Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2019 | May 09, 2019 | |
Document and Entity Information [Abstract] | ||
Entity Registrant Name | Riot Blockchain, Inc. | |
Entity Central Index Key | 0001167419 | |
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Mar. 31, 2019 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2019 | |
Entity Filer Category | Accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | false | |
Entity Common Stock, Shares Outstanding | 15,957,059 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets (Unaudited) - USD ($) | Mar. 31, 2019 | Dec. 31, 2018 |
Current assets | ||
Cash and cash equivalents | $ 1,016,019 | $ 225,390 |
Prepaid expenses and other current assets | 793,690 | 1,378,534 |
Digital currencies | 1,085,018 | 706,625 |
Total current assets | 2,894,727 | 2,310,549 |
Property and equipment, net | 27,507 | 26,269 |
Right of use assets | 980,368 | |
Intangible rights acquired | 700,167 | 700,167 |
Long-term investments | 9,412,726 | 9,412,726 |
Security deposits | 703,275 | 703,275 |
Other long-term assets, net: | ||
Patents, net | 511,248 | 507,342 |
Convertible note and accrued interest | 216,578 | 200,000 |
Total assets | 15,446,596 | 13,860,328 |
Current liabilities | ||
Accounts payable | 3,455,171 | 3,829,315 |
Accrued expenses | 2,506,769 | 1,516,252 |
Convertible notes payable, at fair value | 7,975,308 | |
Warrant liability | 5,322,162 | |
Deferred purchase price - BMSS | 1,200,000 | 1,200,000 |
Operating lease liability, current | 882,991 | |
Deferred revenue, current portion | 96,698 | 96,698 |
Current liabilities of discontinued operations | 16,340 | 16,340 |
Total current liabilities | 21,455,439 | 6,658,605 |
Notes payable | 1,696,083 | 1,696,083 |
Operating lease liability, less current portion | 73,994 | |
Deferred revenue, less current portion | 847,744 | 871,919 |
Deferred income tax liability | 142,709 | 142,709 |
Total liabilities | 24,215,969 | 9,369,316 |
Commitments and contingencies - Note 12 | ||
Stockholders' (deficit) equity | ||
Common stock, no par value; 170,000,000 shares authorized; 14,762,809 and 14,519,058 shares issued and outstanding as of March 31, 2019 and December 31, 2018, respectively | 203,407,485 | 202,917,443 |
Accumulated deficit | (210,728,202) | (197,199,197) |
Total Riot Blockchain stockholders' (deficit) equity | (7,251,658) | 5,787,305 |
Non-controlling interest | (1,517,715) | (1,296,293) |
Total stockholders' (deficit) equity | (8,769,373) | 4,491,012 |
Total liabilities and stockholders' (deficit) equity | 15,446,596 | 13,860,328 |
2% Convertible Preferred Stock Series A [Member] | ||
Stockholders' (deficit) equity | ||
Preferred stock, no par value | ||
0% Convertible Preferred Stock Series B [Member] | ||
Stockholders' (deficit) equity | ||
Preferred stock, no par value | $ 69,059 | $ 69,059 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares | Mar. 31, 2019 | Dec. 31, 2018 |
Preferred stock, par value | ||
Preferred stock, shares authorized | 15,000,000 | 15,000,000 |
Common stock, par value | ||
Common stock, shares authorized | 170,000,000 | 170,000,000 |
Common stock, shares issued | 14,762,809 | 14,519,058 |
Common stock, shares outstanding | 14,762,809 | 14,519,058 |
2% Convertible Preferred Stock Series A [Member] | ||
Preferred stock, shares authorized | 2,000,000 | 2,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
0% Convertible Preferred Stock Series B [Member] | ||
Preferred stock, shares authorized | 1,750,001 | 1,750,001 |
Preferred stock, shares issued | 13,000 | 13,000 |
Preferred stock, shares outstanding | 13,000 | 13,000 |
Condensed Interim Consolidated
Condensed Interim Consolidated Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Revenue: | ||
Total Revenue | $ 1,430,260 | $ 925,554 |
Costs and expenses: | ||
Cost of revenues (exclusive of depreciation and amortization shown below) | 1,471,338 | 349,011 |
Selling, general and administrative | 3,152,138 | 3,910,729 |
Depreciation and amortization | 23,839 | 2,156,427 |
Impairment of property and equipment | 11,480,491 | |
Impairment of digital currencies | 2,467,875 | |
Total costs and expenses | 4,647,315 | 20,364,533 |
Operating loss from continuing operations | (3,217,055) | (19,438,979) |
Other income (expense) | ||
Loss on issuance of convertible notes, common stock and warrants | (6,154,660) | |
Change in fair value of warrant liability | (2,753,228) | |
Change in fair value of convertible notes | (1,644,582) | |
Non-compliance penalty for SEC registration requirement | (333,338) | |
Interest expense | (68,363) | (1,069) |
Other income | 78,872 | |
Investment income | 16,842 | 62,586 |
Realized gain on sale of digital currencies | 4,788 | |
Other expenses | (13,041) | (3,682) |
Total other expense | (10,533,372) | (275,503) |
Loss from continuing operations before income taxes | (13,750,427) | (19,714,482) |
Deferred income tax benefit | 3,053,000 | |
Loss from continuing operations | (13,750,427) | (16,661,482) |
Discontinued operations | ||
Income from operations | 96,132 | |
Income from discontinued operations | 96,132 | |
Net loss | (13,750,427) | (16,565,350) |
Net loss attributable to non-controlling interest | 221,422 | 215,258 |
Net loss attributable to Riot Blockchain | $ (13,529,005) | $ (16,350,092) |
Basic and diluted net loss per share: | ||
Continuing operations attributable to Riot Blockchain | $ (0.94) | $ (1.36) |
Discontinued operations attributable to Riot Blockchain | 0.01 | |
Net loss per share | $ (0.94) | $ (1.35) |
Basic and diluted weighted average number of shares outstanding | 14,449,628 | 12,289,785 |
Revenue - digital currency mining [Member] | ||
Revenue: | ||
Total Revenue | $ 1,406,085 | $ 901,380 |
License fees [Member] | ||
Revenue: | ||
Total Revenue | $ 24,175 | $ 24,174 |
Condensed Interim Consolidate_2
Condensed Interim Consolidated Statement of Stockholders' (Deficit) Equity (Unaudited) - USD ($) | Preferred Stock | Common Stock [Member] | Accumulated Deficit | Total riot blockchain stockholder's equity [Member] | Noncontrolling Interest [Member] | Total |
BALANCE at Dec. 31, 2017 | $ 7,745,266 | $ 180,387,518 | $ (139,263,480) | $ 48,869,304 | $ 758,095 | $ 49,627,399 |
BALANCE, shares at Dec. 31, 2017 | 1,458,001 | 11,622,112 | ||||
Delivery of common stock underlying restricted stock units | ||||||
Delivery of common stock underlying restricted stock units, shares | 50,000 | |||||
Common stock issued for asset purchase - Prive | $ 8,480,000 | 8,480,000 | 8,480,000 | |||
Common stock issued for asset purchase - Prive, shares | 800,000 | |||||
Common stock escrow shares issued for asset purchase - Prive | ||||||
Common stock escrow shares issued for asset purchase - Prive, shares | 200,000 | |||||
Preferred stock converted to Common stock | $ (2,815,498) | $ 2,815,498 | ||||
Preferred stock converted to Common stock, shares | (530,001) | 530,001 | ||||
Exercise of warrants | $ 350,000 | 350,000 | 350,000 | |||
Exercise of warrants, shares | 100,000 | |||||
Stock-based compensation | $ 883,943 | 883,943 | 883,943 | |||
Stock-based compensation, shares | ||||||
Exercise of stock options | $ 78,522 | 78,522 | 78,522 | |||
Exercise of stock options, shares | 19,533 | |||||
Common stock issued for services | $ 20,000 | 20,000 | 20,000 | |||
Common stock issued for services, shares | 2,754 | |||||
Sale of Riot shares held by Tess | $ 320,000 | 320,000 | 320,000 | |||
Sale of Riot shares held by Tess, shares | ||||||
Cashless exercise of stock purchase warrants | ||||||
Cashless exercise of stock purchase warrants, shares | 3,215 | |||||
Non-controlling interest - Logical Brokerage | 40,541 | 40,541 | ||||
Net loss attributable to non-controlling interest | (215,258) | (215,258) | ||||
Net loss | (16,350,092) | (16,350,092) | (16,350,092) | |||
BALANCE at Mar. 31, 2018 | $ 4,929,768 | $ 193,335,481 | (155,613,572) | 42,651,677 | 583,378 | 43,235,055 |
BALANCE, shares at Mar. 31, 2018 | 928,000 | 13,327,615 | ||||
BALANCE at Dec. 31, 2018 | $ 69,059 | $ 202,917,443 | (197,199,197) | 5,787,305 | (1,296,293) | 4,491,012 |
BALANCE, shares at Dec. 31, 2018 | 13,000 | 14,519,058 | ||||
Delivery of common stock underlying restricted stock units | ||||||
Delivery of common stock underlying restricted stock units, shares | 93,751 | |||||
Commons stock issued with convertible notes | $ 255,000 | 255,000 | 255,000 | |||
Commons stock issued with convertible notes, shares | 150,000 | |||||
Stock-based compensation | $ 235,042 | 235,042 | 235,042 | |||
Stock-based compensation, shares | ||||||
Net loss attributable to non-controlling interest | (221,422) | (221,422) | ||||
Net loss | (13,529,005) | (13,529,005) | (13,529,005) | |||
BALANCE at Mar. 31, 2019 | $ 69,059 | $ 203,407,485 | $ (210,728,202) | $ (7,251,658) | $ (1,517,715) | $ (8,769,373) |
BALANCE, shares at Mar. 31, 2019 | 13,000 | 14,762,809 |
Condensed Interim Consolidate_3
Condensed Interim Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Cash flows from operating activities | ||
Net loss | $ (13,750,427) | $ (16,565,350) |
Income from discontinued operations | 96,132 | |
Loss from continuing operations | (13,750,427) | (16,661,482) |
Adjustments to reconcile net loss from continuing operations to net cash used in operating activities of continuing operations: | ||
Stock-based compensation | 235,042 | 883,943 |
Depreciation and amortization | 23,839 | 2,156,427 |
Deferred income tax benefit | (3,053,000) | |
Amortization of license fee revenue | (24,175) | (24,174) |
Amortization of right of use assets | 567,131 | |
Common stock issued for services | 20,000 | |
Loss on issuance of convertible notes, common stock and warrants | 6,154,660 | |
Change in fair value of convertible notes | 1,644,582 | |
Change in fair value of warrant liability | 2,753,228 | |
Impairment of property and equipment | 11,480,491 | |
Impairment of digital currencies | 2,467,875 | |
Realized gain on sale of digital currencies | (4,788) | |
Changes in assets and liabilities: | ||
Prepaid contracts | (3,584,699) | |
Prepaid expenses and other current assets | 584,844 | 27,438 |
Digital currencies - mining, net of mining pool operating fees | (1,377,869) | (901,380) |
Accrued interest | (16,578) | |
Accounts payable | (374,144) | 1,101,198 |
Accrued expenses | 990,517 | 526,590 |
Lease liability | (590,514) | |
Net cash used in operating activities of continuing operations | (3,184,652) | (5,560,773) |
Net cash provided by (used in) operating activities of discontinued operations | (68,824) | |
Net cash used in operating activities | (3,184,652) | (5,629,597) |
Continuing operations: | ||
Proceeds from sale of digital currencies | 1,004,264 | |
Purchase of digital currencies | (5,625,000) | |
Purchases of property and equipment | (3,024) | (18,922,569) |
Purchases of other investments | (6,412,726) | |
Security deposits | (673,463) | |
Purchases of patent and trademark application costs | (25,959) | (24,074) |
Investment in Logical Brokerage, net of cash acquired | (516,918) | |
Purchase of developed technology by 1172767 B.C. Ltd. | (32,640) | |
Net cash provided by (used in) investing activities | 975,281 | (32,207,390) |
Cash flows from financing activities: | ||
Proceeds from issuance of convertible notes | 3,000,000 | 775,074 |
Repayment of notes payable and other obligations | (81,040) | |
Proceeds from exercise of warrants | 350,000 | |
