See accompanying notes,
which are an integral part of these financial statements.
See accompanying notes, which are an integral part of these financial statements.
NOTES
TO FINANCIAL STATEMENTS
As
of March 31, 2019 (Unaudited) and for the Three Months then Ended (Unaudited)
NOTE
1: ORGANIZATION AND NATURE OF OPERATIONS
BLOCKCHAIN
HOLDINGS CAPITAL VENTURES, INC. (the “Company”), formerly Southeastern Holdings, Inc. (formerly Safe Lane Systems,
Inc.) was incorporated in the State of Colorado on September 10, 2013. Safe Lane Systems, Inc. redomiciled to become a Delaware
holding corporation in September of 2016. On September 22, 2016, Safe Lane Systems, Inc. formed two wholly owned subsidiaries,
SLS Industrial, Inc and Southeastern Holdings, Inc. (both Delaware corporations) and on September 30, 2016 completed a merger
and reorganization in which Southeastern Holdings, Inc. (now Blockchain Holdings Capital Ventures, Inc.) became the holding company.
On December 1, 2016, the Company spun off its wholly owned subsidiary, SLS Industrial, Inc., along with its assets and liabilities,
leaving Southeastern Holdings, Inc. as the only surviving entity.
On
August 23, 2018, the Company entered into a Bill of Sale and Assignment and Assumption Agreement with Blockchain Holdings, LLC
(“Blockchain”) pursuant to which the Company purchased all of the assets of Blockchain which are used in the business
of sourcing of blockchain mining equipment from various suppliers for their customers and also providing management of the equipment
hosted, mining pools and tech work on such equipment. The Company issued 300,000,000 (equivalent to 3,000,000 after the reverse
split) shares of its common stock, par value $.0001 to the members of Blockchain in exchange for the assets of Blockchain.
On
August 30, 2018 the Company changed its name to Blockchain Holdings Capital Ventures, Inc.
Business
description
Blockchain
Holdings Capital Ventures, Inc is a public company that is focused on finding, building, vetting and acquiring assets in support
of the high growth associated with computing demands including the blockchain space. The Company’s main purpose is to provide
a safe, transparent diversified investment vehicle for investors to participate in the very exciting space while managing the
risk over a diversified portfolio of assets. The Company’s asset backed cash flowing model will include assets globally
but will begin in the United States to ensure a more stable and predictable growth curve.
NOTE
2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
The
accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with generally accepted
accounting principles in the United States of America (“GAAP”) and the interim reporting rules of the Securities and
Exchange Commission (“SEC”) and should be read in conjunction with the audited financial statements and notes thereto
contained in the Company’s latest Annual Report filed with the SEC on Form 10-K. In the opinion of management, all adjustments,
consisting of normal recurring adjustments (unless otherwise indicated), necessary for a fair presentation of the financial position
and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim
periods are not necessarily indicative of the results to be expected for the full year.
Use
of Estimates
The
preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those
estimates.
Cash
Equivalents and Concentration of Cash Balance
The
Company considers all highly liquid securities with an original maturity of less than three months to be cash equivalents. The
Company’s cash and cash equivalents in bank deposit accounts, at times, may exceed federally insured limits. As of March
31, 2019 and December 31, 2018, the Company’s cash balances did not exceed federally insured limits.
BLOCKCHAIN
HOLDINGS CAPITAL VENTURES, INC. (Formerly Southeastern Holdings, Inc.)
NOTES
TO FINANCIAL STATEMENTS
As
of March 31, 2019 (Unaudited) and for the Three Months then Ended (Unaudited)
Fair
Value of Financial Instruments
Financial
Accounting Standards Board (“FASB”) guidance specifies a hierarchy of valuation techniques based on whether the inputs
to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent
sources, while unobservable inputs reflect market assumptions. The hierarchy gives the highest priority to unadjusted quoted prices
in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level
3 measurement). The three levels of the fair value hierarchy are as follows:
Level
1 - Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to
access at the measurement date. Level 1 primarily consists of financial instruments whose value is based on quoted market prices
such as exchange-traded instruments and listed equities.
