Blockchain Industries, Inc.
730 Arizona Ave., Suite 220
Santa Monica, California 90401
May 28, 2019
Delivered by electronic submission via EDGAR
United States Securities and Exchange Commission
Division of Corporation Finance
100 F Street, N.E., Mail Stop 3561
Washington, DC 20549
Attn: | Mr. William H. Thompson | |
Re: | Blockchain Industries, Inc. | |
Form 10-K for Fiscal Year Ended April 30, 2018 | ||
Filed October 29, 2018 | ||
Amendment 2 to Form 10-Q for Fiscal Quarter Ended January 31, 2018 | ||
Filed November 2, 2018 | ||
Response Dated November 2, 2018 | ||
File No. 0-51126 |
Dear Mr. Thompson:
By letter dated December 3, 2018, the staff (the “staff,” “you,” or ”your”) of the U.S. Securities & Exchange Commission (the “SEC” or the “Commission”) provided Blockchain Industries, Inc. (the “Company,” “we,” “us,” “us,” or “our”) with its comments to the Company’s Form 10-K/A for the Fiscal Year Ended April 30, 2018 and our Form 10-Q/A3 for the Quarterly Period Ended January 31, 2018. We are in receipt of your letter and set forth below are the Company’s responses to the Staff’s comments. For your convenience, the comments are listed below, followed by the Company’s responses.
Set forth below are the Company’s responses to the Staff’s comments. The numbering of the responses corresponds to the numbering of comments in the letter from the Staff.
Form 10-K for Fiscal Year Ended April 30, 2018
General
1.
In light of your revised disclosure regarding your Investment Management vertical and your response to comment 22 in our letter dated May 31, 2018 we are considering your disclosure. We may have additional comments.
Response 1.
Duly noted.
Cover Page
2.
You state on your cover page that you have Common Stock registered pursuant to Section 12(g) of the Exchange Act; however, given that you withdrew your registration statement on Form 10-12G earlier this year, this statement appears to be inaccurate. Please revise to remove this statement or advise.
1
Response 2.
We will revise our disclosure accordingly.
3.
Please disclose the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of your most recently completed second fiscal quarter.
Response 3.
In response to the Staff’s comment, the above-mentioned information will be added to the latest Form 10-K/A to be filed within 15 business days of this response.
Our Business, page 5
4.
As part of your investment management vertical, you have started, and intend to continue, to create a portfolio of digital assets through participation in offerings and secondary market purchases of various tokens. Please disclose the process and framework that you are using to determine which digital assets to add to your portfolio. Please also disclose how you will evaluate whether each digital asset you acquire and hold is a security. If such digital asset constitutes a security, please confirm your understanding that if you choose to sell these tokens in the future, you will either register the issuance, or rely upon an exemption from registration.
Response 4.
In response to the Staff’s comment, the Company has developed an internal evaluation methodology that includes macro/micro-market trends, current portfolio holdings, potential returns with base, best, worst case scenarios, assessments of the intended investment’s management team, or other key factors that would have a significant impact on the business. The Company’s position on whether or not a token is a security is outlined in the memo that is produced for each potential investment. This is a policy the Company plans to handle internally. It did not apply to investments made.
Risk Factors, page 10
5.
We note your disclosure of a material weakness in your internal controls over financial reporting on page 43. Please provide related risk factor disclosure or tell us why you do not believe such disclosure is necessary.
Response 5.
We will revise our disclosure accordingly to include an additional risk factor related to material weakness in our internal controls.
The following disclosure will be added to the latest Form 10-K/A to be filed within 15 business days of this response:
“Failure of our internal control over financial reporting could harm our business and financial results.
Our management is responsible for establishing and maintaining effective internal control over financial reporting. Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of financial reporting for external purposes in accordance with accounting principles generally accepted in the United States. Internal control over financial reporting includes maintaining records that in reasonable detail accurately and fairly reflect our transactions; providing reasonable assurance that transactions are recorded as necessary for preparation of the financial statements; providing reasonable assurance that receipts and expenditures of our assets are made in accordance with management authorization; and providing reasonable assurance that unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements would be prevented or detected on a timely basis. Any failure to maintain an effective system of internal control over financial reporting could limit our ability to report our financial results accurately and timely or to detect and prevent fraud.
2
In connection with the evaluation of our internal control over financial reporting as of April 30, 2018, that was undertaken by management in connection with the preparation of our Annual Report on Form 10-K for the fiscal year ended April 30, 2018, management determined that our lack of sufficient internal accounting resources resulting in a lack of segregation of duties to ensure an adequate review of financial statement preparation and ineffective management review of complex transactions to enable timely decisions regarding disclosures constituted a material weakness as of April 30, 2018. To remediate the foregoing weaknesses managements plans include (i) re-designing our accounting processes and control procedures; (ii) identifying gaps in our skill base and the expertise of our staff required to meet the financial reporting requirements of a public company; and (iii) review and improve current accounting policies and procedures and develop a thorough document detailing said policies and procedures with respects to the requirements and application of both US GAAP and SEC Guidelines. Despite these remedial measures undertaken during the fiscal year end April 30, 2018, we were not able to adequately address the weaknesses that we identified, and thus management determined that the weaknesses still existed as of April 30, 2018.”
We may be classified as an investment company, page 12
6.
Please revise your disclosure to discuss the potential effect that the volatility in the digital asset markets may have on your ability to maintain a portfolio consisting of no more than 40% of digital assets that are securities.
Response 6.
In response to the Staff’s comment, see revision in underline below which will be added to the latest Form 10-K/A to be filed within 15 business days of this response.
“We believe that we are not engaged in the business of investing, reinvesting, or trading in securities, and we do not hold ourselves out as being engaged in those activities. However, under the Investment Company Act of 1940, as amended, (the “1940 Act”), a company may be deemed an investment company under section 3(a)(1)(C) if the value of its investment securities is more than 40% of its total assets (exclusive of government securities and cash items) on a consolidated basis.
As a result of our investments and/or the result of volatility in the digital asset markets, including investments in which we do not have a controlling interest, the investment securities we hold could exceed 40% of our total assets, exclusive of cash items and, accordingly, we could determine that we have become an investment company as defined under the 1940 Act. The Digital Assets we own, acquire or mine may be deemed an investment security by the SEC. An investment company can avoid being classified as an investment company if it can rely on one of the exclusions under the 1940 Act. One such exclusion, Rule 3a-2 under the 1940 Act, allows an investment company a grace period of one year from the earlier of (a) the date on which an issuer owns securities and/or cash having a value exceeding 50% of the issuer's total assets on either a consolidated or unconsolidated basis and (b) the date on which an issuer owns or proposes to acquire investment securities having a value exceeding 40% of the value of such issuer's total assets (exclusive of government securities and cash items) on an unconsolidated basis. As of April 30, 2018, we do not believe we are an investment company, however resolution of pending comments received from the SEC have not been concluded and this issue has not been resolved by SEC rules or regulations. For us, any grace period would be unknown until these issues are resolved or the SEC issues rules and regulations concerning cryptocurrency treatment. We may take actions to cause the investment securities held by us to be less than 40% of our total assets, which may include acquiring assets with our cash and cryptocurrency on hand or liquidating our investment securities, Digital Assets or seeking a no-action letter from the SEC if we are unable to acquire sufficient assets or liquidate sufficient investment securities in a timely manner.
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As Rule 3a-2 is available to a company no more than once every three years, and assuming no other exclusion were available to us, we would have to keep within the 40% limit for at least three years after we cease being an investment company. This may limit our ability to make certain investments or enter into joint ventures that could otherwise have a positive impact on our earnings. However, we do not intend to become an investment company engaged in the business of investing and trading securities.
Classification as an investment company under the 1940 Act requires registration with the SEC. If an investment company fails to register, it would have to stop doing almost all business, and its contracts would become voidable. Registration is time consuming and restrictive and would require a restructuring of our operations, and we may be constrained in the kind of business we could do as a registered investment company. Further, we would become subject to substantial regulation concerning management, operations, transactions with affiliated persons and portfolio composition, and would need to file reports under the Investment Company Act. The cost of such compliance would result in the Company incurring substantial additional expenses, and the failure to register if required would have a materially adverse impact on our operations.”
