Mail Stop 3561
July 11, 2019
Robert Kalkstein
Chief Financial Officer
Blockchain Industries, Inc.
730 Arizona Ave., Suite 220
Santa Monica, California 90401
Re: Blockchain Industries, Inc.
Amendment No. 1 to Form 10-K for Fiscal Year Ended April 30,
2018
Filed June 24, 2019
Response Dated May 28, 2019
File No. 0-51126
Dear Mr. Kalkstein:
We have reviewed your May 28, 2019 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 December 3,
2018 letter.
Amendment No. 1 to Form 10-K for the Year Ended April 30, 2018
General
1. Please file Form 8-K under Item 4.02 regarding the non-reliance on
the financial
statements included in Form 10-K filed October 29, 2018.
Item 9A Controls and Procedures
Management's Report on Internal Control Over Financial Reporting, page 43
2. We note your disclosure that the weaknesses in your internal control
over financial
reporting did not result in any material misstatements of your
consolidated financial
Robert Kalkstein
Blockchain Industries, Inc.
July 11, 2019
Page 2
statements. Please revise to disclose that as a result of the
weaknesses in your internal
control over financial reporting your financial statements for the year
ended April 30,
2018 included in Form 10-K contained errors and that you restated your
financial
statements to correct the errors as filed in an amendment to the Form
10-K filed June 24,
2019.
Financial Statements, page 56
General
3. Please revise to include a statement of shareholders' equity (deficit)
for the year ended
April 30, 2017.
4. Please label the consolidated statements of cash flows and consolidated
statement of
shareholders' equity (deficit) for the year ended April 30, 2018 "as
restated."
Consolidated Statements of Shareholders' Equity (Deficit), page 63
5. We reviewed your response to comment 16 and the revisions to your
disclosure. We note
that sales of common stock disclosed in the consolidated statements of
shareholders'
equity (deficit) exceeds the proceeds from the issuance of common stock
in the
consolidated statements of cash flows. Please tell us what the
difference represents. If
the difference is attributable to non-cash financing transactions,
please disclose the non-
cash transactions in accordance with ASC 230-10-50-3.
Note 2. Summary of Significant Accounting Policies, page 59
Investments in Digital Currencies, page 68
6. We reviewed your response to comment 20 and the revisions to your
disclosure. Please
tell us how you concluded that your investments in digital currencies
are fully impaired
and whether you tested the indefinite-lived assets for impairment in
accordance with ASC
350-30-35. In addition, please explain to us how you determined the fair
value of digital
currencies in determining the amount of the impairment loss. We may have
further
substantive comment.
Investments of SAFTs and Pre-ICO Tokens, page 69
7. Please explain to us why you combine disclosures regarding the
investments in equity
securities and the promissory note receivable with your disclosures
regarding SAFTs
rather than providing separate note disclosures.
8. We reviewed your response to comment 14 and the revisions to your
disclosure. You
disclose that investments in Utility Tokens received as part of your
SAFT agreements are
Robert Kalkstein
Blockchain Industries, Inc.
July 11, 2019
Page 3
accounted for as financial assets measured and recorded at cost and
that you wrote-off
your investments in Utility Tokens since there is no current or future
value related to the
Utility Tokens. As previously requested, please tell us your basis in
GAAP for
accounting for the Utility Tokens as financial assets as opposed to
intangible assets. In
addition, please tell us your basis for concluding that there is no
current or future value
related to the Utility Tokens. Finally, please tell us whether the
Utility Tokens were
reviewed for impairment in accordance with the guidance in ASC 360-10
and explain to
us in detail how you measured the amount of the impairment loss
recognized. We may
have further substantive comment.
Note 3. Restatement of Financial Statements, page 77
9. Please disclose the effect of the corrections on each financial
statement line item,
including net loss per share and cash flows. Please refer to ASC
250-10-50-7a. Please
note that this comment also applies to Amendment No. 3 to Form 10-Q for
the quarter
ended January 31, 2018.
Note 4. Investment in LegatumX, page 78
10. We reviewed your response to comment 21 and the revisions to your
disclosure regarding
the consolidation of LegatumX, a variable interest entity. Please tell
us in detail why
Legatum is considered to be a variable interest entity. In addition,
please revise to
provide the disclosures required by ASC 810-10-50.
11. We note that you may receive additional shares of LegatumX common stock
if
LexatumX is able to sell the shares of common stock you issued to
LexatumX following
the effective date of your Form 10. Please revise your disclosure to
discuss the impact of
the withdrawal of Form 10 on the terms of the agreement with LexatumX.
In addition,
please tell us in detail how you have the power to direct the
activities of Legatum that
most significantly impact Legatum's economic performance and the
obligation to absorb
losses of Legatum or the right to receive benefits from Legatum that
could potentially be
significant to Legatum.
Robert Kalkstein
Blockchain Industries, Inc.
July 11, 2019
Page 4
You may contact Yolanda Guobadia at (202) 551-3562 or me at (202)
551-3344 if you
have questions regarding comments on the financial statements and related
matters. Please
contact Jennifer Lopez-Molina at (202) 551-3792 or Mara Ransom at (202)
551-3264 with any
other questions.
Sincerely,
/s/ William H. Thompson
William H. Thompson
Accounting Branch Chief
Office of Consumer
Products