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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31,
2022
☐ TRANSITION REPORT UNDER SECTION13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number: 333-174759
INTEGRATED VENTURES,
INC.
|
(Exact Name of Registrant as Specified in Its charter)
|
Nevada
|
|
82-1725385
|
(State or Other Jurisdiction of
Incorporation or Organization)
|
|
(I.R.S. Employer
Identification No.)
|
73 Buck Road, Suite
2, Huntingdon Valley, PA 19006
(Address of principal executive offices) (Zip Code)
(215)
613-1111
(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
|
|
Trading Symbol(s)
|
|
Name of each exchange on which registered
|
N/A
|
|
N/A
|
|
N/A
|
Indicate by check mark whether the registrant (1) has filed all
reports required by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 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 is a large
accelerated filer, an accelerated filer, a non-accelerated filer,
or a smaller reporting company. See 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
|
☐
|
Accelerated filer
|
☐
|
Non-accelerated Filer
|
☐
|
Smaller reporting company
|
☒
|
Emerging growth company
|
☒
|
|
|
Indicate by check mark whether the registrant has submitted
electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T during the preceding 12
months (or such shorter period that the registrant was required to
submit such files. Yes ☒ No ☐.
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 ☒
The number of shares outstanding of the issuer’s common stock,
$0.001 par value per share, was 205,246,592 as of May 13, 2022.
INTEGRATED VENTURES, INC.
FORM 10-Q
MARCH 31, 2022
TABLE OF CONTENTS
PART I - FINANCIAL
INFORMATION
INDEX TO FINANCIAL STATEMENTS
Integrated Ventures, Inc.
Condensed Balance Sheets
|
|
March 31,
2022
|
|
|
June 30,
2021
|
|
|
|
(Unaudited)
|
|
|
|
|
ASSETS
|
Current assets:
|
|
|
|
|
|
|
Cash
|
|
$ |
40,729 |
|
|
$ |
2,097,537 |
|
Prepaid expenses and other current assets
|
|
|
2,500 |
|
|
|
197,620 |
|
Total current assets
|
|
|
43,229 |
|
|
|
2,295,157 |
|
|
|
|
|
|
|
|
|
|
Non-current assets:
|
|
|
|
|
|
|
|
|
Equipment deposits
|
|
|
4,984,457 |
|
|
|
7,663,265 |
|
Property and equipment, net of accumulated depreciation and
amortization of $1,630,180 and $521,416 as of March 31, 2022 and
June 30, 2021, respectively
|
|
|
10,820,658 |
|
|
|
3,159,523 |
|
Digital currencies
|
|
|
300,403 |
|
|
|
245,320 |
|
Deposits
|
|
|
700 |
|
|
|
700 |
|
Total assets
|
|
$ |
16,149,447 |
|
|
$ |
13,363,965 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES, MEZZANINE AND STOCKHOLDERS'
EQUITY
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$ |
107,068 |
|
|
$ |
27,259 |
|
Accrued preferred stock dividends
|
|
|
600,595 |
|
|
|
193,933 |
|
Accrued expenses
|
|
|
1,428 |
|
|
|
4,381 |
|
Due to related party
|
|
|
78,212 |
|
|
|
29,357 |
|
Notes payable
|
|
|
- |
|
|
|
19,153 |
|
Total current liabilities
|
|
|
787,303 |
|
|
|
274,083 |
|
Total liabilities
|
|
|
787,303 |
|
|
|
274,083 |
|
|
|
|
|
|
|
|
|
|
Mezzanine:
|
|
|
|
|
|
|
|
|
Series C preferred stock, $0.001 par value, (3,000 shares
authorized, 1,125 shares issued and outstanding as of March 31,
2022 and June 30, 2021 respectively)
|
|
|
1,125,000 |
|
|
|
1,125,000 |
|
Series D preferred stock, $0.001 par value, (4,000 shares
authorized, 3,000 shares issued and outstanding as of March 31,
2022 and June 30, 2021 respectively)
|
|
|
3,000,000 |
|
|
|
3,000,000 |
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ equity:
|
|
|
|
|
|
|
|
|
Series A preferred stock, $0.001 par value, (1,000,000 shares
authorized, 500,000 shares issued and outstanding as of March 31,
2022 and June 30, 2021 respectively)
|
|
|
500 |
|
|
|
500 |
|
Series B preferred stock, $0.001 par value, (1,000,000 shares
authorized, 752,633 and 727,370 shares issued and outstanding as of
March 31, 2022 and June 30, 2021, respectively)
|
|
|
753 |
|
|
|
727 |
|
Common stock, $0.001 par value, (750,000,000 shares authorized,
|
|
|
|
|
|
|
|
|
205,146,592 and 194,487,662 shares issued and outstanding as of
March 31, 2022 and June 30, 2021, respectively)
|
|
|
205,147 |
|
|
|
194,488 |
|
Common stock payable
|
|
|
- |
|
|
|
5,480,000 |
|
Additional paid-in capital
|
|
|
55,755,311 |
|
|
|
48,365,263 |
|
Accumulated deficit
|
|
|
(44,724,567 |
) |
|
|
(45,076,096 |
) |
Total stockholders’ equity
|
|
|
11,237,144 |
|
|
|
8,964,882 |
|
Total liabilities, mezzanine and stockholders’ equity
|
|
$ |
16,149,447 |
|
|
$ |
13,363,965 |
|
See Notes to Condensed Financial Statements
Integrated Ventures, Inc.
Condensed Statements of
Operations
(Unaudited)
|
|
Three Months Ended
March 31,
|
|
|
Nine Months Ended
March 31,
|
|
|
|
2022
|
|
|
2021
|
|
|
2022
|
|
|
2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cryptocurrency mining
|
|
$ |
964,319 |
|
|
$ |
682,706 |
|
|
$ |
4,080,688 |
|
|
$ |
885,931 |
|
Sales of cryptocurrency mining equipment
|
|
|
- |
|
|
|
14,099 |
|
|
|
1,346,610 |
|
|
|
75,221 |
|
Related party sales of cryptocurrency mining equipment
|
|
|
467,500 |
|
|
|
- |
|
|
|
467,500 |
|
|
|
- |
|
Total revenues
|
|
|
1,431,819 |
|
|
|
696,805 |
|
|
|
5,894,798 |
|
|
|
961,152 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues
|
|
|
1,124,327 |
|
|
|
266,897 |
|
|
|
3,008,668 |
|
|
|
618,954 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
307,492 |
|
|
|
429,908 |
|
|
|
2,886,130 |
|
|
|
342,198 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative
|
|
|
118,687 |
|
|
|
16,718,665 |
|
|
|
2,398,424 |
|
|
|
16,910,410 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
118,687 |
|
|
|
16,718,665 |
|
|
|
2,398,424 |
|
|
|
16,910,410 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations
|
|
|
188,805 |
|
|
|
(16,288,757 |
) |
|
|
487,706 |
|
|
|
(16,568,212 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(53 |
) |
|
|
(239,435 |
) |
|
|
(515 |
) |
|
|
(430,049 |
) |
Realized gain (loss) on sale of digital currencies
|
|
|
(215,758 |
) |
|
|
54,920 |
|
|
|
312,075 |
|
|
|
106,497 |
|
Gain on forgiveness of debt
|
|
|
- |
|
|
|
- |
|
|
|
5,924 |
|
|
|
- |
|
Loss on disposition of property and equipment
|
|
|
(46,999 |
) |
|
|
- |
|
|
|
(46,999 |
) |
|
|
(207,281 |
) |
Change in fair value of derivative liabilities
|
|
|
- |
|
|
|
(113,599 |
) |
|
|
- |
|
|
|
(76,687 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income (expense)
|
|
|
(262,810 |
) |
|
|
(298,114 |
) |
|
|
270,485 |
|
|
|
(607,520 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
(74,005 |
) |
|
|
(16,586,871 |
) |
|
|
758,191 |
|
|
|
(17,175,732 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$ |
(74,005 |
) |
|
$ |
(16,586,871 |
) |
|
|
758,191 |
|
|
$ |
(17,175,732 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock dividends
|
|
|
(139,640 |
) |
|
|
- |
|
|
|
(406,662 |
) |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to shareholders
|
|
$ |
(213,645 |
) |
|
$ |
(16,586,871 |
) |
|
$ |
351,529 |
|
|
$ |
(17,175,732 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per common share attributable to
shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$ |
(0.00 |
) |
|
$ |
(0.11 |
) |
|
$ |
0.00 |
|
|
$ |
(0.13 |
) |
Diluted
|
|
$ |
(0.00 |
) |
|
$ |
(0.11 |
) |
|
$ |
0.00 |
|
|
$ |
(0.13 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
205,146,592 |
|
|
|
154,411,932 |
|
|
|
204,584,234 |
|
|
|
130,057,332 |
|
Diluted
|
|
|
205,146,592 |
|
|
|
154,411,932 |
|
|
|
291,501,946 |
|
|
|
130,057,332 |
|
See Notes to Condensed Financial Statements
Integrated Ventures, Inc.
Condensed Statement of Stockholders’
Equity
Nine Months Ended March 31, 2022
(Unaudited)
|
|
Series C
Preferred Stock
|
|
|
Series D
Preferred Stock
|
|
|
Series A
Preferred Stock
|
|
|
Series B
Preferred Stock
|
|
|
Common Stock
|
|
|
Common
Stock
|
|
|
Additional
Paid-in
|
|
|
Accumulated
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Payable
|
|
|
Capital
|
|
|
Deficit
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2021
|
|
|
1,125 |
|
|
$ |
1,125,000 |
|
|
|
3,000 |
|
|
$ |
3,000,000 |
|
|
|
500,000 |
|
|
$ |
500 |
|
|
|
727,370 |
|
|
$ |
727 |
|
|
|
194,487,662 |
|
|
$ |
194,488 |
|
|
$ |
5,480,000 |
|
|
$ |
48,365,263 |
|
|
$ |
(45,076,096 |
) |
|
$ |
8,964,882 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock for conversion of Series B preferred
stock
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(24,737 |
) |
|
|
(24 |
) |
|
|
2,473,700 |
|
|
|
2,474 |
|
|
|
- |
|
|
|
(2,450 |
) |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock for services
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
185,230 |
|
|
|
185 |
|
|
|
- |
|
|
|
40,548 |
|
|
|
- |
|
|
|
40,733 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common shares for common stock payable
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
8,000,000 |
|
|
|
8,000 |
|
|
|
(5,480,000 |
) |
|
|
5,472,000 |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series B preferred stock issued for related party compensation
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
50,000 |
|
|
|
50 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,879,950 |
|
|
|
- |
|
|
|
1,880,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock dividends
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(406,662 |
) |
|
|
(406,662 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
758,191 |
|
|
|
758,191 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31, 2022
|
|
|
1,125 |
|
|
$ |
1,125,000 |
|
|
|
3,000 |
|
|
$ |
3,000,000 |
|
|
|
500,000 |
|
|
$ |
500 |
|
|
|
752,633 |
|
|
$ |
753 |
|
|
|
205,146,592 |
|
|
$ |
205,147 |
|
|
$ |
- |
|
|
$ |
55,755,311 |
|
|
$ |
(44,724,567 |
) |
|
$ |
11,237,144 |
|
See Notes to Condensed Financial Statements
Integrated Ventures, Inc.
Condensed Statement of Stockholders’
Equity
Nine Months Ended March 31, 2021
(Unaudited)
|
|
Series C
Preferred Stock
|
|
|
Series D
Preferred Stock
|
|
|
Series A
Preferred Stock
|
|
|
Series B
Preferred Stock
|
|
|
Common Stock
|
|
|
Additional
Paid-in
|
|
|
Accumulated
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2020
|
|
|
- |
|
|
$ |
- |
|
|
|
- |
|
|
$ |
- |
|
|
|
500,000 |
|
|
$ |
500 |
|
|
|
430,000 |
|
|
$ |
430 |
|
|
|
103,164,460 |
|
|
$ |
103,165 |
|
|
$ |
21,851,284 |
|
|
$ |
(22,064,982 |
) |
|
$ |
(109,603 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common shares in conversion of convertible notes
payable
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
52,723,031 |
|
|
|
52,723 |
|
|
|
947,146 |
|
|
|
- |
|
|
|
999,869 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common shares for stock subscription
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
55,555 |
|
|
|
56 |
|
|
|
33,832 |
|
|
|
- |
|
|
|
33,888 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common shares for services
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
216,616 |
|
|
|
217 |
|
|
|
24,043 |
|
|
|
- |
|
|
|
24,260 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common shares for conversion of Series B preferred
stock
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(52,630 |
) |
|
|
(53 |
) |
|
|
5,263,000 |
|
|
|
5,262 |
|
|
|
(5,209 |
) |
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series B preferred stock issued for related party compensation
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
350,000 |
|
|
|
350 |
|
|
|
- |
|
|
|
- |
|
|
|
16,537,150 |
|
|
|
- |
|
|
|
16,537,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of Series C preferred stock for cash
|
|
|
1,125 |
|
|
|
1,125,000 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock as equity incentive for Series C preferred
stock
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
3,000,000 |
|
|
|
3,000 |
|
|
|
381,100 |
|
|
|
(384,100 |
) |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of Series D preferred stock for cash
|
|
|
- |
|
|
|
- |
|
|
|
3,000 |
|
|
|
3,000,000 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Settlement of derivative liabilities
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
466,093 |
|
|
|
- |
|
|
|
466,093 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock dividends
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(66,311 |
) |
|
|
(66,311 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(17,175,732 |
) |
|
|
(17,175,732 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31, 2021
|
|
|
1,125 |
|
|
$ |
1,125,000 |
|
|
|
3,000 |
|
|
$ |
3,000,000 |
|
|
|
500,000 |
|
|
$ |
500 |
|
|
|
727,370 |
|
|
$ |
727 |
|
|
|
164,422,662 |
|
|
$ |
164,423 |
|
|
$ |
40,235,439 |
|
|
$ |
(39,691,125 |
) |
|
$ |
709,964 |
|
See Notes to Condensed Financial Statements
Integrated Ventures, Inc.