As of the date of this response letter, the Company holds an immaterial amount of cryptocurrencies as almost all of the Company’s holdings were sold during the past 12 months. Additionally, we no longer plan to have an investment management business nor do we foresee making any additional balance sheet investments in cryptocurrencies or other securities in the future. Accordingly, we no longer view becoming a 1940 Act as a possibility given the Company’s current assets and business model moving forward. Further, it is our intention, not to pursue the engagement of certain transactions relating to the Company holding, being issued or acquiring a substantial amount of cryptocurrencies relative to non-investment assets.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Recent Developments, page 30
7.
We note your revised disclosure in response to comment 19 in our letter dated May 31, 2018, included in Note 2 to the Financial Statements and in the “Recent Development” section on page 30. Please expand your disclosure to describe for each investment the amount of tokens received, the issuer of the token, the nature of the token and explain how you determined the nature of such tokens.
Response 7.
In response to the Staff’s comment, we will expand the disclosure per the above-mentioned comment in the latest Form 10-K/A to be filed within 15 business days of this response.
The following disclosures have been added:
1.
Chimes ICO: No tokens received yet as part of investment.
2.
AutoLotto: No tokens received yet as part of investment.
3.
Academy: 416,666.67 tokens and treat them as security tokens.
4.
Coral Health: On January 22, 2019, Coral Health informed the Company that our investment was being converted into an equity position under the Equity Contingency provision of the SAFT. The $250,000 invested translated into 0.25% equity ownership into Coral Health, which consists of 25,000 shares out of a total of 10,000,000 shares in Coral Health’s Canadian corporation. The Company will also receive an equity position in Coral Health’s U.S. corporation, entitled to 25 shares out of 10,000 total shares. Per Coral Health, the amount of total shares outstanding may be lower if certain shareholders do not gain title to their shares. In addition, Coral Health created option pools for incentive compensation for employees, officers and contractors of 1,250,000 for the Canadian corporation and 1,250 for the U.S. corporation, which could result in future dilution of the Company’s equity positions.
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5.
Basecoin & Origin Protocol: Basecoin investment was returned to the Company on Jan 31, 2019 at a loss close to 8%. Origin tokens have not been received, nor do we know the exact amount we will receive. The Company will treat these tokens as security tokens.
6.
BlockEx: The Company treats these tokens as security tokens
7.
Wireline: The Company treats these tokens as security tokens.
8.
VideoCoin: The Company treats these tokens as security tokens.
9.
LegatumX: Common equity, no tokens received or to be received.
8.
We note your response to comment 20 in our letter dated May 31, 2018 and we reissue the comment in part. In this regard, please revise to discuss whether you plan to hold or trade each digital asset or cryptocurrency you currently hold and describe the custodial practices and cybersecurity measures you currently have in place or intend to use to protect the digital assets you hold, or tell us where you have provided such disclosures in your filing. Please also revise to disclose any risks and challenges created by events on the underlying blockchain of the asset, such as “forks” and “airdrops.”
Response 8.
In response to the Staff’s comment, we have expanded the disclosure per the above-mentioned comment in the latest Form 10-K/A to be filed within 15 business days of this response.
The following disclosures are to be added:
1.
Given liquidity needs, the Company could sell digital assets (if there is a liquid market for the asset). If company and general crypto market recovers, the Company may hold.
2.
The Company’s custodial and cybersecurity measures include using cold storage for tokens that have wallets that allow this. The Company’s management and Board, which forms an informal investment committee, will be responsible for determining and using “best practices” measures when engaging in transactions that require buy, sell or hold decision making.
3.
There may be unknown accounting issues with new assets delivered by airdrops and forks. There may also be loss of value from existing assets if the blockchain forks because market conditions do not find the fork advantageous.
9.
We note your response to comment 21 in our letter dated May 31, 2018 and we reissue the comment. To the extent you plan to trade digital assets, disclose the trading platforms or exchanges on which you intend to trade these assets.
Response 9.
The Company currently has accounts with Bitfinex, Binance, Nanex, Gemini and Coinbase/GDAX. The Company will utilize these exchanges, open new accounts at different exchanges, or engage in over-the-counter sales of digital assets in order to obtain the best pricing. In addition, the Company may seek opportunities to exchange current digital assets for other digital assets, depending on current market conditions for both digital asset pairs and digital asset to fiat pairs. The Company currently does not hold a material amount of these assets, but most of what is currently held is without significant value. We have revised the recent developments section of the 10-K to provide for updated disclosure regarding this aspect of our business. The Company believes this comment, regarding the 1940 Act, to be moot as the Company no longer has plans to develop this aspect of its business, and while it maintains these accounts, it does not intend to engage in this line of business any further.
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Chimes ICO, page 30
10.
We note that you have paid for Chimes Equity Tokens and acquired Chimes Equity Tokens pursuant to Simple Agreements for Future Tokens (“SAFTs”) to be issued in the future. Disclose under what circumstances these sets of tokens will be issued to you in the future. These SAFTs grant you “the option to purchase future utility tokens for use on the Chimes network platform.” Please describe the services provided by the Chimes network platform, how you determined that these are utility tokens, and how you will determine the number of tokens to be received.
Response 10.
In response to the Staff’s comment:
For the Company to receive tokens through our investment in the Chimes SAF, there will need to be a Network Launch before the expiration or termination of the SAFT.
Chimes plans to leverage their audience to create a global marketplace facilitating new music-related information, products and services built around a blockchain-based ecosystem for fans, musicians, and music professionals. By becoming the central online hub for music information and discovery, Chimes believe their site will become the nexus for artists’ interactions, communications between industry professionals, and a key launch point for consumers to purchase from artists; buy concert tickets, artist merchandise and memorabilia; and conduct a host of other music-related transactions facilitated by their proprietary cryptocurrency, or token. It is anticipated that the Chimes marketplace will act as a clearinghouse for new music-related services such as crowdsourced musical performances, sponsored creation of music, micro-sales of music licensing rights, and other services conceived and implemented by their user community in a decentralized manner. Chimes believes this new ecosystem requires two elements to be successful: (1) a decentralized blockchain model for smart contract payments and incentives and (2) their comprehensive music information data service, the growth and maintenance of which will be facilitated by a decentralized blockchain. It is the intention for the combination of these two offerings will create the community around which their products will launch.
BlockEx, page 31
11.
We note your response to comment 15 in our letter dated May 31, 2018 and we reissue the comment in part. Please clarify if you, the other investors, or both, will be entitled to the tokens to be issued to the “investor pool.” We also note your revised disclosure that “this investment provides the Company with exposure to a digital asset exchange platform.” Please clarify how this investment provides you with such exposure. If you have procured additional tokens via the pre-sale feature you reference, please disclose those as well.
Response 11.
The Company received 1,428,571 tokens and this is all the Company will receive. The BlockEx Digital Asset Exchange Platform manages the entire lifecycle of blockchain based digital assets, including origination, issuance, exchange, settlement and redemption. Therefore, by owning BlockEx tokens, the Company has a direct investment in this digital asset exchange platform.
Results of Operations
Years Ended April 30, 2018 and 2017, page 33
12.
Revise to discuss the anticipated sources of funds that you will need to proceed with your material commitments. For example, we note your disclosure on page 7 that you will seek additional capital to continue with your plan to build a data center for your Digital Asset Mining vertical and your disclosure on page 9 regarding your expectation to “seed [y]our funds with [y]our own capital by the end of the 2018 calendar year” for your investment company vertical. In light of your disclosure regarding your ability to continue as a going concern, please also disclose how you intend to finance your operating costs over the next 12 months. Refer to Item 303(2)(i) of Regulation S-K.
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Response 12.
In response to the Staff’s comment, we will update the Results of Operations section on page 33 per the above-mentioned comment in the latest Form 10-K/A to be filed within 15 business days of this response.
The following disclosure language will be added:
We do not have any material commitments for capital expenditures as of the fiscal year ended April 30, 2018.
“The Company has funded operations in the past through the sales of its services and issuances of common stock. The Company’s continued operations are dependent upon obtaining an increase in its sales volume through its Advisory and Media and Education Services segments, the successful launch and revenue generation of the Investment Management and Digital Asset Mining segments, or the issuance of additional shares of common stock.
Based on the Company’s cash balance at April 30, 2018, and projected cash needs for the fiscal year ended April 30, 2019, management estimates that it will need to increase sales revenue and/or raise additional capital to cover operating and capital requirements. Management will need to raise additional funds through potential equity or debt financing. Although management has been successful to date in raising necessary funding, there can be no assurance that sales revenue will substantially increase or that any required future financing can be successfully completed on a timely basis, or on terms acceptable to the Company.
