UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
| [X] | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2018
OR
| [ ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period __________ to __________
Commission File Number: 333-198435
BLOCKCHAIN HOLDINGS CAPITAL VENTURES, INC.
(Exact name of registrant as specified in its charter)
| DELAWARE | 46-3892319 | |
(State or Other Jurisdiction of Incorporation or Organization) |
(IRS Employer Identification Number) |
1177 Avenue of the Americas, New York, NY 10036, (833) 682-2428
(Address and telephone number of principal executive offices)
Mr. Delray Wannemacher, CEO, (833) 682-2428
1177 Avenue of the Americas, New York, NY 10036, (833) 682-2428
(Name, address and telephone number of agent for service)
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 [X] No [ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes [X] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
| Large accelerated filer | [ ] | Accelerated filer | [ ] | |||
| Non-accelerated filer | [ ] (Do not check if a smaller reporting company) | Smaller reporting company | [X] | |||
| Emerging growth company | [X] |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
As of November 28, 2018 there were 438,621,667 outstanding shares of the issuer’s common stock, par value $0.0001 per share, 7,000,000 outstanding shares of the issuer’s Class A Preferred Super Majority Voting Stock, par value $0.001 per share and 7,000,000 outstanding shares of the issuer’s Class C Convertible Preferred Stock, par value $.001 per share
BLOCKCHAIN HOLDINGS CAPITAL VENTURES, INC.
FORM 10-Q for the Quarter Ended September 30, 2018
INDEX
| Page | ||
| PART I - FINANCIAL INFORMATION | ||
| Item 1. | Financial Statements | 3 |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 14 |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 15 |
| Item 4. | Controls and Procedures | 15 |
| PART 2 - OTHER INFORMATION | ||
| Item 1. | Legal Proceedings | 15 |
| Item 2. | Unregistered Sale of Equity Securities and Use of Proceeds | 16 |
| Item 3. | Defaults Upon Senior Securities | 16 |
| Item 4. | Mine Safety Disclosures | 16 |
| Item 5. | Other Information | 16 |
| Item 6. | Exhibits | 16 |
| Signatures | 17 | |
| 2 |
PART I - FINANCIAL INFORMATION
Blockchain Holdings Capital Ventures, Inc.
| As of | ||||
| September 30, 2018 | ||||
| (Unaudited) | ||||
| ASSETS | ||||
| Current Assets: | ||||
| Cash and cash equivalents | $ | 18,417 | ||
| Total Current Assets | 18,417 | |||
| TOTAL ASSETS | $ | 18,417 | ||
| LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIENCY) | ||||
| Current Liabilities: | ||||
| Accounts payable | $ | 74,434 | ||
| Accrued expenses | 1,811 | |||
| Total Current Liabilities | 76,245 | |||
| Non-Current Liabilities: | ||||
| Total Non-Current Liabilities | - | |||
| Total Liabilities | 76,245 | |||
| Stockholders’ Equity (Deficiency): | ||||
| Class A super voting preferred stock, $0.001 par value; 10,000,000 shares authorized, 0 issued and outstanding with liquidation preference of $0 as of September 30, 2018. | - | |||
| Class C convertible preferred non-voting stock, $0.001 par value, 10,000,000 shares authorized, 0 issued and outstanding with $0 liquidation preference as of September 30, 2018. | - | |||
| Common stock, $0.0001 par value; 450,000,000 shares authorized, 438,621,667 issued and outstanding as of September 30, 2018. | 43,863 | |||
| Additional paid-in capital | (80,108 | ) | ||
| Accumulated deficit | (21,583 | ) | ||
| Total Stockholders’ Equity (Deficiency) | (57,828 | ) | ||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIENCY) | $ | 18,417 | ||
| 3 |
Blockchain Holdings Capital Ventures, Inc.
Three Months Ended September 30, | Period from February 5, 2018 (inception) Through September 30, | |||||||
| 2018 | 2018 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Revenues: | ||||||||
| Equipment sales - related party | $ | - | $ | 153,064 | ||||
| Consulting and management fee revenue - related party | - | 18,954 | ||||||
| Equipment sales | 69,060 | |||||||
| Consulting and management fee revenue | 44,380 | |||||||
| Mining commission revenue | 745 | 19,892 | ||||||
| Total Revenue | 745 | 305,350 | ||||||
| Cost of goods sold - related party | - | (159,450 | ) | |||||
| Cost of goods sold | (69 | ) | (71,822 | ) | ||||
| Total Cost of Goods Sold | (69 | ) | (231,272 | ) | ||||
| Gross Margin | 676 | 74,078 | ||||||
| Operating Expenses: | ||||||||
| Sales and marketing | - | 31,945 | ||||||
| General and administrative | 32,464 | 37,166 | ||||||
| Total Operating Expenses | 32,464 | 69,111 | ||||||
| Loss from operations | (31,788 | ) | 4,967 | |||||
| Other Income and Expense | ||||||||
| Impairment of long-lived assets | (26,550 | ) | (26,550 | ) | ||||
| Total Other Income (Expense) | (26,550 | ) | (26,550 | ) | ||||
| Net Income/(Loss) | $ | (58,338 | ) | $ | (21,583 | ) | ||
| Net Income/(Loss) per share (basic and diluted) | $ | (0.00 | ) | $ | (0.00 | ) | ||
| Weighted average number of common shares outstanding | 380,661,301 | 415,918,561 | ||||||
| 4 |
Blockchain Holdings Capital Ventures, Inc.
Period from February 5, 2018 (inception) Through September 30, | ||||
| 2018 | ||||
| (Unaudited) | ||||
| Cash Flows from Operating Activities | ||||
| Net Loss | $ | (21,583 | ) | |
| Adjustments to reconcile net loss to net cash provided by (used for) operating activities: | ||||
| Impairment of long-lived assets | 26,550 | |||
| Changes in operating assets and liabilities: | ||||
| Other accrued liabilities | - | |||
| Net Cash Used in Operating Activities | 4,967 | |||
| Cash Flows from Investing Activities | ||||
| Purchase of property and equipment | (26,550 | ) | ||
| Net Cash Used in Investing Activities | (26,550 | ) | ||
| Cash Flows from Financing Activities | ||||
| Sale of common stock | 40,000 | |||
| Net Cash Provided by Financing Activities | 40,000 | |||
| Net Change In Cash | 18,417 | |||
| Cash at Beginning of Period | - | |||
| Cash at End of Period | $ | 18,417 | ||
| Supplemental Disclosure of Cash Flow Information: | ||||
| Accounts payable assumed in connection with acquisition | $ | 74,434 | ||
| 5 |
BLOCKCHAIN HOLDINGS CAPITAL VENTURES, INC.
NOTES TO THE FINANCIAL STATEMENTS
September 30, 2018 (UNAUDITED)
NOTE 1. ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BLOCKCHAIN HOLDINGS CAPITAL VENTURES, INC. (the “Company”), formerly Southeastern Holdings, Inc. (formerly Safe Lane Systems, Inc.) was incorporated in the State of Colorado on September 10, 2013. Safe Lane Systems, Inc. redomiciled to become a Delaware holding corporation in September of 2016. On September 22, 2016, Safe Lane Systems, Inc. formed two wholly owned subsidiaries, SLS Industrial, Inc and Southeastern Holdings, Inc. (both Delaware corporations) and on September 30, 2016 completed a merger and reorganization in which Southeastern Holdings, Inc. (now Blockchain Holdings Capital Ventures, Inc.) became the holding company. On December 1, 2016, the Company spun off its wholly owned subsidiary, SLS Industrial, Inc., along with its assets and liabilities, leaving Southeastern Holdings, Inc. as the only surviving entity.
On August 23, 2018, the Company entered into a Bill of Sale and Assignment and Assumption Agreement with Blockchain Holdings, LLC (“Blockchain”) pursuant to which the Company purchased all of the assets of Blockchain which are used in the business of sourcing of blockchain mining equipment from various suppliers for their customers and also providing management of the equipment hosted, mining pools and tech work on such equipment. The Company issued 300,000,000 shares of its common stock, par value $.0001 valued at $300,000 to the members of Blockchain in exchange for the assets of Blockchain.
On August 30, 2018 the Company changed its name to Blockchain Holdings Capital Ventures, Inc.
Business description
Blockchain Holdings Capital Ventures, Inc is a public company that is focused on finding, vetting and acquiring cash flowing assets including Commercial Real Estate, Energy and Technology Companies.
Change in Control
On August 23, 2018, the Company entered into an agreement to purchase the assets of Blockchain Holdings, LLC for consideration of 300,000,000 shares to be issued in exchange for all of Blockchain Holdings, LLC’s assets. This share issuance resulted in a change of control of the issuer. The Company determined that this transaction resulted in a change of control based on the transfer of common stock since (1) the Company’s historical Class A Super Voting Preferred Stock was legally void, and (2) the intent of management would have been to transfer that control in connection with the purchase if that class of stock were valid. Immediately prior to the transaction, the Company’s former CEO, Paul Dickman, owned 72% of the outstanding common stock. Immediately after the transaction, the member of Blockchain Holdings, LLC held a total of 68% of the outstanding common stock, with the Company’s new management controlling a total of 45.6% of the outstanding common stock comprised of 22.8% held by a company owned and controlled by the current CEO and 22.8% held by an entity owned and controlled by the COO.