Proceeds from exercise of stock options | 78,522 | |
Proceeds from sale of Riot shares held by 1172767 B.C. Ltd. | 320,000 | |
Net cash provided by financing activities of continuing operations | 3,000,000 | 1,442,556 |
Net increase (decrease) in cash and cash equivalents | 790,629 | (36,394,431) |
Cash and cash equivalents at beginning of period | 225,390 | 41,651,965 |
Cash and cash equivalents at end of period | 1,016,019 | 5,257,534 |
Supplemental disclosure of cash flow information: | ||
Cash paid for interest | 1,219 | |
Cash paid for taxes | ||
Supplemental disclosure of noncash investing and financing activities: | ||
Value of shares issued for Prive asset acquisition | $ 8,480,000 | |
Conversion of Preferred stock to Common stock | 2,815,498 | |
Deferred purchase price for BMSS | $ 1,500,000 |
Organization
Organization | 3 Months Ended |
Mar. 31, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization | Note 1. Organization: Nature of operations: Riot Blockchain, Inc. (the “Company” or “Riot Blockchain”) was originally organized on July 24, 2000, as a Colorado corporation. Effective October 19, 2017, the Company's name was changed to Riot Blockchain, Inc., from Bioptix, Inc., and changed its state of incorporation to Nevada from Colorado. The Company operates a digital currency mining operation, which utilizes specialized computers (also known as “miners”) that generate digital currency (primarily bitcoin) from the blockchain. The Company acquired approximately 8,000 miners through its acquisitions of Kairos Global Technology, Inc. (“Kairos”) in November 2017, and from Prive Technologies, Inc. (“Prive”), and separately from Blockchain Mining Supply & Services Ltd. (“BMSS”) in February 2018. |
Liquidity, Financial Condition,
Liquidity, Financial Condition, and Going Concern | 3 Months Ended |
Mar. 31, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Liquidity, Financial Condition, and Going Concern | Note 2. Liquidity, Financial Condition, and Going Concern: The Company has experienced recurring losses and negative cash flows from operations. At March 31, 2019, the Company had approximate balances of cash and cash equivalents of $1,000,000, digital currencies of $1,085,000, a working capital deficit of $18,561,000, total stockholders' deficit of $8,769,000 and an accumulated deficit of $210,728,000. To date, the Company has, in large part, relied on equity and debt financing to fund its operations. The Company’s primary focus is on its digital currency mining operation located in Oklahoma City, Oklahoma, along with its investigation of the launch of RiotX as a digital currency exchange in the United States. That operational focus and the Company’s acquisitions of Kairos and 1172767 B.C. Ltd. (“1172767” or “Tess”), formerly known as Tess Inc., and its investment in goNumerical Ltd. (d/b/a “Coinsquare”), as well as the Company’s name change, reflects a strategic decision by the Company to operate in the blockchain and digital currency related business sector. The Company's current strategy will continue to expose the Company to the numerous risks and volatility associated within this sector. The Company expects to continue to incur losses from operations for the near-term and these losses could be significant as the Company incurs costs and expenses associated with recent and potential future acquisitions, and development of the RiotX exchange platform, as well as public company, legal and administrative related expenses being incurred. As disclosed in Note 7, during the three months ended March 31, 2019, for a total investment of $3,000,000, the Company issued a series of Senior Secured Convertible Promissory Notes, to investors for an aggregate principal amount of $3,358,333 and an equal value of warrants for the purchase of shares of the Company’s common stock. The Company is closely monitoring its cash balances, cash needs and expense levels. The Company believes that in order for the Company to meet its obligations arising from normal business operations for the next twelve months, the Company requires additional capital either in the form of equity or debt. Without additional capital, the Company’s ability to continue to operate will be limited. If the Company is unable to obtain adequate capital, it could be forced to cease or reduce its operations. The Company is currently pursuing capital transactions in the form of debt and equity, however, the Company cannot provide any assurance that it will be successful in its plans. These consolidated financial statements do not include any adjustments to the recoverability and classification of recorded assets amounts and classification of liabilities that might be necessary should the Company not be able to continue as a going concern. In the opinion of management, these factors, among others, raise substantial doubt about the ability of the Company to continue as a going concern. |
Basis of presentation, summary
Basis of presentation, summary of significant accounting policies and recent accounting pronouncements | 3 Months Ended |
Mar. 31, 2019 | |
Accounting Policies [Abstract] | |
Basis of presentation, summary of significant accounting policies and recent accounting pronouncements | Note 3. Basis of presentation, summary of significant accounting policies and recent accounting pronouncements: Basis of presentation and principles of consolidation The accompanying unaudited condensed interim consolidated financial statements have been prepared in accordance with the accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and pursuant to the instructions to Form 10-Q and Article 8 of Regulation S-X of the Securities and Exchange Commission (“SEC”). In the opinion of management, the accompanying unaudited condensed interim consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation of such interim results. The results for the unaudited condensed interim consolidated statement of operations are not necessarily indicative of results to be expected for the year ending December 31, 2019 or for any future interim period. The unaudited condensed interim consolidated balance sheet at March 31, 2019 has been derived from unaudited financial statements; however, it does not include all of the information and notes required by U.S. GAAP for complete financial statements. The accompanying condensed interim consolidated financial statements should be read in conjunction with the consolidated financial statements for the year ended December 31, 2018 and notes thereto included in the Company’s Annual Report on Form 10-K filed with the SEC on April 2, 2019. Use of estimates: The preparation of financial statements in conformity with U.S. GAAP 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 balance sheet and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ significantly from those estimates. The most significant accounting estimates inherent in the preparation of the Company's financial statements include estimates associated with revenue recognition, asset valuations, the useful lives and recoverability of long-lived assets, impairment analysis of intangibles and goodwill, stock-based compensation, assumptions used in estimating the fair value of convertible notes and warrants, and the valuation allowance associated with the Company’s deferred tax assets. Significant Accounting Policies: For a detailed discussion about the Company’s significant accounting policies, see Form 10-K filed with the SEC on April 2, 2019. Sequencing: On January 28, 2019, the Company adopted a sequencing policy under Accounting Standards Codification (“ASC”) 815-40-35 whereby in the event that reclassification of contracts from equity to assets or liabilities is necessary pursuant to ASC 815 due to the Company’s inability to demonstrate it has sufficient authorized shares as a result of certain securities with a potentially indeterminable number of shares, shares will be allocated on the basis of the earliest issuance date of potentially dilutive instruments, with the earliest grants receiving the first allocation of shares. Pursuant to ASC 815, issuance of securities to the Company’s employees or directors are not subject to the sequencing policy. Notes Payable Fair Value Option: As described further in Note 7 - Notes and other obligations, Warrant Liability: The Company issued warrants to purchase 1,908,144 shares of its common stock in connection with its Senior Secured Promissory Notes issued in January 2019, and recorded the stock warrants outstanding as a liability at fair value utilizing a Monte Carlo simulation model. This liability is subject to re-measurement at each balance sheet date, and any change in fair value is recognized in the Company's condensed interim consolidated statements of operations. Leases: Effective January 1, 2019, the Company accounts for its leases under ASC 842, Leases In calculating the right of use asset and lease liability, the Company elects to combine lease and non-lease components. The Company excludes short-term leases having initial terms of 12 months or less from the new guidance as an accounting policy election, and recognizes rent expense on a straight-line basis over the lease term. The Company continues to account for leases in the prior period financial statements under ASC Topic 840. Loss per share Basic net loss per share (“EPS”) of common stock is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity. The Company excludes its unvested restricted shares and escrow shares from the net loss per share calculation. The escrow shares are excluded because of related contingencies and including them would result in anti-dilution. Since the Company has only incurred losses, basic and diluted net loss per share is the same. Securities that could potentially dilute loss per share in the future that were not included in the computation of diluted loss per share at March 31, 2019 and 2018 because their inclusion would be anti-dilutive are as follows: March 31, 2019 2018 Warrants to purchase common stock 3,579,257 1,831,886 Options to purchase common stock 62,000 150,000 Unvested restricted stock awards 33,542 681,176 Escrow shares of common stock 200,000 200,000 Convertible Series B preferred shares 13,000 928,000 Convertible notes 1,813,500 - Total 5,701,299 3,791,062 Reclassifications: Certain prior period amounts reported in the condensed interim consolidated statements of operations have been reclassified to conform to the presentations currently used. The reclassifications did not have a material impact on the Company's condensed interim consolidated financial statements and related disclosures. Recently issued and adopted accounting pronouncements: The Company continually assesses any new accounting pronouncements to determine their applicability. When it is determined that a new accounting pronouncement affects the Company's financial reporting, the Company undertakes a study to determine the consequences of the change to its consolidated financial statements and assures that there are proper controls in place to ascertain that the Company's consolidated financial statements properly reflect the change. