Table of Contents

U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

FORM 10-Q

 

☒    QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2018

 

☐    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Commission file number: 000-54994

  

NODECHAIN, INC.

(Exact name of registrant as specified in its charter)

 

Delaware		46-3021464
(State or Other Jurisdiction of		(I.R.S. Employer
Incorporation or Organization)		Identification No.)
5445 Oceanus Drive, Suite 102 Huntington Beach, CA		92649
(Address of Principal Executive Offices)		(Zip Code)

 

Registrant’s telephone number, including area code: (714) 916-9321

 

 

Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒  No ☐

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒  No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer ☐ Non-accelerated filer ☐ Emerging growth company ☐

Accelerated filer ☐ Smaller reporting company ☒

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐  No ☒

 

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: As of May 30, 2018 the issuer had 85,175,000 shares of its common stock issued and outstanding.

 

 

 

 

TABLE OF CONTENTS

 

PART I
Item 1.	Financial Statements	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	10
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	14
Item 4.	Controls and Procedures	14
PART II
Item 1.	Legal Proceedings	16
Item 1A.	Risk Factors	16
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	16
Item 3.	Defaults Upon Senior Securities	16
Item 4.	Mine Safety Disclosures	16
Item 5.	Other Information	16
Item 6.	Exhibits	16
	Signatures	17

 

 

 

 

 

PART I - FINANCIAL INFORMATION

 

Item 1.

Financial Statements.

 

NODECHAIN, INC.

(Formerly Vapetek, Inc).

BALANCE SHEETS

 

		March 31, 2018				December 31, 2017
		(unaudited)
ASSETS
Current assets:
Cash		$	1,611			$	1,196
Trading securities			3,244				540
Inventory			134,000				–
Assets of discontinued operations			–				3,959
Total current assets			138,855				5,695
Equipment, net			23,903				26,616
Total assets		$	162,758			$	32,311
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued liabilities		$	16,656			$	4,264
Notes payable - related parties			48,820				55,160
Accrued rent – related party			14,650				13,150
Deferred revenue			11,000				–
Total current liabilities			91,126				72,574
Deferred revenue, net of current portion			10,192				–
Total liabilities			101,318				72,574
Stockholders' equity (deficit):
Preferred stock, $0.0001 par value, 5,000,000 shares authorized; none issued and outstanding			–				–
Common stock, $0.0001 par value, 100,000,000 shares authorized; 85,140, 000 and 79,940,000 shares issued and outstanding, as of March 31, 2018 and December 31, 2017, respectively			8,514				7,994
Additional paid-in capital			13,336,875				668,763
Accumulated deficit			(13,283,949	)			(717,020	)
Total stockholders' equity (deficit)			61,440				(40,263	)
Total liabilities and stockholders' equity		$	162,758			$	32,311

 

The accompanying notes are an integral part of these unaudited condensed financial statements.

 

 

 

 

 

NODECHAIN, INC.

(Formerly Vapetek, Inc.)

STATEMENTS OF OPERATIONS

(Unaudited)

 

		For the Three Months Ended March 31,
		2018				2017
Revenue:
Sale of mining rigs		$	28,000			$	–
Hosting revenue			808				–
Service revenue			4,150				–
Net revenue			32,958				–
Cost of sales, related party			30,000				–
Gross Margin			2,958				–
Operating expenses:
Professional fees			16,111				17,296
Director stock compensation expense			12,500,000				–
Rent expense, related party			1,500				–
General and administrative			37,172				10,376
Total operating expenses			12,554,783				27,672
Loss from operations			(12,551,825	)			(27,672	)
Other expense:
Interest expense			(633	)			–
Realized loss on trading securities			(5,250	)			–
Unrealized loss on trading securities			(9,296	)			–
Total other expense			(15,179	)			–
Net loss from continuing operations			(12,567,004	)			(27,672	)
Net income from discontinued operations			75				13,163
Net loss		$	(12,566,929	)		$	(14,509	)
Loss per common share - basic and diluted		$	(0.15	)		$	(0.00	)
Weighted average common shares outstanding – basic and diluted			83,773,333				77,520,000

 

The accompanying notes are an integral part of these unaudited condensed financial statements.

 

 

 

 

 

NODECHAIN, INC.

(Formerly Vapetek, Inc.)

