10-Q 1 intv_10q.htm FORM 10-Q intv_10q.htm

 

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, 2024

 

 

TRANSITION REPORT UNDER SECTION13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

 

For the transition period from __________ to __________

 

Commission file number: 000-55681

 

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.)

 

18385 Route 287, Tioga, PA 16946

(Address of principal executive offices) (Zip Code)

 

(215) 613-9898

(Registrant’s Telephone Number, Including Area Code)

 

Securities registered under Section 12(b) of the Exchange Act: None.

 

Securities registered under Section 12(g) of the Exchange Act: Common Stock, $0.001 par value per share

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common Stock, $0.001 par value

 

INTV

 

N/A

 

Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐     No ☒

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ☐     No ☒

 

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 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 ☐.

 

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

 

Large accelerated filer

Accelerated filer

Non-accelerated Filer

Smaller reporting company

Emerging growth company

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. Yes ☐     No ☐

 

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

 

As of May 14, 2024, the registrant had 5,064,492 shares of its common stock, $0.001 par value, issued and outstanding.

 

 

 

 

TABLE OF CONTENTS

 

Page

PART I: FINANCIAL INFORMATION

Item 1.

Financial Statements

F-1

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

3

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

10

Item 4.

Controls and Procedures

11

PART II: OTHER INFORMATION

Item 1.

Legal Proceedings

12

Item 1A.

Risk Factors

12

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

20

Item 3.

Defaults upon Senior Securities

20

Item 4.

Mine Safety Disclosures

20

Item 5.

Other Information

20

Item 6.

Exhibits

21

SIGNATURES

22

 

 

2

Table of Contents

  

PART I – FINANCIAL INFORMATION

INDEX TO FINANCIAL STATEMENTS

 

 

 

Page

 

 

 

 

 

Balance Sheets as of March 31, 2024 (unaudited) and June 30, 2023

 

F-2

 

 

 

 

 

Statements of Operations for the Three and Nine Months Ended March 31, 2024 and 2023 (unaudited)

 

F-3

 

 

 

 

 

Statement of Stockholders’ Equity for the Three and Nine Months Ended March 31, 2024 and 2023 (unaudited)

 

F-4

 

 

 

 

 

Statements of Cash Flows for Nine Months Ended March 31, 2024 and 2023 (unaudited)

 

F-5

 

 

 

 

 

Notes to Financial Statements (unaudited)

 

F-6

 

 

 
F-1

Table of Contents

 

 INTEGRATED VENTURES, INC.

CONDENSED BALANCE SHEETS

 

 

 

March 31,

 

 

June 30,

 

 

 

 2024

 

 

 2023

 

 

 

 (Unaudited)

 

 

 

 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash

 

$381,872

 

 

$257,998

 

Digital assets

 

 

1,625,424

 

 

 

447,425

 

Prepaid expenses and other current assets

 

 

8,400

 

 

 

7,165

 

Total current assets

 

 

2,015,696

 

 

 

712,588

 

 

 

 

 

 

 

 

 

 

Non-current assets:

 

 

 

 

 

 

 

 

Property and equipment, net of accumulated depreciation and amortization of $5,591,467 and $3,608,202 as of March 31, 2024 and June 30, 2023, respectively

 

 

3,354,016

 

 

 

5,299,834

 

Deposits

 

 

578,147

 

 

 

578,147

 

Total non-current assets

 

 

3,932,163

 

 

 

5,877,981

 

 

 

 

 

 

 

 

 

 

Total assets

 

$5,947,859

 

 

$6,590,569

 

 

 

 

 

 

 

 

 

 

LIABILITIES, MEZZANINE AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$579,453

 

 

$293,711

 

Accrued preferred stock dividends

 

 

2,133,081

 

 

 

1,645,210

 

Accrued expenses

 

 

89,993

 

 

 

121,243

 

Due to related party

 

 

3,584

 

 

 

415,288

 

Notes payable in default, net of debt discount

 

 

500,000

 

 

 

500,000

 

Total current liabilities

 

 

3,306,111

 

 

 

2,975,452

 

 

 

 

 

 

 

 

 

 

Mezzanine:

 

 

 

 

 

 

 

 

Series C preferred stock, $0.01 par value, 3,000 shares authorized, 1,125 shares issued and outstanding as of March 31, 2024 and June 30, 2023, respectively.