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) in order to increase transparency and comparability among organizations by, among other provisions, recognizing lease assets and lease liabilities on the balance sheet for those leases classified as operating leases under previous U.S. GAAP. For public companies, ASU 2016-02 is effective for fiscal years beginning after December 15, 2018 (including interim periods within those periods) using a modified retrospective approach and early adoption is permitted. In transition, entities may also elect a package of practical expedients that must be applied in its entirety to all leases commencing before the adoption date, unless the lease is modified, and permits entities to not reassess (a) the existence of a lease, (b) lease classification or (c) determination of initial direct costs, as of the adoption date, which effectively allows entities to carryforward accounting conclusions under previous U.S. GAAP. In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842): Targeted Improvements, which provides entities an optional transition method to apply the guidance under Topic 842 as of the adoption date, rather than as of the earliest period presented. The Company adopted Topic 842 on January 1, 2019, using the optional transition method to apply the new guidance as of January 1, 2019, rather than as of the earliest period presented, and elected the package of practical expedients described above. Based on the analysis, on January 1, 2019, the Company recorded right of use assets and lease liabilities of approximately $1.5 million. In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Accounting for Goodwill Impairment In June 2018, the FASB issued ASU 2018-07, Improvements to Nonemployee Share-Based Payment Accounting In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820), Disclosure Framework, Changes to the Disclosure Requirements for Fair Value Measurement In August 2018, the FASB issued ASU 2018-15, “Intangibles–Goodwill and Other–Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is A Service Contract” (“ASU 2018-15”). This update clarifies the accounting treatment for fees paid by a customer in a cloud computing arrangement (hosting arrangement) by providing guidance for determining when the arrangement includes a software license. This guidance is effective for public business entities for fiscal years, and interim periods within those years, beginning after December 15, 2019, with early adoption permitted. The amendments may be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. The Company is still evaluating the prospective impact of this guidance on its future consolidated financial statements and related disclosures. In November 2018, the FASB issued ASU 2018-18, C ollaborative Arrangements (Topic 808): Clarifying the Interaction Between Topic 808 and Topic 606, . |
Digital Currencies
Digital Currencies | 3 Months Ended |
Mar. 31, 2019 | |
Indefinite-lived Intangible Assets (Excluding Goodwill) [Abstract] | |
Digital Currencies | Note 4. Digital Currencies: The following table presents additional information about digital currencies: March 31, 2019 (Unaudited) Beginning balance, January 1, 2019 $ 706,625 Revenue recognized from digital currencies mined 1,406,085 Mining pool operating fees (28,216 ) Sale of digital currencies (1,004,264 ) Realized gain on sale of digital currencies 4,788 Ending balance $ 1,085,018 |
Fair value measurements
Fair value measurements | 3 Months Ended |
Mar. 31, 2019 | |
Fair Value Disclosures [Abstract] | |
Fair value measurements | Note 5 Fair value measurements: During the three months ended March 31, 2019 the Company issued senior secured promissory notes and warrants in connection with these notes. The convertible notes and warrants were classified as liabilities and measured at fair value on the issuance date, with changes in fair value recognized as other expense on the consolidated statements of operations and disclosed in the condensed interim consolidated financial statements. A summary of weighted average (in aggregate) significant unobservable inputs (Level 3 inputs) used in measuring the Company’s senior secured promissory notes and warrants at the issuance date of January 28, 2019 and at March 31, 2019 is as follows: Senior Secured Promissory Notes: January 28, 2019 March 31, 2019 (Unaudited) (Unaudited) Dividend yield 0% 0% Expected price volatility 119.5% 118.0% Risk free interest rate 2.60% 2.41% Expected term 1 year 10 months Warrants: January 28, 2019 March 31, 2019 (Unaudited) (Unaudited) Dividend yield 0% 0% Expected price volatility 111.6% 113.7% Risk free interest rate 2.58% 2.23% Expected term 5 years 4 years, 10 months The following tables classify the Company’s liabilities measured at fair value on a recurring basis into the fair value hierarchy as of March 31, 2019: Fair value measured at March 31, 2019 (Unaudited) Total carrying value at March 31, 2019 Quoted prices in active markets (Level 1) Significant other observable inputs (Level 2) Significant unobservable inputs (Level 3) Liabilities Senior secured convertible notes $ 7,975,308 $ - $ - $ 7,975,308 Warrant liability $ 5,322,162 $ - $ - $ 5,322,162 There were no assets or liabilities measured at fair value during the three months ended March 31, 2018. The following table presents changes in Level 3 liabilities measured at fair value for the three months ended March 31, 2019. Unobservable inputs were used to determine the fair value of positions that the Company has classified within the Level 3 category Convertible Notes Warrant Liability Issuance of senior secured convertible notes $ 6,330,726 $ - Issuance of warrants in connection with convertible notes - 2,568,934 Balance at January 28, 2019 6,330,726 2,568,934 Change in fair value 1,644,582 2,753,228 Balance at March 31, 2019 $ 7,975,308 $ 5,322,162 |
Investment in Coinsquare
Investment in Coinsquare | 3 Months Ended |
Mar. 31, 2019 | |
Investments, All Other Investments [Abstract] | |
Investment in Coinsquare | Note 6. Investment in Coinsquare: In September 2017, the Company acquired a minority interest for $3.0 million in Coinsquare, which operates a digital crypto currency exchange platform in Canada. During February 2018, the Company invested an additional $6.4 million to acquire additional common stock of Coinsquare. The investment included an additional equity investment of $2.8 million that was part of an approximate $24 million financing by Coinsquare. Additionally, warrants acquired in the original investment were exercised in exchange of a cash payment of $3.6 million. These additional investments resulted in a current ownership in Coinsquare by the Company of approximately 12% based upon Coinsquare’s issued and outstanding shares. The Company has evaluated the guidance in ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, and elected to account for the investment using the measurement alternative as the equity securities are without a readily determinable fair value and do not give the Company significant influence over Coinsquare. The measurement alternative at cost, less any impairment, plus or minus changes resulting from observable price changes. As of March 31, 2019 and December 31, 2018, the Company considered the cost of the investment to not exceed the fair value of the investment and did not observe price changes. |
Notes Payable
Notes Payable | 3 Months Ended |
Mar. 31, 2019 | |
Debt Disclosure [Abstract] | |
Notes Payable | Note 7. Notes Payable: Senior Secured Convertible Promissory Notes and Warrants On January 28, 2019, in connection with a private financing (the “Private Financing”) first reported by the Company in its current report on Form 8-K filed on February 1, 2019, the Company issued a series of Senior Secured Convertible Promissory Notes (the “Notes”), to investors (the “Investors” and each an “Investor”) for an aggregate principal amount of $3,358,333 and an equal value of warrants for the purchase of shares of the Company’s common stock (the “Warrants”). The Notes are convertible into shares of the Company’s common stock at any time after the issuance date, provided that at no time will the Company will be required to issue shares in excess of the aggregate number of shares of its commons stock outstanding. The Notes mature twelve months from date of issuance and accrue interest at a rate of 8% per annum, with twelve months of interest guaranteed. The Notes are subject to prepayment penalties, default conditions and other terms and conditions, as further defined in the agreements. As additional consideration for the investment, the Company issued a total of 150,000 restricted common shares to the three investors. The Notes are convertible into shares of the common stock of the Company at a price equal to the lower of $2.00 or 80% of the lowest volume-weighted adjusted price of shares of the Company’s common stock in the twenty trading days prior to the conversion date, subject to adjustments in certain cases as defined in the agreements. Provided, however, that according to the Notes, the cumulative shares of our common stock issuable upon conversion of the notes cannot exceed 19.99% of the total number of the Company’s outstanding common stock as of January 28, 2019. Pursuant to a security agreements between the Company and the Investors, the Company has granted to the Investors a security interest in its assets to secure repayment of the Notes. Further to the Private Financing, the Company has also reserved a number of shares of its common stock equal to 300% of the total number of shares issuable upon full conversion of the Notes. The Company issued Warrants to the Investors to acquire up to an aggregate of 1,908,144 shares of the Company’s common stock at an exercise price of $1.94 per share. The Warrants are exercisable by the Investors beginning on July 29, 2019, through the fifth year anniversary of the effective date of the Private Financing; provided however The foregoing description of the Notes and the Warrants is qualified in its entirety by the agreements between the Company and the Investors as first disclosed by the Company in its current report on Form 8-K filed on February 1, 2019. Due to the complexity and number of embedded features within the Notes and as permitted under accounting guidance, the Company elected to account for the Notes and all the embedded features under the fair value option, which records the Notes at fair value rather than at historical cost, with changes in fair value recorded in the condensed interim consolidated statements of operations. Direct costs and fees incurred to issue the Notes were recognized in earnings as incurred and were not deferred. On the initial measurement date of January 28, 2019, the fair value of the Notes was estimated at $6,330,726. Upfront costs and fees related to items for which the fair value option was elected were approximately $358,333 and were recorded as a component of other expenses for the three months ended March 31, 2019. As of March 31, 2019, the fair value of the Notes was $7,795,308, an increase in fair value of $1,644,582 which is reflected on the condensed interim consolidated statements of operations for the three months ended March 31, 2019, as change in fair value of notes payable. (See Note 5). In connection with the Notes, the Company entered into registration rights agreement with the investors. The Company filed a registration statement with the SEC covering the equity rights and any other shares issuable in connection with the Notes on March 14, 2019 and the registration statement was declared effective on April 29, 2019. As of March 28, 2018, Tess, a subsidiary of the Company, entered into a note purchase agreement with a private investor under which a convertible promissory note issued by Tess in the principal amount CAD $2.2 million (the “Convertible Note”) and cash proceeds of CAD $2.2 million were placed into a third-party controlled escrow account. Upon the successful achievement of conditions defined under the escrow agreement relating to closing of a transaction between Tess and Cresval Capital Corp, (“Cresval”) whereby Tess and Cresval would merge as provided in the merger agreements and Tess would become publicly traded on the TSXV Venture Exchange, the then remaining cash and the Convertible Note would be issued to Tess and the investor, respectively. The Convertible Note is convertible at $0.10 per share of the merged entity, as defined, subject to certain adjustments. On February 15, 2019, Cresval terminated its definitive agreement with Tess due to Tess’s inability to complete one of the specified closing conditions in the agreement. The interim release consisted of CAD $1.0 million (USD $775,555) of cash released to Tess and an unsecured promissory note issued by Tess (“Promissory Note”) released to the investor. The Promissory Note bears interest at 5%, is unsecured and due in 2021. On August 23, 2018, the final release from escrow occurred. Tess received approximately USD $921,000, bringing the total Promissory Note balance to approximately $1,696,000. |