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Business Combination
The Company evaluated the August 23, 2018 acquisition of Blockchain Holdings, LLC’s outstanding interests and determined that the acquisition falls under guidance of the SEC’s Financial Reporting Manual, Section 12100, which deems the transaction to be a change in control and a “capital transaction in substance,” as a result of the acquisition of all assets critical to Blockchain Holdings, LLC’s operations. As a result, the Company deemed the transaction to be a reverse acquisition and accounted for the transaction under guidance provided by ASC 805 – Business Combinations. Therefore, for accounting purposes, the acquirer is Blockchain Holdings, LLC, the operating company, and the issuer is deemed to be the accounting acquiree. In the event of a reverse acquisition, ASC 805’s guidance calls for the issuer to retain its capital structure and adopt the activity of the operating company. The Company’s recapitalization entry resulted in the following changes to equity:
| Prior to Recapitalization | Transaction August 23, 2018 | Recapitalization August 23, 2018 | After Recapitalization | |||||||||||||
| Class A super voting preferred stock* | $ | 1,000 | $ | - | $ | (1,000 | ) | $ | - | |||||||
| Class B non-voting preferred stock* | - | - | ||||||||||||||
| Common stock | 13,836 | 30,000 | 43,836 | |||||||||||||
| Additional paid-in capital | 1,526 | 270,000 | (391,607 | ) | (120,081 | ) | ||||||||||
| Accumulated deficit | (92,607 | ) | 92,607 | - | ||||||||||||
| Total Stockholders’ Equity | $ | (76,245 | ) | $ | 300,000 | $ | (300,000 | ) | $ | (76,245 | ) | |||||
| *As discussed elsewhere in this note, the Company subsequently discovered that all of its historical Preferred Stock classes were improperly filed with the State of Delaware and therefore legally null and void. The Company evaluated the impacts of the discovery in light of ASC 250 and determined that the cumulative affect of resulting corrections was qualitatively and quantitatively immaterial to the Company’s operations and therefore eliminated the outstanding Preferred Stock from the historical entity in the recapitalization accounting on August 23, 2018. |
Management determined that the contractual value of the 300,000,000 shares issued at $0.001 to effect the acquisition for $300,000 was a reasonable valuation. However, since neither entity had assets of value or current revenue-generating operations, the Company determined that the value of the acquisition to be fully impaired and charged $300,000 in losses to the Additional Paid-in Capital portion of the recapitalization entry.
Financial Statements
The Company’s balance sheet, and statements of operations and cash flows and accompanying notes included in this interim period filing have not yet been audited and may require substantial adjustments when audited.
Recent Developments
On August 23, 2018, Daniel Wong and Delray Wannemacher became directors of the Company’s Board of Directors and Paul Dickman resigned from his position on the Board of Directors and as Chief Executive Officer of the Company. Upon acceptance of his resignation, Delray Wannemacher and Daniel Wong were appointed Chief Executive Officer and Chief Operating Officer, respectively.
On August 30, 2018, the Company filed a Certificate of Amendment of the Certificate of Incorporation with the Secretary of State of Delaware to effect the following: (1) a name change, (2) a 1 for 100 reverse stock split (the “Reverse Split”) of the shares of the Company’s issued and outstanding common stock, par value $0.0001 (the “Common Stock”), and (3) a decrease in the authorized shares of Common Stock of the Company after the Reverse Split. On October 3, 2018, the Company determined not to implement the Reverse Split or the decrease in the authorized shares of Common Stock of the Company. Effective August 30, 2018, the Company’s name was changed to Blockchain Holdings Capital Ventures, Inc.
On September 14, 2018, the Company learned that during the Merger and Reorganization which occurred on September 30, 2016, the Certificates of Designation with respect to the Class A Preferred Super Majority Voting Stock and the Class B Preferred Convertible Non-Voting Stock were not properly filed with the Department of State of the State of Delaware, rendering these classes historically void. As a result, the Company, determined to file a Certificate of Designation with respect to the Class A Preferred Super Majority Voting Stock and not to file a Certificate of Designation with respect to the Class B Preferred Convertible Non-Voting Stock, as there were no shares outstanding with respect to said class.
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On September 17, 2018, the Company filed (1) a Certificate of Designation of the Class A Preferred Super Majority Voting Stock and (2) a Certificate of Designation of Class C Convertible Preferred Stock.
The Company evaluated the historical impacts of the error in light of ASC 250 – Accounting Changes and Error Corrections, and determined that the impact of the historical Class A Preferred Stock would be immaterial to the Company in its current post-acquisition state and therefore deemed retroactive restatement to be unnecessary. As discussed in the “Business Combination” section of this footnote, the Company included an elimination of the historical $1,000 balance in Class A Preferred Stock in its accounting for the recapitalization on August 23, 2018.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity of three months or less as cash equivalents.
Cash Flows - During the period ending September 30, 2018, the Company relied on revenue proceeds, related party advances, trade payables and the sale of common stock to fund operations.
Cash flows provided by operations for the period from February 5, 2018 through September 30, 2018 totaled $4,506.
As of September 30, 2018, the Company had cash and cash equivalents of $18,417.
Impairment of Long-lived Assets
In accordance with ASC Topic 360, the Company reviews its long-lived assets, including property, plant and equipment, for impairment whenever events or changes in circumstances indicate that the carrying amounts of the assets may not be fully recoverable. If the total of the expected undiscounted future net cash flows is less than the carrying amount of the asset, a loss is recognized for the difference between the fair value and carrying amount of the asset.
The Company purchased coin mining equipment for $26,550 in early 2018 and determined that the fair market value of such equipment decreased significantly and recognized impairment expense of $26,550 during the period from February 5, 2018 (Inception) through September 30, 2018.
Accounts payable and accrued liabilities
Accounts payable consisted of $74,434, and accrued liabilities consisted of $1,811 for state and local taxes payable as of September 30, 2018.
Convertible Notes Payable
In July 2016, the Company (pre-acquisition) entered into $7,500 of convertible notes, of which $1,500 were held by the CEO and $6,000 by the CEO’s friends and family. These notes bear interest at 10% per annum, with accrual of interest commencing after December 31, 2017 and mature on December 31, 2018. The agreements define a trigger event as the sale of preferred stock at a stated value of $100,000 and a material funding as $500,000. Terms of the notes permit the noteholders to convert the debt into 4.026% of the Company’s then-outstanding common stock any time between the trigger event and a material funding. Any time on or after maturity, the noteholders may either call the debt or elect to continue holding the debt at the 10% annual interest rate.
The Company evaluated the possibility that a beneficial conversion feature or derivative liability may exist on these notes and concluded that the Company’s stock value would render both features worthless or trivial and therefore did not record a beneficial conversion feature or derivative liability.
In December 2016, the Company repaid $6,000 of these notes, leaving an outstanding balance of $1,500 due to the CEO as of each, June 30, 2018 and December 31, 2017. Interest expense on these notes totaled $75 and $38 for the six and three months ended June 30, 2018, respectively. Accrued interest outstanding on this debt was $225 and $150 as of June 30, 2018 and December 31, 2017, respectively.
| 8 |
Immediately prior to the acquisition, on August 22, 2018, the Company converted these notes and interest totaling $1,725 along with related party payables of $8,823 into 98,230,000 shares of common stock. As of September 30, 2018, the Company owed $0 in principal and interest on these notes.
Related Party Transactions
From time to time, the Company’s former CEO advanced funds to pay for professional services on behalf of the Company. These advances are due on demand, have no set term and bear no interest. On August 22, 2018, immediately prior to the acquisition, the Company issued 98,230,000 shares of common stock for $8,823 of advances due the former CEO along with convertible debt and interest due him.
During the period from February 5, 2018 (inception) through September 30, 2018, the Company paid consulting fees of $10,000 and $7,500 to its CEO and COO, respectively. The Company does not currently have consulting or employment agreements with these individuals, and as a result, these fees may fluctuate from time to time.
Equipment sales revenue during the period from February 5, 2018 (Inception) through September 30, 2018 included $6,450 of sales to the former CEO and $2,391 to the current CEO.
During the period from February 5, 2018 (Inception) through September 30, 2018, the Company paid the CEO’s company, Wannemacher Corporation., $5,612 of commissions on management and consulting revenue and paid the COO’s company, Omnivance Advisors, Inc. $4,829 of commissions on the same.
During the period from February 5, 2018 (Inception) through September 30, 2018, the Company’s revenues and costs of goods sold included the following related party transactions:
| Management and Consulting Fees | Equipment Sales | |||||||||||||||
| Customer | February 5, 2018 (Inception) through September 30, 2018 | Three Months Ended September 30, 2018 | February 5, 2018 (Inception) through September 30, 2018 | Three Months Ended September 30, 2018 | ||||||||||||
| ChineseInvestors.com, Inc. (1) | $ | 18,954 | $ | - | $ | 141,263 | $ | - | ||||||||
| Paul Dickman (2) | - | - | 6,450 | - | ||||||||||||
| Delray Wannemacher (3) | - | - | 2,391 | - | ||||||||||||
| Total related party revenue | $ | 18,954 | $ | - | $ | 150,104 | $ | - | ||||||||
| Cost of goods sold | - | - | (159,450 | ) | - | |||||||||||
| Gross margin | $ | 18,954 | $ | - | $ | (9,346 | ) | $ | - | |||||||
(1) Paul Dickman, the Company’s former CEO is the CFO of ChineseInvestors.com, Inc. and is therefore deemed to exercise significant influence.
(2) Paul Dickman is the Company’s former CEO.
(3) Delray Wannemacher is the Company’s current CEO.
As of September 30, 2018, the Company was not indebted to any related parties.
Stockholders’ Equity
The Company has designated ten million (10,000,000) shares of its preferred stock, par value $0.001 as Class A Preferred Super Majority Voting Stock (“Class A”). The Class A shares have the right to vote upon matters submitted to the holders of common stock, par value $0.0001 of the Company. Class A shares have a vote equal to the number of shares of common stock of the Company which would give the holders of the Class A shares a vote equal to sixty percent (60%) of the common stock. This vote shall be exercised pro-rata by the holders of the Class A. The Company shall have the right to redeem, in its sole and absolute discretion, at any time one (1) year after the date of issuance of such Class A shares, all or any portion of the shares of Class A at a price of one cent ($0.01) per share. Subsequently, on October 4, 2018, the Company issued a total of 7,000,000 Class A Preferred shares to its CEO and COO as stock-based compensation for services rendered.
The Company has not currently authorized a Class B designation of Preferred Stock.
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The Company has designated ten million (10,000,000) shares of its preferred stock, par value $0.001 as Class C Convertible Preferred Stock (“Class C”). Each shares of Class C shall be convertible into five (5) shares of common stock. The holders of Class C shall be entitled to receive the same dividend as the holders of the common stock and such dividend shall be paid pro rata per share on a fully converted basis. The holders of Class C shall have piggyback registration rights. The Company shall have the right to redeem, in its sole and absolute discretion, at any time after five (5) years, all or any portion of the shares of Class C at a price of five dollars ($5.00) per share. The Class C shares shall be considered to have a junior liquidation preference to Class A shares and a senior dividend preference to Class A shares. Subsequently, on October 4, 2018, the Company issued a total of 7,000,000 Class C Preferred shares to its CEO and COO as stock-based compensation for services rendered.
As of September 30, 2018, the Company was authorized to issue 450,000,000 shares of common stock. All common stock shares have full dividend and voting rights. However, it is not anticipated that the Company will be declaring distributions in the foreseeable future.
