 and
737,406 shares of Common Stock outstanding, respectively. As of
January 31, 2018, and April 30, 2017 there were 328,616.50 and zero
preferred shares outstanding, respectively. Each preferred share is
convertible to 40 shares of Common Stock, which is adjusted for the
2-for-1 forward stock split effective January 16, 2018. Per
ASC 230-10-50-3, we
executed a non-cash financing activity by entering into an
agreement with certain shareholders to convert their 13,144,660
shares of Common Stock into 328,616.50 shares of the
Company’s Series A Preferred Stock.
As of
January 31, 2018, the following dilutive securities calculated
using the treasury method were considered equivalents for the
purposes of calculating earnings per share:
|
Preferred shares
convertible to Common
Stock
|
13,144,660
|
|
Warrants
|
7,637,500
|
|
Stock
options
|
234,247
|
Share count reconciliation
|
Beginning share
balance April 30, 2017
|
737,406
|
|
Control Shares
issued
|
40,000,000
|
|
Shares issued in
private placements
|
12,946,700
|
|
RSU’s
vested
|
620,000
|
|
Shares
retired
|
(5,000,000
)
|
|
Shares converted to
preferred stock.
|
(13,144,660
)
|
|
Ending share
balance January 31, 2018
|
36,159,446
|
Common Stock and Warrants Issued in Private Placements
During
the nine-month period ended January 31, 2018, the Company accepted
subscription agreements, issuing 12,946,700 shares of Common Stock
for $4,282,125. The Company issued the shares of Common Stock as
outlined in the table below:
|
|
|
|
|
$
0.05
|
4,000,000
|
$
200,000
|
|
$
0.10
|
6,175,000
|
$
617,500
|
|
$
1.25
|
2,771,700
|
$
3,464,625
|
|
|
12,946,700
|
$
4,282,125
|
As part
of the $0.05 and $0.10 rounds of investment, investors received
warrants equal to 50% of the shares received at an exercise price
of $0.25. Through the nine-months ended January 31, 2018, the
Company had issued 5,137,500 as part of the issuance for the $0.05
and $0.10 rounds.
Common Stock Issued in Exchange for Consulting, Professional and
Other Services
The Company has issued non-statutory stock options, restricted
stock purchase awards and stock compensation to directors and
consultants. The terms of stock options granted under
these plans generally may not exceed 10 years. The
Company currently does not have a defined equity incentive plan.
Stock issued to directors and consultants have been granted via
individual agreements.
Share-based payment arrangements were made to compensate
independent contractors to perform services as a way to conserve
cash as we develop our business. Share-based payments were made in
negotiations with each independent contractor and may be in the
form of an option to purchase shares of our common stock or
restricted shares of our common stock. We grant share-based payment
over the term of our agreements with vesting schedule to incentive
personnel over time. After the reporting period, we conducted a
409A valuation with the firm SingerLewak, The date of the 409A
valuation was May 22, 2018. SingerLewak took certain available
information about the Company and assess the following values at
specific dates:
|
Value Date
|
|
|
December 1, 2017
|
0.063
|
|
January 1, 2018
|
0.117
|
|
February 1, 2018
|
1.25
|
|
March 1, 2018
|
1.25
|
The Company believes these values represent an accurate
representation of our fair market value at the specific dates.
According to these results above, the Company determined that it
did not issue any options below the fair value market price. The
Company will keep this valuation in the event the IRS investigates
our claims that our OTC-traded price is not a fair representation
of our market value on those dates. If the IRS concludes that the
OTC-traded price should be used to determine our valuation, there
may be penalties to the grantees or to the Company under Section
409A of the Internal Revenue Code.
The Company will continue to assess material changes to its
business that would affect our market values, and we may decide
that certain conditions would allow us to use the OTC-traded price
as an accurate representation of a fair market value of our common
stock.
During
the nine-month period ended January 31, 2018, the Company issued
2,620,000 restricted shares of Common Stock (“RSA”) to
independent contractors for professional services. The fair value
of the restricted shares was calculated to be $508,140 using the
price per share on the grant date of each restricted stock award.