|
Condensed Statements of Cash
Flows
|
(Unaudited)
|
|
|
Nine Months Ended
March 31,
|
|
|
|
2022
|
|
|
2021
|
|
|
|
|
|
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
Net income (loss)
|
|
$ |
758,191 |
|
|
$ |
(17,175,732 |
) |
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
1,142,192 |
|
|
|
289,464 |
|
Series B preferred stock issued for related party stock-based
compensation
|
|
|
1,880,000 |
|
|
|
16,537,500 |
|
Common stock issued for services
|
|
|
40,733 |
|
|
|
24,260 |
|
Realized gain on sale of digital currencies
|
|
|
(312,075 |
) |
|
|
(106,497 |
) |
Gain on forgiveness of debt
|
|
|
(5,924 |
) |
|
|
- |
|
Loss on disposition of property and equipment
|
|
|
46,999 |
|
|
|
207,281 |
|
Change in fair value of derivative liabilities
|
|
|
- |
|
|
|
76,687 |
|
Amortization of debt discount
|
|
|
- |
|
|
|
404,387 |
|
Changes in assets and liabilities:
|
|
|
|
|
|
|
|
|
Digital currencies
|
|
|
(4,080,688 |
) |
|
|
(903,163 |
) |
Equipment deposits
|
|
|
1,005,462 |
|
|
|
- |
|
Prepaid expenses and other current assets
|
|
|
195,120 |
|
|
|
(4,250 |
) |
Accounts payable
|
|
|
(41,369 |
) |
|
|
(42,840 |
) |
Accrued expenses
|
|
|
(2,953 |
) |
|
|
21,143 |
|
Due to related party
|
|
|
48,855 |
|
|
|
(65,737 |
) |
Net cash provided by (used in) operating activities
|
|
|
674,543 |
|
|
|
(737,497 |
) |
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
Increase in equipment deposits
|
|
|
(7,218,405 |
) |
|
|
(2,528,392 |
) |
Net proceeds from the sale of digital currencies
|
|
|
6,460,183 |
|
|
|
3,835,173 |
|
Purchase of digital currencies
|
|
|
(2,001,325 |
) |
|
|
(4,156,874 |
) |
Purchase of property and equipment
|
|
|
(28,575 |
) |
|
|
(975,574 |
) |
Proceeds from the sale of property and equipment
|
|
|
70,000 |
|
|
|
- |
|
Net cash used in investing activities
|
|
|
(2,718,122 |
) |
|
|
(3,825,667 |
) |
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Repayment of notes payable
|
|
|
(13,229 |
) |
|
|
(31,537 |
) |
Proceeds from the issuance of Series C preferred shares
|
|
|
- |
|
|
|
1,125,000 |
|
Proceeds from the issuance of Series D preferred shares
|
|
|
- |
|
|
|
3,000,000 |
|
Proceeds from convertible notes payable
|
|
|
- |
|
|
|
563,000 |
|
Net cash provided (used in) by financing activities
|
|
|
(13,229 |
) |
|
|
4,656,463 |
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash
|
|
|
(2,056,808 |
) |
|
|
93,299 |
|
Cash, beginning of period
|
|
|
2,097,537 |
|
|
|
6,675 |
|
Cash, end of period
|
|
$ |
40,729 |
|
|
$ |
99,974 |
|
See Notes to Condensed Financial Statements
Integrated Ventures, Inc.
|
Condensed Statements of Cash Flows (Continued)
|
(Unaudited)
|
|
|
Nine Months Ended
March 31,
|
|
|
|
2022
|
|
|
2021
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
|
Cash paid for interest
|
|
$ |
515 |
|
|
$ |
2,479 |
|
Cash paid for income taxes
|
|
|
- |
|
|
|
- |
|
Non-cash investing and financing activities:
|
|
|
|
|
|
|
|
|
Equipment deposits transferred to property and equipment
|
|
$ |
8,891,751 |
|
|
$ |
- |
|
Accrued preferred stock dividends
|
|
|
406,662 |
|
|
|
66,311 |
|
Conversion of Series B preferred shares for common shares
|
|
|
2,474 |
|
|
|
5,263 |
|
Common shares issued for common stock payable
|
|
|
5,480,000 |
|
|
|
- |
|
Debt discount for derivative liabilities
|
|
|
- |
|
|
|
258,460 |
|
Common shares issued in conversion of debt
|
|
|
- |
|
|
|
999,869 |
|
Common shares issued for stock subscription
|
|
|
|
|
|
|
33,888 |
|
Common shares issued for Series C preferred stock equity
incentive
|
|
|
|
|
|
|
384,100 |
|
Settlement of derivative liabilities
|
|
|
- |
|
|
|
466,093 |
|
Notes payable issued for property and equipment
|
|
|
- |
|
|
|
57,822 |
|
Property and equipment purchased with digital securities
|
|
|
- |
|
|
|
4,178 |
|
See Notes to Condensed Financial Statements
Integrated Ventures, Inc.
Notes to Condensed Financial Statements
Nine Months Ended March 31, 2022
(Unaudited)
1. ORGANIZATION BASIS OF PRESENTATION
Organization
Integrated Ventures, Inc. (the "Company," "we" or "our") was
incorporated in the State of Nevada on March 22, 2011, under the
name of Lightcollar, Inc. On March 20, 2015, the Company amended
its articles of incorporation and changed its name from
Lightcollar, Inc. to EMS Find, Inc. On May 30, 2017, Integrated
Ventures, Inc. (“Integrated Ventures”), a Nevada corporation, was
formed as a wholly owned subsidiary of the Company. Pursuant to an
Agreement and Plan of Merger dated May 30, 2017, Integrated
Ventures was merged into the Company, with the Company being the
surviving corporation and changing its name to Integrated Ventures,
Inc.
The Company has discontinued its prior operations and changed its
business focus from its prior technologies relating to the EMS Find
platform to acquiring, launching, and operating companies in the
cryptocurrency sector, mainly in digital currency mining, equipment
manufacturing, and sales of branded mining rigs, as well as
blockchain software development.
The Company is developing and acquiring a diverse portfolio of
digital currency assets and block chain technologies.
Cryptocurrencies are a medium of exchange that uses decentralized
control (a block chain) as opposed to a central bank to track and
validate transactions. The Company is currently mining Bitcoin and
Ethereum, whereby the Company earns revenue by solving “blocks” to
be added to the block chain. The Company also purchases certain
digital currencies for short-term investment purposes.
Basis of Presentation
The accompanying unaudited condensed financial statements of the
Company have been prepared in accordance with U.S. generally
accepted accounting principles ("US GAAP") for interim financial
information and the instructions to Form 10-Q and Article 8 of
Regulation S-X. The results of operations for the interim period
ended March 31, 2021 shown in this report are not necessarily
indicative of results to be expected for the full fiscal year
ending June 30, 2022. In the opinion of the Company's management,
the information contained herein reflects all adjustments
(consisting of normal recurring adjustments) necessary for a fair
presentation of the Company's results of operations, financial
position and cash flows. The unaudited interim financial statements
should be read in conjunction with the audited financial statements
in the Company's Annual Report on Form 10-K for the year ended June
30, 2021 filed on September 24, 2021 and Management's Discussion
and Analysis of Financial Condition and Results of Operations.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies of the Company are disclosed in
Notes to Financial Statements included in the Company’s Annual
Report on Form 10-K. The following summary of significant
accounting policies of the Company is presented to assist in
understanding the Company’s interim financial statements. These
accounting policies conform to accounting principles generally
accepted in the United States of America and have been consistently
applied in the preparation of the financial statements.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenue and expenses during the reporting
period. Because of the use of estimates inherent in the financial
reporting process, actual results could differ significantly from
those estimates.
Digital Currencies
Digital currencies consist mainly of Bitcoin and Litecoin generally
received for the Company’s own account as compensation for
cryptocurrency mining services, and other digital currencies
purchased for short-term investment and trading purposes. Given
that there is limited precedent regarding the classification and
measurement of cryptocurrencies under current Generally Accepted
Accounting Principles (“GAAP”), the Company has determined to
account for these digital currencies as indefinite-lived intangible
assets in accordance with Accounting Standards Update ("ASU") No.
350, Intangibles – Goodwill and Other, for the period
covered by this report and in future reports unless and until
further guidance is issued by the Financial Accounting Standards
Board (“FASB”). An intangible asset with an indefinite useful life
is not amortized but assessed for impairment annually, or more
frequently, when events or changes in circumstances occur
indicating that it is more likely than not that the
indefinite-lived asset is impaired. Impairment exists when the
carrying amount exceeds its fair value. In testing for impairment,
the Company has the option to first perform a qualitative
assessment to determine whether it is more likely than not than an
impairment exists. If it is determined that it is more likely than
not that an impairment exists, a quantitative impairment test is
not necessary. If the Company concludes otherwise, it is required
to perform a quantitative impairment test. To the extent an
impairment loss is recognized, the loss establishes the new cost
basis of the asset. Subsequent reversal of impairment losses is not
permitted. Realized gains or losses on the sale of digital
currencies, net of transaction costs, are included in other income
(expense) in the statements of operations. The Company had realized
losses on sale of digital currencies of $215,758 in the three
months ended March 31, 2022 and realized gains on sale of digital
currencies of $54,920 in the three months ended March 31, 2021 and
$312,075 and $106,497 in the nine months ended March 31, 2022 and
2021, respectively. Cryptocurrency mining revenues were $964,319
and $682,706 in the three months ended March 31, 2022 and 2021,
respectively, and $4,080,688 and $885,931 in the nine months ended
March 31, 2022 and 2021, respectively.
Property and Equipment
Property and equipment, consisting primarily of computer and other
cryptocurrency mining equipment (digital transaction verification
servers), is stated at the lower of cost or estimated realizable
value and is depreciated when placed into service using the
straight-line method over estimated useful lives. The Company
operates in an emerging industry for which limited data is
available to make estimates of the useful economic lives of
specialized equipment. Management has assessed the basis of
depreciation of these assets and believes they should be
depreciated over a three-year period due to technological
obsolescence reflecting rapid development of hardware that has
faster processing capacity and other factors. Maintenance and
repairs are expensed as incurred and improvements are capitalized.
Gains or losses on the disposition of property and equipment are
recorded upon disposal.
During the three months ended March 31, 2022, we sold used mining
equipment and realized a loss on the sale of $46,999. During the
nine months ended March 31, 2021, we disposed of and wrote off
non-serviceable, defective mining equipment with a net book value
of $207,281 and wrote off its net book value of $207,281 to loss on
disposition of property and equipment.
Management has determined that the three-year diminishing value
best reflects the current expected useful life of transaction
verification servers. This assessment takes into consideration the
availability of historical data and management’s expectations
regarding the direction of the industry including potential changes
in technology. Management will review this estimate annually and
will revise such estimates as and when data becomes available.
To the extent that any of the assumptions underlying management’s
estimate of useful life of its transaction verification servers are
subject to revision in a future reporting period, either because of
changes in circumstances or through the availability of greater
quantities of data, then the estimated useful life could change and
have a prospective impact on depreciation expense and the carrying
amounts of these assets.
Payments to equipment suppliers prior to shipment of the equipment
are recorded as equipment deposits.
Derivatives
As of March 31, 2022, and June 30, 2021, the Company had no
derivative liabilities.
The Company evaluates its convertible debt, options, warrants or
other contracts to determine if those contracts or embedded
components of those contracts qualify as derivatives to be
separately accounted for. The result of this accounting treatment
is that under certain circumstances the fair value of the
derivative is marked-to-market each balance sheet date and recorded
as a liability. If the fair value is recorded as a liability, the
change in fair value is recorded in the statement of operations as
other income or expense. Upon conversion or exercise of a
derivative instrument, the instrument is marked to fair value at
the conversion date and then that fair value is reclassified to
equity. Equity instruments that are initially classified as equity
that become subject to reclassification under this accounting
standard are reclassified to liability at the fair value of the
instrument on the reclassification date.
Where the number of warrants or common shares to be issued under
these agreements is indeterminate, the Company has concluded that
the equity environment is tainted, and all additional warrants and
convertible debt are included in the value of the derivatives.
We estimate the fair value of the derivatives associated with our
convertible notes payable, common stock issuable pursuant to a
Series B preferred stock Exchange Agreement and a stock
subscription payable using, as applicable, either the Black-Scholes
pricing model or multinomial lattice models that value the
derivative liability based on a probability weighted discounted
cash flow model using future projections of the various potential
outcomes. We estimate the fair value of the derivative liabilities
at the inception of the financial instruments, and, in the case of
our convertible notes payable, at the date of conversions to equity
and at each reporting date, recording a derivative liability, debt
discount, additional paid-in capital and a gain or loss on change
in derivative liabilities as applicable. These estimates are based
on multiple inputs, including the market price of our stock,
interest rates, our stock price volatility, variable conversion
prices based on market prices as defined in the respective
agreements and probabilities of certain outcomes based on
management projections. These inputs are subject to significant
changes from period to period and to management’s judgment;
therefore, the estimated fair value of the derivative liabilities
will fluctuate from period to period, and the fluctuation may be
material.
