Mail Stop 3561
July 23, 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
Amendment No. 1 to Form 10-Q for Fiscal Quarter Ended January
31, 2018
Filed June 22, 2018
Response Dated June 22, 2018
File No. 0-51126
Dear Mr. Moynihan:
We have reviewed your June 22, 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 May 31,
2018 letter.
General
1. We note your response to comments 12, 15, 16, 19-21, and 23-25
indicating that you will
add relevant disclosure in response to our comments in your annual
report on Form 10-K
for the fiscal year ended April 30, 2018. Your annual report on Form
10-K for the period
ended April 30, 2018 should have been filed on EDGAR by now. Please
tell us when
you plan to file this annual report, as we are unable to assess the
adequacy of your
responses to our comments until you do so.
2. Please label the March 31, 2018 financial statements "As Restated"
and provide the
disclosures required by ASC 250-10-50-7.
Patrick Moynihan
Blockchain Industries, Inc.
July 23, 2018
Page 2
Balance Sheets, page 5
3. We note your response to comment 2. We believe the amount of common
shares issued
and outstanding presented in the balance sheet under shareholders'
deficit at January 31,
2018 and April 31, 2017 should be calculated based on the number of
shares issued and
outstanding at January 31, 2018 and April 31, 2017, respectively,
multiplied by the
$0.001 par value of such share. Please revise or explain to us why a
revision is not
required.
Notes to Unaudited Financial Statements
Note 2. Summary of Significant Accounting Policies
Revenue Recognition, page 9
4. Reference is made to your discussion in critical accounting estimates on
page 21
regarding the adoption of ASU 2014-09. Your revenue recognition policy
does not
reflect the adoption of the accounting standard update. Please revise
your disclosure to
reflect the adoption of ASU 2014-09 and provide the disclosure required
by ASC 606-50.
Recent Accounting Pronouncements, page 112
5. Please disclose that you adopted ASU 2014-09 as of November 1, 2017 and
provide a
description of the new standard and a discussion of the impact that
adoption had on your
financial position and results of operations.
6. We note your disclosure regarding the issuance of ASU 2016-09 which was
effective for
fiscal years beginning after December 15, 2016. You disclose that you
are in the process
of evaluating the impact the adoption of ASU 2016-09 will have on your
consolidated
financial statements. However, you should have adopted the new standard
as of May 1,
2017. Please revise your financial statements to reflect the adoption of
ASU 2016-09 on
May 1, 2017 and disclose the impact that adoption had on your financial
statements.
7. Please include a discussion of the adoption of ASU 2016-07 including a
description of
the change in accounting and the impact that adoption of the standard
had on your
consolidated financial statements.
Cash and Cash Equivalents, page 11
8. We do not believe that the analysis you provided in response 7 provides
a sufficient basis
to account for bitcoin and ethereum as cash equivalents. We note that
bitcoin and
ethereum are not cash or financial assets as those terms are defined in
the FASB
Codification Master Glossary, do not represent an ownership interest in
an entity, do not
Patrick Moynihan
Blockchain Industries, Inc.
July 23, 2018
Page 3
have original maturities of three months or less, and do present more
than insignificant
risk of changes in value. Please tell us the consideration you gave to
whether bitcoin and
ethereum represent intangible assets as defined in ASC 350.
Note 4. Available-for-Sale Securities, page 12
9. We are unclear how your analysis you provided in response 10 provides a
sufficient basis
to account for Tokens and Wallets as available for sale securities.
Please address the
following:
Provide us a description of each of the Tokens and Wallets in the
table on page 12
and rights and obligations associated with each, including whether
Tokens or Wallets
represent an ownership or other stakeholder interest in an entity
or a right to cash;
Why your investment in Tokens and Wallets are within the scope of
ASC 321.
Please be detailed in your explanation;
Why the Tokens and Wallets have readily determinable fair values as
defined in ASC
320 and ASC 820; and
Whether you considered utility Tokens and Wallets intangible assets
as defined in
ASC 350 and the detailed reasons for you answer.
Note 9. Stockholders' Equity
Common stock Issued in Exchange for Consulting, Professional and Other
Services, page 14
10. Please tell us the valuation methods used to determine the per-share
fair value of your
common stock at each of the dates set forth in the table of value per
share and the extent
to which estimates are considered highly complex and subjective. Please
also tell us the
OTC-traded price of shares of common stock on each of the dates in the
table of value
per share and the reasons why the market value is not representative of
fair value.
11. We reviewed your response to comment 14 and the revisions to your
disclosure. Please
disclose the total compensation cost for share-based payment
arrangements recognized in
income as well as the total recognized tax benefit related thereto and
the total
compensation cost related to non-vested awards not yet recognized and
the weighted
average period over which it is expected to be recognized. Please refer
to ASC 718-10-
50-2h and i.
12. Please include an introductory paragraph to describe the common stock
equivalents set
forth in the second table on page 15.
Patrick Moynihan
Blockchain Industries, Inc.
July 23, 2018
Page 4
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of
Operations
Chimes ICO, page 17
13. We note your response to comment 25. Although, you indicate that the
agreement dated
February 5, 2018 has been filed as an exhibit, we were unable to locate
such exhibit.
Please file the omitted exhibit or advise.
AutoLotto, page 19
14. Please tell us how the promissory note issued under the AutoLotto
agreement for
amounts funded as of March 31, 2018 is presented in the balance sheets
and statement of
cash flows.
Results of Operations
Service Revenues, page 19
15. The unrealized loss on the investment in KPAY was recognized in the
statement of
operations as stated in your response to comment 1. As such, please
revise your
disclosure in the second paragraph to state that the unrealized loss
was recognized in the
statements of operations rather than in accumulated other comprehensive
income.
Critical Accounting Estimates
Revenue Recognition, page 22
16. We note your disclosure that to the extent the company receives
compensation of illiquid
noncash assets, or any asset that may not have a readily determinable
fair market value,
you may require the use of certain Level 3 fair value estimates as
defined by ASC 820.
Please tell us how your measurement of noncash consideration that may
not have a
readily determinable fair market value complies with ASC 606-10-32-22.
Stock-based Compensation, page 22
17. We note your disclosure that the result of the estimates used in your
valuation was
approximately $18.8 million of non-cash stock-based compensation
expense for the three
months ended January 31, 2018. Please also disclose how you are
recognizing the
expense in income and the amount recognized. In addition, please
explain to us how you
determined the amount of stock-based compensation recognized during the
nine months
ended January 31, 2018.
Patrick Moynihan
Blockchain Industries, Inc.
July 23, 2018
Page 5
Exhibit 31.1
18. We reviewed your response to comment 32 and the revisions to your
disclosure. 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