The Company issued the shares of restricted Common Stock for
services as outlined in the table below:
|
RSAs
|
|
Remeasured Weighted Average Fair Value
|
|
RSA
Unvested at the beginning of the Period
|
|
$
–
|
|
RSA
Granted During the Period
|
2,620,000
|
$
0.11
|
|
RSA
Canceled During the Period
|
|
$
–
|
|
RSA
Vested During the Period
|
620,000
|
$
0.07
|
|
RSA
Unvested at the End of the Period
|
2,000,000
|
$
0.12
|
|
|
|
Weighted Average Exercise Price
|
|
Weighted Average Remaining Life
|
Remeasured Weighted Average Fair Value
|
|
Outstanding
at Beginning of Period
|
|
$
–
|
$
–
|
-
|
$
–
|
|
Exercisable
at the End of the Period
|
276,332
|
$
0.82
|
$
-
|
5.90
|
$
0.072
|
|
Granted
During the Period
|
1,422,000
|
$
1.92
|
$
-
|
7.92
|
$
0.107
|
|
Exercised
During the Period
|
|
$
–
|
$
–
|
-
|
$
-
|
|
Canceled
during the Period(Forfeited)
|
|
$
–
|
$
–
|
-
|
$
-
|
|
Canceled
during the Period(Expired)
|
|
$
–
|
$
–
|
-
|
$
-
|
|
Outstanding
at the End of the Period
|
1,422,000
|
$
1.92
|
$
-
|
7.92
|
$
0.107
|
|
Options
Vested During the Period
|
276,332
|
$
0.82
|
$
-
|
5.90
|
$
0.072
|
|
Vested
at end of Period
|
276,332
|
$
0.82
|
$
-
|
5.90
|
$
0.072
|
|
Shares
Expected to vest
|
1,145,668
|
$
2.19
|
$
-
|
8.40
|
$
0.116
|
|
Vested
and Expected to vest
|
1,422,000
|
$
1.92
|
$
-
|
7.92
|
$
0.107
|
Preferred Notes Convertible to Common Stock
During
the nine-month period ended January 31, 2018, the Company converted
13,144,660 shares of Common Stock into Series A Convertible
Preferred Stock (the “Preferred Shares”). The Company
designated 500,000 shares as Preferred Shares. The Company
had agreed to convert certain investor shares of Common Stock into
the Preferred Shares, which are convertible into shares of Common
Stock at a rate of one Preferred Share into forty shares of Common
Stock. At January 31, 2018, the Company had 328,616.50 Preferred
Shares issued and outstanding.
Key
terms of the Preferred Shares include:
●
Holders
shall have no voting rights unless and until such shares are
converted into shares of common stock.
●
Holders
must provide written notice to the authorized representative of the
Company in order to convert their shares.
●
In
no event may the holder convert any shares of Series A Preferred
Shares into Common Stock if, as a result of such conversion, the
Holder will own of record and/or beneficially in excess of 4.99% of
the outstanding shares of Common Stock.
On
February 12, 2018, the Company filed a Certificate of Designation
with the State of Nevada effective as of November 11, 2017 for a
newly authorized Series A Convertible Preferred Stock. A total of
500,000 shares of Series A Convertible Preferred Stock have been
authorized of which 328,616.50 shares were issued and outstanding,
as follows:
|
Issuee
Name
|
|
Series A
Convertible Preferred Shares
|
|
JOJ
Holdings, LLC (1)
|
|
141,116.50
|
|
JFS
Investments, Inc. (2)
|
|
187,500.00
|
(1) Mr.
Justin Schreiber is the control person of JOJ Holdings,
LLC.
(2) Mr.
Joe Salvani is the control person of JFS Investments,
Inc.
The
Company is obligated is issue shares of Common Stock to the holders
of the Preferred Shares once the holder submits a notice of
conversion to the Company. The Company shall issue the required
number of shares of Common Stock at a rate of 40 shares of Common
Stock to 1 share of the Preferred Shares.
Stock Purchase Warrants
The
stock purchase warrants have been accounted for as equity in
accordance with FASB ASC 480, Accounting for Derivative Financial
Instruments indexed to, and potentially settled in, a
company’s own stock, distinguishing liabilities from
equity.