Upon formation, the Company sold the founder 2,000,000 shares of $0.0001 par value common stock for $1,000 cash. Also upon formation, the Company paid the founder stock based compensation for services rendered of 10,000,000 shares of $0.001 par value class A preferred super majority voting stock. These preferred shares have a stated value of par value of $0.001. The holder of the Class Stock shall have the right to vote on any matter with holders of Common Stock and may vote as required on any action, which Colorado law provides may or must be approved by vote or consent of the holders of the specific series of voting preferred shares and the holders of common shares. The Record Holders of the Class A Preferred Shares shall have that number of votes equal to that number of common shares which is not less than 60% of the vote required to approve any action, which Colorado law provides may or must be approved by vote or consent of the holders of other series of voting preferred shares and the holders of common shares or the holders of other securities entitled to vote, if any.
Upon execution of a patent sublicense agreement the Company issued 22,768,273 shares of its class B preferred convertible stock to a trustee on behalf of shareholders of the original license agreement. These shares were converted into regular common stock when the company registering the underlying shares with the SEC and listing of the shares on a recognized exchange. During the year ended December 31, 2017 all of these shares were retired and common shares were issued on a 1 to 1 basis to replace them.
During the fourth quarter of 2015, the Company issued 350,000 shares of common stock to various individuals in consideration of their services rendered in support of the Company resulting in the company recognizing compensation expense of $35 based upon the declared par value of the Company’s common stock since there has been no market price sale of the Companies stock as of this point.
In the third quarter of 2016 the Company issued 14,881,727 shares to a trust to be disbursed at the trustee’s direction as insurance in lieu of purchasing D&O insurance. As the Company has issued no stock for cash, the Company’s assets are inconsequential and there is no active market for this stock, the Company determined that the stock’s value is inconsequential and valued the transaction based upon par value of $.0001 per share, resulting in general and administrative expense of $1,488 during 2016.
In January 2018, the Company issued 125,000 unrestricted common shares to a consultant for services rendered.
On August 22, 2018, the Company’s former CEO and chairman of the board converted $8,823 of payables and $1,725 of debt and accrued interest into 98,230,000 shares of common stock.
In connection with the acquisition on August 23, 2018, the Company recognized an ASC 805 recapitalization totaling 138,355,000 shares of common stock, which reflect all prior activity, and recognized the issuance of 300,000,000 shares of common stock recorded at par value to effect the acquisition.
On August 29, 2018, the Company’s former CEO purchased 266,667 common shares for $40,000.
As of September 30, 2018, the Company had 438,621,667 common shares outstanding.
As of September 30, 2018, zero shares of Class A Preferred Stock and Class C Preferred Stock were issued and outstanding.
| 10 |
General and Administrative Expenses
During the period from February 5, 2018 (Inception) through September 30, 2018 and for the three months ended September 30, 2018, the Company’s general and administrative expenses totaled $37,166 and $32,464, respectively. In each period, these expenses consisted of $17,500 of consulting fees paid to the CEO and COO, $10,548 of legal and professional fees, and the remainder consisted of various administrative costs.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect 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 revenues and expenses during the reporting period. Actual results could differ from those estimates.
Stock Based Compensation
The Company accounts for share-based payments pursuant to ASC 718, “Stock Compensation” and, accordingly, the Company records compensation expense for share-based awards based upon an assessment of the grant date fair value for stock options and restricted stock awards using the Black-Scholes option pricing model.
Stock compensation expense for stock options is recognized over the vesting period of the award or expensed immediately under ASC 718 when options are given for previous service without further recourse. The Company issued stock options to contractors that had been providing services to the Company upon their termination of services. Under ASC 718 these options were recognized as expense in the period issued because they were given as a form of compensation for services already rendered with no recourse.
Subsequently, on October 4, 2018, the Company issued 4,000,000 Class A Preferred shares and 4,000,000 Class C Preferred shares to its Chief Executive Officer and 3,000,000 Class A Preferred shares and 3,000,000 Class C Preferred shares to its Chief Operating Officer as compensation for services rendered.
Income Tax
The Company accounts for income taxes under ASC 740, “Income Taxes.” Under ASC 740, deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss carry-forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
Fiscal year
The Company employs a fiscal year ending December 31.
Net Income (Loss) per share
The net income (loss) per share is computed by dividing the net income (loss) by the weighted average number of shares of common outstanding. Warrants, stock options, and common stock issuable upon the conversion of the Company’s preferred stock (if any), are not included in the computation if the effect would be anti-dilutive and would increase the earnings or decrease loss per share.
Revenue Recognition
The Company recognizes revenue under ASC 606, using the following five-step model, which requires that we: (1) identify a contract with the customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to performance obligations and (5) recognize revenue as performance obligations are satisfied. The Company’s revenue streams historically consisted of three components:
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| 1. | Equipment sales – The Company purchases and resells equipment, recognizing the equipment’s original costs and costs to deliver such to the customer as costs of goods sold. |
| 2. | Consulting and management fees – These fees consist of various services provided to companies entering the blockchain space and range from equipment setup to facility management to general consulting. |
| 3. | Coin mining commissions – On an ongoing basis, the Company collects a 5% commission on coins processed by its management clients. |
While the operating company generated early revenue from the aforementioned sources, the Company has expanded its focus to finding, vetting and acquiring cash flowing assets including Commercial Real Estate, Energy and Technology Companies. There can be no assurances that these efforts will generate future revenue.
During the period from February 5, 2018 (Inception) through September 30, 2018, the Company’s revenues included related party transactions consisting of $141,263 of equipment sales and $18,954 of management and consulting revenue from an entity over which the former CEO exerts significant influence through his position as its CFO, $6,450 of equipment sales to the former CEO and $2,391 of equipment sales to the current CEO. Costs associated with these related party equipment sales totaled $159,450. See the “Related Party Transactions footnote for a more detailed description of these transactions. We further determined that significant concentrations among a few customers existed in our revenue, as is further discussed in the “Concentrations, Commitments and Contingencies” section of this footnote.
During the period from February 5, 2018 (Inception) through September 30, 2018 and the three months ended September 30, 2018, the Company recognized revenues of $305,350 and $745 and costs of revenue of $231,272 and $69, for gross margins of $74,078 and $646, all respectively.
Financial Instruments
The carrying value of the Company’s financial instruments, including cash and cash equivalents, as reported in the accompanying balance sheet, are stated at fair value.
Going Concern and Management’s Plans
As shown in the accompanying financial statements as of September 30, 2018, the Company had $18,417 of cash, as compared to total current liabilities of $76,245, has incurred substantial operating losses, and had an accumulated deficit of $21,583. Furthermore, the Company’s revenue history has been limited and unstable, and there can be no assurances of future revenues.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, however, the above conditions raise substantial doubt about the Company’s ability to do so. The financial statements do not include any adjustment to reflect the possible future effect on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should the Company be unable to continue as a going concern.
Recent Accounting Pronouncements
The Company has reviewed all recently issued but not yet effective accounting pronouncements and does not believe the future adoption of any such pronouncements may be expected to cause a material impact on its financial condition or results of operations.
Concentrations, Commitments and Contingencies
During the period from February 5, 2018 (Inception) through September 30, 2018 and for the three months ended September 30, 2018, the Company identified the following concentrations among its customers, which it deems significant:
| 12 |
| Concentration | ||||||||
| Customer | February 5, 2018 (Inception) through September 30, 2018 | Three Months Ended September 30, 2018 | ||||||
| Customer A (related party) | 52 | % | ||||||
| Customer B | 33 | % | ||||||
| Customer C | 3 | % | 100 | % | ||||
The Company has identified no material commitments and contingencies through the date of these financial statements.
Subsequent Events
The Company evaluates events and transactions after the balance sheet date but before the financial statements are issued.
On October 4, 2018, the Company issued 4,000,000 Class A Preferred shares and 4,000,000 Class C Preferred shares to its Chief Executive Officer and 3,000,000 Class A Preferred shares and 3,000,000 Class C Preferred shares to its Chief Operating Officer as compensation for services rendered.
As of the date of this filing, management determined there were no other events requiring adjustment to or additional disclosure in the financial statements.
| 13 |
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
This report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties and are based on the beliefs and assumptions of management and information currently available to management. The use of words such as “believes”, “expects”, “anticipates”, “intends”, “plans”, “estimates”, “should”, “likely” or similar expressions, indicates a forward-looking statement.
The identification in this report of factors that may affect our future performance and the accuracy of forward-looking statements is meant to be illustrative and by no means exhaustive. All forward-looking statements should be evaluated with the understanding of their inherent uncertainty.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
General
BLOCKCHAIN HOLDINGS CAPITAL VENTURES, INC. (the “Company”), formerly Southeastern Holdings, Inc. (formerly Safe Lane Systems, Inc.) was incorporated in the State of Colorado on September 10, 2013. Safe Lane Systems, Inc. redomiciled to become a Delaware holding corporation in September of 2016. On September 22, 2016, Safe Lane Systems, Inc. formed two wholly owned subsidiaries, SLS Industrial, Inc and Southeastern Holdings, Inc. (both Delaware corporations) and on September 30, 2016 completed a merger and reorganization in which Southeastern Holdings, Inc. (now Blockchain Holdings Capital Ventures, Inc.) became the holding company. On December 1, 2016, the Company spun off its wholly owned subsidiary, SLS Industrial, Inc., along with its assets and liabilities, leaving Southeastern Holdings, Inc. as the only surviving entity.
On August 23, 2018, the Company entered into a Bill of Sale and Assignment and Assumption Agreement with Blockchain Holdings, LLC (“Blockchain”) pursuant to which the Company purchased all of the assets of Blockchain which are used in the business of sourcing of blockchain mining equipment from various suppliers for their customers and also providing management of the equipment hosted, mining pools and tech work on such equipment. The Company issued 300,000,000 shares of its common stock, par value $.0001 valued at $300,000 to the members of Blockchain in exchange for the assets of Blockchain.
The Company has accounted for this transaction as a reverse recapitalization under ASC 805, under which the operating entity, Blockchain Holdings, LLC, adopted the assets, liabilities and equity structure of Blockchain Holdings Capital Ventures, Inc. on August 23, 2018, while retaining its historical activity. The financial statements therefore present activity beginning with Blockchain Holdings, LLC’s inception date of February 5, 2018 through September 30, 2018.
On August 30, 2018 the Company changed its name to Blockchain Holdings Capital Ventures, Inc.