Stockholders' equity
Stockholders' equity | 3 Months Ended |
Mar. 31, 2019 | |
Equity [Abstract] | |
Stockholders' equity | Note 8. Stockholders’ equity: Restricted Stock: During the three months ended March 31, 2019, 93,751 shares of restricted common stock related to fully vested shares of restricted stock issued under the Company’s 2017 Equity Incentive Plan, were issued to two former officers who separated from the Company in February 2019 and a former director who resigned in October of 2018. |
Stock based compensation, optio
Stock based compensation, options and warrants | 3 Months Ended |
Mar. 31, 2019 | |
Share-based Payment Arrangement [Abstract] | |
Stock based compensation, options and warrants | Note 9. Stock based compensation, options and warrants: Stock based compensation: The Company’s stock-based compensation expenses recognized during the three months ended March 31, 2019 and 2018, were attributable to selling, general and administrative expenses, which are included in the accompanying consolidated statements of operations. The Company recognized total stock-based compensation expense during the three months ended March 31, 2019 and 2018, from the following categories: Three Months Ended March 31, 2019 2018 Restricted stock awards under the Plan $ 176,544 $ 766,949 Stock option awards under the Plan 58,498 116,994 Total stock-based compensation $ 235,042 $ 883,943 Restricted stock units: A summary of the Company’s unvested restricted stock activity in the three months ended March 31, 2019 is presented here: Number of Shares Weighted Average Grant-Date Fair Value Unvested at January 1, 2018 95,939 $ 12.49 Vested (22,397 ) $ 9.37 Forfeited (40,000 ) $ 16.82 Unvested at March 31, 2019 33,542 $ 9.39 During the three months ended March 31, 2019, the Company did not grant restricted stock units. During the three months ended March 31, 2019, forfeitures of restricted common stock totaled 40,000, which consisted of shares forfeited due to the termination of two of the Company’s officers. The fair value of restricted stock unit grants is measured based on their fair value on the date of grant and amortized over the vesting period of twenty-four months. As of March 31, 2019, there was approximately $0.3 million of unrecognized compensation cost related to unvested restricted stock units, which is expected to be recognized over a remaining weighted-average vesting period of approximately 4 months. Stock incentive plan options: A summary of activity under the Plan for the three months ended March 31, 2019 is presented below: Shares Underlying Options Weighted Average Exercise Price Weighted Average Remaining Contractual Term (Years) Aggregate Intrinsic Value Outstanding at January 1, 2019 62,000 $ 15.71 9.2 $ - Outstanding at March 31, 2019 62,000 $ 15.71 9.0 $ - Exercisable at March 31, 2019 62,000 $ 15.71 9.0 $ - Aggregate intrinsic value represents the total intrinsic value (the difference between the Company’s closing stock price on March 31, 2019 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders, had all option holders been able to, and in fact had, exercised their options on March 31, 2019. As of March 31, 2019, there was no unrecognized stock-based compensation expense related to unvested options. Other common stock purchase options and warrants: Following is a summary of outstanding options and warrants that were issued outside of the Plan for the three months ended March 31, 2019: Shares Underlying Options/Warrants Weighted Average Exercise Price Weighted Average Remaining Contractual Term (Years) Aggregate Intrinsic Value Outstanding at January 1, 2019 1,671,113 $ 39.47 2.0 $ - Granted 1,908,144 $ 1.94 5.2 $ 2,537,832 Outstanding at March 31, 2019 3,579,257 $ 19.46 3.6 $ 2,537,832 Exercisable at March 31, 2019 3,579,257 $ 19.46 5.2 $ 2,537,832 The Company granted warrants to purchase 1,908,144 shares of its common stock with an exercise price of $1.94, in connection with its Senior Secured Promissory Notes issued on January 28, 2019. (See Note 7). The aggregate intrinsic value in the table above represents the total intrinsic value (the difference between the Company’s closing stock price on March 31, 2019 and the exercise price, multiplied by the number of in-the-money options and warrants) that would have been received by the option and warrant holders, had all option and warrant holders been able to, and in fact had, exercised their options and warrants on March 31, 2019. |
Discontinued Operations
Discontinued Operations | 3 Months Ended |
Mar. 31, 2019 | |
Discontinued Operations and Disposal Groups [Abstract] | |
Discontinued Operations | Note 10. Discontinued Operations: During the quarter ended March 31, 2017, the Company made the decision to discontinue the operations of its wholly-owned subsidiary BDI. BDI had developed a proprietary Enhanced Surface Plasmon Resonance technology platform for the detection of molecular interactions. The decision to adopt this plan was made following an evaluation by the Company's Board of Directors in January 2017 of the estimated results of operations projected during the near to mid-term period for BDI, including consideration of product development required and updated sales forecasts, and estimated additional cash resources required. The Company substantially disposed of the assets and operations during 2017 by selling the assets and licensing the intellectual property rights. The Company has recognized the exit of BDI in accordance with ASC 205-20, Discontinued Operations The Company's historical financial statements have been revised to present the operating results of the BDI business as a discontinued operation. Liabilities related to the discontinued operations of BDI totaled approximately $16,000 in accounts payable as of March 31, 2019 and December 31, 2018, respectively. There were no results of discontinued operations for the three months ended March 31, 2019. Summarized results of the discontinued operation are as follows for the three months ended March 31, 2018: March 31, 2018 Revenue $ 137,000 Cost of revenue 41,000 Gross margin 96,000 Operating expenses - Operating income 96,000 Income from discontinued operations, net of tax $ 96,000 |
Leases
Leases | 3 Months Ended |
Mar. 31, 2019 | |
Leases [Abstract] | |
Leases | Note 11. Leases: Oklahoma Lease Agreement. On February 27, 2018, Kairos entered into a lease agreement (the “Lease”) with 7725 Reno #1, LLC (the “Landlord”), pursuant to which Kairos leases an approximately 107,600 square foot warehouse located in Oklahoma City, Oklahoma, including improvements thereon. Pursuant to the terms of the Lease, the initial term was scheduled to terminate on February 15, 2019, unless terminated earlier pursuant to the terms of the Lease, subject to Kairos’ options to renew the Lease, however the term of the Lease was extended by agreement of the parties as discussed below. Under the Lease, Kairos has the right to operate from the premises on a 24 hour/seven day a week basis. The Lease provides that, at least three months, but no more than six months, prior to its expiration Kairos shall give Landlord written notice of its intent to either exercise its option to renew the Lease or to allow the Lease to terminate at the end of its term. Prior to the first amendment of the Lease discussed below, the base rent for the facility was equal to $55.95/kW per month for a total of 4 Megawatts (MW) of available electrical power, or $223,800 per month. On March 26, 2018, Kairos entered into a first amendment to the Lease, whereby the Landlord agreed to increase the electrical power available for Kairos’s use from 6MW to 12MW, and, effective as of the date when such additional power became available for use, the base rent under the lease was increased to approximately $664,760 per month. Effective November 29, 2018, Kairos entered into the second amendment to the Lease which provides the following: · extends the initial term of the lease through August 19, 2019; · monthly base rent of $235,000 for December 2018, $230,000 for January and $190,000 per month thereafter for the duration of the lease, including any renewals; · changes the monthly electricity usage charges; and · Kairos shall have the option to renew the lease for up to two, three-month periods after expiration of the initial term. Corporate Lease Agreement On April 9, 2018, the Company entered into a commercial lease covering 1,694 rentable square feet of office space in Fort Lauderdale, Florida, with a third-party. The lease is for an initial term of thirty-nine months, with one five-year option to renew. The lease requires initial monthly rent of approximately $7,000, including base rent and associated operating expenses. At March 31, 2019, the Company had operating lease liabilities of approximately $1.0 million and right of use assets of approximately $1.0 million, which are included in the condensed interim consolidated balance sheet. The following summarizes quantitative information about the Company’s operating leases: Lease cost Three Months Ended March 31, Operating lease cost $ 600,593 Variable lease cost 776,053 Operating lease expense 1,376,646 Short-term lease rent expense 4,620 Total rent expense $ 1,381,266 Other information Operating cash flows from operating leases $ 623,976 Right of use assets exchanged for new operating lease liabilities $ 1,547,499 Weighted-average remaining lease term – operating leases 0.9 years Weighted-average discount rate – operating leases 10.00 % Maturities of the Company’s operating lease liabilities, are as follows (unaudited): For the nine months ended December 31, 2019 $ 898,045 For the year ended December 31, 2020 58,731 For the year ended December 31, 2021 35,040 Total $ 991,816 Less imputed interest (34,831 ) Operating lease liabilities $ 956,985 Rent expense, which is recorded on a straight-line basis, was approximately $350,000 for the three months ended March 31, 2018. |
