Mail Stop 3561
May 31, 2018
Patrick Moynihan
Chairman and Chief Executive Officer and Chief Financial Officer
Blockchain Industries, Inc.
53 Calle Palmeras, Suite 802
San Juan, Puerto Rico 00901
Re: Blockchain Industries, Inc.
Form 10-K for Fiscal Year Ended April 30, 2017
Filed August 30, 2017
Form 10-Q for Fiscal Quarter Ended January 31, 2018
Filed March 19, 2018
Response Dated May 21, 2018
File No. 0-51126
Dear Mr. Moynihan:
We have reviewed your May 21, 2018 response to our comment letter
and have the
following comments. In some of our comments, we may ask you to provide us
with information
so we may better understand your disclosure.
Please respond to these comments within ten business days by
providing the requested
information or advise us as soon as possible when you will respond. If you
do not believe our
comments apply to your facts and circumstances, please tell us why in your
response.
After reviewing your response to these comments, we may have
additional comments.
Unless we note otherwise, our references to prior comments are to comments
in our January 31,
2018 letter.
Form 10-Q for Fiscal Quarter Ended January 31, 2018
General
1. Please report a total for comprehensive income. Please refer to ASC
220-10-45-18.
Balance Sheets, page 5
2. We note that the amount of outstanding common stock at the end of
each period does not
represent the number of shares issued and outstanding at par value.
Please revise or
advise.
Patrick Moynihan
Blockchain Industries, Inc.
May 31, 2018
Page 2
Statement of Cash Flows, page 7
3. Please tell us your basis in GAAP for presenting "unrealized loss on
marketable
securities held for sale" as a decrease in cash flows.
4. Please disclose information about all investing and financing activities
that affect
recognized assets or liabilities but do not result in cash receipts or
cash payments in each
period. The disclosure may be either narrative or summarized in a
schedule. Please refer
to ASC 230-10-50-3.
Note 2. Summary of Significant Accounting Policies
Revenue Recognition, page 9
5. Please tell us your basis in GAAP for recognizing consulting services
revenues pro rata
on a monthly basis rather than as services are performed. In doing so,
it would be helpful
if you described the key terms of your consulting agreements.
Stock-based Compensation, page 10
6. We note your disclosure in Note 9 regarding the issuance of common stock
in exchange
for services. Please expand your stock-based compensation accounting
policies to
describe your accounting for equity-based payments to non-employees.
Please refer to
ASC 505-50.
Cash and Cash Equivalents, page 11
7. We note that you classify certain accounts holding Bitcoin and Ethereum
as cash
equivalents. Please tell us your basis in GAAP for concluding that
Bitcoin and Ethereum
are cash equivalents. Please refer to ASC 305-10-20.
Note 4. Available-for-Sale Securities, page 12
8. We note that the gross unrealized loss on available for sale securities
does not agree to
the amount of the unrealized loss on marketable securities held for sale
reflected in the
statements of cash flow. Please revise or advise.
9. We note that the aggregate fair value of available for sale securities
does not agree to the
balance sheets. We also note that the gross unrealized loss does not
equal the amount of
accumulated other comprehensive income reflected on the balance sheets.
Please revise
or advise. In addition, please provide us with a summary of each cash
transaction
included in "purchases of marketable securities" presented as cash flows
from investing
activities in the statements of cash flows.
Patrick Moynihan
Blockchain Industries, Inc.
May 31, 2018
Page 3
10. Please tell us your basis in GAAP for recognizing digital assets as
available-for-sale
securities. In doing so, please explain to us why equity tokens and
utility tokens
represent an ownership interest in an entity or the right to acquire an
ownership interest in
an entity at fixed or determinable prices. Please also describe the
nature and intent of
your investment in such assets. In addition, if the digital assets are
determined to be
available-for sale securities please disclose the significant inputs
and assumptions used to
determine the fair value of the digital assets acquired and the
pertinent rights and
privileges associated with the assets.
Note 9. Stockholders' Equity, page 13
11. Please disclose the pertinent rights and privileges of the preferred
stock, including
dividend and liquidation preferences, participation rights, unusual
voting rights and other
terms. Please refer to ASC 505-10-50-3 through and 50-5.
12. We note your disclosure that you "had agreed to convert certain
investor shares of
common stock into the Preferred Shares." In your Form 10-K for the
fiscal year ended
April 30, 2018, please disclose any obligations you have to convert
additional shares of
common stock into Preferred Shares.