Impairment of Long-Lived Assets
All assets, including intangible assets subject to amortization,
are reviewed for impairment when changes in circumstances indicate
that the carrying amount of the asset may not be recoverable in
accordance with ASC 350 and ASC 360. If the carrying amount of the
asset exceeds the expected undiscounted cash flows of the asset, an
impairment charge is recognized equal to the amount by which the
carrying amount exceeds fair value or net realizable value. The
testing of these intangibles under established guidelines for
impairment requires significant use of judgment and assumptions.
Changes in forecasted operations and other assumptions could
materially affect the estimated fair values. Changes in business
conditions could potentially require adjustments to these asset
valuations. We reported no impairment expense for the periods ended
March 31, 2022 and 2021.
Mezzanine
Series C and D preferred stock that contain certain default
provisions requiring mandatory cash redemption that are outside the
control of the Company are recorded as Mezzanine in the
accompanying balance sheets.
Stock-Based Compensation
The Company accounts for all equity-based payments in accordance
with ASC Topic 718, Compensation – Stock Compensation. ASC
Topic 718 requires companies to recognize in the statement of
operations the grant-date fair value of stock awards, stock
options, warrants and other equity-based compensation issued to
employees. The value of the portion of an award that is ultimately
expected to vest is recognized as an expense over the requisite
service periods using the straight-line attribution method. The
fair value of a stock award is recorded at the fair market value of
a share of the Company’s stock on the grant date. The Company
estimates the fair value of stock options and warrants at the grant
date by using an appropriate fair value model such as the
Black-Scholes option pricing model or multinomial lattice
models.
The Company accounts for non-employee share-based awards based upon
ASC 505-50, Equity-Based Payments to Non-Employees. ASC
505-50 requires the costs of goods and services received in
exchange for an award of equity instruments to be recognized using
the fair value of the goods and services or the fair value of the
equity award, whichever is more reliably measurable. The fair value
of the equity award is determined on the measurement date, which is
the earlier of the date that a performance commitment is reached or
the date that performance is complete. Generally, our awards do not
entail performance commitments. When an award vests over time such
that performance occurs over multiple reporting periods, we
estimate the fair value of the award as of the end of each
reporting period and recognize an appropriate portion of the cost
based on the fair value on that date. When the award vests, we
adjust the cost previously recognized so that the cost ultimately
recognized is equivalent to the fair value on the date the
performance is complete.
Revenue Recognition
We recognize revenue in accordance with ASC 606, Revenue from
Contracts with Customers. This standard provides a single
comprehensive model to be used in the accounting for revenue
arising from contracts with customers and supersedes current
revenue recognition guidance, including industry-specific guidance.
The standard’s stated core principle is that an entity should
recognize revenue to depict the transfer of promised goods or
services to customers in an amount that reflects the consideration
to which the entity expects to be entitled in exchange for those
goods or services. To achieve this core principle, ASC 606 includes
provisions within a five-step model that includes identifying the
contract with a customer, identifying the performance obligations
in the contract, determining the transaction price, allocating the
transaction price to the performance obligations, and recognizing
revenue when, or as, an entity satisfies a performance
obligation.
Our revenues currently consist of cryptocurrency mining revenues
and revenues from the sale of cryptocurrency mining equipment
recognized in accordance with ASC 606 as discussed above. Amounts
collected from customers prior to shipment of products are recorded
as deferred revenue.
The Company earns its cryptocurrency mining revenues by providing
transaction verification services within the digital currency
networks of cryptocurrencies, such as Bitcoin, Litecoin, ZCash and
Ethereum. The Company satisfies its performance obligation at the
point in time that the Company is awarded a unit of digital
currency through its participation in the applicable network and
network participants benefit from the Company’s verification
service. In consideration for these services, the Company receives
digital currencies, net of applicable network fees, which are
recorded as revenue using the closing U.S. dollar price of the
related cryptocurrency on the date of receipt. Expenses associated
with running the cryptocurrency mining operations, such as
equipment depreciation, rent, operating supplies, rent, utilities
and monitoring services are recorded as cost of revenues.
There is currently no specific definitive guidance in GAAP or
alternative accounting frameworks for the accounting for the
production and mining of digital currencies and management has
exercised significant judgment in determining appropriate
accounting treatment for the recognition of revenue for mining of
digital currencies. Management has examined various factors
surrounding the substance of the Company’s operations and the
guidance in ASC 606, including identifying the transaction price,
when performance obligations are satisfied, and collectability is
reasonably assured being the completion and addition of a block to
a blockchain and the award of a unit of digital currency to the
Company. In the event authoritative guidance is enacted by the
FASB, the Company may be required to change its policies which
could result in a change in the Company’s financial statements.
Income Taxes
For those periods where income before income taxes is reported in
the accompanying condensed statements of operations, no provision
for income taxes is provided due to the net operating loss
carryforward of the Company.
The Company adopted the provisions of ASC 740-10, Accounting
for Uncertain Income Tax Positions. When tax returns are
filed, it is highly certain that some positions taken would be
sustained upon examination by the taxing authorities, while others
are subject to uncertainty about the merits of the position taken
or the amount of the position that would be ultimately sustained.
In accordance with the guidance of ASC 740-10, the benefit of a tax
position is recognized in the financial statements in the period
during which, based on all available evidence, management believes
it is more likely than not that the position will be sustained upon
examination, including the resolution of appeals or litigation
processes, if any. Tax positions taken are not offset or aggregated
with other positions. Tax positions that meet the
more-likely-than-not recognition threshold are measured as the
largest amount of tax benefit that is more than 50 percent likely
of being realized upon settlement with the applicable taxing
authority. The portion of the benefits associated with tax
positions taken that exceeds the amount measured as described above
should be reflected as a liability for unrecognized tax benefits in
the accompanying balance sheets along with any associated interest
and penalties that would be payable to the taxing authorities upon
examination. The Company believes its tax positions are all highly
certain of being upheld upon examination. As such, the Company has
not recorded a liability for unrecognized tax benefits. As of March
31, 2022, tax years 2015 through 2021 remain open for IRS audit.
The Company has received no notice of audit from the IRS for any of
the open tax years.
The Company adopted ASC 740-10, Definition of Settlement in
FASB Interpretation No. 48, (“ASC 740-10”). ASC 740-10
provides guidance on how an entity should determine whether a tax
position is effectively settled for the purpose of recognizing
previously unrecognized tax benefits. The term “effectively
settled” replaces the term “ultimately settled” when used to
describe recognition, and the terms “settlement” or “settled”
replace the terms “ultimate settlement” or “ultimately settled”
when used to describe measurement of a tax position under ASC
740-10. ASC 740-10 clarifies that a tax position can be effectively
settled upon the completion of an examination by a taxing authority
without being legally extinguished. For tax positions considered
effectively settled, an entity would recognize the full amount of
tax benefit, even if the tax position is not considered more likely
than not to be sustained based solely based on its technical merits
and the statute of limitations remains open. The adoption of ASC
740-10 has not had an impact on our financial statements.
Income (Loss) Per Share
Basic net income or loss per share is calculated by dividing net
income or loss by the weighted average number of common shares
outstanding for the period. Diluted income or loss per share
reflects the potential dilution that could occur if securities or
other contracts to issue common stock, such as “in-the-money” stock
options and warrants using the treasury stock method, convertible
debt, and convertible preferred stock, were exercised or converted
into common stock. Equivalent shares are not utilized when the
effect is anti-dilutive. For the three months ended March 31, 2022
and 2021 and the nine months ended March 31, 2021, potential
dilutive securities had an anti-dilutive effect and were not
included in the calculation of diluted net loss per common share;
therefore, basic net loss per share is the same as diluted net loss
per share.
The common shares used in the computation of basic and diluted net
income per share for the nine months ended March 31, 2022 are
reconciled as follows:
Weighted average number of shares outstanding – basic
|
|
|
204,584,234 |
|
Dilutive effect of convertible preferred stock
|
|
|
86,917,712 |
|
Weighted average number of shares outstanding – diluted
|
|
|
291,501,946 |
|
Recently Issued Accounting Pronouncements
There were no new accounting pronouncements issued or proposed by
the FASB during the nine months ended March 31, 2022 and through
the date of filing this report which the Company believes will have
a material impact on its financial statements.
Concentrations
During the nine months ended March 31, 2022, one customer accounted
for 67% of sales of cryptocurrency mining equipment and 21% of
total revenues. A related party customer accounted for 26% of sales
of cryptocurrency mining revenues and 8% of total revenues.
During the nine months ended March 31, 2022, substantially all
cryptocurrency mining equipment, including those units with costs
included in equipment deposits as of March 31, 2022, was purchased
from one supplier.
Reclassifications
Certain amounts in the financial statements for prior year periods
have been reclassified to conform to the presentation for the
current year periods.
3. GOING CONCERN
Historically, the Company has reported recurring net losses from
operations and used net cash in operating activities. As of March
31, 2022, the Company’s current liabilities exceeded its current
assets by $744,074 and the Company had an accumulated deficit of
$44,724,567. These conditions raise substantial doubt about the
Company's ability to continue as a going concern.
The accompanying financial statements have been prepared in
conformity with U.S. GAAP, which contemplate continuation of the
Company as a going concern and the realization of assets and
satisfaction of liabilities in the normal course of business. The
ability of the Company to reach and maintain a successful level of
operations is dependent on the execution of management’s plans,
which include the raising of capital through the debt and/or equity
markets, until such time that funds provided by operations are
sufficient to fund working capital requirements. If the Company
were not to continue as a going concern, it would likely not be
able to realize its assets at values comparable to the carrying
value or the fair value estimates reflected in the balances set out
in the preparation of the financial statements.
There can be no assurances that the Company will be successful in
attaining a profitable level of operations or in generating
additional cash from the equity/debt markets or other sources fund
its operations. The financial statements do not include any
adjustments relating to the recoverability of assets and
classification of assets and liabilities that might be necessary.
Should the Company not be successful in its business plan or in
obtaining the necessary financing to fund its operations, the
Company would need to curtail certain or all operational activities
and/or contemplate the sale of its assets, if necessary.
4. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following as of:
|
|
March 31,
2022
|
|
|
June 30,
2021
|
|
|
|
|
|
|
|
|
Cryptocurrency mining equipment
|
|
$ |
12,242,863 |
|
|
$ |
3,664,573 |
|
Furniture and equipment
|
|
|
207,975 |
|
|
|
16,366 |
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
12,450,838 |
|
|
|
3,680,939 |
|
Less accumulated depreciation and amortization
|
|
|
(1,630,180 |
) |
|
|
(521,416 |
) |
|
|
|
|
|
|
|
|
|
Net
|
|
$ |
10,820,658 |
|
|
$ |
3,159,523 |
|
Depreciation and amortization expense, included in cost of
revenues, for the three months ended March 31, 2022 and 2021 was
$417,312 and $111,672, respectively, and $1,142,192 and $289,464
for the nine months ended March 31, 2022 and 2021,
respectively.
During the three months ended March 31, 2022, we sold used mining
equipment and realized a loss on the sale of $46,999. During the
nine months ended March 31, 2021, we disposed of and wrote off
non-serviceable, defective mining equipment with a net book value
of $207,281.
5. EQUIPMENT DEPOSITS
Payments to equipment suppliers prior to shipment of the equipment
are recorded as equipment deposits.
Bitmain Agreement
On April 12, 2021, we entered into a Non-fixed Price Sales and
Purchase Agreement with Bitmain Technologies Limited (“Bitmain”)
(the “Bitmain Agreement”) to purchase from Bitmain cryptocurrency
mining hardware and other equipment in accordance with the terms
and conditions of the Bitmain Agreement. Bitmain is scheduled to
manufacture and ship miners on monthly basis, in 12 equal batches
of 400 units, starting in August 2021 and through July 2022. The
Purchase Agreement remains in effect until the delivery of the last
batch of products. The total purchase price was approximately
$34,047,600, subject to price adjustments and related offsets. The
total purchase price is payable as follows: (i) 25% of the total
purchase price is due upon the execution of the Agreement or no
later than April 19, 2021; (ii) 35% of the total purchase price, is
due by May 30, 2021; and (iii) the remaining 40% of the total
purchase price, is payable monthly starting in June 2021.
The Company entered into a separate agreement with Wattum
Management, Inc. (“Wattum”), a non-related party, whereby Wattum
agreed to share 50% of the purchase obligation under the Bitmain
Agreement, including reimbursing the Company for 50% of the
equipment deposits paid by the Company to Bitmain.
As of March 31 2022, and June 30, 2021, equipment deposits on the
condensed balance sheets totaled $4,984,457 and $7,663,265,
respectively, and were comprised of payments to Bitmain and
other equipment vendors, net of Wattum reimbursements and the
deliveries of equipment. During the nine months ended March
31, 2022, equipment deposits paid to Bitmain, net of Wattum
reimbursements, totaled $6,266,034. As of March 31, 2022, 6
of the 12 shipments totaling 2,370 miners had been delivered by
Bitmain to the Company, Wattum and two customers of the
Company.