Commitments and contingencies
Commitments and contingencies | 3 Months Ended |
Mar. 31, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and contingencies | Note 12. Commitments and contingencies: Contingencies: The Company, and its subsidiaries, are subject at times to various claims, lawsuits and governmental proceedings relating to the Company’s business and transactions arising in the ordinary course of business. The Company cannot predict the final outcome of such proceedings. Where appropriate, the Company vigorously defends such claims, lawsuits and proceedings. Some of these claims, lawsuits and proceedings seek damages, including, consequential, exemplary or punitive damages, in amounts that could, if awarded, be significant. Certain of the claims, lawsuits and proceedings arising in ordinary course of business are covered by the Company’s insurance program. The Company maintains property, and various types of liability insurance in an effort to protect the Company from such claims. In terms of any matters where there is no insurance coverage available to the Company, or where coverage is available and the Company maintains a retention or deductible associated with such insurance, the Company may establish an accrual for such loss, retention or deductible based on current available information. In accordance with accounting guidance, if it is probable that an asset has been impaired or a liability has been incurred as of the date of the financial statements, and the amount of loss is reasonably estimable, then an accrual for the cost to resolve or settle these claims is recorded by the Company in the accompanying consolidated balance sheets. If it is reasonably possible that an asset may be impaired as of the date of the financial statement, then the Company discloses the range of possible loss. Paid expenses related to the defense of such claims are recorded by the Company as incurred and paid and included in the accompanying consolidated statements of operations. Management, with the assistance of outside counsel, may from time to time adjust such accruals according to new developments in the matter, court rulings, or changes in the strategy affecting the Company’s defense of such matters. On the basis of current information, the Company does not believe there is a reasonable possibility that, other than with regard to the Class Action described below, any material loss, if any, will result from any claims, lawsuits and proceedings to which the Company is subject to either individually, or in the aggregate. On February 17, 2018, Creighton Takata filed an action asserting putative class action claims on behalf of the Company's shareholders in the United District Court for the District of New Jersey, Takata v. Riot Blockchain Inc., et al. Two additional, nearly identical complaints were subsequently filed by Richard Roys and Bruce Greenawalt in the United District States Court for the Southern District of Florida ( Roys v. Riot Blockchain Inc., et al. Greenawalt v. Riot Blockchain Inc., et al. On April 18, 2018, Joseph J. Klapper, Jr., filed a complaint against Riot Blockchain, Inc., and certain of its officers and directors in the United District Court for the District of New Jersey ( Klapper v. Riot Blockchain Inc., et al. Lead Plaintiff filed a consolidated complaint on January 15, 2019. Defendants filed motions to dismiss on March 18, 2019. Lead Plaintiff was subsequently granted leave to file another amended complaint on May 8, 2019. Defendants intend to file a motion to dismiss in response, with briefing expected to be completed on the motion to dismiss in late June 2019. Subject to the outcome of the pending motions, defendants intend to continue to vigorously contest Lead Plaintiff’s allegations. Because this litigation is still at this early stage, we cannot reasonably estimate the likelihood of an unfavorable outcome or the magnitude of such an outcome, if any. Shareholder Derivative Cases On April 5, 2018, Michael Jackson filed a shareholder derivative complaint on behalf of the Company in the Supreme Court of the State of New York, County of Nassau, against certain of the Company's officers and directors, as well as against an investor ( Jackson v. Riot Blockchain, Inc., et al. On May 22, 2018, two additional shareholder derivative complaints were filed on behalf of the Company in the Eighth Judicial District Court of the State of Nevada in and for the County of Clark ( Kish v. O'Rourke, et al. Gaft v. O'Rourke, et al. On September 24, 2018, the court entered an order consolidating the Gaft Kish In re Riot BlockChain, Inc. Shareholder Derivative Litigation On October 9, 2018, another shareholder derivative complaint was filed on behalf of the Company in the United District Court for the Eastern District of New York ( Rotkowitz v. O'Rourke, et al. On October 22, 2018, a fifth shareholder derivative complaint was filed on behalf of the Company in the United District Court for the Southern District of New York ( Finitz v. O'Rourke, et al. Defendants intend to vigorously contest plaintiffs’ allegations in the shareholder derivative actions and plaintiffs’ right to bring the action in the name of Riot Blockchain. But because this litigation is still at this early stage, we cannot reasonably estimate the likelihood of an unfavorable outcome or the magnitude of such an outcome, if any. SEC Subpoena and Other Matters On April 9, 2018, the Company received a subpoena from the SEC, requesting documents and information. The SEC has continued to request information from the Company and the Company has been fully cooperating with the SEC in that investigation. During 2018 the Company received several comment letters (the “Comment Letters”) from the Division of Corporation Finance and the Division of Investment Management of the SEC. The Comment Letters had been issued on the Company’s periodic reports on Form 10-Q for the quarter ended March 31, 2018, Annual Report on Form 10-K for the fiscal year ended December 31, 2017, amendment to Annual Report on Form 10-K/A for the fiscal year ended December 31, 2017 and current report on Form 8-K filed October 4, 2017. The Comment Letters raised matters related to, among other things, the unsettled nature of accounting treatment for the Company’s digital currency mining and the fair value method selected by the Company (as opposed to intangible accounting methods proposed by some experts) and applicability to the Company of the Investment Company Act of 1940, particularly as it relates to the Company’s minority interest in Coinsquare. On April 5, 2019, the Company received a letter from the SEC informing the Company that the SEC had completed their review of the above filings. Beneficial Ownership Pursuant to the rules of the SEC, the Company has consistently reported its beneficial ownership positions in its proxy and other filings where beneficial ownership disclosures are presented, for certain beneficial owners with respect to any person (including any “group” as that term is used in Section 13(d)(3) of the Securities and Exchange Act of 1934 (the “Exchange Act”) who is known to the Company to be the beneficial owner of more than 5% of the Company’s common stock. The Company has relied on each person who has reported to the SEC beneficial ownership of more than 5% of our common stock to provide complete and accurate information regarding their ownership, based on the reports filed by these persons. On September 7, 2018, a complaint was filed by the SEC (Case 1:18-cv-08175) and amended as of March 8, 2019, (the “Complaint”) against, among others, a number of individuals and entities some of whom the Company has previously disclosed as its beneficial owners, as well as, Mr. John O’Rourke III, the Company’s former chairman of the board of directors and chief executive officer who resigned from the Company on September 8, 2018, as disclosed in the Current Periodic Report on Form 8-K filed September 10, 2018. Other persons named in the Complaint have previously reported that they were beneficial owners of the Company’s common stock, however, the Company has no basis to determine whether any such persons may have operated as a control group, collectively beneficially owning more than 5% of the Company’s common stock. |
Tess Related Party Transactions
Tess Related Party Transactions | 3 Months Ended |
Mar. 31, 2019 | |
Related Party Transactions [Abstract] | |
Tess Related Party Transactions | Note 13. Tess Related Party Transactions: Tess related parties include: Powercases Inc., and 2227470 Ontario Inc., (companies that are wholly-owned by Jeffrey Mason, President and Chief Executive Officer of Tess), 1038088 Ontario Limited (a company that is wholly-owned by Fraser Mason, Chairman and Chief Financial Officer of Tess), and JLM Strategic Marketing (a proprietorship owned by Jennifer Mason, Manager Corporate Communications of Tess). The following table provides the total amount of transactions that have been entered into with Tess related parties and outstanding balances with Tess related parties as of and for the periods identified: Three Months Ended Services to Tess provided by: March 31, 2019 March 31, 2018 Powercases Inc. $ 160,826 $ 163,582 JLM Strategic Marketing $ - $ 36,198 1038088 Ontario Limited $ 45,062 $ 47,817 Payable to: March 31, 2019 December 31, 2018 Powercases Inc. $ 145,047 $ 37,250 JLM Strategic Marketing $ 101,405 $ 9,483 1038088 Ontario Limited $ 9,292 $ 52,053 During the three-month periods ended March 31, 2019 and 2018, included in Tess's recorded services from related parties was approximately $150,000 and $213,400, respectively for Tess's key management personnel salaries. |
Subsequent Events
Subsequent Events | 3 Months Ended |
Mar. 31, 2019 | |
Subsequent Events [Abstract] | |
Subsequent Events | Note 14. Subsequent Events: Sale of Digital Currencies Subsequent to March 31, 2019, the Company sold 250 bitcoin and 498 bitcoin cash generating total cash proceeds of approximately $1,372,000. 1172767 B.C. Ltd. Investment (formerly Tess Inc.) On or about April 10, 2019, Tess closed on a funding agreement under which approximately 23.8 million shares of Tess were issued for CAD $1.2 million. As a result of this funding, the Company’s ownership in Tess was reduced to approximately 9%, such that Tess will thereafter no longer be consolidated within the Company’s financial statements. Issuance of Restricted Shares Effective as of May 1, 2019, 12,500 restricted shares under the Company’s 2017 Equity Incentive Plan were awarded, vesting equally over a period of twelve months in connection with the renewal of a consulting agreement. Convertible Note Conversions Subsequent to March 31, 2019, holders of the Senior Secured Convertible Promissory Notes issued on January 28, 2019, as first reported by the Company in its current report on Form 8-K filed on February 1, 2019, converted $2,363,500, of such notes into 1,181,750 shares of the Company’s common stock. |
Basis of presentation, summar_2
Basis of presentation, summary of significant accounting policies and recent accounting pronouncements (Policies) | 3 Months Ended |
Mar. 31, 2019 | |
Accounting Policies [Abstract] | |
