| Summary of Significant Accounting Policies | Note 3 - Summary of Significant
Accounting Policies Basis of Presentation In
the opinion of management, the accompanying unaudited interim Condensed Consolidated Financial Statements of BCoT and its subsidiary
reflect all adjustments, including normal recurring accruals, necessary for a fair presentation. All significant intercompany
balances and transactions have been eliminated in consolidation. Certain information and footnote disclosure normally included
in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America
have been condensed or omitted pursuant to instructions, rules and regulations prescribed by the SEC. The Company believes that
the disclosures provided herein are adequate to make the information presented not misleading when these unaudited Condensed Consolidated
Financial Statements are read in conjunction with the audited Consolidated Financial Statements contained in the Company’s
Form 10 for the year ended December 31, 2019. The results of operations for the three and six month periods ended June 30, 2020
are not necessarily indicative of the results to be expected for the full year. The Consolidated Financial Statements as of December
31, 2019 are derived from audited financial statements included in the Company’s Form 10 for the year ended December 31,
2019. Use
of Estimates The
preparation of financial statements in conformity with 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 includes
the fair values of the BCOT Token Refund Liability and Digital assets, including the impairment assessments, as well as, estimates
related to Stock Based Compensation. Development
Costs The
Company has developed and continues to enhance Catenis, a platform, or web services layer, designed to improve upon existing blockchain
technology, including its security and ease of use. The technology could primarily assist with four blockchain-based services:
1) message transmission, 2) message logging, 3) digital asset generation, and 4) digital asset transfer. Due to the significant
hurdles during development of Catenis, technological feasibility had not been established and, therefore, all of the Company’s
development costs were expensed. BCOT
Tokens Revenue Recognition The
Company issued BCOT Tokens for use by customers in Catenis. In exchange for the BCOT Tokens, the Company, beginning in December
2017 through early July 2018, obtained Ether, Bitcoin, Bitcoin Cash and Tether from customers totaling approximately $11,863,530
and cash of $609,670, of which $91,100 was received in December 2017. The
Company evaluated the terms of sale of the BCOT Tokens and determined that, when sold, a BCOT Token represents an obligation of
the Company with counterparties that were determined to be customers. Therefore, the Company determined that BCOT Token(s), when
sold by the Company, are akin to prepayments of future services and are treated as deferred revenue in accordance with ASC 606,
Revenue from Contracts with Customers (“ASC 606”). ASC 606 applies to contracts with customers and defines a customer
as any user or reseller. Furthermore, a BCOT Token, when sold, is considered a prepayment for services to be performed in Catenis
and once delivered represents deferred revenues derived from those services. Pursuant
to the terms of the BCOT Tokens, there is no form of partnership, joint venture, agency or any similar relationship between a
holder of a BCOT Token and the Company. Except as noted below, BCOT Tokens are non-refundable and do not pay interest and have
no maturity date. BCOT Tokens confer only the right to be used to power the Catenis platform, BCoT’s product, and confer
no other rights of any form with respect to the Company, including, but not limited to, any voting, distribution, redemption,
liquidation, proprietary (including all forms of intellectual property), or other financial or legal rights. Subsequent to the
distribution of BCOT Tokens to customers, the associated liability to deliver the BCOT tokens was satisfied. No BCOT Tokens were
sold by the Company since this distribution. Subsequent
to the distribution noted above, and pursuant to the Settlement Agreement (as defined and described further in Note 8), the Company
is obligated to refund amounts raised from the sale of BCOT Tokens if valid claims are submitted and may incur other fines and
penalties. The Company had until July 31, 2020 to submit Claims Forms to these investors. As of June 30, 2020, the Company estimated
the amount of refunds to be paid to claimants at $12,974,339, which includes $540,023 of accrued interest that is included in
Accounts Payable and Accrued Expenses on the accompanying Condensed Consolidated Balance Sheets (see Note 8). As of December 31,
2019, the Company estimated the amount of refunds to be paid to claimants at $12,935,333, which includes $501,016 of accrued interest
that is included in Accounts Payable and Accrued Expenses on the accompanying Condensed Consolidated Balance Sheets (see Note
8). Concentrations
of Credit Risk and Off-Balance Sheet Risk The
Company is subject to concentration of risk with respect to the Digital Assets which are held in digital wallets. Private keys,
which provide access to the Digital Assets, are held in secured vaults at banking institutions and a limited number of digital
wallets. The Digital Assets are exchanged for United States Dollars (USD) in the normal course of business so that the Company
may meet its operational needs. The Digital Assets are not insured and the exchange rate of the digital assets to USD experiences
significant volatility. Fair
Value Measurement The
Company’s financial instruments include cash, accounts payable, convertible debt, sponsorship agreements and the BCOT Token
Obligation. The fair values of cash, accounts payable, convertible debt, sponsorship agreements, U.S. Small Business Loan and