 

 

1,125,000

 

 

 

1,125,000

 

Series D preferred stock, $0.01 par value, 4,000 shares authorized, 3,000 shares issued and outstanding as of March 31, 2024 and June 30, 2023, 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, 2024 and June 30, 2023, respectively)

 

 

500

 

 

 

500

 

Series B preferred stock, $0.001 par value, 1,000,000 shares authorized, 130,000 and 100,000 shares issued and outstanding as of March 31, 2024 and June 30, 2023, respectively)

 

 

130

 

 

 

100

 

Common stock, $0.001 par value; (300,000,000 shares authorized; 5,064,492 and 2,864,492 shares issued and outstanding as of March 31, 2024 and June 30, 2023, respectively)

 

 

5,065

 

 

 

2,864

 

Additional paid in capital

 

 

81,195,589

 

 

 

72,588,520

 

Accumulated deficit

 

 

(82,684,536)

 

 

(73,101,867)

Total stockholders' deficit

 

 

(1,483,252)

 

 

(509,883)

 

 

 

 

 

 

 

 

 

Total liabilities, mezzanine and stockholders' equity

 

$5,947,859

 

 

$6,590,569

 

 

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

 

 
F-2

Table of Contents

 

 

INTEGRATED VENTURES, INC.

CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

 

Three Months Ended March 31,

 

 

Nine Months Ended March 31,

 

 

 

 2024

 

 

 2023

 

 

 2024

 

 

 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Bitcoin mining

 

$1,983,250

 

 

$1,472,813

 

 

$4,770,422

 

 

$2,398,470

 

Total revenue

 

 

1,983,250

 

 

 

1,472,813

 

 

 

4,770,422

 

 

 

2,398,470

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenues - energy, hosting, and other

 

 

1,197,523

 

 

 

976,958

 

 

 

3,209,083

 

 

 

1,602,434

 

General and administrative

 

 

240,002

 

 

 

337,475

 

 

 

8,919,954

 

 

 

1,032,999

 

Depreciation and amortization

 

 

692,654

 

 

 

1,469,195

 

 

 

2,171,938

 

 

 

2,291,301

 

Change in fair value of digital assets

 

 

(452,808)

 

 

-

 

 

 

(568,224)

 

 

-

 

Realized (gain) loss on sale of digital assets

 

 

(14,572)

 

 

(55,400)

 

 

(11,923)

 

 

12,514

 

Loss on disposition of property and equipment

 

 

-

 

 

 

463,919

 

 

 

121,670

 

 

 

510,634

 

Total operating costs and expenses

 

 

1,662,799

 

 

 

3,192,147

 

 

 

13,842,498

 

 

 

5,449,882

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from operations

 

 

320,451

 

 

 

(1,719,334)

 

 

(9,072,076)

 

 

(3,051,412)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(23,168)

 

 

(36,281)

 

 

(70,082)

 

 

(254,182)

Loss on exercise of warrant

 

 

-

 

 

 

(11,000)

 

 

-

 

 

 

(11,000)

Total other income (expense)

 

 

(23,168)

 

 

(47,281)

 

 

(70,082)

 

 

(265,182)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) before income taxes

 

 

297,283

 

 

 

(1,766,615)

 

 

(9,142,158)

 

 

(3,316,594)

Provision for income taxes

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$297,283

 

 

$(1,766,615)

 

$(9,142,158)

 

$(3,316,594)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends on Preferred Stock

 

 

(72,277)

 

 

(203,281)

 

 

(487,871)

 

 

(988,823)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deemed dividend

 

 

-

 

 

 

(93,337)

 

 

-

 

 

 

(255,374)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to shareholders

 

$225,006

 

 

$(2,063,233)

 