The
Company had a total of 9,637,500 warrants outstanding as of January
31, 2018 as outlined in the table below:
|
|
|
|
Average
Remaining Contractual Life (years)
|
|
|
Founders
|
2,500,000
|
$
2.50
|
4.79
|
$
–
|
|
Founders
|
2,000,000
|
$
0.25
|
2.79
|
–
|
|
Private
Placement
|
5,137,500
|
$
0.25
|
2.85
|
–
|
|
|
9,637,500
|
|
|
$
–
|
|
Weighted-average
exercise price
|
|
$
0.83
|
|
|
The
$0.83 per share is the weighted-average exercise price of all
warrants that have been issued, which are convertible into one
share of our Common Stock. 2,000,000 warrants are not yet vested
and will vest on January 1, 2019. As such the 2,000,000 are not
considered when calculating dilutive shares for the
period.
NOTE 10. SUBSEQUENT EVENTS
During
the period from February 1, 2018 through the date of this
amended Report, the Company has raised a total $1,445,000
through the private placements of its common
stock at $1.25 per share, issuing 1,248,000 shares of
Common Stock. No warrants were issued as part of these private
placements.
Blockex:
On
February 16, 2018, we entered into a Private Token Purchase
Commitment Form (“BlockEx Agreement”) with BlockEx
Limited (“BlockEx”) a privately held limited liability
company incorporated under the laws of Gibraltar. Under the terms
of the BlockEx Agreement, the Company agreed to purchase up to
5,714,285.71 digital tokens from the Company for 2,000,000 Euros,
or at the time of the purchase, approximately $2,481,600 USD. To
date the Company has purchased tokens amounting to approximately
1,128,770 tokens for a purchase price of 395,069.53 Euros. The
Company filled the 2,000,000 Euro obligation for the BlockEx
Agreement by pooling with other investors for the remaining
1,604,930 Euros. This investment provides the Company with exposure
to a digital asset exchange platform. The BlockEx platform provides
an institutional exchange, white-labeled brokerage software, and
the ability to launch ICO’s.
LegatumX:
On
February 19, 2018, the Company entered into a Stock Purchase
Agreement (“LegatumX Agreement”) with LegatumX, Inc.
(“LegatumX”). This investment will provide us with a
market share into the legal industry for the storage,
authentication and validation of legal documents such as wills,
trusts, deeds, mortgages, and more. We expect that the Media and
Education segment of our business will be able to assist this
company in marketing their products to consumers worldwide,
although we will be starting with U.S. consumers. Under the terms
of the LegatumX Agreement, we will initially receive 30% of
LegatumX’s common stock calculated on a fully diluted basis
for a purchase price of $1,300,000:
|
Amount paid by
Company
|
Paid or Due
on
|
|
$100,000
|
February 19,
2018
|
|
$200,000
|
May
20, 2018
|
|
100,000 shares
of our Common Stock (1)
|
March 1,
2018
|
The
value of our Common Stock for this agreement was valued at $10 per
share.
The
Company may earn an additional (i) 5%, for a total of 35%, of
LegatumX’s common stock if LegatumX realizes $2.3 million in
gross proceeds from the sale of the 100,000 shares of our common
stock within the 12-month period following the effective date of
the Company’s filing of a Form 10 with the SEC (the
“Form 10”), or (ii) an additional 10%, for a total of
40%, of LegatumX’s common stock if LegatumX realizes $10.1
million in gross proceeds from the sale of the 100,000 shares of
our common stock within the 12-month period following the effective
date of the Form 10.
Basecoin & Origin Protocol:
On
February 13, 2018 and February 20, 2018, the Company entered into
two separate subscription agreements with KR CRYPTO SPE, LLC, a
special-purpose entity, for the purpose of acquiring tokens of
Basecoin and Origin Protocol, respectively. The Company invested
$100,000 and $50,000 into the subscription agreements for Basecoin
and Origin Protocol, respectively. Basecoin’s token will be
utilized as a form of controlling the supply and demand of
fiat-based currencies to expand or contract the money-supply,
similar to how current central banks attempt to maintain a
normalized supply and demand of their respective fiat currencies.
The Origin Protocol utilizes the Ethereum blockchain, allowing
developers to build decentralized marketplaces to create and manage
listings for the fractional usage of assets and
services.