| Note 3 - Summary of Significant Accounting Policies | Note
3 - Summary of Significant Accounting Policies Basis
of Presentation The
accompanying consolidated financial statements have been prepared in accordance with the accounting principles generally accepted in
the United States of America (“GAAP”) as determined by Financial Accounting Standards Board (the “FASB”) within
its Accounting Standards Codification (“ASC”) and under the rules and regulations of the United States Securities and Exchange
Commission (“SEC”). The accompanying consolidated financial statements include the accounts of BCoT and its 100% owned subsidiary.
All intercompany transactions have been eliminated in consolidation. Use
of Estimates The
preparation of the consolidated 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 consolidated 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. BCOT
Security Tokens Revenue Recognition The Company issued BCOT Security Tokens for use by customers
in Catenis. From December 2017 through early July 2018, the Company obtained Ether, Bitcoin, Bitcoin Cash and Tether from customers totaling
approximately $11,863,530 $609,670 The
BCOT Security Tokens are issued on the Bitcoin blockchain and are used as independent programmable units of power that directly convert
to Catenis credits which power the virtual devices and ultimately the entire Catenis system. These security tokens can be independently
purchased, held, traded, and used on Catenis. Using the administrative interface, the customer can send BCOT Security Tokens to their
account and they will be converted on a one-to-one basis into Catenis credits for their account. Each BCOT Security Token value is taken
into account when calculating the amount of Catenis Credits required to pay for a given Catenis service when that service is consumed. The
Company evaluated the terms of sale of the BCOT Security Tokens and determined that, when sold, a BCOT Security Token represents an obligation
of the Company with counterparties that were determined to be customers. Therefore, the Company determined that BCOT Security Tokens,
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”). Pursuant
to the terms of the BCOT Security Tokens, there is no form of partnership, joint venture, agency or any similar relationship between
a holder of a BCOT Security Token and the Company. Except as noted below, BCOT Security Tokens are non-refundable and do not pay interest
and have no maturity date. BCOT Security 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 Security Tokens to customers, the associated liability to deliver the BCOT Security Tokens was satisfied. No additional BCOT
Security 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 9), the Company was
obligated to refund amounts raised from the sale of BCOT Security Tokens for valid claims submitted and may incur other fines and penalties.
The Rescission Offer (as defined and described further in Note 9) deadline was February 21, 2021. Accordingly, as of December 31, 2021,
all valid claims have been submitted and the Company issued refunds to claimants of $226,258 $10,553 $12,982,170 $547,853 $537,300 In
the first quarter of 2021, subsequent to the receipt of all valid Rescission Offer claims, the Company recognized the remaining amount
of $12,218,612 Deferred
Revenue Deferred
revenue represents BCOT Security Tokens that have been purchased by customers but not yet redeemed and utilized as Catenis credits for
Catenis services. 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. Software
Development Costs The
Company capitalizes costs related to software developed or obtained for internal use in accordance with the ASC 350-40, Internal-Use
Software (“ASC 350-40”). The following illustrates the various stages and related processes of computer software development
in accordance with ASC 350-40: Preliminary
project stage: (a) conceptual formulation of alternatives; (b) evaluation of alternatives; (c) determination of existence of needed technology;
and (d) final selection of alternatives. Internal and external costs incurred during the preliminary project stage are expensed as incurred.
Application development stage: (a) design of chosen path, including software configuration and software interfaces; (b) coding; installation
to hardware; and (c) testing, including parallel processing phase. Internal and external costs incurred to develop internal-use computer
software during the application development stage are capitalized. Post-implementation-operation stage: (a) training; and (b) application
maintenance. Internal and external costs incurred during the post-implementation-operation stage are expensed as incurred. Certain
costs incurred are considered enhancements, modifications to existing internal-use software that result in additional functionality.
Enhancements normally require new software specifications and may also require a change to all or part of the existing software specifications.