Canaan Convey Purchase
As of June 30, 2021, the Company prepaid $990,000 to Canaan
Convey Co. LTD (“Canaan Convey”) for the purchase of 250
cryptocurrency miners and freight and custom charges. As of March
31, 2022, the 250 miners had been delivered to the Company by
Canaan Convey.
Sale of Miners
In February 2022, the Company sold 95 miners to a non-related party
for $875,017 and sold 55 miners to a related party for
$467,500.
6. RELATED PARTY TRANSACTIONS
We have one executive officer, Steve Rubakh, who is currently our
only full-time employee and sole member of our Board of Directors.
Mr. Rubakh is paid an annual salary established by the Board of
Directors, bonuses as determined by the Board of Directors, and is
issued shares of Series B preferred stock on a quarterly basis for
additional compensation. The number and timing of Series B
preferred shares issued to Mr. Rubakh is at the discretion of the
Board of Directors.
Effective April 1, 2021, the Company entered a four-year employment
contract with Steve Rubakh establishing annual salary at $250,000
with a quarterly bonus of $50,000 or 5,000 shares of Series B
preferred stock, as determined by the Board of Directors. Quarterly
bonuses of $25,000 and $50,000 were approved by the Board of
Directors for the three months ended December 31, 2021 and
September 30, 2021, respectively. Annual salary for Mr. Rubakh was
$150,000 prior to April 1, 2021.
In October 2021, the Company issued to Mr. Rubakh 50,000 shares of
Series B convertible preferred stock valued on an “as converted to
common” basis at $1,880,000, using the closing market price of the
Company’s common stock on the date of issuance. Each share of
Series B preferred stock is convertible into 100 shares of the
Company’s common stock. This non-cash, related party stock-based
compensation is included in operating expenses in the accompanying
statements of operations.
Total compensation expense included in general and administrative
expenses was $67,500 and $37,500 for the three months ended March
31, 2022 and 2021, respectively, and $262,500 and $112,500 for the
nine months ended March 31, 2022 and 2021, respectively. Amounts
due to related party, consisting of accrued salary to Mr. Rubakh,
totaled $78,212 and $29,357 as of March 31, 2022 and June 30, 2021,
respectively.
In August 2021, Mr. Rubakh converted 24,737 shares of Series B
preferred stock into 2,473,700 shares of common stock in a
transaction recorded at the par value of the shares.
On December 15, 2021, the Company and Tioga Holding, LLC, a related
party owned 50% by Mr. Rubakh (“Tioga”), entered into a Property
Lease and Power Purchase Agreement for the use by the Company of
facilities located in Tioga, Pennsylvania. The Company’s sole
obligation under the agreement is to pay monthly a contractual rate
per kilowatt hour of electricity consumed in the Company’s
cryptocurrency mining operations. The term of the agreement is 36
months. Full mining operations had not commenced as of March 31,
2022. In March 2022, the Company paid power expense of $8,400 to
Tioga.
In February 2022, the Company sold to Tioga 55 miners from the
Bitmain shipments (Note 5) for a total sales price of $467,500.
7. NOTES PAYABLE
With an effective date of April 20, 2020, a loan to the Company was
approved under the terms and conditions of the Paycheck Protection
Program (“PPP”) of the United States Small Business Administration
(“SBA”) and the CARES Act (2020) (H.R. 748) (15 U.S.C. 636 et seq.)
(the “Act”) in the amount of $7,583. The loan matures 24 months
from inception, bears interest at 1% and had a balance of $7,583 as
of June 30, 2021. In November 2021, the Company made principal
payments totaling $1,659. In December 2021, the remaining principal
balance of $5,924 was forgiven pursuant to the provisions of the
Act, and the Company recorded a gain of forgiveness of debt for
this amount.
In August and September 2020, the Company entered into two
agreements for the purchase of digital mining equipment with Wattum
Management Inc. resulting in two promissory notes in the principal
amounts of $17,822 and $40,000. The notes were secured by the
equipment purchased and bore interest at 10%.
The $17,822 note was payable in twelve equal consecutive monthly
installments of $1,567 and matured in September 2021. The note had
a principal balance of $0 and $6,947 as of March 31, 2022 and June
30, 2021, respectively.
The $40,000 note was payable in twelve equal consecutive monthly
installments of $3,516 and matured in August 2021. The note had a
principal balance of $0 and $4,623 as of March 31, 2022 and June
30, 2021, respectively.
8. MEZZANINE
Series C Preferred Stock
Effective January 14, 2021, the Company filed a Certificate of
Designation of the Series C Convertible Preferred Stock with the
Nevada Secretary of State. The Company has authorized the issuance
of an aggregate of 3,000 shares of the Series C preferred stock.
Each share of Series C preferred stock has a par value of
$0.001 per share and a stated value of $1,100 per share. The shares
of Series C preferred stock are convertible into shares of the
Company’s common stock at a conversion price of $0.068 per
share.
Each share of the Series C preferred stock is entitled to receive
cumulative dividends of 12% per annum, payable monthly and accruing
and compounding daily from the date of issuance of the shares.
Dividends may be paid in cash or in shares of Series C preferred
stock at the discretion of the Company. As of March 31, 2022 and
June 30, 2021, the Company accrued Series C preferred stock
dividends of $172,779 and $61,098, respectively.
The Company, at its sole discretion, has the right to redeem all,
but not less than all, shares of the Series C preferred stock
issued and outstanding upon 5 days’ notice at a defined redemption
price. The holders of the Series C preferred stock do not have a
right to put the shares to the Company.
The holders of the Series C preferred stock shall have the
right to vote together with holders of common stock, on an as
“converted basis”, on any matter that the Company’s shareholders
may be entitled to vote on, either by written consent or by
proxy.
On January 14, 2021, the Company entered into a Securities Purchase
Agreement (the “Series C Agreement”) with BHP Capital NY, Inc.
(“BHP”), providing for the issuance and sale by the Company and the
purchase by BHP of newly designated shares of Series C Convertible
preferred stock issued by the Company at a purchase price per share
of $1,000. The first closing under the Series C Agreement was held
on January 22, 2021, at which the Company sold, and BHP purchased
750 shares of Series C preferred stock for $750,000. The Company
received net proceeds of $740,000 after payment of legal fees. The
Company also on that date issued 2,000,000 shares of its common
stock to BHP as equity incentive shares, which shares were valued
at $295,000 based on the closing market price of the Company’s
common stock and recorded to accumulated deficit as a deemed
dividend.
Effective February 5, 2021, BHP purchased a second tranche
consisting of 375,000 shares of Series C preferred stock for
$375,000. As an equity incentive to this purchase of Series C
preferred stock, the Company issued 1,000,000 shares of the
Company’s common stock to BHP, which shares were valued at $89,100
based on the closing market price of the Company’s common stock and
recorded to accumulated deficit as a deemed dividend.
In addition to the requirement of the Company to cause a
registration statement covering the shares issued to be declared
effective by the SEC within 180 days, the Series C Agreement and
the terms of the Series C Certificate of Designation contain
multiple defined triggering events or events of default that may
require the Company to redeem in cash the Series C preferred stock.
Such events include, but are not limited to the following: (i) the
suspension, cessation from trading or delisting of the Company’s
Common Stock on the Principal Market for a period of two (2)
consecutive trading days or more; (ii) the failure by the Company
to timely comply with the reporting requirements of the Exchange
Act (including applicable extension periods); (iii) the failure for
any reason by the Company to issue Commitment Shares, Dividends or
Conversion Shares to the Purchaser within three trading days; (iv)
the Company breaches any representation warranty, covenant or other
term of condition contained in the definitive agreements between
the parties; (v) the Company files for Bankruptcy or receivership
or any money judgment writ, liquidation or a similar process is
entered by or filed against the Company for more than $50,000 and
remains unvacated, unbonded or unstayed for a period of twenty (20)
calendar days; (vi) conduct its business; (vii) the Company shall
lose the “bid” price for its Common stock on the Principal Market;
(viii) if at any time the Common Stock is no longer DWAC eligible;
(ix) the Company must have a registration statement covering the
Preferred Shares declared effective by the SEC within one hundred
eighty (180) days of the Effective Date hereof; (x) the Company
must complete deposits to secure power supply contracts and
purchase mining equipment within ninety (90) days from the
Effective Date hereof; (xi) the Company shall cooperate and provide
the necessary information for the Purchaser to file the appropriate
UCC filings to be filed promptly after each of the pieces of mining
equipment is purchased as required under section (x) of this
section, giving Purchaser a priority lien on any and all said
purchased mining equipment; and (xii) any other event specifically
listed as an Event of Default under any section in the Transaction
Documents.
As of March 31, 2022, and June 30, 2021, 1,125 shares of Series C
preferred stock were issued and outstanding and recorded at stated
value as mezzanine due to certain default provisions requiring
mandatory cash redemption that are outside the control of the
Company.
Series D Preferred Stock
On February 19, 2021, the Company filed a Certificate of
Designation of the Series D Convertible Preferred Stock with the
Nevada Secretary of State authorizing the issuance of an aggregate
of 4,000 shares of the Series D preferred stock. Each share of
Series D preferred stock has a par value of $0.001 per share and a
stated value of $1,100 per share. The shares of Series D preferred
stock are convertible into shares of the Company’s common stock at
a conversion price of $0.30 per share.
Each share of the Series D preferred stock is entitled to receive
cumulative dividends of 12% per annum, payable monthly and accruing
and compounding daily from the date of issuance of the shares.
Dividends may be paid in cash or in shares of Series D preferred
stock at the discretion of the Company. As of March 31, 2022 and
June 30, 2021, the Company accrued Series D preferred stock
dividends of $427,816 and $132,835, respectively.
The Company, at its sole discretion, has the right to redeem all,
but not less than all, shares of the Series D preferred stock
issued and outstanding upon 5 days’ notice at a defined redemption
price. The holders of the Series D preferred stock do not have a
right to put the shares to the Company.
The holders of the Series D preferred stock shall have the
right to vote together with holders of common stock, on an as
“converted basis”, on any matter that the Company’s shareholders
may be entitled to vote on, either by written consent or by
proxy.
On February 18, 2021, the Company entered into a Securities
Purchase Agreement, dated as of February 18, 2021 (the “Series D
Agreement”) with BHP providing for the issuance and sale by the
Company and the purchase by BHP of shares of Series D preferred
stock. At a closing held February 19, 2021, BHP initially purchased
3,000 shares of Series D preferred stock at a price of $1,000 per
share for a total purchase price of $3,000,000. Included in the
purchase price was a five-year warrant granting BHP the right to
purchase up to one hundred percent (100%) warrant coverage,
exercisable into shares of the Company’s common stock at a per
share $0.60 per share. Warrants exercisable for 11,000,000 common
shares were issued.
In addition to the requirement of the Company to cause a
registration statement covering the shares issued to be declared
effective by the SEC within 180 days, the Series D Agreement and
the terms of the Series D Certificate of Designation contain
multiple defined triggering events or events of default that may
require the Company to redeem in cash the Series D preferred stock.
Such events include, but are not limited to the following: (i) the
suspension, cessation from trading or delisting of the Company’s
Common Stock on the Principal Market for a period of two (2)
consecutive trading days or more; (ii) the failure by the Company
to timely comply with the reporting requirements of the Exchange
Act (including applicable extension periods); (iii) the failure for
any reason by the Company to issue Commitment Shares, Dividends or
Conversion Shares to the Purchaser within three trading days; (iv)
the Company breaches any representation warranty, covenant or other
term of condition contained in the definitive agreements between
the parties; (v) the Company files for Bankruptcy or receivership
or any money judgment writ, liquidation or a similar process is
entered by or filed against the Company for more than $50,000 and
remains unvacated, unbonded or unstayed for a period of twenty (20)
calendar days; (vi) conduct its business; (vii) the Company shall
lose the “bid” price for its Common stock on the Principal Market;
(viii) if at any time the Common Stock is no longer DWAC eligible;
(ix) the Company must have a registration statement covering the
Preferred Shares declared effective by the SEC within one hundred
eighty (180) days of the Effective Date hereof; (x) the Company
must complete deposits to secure power supply contracts and
purchase mining equipment within ninety (90) days from the
Effective Date hereof; (xi) the Company shall cooperate and provide
the necessary information for the Purchaser to file the appropriate
UCC filings to be filed promptly after each of the pieces of mining
equipment is purchased as required under section (x) of this
section, giving Purchaser a priority lien on any and all said
purchased mining equipment; and (xii) any other event specifically
listed as an Event of Default under any section in the Transaction
Documents.
As of March 31, 2022, and June 30, 2021, 3,000 shares of Series D
preferred stock were issued and outstanding and recorded as
mezzanine due to certain default provisions requiring mandatory
cash redemption that are outside the control of the Company.
9. STOCKHOLDERS’ EQUITY
Preferred Stock
On January 25, 2019, the Board of Directors of the Company approved
a resolution to increase the number of authorized preferred shares
to 20,000,000 shares.
Series A Preferred Stock
In March 2015, the Company filed with the State of Nevada a
Certificate of Designation establishing the designations,
preferences, limitations, and relative rights of 1,000,000 shares
of the Company's Series A preferred stock. Holders of the Series A
preferred stock have the right to vote in aggregate, on all
shareholder matters equal to 1,000 votes per share of Series A
preferred stock. The shares of Series A preferred stock are not
convertible into shares of common stock.