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

 

		For the Three Months Ended March 31,
		2018				2017
Cash flows from operating activities:
Net Loss		$	(12,566,929	)		$	(14,509	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation			2,713				92
Director stock compensation expense			12,500,000				–
Unrealized loss on trading securities			21,296				–
Changes in operating assets and liabilities:
Accounts receivable			3,959				–
Accounts payable and accrued liabilities			12,391				9,523
Accrued rent – related party			1,500				4,400
Deferred revenue			21,192				–
Net cash provided by discontinued operation			–				(104	)
Net cash used in operating activities			(3,878	)			(598	)
Cash flows from investing activities:			–				–
Cash flows from financing activities:
Proceeds from related party loan			660				–
Repayment of related party loans			(7,000	)			–
Imputed interest expense			633				–
Proceeds from the sale of common stock			10,000				–
Net cash provided by financing activities			4,293				–
Net change in cash			415				(598	)
Cash, beginning of period			1,196				2,848
Cash, end of period		$	1,611			$	2,250
Supplemental Disclosures:
Cash paid for interest		$	–			$	–
Cash paid for taxes		$	–			$	–
Supplemental disclosure of noncash activities:
Contributed trading securities		$	26,550			$	–

 

The accompanying notes are an integral part of these unaudited condensed financial statements.

 

 

 

 

NODECHAIN, INC.

(Formerly Vapetek, INC.)

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

March 31, 2018

 

NOTE 1. ORGANIZATION AND DESCRIPTION OF BUSINESS

 

Nodechain Inc., f/k/a, Vapetek, Inc. (the “Company”), was incorporated under the laws of the State of Delaware on June 18, 2013. Nodechain, Inc. has, as of this time, ceased any and all activities relating to the sale of e-cigarettes and vapor products. As such, all former assets and inventory of the Company pertaining to the vape industry have been disposed of. Nodechain, Inc.’s current business operations are comprised of activities revolving around the blockchain, with a particular emphasis on digital cryptocurrency mining and transaction validation.

 

On March 6, 2014, the Board of Directors and majority stockholder of the Company approved an amendment to the Company’s Certificate of Incorporation to change the name of the Company from ALPINE 2 Inc. to VAPETEK Inc. On that date, the Company filed a Certificate of Amendment with the State of Delaware.

 

On April 1, 2014, the Company entered into a product distribution agreement with West Coast Vape Supply Inc. to supply electronic cigarettes, vaporizers, e-liquids, and accessories, and other third party products. West Coast Vape Supply Inc. is a related party and owned 100% by the management of Vapetek Inc.

 

On September 23, 2014, the Company filed its Form 8-K (“Super 8-K”) outlining its discussion on its asset acquisition license with PennyGrab Inc., its entry into a product distribution agreement with West Coast Vape Supply Inc. to supply products of electronic cigarettes, vaporizers, e-liquids, and accessories, and other third party products, the development of its corporate website and sales from its line of products that it now offers. As a fully-operating entity, the Super 8-K disclosed that it had exited its shell company status pursuant to Item 5.06, Change in Shell Company Status.

 

On August 11, 2014, the Company entered into a Licensing Agreement (the “Agreement”) with PennyGrab Inc. (“PennyGrab”). PennyGrab, a company owned 100% by our Chairman, Alham Benyameen, is the owner of technology, including software code, relating a website designed for wholesale, retail, and online auction compatible products.  The software code is a PHP website script that is 100% customizable and is SEO friendly that improves site search engines rankings. The software code is the “Licensed Technology.”

 

Pursuant to the Agreement, PennyGrab granted to the Company an exclusive, transferable (including sublicensable) worldwide perpetual license of the Licensed Technology, to make, use, lease, and sell products incorporating the Licensed Technology.  The Company is required to pay to PennyGrab royalty payments equal to $100 (One Hundred Dollars) per year. The term of the Agreement is ongoing and effective as of August 11, 2014.

 

On December 1, 2017, the Board of Directors and majority stockholder of the Company approved an amendment to the Company’s Certificate of Incorporation to change the name of the Company from Vapetek, Inc. to Nodechain, Inc. On that date, the Company filed a Certificate of Amendment with the State of Delaware.

 

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

The Company’s unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). These unaudited condensed financial statements should be read in conjunction with the audited financial statements and footnotes for the year ended December 31, 2017 included on the Company’s Form 10-K filed on April 12, 2018. The results of the three months ended March 31, 2018 are not necessarily indicative of the results to be expected for the full year ending December 31, 2018.