Level
2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or
indirectly (e.g., quoted prices of similar assets or liabilities inactive markets, or quoted prices for identical or similar assets
or liabilities in markets that are not active).
Level
3 - Unobservable inputs for the asset or liability. Financial instruments are considered Level 3 when their fair values are determined
using pricing models, discounted cash flows or similar techniques and at least one significant model assumption or input is unobservable.
The
carrying amounts reported in the balance sheets approximate their fair value.
Revenue
Recognition
The
Company recognizes revenue under ASC 606, using the following five-step model, which requires that the Company: (1) identify a
contract with the customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4)
allocate the transaction price to performance obligations and (5) recognize revenue as performance obligations are satisfied.
The Company’s revenue streams historically consisted of three components:
|
1.
|
Equipment
sales – The Company purchases and resells equipment, recognizing the equipment’s original costs and costs to deliver
such to the customer as costs of goods sold.
|
|
|
|
|
2.
|
Consulting
and management fees – These fees consist of various services provided to companies entering the blockchain space and
range from equipment setup to facility management to general consulting.
|
|
|
|
|
3.
|
Coin
mining commissions – On an ongoing basis, the Company collects a 5% commission on coins processed by its management
clients.
|
While
the Company generated early revenue from the aforementioned sources, the Company has shifted its focus to finding, building, vetting
and acquiring assets to support computing demands including the blockchain space and is not currently pursuing operations that
historically have generated revenue. There can be no assurances that these efforts will generate future revenue.
Stock-Based
Compensation
The
Company accounts for share-based payments pursuant to ASC 718, “Stock Compensation” and, accordingly, the Company
records compensation expense for share-based awards based upon an assessment of the grant date fair value for stock options and
restricted stock awards using the Black-Scholes option pricing model.
Stock
compensation expense for stock options is recognized over the vesting period of the award or expensed immediately when stock or
options are awarded for previous or current service without further recourse.
In
February and March 2019, the Company granted advisors and consultants 915,000 shares of common stock in connection with services
provided. 875,000 of these shares vested immediately, and the remaining 40,000 vests at a rate of 4,500 per quarter beginning
in the second quarter of 2019, with 10,000 shares due upon closing a financing and 16,500 due in the first quarter of 2020. The
Company recognized stock-based compensation expense of $92 during the three months ended March 31, 2019.
BLOCKCHAIN
HOLDINGS CAPITAL VENTURES, INC. (Formerly Southeastern Holdings, Inc.)
NOTES
TO FINANCIAL STATEMENTS
As
of March 31, 2019 (Unaudited) and for the Three Months then Ended (Unaudited)
Income
Taxes
The
Company is subject to taxation in various jurisdictions and may be subject to examination by various authorities.
Deferred
tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets, including tax loss and
credit carryforwards, and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of
a change in tax rates is recognized in income in the period that includes the enactment date. Deferred income tax expense represents
the change during the period in the deferred tax assets and deferred tax liabilities. The components of the deferred tax assets
and liabilities are individually classified as current and non-current based on their characteristics. Deferred tax assets are
reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the
deferred tax assets will not be realized.
The
Company recognizes the amount of taxes payable or refundable for the current year and recognizes deferred tax liabilities and
assets for the expected future tax consequences of events and transactions that have been recognized in the Company’s financial
statements or tax returns.
NOTE
3: GOING CONCERN
As
shown in the accompanying financial statements as of March 31, 2019, the Company had $275 of cash, as compared to total current
liabilities of $207,534, has incurred substantial operating losses, and had an accumulated deficit of $277,606. Furthermore, the
Company’s revenue history has been limited and unstable, and there can be no assurances of future revenues.
Given
these factors, the Company is dependent on financing from outside parties, and management intends to pursue outside capital through
debt and equity vehicles. There is no assurance that these efforts will materialize or be successful or sufficient to fund operations
and meet obligations as they come due.
The
accompanying financial statements have been prepared assuming that the Company will continue as a going concern, however, the
above conditions raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements
do not include any adjustments to reflect the possible future effect on the recoverability and classification of assets or the
amounts and classifications of liabilities that may result should the Company be unable to continue as a going concern.