The Company has 1,000,000 shares of Series A preferred stock
authorized, with 500,000 shares issued and outstanding as of March
31, 2022 and June 30, 2021, which were issued in March 2015 to
members of the Company’s Board of Directors in consideration for
services.
Series B Preferred Stock
On December 21, 2015, the Company filed a Certificate of
Designation for a new Series B convertible preferred stock with the
State of Nevada following approval by the board of directors of the
Company. Five Hundred Thousand (500,000) shares of the Company's
authorized preferred stock are designated as the Series B
convertible preferred stock, par value of $0.001 per share and with
a stated value of $0.001 per share (the "Stated Value"). Holders of
Series B preferred stock shall be entitled to receive dividends,
when and as declared by the Board of Directors out of funds legally
available therefor. At any time and from time to time after the
issuance of shares of the Series B preferred stock, each issued
share of Series B preferred stock is convertible into 100 shares of
the Company’s common stock. The holders of the Series B preferred
stock shall have the right to vote together with holders of common
stock, on an as "converted basis", on any matter that the Company's
shareholders may be entitled to vote on, either by written consent
or by proxy. Upon any liquidation, dissolution or winding-up of the
Company, the holders of the Series B preferred stock shall be
entitled to receive out of the assets of the Company, whether such
assets are capital or surplus, for each share of Series B preferred
stock an amount equal to the Stated Value, and all other amounts in
respect thereof then due and payable prior to any distribution or
payment shall be made to the holders of any junior securities. The
number of authorized Series B preferred stock was later increased
to 1,000,000 shares.
The Company had 752,633 and 727,370 shares issued and outstanding
as of March 31, 2022 and June 30, 2021, respectively.
On February 19, 2021, Mr. Rubakh converted 52,630 shares of Series
B preferred stock into 5,263,000 shares of common stock in a
transaction recorded at the par value of the shares.
In August 2021, Mr. Rubakh converted 24,737 shares of Series B
preferred stock into 2,473,700 shares of common stock in a
transaction recorded at the par value of the shares.
In October 2021, the Company issued to Mr. Rubakh 50,000 shares of
Series B convertible preferred stock valued on an “as converted to
common” basis at $1,880,000, using the closing market price of the
Company’s common stock of $0.37 on the date of issuance. Each share
of Series B preferred stock is convertible into 100 shares of the
Company’s common stock. This non-cash, related party stock-based
compensation is included in operating expenses in the accompanying
statements of operations.
Common Stock
On January 25, 2019, the Board of Directors of the Company approved
a resolution to increase the number of authorized common shares to
250,000,000. The Company had 205,146,592 and 194,487,662 common
shares issued and outstanding as of March 31, 2022 and June 30,
2021, respectively.
During the nine months ended March 31, 2022, the Company issued a
total of 10,658,930 shares of its common stock: 2,473,700 shares
issued in conversion of Series B preferred stock recorded at par
value of $2,474; 8,000,000 shares for common stock payable of
$5,480,000 and 185,230 shares for services valued at $40,733.
During the nine months ended March 31, 2021, the Company issued a
total of 61,258,202 shares of its common stock: 52,723,031 shares
in conversion of $960,311 note principal, $34,258 accrued interest
payable, and $5,300 in fees; 55,555 shares in the repayment of a
stock subscription payable of $33,888, 216,616 shares for services
valued at $24,260; 5,263,000 shares issued in conversion of Series
B preferred stock recorded at par value of $5,262; and 3,000,000
shares issued as equity incentive shares in the sale of Series C
and D preferred stock recorded at total market value of $384,100
and recorded as a cost of capital. No gain or loss was recorded as
the conversions were completed within the terms of the debt
agreements and the transactions resulted in the extinguishment of
derivative liabilities totaling $466,093.
Common Stock Payable
As of June 30, 2021, the Company was obligated to issue a total of
8,000,000 shares of its common stock to two consultants and
recorded a common stock payable of $5,480,000, based on the market
value of the common shares on the date of the consulting
agreements. In July 2021, the Company issued 8,000,000 shares of
its common stock in satisfaction of this obligation.
10. WARRANTS
As discussed in Note 8, the Company issued warrants in February
2021 to purchase 11,000,000 shares of its common stock in
connection with the sale of Series D preferred stock. The Company
also issued warrants to purchase 30,000,000 shares of its common
stock in April 2021 in connection with the sale of common
stock.
A summary of the Company’s warrants as of March 31, 2022, and
changes during the nine months then ended is as follows:
|
|
Shares
|
|
|
Weighted
Average
Exercise Price
|
|
|
Weighted Average
Remaining
Contract Term
(Years)
|
|
|
Aggregate
Intrinsic
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding as of June 30, 2021
|
|
|
41,000,000 |
|
|
$ |
0.30 |
|
|
|
|
|
|
|
Granted
|
|
|
- |
|
|
$ |
- |
|
|
|
|
|
|
|
Exercised
|
|
|
- |
|
|
$ |
- |
|
|
|
|
|
|
|
Forfeited or expired
|
|
|
- |
|
|
$ |
- |
|
|
|
|
|
|
|
Outstanding and exercisable as of March 31, 2022
|
|
|
41,000,000 |
|
|
$ |
0.30 |
|
|
|
3.97 |
|
|
$ |
- |
|
The aggregate intrinsic value in the preceding table represents the
total pretax intrinsic value, based on the closing price of our
common stock of $0.115 as of March 31, 2022, which would have been
received by the holders of in-the-money warrants had the holders
exercised their warrants as of that date.
11. COMMITMENTS AND CONTINGENCIES
Legal Matters
From time to time, we may be involved in litigation relating to
claims arising out of our operations in the normal course of
business. As of the date of filing of this report, there were no
pending or threatened lawsuits.
Operating Leases
As of March 31, 2022, the Company had no obligation for future
lease payments under non-cancelable operating leases. However, the
Company has entered into three agreements described below related
to its crypto currency mining operations pursuant to which the
Company’s sole obligation is to pay monthly a contractual rate per
kilowatt hour of electricity consumed.
PetaWatt Power Purchase Agreement
Power Supply and Purchase Agreement
In May 2019, the Company consolidated its then cryptocurrency
operations in one facility in Carthage, New York. The Carthage
power supply and purchase agreement with PetaWatt Properties, LLC
(“PetaWatt”) was entered into on May 10, 2019 for an initial term
of 90 days, with an option to continue the agreement for a
subsequent 36 months, which option the Company has exercised. The
Company’s sole obligation under the agreement is to pay monthly a
contractual rate per kilowatt hour of electricity consumed in the
Company’s cryptocurrency mining operations. This agreement was
superseded on May 7, 2021 with a new Lease, Hosting, and Energy
Services Agreement with PetaWatt.
Lease, Hosting, and Energy Services Agreement
On May 7, 2021, the Company and PetaWatt entered into a Lease,
Hosting and Energy Services Agreement for the Carthage, New York
facility for a period of 36 months. The Company’s sole obligation
under the agreement is to pay monthly a contractual rate per
kilowatt hour of electricity consumed in the Company’s
cryptocurrency mining operations. The agreement may also be
expanded to include up to 7 mobile mining containers. The Company
made a prepayment of $300,000 upon signing the agreement, to be
drawn down with monthly invoices submitted to the Company by
PetaWatt. As of March 31, 2022 and June 30, 2021, the remaining
prepayment balance was $0 and $193,870, respectively, which amounts
were included in prepaid expenses and other current assets in the
accompanying balance sheet. Due to PetaWatt’s financial
difficulties, the Company discontinued its cryptocurrency mining
operations in New York and the agreement was terminated. All mining
equipment had been shipped to Tioga, Pennsylvania as of March 11,
2022. The Company estimates these miners will be connected and
placed into service in late May or early June 2022.
Compute North Power Purchase and Hosting
Agreement
On March 8, 2021, the Company and Compute North LLC (“Compute
North”) entered into a Master Agreement for the colocation and
management of the Company’s cryptocurrency mining operations. The
Company submits Order Forms to Compute North to determine the
location of the hosted facilities, the number of cryptocurrency
miners, the term of the services provided and the contractual rate
per kilowatt hour of electricity consumed in the Company’s
cryptocurrency mining operations. The agreement also provides the
Company the option to purchase cryptocurrency mining equipment from
Compute North. The initial Order form was for 425 miners in
Kearney, Nebraska for a term of 3 years and 250 miners in Savoy,
Texas for a term of 3 years. The parties subsequently consolidated
the cryptocurrency mining operations in the Kearney, Nebraska
facility. The Company’s ongoing obligation under the agreement to
pay monthly a contractual rate per kilowatt hour of electricity
consumed in the Company’s cryptocurrency mining operations.
Nebraska operations commenced in September 2021.
Tioga Property Lease and Power Purchase
Agreement
On December 15, 2021, the Company and Tioga Holding, LLC, a related
party, entered into a Property Lease and Power Purchase Agreement
for the use by the Company of facilities located in Tioga,
Pennsylvania. The Company’s sole obligation under the agreement is
to pay monthly a contractual rate per kilowatt hour of electricity
consumed in the Company’s cryptocurrency mining operations. The
term of the agreement is 36 months. Full mining operations had not
commenced as of March 31, 2022.
Service Agreement
On January 25, 2022, the Company and Bitkern Consulting, Inc.
(“Bitkern”) entered into a Services Agreement for the Company’s
Tioga, Pennsylvania mining operations. Bitkern is to provide:
management of schedules of deliveries of mining equipment; receive
and install mining equipment; install mining software, as needed,
and maintain the mining equipment after installation. The agreement
shall remain in effect for an indefinite period until terminated by
either party in accordance with terms of the agreement. The Company
is to pay monthly a contractual rate of $0.005 per kilowatt hour of
electricity consumed in the Company’s cryptocurrency mining
operations. Other costs of repairs and maintenance incurred by
Bitkern, including materials and subcontractors, will be reimbursed
by the Company.
12. SUBSEQUENT EVENTS
Management has evaluated subsequent events according to the
requirements of ASC TOPIC 855, and has reported the following:
Issuance of Common Stock
On April 27, 2022, the Company issued 100,000 common shares to a
consultant for services valued at $5,210, based on the closing
market price of the stock on that date.
Carthage, New York Operations
In March 2022, the Company discontinued its cryptocurrency mining
operations in its Carthage, New York facility and transferred the
mining equipment previously utilized in New York to its Tioga,
Pennsylvania location. Subsequent to March 31, 2022, the Company
continued the integration of the equipment to its Tioga facility
and estimates these miners will be connected and placed into
service in late May or early June 2022.
ITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SPECIAL NOTE CONCERNING FORWARD-LOOKING
STATEMENTS
We believe that it is important to communicate our future
expectations to our security holders and to the public. This
report, therefore, contains statements about future events and
expectations which are “forward-looking statements” within the
meaning of Sections 27A of the Securities Act of 1933 and 21E of
the Securities Exchange Act of 1934, including the statements about
our plans, objectives, expectations and prospects under the heading
“Management’s Discussion and Analysis of Financial Condition and
Results of Operations.” You can expect to identify these statements
by forward-looking words such as “may,” “might,” “could,” “would,”
“will,” “anticipate,” “believe,” “plan,” “estimate,” “project,”
“expect,” “intend,” “seek” and other similar expressions. Any
statement contained in this report that is not a statement of
historical fact may be deemed to be a forward-looking statement.
Although we believe that the plans, objectives, expectations and
prospects reflected in or suggested by our forward-looking
statements are reasonable, those statements involve known and
unknown risks, uncertainties and other factors that may cause our
actual results, performance or achievements to be materially
different from any future results, performance or achievements
expressed or implied by these forward-looking statements, and we
can give no assurance that our plans, objectives, expectations and
prospects will be achieved.
Important factors that may cause our actual results to differ
materially from the results contemplated by the forward-looking
statements are contained in the “Risk Factors” section of and
elsewhere in our Annual Report on Form 10-K for the year ended June
30, 2021 and in our subsequent filings with the Securities and
Exchange Commission. The following discussion of our results of
operations should be read together with our financial statements
and related notes included elsewhere in this report.
GENERAL
We were incorporated in the State of Nevada on March 22, 2013 under
the name Lightcollar, Inc. On March 22, 2015, we changed our name
to EMS Find, Inc., and in July 2017, we changed our name to
Integrated Ventures, Inc. We have discontinued our prior operations
and changed our business focus from our prior technologies relating
to the EMS Find platform to acquiring, launching, and operating
companies in the cryptocurrency sector, mainly in digital currency
mining and sales of branded mining rigs. Our offices are located at
73 Buck Road, Suite 2, Huntingdon Valley, Pennsylvania 19006.
On November 22, 2017, we successfully launched our cryptocurrency
operations, and revenues commenced from cryptocurrency mining
operations and from sales of cryptocurrency mining equipment. As of
March 31, 2022 , the Company owned a total of approximately 2,122
miners in two locations, Kearney, Nebraska and Tioga, Pennsylvania.
Under our contract with Bitmain, which expires in July 2022, we
expect to receive an additional 800 miners. Due to PetaWatt’s
financial difficulties, the Company has discontinued its
cryptocurrency mining operations in New York. All mining equipment
previously operating in New York has been relocated to Tioga,
Pennsylvania. The Company estimates these miners and new Bitmain
miners delivered to Tioga will be connected and placed into service
late May or early June 2022. During the nine months ended March 31,
2022, the Company paid deposits totaling $6,266,034 (net of Wattum
reimbursements) for additional miners.
