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 June 30, 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 [X]

 

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 August 14, 2018, the issuer had 85,225,000 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	11
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	15
Item 4.	Controls and Procedures	15
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	17
	Signatures	17

 

 

 

 

 

 

 

 

PART I - FINANCIAL INFORMATION

 

Item 1.

Financial Statements.

 

NODECHAIN, INC.

CONDENSED BALANCE SHEETS

 

		June 30, 2018				December 31, 2017
		(unaudited)
ASSETS
Current assets:
Cash		$	553			$	1,196
Trading securities			2,500				540
Inventory			134,000				–
Assets of discontinued operations			–				3,959
Total current assets			137,053				5,695
Equipment, net			21,648				26,616
Total assets		$	158,701			$	32,311
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued liabilities		$	17,157			$	4,264
Notes payable - related parties			46,320				55,160
Accrued rent – related party			16,150				13,150
Loan payable, net of discount of $1,750			750				–
Derivative liability			3,423				–
Deferred revenue			11,000				–
Total current liabilities			94,800				72,574
Deferred revenue, net of current portion			7,442				–
Total liabilities			102,242				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; 85,225,000 and 79,940,000 shares issued and outstanding, as of June 30, 2018 and December 31, 2017, respectively			8,523				7,994
Additional paid-in capital			13,349,828				668,763
Accumulated deficit			(13,301,892	)			(717,020	)
Total stockholders' equity (deficit)			56,459				(40,263	)
Total liabilities and stockholders' deficit		$	158,701			$	32,311

 

 

 

 

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

 

 

NODECHAIN, INC.

CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

 

		For the Three Months Ended June 30,								For the Six Months Ended June 30,
		2018				2017				2018				2017
Revenue:
Sale of mining rigs		$	–			$	–			$	28,000				$
Hosting revenue			2,750				–				3,558				–
Service revenue			12,697				–				16,847				–
Total sales			15,447				–				48,405				–
Cost of sales			–				–				30,000				–
Gross Margin			15,447				–				18,405				–
Operating expenses:
Professional fees			9,660				5,030				25,771				22,326
Director compensation			–				–				12,500,000				–
Rent expense, related party			1,500				6,600				3,000				13,200
General and administrative			19,107				1,277				56,279				2,189
Total operating expenses			30,267				12,907				12,585,050				37,715
Loss from operations			(14,820	)			(12,907	)			(12,566,645	)			(37,715	)
Other income/(expense):
Change in fair value of derivative			3,305				–				3,305				–
Loss on issuance of convertible debt			(4,228	)			(4,228	)
Interest expense – debt discount			(750	)			–				(750	)			–
Interest expense			(706	)			–				(1,339	)			–
Realized loss on trading securities			(694	)			–				(5,944	)			–
Unrealized loss on trading securities			(50	)			–				(9,346	)			–
Total other expense			(3,123	)			–				(18,302	)			–
Net loss from continuing operations			(17,943	)			(12,907	)			(12,584,947	)			(37,715	)
Net income from discontinued operations			–				12,451				75				22,750
Net loss		$	(17,943	)		$	(456	)		$	(12,584,872	)		$	(14,965	)
Loss per common share, basic and diluted		$	(0.00	)		$	(0.00	)		$	(0.15	)		$	(0.00	)
Weighted average common shares outstanding, basic and diluted			85,204,505				77,866,522				84,492,873				77,696,133

 

 

 

 

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

 

NODECHAIN, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

 