NOTE
4: STOCKHOLDERS’ DEFICIENCY
The
Company has designated ten million (10,000,000) shares of its preferred stock, par value $0.001 as Class A Preferred Super Majority
Voting Stock* (“Class A”). The Class A shares have the right to vote upon matters submitted to the holders of common
stock, par value $0.0001 of the Company. Class A shares have a vote equal to the number of shares of common stock of the Company
which would give the holders of the Class A shares a vote equal to sixty percent (60%) of the common stock. This vote shall be
exercised pro-rata by the holders of the Class A. The Company shall have the right to redeem, in its sole and absolute discretion,
at any time one (1) year after the date of issuance of such Class A shares, all or any portion of the shares of Class A at a price
of one cent ($0.01) per share. On October 4, 2018, the Company issued a total of 7,000,000 Class A shares to its CEO and COO as
stock-based compensation for services rendered.
The
Company has not currently authorized a Class B designation of Preferred Stock.
BLOCKCHAIN
HOLDINGS CAPITAL VENTURES, INC. (Formerly Southeastern Holdings, Inc.)
NOTES
TO FINANCIAL STATEMENTS
As
of March 31, 2019 (Unaudited) and for the Three Months then Ended (Unaudited)
The
Company has designated ten million (10,000,000) shares of its preferred stock, par value $0.001 as Class C Convertible Preferred
Non-Voting Stock* (“Class C”). Each share of Class C shall be convertible into five (5) shares of common stock. The
holders of Class C shall be entitled to receive the same dividend as the holders of the common stock and such dividend shall be
paid pro rata per share on a fully converted basis. The holders of Class C shall have piggyback registration rights. The Company
shall have the right to redeem, in its sole and absolute discretion, at any time after five (5) years, all or any portion of the
shares of Class C at a price of five dollars ($5.00) per share. The Class C shares shall be considered to have a junior liquidation
preference to Class A shares and a senior dividend preference to Class A shares. On October 4, 2018, the Company issued a total
of 7,000,000 Class C shares to its CEO and COO as stock-based compensation for services rendered. Subsequently, in April 2019,
the Company filed an amended and restated certificate of designation, which restricts the CEO and COO from converting the 7,000,000
shares into common stock for 36 months from the issuance date.
As
of March 31, 2019, the Company was authorized to issue 150,000,000 shares of common stock. All common stock shares have full dividend
and voting rights. However, it is not anticipated that the Company will be declaring dividends in the foreseeable future.
As
of March 31, 2019, the Company had 5,301,217 common shares outstanding.
As
of March 31, 2019, 7,000,000 shares of Class A Preferred Stock and 7,000,000 shares of Class C Preferred Stock were issued and
outstanding.
NOTE
5: RELATED PARTY TRANSACTIONS
As
of March 31, 2019 and December 31, 2018, accrued consulting fees due to the CEO and COO totaled $82,500 and $82,500, respectively.
The
Company does not currently have consulting or employment agreements with these individuals, and as a result, these fees may fluctuate
from time to time. While the Company believes these individuals were appropriately classified as contractors and has accordingly
neither paid nor accrued payroll taxes, these payments may result in future tax liabilities should the Internal Revenue Service
deem these individuals to be employees.
During
the three months ended March 31, 2019, the Company’s CEO advanced $3,722, and the COO advanced $1,315 to fund operations.
These advances bear no interest, are unsecured, and are due on demand.
During
the period from February 5, 2018 (Inception) through March 31, 2018, The Company paid out an estimated $398 in cryptocurrency
as commissions to its CEO and COO from the Company’s mining operations and included this in sales and marketing expense.
These commissions are included in sales and marketing expense on the statement of operations.
BLOCKCHAIN
HOLDINGS CAPITAL VENTURES, INC. (Formerly Southeastern Holdings, Inc.)