Blockchain Holdings Capital Ventures, Inc is a public company that is focused on finding, vetting and acquiring cash flowing assets including Commercial Real Estate, Energy and Technology Companies.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. However, the above conditions raise substantial doubt about the Company’s ability to do so. New business opportunities may never emerge, and we may not be able to sufficiently fund the pursuit of new business opportunities should they arise.
As of September 30, 2018, we had approximately $18,417 in cash on hand. Our current monthly cash burn rate is approximately $15,000, and it is expected that burn rate will continue and is expected to increase to $30,000-$50,000 until significant additional capital is raised and our marketing plan is executed. Our trade creditors may call debts at any time, and our cash reserves would not be sufficient to satisfy all balances. We are currently dependent on minimal expenses to be covered by a loan or other cash infusion from the company’s chairman of the board and CEO, Mr. Dickman. There is no guarantee that this cash infusion will continue to be made.
| 14 |
Results of Operations
During the period from February 5, 2018 (Inception) through September 30, 2018 and the three months ended September 30, 2018, the Company generated revenues of $305,350 and $745 and incurred associated costs of $231,272 for gross margin of $74,078 and $676, all respectively. While the Company generated revenue during these periods, the revenue was volatile and unstable, and there can be no guarantee of future revenue.
The Company incurred net operating losses of $36,044 and $72,800 for the period from February 5, 2018 (Inception) through September 30, 2018 and for the three months ended September 30, 2018, respectively. During this period, the Company determined all of its capitalized mining equipment was impaired, resulting in a charge of $26,550 to impairment expense for the period from February 5, 2018 (Inception) through September 30, 2018 and for the three months ended September 30, 2018.
Liquidity and Capital Resources
During the period from February 5, 2018 (Inception) through September 30, 2018 and the three months ended September 30, 2018, the Company sold 266,667 shares of common stock to its former CEO for proceeds of $40,000.
During the twelve months ending September 30, 2019 the Company estimates it will need approximately $480,000 to pursue business opportunities. The Company currently pursues business in the blockchain technology industry, which is a volatile industry and as a result may experience significant fluctuations and losses. Other than the foregoing, the Company does not know of any trends, events or uncertainties that have had, or are reasonably expected to have, a material impact on sales, revenues or income from continuing operations, or liquidity and capital resources.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Not required for smaller reporting companies.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
An evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Operating Officer, of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report on Form 10-Q. Disclosure controls and procedures are procedures designed with the objective of ensuring that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, such as this Form 10-Q, is recorded, processed, summarized and reported, within the time period specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and is communicated to our management, including our Chief Executive Officer and Chief Financial Officer, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Based on that evaluation, our management concluded that, as of September 30, 2018, our disclosure controls and procedures were not effective.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting during the quarter ended September 30, 2018 that materially affected or are reasonably likely to materially affect our internal control over financial reporting.
The Company is not a party to any legal proceeding that it believes will have a material adverse effect upon its business or financial position.
| 15 |
Item 1A. Risk Factors.
Not required for smaller reporting companies.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
On August 22, 2018, the Company’s former CEO and chairman of the board converted $8,823 of payables and $1,725 of debt and accrued interest into 98,230,000 shares of common stock.
On August 29, 2018, the Company’s former CEO purchased 266,667 common shares for $40,000.
Item 3. Defaults Upon Senior Securities.
There have been no defaults upon senior securities.
Item 4. Mine Safety Disclosures
Not applicable.
None.
a. Exhibits
| 31.1 | Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
| 31.2 | Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
| 32.1 | Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
| 32.2 | Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
| 101.INS | XBRL Instance Document | |
| 101.SCH | XBRL Schema Document | |
| 101.CAL | XBRL Calculation Linkbase Document | |
| 101.DEF | XBRL Definition Linkbase Document | |
| 101.LAB | XBRL Labels Linkbase Document | |
| 101.PRE | XBRL Presentation Linkbase Document |
| 16 |
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 hereunto duly authorized.
| Blockchain Holdings Capital Ventures, Inc. | ||
| Date: November 28, 2018 | By: | /s/ Delray Wannemacher |
| Delray Wannemacher, CEO | ||
| Date: November 28, 2018 | By: | /s/ Daniel Wong |
| Daniel Wong, COO & | ||
| Acting Principal Financial Officer | ||
| 17 |
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002
I, Delray Wannemacher, Chief Executive Officer, of Blockchain Holdings Capital Ventures, Inc., a Delaware corporation (the “Registrant”), certify that:
1. I have reviewed this quarterly report on Form 10-Q for the quarter ended September 30, 2018 of the Registrant;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
4. The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant) and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting;
5. The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal controls over financial reporting, to the Registrant’s auditors and the audit committee of Registrant’s board of directors (or persons performing the equivalent function):
a) All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial data information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal controls over financial reporting.
Date: November 28, 2018
| /s/ Delray Wannemacher | |
| Delray Wannemacher, CEO |
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002
I, Daniel Wong, Chief Operating Officer and Acting Principal Financial Officer, of Blockchain Holdings Capital Ventures, Inc., a Delaware corporation (the “Registrant”), certify that:
1. I have reviewed this quarterly report on Form 10-Q for the quarter ended September 30, 2018 of the Registrant;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
4. The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant) and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting;
5. The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal controls over financial reporting, to the Registrant’s auditors and the audit committee of Registrant’s board of directors (or persons performing the equivalent function):
a) All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial data information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal controls over financial reporting.
Date: November 28, 2018
| /s/ Daniel Wong | |
| Daniel Wong, COO | |
| and Acting Principal Financial Officer |
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Blockchain Holding Capital Ventures, Inc. (the “Registrant”) on Form 10-Q for the nine months ended September 30, 2018 as filed with the Securities and Exchange Commission (the “Report”), I, Delray Wannemacher, Chief Executive Officer of the Registrant, certify, pursuant to 18 U.S.C. SS. 1350, as adopted pursuant to SS. 906 of the Sarbanes-Oxley Act of 2002, that:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Registrant.
Date: November 28, 2018
| /s/ Delray Wannemacher | |
| Delray Wannemacher, CEO |
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Blockchain Holding Capital Ventures, Inc. (the “Registrant”) on Form 10-Q for the nine months ended September 30, 2018 as filed with the Securities and Exchange Commission (the “Report”), I, Daniel Wong, Chief Operating Officer and Acting Principal Financial Officer of the Registrant, certify, pursuant to 18 U.S.C. SS. 1350, as adopted pursuant to SS. 906 of the Sarbanes-Oxley Act of 2002, that:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Registrant.
Date: November 28, 2018
| /s/ Daniel Wong | |
| Daniel Wong, COO | |
| and Acting Principal Financial Officer |
Document and Entity Information - shares |
8 Months Ended | |
|---|---|---|
Sep. 30, 2018 |
Nov. 28, 2018 |
|
| Document And Entity Information | ||
| Entity Registrant Name | Blockchain Holdings Capital Ventures, Inc. | |
| Entity Central Index Key | 0001614826 | |
| Document Type | 10-Q | |
| Document Period End Date | Sep. 30, 2018 | |
| Amendment Flag | false | |
| Current Fiscal Year End Date | --12-31 | |
| Entity Filer Category | Non-accelerated Filer | |
| Entity Small Business Flag | true | |
| Entity Emerging Growth Company | true | |
| Entity Ex Transition Period | false | |
| Entity Common Stock, Shares Outstanding | 438,621,667 | |
| Trading Symbol | BHCV | |
| Document Fiscal Period Focus | Q3 | |
| Document Fiscal Year Focus | 2018 |
Balance Sheets (Parenthetical) |
Sep. 30, 2018
USD ($)
$ / shares
shares
|
|---|---|
| Preferred stock, par value | $ / shares | $ 0.001 |
| Common stock, par value | $ / shares | $ 0.0001 |
| Common stock, shares authorized | 450,000,000 |
| Common stock, shares issued | 438,621,667 |
| Common stock, shares outstanding | 438,621,667 |
| Class A Super Voting Preferred Stock [Member] | |
| Preferred stock, par value | $ / shares | $ 0.001 |
| Preferred stock, shares authorized | 10,000,000 |
| Preferred stock, shares issued | 0 |
| Preferred stock, shares outstanding | 0 |
| Preferred stock, liquidation preferences | $ | $ 0 |
| Class C Convertible Preferred Non-Voting Stock [Member] | |
| Preferred stock, par value | $ / shares | $ 0.001 |
| Preferred stock, shares authorized | 10,000,000 |
| Preferred stock, shares issued | 0 |
| Preferred stock, shares outstanding | 0 |
| Preferred stock, liquidation preferences | $ | $ 0 |
Statements of Cash Flows (Unaudited) |
8 Months Ended |
|---|---|
|
Sep. 30, 2018
USD ($)
| |
| Cash Flows from Operating Activities | |
| Net Loss | $ (21,583) |
| Adjustments to reconcile net loss to net cash provided by (used for) operating activities: | |
| Impairment of long-lived assets | 26,550 |
| Changes in operating assets and liabilities: | |
| Other accrued liabilities | |
| Net Cash Used in Operating Activities | 4,967 |
| Cash Flows from Investing Activities | |
| Purchase of property and equipment | (26,550) |
| Net Cash Used in Investing Activities | (26,550) |
| Cash Flows from Financing Activities | |
| Sale of common stock | 40,000 |
| Net Cash Provided by Financing Activities | 40,000 |
| Net Change In Cash | 18,417 |
| Cash at Beginning of Period | |
| Cash at End of Period | 18,417 |
| Supplemental Disclosure of Cash Flow Information: | |
| Accounts payable assumed in connection with acquisition | $ 74,434 |
Organization, Operations and Summary of Significant Accounting Policies |
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| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Organization, Operations and Summary of Significant Accounting Policies |
NOTE 1. ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BLOCKCHAIN HOLDINGS CAPITAL VENTURES, INC. (the “Company”), formerly Southeastern Holdings, Inc. (formerly Safe Lane Systems, Inc.) was incorporated in the State of Colorado on September 10, 2013. Safe Lane Systems, Inc. redomiciled to become a Delaware holding corporation in September of 2016. On September 22, 2016, Safe Lane Systems, Inc. formed two wholly owned subsidiaries, SLS Industrial, Inc and Southeastern Holdings, Inc. (both Delaware corporations) and on September 30, 2016 completed a merger and reorganization in which Southeastern Holdings, Inc. (now Blockchain Holdings Capital Ventures, Inc.) became the holding company. On December 1, 2016, the Company spun off its wholly owned subsidiary, SLS Industrial, Inc., along with its assets and liabilities, leaving Southeastern Holdings, Inc. as the only surviving entity.