The Company’s forward-looking business plan is focused on: (1)
raising capital to purchase new mining equipment; (2) rotating and
upgrading mining equipment; (3) expansion of power capacity; and
(4) launching cryptocurrency mining operations in new
locations.
Financial
As of March 31, 202, we operated our cryptocurrency mining
operations in one hosted facility located in Kearney, Nebraska. We
estimate the mining equipment previously used in New York and
transferred to Tioga Pennsylvania and new mining equipment
purchased and delivered to Tioga will be connected and placed into
service sometime in May 2022. The hosting and power purchase
agreements for the Nebraska and Pennsylvania facilities require the
Company to pay monthly a contractual rate per kilowatt hour of
electricity consumed in the Company’s cryptocurrency mining
operations. The agreement for the Pennsylvania facility is with a
related party owned 50% by Steve Rubakh, our President and Chief
Executive Officer.
Revenues from our cryptocurrency mining operations were $964,319
and $682,706 for the three months ended March 31, 2022 and 2021,
respectively, and $4,080,688 and $885,931 for the nine months ended
March 31, 2022 and 2021, respectively. Revenues from the sales of
cryptocurrency mining equipment were $467,500 and $14,099 for the
three months ended March 31, 2022 and 2021, respectively, and
$1,814,110 and $75,221 for the nine months ended March 31, 2022 and
2021, respectively. Included in the sales of cryptocurrency mining
equipment in the three and nine months ended March 31, 2022 were
sales to a related party of $467,500.
When funds are available and market conditions allow, we also
invest in certain denominations of cryptocurrencies to complement
our mining operations. We consider these investments similar to
marketable securities where we purchase and hold the
cryptocurrencies for sale. We report realized gains and losses on
the sales of cryptocurrencies net of transaction costs. As of March
31, 2022, our digital currencies at cost totaled $300,403 and were
comprised primarily of Bitcoin (BTC).
Historically, we have funded our operations primarily from cash
generated from our digital currency mining operations and proceeds
from convertible notes payable and preferred stock. During the nine
months ended March 31, 2022, we generated sufficient cash flow from
operations and from the sale of digital currencies, and did not
incur additional debt or issue securities for cash.
The Digital Asset Market
The Company is focusing on the mining of digital assets, as well as
blockchain applications (“blockchain”) and related technologies. A
blockchain is a shared immutable ledger for recording the history
of transactions of digital assets—a business blockchain provides a
permissioned network with known identities. A Bitcoin is the most
recognized type of a digital asset that is issued by, and
transmitted through, an open source, math-based protocol platform
using cryptographic security that is known as the “Bitcoin
Network.” The Bitcoin Network is an online, peer-to-peer user
network that hosts the public transaction ledger, known as the
blockchain, and the source code that comprises the basis for the
cryptography and math-based protocols governing the Bitcoin
Network.
Bitcoins, for example, can be used to pay for goods and services or
can be converted to fiat currencies, such as the US Dollar, at
rates determined on Bitcoin exchanges or in individual
end-user-to-end-user transactions under a barter system. The
networks utilized by digital coins are designed to operate without
any company or government in charge, governed by a collaboration of
volunteer programmers and computers that maintain all the records.
These blockchains are typically maintained by a network of
participants which run servers while securing their blockchain.
Third party service providers such as Bitcoin exchanges and bitcoin
third party payment processing services may charge significant fees
for processing transactions and for converting, or facilitating the
conversion of, bitcoins to or from fiat currency.
This market is rapidly evolving and there can be no assurances that
we will remain competitive with industry participants that have or
may have greater resources or experience in in this industry than
us, nor that the unproven digital assets that we mine will ever
have any significant market value.
The Company, like many cryptocurrency mining operators, is
currently operating at a non-profitable status following record
historic runs in market prices of digital currencies. Market prices
of digital currencies have not been high enough to cover the
operating costs of mining companies, including significant power
costs, escalating prices of mining equipment and high levels of
equipment depreciation. The Company is addressing these operational
challenges through considering alternative sources of power,
further consolidation of facilities, and potential hosting
arrangements. There can be no assurance that the Company will be
successful in these efforts and attain profitable levels of
operations.
Financial Operations Review
We are incurring increased costs because of being a publicly traded
company. As a public company, we incur significant legal,
accounting, and other expenses that we did not incur as a private
company. We also have paid compensation through the issuance of
shares of our common stock and Series B preferred stock, the
valuation of which has resulted in significant stock-based
compensation. In addition, the Sarbanes-Oxley Act of 2002, as well
as new rules subsequently implemented by the Securities and
Exchange Commission, have required changes in corporate governance
practices of public companies and will require us to comply with
these rules. These new rules and regulations have will increase our
legal and financial compliance costs and have made some activities
more time-consuming and costlier. In addition, these new rules and
regulations have made it more difficult and more expensive for us
to obtain director and officer liability insurance, which we
currently cannot afford to do. As a result of the new rules, it may
become more difficult for us to attract and retain qualified
persons to serve on our Board of Directors or as executive
officers. We cannot predict or estimate the amount of additional
costs we may incur as a result of being a public company or the
timing of such costs.
To operate our digital currency mining facilities and to fund
future operations, we must raise additional capital. The amount and
timing of future funding requirements will depend on many factors,
including the timing and results of our ongoing development
efforts, the potential expansion of our current development
programs, potential new development programs and related general
and administrative support. We anticipate that we will seek to fund
our operations through further liquidation of our marketable
securities, public or private equity or debt financings or other
sources, such as potential collaboration agreements. We cannot be
certain that anticipated additional financing will be available to
us on favorable terms, or at all.
RESULTS OF OPERATIONS
THREE MONTHS AND NINE MONTHS ENDED MARCH 31, 2022 COMPARED
TO THE THREE MONTHS AND NINE MONTHS ENDED MARCH 31,
2021
Revenues
Our cryptocurrency mining revenues increased to $964,319 in the
three months ended March 31, 2022 from $682,706 in the three months
ended March 31, 2021 and increased to $4,080,688 in the nine months
ended March 31, 2022 from $885,931 in the nine months ended March
31, 2021. On a year-to-date basis, this increase in revenues
resulted primarily from higher prices of BTC and the Company’s
successful efforts to raise capital to purchase more efficient and
profitable mining equipment. In addition, we expanded our
cryptocurrency mining operations to a second location in Kearney,
Nebraska. However, our cryptocurrency mining revenues were
negatively impacted in the current year periods due to the
weakening of cryptocurrency markets during our second and third
fiscal quarters and to the financial difficulties of PetaWatt
Holdings, which resulted in the termination of our Carthage, New
York mining operations.
We also have revenues from the sale of cryptocurrency mining
equipment that have been either newly purchased or refurbished for
resale. Such sales totaled $467,500 and $14,099 in the three months
ended March 31, 2022 and 2021, respectively, and totaled $1,814,110
and $75,221 in the nine months ended March 31, 2022 and 2021,
respectively. The increase in sales of equipment in the current
year was due primarily to three sales of miners to non-related
customers. Also included in the sales of cryptocurrency mining
equipment in the three and nine months ended March 31, 2022 were
sales to a related party of $467,500. Sales of equipment will
fluctuate from period to period depending on equipment available to
us to sell and the current retail demand for our model of
cryptocurrency mining units.
Cost of Revenues
Cost of revenues was $1,124,327 and $266,897 in the three months
ended March 31, 2022 and 2021, respectively, and $3,008,668 and
$618,954 in the nine months ended March 31, 2022 and 2021,
respectively. The increase in cost of revenues in the current
fiscal year is due primarily to: increased cryptocurrency mining
revenues, expansion to two operating locations and increased
depreciation and amortization expense. Expenses associated with
running our cryptocurrency mining operations, such as equipment
depreciation and amortization, operating supplies, utilities, and
consulting services are recorded as cost of revenues. Also included
in cost of revenues are the costs of purchasing or assembling the
cryptocurrency mining units sold. We reported a gross profit on
revenues of $307,492 and $429,908 in the three months ended March
31, 2022 and 2021, respectively, and $2,886,130 and $342,198 in the
six months ended March 31, 2022 and 2021, respectively. In prior
year periods, we have reported a gross loss on revenues primarily
due to lower revenues, high utility costs and a conservative, short
useful life for mining equipment depreciation and amortization.
Higher cryptocurrency mining revenues in the current year resulting
from higher BTC market pricing, the implementation of more
efficient mining equipment and the increase in the number of miners
purchased also contributed to the gross profit on revenues.
Operating Expenses
Our general and administrative expenses decreased to $118,687 in
the three months ended March 31, 2022 from $16,718,665 in the three
months ended March 31, 2021. Our general and administrative
expenses decreased to $2,398,424 in the nine months ended March 31,
2022 from $16,910,410 in the nine months ended March 31, 2021. The
decrease resulted primarily from decreased non-cash related party
stock-based compensation expense. We reported non-cash, related
party stock-based compensation of $16,537,500 in the three months
and nine months ended March 31, 2021 compared to $0 and $1,880,000
in the three months ended March 31, 2022, respectively . On
February 26, 2021 the Company issued to Steve Rubakh, our
President, 350,000 total shares of Series B convertible preferred
stock valued on an “as converted to common” basis at $16,537,500,
using the closing market price of the Company’s common stock on
that date. In October 2021, the Company issued to Mr. Rubakh 50,000
shares of Series B convertible preferred stock valued on an “as
converted to common” basis at $1,880,000, using the closing market
price of the Company’s common stock of $0.37 on the date of
issuance. Each share of Series B preferred stock is convertible
into 100 shares of the Company’s common stock.
Other Income (Expense)
Our other income (expense) was comprised of the following:
|
|
Three Months Ended
March 31,
|
|
|
Nine Months Ended
March 31,
|
|
|
|
2022
|
|
|
2021
|
|
|
2022
|
|
|
2021
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
$ |
(53 |
) |
|
$ |
(239,435 |
) |
|
$ |
(515 |
) |
|
$ |
(430,049 |
) |
Realized gain (loss) on sale of digital currencies
|
|
|
(215,758 |
) |
|
|
54,920 |
|
|
|
312,075 |
|
|
|
106,497 |
|
Gain on forgiveness of debt
|
|
|
- |
|
|
|
- |
|
|
|
5,924 |
|
|
|
- |
|
Loss on disposition of property and equipment
|
|
|
(46,999 |
) |
|
|
- |
|
|
|
(46,999 |
) |
|
|
(207,281 |
) |
Change in fair value of derivative liabilities
|
|
|
- |
|
|
|
(113,599 |
) |
|
|
- |
|
|
|
(76,687 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income (expense)
|
|
$ |
(262,810 |
) |
|
$ |
(298,114 |
) |
|
$ |
270,485 |
|
|
$ |
(607,520 |
) |
During our fiscal year ended June 30, 2021, our lenders completed
the full conversion of our convertible notes payable, resulting in
a substantial decrease in interest expense in the current fiscal
year. Our interest expense includes the amortization of debt
discount and original issue discount for our convertible notes
payable. These amounts vary from period to period depending on the
timing of new borrowings and the conversion of the debt to common
stock by the lenders.
When funds are available and market conditions allow, we also
invest in certain denominations of cryptocurrencies to complement
our mining operations. In addition to the currencies received as
compensation for our mining services, during the nine months ended
March 31, 2022, we purchased various digital currencies totaling
$2,001,325 and converted currencies from one denomination to
another based on our assessment of market conditions for each
respective currency. The market values of individual currency
denominations continually fluctuate, and the fluctuations may be
material from day to day. During the nine months ended March 31,
2022, we received total proceeds of $6,460,183 from the sale of
digital currencies and incurred transactions fees totaling
$121,178, which were deducted from the gain realized of $433,253.
During the nine months ended March 31, 2021, we received total
proceeds of $3,835,173 from the sale of digital currencies and
incurred transactions fees totaling $105,163, which were deducted
from the gain realized of $211,660. In the quarter ended March 31,
2022 we realized a loss on sale of digital currencies of $215,758
and realized a gain on sale of digital currencies of $54,920 in the
three months ended March 31, 2021.
In April 2020, the Company received loan proceeds of $7,583 under
the terms and conditions of the Paycheck Protection Program
(“PPP”). The loan was to mature 24 months from inception and bore
interest at 1% per annum. In November 2021, the Company made PPP
loan principal payments totaling $1,659. In December 2021, the
remaining principal balance of $5,924 was forgiven pursuant to the
provisions of the Act, and the Company recorded a gain of
forgiveness of debt for this amount in the nine months ended March
31, 2022.
During the three months and nine months ended March 31, 2022, we
sold used mining equipment and realized a loss on the sale of
$46,999. During the nine months ended March 31, 2021, we disposed
of and wrote off non-serviceable, defective mining equipment with a
net book value of $207,281. The equipment disposed of or sold was
replaced with new, more efficient mining equipment. We reported no
loss on disposition of property and equipment during the three
months ended March 31, 2021.
During the year ended June 30, 2021, all convertible notes payable
and other equity instruments with provisions identified as
derivatives were extinguished through conversion to common shares
and all related derivative liabilities were settled. As a result,
we reported no gain or loss from change in fair value of derivative
liabilities in the three months and nine months ended March 31,
2022. We reported losses change in fair value of derivative
liabilities of $113,599 and $76,687 in the three months ended March
31, 2021 and the nine months ended March 31, 2021, respectively. We
estimate the fair value of the derivatives associated with our
convertible debt, options, warrants and other contracts using, as
applicable, either the Black-Scholes pricing model or multinomial
lattice models that value the derivative liability based on a
probability weighted discounted cash flow model using future
projections of the various potential outcomes. We estimate the fair
value of the derivative liabilities at the inception of the
financial instruments, and, in the case of our convertible notes
payable, at the date of conversions to equity and at each reporting
date, recording a derivative liability, debt discount, additional
paid-in capital and a gain or loss on change in derivative
liabilities as applicable. These estimates are based on multiple
inputs, including the market price of our stock, interest rates,
our stock price volatility, variable conversion prices based on
market prices as defined in the respective agreements and
probabilities of certain outcomes based on management projections.