 

Use of Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the Company to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. These estimates and judgments are based on historical information, information that is currently available to the Company and on various other assumptions that the Company believes to be reasonable under the circumstances. Actual results could differ from those estimates.

 

 

 

 

Revenue Recognition

 

Revenue is recognized when a customer obtains control of promised goods or services and is recognized in an amount that reflects the consideration that an entity expects to receive in exchange for those goods or services. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The amount of revenue that is recorded reflects the consideration that the Company expects to receive in exchange for those goods. The Company applies the following five-step model in order to determine this amount: (i) identification of the promised goods in the contract; (ii) determination of whether the promised goods are performance obligations, including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation.

 

The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. Once a contract is determined to be within the scope of ASC 606 at contract inception, the Company reviews the contract to determine which performance obligations the Company must deliver and which of these performance obligations are distinct. The Company recognizes as revenues the amount of the transaction price that is allocated to the respective performance obligation when the performance obligation is satisfied or as it is satisfied. Generally, the Company's performance obligations are transferred to customers at a point in time, typically upon delivery.

 

For the Company’s new operations there are four types of revenue. 1) Revenue is recognized from the sales of GPU mining units that are built and sold to third parties. 2) The Company earns revenue on the cryptocurrency that its GPU mining computers mine / blocks that are solved, 3) revenue from the hosting of mining rigs that it sells, and 4) revenue from the leasing of mining rigs. The Company currently only mines Bitcoin and Ethereum. The only cryptocurrency mined in 2017 was Bitcoin, payment is always in Bitcoin and recoded on the date it is earned. When cryptocurrency is received as revenue is debited to an asset account and accounted for as trading securities. The Company may sell the asset at a higher or lower price than when it was mined or may trade it for a different cryptocurrency asset.

 

Trading Securities

 

The Company holds trading securities, which consist of investments in Digital Assets such as Bitcoin and Ethereum. The securities are recorded on the balance sheet in current assets at their fair value at the time of receipt. Trading securities are marked to market at each balance sheet date with gains and losses recorded in net income. As of March 31, 2018, the Company has 5,000 Ripple (XRP) on hand.

 

Recently issued accounting pronouncements

 

The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

 

NOTE 3. GOING CONCERN

 

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred losses since inception and has an accumulated a deficit of $13,283,949 as of March 31, 2018. The Company requires capital for its contemplated operational and marketing activities.  The Company’s ability to raise additional capital through the future issuances of common stock is unknown. The obtainment of additional financing, the successful development of the Company’s contemplated plan of operations, and its transition, ultimately, to the attainment of profitable operations are necessary for the Company to continue operations. The ability to successfully resolve these factors raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements of the Company do not include any adjustments that may result from the outcome of these aforementioned uncertainties.

 

NOTE 4. RELATED PARTY TRANSACTIONS

 

On March 10, 2015, the Company executed another Consolidated Loan Agreement for $20,000 to West Coast Vape Supply Inc., The note is unsecured, non-interest bearing, payable on demand and is due no later than March 10, 2020. The note also contains a conversion feature that allows West Coast Vape Supply, Inc. to convert into shares of restricted common stock at any time after the first year’s anniversary of the date of the Loan Agreement, at the price based upon either: a) the price of its most recent private placement offering, closest to the time of conversion, b) if publicly -traded, then the bid price of its common stock on the closing day of conversion at. This loan agreement has been amended on April 1, 2015 to eliminate the conversion clause. All other terms remain the same. On August 1, 2016, $5,000 was repaid on the loan. As of March 31, 2018, $15,000 is still outstanding. The Company has recorded imputed interest for three months ended March 31, 2018 of $222.

 

 

 

  

On June 1, 2015, the Company entered into a Lease Agreement (“Lease”) with West Coast Vape Supply, Inc. (“West Coast”) a company owned 100% by the Company’s management. The term of the lease is one year commencing June 1, 2015 and ending March 31, 2017. The Company shall pay West Coast rent of $26,400 per year in equal monthly installments of $2,200 payable in advance on the 1^st of every month. As of March 31, 2018, there is $4,400 of accrued unpaid rent for this lease agreement.

 

On July 17, 2015, West Coast Vape Supply loaned the Company $5,000 for general operating expenses. The loan is unsecured, non-interest bearing, payable on demand, and due no later than April 17, 2020. As of March 31, 2018, this loan is still outstanding. The Company has recorded imputed interest for the three months ended March 31, 2018 of $74.