On August 23, 2018, the Company entered into a Bill of Sale and Assignment and Assumption Agreement with Blockchain Holdings, LLC (“Blockchain”) pursuant to which the Company purchased all of the assets of Blockchain which are used in the business of sourcing of blockchain mining equipment from various suppliers for their customers and also providing management of the equipment hosted, mining pools and tech work on such equipment. The Company issued 300,000,000 shares of its common stock, par value $.0001 valued at $300,000 to the members of Blockchain in exchange for the assets of Blockchain.
On August 30, 2018 the Company changed its name to Blockchain Holdings Capital Ventures, Inc.
Business description
Blockchain Holdings Capital Ventures, Inc is a public company that is focused on finding, vetting and acquiring cash flowing assets including Commercial Real Estate, Energy and Technology Companies.
Change in Control
On August 23, 2018, the Company entered into an agreement to purchase the assets of Blockchain Holdings, LLC for consideration of 300,000,000 shares to be issued in exchange for all of Blockchain Holdings, LLC’s assets. This share issuance resulted in a change of control of the issuer. The Company determined that this transaction resulted in a change of control based on the transfer of common stock since (1) the Company’s historical Class A Super Voting Preferred Stock was legally void, and (2) the intent of management would have been to transfer that control in connection with the purchase if that class of stock were valid. Immediately prior to the transaction, the Company’s former CEO, Paul Dickman, owned 72% of the outstanding common stock. Immediately after the transaction, the member of Blockchain Holdings, LLC held a total of 68% of the outstanding common stock, with the Company’s new management controlling a total of 45.6% of the outstanding common stock comprised of 22.8% held by a company owned and controlled by the current CEO and 22.8% held by an entity owned and controlled by the COO.
Business Combination
The Company evaluated the August 23, 2018 acquisition of Blockchain Holdings, LLC’s outstanding interests and determined that the acquisition falls under guidance of the SEC’s Financial Reporting Manual, Section 12100, which deems the transaction to be a change in control and a “capital transaction in substance,” as a result of the acquisition of all assets critical to Blockchain Holdings, LLC’s operations. As a result, the Company deemed the transaction to be a reverse acquisition and accounted for the transaction under guidance provided by ASC 805 – Business Combinations. Therefore, for accounting purposes, the acquirer is Blockchain Holdings, LLC, the operating company, and the issuer is deemed to be the accounting acquiree. In the event of a reverse acquisition, ASC 805’s guidance calls for the issuer to retain its capital structure and adopt the activity of the operating company. The Company’s recapitalization entry resulted in the following changes to equity:
Management determined that the contractual value of the 300,000,000 shares issued at $0.001 to effect the acquisition for $300,000 was a reasonable valuation. However, since neither entity had assets of value or current revenue-generating operations, the Company determined that the value of the acquisition to be fully impaired and charged $300,000 in losses to the Additional Paid-in Capital portion of the recapitalization entry.
Financial Statements
The Company’s balance sheet, and statements of operations and cash flows and accompanying notes included in this interim period filing have not yet been audited and may require substantial adjustments when audited.
Recent Developments
On August 23, 2018, Daniel Wong and Delray Wannemacher became directors of the Company’s Board of Directors and Paul Dickman resigned from his position on the Board of Directors and as Chief Executive Officer of the Company. Upon acceptance of his resignation, Delray Wannemacher and Daniel Wong were appointed Chief Executive Officer and Chief Operating Officer, respectively.
On August 30, 2018, the Company filed a Certificate of Amendment of the Certificate of Incorporation with the Secretary of State of Delaware to effect the following: (1) a name change, (2) a 1 for 100 reverse stock split (the “Reverse Split”) of the shares of the Company’s issued and outstanding common stock, par value $0.0001 (the “Common Stock”), and (3) a decrease in the authorized shares of Common Stock of the Company after the Reverse Split. On October 3, 2018, the Company determined not to implement the Reverse Split or the decrease in the authorized shares of Common Stock of the Company. Effective August 30, 2018, the Company’s name was changed to Blockchain Holdings Capital Ventures, Inc.
On September 14, 2018, the Company learned that during the Merger and Reorganization which occurred on September 30, 2016, the Certificates of Designation with respect to the Class A Preferred Super Majority Voting Stock and the Class B Preferred Convertible Non-Voting Stock were not properly filed with the Department of State of the State of Delaware, rendering these classes historically void. As a result, the Company, determined to file a Certificate of Designation with respect to the Class A Preferred Super Majority Voting Stock and not to file a Certificate of Designation with respect to the Class B Preferred Convertible Non-Voting Stock, as there were no shares outstanding with respect to said class.
On September 17, 2018, the Company filed (1) a Certificate of Designation of the Class A Preferred Super Majority Voting Stock and (2) a Certificate of Designation of Class C Convertible Preferred Stock.
The Company evaluated the historical impacts of the error in light of ASC 250 – Accounting Changes and Error Corrections, and determined that the impact of the historical Class A Preferred Stock would be immaterial to the Company in its current post-acquisition state and therefore deemed retroactive restatement to be unnecessary. As discussed in the “Business Combination” section of this footnote, the Company included an elimination of the historical $1,000 balance in Class A Preferred Stock in its accounting for the recapitalization on August 23, 2018.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity of three months or less as cash equivalents.
Cash Flows - During the period ending September 30, 2018, the Company relied on revenue proceeds, related party advances, trade payables and the sale of common stock to fund operations.
Cash flows provided by operations for the period from February 5, 2018 through September 30, 2018 totaled $4,506.
As of September 30, 2018, the Company had cash and cash equivalents of $18,417.
Impairment of Long-lived Assets
In accordance with ASC Topic 360, the Company reviews its long-lived assets, including property, plant and equipment, for impairment whenever events or changes in circumstances indicate that the carrying amounts of the assets may not be fully recoverable. If the total of the expected undiscounted future net cash flows is less than the carrying amount of the asset, a loss is recognized for the difference between the fair value and carrying amount of the asset.
The Company purchased coin mining equipment for $26,550 in early 2018 and determined that the fair market value of such equipment decreased significantly and recognized impairment expense of $26,550 during the period from February 5, 2018 (Inception) through September 30, 2018.
Accounts payable and accrued liabilities
Accounts payable consisted of $74,434, and accrued liabilities consisted of $1,811 for state and local taxes payable as of September 30, 2018.
Convertible Notes Payable
In July 2016, the Company (pre-acquisition) entered into $7,500 of convertible notes, of which $1,500 were held by the CEO and $6,000 by the CEO’s friends and family. These notes bear interest at 10% per annum, with accrual of interest commencing after December 31, 2017 and mature on December 31, 2018. The agreements define a trigger event as the sale of preferred stock at a stated value of $100,000 and a material funding as $500,000. Terms of the notes permit the noteholders to convert the debt into 4.026% of the Company’s then-outstanding common stock any time between the trigger event and a material funding. Any time on or after maturity, the noteholders may either call the debt or elect to continue holding the debt at the 10% annual interest rate.
The Company evaluated the possibility that a beneficial conversion feature or derivative liability may exist on these notes and concluded that the Company’s stock value would render both features worthless or trivial and therefore did not record a beneficial conversion feature or derivative liability.
In December 2016, the Company repaid $6,000 of these notes, leaving an outstanding balance of $1,500 due to the CEO as of each, June 30, 2018 and December 31, 2017. Interest expense on these notes totaled $75 and $38 for the six and three months ended June 30, 2018, respectively. Accrued interest outstanding on this debt was $225 and $150 as of June 30, 2018 and December 31, 2017, respectively.
Immediately prior to the acquisition, on August 22, 2018, the Company converted these notes and interest totaling $1,725 along with related party payables of $8,823 into 98,230,000 shares of common stock. As of September 30, 2018, the Company owed $0 in principal and interest on these notes.
Related Party Transactions
From time to time, the Company’s former CEO advanced funds to pay for professional services on behalf of the Company. These advances are due on demand, have no set term and bear no interest. On August 22, 2018, immediately prior to the acquisition, the Company issued 98,230,000 shares of common stock for $8,823 of advances due the former CEO along with convertible debt and interest due him.
During the period from February 5, 2018 (inception) through September 30, 2018, the Company paid consulting fees of $10,000 and $7,500 to its CEO and COO, respectively. The Company does not currently have consulting or employment agreements with these individuals, and as a result, these fees may fluctuate from time to time.
Equipment sales revenue during the period from February 5, 2018 (Inception) through September 30, 2018 included $6,450 of sales to the former CEO and $2,391 to the current CEO.
During the period from February 5, 2018 (Inception) through September 30, 2018, the Company paid the CEO’s company, Wannemacher Corporation., $5,612 of commissions on management and consulting revenue and paid the COO’s company, Omnivance Advisors, Inc. $4,829 of commissions on the same.
During the period from February 5, 2018 (Inception) through September 30, 2018, the Company’s revenues and costs of goods sold included the following related party transactions:
(1) Paul Dickman, the Company’s former CEO is the CFO of ChineseInvestors.com, Inc. and is therefore deemed to exercise significant influence. (2) Paul Dickman is the Company’s former CEO. (3) Delray Wannemacher is the Company’s current CEO.
As of September 30, 2018, the Company was not indebted to any related parties.
Stockholders’ Equity
The Company has designated ten million (10,000,000) shares of its preferred stock, par value $0.001 as Class A Preferred Super Majority Voting Stock (“Class A”). The Class A shares have the right to vote upon matters submitted to the holders of common stock, par value $0.0001 of the Company. Class A shares have a vote equal to the number of shares of common stock of the Company which would give the holders of the Class A shares a vote equal to sixty percent (60%) of the common stock. This vote shall be exercised pro-rata by the holders of the Class A. The Company shall have the right to redeem, in its sole and absolute discretion, at any time one (1) year after the date of issuance of such Class A shares, all or any portion of the shares of Class A at a price of one cent ($0.01) per share. Subsequently, on October 4, 2018, the Company issued a total of 7,000,000 Class A Preferred shares to its CEO and COO as stock-based compensation for services rendered.
The Company has not currently authorized a Class B designation of Preferred Stock.