Since these inputs are subject to significant changes from period
to period and to management’s judgment, the estimated fair value of
the derivative liabilities will fluctuate from period to period,
and the fluctuation may be material.
Net Income (Loss)
As a result, we reported net losses of $74,005 and $16,586,871 in
the three months ended March 31, 2022 and 2021, respectively. We
reported net income of $758,191 in the nine months ended March 31,
2022 and a net loss of $17,175,732 in the nine months ended March
31, 2021.
LIQUIDITY AND CAPITAL RESOURCES
Overview
As of March 31, 2022, we had total current assets of $43,229,
including cash of $40,729 and prepaid expenses and other current
assets of $2,500. As of March 31, 2022, we had total current
liabilities of $787,303, including accrued preferred stock
dividends of $600,595. We had total stockholders’ equity of
$11,237,144 as of March 31, 2022 compared to total stockholders’
equity of $8,964,882 as of June 30, 2021.
Sources and Uses of Cash
Net cash provided by operating activities in the nine months ended
March 31, 2022 was $674,543 as a result of our net income of
$758,191, non-cash expenses totaling $3,109,924, decrease in
equipment deposits of $1,005,462, decrease in prepaid expenses and
other current assets of $195,120 and increase in due to related
party of $48,855, partially offset by non-cash gains totaling
$318,000, increase in digital currencies of $4,080,688 and
decreases in accounts payable of $41,368 and accrued expenses of
$2,953.
We used net cash in operations of $737,497 in the nine months ended
March 31, 2021 as a result of our net loss of $17,175,732, non-cash
gain of $106,497, increases in prepaid expenses and other current
assets of $4,250 and digital currencies of $903,163 and decreases
in accounts payable of $42,840 and due to related party of $65,737,
partially offset by non-cash expenses totaling $17,539,579 and
increase accrued expenses of $21,143.
During the nine months ended March 31, 2022, we used net cash in
investing activities of $2,718,122, comprised of the increase in
equipment deposits of $7,218,405, purchase of digital currencies of
$2,001,325 and purchase of property and equipment of $28,575,
partially offset by net proceeds from the sale of digital
currencies of $6,460,183 and proceeds from the sale of property and
equipment of $70,000. We transferred mining equipment with a total
cost of $8,891,751 from equipment deposits to property and
equipment during the nine months ended March 31, 2022
During the nine months ended March 31, 2021, we used net cash in
investing activities of $3,825,667, comprised of the purchase of
digital currencies of $4,156,874, the purchase of property and
equipment of $975,574 and equipment deposits of $2,528,392,
partially offset by proceeds from the sale of digital currencies of
$3,835,173.
During the nine months ended March 31, 2022, we used net cash in
financing activities of $13,229, comprised of repayment of notes
payable.
During the nine months ended March 31, 2021, we had net cash
provided by financing activities of $4,656,463 comprised of
proceeds from convertible notes payable of $563,000, proceeds from
the issuance of Series C preferred stock of $1,125,000 and
$3,000,000 proceeds from the issuance of Series D preferred stock,
partially offset by repayment of notes payable of
$31,537.
We must raise additional funds to successfully operate our digital
currency mining operations, purchase equipment and expand our
operations to multiple facilities. The Company may need to: (1)
borrow money from shareholders; (2) issue debt or equity or (3) or
enter a strategic financial arrangement with a third party. There
can be no assurance that additional capital will be available to
us.
Going Concern
Historically, the Company has reported recurring net losses from
operations and used net cash in operating activities. As of March
31, 2022, the Company’s current liabilities exceeded its current
assets by $744,074 and the Company had an accumulated deficit of
$44,724,567. These conditions raise substantial doubt about the
Company's ability to continue as a going concern.
The accompanying financial statements have been prepared in
conformity with U.S. GAAP, which contemplate continuation of the
Company as a going concern and the realization of assets and
satisfaction of liabilities in the normal course of business. The
ability of the Company to reach and maintain a successful level of
operations is dependent on the execution of management’s plans,
which include the raising of capital through the debt and/or equity
markets, until such time that funds provided by operations are
sufficient to fund working capital requirements. If the Company
were not to continue as a going concern, it would likely not be
able to realize its assets at values comparable to the carrying
value or the fair value estimates reflected in the balances set out
in the preparation of the financial statements.
There can be no assurances that the Company will be successful in
attaining a profitable level of operations or in generating
additional cash from the equity/debt markets or other sources fund
its operations. The financial statements do not include any
adjustments relating to the recoverability of assets and
classification of assets and liabilities that might be necessary.
Should the Company not be successful in its business plan or in
obtaining the necessary financing to fund its operations, the
Company would need to curtail certain or all operational activities
and/or contemplate the sale of its assets, if necessary.
Current and Future Impact of COVID-19
The COVID-19 pandemic continues to have a material negative impact
on capital markets. While we continue to incur operating losses, we
are currently dependent on debt or equity financing to fund our
operations and execute our business plan. We believe that the
impact on capital markets of COVID-19 may make it more costly and
more difficult for us to access these sources of funding.
SIGNIFICANT ACCOUNTING POLICIES
Our significant accounting policies are disclosed in Note 2 to the
accompanying condensed financial statements and in the notes to our
audited financial statements included in our Annual Report on Form
10-K for the year ended June 30, 2021. The following is a summary
of those accounting policies that involve significant estimates and
judgment of management.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenue and expenses during the reporting
period. Because of the use of estimates inherent in the financial
reporting process, actual results could differ significantly from
those estimates.
Digital Currencies
Digital currencies consist mainly of Bitcoin and Litecoin,
generally received for the Company’s own account as compensation
for cryptocurrency mining services, and other digital currencies
purchased for short-term investment and trading purposes. Given
that there is limited precedent regarding the classification and
measurement of cryptocurrencies under current Generally Accepted
Accounting Principles (“GAAP”), the Company has determined to
account for these digital currencies as indefinite-lived intangible
assets in accordance with Accounting Standards Update (“ASU”) No.
350, Intangibles – Goodwill and Other, for the period covered
by this report and in future reports unless and until further
guidance is issued by the Financial Accounting Standards Board
(“FASB”). An intangible asset with an indefinite useful life is not
amortized but assessed for impairment annually, or more frequently,
when events or changes in circumstances occur indicating that it is
more likely than not that the indefinite-lived asset is impaired.
Impairment exists when the carrying amount exceeds its fair value.
In testing for impairment, the Company has the option to first
perform a qualitative assessment to determine whether it is more
likely than not than an impairment exists. If it is determined that
it is more likely than not that an impairment exists, a
quantitative impairment test is not necessary. If the Company
concludes otherwise, it is required to perform a quantitative
impairment test. To the extent an impairment loss is recognized,
the loss establishes the new cost basis of the asset. Subsequent
reversal of impairment losses is not permitted. Realized gains or
losses on the sale of digital currencies, net of transaction costs,
are included in other income (expense) in the statements of
operations. The Company had realized losses on sale of digital
currencies of $215,758 in the three months ended March 31, 2022 and
realized gains on sale of digital currencies of $54,920 in the
three months ended March 31, 2021 and $312,075 and $106,497 in the
nine months ended March 31, 2022 and 2021, respectively.
Cryptocurrency mining revenues were $964,319 and $682,706 in the
three months ended March 31, 2022 and 2021, respectively, and
$4,080,688 and $885,931 in the nine months ended March 31, 2022 and
2021, respectively.
Property and Equipment
Property and equipment, consisting primarily of computer and other
cryptocurrency mining equipment (digital transaction verification
servers), is stated at the lower of cost or estimated realizable
value and is depreciated when placed into service using the
straight-line method over estimated useful lives. The Company
operates in an emerging industry for which limited data is
available to make estimates of the useful economic lives of
specialized equipment. Management has assessed the basis of
depreciation of these assets and believes they should be
depreciated over a three-year period due to technological
obsolescence reflecting rapid development of hardware that has
faster processing capacity and other factors. Maintenance and
repairs are expensed as incurred and improvements are capitalized.
Gains or losses on the disposition of property and equipment are
recorded upon disposal.
During the three months ended March 31, 2022, we sold used mining
equipment and realized a loss on the sale of $46,999. During the
nine months ended March 31, 2021, we disposed of and wrote off
non-serviceable, defective mining equipment with a net book value
of $207,281 and wrote off its net book value of $207,281 to loss on
disposition of property and equipment.
Management has determined that the three-year diminishing value
best reflects the current expected useful life of transaction
verification servers. This assessment takes into consideration the
availability of historical data and management’s expectations
regarding the direction of the industry including potential changes
in technology. Management will review this estimate annually and
will revise such estimates as and when data becomes available.
To the extent that any of the assumptions underlying management’s
estimate of useful life of its transaction verification servers are
subject to revision in a future reporting period, either because of
changes in circumstances or through the availability of greater
quantities of data, then the estimated useful life could change and
have a prospective impact on depreciation expense and the carrying
amounts of these assets.
Derivatives
As of March 31, 2022, and June 30, 2021, the Company had no
derivative liabilities.
The Company evaluates its convertible debt, options, warrants or
other contracts to determine if those contracts or embedded
components of those contracts qualify as derivatives to be
separately accounted for. The result of this accounting treatment
is that under certain circumstances the fair value of the
derivative is marked-to-market each balance sheet date and recorded
as a liability. In the event that the fair value is recorded as a
liability, the change in fair value is recorded in the statement of
operations as other income or expense. Upon conversion or exercise
of a derivative instrument, the instrument is marked to fair value
at the conversion date and then that fair value is reclassified to
equity. Equity instruments that are initially classified as equity
that become subject to reclassification under this accounting
standard are reclassified to liability at the fair value of the
instrument on the reclassification date.
Where the number of warrants or common shares to be issued under
these agreements is indeterminate, the Company has concluded that
the equity environment is tainted, and all additional warrants and
convertible debt are included in the value of the derivatives.
We estimate the fair value of the derivatives associated with our
convertible notes payable, common stock issuable pursuant to a
Series B preferred stock Exchange Agreement and a stock
subscription payable using, as applicable, either the Black-Scholes
pricing model or multinomial lattice models that value the
derivative liability based on a probability weighted discounted
cash flow model using future projections of the various potential
outcomes. We estimate the fair value of the derivative liabilities
at the inception of the financial instruments, and, in the case of
our convertible notes payable, at the date of conversions to equity
and at each reporting date, recording a derivative liability, debt
discount, additional paid-in capital and a gain or loss on change
in derivative liabilities as applicable. These estimates are based
on multiple inputs, including the market price of our stock,
interest rates, our stock price volatility, variable conversion
prices based on market prices as defined in the respective
agreements and probabilities of certain outcomes based on
management projections. These inputs are subject to significant
changes from period to period and to management’s judgment;
therefore, the estimated fair value of the derivative liabilities
will fluctuate from period to period, and the fluctuation may be
material.
Impairment of Long-Lived Assets
All assets, including intangible assets subject to amortization,
are reviewed for impairment when changes in circumstances indicate
that the carrying amount of the asset may not be recoverable in
accordance with ASC 350 and ASC 360. If the carrying amount of the
asset exceeds the expected undiscounted cash flows of the asset, an
impairment charge is recognized equal to the amount by which the
carrying amount exceeds fair value or net realizable value. The
testing of these intangibles under established guidelines for
impairment requires significant use of judgment and assumptions.
Changes in forecasted operations and other assumptions could
materially affect the estimated fair values. Changes in business
conditions could potentially require adjustments to these asset
valuations. We reported no impairment expense for the periods ended
March 31, 2022 and 2021.
Stock-Based Compensation
The Company accounts for all equity-based payments in accordance
with ASC Topic 718, Compensation – Stock
Compensation. ASC Topic 718 requires companies to
recognize in the statement of operations the grant-date fair value
of stock awards, stock options, warrants and other equity-based
compensation issued to employees. The value of the portion of an
award that is ultimately expected to vest is recognized as an
expense over the requisite service periods using the straight-line
attribution method. The fair value of a stock award is recorded at
the fair market value of a share of the Company’s stock on the
grant date. The Company estimates the fair value of stock options
and warrants at the grant date by using an appropriate fair value
model such as the Black-Scholes option pricing model or multinomial
lattice models.
The Company accounts for non-employee share-based awards based upon
ASC 505-50, Equity-Based Payments to
Non-Employees. ASC 505-50 requires the costs of goods and
services received in exchange for an award of equity instruments to
be recognized using the fair value of the goods and services or the
fair value of the equity award, whichever is more reliably
measurable. The fair value of the equity award is determined on the
measurement date, which is the earlier of the date that a
performance commitment is reached or the date that performance is
complete. Generally, our awards do not entail performance
commitments. When an award vests over time such that performance
occurs over multiple reporting periods, we estimate the fair value
of the award as of the end of each reporting period and recognize
an appropriate portion of the cost based on the fair value on that
date. When the award vests, we adjust the cost previously
recognized so that the cost ultimately recognized is equivalent to
the fair value on the date the performance is complete.