NOTES
TO FINANCIAL STATEMENTS
As
of March 31, 2019 (Unaudited) and for the Three Months then Ended (Unaudited)
During
the period from February 5, 2018 (Inception) through March 31, 2018, the Company’s revenues and costs of goods sold included
the following related party transactions:
|
|
Management and Consulting Fees
|
|
|
Equipment Sales
|
|
|
Mining
Commissions
|
|
Customer
|
|
February 5, 2018 (Inception) through
March 31, 2018
|
|
|
February 5, 2018 (Inception) through
March 31, 2018
|
|
|
February 5, 2018 (Inception) through
March 31, 2018
|
|
ChineseInvestors.com, Inc. (1)
|
|
$
|
18,954
|
|
|
$
|
141,263
|
|
|
$
|
398
|
|
Paul Dickman (2)
|
|
|
-
|
|
|
|
2,391
|
|
|
|
-
|
|
Delray Wannemacher (3)
|
|
|
-
|
|
|
|
6,450
|
|
|
|
-
|
|
Total related party revenue
|
|
$
|
18,954
|
|
|
$
|
150,104
|
|
|
$
|
398
|
|
Cost of goods sold
|
|
|
-
|
|
|
|
(136,071
|
)
|
|
|
-
|
|
Gross margin
|
|
$
|
18,954
|
|
|
$
|
14,033
|
|
|
$
|
398
|
|
(1)
Paul Dickman, the Company’s former CEO, is the CFO of ChineseInvestors.com, Inc. and is therefore deemed to exercise
significant influence.
|
(2)
Paul Dickman is the Company’s former CEO.
|
(3)
Delray Wannemacher is the Company’s current CEO.
|
NOTE
6: CONCENTRATIONS, COMMITMENTS AND CONTINGENCIES
During
the period from February 5, 2018 (Inception) through March 31, 2018, the Company identified a 95% concentration in overall revenue
from one customer, which concentration it deemed significant. The Company identified no significant concentrations for the three
months ended March 31, 2019.
NOTE
7: RECENT ACCOUNTING PRONOUNCEMENTS
In
February 2016, the FASB issued ASU 2016-02, “Leases” (Topic 842). This ASU requires a lessee to recognize a right-of-use
asset and a lease liability under most operating leases in its balance sheet. The ASU is effective for annual and interim periods
beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. The Company
has adopted this accounting policy on January 1, 2019 and has determined that it currently does not impact the Company’s
financial statements.
Management
does not believe that any other recently issued, but not yet effective, accounting standards could have a material effect on the
accompanying financial statements. As new accounting pronouncements are issued, we will adopt those that are applicable under
the circumstances.
NOTE
8: SUBSEQUENT EVENTS
On
April 19, 2019, the Company entered into an agreement with a professional services provider, which called for the issuance of
200,000 shares of common stock as compensation.
CAUTIONARY
STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
This
report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of
1995. These statements are subject to risks and uncertainties and are based on the beliefs and assumptions of management and information
currently available to management. The use of words such as “believes”, “expects”, “anticipates”,
“intends”, “plans”, “estimates”, “should”, “likely” or similar expressions,
indicates a forward-looking statement. In connection with, and because we desire to take advantage of, the “safe harbor”
provisions of the Private Securities Litigation Reform Act of 1995, we caution readers regarding certain forward looking statements
in the following discussion and elsewhere in this report and in any other statement made by, or on our behalf, whether or not
in future filings with the Securities and Exchange Commission. Forward-looking statements are statements not based on historical
information and which relate to future operations, strategies, financial results or other developments. Forward looking statements
are necessarily based upon estimates and assumptions that are inherently subject to significant business, economic and competitive
uncertainties and contingencies, many of which are beyond our control and many of which, with respect to future business decisions,
are subject to change. These uncertainties and contingencies can affect actual results and could cause actual results to differ
materially from those expressed in any forward-looking statements made by, or on our behalf. We disclaim any obligation to update
forward-looking statements.
The
identification in this report of factors that may affect our future performance and the accuracy of forward-looking statements
is meant to be illustrative and by no means exhaustive. All forward-looking statements should be evaluated with the understanding
of their inherent uncertainty.