The Company has designated ten million (10,000,000) shares of its preferred stock, par value $0.001 as Class C Convertible Preferred Stock (“Class C”). Each shares of Class C shall be convertible into five (5) shares of common stock. The holders of Class C shall be entitled to receive the same dividend as the holders of the common stock and such dividend shall be paid pro rata per share on a fully converted basis. The holders of Class C shall have piggyback registration rights. The Company shall have the right to redeem, in its sole and absolute discretion, at any time after five (5) years, all or any portion of the shares of Class C at a price of five dollars ($5.00) per share. The Class C shares shall be considered to have a junior liquidation preference to Class A shares and a senior dividend preference to Class A shares. Subsequently, on October 4, 2018, the Company issued a total of 7,000,000 Class C Preferred shares to its CEO and COO as stock-based compensation for services rendered.
As of September 30, 2018, the Company was authorized to issue 450,000,000 shares of common stock. All common stock shares have full dividend and voting rights. However, it is not anticipated that the Company will be declaring distributions in the foreseeable future.
Upon formation, the Company sold the founder 2,000,000 shares of $0.0001 par value common stock for $1,000 cash. Also upon formation, the Company paid the founder stock based compensation for services rendered of 10,000,000 shares of $0.001 par value class A preferred super majority voting stock. These preferred shares have a stated value of par value of $0.001. The holder of the Class Stock shall have the right to vote on any matter with holders of Common Stock and may vote as required on any action, which Colorado law provides may or must be approved by vote or consent of the holders of the specific series of voting preferred shares and the holders of common shares. The Record Holders of the Class A Preferred Shares shall have that number of votes equal to that number of common shares which is not less than 60% of the vote required to approve any action, which Colorado law provides may or must be approved by vote or consent of the holders of other series of voting preferred shares and the holders of common shares or the holders of other securities entitled to vote, if any.
Upon execution of a patent sublicense agreement the Company issued 22,768,273 shares of its class B preferred convertible stock to a trustee on behalf of shareholders of the original license agreement. These shares were converted into regular common stock when the company registering the underlying shares with the SEC and listing of the shares on a recognized exchange. During the year ended December 31, 2017 all of these shares were retired and common shares were issued on a 1 to 1 basis to replace them.
During the fourth quarter of 2015, the Company issued 350,000 shares of common stock to various individuals in consideration of their services rendered in support of the Company resulting in the company recognizing compensation expense of $35 based upon the declared par value of the Company’s common stock since there has been no market price sale of the Companies stock as of this point.
In the third quarter of 2016 the Company issued 14,881,727 shares to a trust to be disbursed at the trustee’s direction as insurance in lieu of purchasing D&O insurance. As the Company has issued no stock for cash, the Company’s assets are inconsequential and there is no active market for this stock, the Company determined that the stock’s value is inconsequential and valued the transaction based upon par value of $.0001 per share, resulting in general and administrative expense of $1,488 during 2016.
In January 2018, the Company issued 125,000 unrestricted common shares to a consultant for services rendered.
On August 22, 2018, the Company’s former CEO and chairman of the board converted $8,823 of payables and $1,725 of debt and accrued interest into 98,230,000 shares of common stock.
In connection with the acquisition on August 23, 2018, the Company recognized an ASC 805 recapitalization totaling 138,355,000 shares of common stock, which reflect all prior activity, and recognized the issuance of 300,000,000 shares of common stock recorded at par value to effect the acquisition.
On August 29, 2018, the Company’s former CEO purchased 266,667 common shares for $40,000.
As of September 30, 2018, the Company had 438,621,667 common shares outstanding.
As of September 30, 2018, zero shares of Class A Preferred Stock and Class C Preferred Stock were issued and outstanding.
General and Administrative Expenses
During the period from February 5, 2018 (Inception) through September 30, 2018 and for the three months ended September 30, 2018, the Company’s general and administrative expenses totaled $37,166 and $32,464, respectively. In each period, these expenses consisted of $17,500 of consulting fees paid to the CEO and COO, $10,548 of legal and professional fees, and the remainder consisted of various administrative costs.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect 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 revenues and expenses during the reporting period. Actual results could differ from those estimates.
Stock Based Compensation
The Company accounts for share-based payments pursuant to ASC 718, “Stock Compensation” and, accordingly, the Company records compensation expense for share-based awards based upon an assessment of the grant date fair value for stock options and restricted stock awards using the Black-Scholes option pricing model.
Stock compensation expense for stock options is recognized over the vesting period of the award or expensed immediately under ASC 718 when options are given for previous service without further recourse. The Company issued stock options to contractors that had been providing services to the Company upon their termination of services. Under ASC 718 these options were recognized as expense in the period issued because they were given as a form of compensation for services already rendered with no recourse.
Subsequently, on October 4, 2018, the Company issued 4,000,000 Class A Preferred shares and 4,000,000 Class C Preferred shares to its Chief Executive Officer and 3,000,000 Class A Preferred shares and 3,000,000 Class C Preferred shares to its Chief Operating Officer as compensation for services rendered.
Income Tax
The Company accounts for income taxes under ASC 740, “Income Taxes.” Under ASC 740, deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss carry-forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
Fiscal year
The Company employs a fiscal year ending December 31.
Net Income (Loss) per share
The net income (loss) per share is computed by dividing the net income (loss) by the weighted average number of shares of common outstanding. Warrants, stock options, and common stock issuable upon the conversion of the Company’s preferred stock (if any), are not included in the computation if the effect would be anti-dilutive and would increase the earnings or decrease loss per share.
Revenue Recognition
The Company recognizes revenue under ASC 606, using the following five-step model, which requires that we: (1) identify a contract with the customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to performance obligations and (5) recognize revenue as performance obligations are satisfied. The Company’s revenue streams historically consisted of three components:
While the operating company generated early revenue from the aforementioned sources, the Company has expanded its focus to finding, vetting and acquiring cash flowing assets including Commercial Real Estate, Energy and Technology Companies. There can be no assurances that these efforts will generate future revenue.
During the period from February 5, 2018 (Inception) through September 30, 2018, the Company’s revenues included related party transactions consisting of $141,263 of equipment sales and $18,954 of management and consulting revenue from an entity over which the former CEO exerts significant influence through his position as its CFO, $6,450 of equipment sales to the former CEO and $2,391 of equipment sales to the current CEO. Costs associated with these related party equipment sales totaled $159,450. See the “Related Party Transactions footnote for a more detailed description of these transactions. We further determined that significant concentrations among a few customers existed in our revenue, as is further discussed in the “Concentrations, Commitments and Contingencies” section of this footnote.
During the period from February 5, 2018 (Inception) through September 30, 2018 and the three months ended September 30, 2018, the Company recognized revenues of $305,350 and $745 and costs of revenue of $231,272 and $69, for gross margins of $74,078 and $646, all respectively.
Financial Instruments
The carrying value of the Company’s financial instruments, including cash and cash equivalents, as reported in the accompanying balance sheet, are stated at fair value.
Going Concern and Management’s Plans
As shown in the accompanying financial statements as of September 30, 2018, the Company had $18,417 of cash, as compared to total current liabilities of $76,245, has incurred substantial operating losses, and had an accumulated deficit of $21,583. Furthermore, the Company’s revenue history has been limited and unstable, and there can be no assurances of future revenues.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, however, the above conditions raise substantial doubt about the Company’s ability to do so. The financial statements do not include any adjustment to reflect the possible future effect on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should the Company be unable to continue as a going concern.
Recent Accounting Pronouncements
The Company has reviewed all recently issued but not yet effective accounting pronouncements and does not believe the future adoption of any such pronouncements may be expected to cause a material impact on its financial condition or results of operations.
Concentrations, Commitments and Contingencies
During the period from February 5, 2018 (Inception) through September 30, 2018 and for the three months ended September 30, 2018, the Company identified the following concentrations among its customers, which it deems significant:
The Company has identified no material commitments and contingencies through the date of these financial statements.
Subsequent Events
The Company evaluates events and transactions after the balance sheet date but before the financial statements are issued.
On October 4, 2018, the Company issued 4,000,000 Class A Preferred shares and 4,000,000 Class C Preferred shares to its Chief Executive Officer and 3,000,000 Class A Preferred shares and 3,000,000 Class C Preferred shares to its Chief Operating Officer as compensation for services rendered.
As of the date of this filing, management determined there were no other events requiring adjustment to or additional disclosure in the financial statements. |
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Organization, Operations and Summary of Significant Accounting Policies (Policies) |
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| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Business Description |
Business description
Blockchain Holdings Capital Ventures, Inc is a public company that is focused on finding, vetting and acquiring cash flowing assets including Commercial Real Estate, Energy and Technology Companies. |
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| Change in Control |
Change in Control
On August 23, 2018, the Company entered into an agreement to purchase the assets of Blockchain Holdings, LLC for consideration of 300,000,000 shares to be issued in exchange for all of Blockchain Holdings, LLC’s assets. This share issuance resulted in a change of control of the issuer. The Company determined that this transaction resulted in a change of control based on the transfer of common stock since (1) the Company’s historical Class A Super Voting Preferred Stock was legally void, and (2) the intent of management would have been to transfer that control in connection with the purchase if that class of stock were valid. Immediately prior to the transaction, the Company’s former CEO, Paul Dickman, owned 72% of the outstanding common stock. Immediately after the transaction, the member of Blockchain Holdings, LLC held a total of 68% of the outstanding common stock, with the Company’s new management controlling a total of 45.6% of the outstanding common stock comprised of 22.8% held by a company owned and controlled by the current CEO and 22.8% held by an entity owned and controlled by the COO. |
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| Business Combination |
Business Combination
The Company evaluated the August 23, 2018 acquisition of Blockchain Holdings, LLC’s outstanding interests and determined that the acquisition falls under guidance of the SEC’s Financial Reporting Manual, Section 12100, which deems the transaction to be a change in control and a “capital transaction in substance,” as a result of the acquisition of all assets critical to Blockchain Holdings, LLC’s operations. As a result, the Company deemed the transaction to be a reverse acquisition and accounted for the transaction under guidance provided by ASC 805 – Business Combinations. Therefore, for accounting purposes, the acquirer is Blockchain Holdings, LLC, the operating company, and the issuer is deemed to be the accounting acquiree. In the event of a reverse acquisition, ASC 805’s guidance calls for the issuer to retain its capital structure and adopt the activity of the operating company. The Company’s recapitalization entry resulted in the following changes to equity:
Management determined that the contractual value of the 300,000,000 shares issued at $0.001 to effect the acquisition for $300,000 was a reasonable valuation. However, since neither entity had assets of value or current revenue-generating operations, the Company determined that the value of the acquisition to be fully impaired and charged $300,000 in losses to the Additional Paid-in Capital portion of the recapitalization entry. |
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| Financial Statements |
Financial Statements
The Company’s balance sheet, and statements of operations and cash flows and accompanying notes included in this interim period filing have not yet been audited and may require substantial adjustments when audited. |
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| Recent Developments |
Recent Developments
On August 23, 2018, Daniel Wong and Delray Wannemacher became directors of the Company’s Board of Directors and Paul Dickman resigned from his position on the Board of Directors and as Chief Executive Officer of the Company. Upon acceptance of his resignation, Delray Wannemacher and Daniel Wong were appointed Chief Executive Officer and Chief Operating Officer, respectively.