Stock Purchase Warrants, page 15
13. Please disclose what the weighted-average exercise price after the
table of warrants
outstanding of $.83 represents.
14. The tabular presentation at the end of the note appears to relate to
stock options granted
during the nine months ended January 31, 2018. Please disclose the
nature and terms of
share-based payment arrangements that existed during the period, the
potential effects of
those arrangements on shareholders and the effect of compensation cost
arising from
share-based payment arrangements on the income statement.
Note 10. Subsequent Events
BlockEx, page 15
15. We note your disclosure in Note 10 regarding the purchase of
approximately 395,000 of
digital tokens pursuant to the BlockEx agreement. Please provide
additional disclosure
regarding this agreement in your Form 10-K for the fiscal year ended
April 30, 2018 and
disclose whether such tokens have been issued to you and, if not, when
you anticipate
receiving such tokens. We also note your disclosure that you pooled
with investors to
raise money for the remaining 1,604,930 purchase commitment. Please
disclose in your
Form 10-K for the fiscal year ended April 30, 2018 whether you, or
other investors, will
be entitled to the coins that were purchased with pooled funds.
Patrick Moynihan
Blockchain Industries, Inc.
May 31, 2018
Page 4
LegatumX, page 18
16. Please disclose in your Form 10-K for the fiscal year ended April 30,
2018 whether you
have issued the shares of common stock and cash consideration as
contemplated by the
agreement. Please also disclose the number of LegatumX common stock
that have been
issued to you to date, and the percentage of LegatumX common stock that
you currently
hold.
Item 2. Management's Discussion and Analysis of Financial Position and Results
of Operations,
page 17
General
17. Please include a discussion of the potential effects of adoption of
recently issued
accounting standards, including:
A brief description of the new standard, the date that adoption
is required and the
date that you plan to adopt, if earlier;
A discussion of the methods of adoption allowed by the standard
and the method
that you expect to use; and
A discussion of the impact that adoption of the standard is
expected to have on the
financial statements or that the effect is not known or
reasonably estimable.
18. You state that you plan to monetize your existing online travel
business "through the use
of [y]our newly established blockchain technology." Please disclose in
your Form 10-K
for the fiscal year ended April 30, 2018 how you intend to use the
blockchain in this
aspect of your business, whether the blockchain technology you intend
to utilize to
operate the travel business is complete and, if so, whether you are
currently utilizing this
technology. If the blockchain technology you intend to develop is not
yet complete,
briefly describe the steps, resources and capital required to establish
this technology, and
clearly disclose what the company has accomplished to date and what
remains to be
accomplished.
19. We note your intent to target and acquire a broad portfolio of virtual
currencies, digital
coin and tokens, and other blockchain assets within the digital asset
bank, mining and
trading, initial coin offerings and media and education verticals.
Please balance your
disclosure in your Form 10-K for the fiscal year ended April 30, 2018
regarding these
intended businesses by describing any material obstacles or
uncertainties to your ability
to commence operations in these verticals. Please also disclose the
estimated amount of
capital that will be necessary to commence operations in these
verticals and, if known,
provide a timeline detailing when you expect to commence operations in
these verticals.
For example, disclose the estimated cost of the hardware and power
necessary to build
Patrick Moynihan
Blockchain Industries, Inc.
May 31, 2018
Page 5
your desired mining and trading operations and disclose the anticipated
amount of time
you expect it will take to secure the necessary hardware and power to
commence mining
operations. Refer to Item 303 of Regulation S-K.
20. Please disclose in your Form 10-K for the fiscal year ended April 30,
2018 what you plan
to do with digital assets that you currently hold or will acquire as a
result of your planned
consulting or mining operations, including whether you plan to hold or
trade such assets.
Please also discuss in your Form 10-K for the fiscal year ended April
30, 2018 how your
business and financial results may be impacted by the potential
illiquidity and volatility
of digital assets, and explain how you plan to value the digital assets
that you hold given
their volatility and fragmentation, potential for manipulation, and the
general lack of
regulation of digital assets markets. Also describe your intended
custodial practices for
the digital assets that you hold, and the cybersecurity measures you
intend to use to
protect them.
21. To the extent you plan to trade digital assets, disclose in your Form
10-K for the fiscal
year ended April 30, 2018 the trading platforms or exchanges on which
you intend to
trade these assets and disclose whether they are registered national
securities exchanges
or alternative trading systems. Please also revise your disclosure to
address whether
trading of digital assets triggers obligations under the federal
securities laws, including
any obligations to register as a broker-dealer.