 

On April 1, 2017, the Company entered into a Lease Agreement (“Lease”) with West Coast Vape Supply, Inc. (“West Coast”) a company owned 100% by the Company’s management. The term of the lease was for two years commencing April 1, 2017. The Company shall pay West Coast rent of $12,000 per year in equal monthly installments of $1,000 payable in advance on the 1^st of every month. This lease was terminated by both parties on March 31, 2017. As of March 31, 2018, there is $8,500 of accrued unpaid rent for this lease agreement.

 

On July 7, 2017 and September 21, 2017, MeWe World, a related party, loaned the Company $25,000 and $7,000, respectively. The loans were made to purchase inventory and cover operating expenses. They are unsecured, non-interest bearing, payable on demand and due no later than March 10, 2020. On January 1, 2018, the Company repaid $7,000 of the loan. As of March 31, 2018, $27,500 is still outstanding. The Company has recorded imputed interest for the three months ended March 31, 2018 of $337.

 

On December 15, 2017, the Company entered into a Lease Agreement (“Lease”) with Andy Michael Ibrahim, the CEO. The term of the lease is one year commencing December 15, 2017. The Company shall pay Mr. Ibrahim rent of $6,000 per year in equal monthly installments of $500 payable in advance on the 15th of every month. As of March 31, 2018, there is $1,750 of accrued unpaid rent for this lease agreement.

 

On January 25, 2018, the Company entered into and consummated an agreement with Mewe World, Inc., a California Company owned and controlled by our Chairman of the Board, Alham Benyameen, to purchase a total of five GPU Computers built specifically for mining various types of “cryptocurrency” in exchange for $30,000.

 

On March 15, 2018, the Company acquired, from Mewe World, Inc., forty computers modified for the purpose of mining cryptocurrency. The computers were valued at their cost of $3,350 per unit. $134,000 has been credited to paid in capital.

 

On January 2, 2018, the Company acquired, from Mewe World, Inc., 10,000 units of Ripple. The Ripple was valued at the fair market value on January 2, 2018 of $2.40. $24,000 has been credited to paid in capital.

 

 

NOTE 5. STOCKHOLDER’S DEFICIT

 

On January 22, 2018, we issued 1,000,000 shares of restricted common stock to David Kim, and Youssef Hanine, respectively, for services rendered to the Company. The shares were issued at the closing stock price on the date of grant of $2.50 for total non-cash expense of $5,000,000.

 

On January 22, 2018, we issued 3,000,000 shares of restricted common stock to Phillip Nuciola for services rendered to the Company. The shares were issued at the closing stock price on the date of grant of $2.50 for total non-cash expense of $7,500,000.

 

During the three months ended March 31, 2018 the Company sold 200,000 shares of common stock for total cash proceeds of $10,000.

 

 

 

 

NOTE 6. DISCONTINUED OPERATIONS

 

The Company has ceased any and all activities relating to the sale of e-cigarettes and vapor products. As such, all former assets and inventory of the Company pertaining to the vape industry have been disposed of. Revenue and expenses applicable to the discontinued operations are disclosed separately on the face of the Statement of Operations in accordance with ASC 205, Presentation of Financial Statements.

 

Summarized operating results for the discontinuation of operations is as follows:

 

		March 31, 2018				March 31, 2017
Sales		$	75			$	17,829
Sales, related party			–				23,189
Total sales			75				41,018
Cost of sales			–				(27,855	)
Net income from discontinued operations		$	75			$	13,163

 

Assets and liabilities of discontinued operations are as follows:

 

		March 31, 2018				December 31, 2017
Accounts receivable		$	–			$	3,959
Inventory			–				–
Assets of discontinued operations		$	–			$	3,959
Accounts payable		$	–			$	–
Liabilities of discontinued operations		$	–			$	–

 

 

NOTE 7. COMMITMENTS AND CONTINGENCIES

 

On December 15, 2017, the Company entered into a Lease Agreement (“Lease”) with Andy Michael Ibrahim, the CEO. The term of the lease is one year commencing December 15, 2017. The Company shall pay Mr. Ibrahim rent of $6,000 per year in equal monthly installments of $500 payable in advance on the 15th of every month.

 

NOTE 8. SUBSEQUENT EVENTS

 

In accordance with SFAS 165 (ASC 855-10) management has performed an evaluation of subsequent events through the date that the financial statements were available to be issued and through the date of the filing and has determined that it does not have any material subsequent events to disclose in these financial statements other then the following.