Operating expenses, page 34
13.
We note that you identify two or more factors that contributed to a change in your operating expenses. Please disclose the factors that resulted in the increase in legal and professional fees and general and administrative expenses and the dollar impact that each had on operating expenses. Please refer to Item 303(a)(3)(i) of Regulation S-K.
Response 13.
In response to the Staff’s comment, we will update the disclosure language in the above-mentioned section in the latest Form 10-K/A to be filed within 15 business days of this response. Revision in underline below
See revised disclosure below.
“Operating expenses for the years ended April 30, 2018 and 2017 were $2,894,882 and $148,000, respectively. The increase is attributable to the commencement of significant operations, primarily in the form of professional fees and administrative fees. These expenses include $1,760,703 in legal and professional services and $1,134,179 in general and administrative expenses. The general and administrative expenses consist of primarily travel expenses, advertising and marketing for our blockchain conference in Puerto Rico, meals, rent, office supplies and other miscellaneous office expenses. The legal and professional services expenses increased significantly due to the Company hiring contractors to help with legal reviews, investment banking analysis, digital asset banking analysis, management of the company (executive officer compensation, IT services, marketing, general operations, etc.), and specialists for the conference in Puerto Rico.”
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Item 8. Financial Statements and Supplementary Data
Consolidated Balance Sheets, page F-12
14.
Please identify for us and consider the need to revise your disclosure to clarify the material components of the Investment in the SAFT balance sheet line item, the accounting for them and the basis for such accounting, and whether the title of the line item appropriately reflects its material components. For example, when your refer to equity tokens and utility tokens do they represent the ASC Master Glossary definition of financial assets, derivative, equity security or intangible asset? Similarly, please also consider the need to clarify your disclosure to indicate for each material item on pages F-12 to F-14 of your April 30, 2018 10-K the balance sheet line item in which it is presented and how you are accounting for each.
Response 14.
In response to the Staff’s comment,
The Company accounts for the investments in Equity Tokens as Equity Securities as defined in the ASC Master Glossary. These are measured at Fair Value at each reporting period in accordance with ASC 820 and are represented as Investments in Digital Currencies line items on the balance sheet.
The Company accounted for the Utility Tokens received as part of our SAFT agreements as Financial Assets as defined in the ASC Master Glossary. These were measured and recorded at cost upon the date of investment by the Company. The Company has concluded that there is no current or future value related to these Utility Tokens and have written these SAFT investments down to $0.
We will update the disclosure language and include a table detailing the components of the SAFT investment in the above-mentioned section in the latest Form 10-K/A to be filed within 15 business days of this response.
See revised disclosure below. Revision in underline below:
“The Company enters into simple agreements for future tokens (“SAFT”) in which the Company invests in a company for a promise of access to future product of the company. The Company accounts for its Investment in SAFT agreements as a financial asset and, in accordance with ASC 321 Investments – Equity Securities, the Investments in SAFT agreements are carried at cost. At April 30, 2018, the Company concluded that there is no current or future value related to the Investments in SAFTs and, as a result, have written-off the full $1,720,000.”
Consolidated Statement of Operations, page F-3
15.
Please tell us your basis in GAAP for classifying stock compensation expense under other income (expense) rather than under operating expenses in the consolidated statement of operations for the year ended April 30, 2018.
Response 15.
In response to the Staff’s comment, we inadvertently included stock compensation expense in other income (expense). We have reclassified stock compensation expense to operating expense in the Statement of Operations for the year ended April 30, 2018, of the latest Form 10-K/A to be filed within 15 business days of this response.
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Consolidated Statements of Cash Flows, page F-5
16.
Please tell us how to reconcile proceeds from the issuance of common stock disclosed in the consolidated statements of shareholders’ equity (deficit). In addition, please revise to disclose non-cash investing and financing activities. Please refer to ASC 230-10-50-3.
Response 16.
In response to the Staff’s comment, we updated cash flow statement to better reflect the issuances of common and preferred stock in the latest Form 10-K/A to be filed within 15 business days of this response.
Notes to the Audited Consolidated Financial Statements
Note 2. Summary of Significant Accounting Policies
General
17.
Please disclose the factors used to identify your reportable segments, including the basis of organization and the types of products and services from which each segment derives its revenues. Please refer to ASC 280-50-10-21. In addition, please disclose revenues for each product and service or each group of similar products and services unless it is impracticable to do so. If providing the information is impracticable, please disclose that fact.
Response 17.
In response to the Staff’s comment, we have included disclosure regarding the factors used to identify our reportable segments, including the basis of organization and the types of products and services from which each segment would derive its revenues. In addition, due to a majority of the Company’s revenues being generated by one reportable segment, the media and education segment, the Company was unable to produce any consistent, material operations in any of our other segments. We believe the added disclosure, as noted above, provides a transparent disclosure to investors regarding our business verticals. While these business segments existed at the time of the filing, due to the lack of interest from outside parties, the Company has pivoted away from the Investment Management, Digital Asset Advisory Services and Digital Asset Mining segments. There is a possibility the Company explores the Digital Asset Advisory Services business segment in the future if there is interest and the Company has the capabilities to do so.
See added disclosure below:
“Segment Reporting
The Company has four reportable segments: Investment Management, Digital Asset Advisory Services, Media and Education, and Digital Asset Mining. The Investment Management segment provides investment management services for block-chained related assets. The Digital Asset Advisory segment provides clients a complete solution including, but not limited to, architecting their token structure and issuance, crypto-economic design, technology engineering, consulting, generating whitepapers, software development, marketing and eventually making capital introductions. The Media and Education segment helps promote the awareness, growth and education of blockchain technology and digital assets. The Digital Asset Mining segment will set up mining facilities with access to inexpensive energy and lease these facilities to experienced digital asset miners.
The accounting policies of each of the segments are the same as those described in the summary of significant accounting policies. The Company evaluates performance based on profit or loss from operations before income taxes not including nonrecurring gains and losses and foreign exchange gains and losses. We account for intersegment sales and transfers as if the sales or transfers were to third parties, that is, at current market prices.
9
The Company’s reportable segments are strategic business units that offer different products and services. They are managed separately because each business requires different technology and marketing strategies. As of the year ended April 30, 2018, the only reportable segment that generated significant revenue or operations was the Media and Education segment. The Company is currently unable to follow through on the development of its other segments.”
18.
Please revise to include a description of the accounting policies related to available-for-sale securities.
Response 18.
In response to the Staff’s comment, we updated the Fair Value Measurement disclosure in Note 2 to reflect our accounting policy related to investments insecurities in the latest Form 10-K/A to be filed within 15 business days of this response.
Stock-based Compensation, page F-10
19.
Please revise to disclose how you determine the measurement date of stock-based awards to nonemployees, how you measure stock-based compensation costs before the measurement date, and how you measure stock-based compensation costs after the measurement date. Please refer to ASC 505-50.
Response 19.
In response to the Staff’s comment, we updated the Stock-based Compensation disclosure in Note 2 to reflect the above comment in the latest Form 10-K/A to be filed within 15 business days of this response.
See revised disclosure below. Revision in underline below.
“In accordance with ASC 718, Compensation – Stock Based Compensation, and ASC 505, Equity Based Payments to Non- Employees (“ASC 505”), the Company accounts for share-based payment using the fair value method. Common shares issued to third parties for non-cash consideration are valued based on the fair market value of the services provided or the fair market value of the common stock on the measurement date, whichever is readily determinable. Per ASC 505 the measurement date is (a) when a performance commitment, as defined, is reached or (b) when the earlier of (i) the non-employee performance is complete or (ii) the instruments are vested. ASC 505 allows for, when appropriate, an issuer to recognize the costs related to share-based payment transactions with non-employees before a measurement date has occurred if (i) the quantity and terms of the equity instruments are known up front or (ii) the quantity or any of the terms of the equity instruments are not known up front for purposes of recognition of any costs of the transaction during financial reporting periods before the measurement date. If any costs are recognized prior to the measurement date the fair value of the equity instruments shall be remeasured at each reporting period. The Company identified the measurement date for the share-based instruments at the date of their specific performance commitment and did not recognize any related costs prior to the measurement dates.