Revenue Recognition
We recognize revenue in accordance with ASC 606, Revenue
from Contracts with Customers. This standard provides a single
comprehensive model to be used in the accounting for revenue
arising from contracts with customers and supersedes current
revenue recognition guidance, including industry-specific guidance.
The standard’s stated core principle is that an entity should
recognize revenue to depict the transfer of promised goods or
services to customers in an amount that reflects the consideration
to which the entity expects to be entitled in exchange for those
goods or services. To achieve this core principle, ASC 606 includes
provisions within a five-step model that includes identifying the
contract with a customer, identifying the performance obligations
in the contract, determining the transaction price, allocating the
transaction price to the performance obligations, and recognizing
revenue when, or as, an entity satisfies a performance
obligation.
Our revenues currently consist of cryptocurrency mining revenues
and revenues from the sale of cryptocurrency mining equipment
recognized in accordance with ASC 606 as discussed above. Amounts
collected from customers prior to shipment of products are recorded
as deferred revenue.
The Company earns its cryptocurrency mining revenues by providing
transaction verification services within the digital currency
networks of cryptocurrencies, such as Bitcoin, Litecoin, ZCash and
Ethereum. The Company satisfies its performance obligation at the
point in time that the Company is awarded a unit of digital
currency through its participation in the applicable network and
network participants benefit from the Company’s verification
service. In consideration for these services, the Company receives
digital currencies, net of applicable network fees, which are
recorded as revenue using the closing U.S. dollar price of the
related cryptocurrency on the date of receipt. Expenses associated
with running the cryptocurrency mining operations, such as
equipment depreciation, rent, operating supplies, rent, utilities
and monitoring services are recorded as cost of revenues.
There is currently no specific definitive guidance in GAAP or
alternative accounting frameworks for the accounting for the
production and mining of digital currencies and management has
exercised significant judgment in determining appropriate
accounting treatment for the recognition of revenue for mining of
digital currencies. Management has examined various factors
surrounding the substance of the Company’s operations and the
guidance in ASC 606, including identifying the transaction price,
when performance obligations are satisfied, and collectability is
reasonably assured being the completion and addition of a block to
a blockchain and the award of a unit of digital currency to the
Company. In the event authoritative guidance is enacted by the
FASB, the Company may be required to change its policies which
could result in a change in the Company’s financial statements.
Other Agreements
On January 25, 2022, the Company and Bitkern Consulting, Inc.
(“Bitkern”) entered into a confidential Services Agreement for the
Company’s Tioga, Pennsylvania mining operations. Bitkern is to:
provide management of schedules of deliveries of mining equipment;
receive and install mining equipment; install mining software, as
needed, and maintain the mining equipment after installation. The
agreement shall remain in effect for an indefinite period until
terminated by either party in accordance with terms of the
agreement. The Company is to pay monthly a contractual rate per
kilowatt hour of electricity consumed in the Company’s
cryptocurrency mining operations. Other costs of repairs and
maintenance incurred by Bitkern, including materials and
subcontractors, will be reimbursed by the Company.
OFF BALANCE SHEET ARRANGEMENTS
Operating Leases
As of March 31, 2022, the Company had no obligation for future
lease payments under non-cancelable operating leases. However, the
Company has entered into three agreements described below related
to its crypto currency mining operations pursuant to which the
Company’s sole obligation is to pay monthly a contractual rate per
kilowatt hour of electricity consumed.
PetaWatt Power Purchase Agreement
Power Supply and Purchase Agreement
In May 2019, the Company consolidated its then cryptocurrency
operations in one facility in Carthage, New York. The Carthage
power supply and purchase agreement with PetaWatt Properties, LLC
(“PetaWatt”) was entered into on May 10, 2019 for an initial term
of 90 days, with an option to continue the agreement for a
subsequent 36 months, which option the Company has exercised. The
Company’s sole obligation under the agreement is to pay monthly a
contractual rate per kilowatt hour of electricity consumed in the
Company’s cryptocurrency mining operations. This agreement was
superseded on May 7, 2021 with a new Lease, Hosting, and Energy
Services Agreement with PetaWatt.
Lease, Hosting, and Energy Services Agreement
On May 7, 2021, the Company and PetaWatt entered into a Lease,
Hosting and Energy Services Agreement for the Carthage, New York
facility for a period of 36 months. The Company’s sole obligation
under the agreement is to pay monthly a contractual rate per
kilowatt hour of electricity consumed in the Company’s
cryptocurrency mining operations. The agreement may also be
expanded to include up to 7 mobile mining containers. The Company
made a prepayment of $300,000 upon signing the agreement, to be
drawn down with monthly invoices submitted to the Company by
PetaWatt. As of March 31, 2022 and June 30, 2021, the remaining
prepayment balance was $0 and $193,870, respectively, which amounts
were included in prepaid expenses and other current assets in the
accompanying balance sheet. Subsequent to March 31, 2022, due to
PetaWatt’s financial difficulties, the Company discontinued its
cryptocurrency mining operations in New York and the agreement was
terminated. All mining equipment has been relocated to Tioga,
Pennsylvania. The Company estimates these miners will be connected
and placed into service in May 2022.
Compute North Purchase and Hosting Agreement
On March 8, 2021, the Company and Compute North LLC (“Compute
North”) entered into a Master Agreement for the colocation and
management of the Company’s cryptocurrency mining operations. The
Company submits Order Forms to Compute North to determine the
location of the hosted facilities, the number of cryptocurrency
miners, the term of the services provided and the contractual rate
per kilowatt hour of electricity consumed in the Company’s
cryptocurrency mining operations. The agreement also provides the
Company the option to purchase cryptocurrency mining equipment from
Compute North. The initial Order form was for 425 miners in
Kearney, Nebraska for a term of 3 years and 250 miners in Savoy,
Texas for a term of 3 years. The parties subsequently consolidated
the cryptocurrency mining operations in the Kearney, Nebraska
facility. The Company’s ongoing obligation under the agreement to
pay monthly a contractual rate per kilowatt hour of electricity
consumed in the Company’s cryptocurrency mining operations.
Nebraska operations commenced in September 2021.
Tioga Property Lease and Power Purchase
Agreement
On December 15, 2021, the Company and Tioga Holding, LLC, a related
party (“Tioga”), entered into a Property Lease and Power Purchase
Agreement. Under the agreement, the Company will lease 12,134
square feet of aa building in Tioga, Pennsylvania (“Premises”). The
term of the agreement is 36 months ending on December 15, 2024. The
Company has right to terminate the agreement under certain
circumstances, and may assign or sublet the Premises if Tioga
provides prior written consent. The Company is to pay a base rent
of $2,500 plus a monthly contractual rate per kilowatt hour of
electricity consumed in the Company’s cryptocurrency mining
operations. The Company projects mining operations will commenced
in May 2022.
Equipment Purchase Agreements
Bitmain Agreement
On April 12, 2021, we entered into a Non-fixed Price Sales and
Purchase Agreement with Bitmain Technologies Limited (“Bitmain”)
(the “Bitmain Agreement”) to purchase from Bitmain cryptocurrency
mining hardware and other equipment in accordance with the terms
and conditions of the Bitmain Agreement. Bitmain is scheduled to
manufacture and ship miners on monthly basis, in 12 equal batches
of 400 units, starting in August 2021 and through July 2022. The
Purchase Agreement remains in effect until the delivery of the last
batch of products. The total purchase price was approximately
$34,047,600, subject to price adjustments and related offsets. The
total purchase price is payable as follows: (i) 25% of the total
purchase price is due upon the execution of the Agreement or no
later than April 19, 2021; (ii) 35% of the total purchase price, is
due by May 30, 2021; and (iii) the remaining 40% of the total
purchase price, is payable monthly starting in June 2021.
The Company entered into a separate agreement with Wattum
Management, Inc. (“Wattum”), a non-related party, whereby Wattum
agreed to share 50% of the purchase obligation under the Bitmain
Agreement, including reimbursing the Company for 50% of the
equipment deposits paid by the Company to Bitmain.
As of March 31 2022, and June 30, 2021, equipment deposits on the
condensed balance sheets totaled $4,984,457 and $7,663,265,
respectively, and were comprised of payments to Bitmain and other
equipment vendors, net of Wattum reimbursements and the deliveries
of equipment. During the nine months ended March 31, 2022,
equipment deposits paid to Bitmain, net of Wattum reimbursements,
totaled $6,266,034. As of March 31, 2022, 6 of the 12
shipments totaling 2,370 miners had been delivered by Bitmain to
the Company, Wattum and two customers of the Company.
RECENTLY ISSUED ACCOUNTING POLICIES
There were no new accounting pronouncements issued or proposed by
the FASB during the nine months ended March 31, 2022, and through
the date of filing this report which the Company believes will have
a material impact on its financial statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
As a smaller reporting company, as defined by Item 10 of Regulation
S-K, the Company is not required to provide the information
required by this item.
ITEM 4. CONTROLS AND
PROCEDURES
Evaluation of Disclosure Controls and
Procedures
The Securities and Exchange Commission defines the term “disclosure
controls and procedures” to mean a company’s controls and other
procedures of an issuer that are designed to ensure that
information required to be disclosed in the reports that it files
or submits under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported, within the time periods
specified in the Securities and Exchange Commission’s rules and
forms. Disclosure controls and procedures include, without
limitation, controls and procedures designed to ensure that
information required to be disclosed by an issuer in the reports
that it files or submits under the Securities Exchange Act of 1934
is accumulated and communicated to the issuer’s management,
including its chief executive and chief financial officers, or
persons performing similar functions, as appropriate to allow
timely decisions regarding required disclosure. The Company
maintains such a system of controls and procedures in an effort to
ensure that all information which it is required to disclose in the
reports it files under the Securities Exchange Act of 1934 is
recorded, processed, summarized and reported within the time
periods specified under the SEC’s rules and forms and that
information required to be disclosed is accumulated and
communicated to the chief executive and interim chief financial
officer to allow timely decisions regarding disclosure.
As of the end of the period covered by this report, we carried out
an evaluation, under the supervision and with the participation of
our Chief Executive Officer and Chief Financial Officer, of the
effectiveness of the design and operation of our disclosure
controls and procedures. Based on this evaluation, the Chief
Executive Officer and Chief Financial Officer have concluded that
the Company’s disclosure controls and procedures are not effective
as of such date. The Chief Executive Officer and Chief Financial
Officer have determined that the Company continues to have the
following deficiencies which represent a material weakness:
1.
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As of March 31, 2022, we did not maintain effective controls over
the control environment. Specifically, the Board of Directors does
not currently have any independent members and no director
qualifies as an audit committee financial expert as defined in Item
407(d)(5)(ii) of Regulation S-B. Since these entity level programs
have a pervasive effect across the organization, management has
determined that these circumstances constitute a material
weakness.
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2.
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As of March 31, 2022, due to the inherent challenge of segregation
of duties in a small company, we have relied heavily on entity or
management review controls and engaged an outside financial
consultant to lessen the issue of segregation of duties over
accounting, financial close procedures and controls over financial
statement disclosure. Accordingly, management has determined that
this control deficiency constitutes a material weakness.
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3.
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As of March 31, 2022, we did not establish a written policy for the
approval, identification and authorization of related party
transactions. Accordingly, management has determined that this
control deficiency constitutes a material weakness.
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Because of these material weaknesses, management has concluded that
the Company did not maintain effective internal control over
financial reporting as of March 31, 2022, based on the criteria
established in “Internal Control-Integrated Framework” issued by
the COSO.
Changes in Internal
Control Over Financial Reporting
There have been no changes in the Company’s internal control over
financial reporting through the date of this report or during the
quarter ended March 31, 2022, that materially affected, or are
reasonably likely to materially affect, the Company’s internal
control over financial reporting.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are currently not involved in any litigation that we believe
could have a material adverse effect on our financial condition or
results of operations, except as set forth below. There is no
action, suit, proceeding, inquiry or investigation before or by any
court, public board, government agency, self-regulatory
organization or body pending or, to the knowledge of the executive
officers of our company, threatened against or affecting our
company, our common stock, or our company’s officers or directors
in their capacities as such, in which an adverse decision could
have a material adverse effect.
ITEM 1A. RISK FACTORS
In addition to the other information set forth in this report, you
should carefully consider the risk factors discussed in Part I
“Item 1A. Risk Factors” in our Annual Report on Form 10-K for the
fiscal year ended June 30, 2021. The risks identified in these risk
factors could materially affect our business, financial condition
or future results.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES
AND USE OF PROCEEDS
During the three months ended March 31, 2022, we did not issue any
securities that were not registered under the Securities Act, and
were not previously disclosed in a Current Report on Form 8-K or
Quarterly Report on Form 10-Q as listed below.
ITEM 3. DEFAULTS UPON SENIOR
SECURITIES
None.
ITEM 4. MINE SAFETY
DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
There is no other information required to be disclosed under this
item which was not previously disclosed.
ITEM 6. EXHIBITS
(a) Exhibits.
______________
* Filed herewith.
**This certification is being furnished rather than filed and shall
not be deemed incorporated by reference into any filing, in
accordance with Item 601 of Regulation S-K.
SIGNATURES
In accordance with the requirements of the Exchange Act, the
Company has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
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INTEGRATED VENTURES, INC.
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Dated: May 13, 2022
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By:
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/s/ Steve Rubakh
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President and Chief Executive Officer
and Principal Financial Officer
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