 

On April 9, 2018, the Company granted 35,000 shares of common stock and warrants to purchase an additional 35,000 shares of common stock to a service provider.

 

 

 

 

 

 

 

 

 

 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Forward-Looking Statements

 

Certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. We intend such forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and are including this statement for purposes of complying with those safe-harbor provisions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on our operations and future prospects on a consolidated basis include, but are not limited to: changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Further information concerning our business, including additional factors that could materially affect our financial results, is included herein and in our other filings with the SEC.

 

 

Company Overview

 

Corporate History

 

The Company was incorporated under the laws of the State of Delaware on June 18, 2013, with an objective to acquire, or merge with, an operating business.

 

On March 6, 2014, we entered into a Share Purchase Agreement, resulting in a change of control, with Alham Benyameen and Andy Michael Ibrahim whereby Richard Chiang our Chairman of the Board of Directors, President, CEO, CFO and Secretary elected Mr. Benyameen as our Chairman of the Board of Directors and Mr. Ibrahim as our President, CEO, CFO, Secretary and Member of our Board of Directors.

 

Under the terms of the agreement, Mr. Chiang our former President and CEO sold 7,200,000 shares of Nodechain, Inc., formerly known as ALPINE 2 Inc. to Mr. Benyameen and Mr. Ibrahim in exchange for $20,000. Mr. Chiang simultaneously resigned from his positions held in the Company. Upon the closing of our Share Purchase Agreement, we entered into an employment agreement with Mr. Benyameen and Mr. Ibrahim as officers and directors of ALPINE 2 Inc. We issued in advance 20,000,000 shares of our common stock to Mr. Benyameen and 20,000,000 shares of our common stock to Mr. Ibrahim. These shares were valued at par $0.0001 at the time of transfer. Immediately after the closing of the Share Purchase Agreement, we had 50,000,000 shares of common stock outstanding, no shares of preferred stock, no options, and no warrants outstanding. On March 12, 2014, we filed a certificate of amendment of certificate of incorporation with the State of Delaware and on March 25, 2014, officially amended our name from ALPINE 2 Inc., to Vapetek, Inc.

 

On April 1, 2014, the Company entered into a product distribution agreement with West Coast Vape Supply Inc. to supply electronic cigarettes, vaporizers, e-liquids, and accessories, and other third-party products. West Coast Vape Supply Inc. is a related party and owned 100% by the management of Nodechain, Inc.

 

On August 11, 2014, we entered into a Licensing Agreement with PennyGrab Inc. (“PennyGrab”). PennyGrab is the owner of technology, including software code, relating a website designed for wholesale, retail, and online auction compatible products. The software code is a PHP website script that is 100% customizable and is SEO friendly that improves site search engines rankings. The software code is the “Licensed Technology.” Pursuant to the Agreement, PennyGrab granted to the Company an exclusive, transferable (including sublicensable) worldwide perpetual license of the Licensed Technology, to make, use, lease, and sell products incorporating the Licensed Technology (the “Licensed Products”). The Company is required to pay to PennyGrab royalty payments equal to $100 per year. To date there has been no revenue from the licensing agreement.

 

 

 

 

On September 23, 2014 we filed an 8-K regarding a change in shell Company Status as we were no longer to be deemed a shell Company as we had more than nominal operations. There are currently no outstanding comments in regards to the 8-K filed and as of today we are no longer deemed to be a shell Company.

 

On April 6, 2015 the Company completed a reverse stock split in which every eight shares of common stock became one share of common stock.

 

On December 1, 2017, the Board of Directors and majority stockholder of the Company approved an amendment to the Company’s Certificate of Incorporation to change the name of the Company from Vapetek, Inc. to Nodechain, Inc. On that date, the Company filed a Certificate of Amendment with the State of Delaware.

 

Our Business

 

Nodechain, Inc.’s current business operations are comprised of activities revolving around the blockchain, with a particular emphasis on digital cryptocurrency mining and transaction validation.

 

The Company utilizes, at present, forty-five mining computers (rigs) that include 1070, 1070Ti and AMD 570 and 580 GPUs per unit. Our mining rigs are capable of efficiently mining approximately $400-$500 per month in Ethereum cryptocurrency and $500-600 per month in Bitcoin cryptocurrency per mining rig. It must be noted that the projected revenue estimates are directly linked to the highly volatile currency market conditions and daily Bitcoin (BTC) and Ethereum (ETH) pricing.