$(9,630,029)

 

$(4,560,791)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) per common share attributable to shareholders, basic

 

$0.04

 

 

$(1.03)

 

$(2.29)

 

$(2.23)

Net income (loss) per common share attributable to shareholders, diluted

 

$0.01

 

 

$(1.03)

 

$(2.29)

 

$(2.23)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of common shares outstanding, basic

 

 5,064,492

 

 

 2,000,600

 

 

 4,197,543

 

 

 2,043,596

 

Weighted average number of common shares outstanding, diluted

 

 18,298,080

 

 

 2,000,600

 

 

 4,197,543

 

 

 2,043,596

 

 

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

   

 
F-3

Table of Contents

 

INTEGRATED VENTURES, INC.

CONDENSED STATEMENTS OF STOCKHOLDERS' EQUITY

THREE AND NINE MONTHS ENDED MARCH 31, 2024 AND 2023

(Unaudited)

 

 

 

Series C

 

 

Series D

 

 

Series A

 

 

Series B

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

 

 

 

Preferred Stock

 

 

Preferred Stock

 

 

Preferred Stock

 

 

Preferred Stock

 

 

Common Stock

 

 

Paid in

 

 

Accumulated

 

 

 

 

 

 

 Shares

 

 

 Amount

 

 

 Shares

 

 

 Amount

 

 

 Shares

 

 

 Amount

 

 

 Shares

 

 

 Amount

 

 

 Shares

 

 

 Amount

 

 

 Capital

 

 

 Deficit

 

 

 Total

 

Balance, June 30, 2022

 

 

1,125

 

 

$1,125,000

 

 

 

3,000

 

 

$3,000,000

 

 

 

500,000

 

 

$500

 

 

 

902,633

 

 

$903

 

 

 

1,657,973

 

 

$1,658

 

 

$56,781,410

 

 

$(46,192,164)

 

$10,592,307

 

Issuance of common stock for conversion of Series B preferred stock

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(190,000)

 

 

(190)

 

 

152,000

 

 

 

152

 

 

 

38

 

 

 

-

 

 

 

-

 

Issuance of Series B preferred stock for related party compensation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

50,000

 

 

 

50

 

 

 

-

 

 

 

-

 

 

 

207,450

 

 

 

-

 

 

 

207,500

 

Issuance of common shares for cashless exercise of warrants

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

164,061

 

 

 

164

 

 

 

(164)

 

 

-

 

 

 

-

 

Deemed dividend for warrant modification

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

162,037

 

 

 

(162,037)

 

 

-

 

Preferred stock dividends

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(153,255)

 

 

(153,255)

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(786,382)

 

 

(786,382)

Balance, September 30, 2022

 

 

1,125

 

 

 

1,125,000

 

 

 

3,000

 

 

 

3,000,000

 

 

 

500,000

 

 

 

500

 

 

 

762,633

 

 

 

763

 

 

 

1,974,034

 

 

 

1,974

 

 

 

57,150,771

 

 

 

(47,293,838)

 

 

9,860,170

 

Issuance of common shares for cashless exercise of warrants

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

31,334

 

 

 

31

 

 

 

(31)

 

 

-

 

 

 

-

 

Issuance of Series B preferred stock for related party compensation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

50,000

 

 

 

50

 

 

 

-

 

 

 

-

 

 

 

144,950

 

 

 

-

 

 

 

145,000

 

Preferred stock dividends

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(632,287)

 

 

(632,287)

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(763,597)

 

 

(763,597)

Balance, December 31, 2022

 

 

1,125

 

 

$1,125,000

 

 

 

3,000

 

 

$3,000,000

 

 

 

500,000

 

 

$500

 

 

 

812,633

 

 

$813

 

 

 

2,005,368

 

 

$2,005

 

 

$57,295,690

 

 

$(48,689,722)

 

$8,609,286

 

Issuance of common stock for conversion of Series B preferred stock

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(712,630)

 

 

(713)

 

 

570,104

 

 

 

570

 

 

 

143

 

 

 

-

 