		For the Six Months Ended June 30,
		2018				2017
Cash flows from operating activities:
Net Loss		$	(12,584,872	)		$	(14,965	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation			4,968				92
Change in fair value of derivative			(3,305	)			–
Debt discount			750				–
Loss on issuance of convertible debt			4,228				–
Director stock compensation expense			12,500,000				–
Stock for services			12,255				–
Realized loss on trading securities			5,944				–
Unrealized loss on trading securities			9,356				–
Changes in operating assets and liabilities:
Accounts receivable			3,959				–
Digital assets			(1,960	)			–
Accounts payable and accrued liabilities			12,892				6,836
Accrued rent – related party			3,000				4,400
Deferred revenue			18,442				–
Net cash provided by discontinued operations			–				11,110
Net cash used in operating activities			(5,642	)			7,473
Cash flows from investing activities:			–				–
Cash flows from financing activities:
Proceeds from related party loan			660				–
Repayment of related party loans			(9,500	)			(9,500	)
Proceeds from convertible loan payable			2,500				–
Imputed interest expense			1,339				–
Proceeds from the sale of common stock			10,000				232
Net cash provided by (used in) financing activities			4,999				(9,268	)
Net change in cash			(643	)			(1,795	)
Cash, beginning of period			1,196				2,848
Cash, end of period		$	553			$	1,053
Supplemental Disclosures:
Cash paid for interest		$	–			$	–
Cash paid for taxes		$	–			$	–
Supplemental disclosure of noncash activities:
Contributed trading securities		$	24,000			$	–

 

 

 

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

 

 

NODECHAIN, INC.

 

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

June 30, 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 six months ended June 30, 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.

 

Reclassifications

Certain reclassifications have been made to the prior period financial information to conform to the presentation used in the financial statements for the three and six months ended June 30, 2018.

 

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 June 30, 2018, the Company has 2,500 Ripple (XRP) on hand.

 

Fair Value of Financial Instruments

The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America (U.S. GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels.  The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:

 

Level 1: Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.

 

Level 2: Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.

 

Level 3: Pricing inputs that are generally unobservable inputs and not corroborated by market data.

 

The carrying amount of the Company’s financial assets and liabilities, such as cash, prepaid expenses, accrued expenses and notes payable approximate their fair value because of the short maturity of those instruments. 

 

 

 

 

 

The following table classifies the Company’s liabilities measured at fair value on a recurring basis into the fair value hierarchy as of June 30, 2018:

 

Description		Level 1				Level 2				Level 3				Total Gains and (Losses)
Derivative		$	–			$	–			$	3,423			$	3,305

 

Derivative Financial Instruments

Derivative liabilities are recognized in the balance sheets at fair value based on the criteria specified in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 815-15 – Derivatives and Hedging – Embedded Derivatives (“ASC 815-15”). Pursuant to ASC Topic 815-15 an evaluation of the embedded conversion feature of convertible debt is evaluated to determine if the bifurcated debt conversion feature is required to be classified as a derivative liability. Since the terms of the embedded conversion features of the Company’s convertible debt provides for the issuance of shares of common stock at the election of the holders and the number of shares is subject to adjustment for a decline in the price of the Company’s common stock, the Company determined that the embedded conversion option met the criteria of a derivative liability. The estimated fair value of the embedded conversion feature of debt classified as derivative liabilities are determined using the Black-Scholes option pricing model. The model utilizes Level 3 unobservable inputs to calculate the fair value of the derivative liabilities at each reporting period.

 

The Company determined that using an alternative valuation model such as a Binomial-Lattice model would result in minimal differences. The fair value of the embedded conversion feature of debt classified as derivative liabilities are adjusted for changes in fair value at each reporting period, and the corresponding non-cash gain or loss is recorded as other income or expense in the statement of operations. As of June 30, 2018, the embedded conversion feature of $3,423 of convertible notes payable was classified as a derivative liability. Each reporting period the embedded conversion feature is re-valued and adjusted through the caption “change in fair value of derivative” on the statements of operations.

 

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 $13,301,892 as of June 30, 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 June 30, 2018, $15,000 is still outstanding. The Company has recorded imputed interest for the six months ended June 30, 2018 of $446.

  

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 June 30, 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 June 30, 2018, this loan is still outstanding. The Company has recorded imputed interest for the six months ended June 30, 2018 of $149.