 

Cryptocurrency mining is the underlying system that allows Bitcoin, Ethereum, and other cryptocurrencies, to be traded in a decentralized manner. It revolves around a ledger, or database, that is continuously updated and accessible to the public. Nodes have a copy of the ledger and verify the transactions by completing difficult mathematical problems by utilizing the GPU of the mining rigs. The validators are called “miners”. They authenticate and group transactions into cryptographically protected “blocks” which are then added to the public “chain”. Cryptocurrency miners are slowly rewarded with Bitcoin or Ethereum for carrying out this work, which involves substantial computing power.

 

In addition to our five current mining rigs we may, in the future, create additional mining rigs to increase our operations. The majority of mining companies purchase ASIC based mining rigs from China, which requires a long waiting period. In contrast, we believe all of our mining rigs will be created in-house with hardware from US based suppliers. It is the belief of the Company that building rigs from the ground up will allow us to scale our mining operations significantly faster than many competitors.

 

At present we will focus on mining Bitcoin and Ethereum, which have seen substantial and very public growth since their introduction. Our mining rigs are capable of mining alternative cryptocurrencies and we may evaluate, in the future, mining additional cryptocurrencies such as Zcash, Ethereum Classic, Bitcoin Gold and Monero. Such plans have not been fully developed at this point in time. We store our mined Bitcoin and Ethereum in a high-security, state-of-the-art cold storage wallets using the advanced cold storage wallet system provided by Coinbase.

 

In order to market and increase awareness of our Company we have hired a third party graphic artist and website developer to create and build a new website for our Company. This website is currently under development, although we anticipate it will be fully completed within several months.

 

In the future, the Company intends to, through as of yet unidentified means, expand its operations into different sectors related to the blockchain including, but not strictly limited to, dynamic cryptocurrency mining applications, blockchain applications, solidity smart contract development, cryptocurrency hashpower leasing, sales, service and B2B cryptocurrency consultation.

  

At present all of our mining rigs are managed and operated solely by our officers and directors.

 

The Company’s executive offices are located in Huntington Beach, CA, at 5445 Oceanus Drive, Suite 102, Huntington Beach, CA, 92649.

 

 

 

 

Results of operations for the three months ended March 31, 2018 and 2017.

 

Revenues

Our revenue was $32,958 for the three months ended March 31, 2018, compared to $41,018 for the three months ended March 31, 2017. Of the sales in the current period $75 were from our now discontinued operations. All of the sales in the prior period were from discontinued operations. The decrease in revenue is due to the phasing out of the e-cigarettes and vapor product business. During the current period we used 5,000 Ripple (XRP) for services resulting in a realized loss of $5,250 and had an unrealized loss of $9,296 on the mark to market of our digital assets.

 

Cost of Sales

Our cost of sales was $30,000 for the three months ended March 31, 2018, compared to $27,855 for the three months ended March 31, 2017. In the current period our cost of sales is due to the sale of five GPU Mining Units.

 

Operating Expenses

Our operating expenses from continuing operations were $12,554,783 for the three months ended March 31, 2018 compared to $27,262 for the three months ended March 31, 2017. During the current period we issued 5,000,000 shares of common stock to our newly appointed directors for total non-cash expense of $12,500,000. We also incurred professional fees of $16,111 compared to $17,296 in the prior period, $1,500 of rent expense and $37,172 of general and administrative expense. In the current period we incurred a non-cash G&A expense of $6,750 from the use of 5,000 Ripple used to pay for consulting expense.

 

Other Income and Expense

During the three months ended March 31, 2018, we incurred $633 of interest expense on related party loans that was credited to paid in capital. In addition, we recognized an unrealized loss of $14,546 on our digital assets.

 

Net Loss

We recorded a net loss of $12,566,929 for the three months ended March 31, 2018, as compared to $14,509 for the three months ended March 31, 2017. The increase to our net loss is due to the $12,500,000 non-cash expense for the issuance of common stock.

 

Liquidity and Capital Resources

 

Cash Flows

 

Cash Used in Operating Activities

 

For the three months ended March 31, 2018 net cash used in operating activities was $3,878 compared to $598 in the prior period. The decrease in net cash used in operating activities is due to a decreased level of operations for the three months ended March 31, 2018.

 

Cash from Investing Activities

 

There were no investing activities in either the current or prior period.

 

Cash from Financing Activities

 

For the three months ended March 31, 2018 and 2017 we had net cashflows of $4,293 and $0, respectively.