22. It appears that your common equity interests in KinerjaPay and LegatumX
and various
equity and utility tokens you hold comprise a significant amount of
your assets. In light
of the foregoing, please provide your analysis as to why you are not
required to register
as an Investment Company under the Investment Company Act of 1940 and,
if exempt,
how you intend to operate your business in a manner that will permit
you to maintain an
exemption from registration under the Investment Company Act of 1940.
In doing so,
please list all of your assets and the value you assign to them on an
unconsolidated basis.
KinerjaPay ICO, page 17
23. We note your disclosure regarding the agreement you have entered into
to build the first
Indonesian Digital Asset exchange. In your Form 10-K for the fiscal
year ended April
30, 2018, please provide additional disclosure regarding your
obligations in building this
exchange, including the amount of capital you will need to complete
this project.
24. In your Form 10-K for the fiscal year ended April 30, 2018, please
revise to elaborate
upon the types of services that you plan to provide in administering
the KinerjaPay ICO,
and briefly describe the nature of any services provided to date.
Patrick Moynihan
Blockchain Industries, Inc.
May 31, 2018
Page 6
Chimes ICO, page 17
25. With a view to providing investors with information about the
significance of your equity
interest in Chimes Broadcasting, please disclose in your Form 10-K for
the fiscal year
ended April 30, 2018 the percentage ownership interest you will hold in
Chimes
Broadcasting following the purchase of all tokens pursuant to the
agreement. Please also
disclose the number of equity tokens you agreed to purchase from Chimes
Broadcasting,
Inc. pursuant to the February 5, 2018 agreement and whether those
tokens have been
issued to you.
Results of Operations, page 18
26. We note several instances where the amounts disclosed for operating
expenses for the
nine and three month periods ended January 31, 2018 do not agree to the
financial
statements. We also note that amounts disclosed in liquidity and
capital resources do not
agree to the financial statements. Please revise your disclosures
accordingly.
27. Please include a discussion and analysis of the debt forgiveness income
included in other
income (expense).
Earnings per share, basic and diluted, page 19
28. Please revise the weighted average number of shares outstanding used in
computing
earnings per share on a diluted basis to agree with the diluted
weighted average shares
reflected in the Statements of Operations. Please also revise the
number of shares retired
to agree with Note 9 to the financial statements.
Liquidity and Capital Resources, page 19
29. Please identify any known trends or any known demands, commitments,
events or
uncertainties that will result in or that are reasonably likely to
result in your liquidity
increasing or decreasing in any material way. If a material deficiency
is identified,
indicate the course of action you have taken or proposes to take to
remedy the deficiency.
Please also identify and describe internal and external sources of
liquidity, and briefly
discuss any material unused sources of liquid assets. Refer to Item
303(a)(1) of
Regulation S-K.
30. We note that the increase in cash flows from operating activities,
excluding stock-based
compensation, during the nine months ended January 31, 2018 was also
impacted by
significant decreases in liabilities. Please revise to discuss the
primary reasons for the
significant decrease in liabilities and the increase in deferred
revenue.
Patrick Moynihan
Blockchain Industries, Inc.
May 31, 2018
Page 7
Critical Accounting Estimates, page 20
31. We note you reference the disclosure of critical accounting estimates
included in your
2017 Form 10-K rather than addressing the material implications of
uncertainties
associated with the methods, assumptions and estimates underlying your
critical
accounting measurements. Given the significant changes in your
operations, please
include a discussion of critical accounting estimates, such as
estimates related to revenue
recognition, stock-based compensation, available for sale securities
and deferred revenue.
The discussion should supplement, not duplicate, the description of
accounting policies
and provide greater insight into the quality and variability of
information regarding
financial condition and operating performance.
Item 4. Controls and Procedures, page 20
32. Please revise to state that your Chief Financial Officer also
participated in the evaluation
of your disclosure controls and procedures and also concluded that your
disclosure
controls and procedures were effective.
Exhibit 31.1
33. Please revise paragraphs 3 and 4 of the certification to reference the
current name of the
Company rather than its former name, Omni Global Technologies, Inc.
Also, we note
that you omitted the parenthetical language, "(the registrant's fourth
fiscal quarter in the
case of an annual report)", in paragraph 4d. Please revise to conform
to the certification
in Item 601(31)(i) of Regulation S-K.
You may contact Yolanda Guobadia at (202) 551-3562 or me at (202)
551-3344 with any
questions.
Sincerely,
/s/ William H.
Thompson
William H.
Thompson
Accounting Branch
Chief
Office of
Consumer Products