 

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 June 30, 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. During the six months ended June 30, 2018, the Company repaid $9,500 of the loan. As of June 30, 2018, $25,000 is still outstanding. The Company has recorded imputed interest for the six months ended June 30, 2018 of $370.

 

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 June 30, 2018, there is $3,250 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 – CONVERTIBLE NOTE

 

On April 26, 2018 the Company executed a convertible promissory note with GPL Ventures, LLC for $2,500. The note bears interest at 5% per annum and matures on December 16, 2018. The holder has the right at any time to convert any portion of the note and/or interest into shares of common stock at a 35% discount of the lowest trade during the twenty days prior to conversion. The company bifurcated the conversion feature and accounted for it as a derivative liability. The Company recorded the derivative liability at its fair value of $6,728 based on the Black Scholes Merton pricing model, a loss on issuance of $4,228 and a corresponding debt discount of $2,500 to be amortized utilizing the interest method of accretion over the term of the note. As of June 30, 2018, the Company fair valued the derivative at $3,423 resulting in a gain on the change in the fair value of $3,305. In addition, $750 of the debt discount has been amortized to interest expense.

 

NOTE 6 - 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 six months ended June 30, 2018 the Company sold 200,000 shares of common stock for total cash proceeds of $10,000.

 

On April 9, 2018, we issued 35,000 shares of restricted common stock to Michael Stefanoski for services rendered to the Company. The shares were issued at the closing stock price on the date of grant of $0.15 for total non-cash expense of $5,355.

 

On May 1, 2018, we issued 50,000 shares of restricted common stock to Fadi Soliman for services rendered to the Company. The shares were issued at the closing stock price on the date of grant of $0.15 for total non-cash expense of $6,900.

 

 

 

 

 

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:

 

		June 30, 2018				June 30, 2017
Sales		$	75			$	25,081
Sales, related party			–				35,142
Total sales			75				60,223
Expenses			–				(37,473	)
Net income from discontinued operations		$	75			$	22,750

 

Assets and liabilities of discontinued operations are as follows:

 

		June 30, 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.

 

 

 

 

 

 

 

 

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 June 30, 2018 and 2017.

 

Revenues

Our revenue was $15,447 for the three months ended June 30, 2018, compared to $19,205 for the three months ended June 30, 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 $694 and had an unrealized loss of $50 on the mark to market of our digital assets.

 

 

 

 

 

Cost of Sales

Our cost of sales was $0 for the three months ended June 30, 2018, compared to $6,554 of costs from discontinued operations for the three months ended June 30, 2017.

 

Operating Expenses

Our operating expenses from continuing operations were $30,267 for the three months ended June 30, 2018 compared to $10,043 for the three months ended June 30, 2017. During the current period we incurred professional fees of $9,660 compared to $5,030 in the prior period, $1,500 of rent expense and $19,107 of general and administrative expense.

 

Other Income and Expense

During the three months ended June 30, 2018, we had a change in fair value of derivative of $3,305. We incurred $750 of interest expense from debt discount, $706 of interest expense on related party loans that was credited to paid in capital, and a loss on issuance of convertible debt of $4,228. In addition, we recognized a realized loss on trading securities of $694 and an unrealized loss of $50 on our digital assets.

 

Net Loss

We recorded a net loss of $17,943 for the three months ended June 30, 2018, as compared to $456 for the three months ended June 30, 2017. The increase to our net loss is due to increased professional fees and other expenses, including the loss on the issuance of convertible debt.

 

Results of operations for the six months ended June 30, 2018 and June 30, 2017.

 

Revenues

Our sales revenue was $48,405 for the six months ended June 30, 2018, compared to $25,081 for the six months ended June 30, 2017. All of the sales in the prior period were from discontinued operations. During the current period we used 5,000 Ripple (XRP) for services resulting in a realized loss of $5,944 and had an unrealized loss of $9,346 on the mark to market of our digital assets.