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The Company calculates the fair value of option grants utilizing the Black-Scholes pricing model and estimates the fair value of the stock based upon the estimated fair value of the common stock. The amount of stock-based compensation recognized during a period is based on the value of the portion of the awards that are ultimately expected to vest. The result of the estimates used in our valuation was approximately $3,222,436 million of stock-based compensation expense for the year ended April 30, 2018, comprised of $2,460,083 of expense related to common shares issued to independent contractors and $762,353 of expense related to options granted to independent contractors.”
Investments in Digital Currencies, page F-11
20.
We note your accounting policy disclosure that you account for investments in digital currencies in accordance with the fair value option in ASC 825. In order to help us evaluate your accounting policy, please analyze for us each of your investments in digital assets in the context of the specific provisions of ASC 825-10-15 and demonstrate why they represent eligible items to which the fair value option may be applied. In addition, as previously requested, please analyze for us whether each of your investments in digital assets are intangible assets as defined in ASC 350 and if so, your analysis of the specific provisions of ASC 350-10-15.
Response 20.
In response to the Staff’s comment, upon further review of the Company’s investments in cryptocurrency we believe that these investments should qualify and be recorded as indefinite-lived intangible assets. The definition of an intangible asset, per ASC 305-10-20, is an asset (not including financial assets) that lack physical substance. Due to the fact that cryptocurrencies are created by mining and that they are stored in digital wallets the Company believes that cryptocurrencies satisfy the definition of not having physical substance. Further, the Company does not believe cryptocurrency qualifies for cash or cash equivalents as defined in the ASC Master Glossary. As a result, the Company will reclassify its investment in cryptocurrency to intangible assets, recorded at cost, and test for impairment annually or at the time of a triggering event.
Investments in SAFT’s and Pre-IOC Tokens
LegatumX, page F-14
21.
Please tell us how you are accounting for your investment in LagatumX common stock and how the investment is recorded in the consolidated balance sheets.
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Response 21.
In response to the Staff’s comment, we updated the disclosure to reflect the treatment of the investment as a VIE. We also updated Note 2. Significant Accounting Policies to reflect VIE language as well as the financial statements to reflect the non-controlling interest piece in the latest Form 10-K/A to be filed within 15 business days of this response.
See added disclosure language for VIE treatment in Note 2 below:
“Variable Interest Entities
The Company follows ASC 810-10-15 guidance with respect to accounting for variable interest entities (each, a “VIE”). These entities do not have sufficient equity at risk to finance their activities without additional subordinated financial support from other parties or whose equity investors lack any of the characteristics of a controlling financial interest. A variable interest is an investment or other interest that will absorb portions of a VIE’s expected losses or receive portions of its expected residual returns and are contractual, ownership, or pecuniary in nature and that change with changes in the fair value of the entity’s net assets. A reporting entity is the primary beneficiary of a VIE and must consolidate it when that party has a variable interest, or combination of variable interest, that provides it with a controlling financial interest. A party is deemed to have a controlling financial interest if it meets both of the power and losses/benefits criteria. The power criterion is the ability to direct the activities of the VIE that most significantly impact its economic performance. The losses/benefits criterion is the obligation to absorb losses from, or right to receive benefits from, the VIE that could potentially be significant to the VIE. The VIE model requires an ongoing reconsideration of whether a reporting entity is the primary beneficiary of a VIE due to changes in facts and circumstances.
We currently consolidate one VIE, LegtumX, as of April 30, 2018. The Company had no VIEs at April 30, 2017. Refer to Note 4, Investment in LegatumX, for additional information.”
Note 6. Note Receivable, page F-21
22.
Please explain to us how you are accounting for the option to purchase tokens of AutoLoan initial coin offering and the basis in GAAP for your accounting citing relevant accounting literature. Please be sure to address the guidance in ASC 815.
Response 22.
In response to the Staff’s comment, we have estimated that the current and future value for the AutoLotto Options is $0. We have added the following language to the disclosures discussing the AutoLotto Options.
“Due to management’s estimate of the lack of an active market for the Option or the future market of the AutoLotto Tokens the Company recorded a value of $0 at April 30, 2018.”
Note 12. Stockholders’ Equity (Deficit)
Common Stock Issued in Exchange for Consulting, Professional and Other Services, page F-23
23.
We reviewed you response to comment 10 and the revisions to your disclosure. Please address the following with respect to stock-based compensation awards:
●
We understand that you completed a 409(A) valuation on May 22, 2018 to determine the fair value of stock-based compensation awards granted to employees and nonemployees during 2017 and 2018. Please explain to us why you did not use the OTC trading prices of your common stock in determining the fair value of equity awards granted to nonemployees and employees. In addition, please tell us the trading prices of your common stock on each valuation date. Finally, please tell us whether the 409A valuations comply the AICPA Audit and Accounting Practice Aid “Valuation of Privately-Held-Company Equity Securities Issued as Compensation.”
12
●
We also understand that you may have used the sales prices of recent private offerings of common stock to determine the fair value of stock-based compensation awards. Please tell us what the OTC trading prices of your common stock was on the dates of the private placements.
●
Please provide us a summary of stock-based awards that includes the grantee, grant date, the OTC trading prices on the grant dates and the number of shares of common stock underlying the stock option and restricted stock awards.
●
Please tell us how you accounted for the modified award described on page 47 granted to Mr. Robbins on May 10, 2018.
●
Please revise to provide all of the applicable disclosures required by ASC 718-10-50-2 for stock options and restricted stock awards granted to employees and nonemployees.
Response 23.
In response to the Staff’s comment
●
The Company did not use the OTC trading prices of our common stock in determining the fair value equity awards granted to nonemployees and employees due to the lack of significant historical trading activity and volume at the time of the grants. Management felt that the price provided in Private Placements provided a more reasonable and conservative baseline for valuation.
●
The OTC trading prices for our common stock on each valuation date is as follows:
o
December 1, 2017 – $3.50
o
January 1, 2018 – $7.025
o
February 1, 2018 – $14.00
o
March 1, 2018 - $13.50
●
The OTC trading prices of our common stock on each of the dates of our private placements are as follows:
o
Please refer to Exhibit A of this document
●
Please refer to the Exhibit B of this document for a summary of the stock-based awards;
●
The initial 120,000 options issued to Mr. Robbins as part of his February 1, 2018 employment agreement were initially valued using the Black-Scholes model. As of the cancellation and date of Mr. Robbins’ new employment agreement on May 10, 2018, none of the original 120,000 options had vested and therefore had not been expensed in any amount. The 120,000 options were cancelled. We fair valued the 144,000 options provided in the May 10, 2018 agreement, using the Black-Scholes Model, and have recorded expense based on the vesting schedule.
●
We have updated applicable disclosures required by ASC 718-10-50-2 for stock options and restricted stock awards in Note 12.
Subsequent Events, page F-26
24.
We note your last paragraph that you have received Ether and Bitcoin as payment for a subscription purchase agreement. In an appropriate place in your annual report, please explain the payment process. For example, explain how the conversion of the cryptocurrency to dollars will be accomplished, whether the company will use a specific cryptocurrency exchange and how and when the price in cryptocurrency will be determined and communicated to the purchaser.
13
Response 24.
For a subscription purchase agreement, the Company would provide the related wallet address to the investor. Typically, the investor would send a small test transaction, ensuring the Company receives the deposit. For a test transaction or any other deposit for a subscription purchase agreement, the Company would communicate the U.S. Dollar related exchange to the investor either immediately before or after the transaction settled. The exchange rate used would either be from Coinmarketcap.com, which would typically be the case if the investor send money into a cold storage wallet, or a price quoted by the exchange, if the investor sent money to an exchange wallet. The exchange rates, wallets of the investor, Ether and Bitcoin amounts remitted, or other relevant information were recorded for best practices in recordkeeping.
Exhibits 31.1 and 31.2
25.
We note that paragraph 4d. does not conform to the certification set forth in Item 601(31)(i) of Regulation S-K. Please revise to conform to the certification in Item 601(31)(i) of Regulation S-K.
Response 25.
In response to the Staff’s comment, we have updated the language for paragraph 4d. in Exhibits 31.1 and 31.2 in the latest Form 10-K/A to be filed within 15 business days of this response .
General
26.
Please tell us when you plan to file your quarterly report on Form 10-Q for the quarter ended July 31, 2018.
Response 26.
In response to the Staff’s comment, we plan on filing our quarterly report on Form 10-Q for the quarter ended July 31, 2018, on or about September 15, 2019, contingent on the resolution of the comments included in this letter. We are continuing to file with OTC in the meantime.