 

As of March 31, 2018, we owed $20,000 to West Coast Vape Supply Inc. and $27,500 to MeWe World, Inc.

 

As of March 31, 2018, we have insufficient cash to operate our business at the current level for the next twelve months and insufficient cash to achieve our business goals. The success of our business plan beyond the next 12 months is contingent upon us obtaining additional financing. We intend to fund operations through debt and/or equity financing arrangements, which may be insufficient to fund our capital expenditures, working capital, or other cash requirements. We do not have any formal commitments or arrangements for the sales of stock or the advancement or loan of funds at this time. There can be no assurance that such additional financing will be available to us on acceptable terms, or at all.

 

 

 

 

Off-Balance Sheet Arrangements and Contractual Obligations

 

We have not entered into any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources and would be considered material to investors.

 

Critical Accounting Policies and Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Note 2 to the Financial Statements describes the significant accounting policies and methods used in the preparation of the Financial Statements. Estimates are used for, but not limited to, contingencies and taxes.  Actual results could differ materially from those estimates. The following critical accounting policies are impacted significantly by judgments, assumptions, and estimates used in the preparation of the Financial Statements.

 

We are subject to various loss contingencies arising in the ordinary course of business.  We consider the likelihood of loss or impairment of an asset or the incurrence of a liability, as well as our ability to reasonably estimate the amount of loss in determining loss contingencies.  An estimated loss contingency is accrued when management concludes that it is probable that an asset has been impaired or a liability has been incurred and the amount of the loss can be reasonably estimated.  We regularly evaluate current information available to us to determine whether such accruals should be adjusted.

 

We recognize deferred tax assets (future tax benefits) and liabilities for the expected future tax consequences of temporary differences between the book carrying amounts and the tax basis of assets and liabilities.  The deferred tax assets and liabilities represent the expected future tax return consequences of those differences, which are expected to be either deductible or taxable when the assets and liabilities are recovered or settled.  Future tax benefits have been fully offset by a 100% valuation allowance as management is unable to determine that it is more likely than not that this deferred tax asset will be realized.

  

Revenue Recognition

Revenue is recognized when a customer obtains control of promised goods or services and is recognized in an amount that reflects the consideration that an entity expects to receive in exchange for those goods or services. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The amount of revenue that is recorded reflects the consideration that the Company expects to receive in exchange for those goods. The Company applies the following five-step model in order to determine this amount: (i) identification of the promised goods in the contract; (ii) determination of whether the promised goods are performance obligations, including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation.

 

The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. Once a contract is determined to be within the scope of ASC 606 at contract inception, the Company reviews the contract to determine which performance obligations the Company must deliver and which of these performance obligations are distinct. The Company recognizes as revenues the amount of the transaction price that is allocated to the respective performance obligation when the performance obligation is satisfied or as it is satisfied. Generally, the Company's performance obligations are transferred to customers at a point in time, typically upon delivery.

 

For the Company’s new operations there are two types of revenue as of December 31, 2017. 1) Revenue is recognized from the sales of GPU mining units that are built and sold to third parties. 2) The Company earns revenue on the cryptocurrency that its GPU mining computers mine / blocks that are solved. The Company currently only mines Bitcoin and Ethereum. The only cryptocurrency mined in 2017 was Bitcoin, payment is always in Bitcoin and recoded on the date it is earned. When cryptocurrency is received as revenue is debited to an asset account and accounted for as trading securities. The Company may sell the asset at a higher or lower price than when it was mined or may trade it for a different cryptocurrency asset.

 

 

 

 

Trading Securities

The Company holds trading securities, which consist of investments in Digital Assets such as Bitcoin and Ethereum. The securities are recorded on the balance sheet in current assets at their fair value at the time of receipt. Trading securities are marked to market at each balance sheet date with gains and losses recorded in net income.

 

Going Concern

 

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred losses since inception and had accumulated a deficit of $13,283,949 as of March 31, 2018. The Company requires capital for its contemplated operational and marketing activities. The Company’s ability to raise additional capital through the future issuances of common stock is unknown. The obtainment of additional financing, the successful development of the Company’s contemplated plan of operations, and its transition, ultimately, to the attainment of profitable operations are necessary for the Company to continue operations. The ability to successfully resolve these factors raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements of the Company do not include any adjustments that may result from the outcome of these aforementioned uncertainties.