 

Cost of Sales

Our cost of sales was $30,000 for the six months ended June 30, 2018, compared to $34,409 for the six months ended June 30, 2017. The decrease is in line with the discontinued operations as mentioned above. All of the cost of sales in the prior period were from discontinued operations. In the current period our cost of sales is due to the sale of five GPU Mining Units.

 

Operating Expenses

Our operating expenses were $12,585,050 for the six months ended June 30, 2018 as compared to $40,779 for the six months ended June 30, 2017. The increase in expenses is primarily due to a $12,500,000 expense for director compensation. In the prior period $3,064 is from discontinued operations.

 

Net Loss

We recorded a net loss of $12,584,947 for the six months ended June 30, 2018, as compared to $14,965 for the six months ended June 30, 2017. The increase is primarily attributed to the $12,500,000 expense for director compensation.

 

Liquidity and Capital Resources

 

Cash Flows

 

Cash Used in Operating Activities

 

For the six months ended June 30, 2018 net cash used in operating activities was $5,642 compared to net cash provided by operating activities of $7,473 in the prior period. The decrease in net cash used in operating activities is due to an increased level of operations for the six months ended June 30, 2018.

 

Cash from Investing Activities

 

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

 

Cash from Financing Activities

 

For the six months ended June 30, 2018 and 2017 we had net cash of $4,999 provided by and $9,268, used in financing activities, respectively. In the current period we received $10,000 from the sale of common stock, $2,500 from a convertible note, $660 from a related party and repaid $9,500 of related party loans. In the prior period the company sold stock for total proceeds of $232 and repaid $9,500 on loans.

 

 

 

 

As of June 30, 2018, we owed $20,000 to West Coast Vape Supply Inc and $25,000 to MeWe World, Inc.

 

As of June 30, 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 $13,301,892 as of June 30, 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 June 30, 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 six months ended June 30, 2018 the Company sold 200,000 shares of common stock for total cash proceeds of $10,000.

 

On April 9, 2018, we issued 35,000 shares of restricted common stock to Michael Stefanoski for services rendered to the Company. The shares were issued at the closing stock price on the date of grant of $0.15 for total non-cash expense of $5,355.

 

On May 1, 2018, we issued 50,000 shares of restricted common stock to Fadi Soliman for services rendered to the Company. The shares were issued at the closing stock price on the date of grant of $0.15 for total non-cash expense of $6,900.

 

Item 3.

Defaults Upon Senior Securities

 

None.

 

Item 4.

Mine Safety Disclosures

 

Not applicable.

 

Item 5.

Other Information.

 

On August 7, 2018, Nodechain, Inc. (the “Company”) entered into a Debt Assumption Agreement with West Coast Vape Supply, Inc., MeWe World, Inc., and Andy Michael Ibrahim whereby in return for the assumption of the related party debt, the assets of the Company would be transferred to MeWe World, Inc.

 

On August 8, 2018, Nodechain, Inc. (the “Company”) entered into a Stock Purchase Agreement (the “SPA”) with (i) Changzhi Shen (the “Purchaser”), and (ii) Andy Michael Ibrahim, a California resident, and Alham Benyameen, a California resident, who are the record holders of the Shares (as defined below) in the Company (collectively, the “Sellers”), for the sale and purchase of an aggregate of 68,200,000 shares of common stock of the Company (the “Shares”), subject to the terms and conditions contained in this Agreement. The SPA was a result of a privately negotiated transaction. 

 

 

 

 

Item 6.

Exhibits.

 

Exhibit No.		Description
31.1		Certification of the Company’s Principal Executive 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 June 30, 2018
31.2		Certification of the Company’s 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 June 30, 2018
32.1		Certification of the Company’s Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (1)
32.2		Certification of the Company’s 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)

 

* To be filed by amendment

 

(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

 

In accordance with the requirements of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Nodechain, Inc.

 

Dated: August 17, 2018

 

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