Amendment 2 to Form 10-Q for Fiscal Quarter Ended January 31, 2018
Notes to Unaudited Financial Statements
For the Three and Nine Month Interim Periods Ended January 31, 2018
Note 10. Restatement of Financial Statements, page 4
27.
We reviewed your response to comment 2 and the revisions to your disclosure. We note you restated your financial statements for other errors that you did not address in your restatement disclosures, including a restatement of professional fees and the AutoLotto note receivable not previously recognized. Please revise your disclosure to also discuss the errors in your interim financial statements related to stock-based compensation expense included in professional fees and the AutoLotto note receivable. Please refer to ASC 250-10-50-7 and 50-11.
Response 27.
In response to the Staff’s comment, we updated the disclosure in Note 10. Restatement of Financial Statements to reflect the items noted above not addressed in Amendment #2 in the latest Form 10-QA to be filed within 15 business days of this response.
14
See added disclosure language below:
“On January 16, 2018, the Company executed a 2-for-1 forward stock split. Accordingly, all references to the numbers of common shares and per data in the accompanying financial statements have been adjusted to reflect these splits, on a retroactive basis, unless indicated otherwise. Upon further review it was determined that certain components of the Company’s shareholders’ equity (deficit) had not been adjusted for the above mentioned forward split.
The balance at January 31, 2018, of common stock and additional paid-in capital was originally reported at $17,769 and $10,611,198, respectively and revised as $36,159 and $10,592,808, respectively. The balance at April 30, 2017, of common stock and additional paid-in capital was originally reported at $10,368 and $6,179,489, respectively and revised as $40,737 and $6,159,120, respectively. In addition, the number of common shares issued and outstanding as of April 30, 2017, was originally reported as 737,406 and revised as 40,737,406.
The Company previously disclosed on page 22 of amendment No. 1 to Form 10-Q for the fiscal quarter ended January 31, 2018, $18.8 million of non-cash stock-based compensation expense. The Company had corrected the stock-based compensation expense and recorded the amount as $166,603 in the statement of operations and statement of cash flows in Amendment No. 1, however, inadvertently did not change the disclosure on page 22 from the original filing of the Form 10-Q for the fiscal quarter ended January 31, 2018.
On January 17, 2018, the Company entered into a Promissory Note Agreement (“AutoLotto Agreement”) with AutoLotto, Inc., a Delaware corporation. Under the terms of the AutoLotto Agreement, the Company will pay to AutoLotto $1.5 million (the “Principal”) in exchange for a promissory note that will accrue interest at one percent per annum (the “Interest”). All unpaid Principal and Interest are due and payable to the Company at the earlier of (i) the closing of AutoLotto’s initial coin offering of at least $20,000,000 or (ii) AutoLotto’s issuance of equity securities (excluding any conversion or issuance of any note or other convertible security) of at least $20,000,000. In the event AutoLotto does not raise $20,000,000 through an initial coin offering or issuance of equity noted above, any unpaid Principal and Interest will convert to equity at a rate of $250,000,000 divided by the number of common shares outstanding immediately prior to January 17, 2020. As part of the AutoLotto Agreement, the Company also received an option to purchase tokens of the AutoLotto initial coin offering (the “Option”) equal to two times the outstanding unpaid Principal and Interest under the AutoLotto Agreement. The exercise price of the Option will be an undisclosed private pre-sale price, and the Option is exercisable within ten days of AutoLotto providing notice to the Company of its initial coin offering. The Option expires on January 16, 2020.
As of the date of this Report, the Company has funded $500,000 toward the AutoLotto Agreement, of which $250,000 was funded at the period ending January 31, 2018. The Company inadvertently classified the $250,000 funded to AutoLotto.com as an investment in available-for-sale securities. As such, the Company reclassed this amount to Notes Receivable.”
28.
We note that you only included Note 10 to the unaudited financial statements in Amendment 2 to Form 10-Q for the fiscal quarter ended January 31, 2018. Please note that any amendment to the financial statements or notes to the financial statements must contain the complete text of the item being amended. Please further amend Form 10-Q for fiscal quarter ended January 31, 2018 to include the complete text of Item 1 and updated certifications. Please refer to Exchange Act Rule 12b-15.
Response 28.
In response to the Staff’s comment, we will address the above in the latest Form 10-Q/Ato be filed within 15 business days of this response, to include all required information.
15
29.
Please label the financial statements as of and for the quarter ended April 30, 2018 and the balance sheet as of April 30, 2017 “as restated”.
Response 29.
In response to the Staff’s comment, we have addressed the above in the latest Form 10-QA.
30.
Please file a report under Item 4.02(a) of Form 8-K regarding non-reliance on previously issued unaudited financial statements for the fiscal quarter ended January 31, 2018.
Response 30.
In response to the Staff’s comment, we will have filed such 8-K.
If you have further questions or comments, please feel free to contact us. We are happy to cooperate in any way we can.
Regards,
/s/ Robert Kalkstein
Robert Kalkstein
Chief Financial Officer
Blockchain Industries, Inc.
16
Exhibit A
Date of Transaction | Transaction Type | Number of Shares Issued (or cancelled) | Class of Securities | Individual/ Entity Shares were issued to (entities must have individual with voting / investment control disclosed). | Reason for share issuance (e.g. for cash or debt conversion) OR Nature of Services Provided (if applicable) | Restricted or Unrestricted as of this filing? | OTC Trading Prices on Grant Date |
11/17/2017 | New Issuance | 2,000,000 | Common | Robert Miketich | Cash | Restricted | $ 1.500 |
11/20/2017 | New Issuance | 2,000,000 | Common | Gary Goodman | Cash | Restricted | $ 1.995 |
11/27/2017 | New Issuance | 200,000 | Common | Timothy M. O'Loughlin #1 | Cash | Restricted | $ 8.000 |
11/27/2017 | New Issuance | 50,000 | Common | Steven M Nelson | Cash | Restricted | $ 8.000 |
11/27/2017 | New Issuance | 100,000 | Common | JSGA LLC | Cash | Restricted | $ 8.000 |