 

In order to mitigate the risk related with this uncertainty, the Company plans to issue additional shares of common stock for cash and services during the next 12 months.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

 

Not applicable to smaller reporting companies.

 

Item 4. Controls and Procedures.

 

Disclosure Controls and Procedures

 

As required by Rule 13a-15 of the Securities Exchange Act of 1934, our principal executive officer and principal financial officer evaluated our company's disclosure controls and procedures (as defined in Rules 13a-15(e) of the Securities Exchange Act of 1934) as of the end of the period covered by this report. Based on this evaluation, our principal executive officer and principal financial officer concluded that as of the end of the period covered by this report, these disclosure controls and procedures were not effective to ensure that the information required to be disclosed by our company in reports it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities Exchange Commission and to ensure that such information is accumulated and communicated to our company's management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure. The conclusion that our disclosure controls and procedures were not effective was due to the presence of the following material weaknesses in internal control over financial reporting which are indicative of many small companies with small staff: (i) inadequate segregation of duties and effective risk assessment; and (ii) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both United States generally accepted accounting principles and Securities and Exchange Commission guidelines. Management anticipates that such disclosure controls and procedures will not be effective until the material weaknesses are remediated.

 

We have taken and plan to take steps to enhance and improve the design of our internal controls over financial reporting. During the period covered by this report on Form 10-K, we have not been able to remediate the material weaknesses identified above. To remediate such weaknesses, we have implemented an Audit Committee Charter Agreement, and are in the process of making the necessary changes to fully comply with our new Charter. In addition, we plan to implement the following changes during our fiscal year ending December 31, 2018, subject to obtaining additional financing: (i) appoint additional qualified personnel to address inadequate segregation of duties and ineffective risk management. The remediation efforts set out above are largely dependent upon our securing additional financing to cover the costs of implementing the changes required. If we are unsuccessful in securing such funds, remediation efforts may be adversely affected in a material manner.

 

 

 

 

Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake.

 

Changes in Internal Control over Financial Reporting

 

Our management has determined that there were no changes made in the implementation of our internal controls over financial reporting during the three months ended March 31, 2018.

 

 

 

 

 

 

 

 

 

 

PART II - OTHER INFORMATION

 

Item 1.

Legal Proceedings.

 

There are not presently any material pending legal proceedings to which the Registrant is a party or as to which any of its property is subject, and no such proceedings are known to the Registrant to be threatened or contemplated against it.

  

Item 1A. Risk Factors

 

There have been no material changes to the risk factors contained in our Annual Report on Form 10-K for the year ended December 31, 2017.

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

 

On January 22, 2018, we issued 1,000,000 shares of restricted common stock to David Kim, and Youssef Hanine, respectively, for services rendered to the Company. The shares were issued at the closing stock price on the date of grant of $2.50 for total non-cash expense of $5,000,000.

 

On January 22, 2018, we issued 3,000,000 shares of restricted common stock to Phillip Nuciola for services rendered to the Company. The shares were issued at the closing stock price on the date of grant of $2.50 for total non-cash expense of $7,500,000.

 

During the three months ended March 31, 2018 the Company sold 200,000 shares of common stock for total cash proceeds of $10,000.

 

Item 3.

Defaults Upon Senior Securities

 

None.

 

Item 4.

Mine Safety Disclosures

 

Not applicable.

 

Item 5.

Other Information.

 

None.

  

 

Item 6.

Exhibits.

 

Exhibit No.		Description
31.1		Certification of the Company’s Principal Executive and Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, with respect to the registrant’s report on Form 10-Q for the period ended September 30, 2017 (1)
32.1		Certification of the Company’s Principal Executive and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (1)
101.INS		XBRL Instance Document (2)
101.SCH		XBRL Taxonomy Extension Schema (2)
101.CAL		XBRL Taxonomy Extension Calculation Linkbase (2)
101.DEF		XBRL Taxonomy Extension Definition Linkbase (2)
101.LAB		XBRL Taxonomy Extension Label Linkbase (2)
101.PRE		XBRL Taxonomy Extension Presentation Linkbase (2)

 

 

(1)	Filed herewith.
(2)	Users of this data are advised that, pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or Annual Report for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Exchange Act of 1934 and otherwise are not subject to liability.

 

 

 

 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

	Nodechain, Inc.
	By:	/s/ Andy Michael Ibrahim
		Andy Michael Ibrahim, Chief Executive Officer (Principal Executive Officer), Secretary and Member of the Board of Directors

 

Date:  July 5, 2018