On August 30, 2018, the Company filed a Certificate of Amendment of the Certificate of Incorporation with the Secretary of State of Delaware to effect the following: (1) a name change, (2) a 1 for 100 reverse stock split (the “Reverse Split”) of the shares of the Company’s issued and outstanding common stock, par value $0.0001 (the “Common Stock”), and (3) a decrease in the authorized shares of Common Stock of the Company after the Reverse Split. On October 3, 2018, the Company determined not to implement the Reverse Split or the decrease in the authorized shares of Common Stock of the Company. Effective August 30, 2018, the Company’s name was changed to Blockchain Holdings Capital Ventures, Inc.
On September 14, 2018, the Company learned that during the Merger and Reorganization which occurred on September 30, 2016, the Certificates of Designation with respect to the Class A Preferred Super Majority Voting Stock and the Class B Preferred Convertible Non-Voting Stock were not properly filed with the Department of State of the State of Delaware, rendering these classes historically void. As a result, the Company, determined to file a Certificate of Designation with respect to the Class A Preferred Super Majority Voting Stock and not to file a Certificate of Designation with respect to the Class B Preferred Convertible Non-Voting Stock, as there were no shares outstanding with respect to said class.
On September 17, 2018, the Company filed (1) a Certificate of Designation of the Class A Preferred Super Majority Voting Stock and (2) a Certificate of Designation of Class C Convertible Preferred Stock.
The Company evaluated the historical impacts of the error in light of ASC 250 – Accounting Changes and Error Corrections, and determined that the impact of the historical Class A Preferred Stock would be immaterial to the Company in its current post-acquisition state and therefore deemed retroactive restatement to be unnecessary. As discussed in the “Business Combination” section of this footnote, the Company included an elimination of the historical $1,000 balance in Class A Preferred Stock in its accounting for the recapitalization on August 23, 2018. |
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| Cash and Cash Equivalents |
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity of three months or less as cash equivalents.
Cash Flows - During the period ending September 30, 2018, the Company relied on revenue proceeds, related party advances, trade payables and the sale of common stock to fund operations.
Cash flows provided by operations for the period from February 5, 2018 through September 30, 2018 totaled $4,506.
As of September 30, 2018, the Company had cash and cash equivalents of $18,417. |
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| Impairment of Long-lived Assets |
Impairment of Long-lived Assets
In accordance with ASC Topic 360, the Company reviews its long-lived assets, including property, plant and equipment, for impairment whenever events or changes in circumstances indicate that the carrying amounts of the assets may not be fully recoverable. If the total of the expected undiscounted future net cash flows is less than the carrying amount of the asset, a loss is recognized for the difference between the fair value and carrying amount of the asset.
The Company purchased coin mining equipment for $26,550 in early 2018 and determined that the fair market value of such equipment decreased significantly and recognized impairment expense of $26,550 during the period from February 5, 2018 (Inception) through September 30, 2018. |
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| Accounts Payable and Accrued Liabilities |
Accounts payable and accrued liabilities
Accounts payable consisted of $74,434, and accrued liabilities consisted of $1,811 for state and local taxes payable as of September 30, 2018. |
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| Convertible Notes Payable |
Convertible Notes Payable
In July 2016, the Company (pre-acquisition) entered into $7,500 of convertible notes, of which $1,500 were held by the CEO and $6,000 by the CEO’s friends and family. These notes bear interest at 10% per annum, with accrual of interest commencing after December 31, 2017 and mature on December 31, 2018. The agreements define a trigger event as the sale of preferred stock at a stated value of $100,000 and a material funding as $500,000. Terms of the notes permit the noteholders to convert the debt into 4.026% of the Company’s then-outstanding common stock any time between the trigger event and a material funding. Any time on or after maturity, the noteholders may either call the debt or elect to continue holding the debt at the 10% annual interest rate.
The Company evaluated the possibility that a beneficial conversion feature or derivative liability may exist on these notes and concluded that the Company’s stock value would render both features worthless or trivial and therefore did not record a beneficial conversion feature or derivative liability.
In December 2016, the Company repaid $6,000 of these notes, leaving an outstanding balance of $1,500 due to the CEO as of each, June 30, 2018 and December 31, 2017. Interest expense on these notes totaled $75 and $38 for the six and three months ended June 30, 2018, respectively. Accrued interest outstanding on this debt was $225 and $150 as of June 30, 2018 and December 31, 2017, respectively.
Immediately prior to the acquisition, on August 22, 2018, the Company converted these notes and interest totaling $1,725 along with related party payables of $8,823 into 98,230,000 shares of common stock. As of September 30, 2018, the Company owed $0 in principal and interest on these notes. |
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| Related Party Transactions |
Related Party Transactions
From time to time, the Company’s former CEO advanced funds to pay for professional services on behalf of the Company. These advances are due on demand, have no set term and bear no interest. On August 22, 2018, immediately prior to the acquisition, the Company issued 98,230,000 shares of common stock for $8,823 of advances due the former CEO along with convertible debt and interest due him.
During the period from February 5, 2018 (inception) through September 30, 2018, the Company paid consulting fees of $10,000 and $7,500 to its CEO and COO, respectively. The Company does not currently have consulting or employment agreements with these individuals, and as a result, these fees may fluctuate from time to time.
Equipment sales revenue during the period from February 5, 2018 (Inception) through September 30, 2018 included $6,450 of sales to the former CEO and $2,391 to the current CEO.
During the period from February 5, 2018 (Inception) through September 30, 2018, the Company paid the CEO’s company, Wannemacher Corporation., $5,612 of commissions on management and consulting revenue and paid the COO’s company, Omnivance Advisors, Inc. $4,829 of commissions on the same.
During the period from February 5, 2018 (Inception) through September 30, 2018, the Company’s revenues and costs of goods sold included the following related party transactions:
(1) Paul Dickman, the Company’s former CEO is the CFO of ChineseInvestors.com, Inc. and is therefore deemed to exercise significant influence. (2) Paul Dickman is the Company’s former CEO. (3) Delray Wannemacher is the Company’s current CEO.
As of September 30, 2018, the Company was not indebted to any related parties. |
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| Stockholders' Equity |
Stockholders’ Equity
The Company has designated ten million (10,000,000) shares of its preferred stock, par value $0.001 as Class A Preferred Super Majority Voting Stock (“Class A”). The Class A shares have the right to vote upon matters submitted to the holders of common stock, par value $0.0001 of the Company. Class A shares have a vote equal to the number of shares of common stock of the Company which would give the holders of the Class A shares a vote equal to sixty percent (60%) of the common stock. This vote shall be exercised pro-rata by the holders of the Class A. The Company shall have the right to redeem, in its sole and absolute discretion, at any time one (1) year after the date of issuance of such Class A shares, all or any portion of the shares of Class A at a price of one cent ($0.01) per share. Subsequently, on October 4, 2018, the Company issued a total of 7,000,000 Class A Preferred shares to its CEO and COO as stock-based compensation for services rendered.
The Company has not currently authorized a Class B designation of Preferred Stock.
The Company has designated ten million (10,000,000) shares of its preferred stock, par value $0.001 as Class C Convertible Preferred Stock (“Class C”). Each shares of Class C shall be convertible into five (5) shares of common stock. The holders of Class C shall be entitled to receive the same dividend as the holders of the common stock and such dividend shall be paid pro rata per share on a fully converted basis. The holders of Class C shall have piggyback registration rights. The Company shall have the right to redeem, in its sole and absolute discretion, at any time after five (5) years, all or any portion of the shares of Class C at a price of five dollars ($5.00) per share. The Class C shares shall be considered to have a junior liquidation preference to Class A shares and a senior dividend preference to Class A shares. Subsequently, on October 4, 2018, the Company issued a total of 7,000,000 Class C Preferred shares to its CEO and COO as stock-based compensation for services rendered.
As of September 30, 2018, the Company was authorized to issue 450,000,000 shares of common stock. All common stock shares have full dividend and voting rights. However, it is not anticipated that the Company will be declaring distributions in the foreseeable future.
Upon formation, the Company sold the founder 2,000,000 shares of $0.0001 par value common stock for $1,000 cash. Also upon formation, the Company paid the founder stock based compensation for services rendered of 10,000,000 shares of $0.001 par value class A preferred super majority voting stock. These preferred shares have a stated value of par value of $0.001. The holder of the Class Stock shall have the right to vote on any matter with holders of Common Stock and may vote as required on any action, which Colorado law provides may or must be approved by vote or consent of the holders of the specific series of voting preferred shares and the holders of common shares. The Record Holders of the Class A Preferred Shares shall have that number of votes equal to that number of common shares which is not less than 60% of the vote required to approve any action, which Colorado law provides may or must be approved by vote or consent of the holders of other series of voting preferred shares and the holders of common shares or the holders of other securities entitled to vote, if any.
Upon execution of a patent sublicense agreement the Company issued 22,768,273 shares of its class B preferred convertible stock to a trustee on behalf of shareholders of the original license agreement. These shares were converted into regular common stock when the company registering the underlying shares with the SEC and listing of the shares on a recognized exchange. During the year ended December 31, 2017 all of these shares were retired and common shares were issued on a 1 to 1 basis to replace them.
During the fourth quarter of 2015, the Company issued 350,000 shares of common stock to various individuals in consideration of their services rendered in support of the Company resulting in the company recognizing compensation expense of $35 based upon the declared par value of the Company’s common stock since there has been no market price sale of the Companies stock as of this point.
In the third quarter of 2016 the Company issued 14,881,727 shares to a trust to be disbursed at the trustee’s direction as insurance in lieu of purchasing D&O insurance. As the Company has issued no stock for cash, the Company’s assets are inconsequential and there is no active market for this stock, the Company determined that the stock’s value is inconsequential and valued the transaction based upon par value of $.0001 per share, resulting in general and administrative expense of $1,488 during 2016.