11/27/2017 | New Issuance | 25,000 | Common | Robert Liscouski | Cash | Restricted | $ 8.000 |
11/28/2017 | New Issuance | 100,000 | Common | Denise Aversano | Cash | Restricted | $ 2.680 |
11/28/2017 | New Issuance | 50,000 | Common | Clifford & Nicole Aversano | Cash | Restricted | $ 2.680 |
11/28/2017 | New Issuance | 100,000 | Common | Lauren Salvani | Cash | Restricted | $ 2.680 |
11/28/2017 | New Issuance | 100,000 | Common | Henry Hagood (IRA) | Cash | Restricted | $ 2.680 |
11/28/2017 | New Issuance | 100,000 | Common | Henry Hagood | Cash | Restricted | $ 2.680 |
11/28/2017 | New Issuance | 50,000 | Common | Tracy Mays | Cash | Restricted | $ 2.680 |
11/28/2017 | New Issuance | 50,000 | Common | Thomas Madden | Cash | Restricted | $ 2.680 |
11/29/2017 | New Issuance | 100,000 | Common | Joseph D. Catone | Cash | Restricted | $ 4.500 |
11/29/2017 | New Issuance | 200,000 | Common | Timothy M. O'Loughlin #2 | Cash | Restricted | $ 4.500 |
11/29/2017 | New Issuance | 100,000 | Common | Kevin Raich | Cash | Restricted | $ 4.500 |
11/29/2017 | New Issuance | 50,000 | Common | Abby Girvin | Cash | Restricted | $ 4.500 |
11/29/2017 | New Issuance | 300,000 | Common | Michael Levine | Cash | Restricted | $ 4.500 |
11/29/2017 | New Issuance | 50,000 | Common | Walter Schenker | Cash | Restricted | $ 4.500 |
17
11/29/2017 | New Issuance | 200,000 | Common | Lisa Moynihan | Cash | Restricted | $ 4.500 |
11/30/2017 | New Issuance | 100,000 | Common | Paul Becker | Cash | Restricted | $ 3.500 |
11/30/2017 | New Issuance | 100,000 | Common | Bryan Larkin | Cash | Restricted | $ 3.500 |
11/30/2017 | New Issuance | 100,000 | Common | RockerFunder, LLC | Cash | Restricted | $ 3.500 |
11/30/2017 | New Issuance | 100,000 | Common | Gordon-Robbins Family Trust | Cash | Restricted | $ 3.500 |
11/30/2017 | New Issuance | 100,000 | Common | William DuPlessie | Cash | Restricted | $ 3.500 |
11/30/2017 | New Issuance | 100,000 | Common | Zack Bouthiller | Cash | Restricted | $ 3.500 |
11/30/2017 | New Issuance | 500,000 | Common | James Slazas | Cash | Restricted | $ 3.500 |
11/30/2017 | New Issuance | 100,000 | Common | Scott Walker | Cash | Restricted | $ 3.500 |
11/30/2017 | New Issuance | 50,000 | Common | R. Kirk Huntsman | Cash | Restricted | $ 3.500 |
11/30/2017 | New Issuance | 100,000 | Common | Brock Pierce | Cash | Restricted | $ 3.500 |
11/30/2017 | New Issuance | 50,000 | Common | Larry Chatterly | Cash | Restricted | $ 3.500 |
11/30/2017 | New Issuance | 50,000 | Common | Joshua Levy | Cash | Restricted | $ 3.500 |
11/30/2017 | New Issuance | 250,000 | Common | Riverside Pictures LLC | Cash | Restricted | $ 3.500 |
11/30/2017 | New Issuance | 50,000 | Common | Doug Cole | Cash | Restricted | $ 3.500 |
11/30/2017 | New Issuance | 100,000 | Common | Michael DiLeo | Cash | Restricted | $ 3.500 |
11/30/2017 | New Issuance | 100,000 | Common | Endeavor Plus Holdings LLC | Cash | Restricted | $ 3.500 |
11/30/2017 | New Issuance | 33,330 | Common | Leonard DiLeo | Cash | Restricted | $ 3.500 |
11/30/2017 | New Issuance | 33,330 | Common | David Radeschi | Cash | Restricted | $ 3.500 |
11/30/2017 | New Issuance | 33,340 | Common | Catherine Radeschi | Cash | Restricted | $ 3.500 |
12/1/2017 | New Issuance | 150,000 | Common | Tony Evans | Cash | Restricted | $ 3.500 |
12/1/2017 | New Issuance | 150,000 | Common | Kingsley Kobayashi | Cash | Restricted | $ 3.500 |
12/4/2017 | New Issuance | 100,000 | Common | Paul Gebhardt | Cash | Restricted | $ 4.200 |
12/4/2017 | New Issuance | 100,000 | Common | Jared Gaeta | Cash | Restricted | $ 4.200 |
12/4/2017 | New Issuance | 100,000 | Common | Riptide Capital, LLC | Cash | Restricted | $ 4.200 |
18
12/4/2017 | New Issuance | 200,000 | Common | Sagacious Gambit, Inc. | Cash | Restricted | $ 4.200 |
12/5/2017 | New Issuance | 150,000 | Common | 3102 Holdings LLC | Cash | Restricted | $ 4.050 |
12/5/2017 | New Issuance | 150,000 | Common | Isaac Barber (IB Holdings) | Cash | Restricted | $ 4.050 |
12/7/2017 | New Issuance | 50,000 | Common | David Lyons | Cash | Restricted | $ 4.150 |
12/8/2017 | New Issuance | �� 250,000 | Common | Peter Schultz | Cash | Restricted | $ 7.125 |
12/14/2017 | New Issuance | 250,000 | Common | Lawrence Partners LLC | Cash | Restricted | $ 12.050 |
12/16/2017 | New Issuance | 50,000 | Common | Houssam Karam | Cash | Restricted | $ 10.500 |
12/16/2017 | New Issuance | 50,000 | Common | Serena Azzghayer | Cash | Restricted | $ 10.500 |
12/19/2017 | New Issuance | 50,000 | Common | LOUISE A FORD | Cash | Restricted | $ 10.000 |
12/21/2017 | New Issuance | 200,000 | Common | DBW INVESTMENTS, LLC | Cash | Restricted | $ 10.250 |
12/22/2017 | New Issuance | 50,000 | Common | John Gildea | Cash | Restricted | $ 9.005 |
1/10/2018 | New Issuance | 150,000 | Common | Daintree Holdings, LLC | Cash | Restricted | $ 7.495 |
11/30/2017 | New Issuance | 80,000 | Common | IC, LLC | Cash | Restricted | $ 3.500 |
12/19/2017 | New Issuance | 8,000 | Common | LOUISE A FORD | Cash | Restricted | $ 10.000 |
12/19/2017 | New Issuance | 20,000 | Common | Sal Ruiz | Cash | Restricted | $ 10.000 |
12/20/2017 | New Issuance | 24,000 | Common | Adam F. Angelo | Cash | Restricted | $ 11.250 |
12/21/2017 | New Issuance | 16,000 | Common | DBW INVESTMENTS, LLC | Cash | Restricted | $ 10.250 |
12/27/2017 | New Issuance | 20,000 | Common | Len Chanasyk | Cash | Restricted | $ 8.495 |
1/1/2018 | New Issuance | 12,000 | Common | John Yannielli | Cash | Restricted | $ 7.025 |
1/2/2018 | New Issuance | 8,000 | Common | Edward Umlauf | Cash | Restricted | $ 9.400 |
1/2/2018 | New Issuance | 4,000 | Common | Jeff Milewski | Cash | Restricted | $ 9.400 |
1/4/2018 | New Issuance | 200,000 | Common | Bertrand Velge | Cash | Restricted | $ 6.065 |
1/6/2018 | New Issuance | 8,000 | Common | Brian P. Costello | Cash | Restricted | $ 9.000 |
1/6/2018 | New Issuance | 24,000 | Common | Micah Lieberman | Cash | Restricted | $ 9.000 |
19
1/8/2018 | New Issuance | 4,000 | Common | David L. Bicking | Cash | Restricted | $ 8.995 |
1/8/2018 | New Issuance | 40,000 | Common | James Scheffel | Cash | Restricted | $ 8.995 |
1/10/2018 | New Issuance | 24,000 | Common | Greg Hanley | Cash | Restricted | $ 7.495 |
1/10/2018 | New Issuance | 4,000 | Common | Barbara Ann Jones | Cash | Restricted | $ 7.495 |
1/12/2018 | New Issuance | 20,000 | Common | Richard L. Busch and Teresa Busch Revocable Trust dated August 30, 2007 | Cash | Restricted | $ 11.000 |
1/12/2018 | New Issuance | 20,000 | Common | Robert Michael Day | Cash | Restricted | $ 11.000 |
1/14/2018 | New Issuance | 4,000 | Common | Dale C. Sommers | Cash | Restricted | $ 11.000 |