Basis of presentation and principles of consolidation | Basis of presentation and principles of consolidation The accompanying unaudited condensed interim consolidated financial statements have been prepared in accordance with the accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and pursuant to the instructions to Form 10-Q and Article 8 of Regulation S-X of the Securities and Exchange Commission (“SEC”). In the opinion of management, the accompanying unaudited condensed interim consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation of such interim results. The results for the unaudited condensed interim consolidated statement of operations are not necessarily indicative of results to be expected for the year ending December 31, 2019 or for any future interim period. The unaudited condensed interim consolidated balance sheet at March 31, 2019 has been derived from unaudited financial statements; however, it does not include all of the information and notes required by U.S. GAAP for complete financial statements. The accompanying condensed interim consolidated financial statements should be read in conjunction with the consolidated financial statements for the year ended December 31, 2018 and notes thereto included in the Company’s Annual Report on Form 10-K filed with the SEC on April 2, 2019. |
Use of estimates | Use of estimates: The preparation of financial statements in conformity with U.S. GAAP 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 balance sheet and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ significantly from those estimates. The most significant accounting estimates inherent in the preparation of the Company's financial statements include estimates associated with revenue recognition, asset valuations, the useful lives and recoverability of long-lived assets, impairment analysis of intangibles and goodwill, stock-based compensation, assumptions used in estimating the fair value of convertible notes and warrants, and the valuation allowance associated with the Company’s deferred tax assets. |
Sequencing | Sequencing: On January 28, 2019, the Company adopted a sequencing policy under Accounting Standards Codification (“ASC”) 815-40-35 whereby in the event that reclassification of contracts from equity to assets or liabilities is necessary pursuant to ASC 815 due to the Company’s inability to demonstrate it has sufficient authorized shares as a result of certain securities with a potentially indeterminable number of shares, shares will be allocated on the basis of the earliest issuance date of potentially dilutive instruments, with the earliest grants receiving the first allocation of shares. Pursuant to ASC 815, issuance of securities to the Company’s employees or directors are not subject to the sequencing policy. |
Notes Payable Fair Value Option | Notes Payable Fair Value Option: As described further in Note 7 - Notes and other obligations, |
Warrant Liability | Warrant Liability: The Company issued warrants to purchase 1,908,144 shares of its common stock in connection with its Senior Secured Promissory Notes issued in January 2019, and recorded the stock warrants outstanding as a liability at fair value utilizing a Monte Carlo simulation model. This liability is subject to re-measurement at each balance sheet date, and any change in fair value is recognized in the Company's condensed interim consolidated statements of operations. |
Leases | Leases: Effective January 1, 2019, the Company accounts for its leases under ASC 842, Leases In calculating the right of use asset and lease liability, the Company elects to combine lease and non-lease components. The Company excludes short-term leases having initial terms of 12 months or less from the new guidance as an accounting policy election, and recognizes rent expense on a straight-line basis over the lease term. The Company continues to account for leases in the prior period financial statements under ASC Topic 840. |
Loss per share | Loss per share Basic net loss per share (“EPS”) of common stock is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity. The Company excludes its unvested restricted shares and escrow shares from the net loss per share calculation. The escrow shares are excluded because of related contingencies and including them would result in anti-dilution. Since the Company has only incurred losses, basic and diluted net loss per share is the same. Securities that could potentially dilute loss per share in the future that were not included in the computation of diluted loss per share at March 31, 2019 and 2018 because their inclusion would be anti-dilutive are as follows: March 31, 2019 2018 Warrants to purchase common stock 3,579,257 1,831,886 Options to purchase common stock 62,000 150,000 Unvested restricted stock awards 33,542 681,176 Escrow shares of common stock 200,000 200,000 Convertible Series B preferred shares 13,000 928,000 Convertible notes 1,813,500 - Total 5,701,299 3,791,062 |
Reclassifications | Reclassifications: Certain prior period amounts reported in the condensed interim consolidated statements of operations have been reclassified to conform to the presentations currently used. The reclassifications did not have a material impact on the Company's condensed interim consolidated financial statements and related disclosures. |
Recently issued and adopted accounting pronouncements | Recently issued and adopted accounting pronouncements: The Company continually assesses any new accounting pronouncements to determine their applicability. When it is determined that a new accounting pronouncement affects the Company's financial reporting, the Company undertakes a study to determine the consequences of the change to its consolidated financial statements and assures that there are proper controls in place to ascertain that the Company's consolidated financial statements properly reflect the change. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) in order to increase transparency and comparability among organizations by, among other provisions, recognizing lease assets and lease liabilities on the balance sheet for those leases classified as operating leases under previous U.S. GAAP. For public companies, ASU 2016-02 is effective for fiscal years beginning after December 15, 2018 (including interim periods within those periods) using a modified retrospective approach and early adoption is permitted. In transition, entities may also elect a package of practical expedients that must be applied in its entirety to all leases commencing before the adoption date, unless the lease is modified, and permits entities to not reassess (a) the existence of a lease, (b) lease classification or (c) determination of initial direct costs, as of the adoption date, which effectively allows entities to carryforward accounting conclusions under previous U.S. GAAP. In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842): Targeted Improvements, which provides entities an optional transition method to apply the guidance under Topic 842 as of the adoption date, rather than as of the earliest period presented. The Company adopted Topic 842 on January 1, 2019, using the optional transition method to apply the new guidance as of January 1, 2019, rather than as of the earliest period presented, and elected the package of practical expedients described above. Based on the analysis, on January 1, 2019, the Company recorded right of use assets and lease liabilities of approximately $1.5 million. In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Accounting for Goodwill Impairment In June 2018, the FASB issued ASU 2018-07, Improvements to Nonemployee Share-Based Payment Accounting In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820), Disclosure Framework, Changes to the Disclosure Requirements for Fair Value Measurement In August 2018, the FASB issued ASU 2018-15, “Intangibles–Goodwill and Other–Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is A Service Contract” (“ASU 2018-15”). This update clarifies the accounting treatment for fees paid by a customer in a cloud computing arrangement (hosting arrangement) by providing guidance for determining when the arrangement includes a software license. This guidance is effective for public business entities for fiscal years, and interim periods within those years, beginning after December 15, 2019, with early adoption permitted. The amendments may be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. The Company is still evaluating the prospective impact of this guidance on its future consolidated financial statements and related disclosures. In November 2018, the FASB issued ASU 2018-18, C ollaborative Arrangements (Topic 808): Clarifying the Interaction Between Topic 808 and Topic 606, . |
Basis of presentation, summar_3
Basis of presentation, summary of significant accounting policies and recent accounting pronouncements (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Accounting Policies [Abstract] | |
Schedule of Antidilutive Securities | Securities that could potentially dilute loss per share in the future that were not included in the computation of diluted loss per share at March 31, 2019 and 2018 because their inclusion would be anti-dilutive are as follows: March 31, 2019 2018 Warrants to purchase common stock 3,579,257 1,831,886 Options to purchase common stock 62,000 150,000 Unvested restricted stock awards 33,542 681,176 Escrow shares of common stock 200,000 200,000 Convertible Series B preferred shares 13,000 928,000 Convertible notes 1,813,500 - Total 5,701,299 3,791,062 |
Digital Currencies (Tables)
Digital Currencies (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Indefinite-lived Intangible Assets (Excluding Goodwill) [Abstract] | |
Summary of Additional Information About Digital Currencies | The following table presents additional information about digital currencies: March 31, 2019 (Unaudited) Beginning balance, January 1, 2019 $ 706,625 Revenue recognized from digital currencies mined 1,406,085 Mining pool operating fees (28,216 ) Sale of digital currencies (1,004,264 ) Realized gain on sale of digital currencies 4,788 Ending balance $ 1,085,018 |
Fair value measurements (Tables
Fair value measurements (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Fair Value Disclosures [Abstract] | |
Schedule of Weighted Average Unobservable Inputs | A summary of weighted average (in aggregate) significant unobservable inputs (Level 3 inputs) used in measuring the Company’s senior secured promissory notes and warrants at the issuance date of January 28, 2019 and at March 31, 2019 is as follows: Senior Secured Promissory Notes: January 28, 2019 March 31, 2019 (Unaudited) (Unaudited) Dividend yield 0% 0% Expected price volatility 119.5% 118.0% Risk free interest rate 2.60% 2.41% Expected term 1 year 10 months Warrants: January 28, 2019 March 31, 2019 (Unaudited) (Unaudited) Dividend yield 0% 0% Expected price volatility 111.6% 113.7% Risk free interest rate 2.58% 2.23% Expected term 5 years 4 years, 10 months |
Schedule of Liabilities Measured at Fair Value Recurring Basis | The following tables classify the Company’s liabilities measured at fair value on a recurring basis into the fair value hierarchy as of March 31, 2019: Fair value measured at March 31, 2019 (Unaudited) Total carrying value at March 31, 2019 Quoted prices in active markets (Level 1) Significant other observable inputs (Level 2) Significant unobservable inputs (Level 3) Liabilities Senior secured convertible notes $ 7,975,308 $ - $ - $ 7,975,308 Warrant liability $ 5,322,162 $ - $ - $ 5,322,162 |