When this additional functionality is determinable, the related costs are capitalized. Otherwise, costs are expensed as incurred. Capitalization
of internal-use software costs ceases when a computer software project is substantially complete and ready for its intended use. 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 primarily assists 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
and launch of Catenis, market adoption and recovery of the development costs is uncertain. Accordingly, the Company expensed $297,837 $269,174 Income
Taxes Income
taxes are recorded in accordance with ASC 740, Income Taxes (“ASC 740”), which provides for deferred taxes using an asset
and liability approach. The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events
that have been included in the financial statements or tax returns. Deferred tax assets and liabilities are determined based on the difference
between the financial statement and tax basis of assets and liabilities and net operating and capital loss carryforwards using enacted
tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are provided, if based upon the
weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. The valuation
allowance is reduced when it is determined that it is more likely than not that the deferred tax asset will be realized. The
Company accounts for uncertain tax positions in accordance with the provisions of ASC 740. When uncertain tax positions exist, the Company
recognizes the tax benefit of tax positions to the extent that the benefit would more likely than not be realized assuming examination
by the taxing authority. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical
merits of the tax position as well as consideration of the available facts and circumstances. The Company recognizes any interest and
penalties accrued related to unrecognized tax benefits as income tax expense. The
Company files a consolidated tax return, which incorporates the limited liability company subsidiary. Stock-based
Compensation The
Company accounts for stock-based compensation to employees and non-employees in conformity with the provisions of ASC 718, Stock Based
Compensation. The Company expenses stock-based compensation to employees and non-employees over the requisite service period based on
the estimated grant-date fair value of the awards. The Company accounts for forfeitures as they occur. Stock-based awards are recognized
on a straight-line basis over the requisite service period. Common
shares issued to third parties for services provided are valued based on the estimated fair value of the Company’s common shares.
All stock-based compensation costs are recorded in selling, general and administrative expenses in the consolidated statements of operations. To
date, stock-based compensation is immaterial to the consolidated financial statements. Fair
Value Measurement 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. The
Company’s financial instruments include cash, accounts payable, sponsorship agreements, U.S. Small Business Loan and Advance and
the BCOT Token Obligation. The fair values of cash, accounts payable, sponsorship agreements, U.S. Small Business Loan and Advance and
the BCOT Token Obligation (as defined and described further in Note 8) 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. Intangible
Assets Digital
Assets held by the Company consist of Ethers, Bitcoins and Bitcoin Cash and are included in current assets in the Consolidated Balance
Sheets. Digital assets such as Bitcoins, Ethers, 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 (“ASC 350”). 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 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, and Bitcoin
Cash are determined by the Company using a principal market analysis in accordance with ASC 820, Fair Value Measurement. When
the Company evaluates Ethers, Bitcoins, and Bitcoin Cash for impairment under ASC 350, each acquisition of Ether, Bitcoin, and Bitcoin
Cash is considered a separate unit of account. The Company tracks the cost of each unit of Ether, Bitcoin, and Bitcoin Cash 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 Consolidated Statements of Operations,
while impairment of Digital Assets is included in operating expenses because of the nature of the assets. The
Company obtains the equivalency rate of the digital currencies to USD based on a global exchange rate from public exchange Gemini. As
of December 31, 2021, and December 31, 2020, the Company’s adjusted cost basis was $1,284,953 $1,362,066 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 year ended December 31, 2021, the Company reported net income. Therefore, for purposes of calculating diluted net earnings per share,
the weighted average number of common stock includes all potentially dilutive common shares.
Years
ended December 31,
2021 2020
Net
income (loss) available to common stockholders 1,706,912 (443,171)
Weighted
average number of common shares outstanding - basic 4,636,461 4,420,688
Dilutive
effect of stock options 147,499 —
Weighted
average number of common shares outstanding - diluted 4,783,960 4,420,688
Net income
(loss) per share available to common stockholders
Basic $ 0.37 $ (0.10)
Diluted $ 0.36 $ (0.10) For
the year ended December 31, 2020, the Company reported a net loss. 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 outstanding at December 31, 2021 were 139,708 Adoption
of Recent Accounting Pronouncements The
Company has reviewed recent accounting pronouncements and concluded they are either not applicable to the business, or no material effect
is expected on the consolidated financial statements as a result of future adoption. |