1/14/2018 | New Issuance | 80,000 | Common | J3E2A2Z LP | Cash | Restricted | $ 11.000 |
1/14/2018 | New Issuance | 40,000 | Common | Russell & Tracy Blanch | Cash | Restricted | $ 11.000 |
1/15/2018 | New Issuance | 20,000 | Common | Stephen L. Edwards II | Cash | Restricted | $ 11.000 |
1/15/2018 | New Issuance | 40,000 | Common | Marcell Niederhauser | Cash | Restricted | $ 11.000 |
1/15/2018 | New Issuance | 4,000 | Common | George Albert Baldigara | Cash | Restricted | $ 11.000 |
1/16/2018 | New Issuance | 20,000 | Common | Dawn Johanknecht | Cash | Restricted | $ 16.000 |
1/16/2018 | New Issuance | 24,000 | Common | Baldev Singh Birk | Cash | Restricted | $ 16.000 |
1/16/2018 | New Issuance | 39,600 | Common | Sheri Hollenback | Cash | Restricted | $ 16.000 |
1/16/2018 | New Issuance | 8,000 | Common | Kevin Hersh | Cash | Restricted | $ 16.000 |
1/16/2018 | New Issuance | 5,600 | Common | Rita Rovazzi | Cash | Restricted | $ 16.000 |
1/16/2018 | New Issuance | 28,000 | Common | Emily Diane Fuller | Cash | Restricted | $ 16.000 |
1/17/2018 | New Issuance | 6,000 | Common | Todd Hooper | Cash | Restricted | $ 16.000 |
1/17/2018 | New Issuance | 10,000 | Common | James L. Dillard | Cash | Restricted | $ 16.000 |
1/17/2018 | New Issuance | 20,000 | Common | Clinton Eugene Boyles | Cash | Restricted | $ 16.000 |
1/17/2018 | New Issuance | 20,000 | Common | Alan Beaumont | Cash | Restricted | $ 16.000 |
1/17/2018 | New Issuance | 60,000 | Common | David Zebrowski | Cash | Restricted | $ 16.000 |
20
1/17/2018 | New Issuance | 12,000 | Common | Mark Alan Rossman | Cash | Restricted | $ 16.000 |
1/17/2018 | New Issuance | 20,000 | Common | Mark Alan Rossman | Cash | Restricted | $ 16.000 |
1/17/2018 | New Issuance | 40,000 | Common | Venkata S. Pulugurta | Cash | Restricted | $ 16.000 |
1/17/2018 | New Issuance | 20,000 | Common | Michael Wiitala | Cash | Restricted | $ 16.000 |
1/17/2018 | New Issuance | 24,000 | Common | Stan Smidt | Cash | Restricted | $ 16.000 |
1/17/2018 | New Issuance | 20,000 | Common | Jeffrey Bognar | Cash | Restricted | $ 16.000 |
1/17/2018 | New Issuance | 20,000 | Common | Leslie Tolliver | Cash | Restricted | $ 16.000 |
1/17/2018 | New Issuance | 4,000 | Common | Harbans Aulakh | Cash | Restricted | $ 16.000 |
1/17/2018 | New Issuance | 24,000 | Common | Robert Rogers | Cash | Restricted | $ 16.000 |
1/17/2018 | New Issuance | 16,000 | Common | Geoffrey L Jenkins | Cash | Restricted | $ 16.000 |
1/17/2018 | New Issuance | 40,000 | Common | J3E2A2Z LP | Cash | Restricted | $ 16.000 |
1/17/2018 | New Issuance | 28,000 | Common | Brian Shrock | Cash | Restricted | $ 16.000 |
1/17/2018 | New Issuance | 8,000 | Common | Steve Rossman | Cash | Restricted | $ 16.000 |
1/18/2018 | New Issuance | 20,000 | Common | Timothy W Phillips | Cash | Restricted | $ 22.000 |
1/18/2018 | New Issuance | 32,000 | Common | Eliel DaSilva | Cash | Restricted | $ 22.000 |
1/18/2018 | New Issuance | 20,000 | Common | Garry Sherman | Cash | Restricted | $ 22.000 |
1/18/2018 | New Issuance | 20,000 | Common | Michael Collins | Cash | Restricted | $ 22.000 |
1/18/2018 | New Issuance | 25,000 | Common | Gary Ulrich | Cash | Restricted | $ 22.000 |
1/18/2018 | New Issuance | 40,000 | Common | Kester Brothers Farm, LLC | Cash | Restricted | $ 22.000 |
1/18/2018 | New Issuance | 20,000 | Common | Nicole Becker | Cash | Restricted | $ 22.000 |
1/18/2018 | New Issuance | 8,000 | Common | Heidi A. Mizera | Cash | Restricted | $ 22.000 |
1/18/2018 | New Issuance | 20,000 | Common | Meghan E. Kelley | Cash | Restricted | $ 22.000 |
1/18/2018 | New Issuance | 20,000 | Common | Spanish Hill Investments LLC | Cash | Restricted | $ 22.000 |
1/18/2018 | New Issuance | 16,000 | Common | Larry Dale Hines | Cash | Restricted | $ 22.000 |
1/18/2018 | New Issuance | 40,000 | Common | Lidio Rainaldi | Cash | Restricted | $ 22.000 |
21
1/18/2018 | New Issuance | 20,000 | Common | GERHARD & CHRISTINA FORMELLA | Cash | Restricted | $ 22.000 |
1/18/2018 | New Issuance | 20,000 | Common | Harold T. Ashcraft | Cash | Restricted | $ 22.000 |
1/18/2018 | New Issuance | 6,800 | Common | Ronald B. Beach | Cash | Restricted | $ 22.000 |
1/18/2018 | New Issuance | 120,000 | Common | Daniel Beveridge | Cash | Restricted | $ 22.000 |
1/18/2018 | New Issuance | 20,000 | Common | Cory Tarpenning | Cash | Restricted | $ 22.000 |
1/18/2018 | New Issuance | 28,000 | Common | Khaled Elraie | Cash | Restricted | $ 22.000 |
1/18/2018 | New Issuance | 40,000 | Common | Jeffrey Beach | Cash | Restricted | $ 22.000 |
1/18/2018 | New Issuance | 20,000 | Common | Russell Martz | Cash | Restricted | $ 22.000 |
1/18/2018 | New Issuance | 20,000 | Common | John F. Jakovich & Helen Jakovich | Cash | Restricted | $ 22.000 |
1/18/2018 | New Issuance | 20,000 | Common | Michael James Ilyankoff | Cash | Restricted | $ 22.000 |
1/18/2018 | New Issuance | 20,000 | Common | Robert E. Hackett | Cash | Restricted | $ 22.000 |
1/18/2018 | New Issuance | 20,000 | Common | Charles-Olivier Sylvestre | Cash | Restricted | $ 22.000 |
1/18/2018 | New Issuance | 4,000 | Common | R. Mark Wilhelm | Cash | Restricted | $ 22.000 |
1/19/2018 | New Issuance | 40,000 | Common | Lawrence Kalkstein | Cash | Restricted | $ 20.000 |
1/19/2018 | New Issuance | 60,000 | Common | Brian H Doench | Cash | Restricted | $ 20.000 |
1/19/2018 | New Issuance | 20,000 | Common | Jack Sickles | Cash | Restricted | $ 20.000 |
1/19/2018 | New Issuance | 20,000 | Common | James LaBorde Investments, LLC | Cash | Restricted | $ 20.000 |
1/19/2018 | New Issuance | 20,000 | Common | Glen P Carbo | Cash | Restricted | $ 20.000 |
1/19/2018 | New Issuance | 16,000 | Common | Francesco Mizera | Cash | Restricted | $ 20.000 |
1/19/2018 | New Issuance | 4,500 | Common | Mark Reddinger & Beth VandeVelde | Cash | Restricted | $ 20.000 |
1/19/2018 | New Issuance | 8,000 | Common | Theresa M. Ahern & Ricky D. Bohr | Cash | Restricted | $ 20.000 |
1/19/2018 | New Issuance | 33,600 | Common | Tretter Investments Inc. | Cash | Restricted | $ 20.000 |
22
1/19/2018 | New Issuance | 8,800 | Common | Mike Bennett | Cash | Restricted | $ 20.000 |
1/19/2018 | New Issuance | 20,000 | Common | Peter Schultz | Cash | Restricted | $ 20.000 |
1/19/2018 | New Issuance | 20,000 | Common | Guoling Hao | Cash | Restricted | $ 20.000 |
1/19/2018 | New Issuance | 20,000 | Common | Richard Meekins | Cash | Restricted | $ 20.000 |
1/19/2018 | New Issuance | 20,000 | Common | Bradley Ralph Beals | Cash | Restricted | $ 20.000 |
1/20/2018 | New Issuance | 16,000 | Common | Makoto Miyakawa | Cash | Restricted | $ 20.000 |
1/20/2018 | New Issuance | 20,000 | Common | Michael McQuillan | Cash | Restricted | $ 20.000 |