Advance, and the BCOT Token Obligation (as defined and described further in Note 10) approximate their stated amounts because
of the short maturity of these financial instruments from the balance sheet date. Our sponsorship agreements are carried at fair
value and based on Level 2 inputs. The
valuation hierarchy is composed of three levels. The classification within the valuation hierarchy is based on the lowest level
of input that is significant to the fair value measurement. The levels within the valuation hierarchy under ASC 820 are described
below: Level
1 — Assets and liabilities with unadjusted, quoted prices listed on active market exchanges. Inputs to the fair value measurement
are observable inputs, such as quoted prices in active markets for identical assets or liabilities. Level
2 — Inputs to the fair value measurement are determined using prices for recently traded assets and liabilities with similar
underlying terms, as well as direct or indirect observable inputs, such as interest rates and yield curves that are observable
at commonly quoted intervals. Level
3 — Inputs to the fair value measurement are unobservable inputs, such as estimates, assumptions, and valuation techniques
when little or no market data exists for the assets or liabilities. Intangible
Assets Digital
Assets held by the Company consist of Ethers, Bitcoins, Bitcoin Cash and Tethers and are included in current assets in the Condensed
Consolidated Balance Sheets. Digital assets such as Bitcoins, Ethers, Tethers and Bitcoin Cash are digital currencies considered
cryptocurrencies that are not fiat currencies (i.e. a currency that is backed by a central bank or a national, supra- national
or quasi-national organization) and are not backed by hard assets or other credits. Digital currencies are not financial assets
because they are not an ownership interest in a company, or a contract establishing a right or obligation to deliver or receive
cash or another financial instrument. Since they lack physical substance and have no limit on the useful life, digital currencies
are considered to be indefinite-lived intangible assets under ASC 350, Intangibles–Goodwill and Other. Indefinite-lived
intangible assets are not subject to amortization. Instead they are tested for impairment on an annual basis and more frequently
if events or circumstances change that indicate that it’s more likely than not that the asset is impaired. As a result,
the Company will only recognize decreases in the value of its Digital Assets, and any increase in value will be recognized upon
disposition. Ether, Bitcoin, Bitcoin Cash and Tether are traded on exchanges in which there are observable prices in an active
market, the Company views a decline in the quoted price below the cost to be an impairment indicator. The quoted price and observable
prices for Ether, Bitcoin, Bitcoin Cash and Tether are determined by the Company using a principal market analysis in accordance
with ASC 820, Fair Value Measurement. When
the Company evaluates Ethers, Bitcoins, Bitcoin Cash and Tethers for impairment under ASC 350, Intangible – Goodwill and
Other, each acquisition of Ether, Bitcoin, Bitcoin Cash and Tether is considered a separate unit of account. The Company tracks
the cost of each unit of Ether, Bitcoin, Bitcoin Cash and Tether when received or purchased, when performing impairment testing
and upon disposition either through sale or exchanged for goods or services. The realized gain or loss on sale of Digital Assets
is included in a separate financial statement line item in the Condensed Consolidated Statements of Operations, while impairment
of Digital Assets is included in operating expenses because of the nature of the assets. From
November 2017 through early August 2018, the Company received four types of digital currencies, Bitcoins, Ethers, Tether, and
Bitcoin Cash related to its token offering (See Note 4). The Company obtains the equivalency rate of the digital currencies to
USD based on a global exchange rate from public exchange Gemini. As
of June 30, 2020, and December 31, 2019, the Company’s adjusted cost basis was $1,573,095 and $1,862,988, respectively.
During the three and six months ended June 30, 2020 and June 30, 2019, the Company recognized no impairment losses. Please refer
to Note 4 for additional information about Digital Assets. Income
(loss) per common share Basic
income (loss) per share (“Basic EPS”) is computed by dividing net income (loss) by the weighted average number of
common shares outstanding during the reporting period. Diluted income (loss) per share (“Diluted EPS”) is computed
by dividing the net income (loss) by the weighted average number of common shares outstanding during the reporting period while
also giving effect to all potentially dilutive common shares that were outstanding during the reporting period. For
the three and six month periods ended June 30, 2020 and 2019, the Company reported a net loss and as a result, basic and diluted
loss per common share are the same. Therefore, in calculating net loss per share amounts, shares underlying the potentially dilutive
common stock equivalents were excluded from the calculation of diluted net income per common share because their effect was anti-dilutive. The
potentially dilutive common stock equivalents at June 30, 2020 and 2019 were 177,959 and 104,875, respectively, and were not included
in diluted EPS as their effect would be anti-dilutive. Adoption
of Recent Accounting Pronouncements The
Company's accounting policies are the same as those described in Note 1 to the Company's consolidated financial statements in
its Annual Report on Form 10-K for the year ended December 31, 2019. The
Company has reviewed other recent accounting pronouncements and concluded they are either not applicable to the business or no
material effect is expected on the Condensed Consolidated Financial Statements as a result of future adoption. |