Schedule of Changes in Level 3 Liabilities Measured at Fair Value | The following table presents changes in Level 3 liabilities measured at fair value for the three months ended March 31, 2019. Unobservable inputs were used to determine the fair value of positions that the Company has classified within the Level 3 category Convertible Notes Warrant Liability Issuance of senior secured convertible notes $ 6,330,726 $ - Issuance of warrants in connection with convertible notes - 2,568,934 Balance at January 28, 2019 6,330,726 2,568,934 Change in fair value 1,644,582 2,753,228 Balance at March 31, 2019 $ 7,975,308 $ 5,322,162 |
Stock based compensation, opt_2
Stock based compensation, options and warrants (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Share-based Payment Arrangement [Abstract] | |
Schedule of Recognized Stock-based Compensation | The Company recognized total stock-based compensation expense during the three months ended March 31, 2019 and 2018, from the following categories: Three Months Ended March 31, 2019 2018 Restricted stock awards under the Plan $ 176,544 $ 766,949 Stock option awards under the Plan 58,498 116,994 Total stock-based compensation $ 235,042 $ 883,943 |
Summary of Restricted Plan Activity | A summary of the Company’s unvested restricted stock activity in the three months ended March 31, 2019 is presented here: Number of Shares Weighted Average Grant-Date Fair Value Unvested at January 1, 2018 95,939 $ 12.49 Vested (22,397 ) $ 9.37 Forfeited (40,000 ) $ 16.82 Unvested at March 31, 2019 33,542 $ 9.39 |
Summary of Stock Incentive Plan Activity | A summary of activity under the Plan for the three months ended March 31, 2019 is presented below: Shares Underlying Options Weighted Average Exercise Price Weighted Average Remaining Contractual Term (Years) Aggregate Intrinsic Value Outstanding at January 1, 2019 62,000 $ 15.71 9.2 $ - Outstanding at March 31, 2019 62,000 $ 15.71 9.0 $ - Exercisable at March 31, 2019 62,000 $ 15.71 9.0 $ - |
Schedule of Changes in Outstanding Warrants | Following is a summary of outstanding options and warrants that were issued outside of the Plan for the three months ended March 31, 2019: Shares Underlying Options/Warrants Weighted Average Exercise Price Weighted Average Remaining Contractual Term (Years) Aggregate Intrinsic Value Outstanding at January 1, 2019 1,671,113 $ 39.47 2.0 $ - Granted 1,908,144 $ 1.94 5.2 $ 2,537,832 Outstanding at March 31, 2019 3,579,257 $ 19.46 3.6 $ 2,537,832 Exercisable at March 31, 2019 3,579,257 $ 19.46 5.2 $ 2,537,832 |
Discontinued Operations (Tables
Discontinued Operations (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Discontinued Operations and Disposal Groups [Abstract] | |
Schedule of Operation and Assets and Liabilities Related to Discontinued Operations | There were no results of discontinued operations for the three months ended March 31, 2019. Summarized results of the discontinued operation are as follows for the three months ended March 31, 2018: March 31, 2018 Revenue $ 137,000 Cost of revenue 41,000 Gross margin 96,000 Operating expenses - Operating income 96,000 Income from discontinued operations, net of tax $ 96,000 |
Leases (Tables)
Leases (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Leases [Abstract] | |
Schedule of Operating Leases | The following summarizes quantitative information about the Company’s operating leases: Lease cost Three Months Ended March 31, Operating lease cost $ 600,593 Variable lease cost 776,053 Operating lease expense 1,376,646 Short-term lease rent expense 4,620 Total rent expense $ 1,381,266 Other information Operating cash flows from operating leases $ 623,976 Right of use assets exchanged for new operating lease liabilities $ 1,547,499 Weighted-average remaining lease term – operating leases 0.9 years Weighted-average discount rate – operating leases 10.00 % |
Schedule of Maturities of Operating Lease Liabilities | Maturities of the Company’s operating lease liabilities, are as follows (unaudited): For the nine months ended December 31, 2019 $ 898,045 For the year ended December 31, 2020 58,731 For the year ended December 31, 2021 35,040 Total $ 991,816 Less imputed interest (34,831 ) Operating lease liabilities $ 956,985 |
Tess Related Party Transactio_2
Tess Related Party Transactions (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Related Party Transactions [Abstract] | |
Schedule of Tess Related Party Transactions | The following table provides the total amount of transactions that have been entered into with Tess related parties and outstanding balances with Tess related parties as of and for the periods identified: Three Months Ended Services to Tess provided by: March 31, 2019 March 31, 2018 Powercases Inc. $ 160,826 $ 163,582 JLM Strategic Marketing $ - $ 36,198 1038088 Ontario Limited $ 45,062 $ 47,817 Payable to: March 31, 2019 December 31, 2018 Powercases Inc. $ 145,047 $ 37,250 JLM Strategic Marketing $ 101,405 $ 9,483 1038088 Ontario Limited $ 9,292 $ 52,053 |
Organization (Details)
Organization (Details) | Mar. 31, 2019 |
Kairos Global Technology, Inc [Member] | |
Number of computers acquired | 8,000 |
Liquidity, Financial Conditio_2
Liquidity, Financial Condition, and Going Concern (Details) - USD ($) | Mar. 31, 2019 | Jan. 28, 2019 | Dec. 31, 2018 | Mar. 31, 2018 | Dec. 31, 2017 |
Cash and cash equivalents | $ 1,016,019 | $ 225,390 | $ 5,257,534 | $ 41,651,965 | |
Working capital | 18,561,000 | ||||
Stockholders' equity | 8,769,373 | (4,491,012) | $ (43,235,055) | $ (49,627,399) | |
Accumulated deficit | 210,728,202 | $ 197,199,197 | |||
Total investment | 3,000,000 | ||||
Senior Secured Convertible Promissory Notes [Member] | Investors [Member] | |||||
Debt instrument face amount | $ 3,358,333 | $ 3,358,333 |
Basis of presentation, summar_4
Basis of presentation, summary of significant accounting policies (Narrative) (Details) - USD ($) | Mar. 31, 2019 | Jan. 28, 2019 | Dec. 31, 2018 |
Expected operating liabilities to be recorded from adoption of FASB ASU 2016-02 | $ 1,500,000 | ||
Senior Secured Promissory Notes [Member] | |||
Warrant issued | 1,908,144 | ||
Senior Secured Convertible Promissory Notes [Member] | Investors [Member] | |||
Debt instrument face amount | $ 3,358,333 | $ 3,358,333 | |
Warrant issued | 1,908,144 |
Basis of presentation, summar_5
Basis of presentation, summary of significant accounting policies (Schedule of Antidilutive Securities) (Details) - shares | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Shares not included in the computation of EPS | 5,701,299 | 3,791,062 |
Warrants to purchase common stock [Member] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Shares not included in the computation of EPS | 3,579,257 | 1,831,886 |
Option to purchase common stock [Member] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Shares not included in the computation of EPS | 62,000 | 150,000 |
Unvested restricted stock awards [Member] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Shares not included in the computation of EPS | 33,542 | 681,176 |
Escrow shares of common stock [Member] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Shares not included in the computation of EPS | 200,000 | 200,000 |
Convertible Preferred Stock Series B [Member] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Shares not included in the computation of EPS | 13,000 | 928,000 |
Convertible notes [Member] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Shares not included in the computation of EPS | 1,813,500 |
Digital Currencies (Summary of
Digital Currencies (Summary of Additional Information About Digital Currencies) (Details) | 3 Months Ended |
Mar. 31, 2019USD ($) | |
Indefinite-lived Intangible Assets (Excluding Goodwill) [Abstract] | |
Digital currencies, beginning balance | $ 706,625 |
Revenue recognized from digital currencies mined | 1,406,085 |
Mining pool operating fees | (28,216) |
Sale of digital currencies | (1,004,264) |
Realized gain on sale of digital currencies | 4,788 |
Digital currencies, ending balance | $ 1,085,018 |
Fair value measurements (Schedu
Fair value measurements (Schedule of Weighted Average Unobservable Inputs) (Details) - Fair Value, Inputs, Level 3 [Member] | 1 Months Ended | 3 Months Ended |
Jan. 28, 2019 | Mar. 31, 2019 | |
Dividend yield [Member] | Warrant [Member] | ||
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | ||
Weighted Average Unobservable Inputs | 0% | 0% |
Expected Price volatility [Member] | Warrant [Member] | ||
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | ||
Weighted Average Unobservable Inputs | 111.6% | 113.7% |
Risk free interest rate [Member] | Warrant [Member] | ||
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | ||
Weighted Average Unobservable Inputs | 2.58% | 2.23% |
Expected term [Member] | Warrant [Member] | ||
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | ||
Weighted Average Unobservable Inputs | 5 years | 4 years, 10 months |
Senior Secured Convertible Promissory Notes [Member] | Dividend yield [Member] | ||
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | ||
Weighted Average Unobservable Inputs | 0% | 0% |
Senior Secured Convertible Promissory Notes [Member] | Expected Price volatility [Member] | ||
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | ||
Weighted Average Unobservable Inputs | 119.5% | 118.0% |
Senior Secured Convertible Promissory Notes [Member] | Risk free interest rate [Member] | ||
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | ||
Weighted Average Unobservable Inputs | 2.60% | 2.41% |
Senior Secured Convertible Promissory Notes [Member] | Expected term [Member] | ||
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | ||
Weighted Average Unobservable Inputs | 1 year | 10 months |
Fair value measurements (Sche_2
Fair value measurements (Schedule of Liabilities Measured at Fair Value Recurring Basis) (Details) | Mar. 31, 2019USD ($) |
Liablities: | |
Senior secured convertible notes | $ 7,975,308 |
Warrant liability | 5,322,162 |
Fair Value, Inputs, Level 1 [Member] | |
Liablities: | |
Senior secured convertible notes | |
Warrant liability | |
Fair Value, Inputs, Level 2 [Member] | |
Liablities: | |
Senior secured convertible notes | |
Warrant liability | |
Fair Value, Inputs, Level 3 [Member] | |
Liablities: | |
Senior secured convertible notes | 7,975,308 |
Warrant liability | $ 5,322,162 |
Fair value measurements (Sche_3
Fair value measurements (Schedule of Changes in Level 3 Liabilities Measured at Fair Value) (Details) - Fair Value, Inputs, Level 3 [Member] | 3 Months Ended |
Mar. 31, 2019USD ($) | |
Convertible Notes [Member] | |
Issuance of senior secured convertible notes | $ 6,330,726 |
Issuance of warrants in connection with convertible notes | |
Balance at January 28, 2019 | 6,330,726 |
Change in fair value | 1,644,582 |
Balance at March 31, 2019 | 7,975,308 |
Warrant Liability [Member] | |
Issuance of senior secured convertible notes | |
Issuance of warrants in connection with convertible notes | 2,568,934 |
Balance at January 28, 2019 | 2,568,934 |
Change in fair value | 2,753,228 |
Balance at March 31, 2019 | $ 5,322,162 |
Investment in Coinsquare (Detai
Investment in Coinsquare (Details) - Coinsquare [Member] - USD ($) | 1 Months Ended | |