1/20/2018 | New Issuance | 5,000 | Common | Keenan P Dillard | Cash | Restricted | $ 20.000 |
1/21/2018 | New Issuance | 10,000 | Common | Taylor Collings | Cash | Restricted | $ 20.000 |
1/21/2018 | New Issuance | 40,000 | Common | Zlatica Vincini | Cash | Restricted | $ 20.000 |
1/21/2018 | New Issuance | 8,000 | Common | James Willsey | Cash | Restricted | $ 20.000 |
1/21/2018 | New Issuance | 14,400 | Common | Ajay Dugar | Cash | Restricted | $ 20.000 |
1/21/2018 | New Issuance | 50,000 | Common | Ari Gold | Cash | Restricted | $ 20.000 |
1/22/2018 | New Issuance | 80,000 | Common | Michael McCahill TTEEU/A DTD 12/24/02 FBO Michael McCahill | Cash | Restricted | $ 16.000 |
1/22/2018 | New Issuance | 24,000 | Common | Peter D Schneider TTEEU/A DTD 9/28/15 FBO Keil P.Schneider and Michael James Hague | Cash | Restricted | $ 16.000 |
1/22/2018 | New Issuance | 20,000 | Common | Ken Nozaki | Cash | Restricted | $ 16.000 |
1/22/2018 | New Issuance | 40,000 | Common | DHIRENDRA SAXENA | Cash | Restricted | $ 16.000 |
1/22/2018 | New Issuance | 8,000 | Common | Jack D. Gibbs TTEEU/A DTD 517/16 Gibbs Family Trust FBO John D Gibbs Jr & Jennifer S. Gibbs | Cash | Restricted | $ 16.000 |
23
1/22/2018 | New Issuance | 8,000 | Common | Tom Cocchiola | Cash | Restricted | $ 16.000 |
1/22/2018 | New Issuance | 20,000 | Common | Kelly Santana | Cash | Restricted | $ 16.000 |
1/23/2018 | New Issuance | 20,000 | Common | Brian Gunning | Cash | Restricted | $ 15.000 |
1/23/2018 | New Issuance | 20,000 | Common | M. Dean White | Cash | Restricted | $ 15.000 |
1/23/2018 | New Issuance | 20,000 | Common | Robert C. and Nedra Davidson | Cash | Restricted | $ 15.000 |
1/23/2018 | New Issuance | 2,400 | Common | Priscilla Lee Wimmer TrustEric Jerome Wimmer TTEEU/A DTD 12/21/98 FBO Eric Jerome Wimmer | Cash | Restricted | $ 15.000 |
1/23/2018 | New Issuance | 20,000 | Common | Richard J. Cote | Cash | Restricted | $ 15.000 |
1/24/2018 | New Issuance | 20,000 | Common | Causey C Lee | Cash | Restricted | $ 13.990 |
1/24/2018 | New Issuance | 8,000 | Common | Stephen T Shoemaker | Cash | Restricted | $ 13.990 |
1/24/2018 | New Issuance | 9,600 | Common | John J. Burke & Minda Louise Burr | Cash | Restricted | $ 13.990 |
1/24/2018 | New Issuance | 4,000 | Common | Uday Phatak | Cash | Restricted | $ 13.990 |
1/24/2018 | New Issuance | 20,000 | Common | Principled Healthcare Solutions, Inc. | Cash | Restricted | $ 13.990 |
1/25/2018 | New Issuance | 20,000 | Common | Michael Head | Cash | Restricted | $ 8.969 |
1/25/2018 | New Issuance | 12,800 | Common | James Denke | Cash | Restricted | $ 8.969 |
1/25/2018 | New Issuance | 20,000 | Common | Ralph A. Sair | Cash | Restricted | $ 8.969 |
1/27/2018 | New Issuance | 8,000 | Common | Joshua Smith | Cash | Restricted | $ 11.000 |
1/27/2018 | New Issuance | 10,000 | Common | Benzion Sapir | Cash | Restricted | $ 11.000 |
1/29/2018 | New Issuance | 1,600 | Common | James A. Hughes | Cash | Restricted | $ 11.000 |
1/27/2018 | New Issuance | 8,000 | Common | Laura Schumacher Smith | Cash | Restricted | $ 11.000 |
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2/2/2018 | New Issuance | 4,000 | Common | Daniel Joe Duncan | Cash | Restricted | $ 13.650 |
1/19/2018 | New Issuance | 20,000 | Common | Alfonso Massaro | Cash | Restricted | $ 20.000 |
2/8/2018 | New Issuance | 4,000 | Common | William Thomas Sharp Jr. | Cash | Restricted | $ 11.400 |
2/14/2018 | New Issuance | 1,600 | Common | William Thomas Sharp Jr. | Cash | Restricted | $ 10.600 |
1/18/2018 | New Issuance | 8,000 | Common | Andy Moy | Cash | Restricted | $ 22.000 |
1/30/2018 | New Issuance | 20,000 | Common | Richard Beaty | Cash | Restricted | $ 13.000 |
2/16/2018 | New Issuance | 4,000 | Common | Andrew Card | Cash | Restricted | $ 11.000 |
2/23/2018 | New Issuance | 20,000 | Common | JARY SIEGEL | Cash | Restricted | $ 13.520 |
2/23/2018 | New Issuance | 20,000 | Common | Steven Sell | Cash | Restricted | $ 13.520 |
2/23/2018 | New Issuance | 80,000 | Common | Adam Brosius | Cash | Restricted | $ 13.520 |
2/23/2018 | New Issuance | 20,000 | Common | Randall Nunley | Cash | Restricted | $ 13.520 |
11/30/2017 | New Issuance | 100,000 | Common | Zack Bouthiller | Cash | Restricted | $ 3.500 |
2/27/2018 | New Issuance | 20,000 | Common | James Gervasi | Cash | Restricted | $ 13.750 |
3/2/2018 | New Issuance | 240,000 | Common | Gregg Ostrander Revocable TrustDTD March 14, 2003Gregg Ostrander TTEE | Cash | Restricted | $ 13.550 |
3/7/2018 | New Issuance | 16,000 | Common | Amanda Harvey | Cash | Restricted | $ 12.020 |
3/23/2018 | New Issuance | 662,400 | Common | David Ostrander | Cash | Restricted | $ 9.510 |
10/9/2018 | New Issuance | 435,775 | Common | Ian Molendyk | Cash | Restricted | $ 3.600 |
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Exhibit B
Blockchain Industries Grants | ||||
Grant Number | Employee Name | Grant Date | OTC Trading Prices on Grant Date | Shares |
RSA-1 | Roberto Corretjer | 2017-11-15 | $ 0.2595 | 500,000 |
ES-1 | Fintech Global Consultants | 2017-12-01 | $ 3.5000 | 300,000 |
ES-2 | Fintech Global Consultants | 2017-12-01 | $ 3.5000 | 200,000 |
RSA-2 | Stefan Galluppi | 2017-11-15 | $ 0.2595 | 500,000 |
ES-3 | Fintech Global Consultants | 2017-12-01 | $ 3.5000 | 200,000 |
RSA-3 | Fintech Global Consultants | 2017-12-01 | $ 3.5000 | 600,000 |
RSA-4-A | Sagacious Gambit, Inc. | 2017-12-01 | $ 3.5000 | 500,000 |
ES-4 | Kingsley Kobayashi | 2017-12-01 | $ 3.5000 | 200,000 |
RSA-4-B | Robert Kalkstein | 2017-12-01 | $ 3.5000 | 500,000 |
ES-5 | Lyons Capital, LLC | 2017-12-10 | $ 7.1250 | 60,000 |
RSA-5 | Zack Pontgrave | 2017-12-01 | $ 3.5000 | |
RSA-6 | Hey Big Dawg LLC | 2018-01-28 | $ 11.0000 | 20,000 |
ES-6 | Paul Kim | 2018-01-01 | $ 7.0250 | 166,664 |
RSA-7 | Brendan Beveridge | 2018-02-01 | $ 14.0000 | 100,000 |
ES-7 | Paul Kim | 2018-01-01 | $ 7.0250 | 66,668 |
RSA-8 | Lisa Moynihan | 2018-02-01 | $ 14.0000 | 100,000 |
ES-8 | Paul Kim | 2018-01-01 | $ 7.0250 | 66,668 |
ES-9 | Sarah Mackay | 2018-01-01 | $ 7.0250 | 4,000 |
ES-10 | Sarah Mackay | 2018-01-01 | $ 7.0250 | 4,000 |
ES-11 | Sarah Mackay | 2018-01-01 | $ 7.0250 | 4,000 |
ES-12 | Rod Garratt | 2018-01-15 | $ 11.0000 | 50,000 |
ES-13 | Rod Garratt | 2018-01-15 | $ 11.0000 | 50,000 |
ES-14 | Rod Garratt | 2018-01-15 | $ 11.0000 | 50,000 |
ES-15 | Max Robbins | 2018-02-01 | $ 14.0000 | 144,000 |
ES-19 | Bridan Enterprises LLC | 2018-02-15 | $ 10.6500 | 16,500 |
ES-20 | Bridan Enterprises LLC | 2018-02-15 | $ 10.6500 | 16,500 |
ES-21 | Bridan Enterprises LLC | 2018-02-15 | $ 10.6500 | 17,000 |
ES-25 | Kevin Hu | 2018-02-26 | $ 15.0000 | 165,000 |
ES-26 | Kevin Hu | 2018-02-26 | $ 15.0000 | 165,000 |
ES-27 | Kevin Hu | 2018-02-26 | $ 15.0000 | 170,000 |
26