In January 2018, the Company issued 125,000 unrestricted common shares to a consultant for services rendered.
On August 22, 2018, the Company’s former CEO and chairman of the board converted $8,823 of payables and $1,725 of debt and accrued interest into 98,230,000 shares of common stock.
In connection with the acquisition on August 23, 2018, the Company recognized an ASC 805 recapitalization totaling 138,355,000 shares of common stock, which reflect all prior activity, and recognized the issuance of 300,000,000 shares of common stock recorded at par value to effect the acquisition.
On August 29, 2018, the Company’s former CEO purchased 266,667 common shares for $40,000.
As of September 30, 2018, the Company had 438,621,667 common shares outstanding.
As of September 30, 2018, zero shares of Class A Preferred Stock and Class C Preferred Stock were issued and outstanding. |
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| General and Administrative Expenses |
General and Administrative Expenses
During the period from February 5, 2018 (Inception) through September 30, 2018 and for the three months ended September 30, 2018, the Company’s general and administrative expenses totaled $37,166 and $32,464, respectively. In each period, these expenses consisted of $17,500 of consulting fees paid to the CEO and COO, $10,548 of legal and professional fees, and the remainder consisted of various administrative costs. |
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| Use of Estimates |
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect 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 revenues and expenses during the reporting period. Actual results could differ from those estimates. |
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| Stock Based Compensation |
Stock Based Compensation
The Company accounts for share-based payments pursuant to ASC 718, “Stock Compensation” and, accordingly, the Company records compensation expense for share-based awards based upon an assessment of the grant date fair value for stock options and restricted stock awards using the Black-Scholes option pricing model.
Stock compensation expense for stock options is recognized over the vesting period of the award or expensed immediately under ASC 718 when options are given for previous service without further recourse. The Company issued stock options to contractors that had been providing services to the Company upon their termination of services. Under ASC 718 these options were recognized as expense in the period issued because they were given as a form of compensation for services already rendered with no recourse.
Subsequently, on October 4, 2018, the Company issued 4,000,000 Class A Preferred shares and 4,000,000 Class C Preferred shares to its Chief Executive Officer and 3,000,000 Class A Preferred shares and 3,000,000 Class C Preferred shares to its Chief Operating Officer as compensation for services rendered. |
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| Income Tax |
Income Tax
The Company accounts for income taxes under ASC 740, “Income Taxes.” Under ASC 740, deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss carry-forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. |
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| Fiscal Year |
Fiscal year
The Company employs a fiscal year ending December 31. |
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| Net Income (Loss) Per Share |
Net Income (Loss) per share
The net income (loss) per share is computed by dividing the net income (loss) by the weighted average number of shares of common outstanding. Warrants, stock options, and common stock issuable upon the conversion of the Company’s preferred stock (if any), are not included in the computation if the effect would be anti-dilutive and would increase the earnings or decrease loss per share. |
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| Revenue Recognition |
Revenue Recognition
The Company recognizes revenue under ASC 606, using the following five-step model, which requires that we: (1) identify a contract with the customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to performance obligations and (5) recognize revenue as performance obligations are satisfied. The Company’s revenue streams historically consisted of three components:
While the operating company generated early revenue from the aforementioned sources, the Company has expanded its focus to finding, vetting and acquiring cash flowing assets including Commercial Real Estate, Energy and Technology Companies. There can be no assurances that these efforts will generate future revenue.
During the period from February 5, 2018 (Inception) through September 30, 2018, the Company’s revenues included related party transactions consisting of $141,263 of equipment sales and $18,954 of management and consulting revenue from an entity over which the former CEO exerts significant influence through his position as its CFO, $6,450 of equipment sales to the former CEO and $2,391 of equipment sales to the current CEO. Costs associated with these related party equipment sales totaled $159,450. See the “Related Party Transactions footnote for a more detailed description of these transactions. We further determined that significant concentrations among a few customers existed in our revenue, as is further discussed in the “Concentrations, Commitments and Contingencies” section of this footnote.
During the period from February 5, 2018 (Inception) through September 30, 2018 and the three months ended September 30, 2018, the Company recognized revenues of $305,350 and $745 and costs of revenue of $231,272 and $69, for gross margins of $74,078 and $646, all respectively. |
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| Financial Instruments |
Financial Instruments
The carrying value of the Company’s financial instruments, including cash and cash equivalents, as reported in the accompanying balance sheet, are stated at fair value. |
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| Going Concern and Management's Plans |
Going Concern and Management’s Plans
As shown in the accompanying financial statements as of September 30, 2018, the Company had $18,417 of cash, as compared to total current liabilities of $76,245, has incurred substantial operating losses, and had an accumulated deficit of $21,583. Furthermore, the Company’s revenue history has been limited and unstable, and there can be no assurances of future revenues.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, however, the above conditions raise substantial doubt about the Company’s ability to do so. The financial statements do not include any adjustment to reflect the possible future effect on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should the Company be unable to continue as a going concern. |
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| Recent Accounting Pronouncements |
Recent Accounting Pronouncements
The Company has reviewed all recently issued but not yet effective accounting pronouncements and does not believe the future adoption of any such pronouncements may be expected to cause a material impact on its financial condition or results of operations. |
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| Concentrations, Commitments and Contingencies |
Concentrations, Commitments and Contingencies
During the period from February 5, 2018 (Inception) through September 30, 2018 and for the three months ended September 30, 2018, the Company identified the following concentrations among its customers, which it deems significant:
The Company has identified no material commitments and contingencies through the date of these financial statements. |
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| Subsequent Events |
Subsequent Events
The Company evaluates events and transactions after the balance sheet date but before the financial statements are issued.
On October 4, 2018, the Company issued 4,000,000 Class A Preferred shares and 4,000,000 Class C Preferred shares to its Chief Executive Officer and 3,000,000 Class A Preferred shares and 3,000,000 Class C Preferred shares to its Chief Operating Officer as compensation for services rendered.
As of the date of this filing, management determined there were no other events requiring adjustment to or additional disclosure in the financial statements. |
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Organization, Operations and Summary of Significant Accounting Policies (Tables) |
8 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Recapitalization Entry Resulted in Changes to Equity |
The Company’s recapitalization entry resulted in the following changes to equity:
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| Schedule of Revenues and Costs of Goods Sold Included the Following Related Party Transactions |
During the period from February 5, 2018 (Inception) through September 30, 2018, the Company’s revenues and costs of goods sold included the following related party transactions:
(1) Paul Dickman, the Company’s former CEO is the CFO of ChineseInvestors.com, Inc. and is therefore deemed to exercise significant influence. (2) Paul Dickman is the Company’s former CEO. (3) Delray Wannemacher is the Company’s current CEO. |
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| Schedule of Concentration Risk Among Customers |
During the period from February 5, 2018 (Inception) through September 30, 2018 and for the three months ended September 30, 2018, the Company identified the following concentrations among its customers, which it deems significant:
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Organization, Operations and Summary of Significant Accounting Policies - Schedule of Recapitalization Entry Resulted in Changes to Equity (Details) - USD ($) |
8 Months Ended | ||||
|---|---|---|---|---|---|
Aug. 23, 2018 |
Sep. 30, 2018 |
||||
| Total Stockholders' Equity [Member] | |||||
| Prior to Recapitalization | $ (76,245) | ||||
| Transaction | 300,000 | ||||
| Recapitalization | (300,000) | ||||
| After Recapitalization | (76,245) | ||||
| Common Stock [Member] | |||||
| Prior to Recapitalization | 13,836 | ||||
| Transaction | 30,000 | ||||
| After Recapitalization | 43,836 | ||||
| Additional Paid-in Capital [Member] | |||||
| Prior to Recapitalization | 1,526 | ||||
| Transaction | 270,000 | ||||
| Recapitalization | (391,607) | ||||
| After Recapitalization | (120,081) | ||||
| Accumulated Deficit [Member] | |||||
| Prior to Recapitalization | (92,607) | ||||
| Recapitalization | 92,607 | ||||
| After Recapitalization | |||||
| Class A Super Voting Preferred Stock [Member] | |||||
| Prior to Recapitalization | [1] | 1,000 | |||
| Transaction | [1] | ||||
| Recapitalization | [1] | (1,000) | $ (1,000) | ||
| After Recapitalization | [1] | ||||
| Class B Non-voting Preferred Stock [Member] | |||||
| Prior to Recapitalization | [1] | ||||
| After Recapitalization | [1] | ||||
| |||||
Organization, Operations and Summary of Significant Accounting Policies - Schedule of Revenues and Costs of Goods Sold Included the Following Related Party Transactions (Details) - USD ($) |
3 Months Ended | 8 Months Ended | |||||||
|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2018 |
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| Cost of goods sold | $ (69) | $ (231,272) | |||||||
| Gross margin | 676 | 74,078 | |||||||
| Management and Consulting Fees [Member] | |||||||||
| Total related party revenue | 18,954 | ||||||||
| Cost of goods sold | |||||||||
| Gross margin | 18,954 | ||||||||
| Management and Consulting Fees [Member] | ChineseInvestors.com, Inc. [Member] | |||||||||
| Total related party revenue | 18,954 | ||||||||
| Management and Consulting Fees [Member] | Paul Dickman [Member]] | |||||||||
| Total related party revenue | |||||||||
| Management and Consulting Fees [Member] | Delray Wannemacher [Member] | |||||||||
| Total related party revenue | |||||||||
| Equipment Sales [Member] | |||||||||
| Total related party revenue | 69,060 | ||||||||
| Cost of goods sold | (159,450) | ||||||||
| Gross margin | (9,346) | ||||||||
| Equipment Sales [Member] | ChineseInvestors.com, Inc. [Member] | |||||||||
| Total related party revenue | [1] | 141,236 | |||||||
| Equipment Sales [Member] | Paul Dickman [Member]] | |||||||||
| Total related party revenue | [2] | 6,450 | |||||||
| Equipment Sales [Member] | Delray Wannemacher [Member] | |||||||||
| Total related party revenue | [3] | $ 2,391 | |||||||
| |||||||||
Organization, Operations and Summary of Significant Accounting Policies - Schedule of Concentration Risk Among Customers (Details) |
3 Months Ended | 8 Months Ended |
|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2018 |
|
| Customer A (Related Party) [Member] | ||
| Concentration risk percentage | 52.00% | |
| Customer B [Member] | ||
| Concentration risk percentage | 33.00% | |
| Customer C [Member] | ||
| Concentration risk percentage | 100.00% | 3.00% |