Sep. 30, 2017 | Feb. 28, 2018 | |
Minority interest | $ 3,000,000 | |
Amount of Investment | $ 6,400,000 | |
Equity investment | 2,800,000 | |
Financing amount | 24,000,000 | |
Warrant acquired cash payment | $ 3,600,000 | |
Percentage of owned | 12.00% |
Notes Payable (Details)
Notes Payable (Details) | 1 Months Ended | 3 Months Ended | ||||
Aug. 23, 2018USD ($) | Aug. 23, 2018CAD ($) | Mar. 28, 2018CAD ($) | Mar. 31, 2019USD ($)shares | Jan. 28, 2019USD ($)$ / sharesshares | Mar. 28, 2018$ / shares | |
Convertible Note [Member] | Canada, Dollars [Member] | Third party [Member] | ||||||
Debt Instrument [Line Items] | ||||||
Proceeds from convertible debt held in escrow | $ 2,200,000 | |||||
Private Placement [Member] | Convertible Note [Member] | ||||||
Debt Instrument [Line Items] | ||||||
Conversion price | $ / shares | $ 0.10 | |||||
Private Placement [Member] | Convertible Note [Member] | Canada, Dollars [Member] | ||||||
Debt Instrument [Line Items] | ||||||
Proceeds from convertible debt held in escrow | $ 2,200,000 | |||||
Private Placement [Member] | Promissory Note [Member] | ||||||
Debt Instrument [Line Items] | ||||||
Notes Payable | $ 1,696,000 | |||||
Cash released | $ 921,000 | |||||
Interest rate | 5.00% | 5.00% | ||||
Proceeds from convertible debt held in escrow | $ 775,555 | |||||
Private Placement [Member] | Promissory Note [Member] | Canada, Dollars [Member] | ||||||
Debt Instrument [Line Items] | ||||||
Proceeds from convertible debt held in escrow | $ 1,000,000 | |||||
Restricted Stock [Member] | ||||||
Debt Instrument [Line Items] | ||||||
Issuance of common stock | shares | 93,751 | |||||
Senior Secured Convertible Promissory Notes [Member] | ||||||
Debt Instrument [Line Items] | ||||||
Interest rate | 8.00% | |||||
Fair value of notes | $ 7,795,308 | $ 6,330,726 | ||||
Upfront costs and fees | 358,333 | |||||
Increase in fair value of notes | $ 1,644,582 | |||||
Senior Secured Convertible Promissory Notes [Member] | Restricted Stock [Member] | ||||||
Debt Instrument [Line Items] | ||||||
Issuance of common stock | shares | 150,000 | |||||
Senior Secured Convertible Promissory Notes [Member] | Investors [Member] | ||||||
Debt Instrument [Line Items] | ||||||
Conversion price | $ / shares | $ 2 | |||||
Percentage of lowest volume-weighted adjusted price of shares | 80.00% | |||||
Exercise price | $ / shares | $ 1.94 | |||||
Debt instrument face amount | $ 3,358,333 | $ 3,358,333 | ||||
Percentage amount of shares issuable upon full conversion of Notes | 300.00% | |||||
Warrant issued | shares | 1,908,144 | |||||
Senior Secured Convertible Promissory Notes [Member] | Investors [Member] | Maximum [Member] | ||||||
Debt Instrument [Line Items] | ||||||
Shares issuable | shares | 2,903,666 | |||||
Percentage of number of shares issuable | 19.99% | |||||
Percentage of beneficial ownership of shares | 9.99% | |||||
Senior Secured Convertible Promissory Notes [Member] | Investors [Member] | Minimum [Member] | ||||||
Debt Instrument [Line Items] | ||||||
Percentage of beneficial ownership of shares | 4.99% |
Stockholders' equity (Details)
Stockholders' equity (Details) | 3 Months Ended |
Mar. 31, 2019shares | |
Restricted Stock [Member] | |
Class of Stock [Line Items] | |
Issuance of common stock | 93,751 |
Stock based compensation, opt_3
Stock based compensation, options and warrants (Narrative) (Details) | 3 Months Ended |
Mar. 31, 2019USD ($) | |
Share-based Payment Arrangement [Abstract] | |
Unrecognized compensation cost | $ 300,000 |
Unrecognized compensation cost, period | 4 months |
Stock based compensation, opt_4
Stock based compensation, options and warrants (Schedule of Recognized Stock-based Compensation) (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | ||
Total stock-based compensation | $ 235,042 | $ 883,943 |
Restricted Stock [Member] | ||
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | ||
Total stock-based compensation | 176,544 | 766,949 |
Stock options awards under the Plan Member [Member] | ||
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | ||
Total stock-based compensation | $ 58,498 | $ 116,994 |
Stock based compensation, opt_5
Stock based compensation, options and warrants (Schedule of Restricted Stock Activity) (Details) - Restricted Stock [Member] | 3 Months Ended |
Mar. 31, 2019$ / sharesshares | |
Number of shares | |
Unvested beginning balance | shares | 95,939 |
Vested | shares | (22,397) |
Forfeited | shares | (40,000) |
Unvested ending balance | shares | 33,542 |
Weighted Average Grant Date Fair value | |
Unvested beginning balance | $ / shares | $ 12.49 |
Vested | $ / shares | 9.37 |
Forfeited | $ / shares | 16.82 |
Unvested ending balance | $ / shares | $ 9.39 |
Stock based compensation, opt_6
Stock based compensation, options and warrants (Schedule of Award Activity) (Details) - USD ($) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2019 | Dec. 31, 2018 | |
Stock Incentive Plan [Member] | ||
Shares Underlying Options | ||
Outstanding, beginning | 62,000 | |
Granted | ||
Exercised | ||
Forfeited | ||
Outstanding, ending | 62,000 | 62,000 |
Exercisable | 62,000 | |
Weighted Average Exercise Price | ||
Outstanding, beginning | $ 15.71 | |
Granted | ||
Exercised | ||
Forfeited | ||
Outstanding, ending | 15.71 | $ 15.71 |
Exercisable | $ 15.71 | |
Weighted Average Remaining Contractual Term | ||
Outstanding | 9 years | 9 years 2 months 12 days |
Exercisable | 9 years | |
Aggregate Intrinsic Value | ||
Outstanding | ||
Outstanding, ending | ||
Exercisable | ||
Other common stock purchase options and warrants [Member] | ||
Shares Underlying Options | ||
Outstanding, beginning | 1,671,113 | |
Granted | 1,908,144 | |
Outstanding, ending | 3,579,257 | 1,671,113 |
Exercisable | 3,579,257 | |
Weighted Average Exercise Price | ||
Outstanding, beginning | $ 39.47 | |
Granted | 1.94 | |
Outstanding, ending | 19.46 | $ 39.47 |
Exercisable | $ 19.46 | |
Weighted Average Remaining Contractual Term | ||
Outstanding | 5 years 2 months 12 days | 2 years |
Granted | 3 years 7 months 6 days | |
Exercisable | 5 years 2 months 12 days | |
Aggregate Intrinsic Value | ||
Outstanding | ||
Granted | 2,537,832 | |
Outstanding, ending | 2,537,832 | |
Exercisable | $ 2,537,832 |
Discontinued Operations (Detail
Discontinued Operations (Details) - USD ($) | Mar. 31, 2019 | Dec. 31, 2018 |
BDI Member | ||
Current liabilities: | ||
Accounts payable | $ 16,000 | $ 16,000 |
Discontinued Operations (Schedu
Discontinued Operations (Schedule of Operation and Assets and Liabilities Related to Discontinued Operations) (Details) - BDI [Member] | 3 Months Ended |
Mar. 31, 2018USD ($) | |
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |
Revenue | $ 137,000 |
Cost of revenue | 41,000 |
Gross margin | 96,000 |
Operating expenses | |
Operating income | 96,000 |
Income from discontinued operations, net of tax | $ 96,000 |
Leases (Narrative) (Details)
Leases (Narrative) (Details) | 3 Months Ended | ||||
Mar. 31, 2018USD ($) | Mar. 31, 2019USD ($) | Apr. 09, 2018USD ($)ft² | Mar. 26, 2018USD ($) | Feb. 27, 2018USD ($)ft² | |
Lessee, Lease, Description [Line Items] | |||||
Operating lease liabilities | $ 1,000,000 | ||||
Right of use assets | 1,000,000 | ||||
Rent expense | $ 350,000 | ||||
Office Space - Fort Lauderdale, Florida [Member] | |||||
Lessee, Lease, Description [Line Items] | |||||
Area of lease | ft² | 1,694 | ||||
Base rent per month | $ 7,000 | ||||
Lease term | 39 months | ||||
Lease renewal term | 5 years | ||||
Kairos Global Technology, Inc [Member] | |||||
Lessee, Lease, Description [Line Items] | |||||
Area of lease | ft² | 107,600 | ||||
Base rent per month | 235,000 | $ 664,760 | $ 223,800 | ||
Monthly base rent owed for January 2019 | 230,000 | ||||
Monthly base rent owed for all remaining periods thereafter for the duration of the lease, including any renewals | $ 190,000 |
Leases (Schedule of Operating L
Leases (Schedule of Operating Leases) (Details) | 3 Months Ended |
Mar. 31, 2019USD ($) | |
Lease cost | |
Operating lease cost | $ 600,593 |
Variable lease cost | 776,053 |
Operating lease expense | 1,376,646 |
Short-term lease rent expense | 4,620 |
Total rent expense | 1,381,266 |
Other information | |
Operating cash flows from operating leases | 623,976 |
Right of use assets exchanged for new operating lease liabilities | $ 1,547,499 |
Weighted-average remaining lease term - operating leases | 10 months 25 days |
Weighted-average discount rate - operating leases | 10.00% |
Leases (Schedule of Maturities
Leases (Schedule of Maturities of Operating Lease Liabilities) (Details) | Mar. 31, 2019USD ($) |
Leases [Abstract] | |
For the nine months ended December 31,2019 | $ 898,045 |
For the year ended December 31, 2020 | 58,731 |
For the year ended December 31, 2021 | 35,040 |
Total operating lease obligation | 991,816 |
Less imputed interest | (34,831) |
TOTAL | $ 956,985 |
Tess Related Party Transactio_3
Tess Related Party Transactions (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Tess [Member] | ||
Related Party Transaction [Line Items] | ||
Key management personnel salaries | $ 150,000 | $ 213,400 |
Tess Related Party Transactio_4
Tess Related Party Transactions (Schedule of Tess Related Party Transactions) (Details) - USD ($) | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | Dec. 31, 2018 | |
Powercases Inc [Member] | |||
Related Party Transaction [Line Items] | |||
Services to Tess provided by | $ 160,826 | $ 163,582 | |
Payable to | 145,047 | $ 37,250 | |
JLM Strategic Marketing [Member] | |||
Related Party Transaction [Line Items] | |||
Services to Tess provided by | 36,198 | ||
Payable to | 101,405 | 9,483 | |
1038088 Ontario Limited [Member] | |||
Related Party Transaction [Line Items] | |||
Services to Tess provided by | 45,062 | $ 47,817 | |
Payable to | $ 9,292 | $ 52,053 |
Subsequent Events (Details)
Subsequent Events (Details) | Apr. 10, 2019CAD ($)shares | Mar. 31, 2019USD ($)Unitsshares | Mar. 31, 2018USD ($) | May 01, 2019shares |
Subsequent Event [Line Items] | ||||
Proceeds from sale of digital currencies | $ | $ 1,004,264 | |||
Debt converted to Common stock value | $ | 255,000 | |||
Bitcoin [Member] | ||||
Subsequent Event [Line Items] | ||||
Proceeds from sale of digital currencies | $ | $ 1,372,000 | |||
Number of digital currencies sold | Units | 250 | |||
Litecoin [Member] | ||||
Subsequent Event [Line Items] | ||||
Number of digital currencies sold | Units | 498 | |||
Restricted Stock [Member] | ||||
Subsequent Event [Line Items] | ||||
Shares issued | shares | 93,751 | |||
Senior Secured Convertible Promissory Notes [Member] | ||||
Subsequent Event [Line Items] | ||||
Debt converted to Common stock, shares | shares | 1,181,750 | |||
Debt converted to Common stock value | $ | $ 2,363,500 | |||
Senior Secured Convertible Promissory Notes [Member] | Restricted Stock [Member] | ||||
Subsequent Event [Line Items] | ||||
Shares issued | shares | 150,000 | |||
Subsequent Event [Member] | Restricted Stock [Member] | ||||
Subsequent Event [Line Items] | ||||
Issuance of Common Stock | shares | 12,500 | |||
Tess [Member] | Subsequent Event [Member] | ||||
Subsequent Event [Line Items] | ||||
Ownership interest reduced | 9.00% | |||
Tess [Member] | Subsequent Event [Member] | Canada, Dollars [Member] | ||||
Subsequent Event [Line Items] | ||||
Shares issued, value | $ | $ 1,200,000 | |||
Shares issued | shares | 23,800,000 |