 

 

-

 

Issuance of common shares for cashless exercise of warrants

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

38,820

 

 

 

39

 

 

 

(39)

 

 

-

 

 

 

-

 

Issuance of common share for exercise of warrants

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

88,000

 

 

 

88

 

 

 

10,912

 

 

 

-

 

 

 

11,000

 

Issuance of Series B Series B preferred stock for related party compensation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

50,000

 

 

 

50

 

 

 

-

 

 

 

-

 

 

 

144,950

 

 

 

-

 

 

 

145,000

 

Issuance of common shares for settlement of accrued dividends

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

78,304

 

 

 

78

 

 

 

293,561

 

 

 

-

 

 

 

293,639

 

Deemed dividend for warrant modification

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

93,337

 

 

 

(93,337)

 

 

-

 

Rounding shares due to reverse split

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

11

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Preferred stock dividends

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(203,281)

 

 

(203,281)

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,766,615)

 

 

(1,766,615)

Balance, March 31, 2023

 

 

1,125

 

 

$1,125,000

 

 

 

3,000

 

 

$3,000,000

 

 

 

500,000

 

 

$500

 

 

 

150,003

 

 

$150

 

 

 

2,780,607

 

 

$2,780

 

 

$57,838,554

 

 

$(50,752,955)

 

$7,089,029

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, June 30, 2023

 

 

1,125

 

 

$1,125,000

 

 

 

3,000

 

 

$3,000,000

 

 

 

500,000

 

 

$500

 

 

 

100,000

 

 

$100

 

 

 

2,864,492

 

 

$2,864

 

 

$72,588,520

 

 

$(73,101,867)

 

$(509,883)

Cumulative effect upon adoption of ASU 2023-08

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

$-

 

 

 

-

 

 

$-

 

 

$-

 

 

 

47,360

 

 

 

47,360

 

Issuance of common stock for conversion of Series B preferred stock

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(11,355)

 

 

(11)

 

 

1,135,500

 

 

 

1,136

 

 

 

(1,125)

 

 

-

 

 

 

-

 

Issuance of Series B preferred stock for related party compensation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

50,000

 

 

 

50

 

 

 

-

 

 

 

-

 

 

 

8,299,950

 

 

 

-

 

 

 

8,300,000

 

Preferred stock dividends

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(207,797)

 

 

(207,797)

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(9,079,877)

 

 

(9,079,877)

Balance, September 30, 2023

 

 

1,125

 

 

 

1,125,000

 

 

 

3,000

 

 

 

3,000,000

 

 

 

500,000

 

 

 

500

 

 

 

138,645

 

 

 

139

 

 

 

3,999,992

 

 

 

4,000

 

 

 

80,887,345

 

 

 

(82,342,181)

 

 

(1,450,197)

Issuance of common shares for purchase of bitcoin miners

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

200,000

 

 

 

200

 

 

 

309,100

 

 

 

-

 

 

 

309,300

 

Issuance of common stock for conversion of Series B preferred stock

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(8,645)

 

 

(9)

 

 

864,500

 

 

 

865

 

 

 

(856)

 

 

-

 

 

 

-

 

Preferred stock dividends

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(207,797)

 

 

(207,797)

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(359,564)

 

 

(359,564)

Balance, December 31, 2023

 

 

1,125

 

 

$1,125,000

 

 

 

3,000

 

 

$3,000,000

 

 

 

500,000

 

 

$500

 

 

 

130,000

 

 

$130

 

 

 

5,064,492

 

 

$5,065

 

 

$81,195,589

 

 

$(82,909,542)

 

$(1,708,258)

Preferred stock dividends

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(72,277)

 

 

(72,277)

Net Income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

297,283

 

 

 

297,283

 

Balance, March 31, 2024

 

 

1,125

 

 

$1,125,000

 

 

 

3,000

 

 

$3,000,000

 

 

 

500,000

 

 

$500

 

 

 

130,000

 

 

$130

 

 

 

5,064,492

 

 

$5,065

 

 

$81,195,589

 

 

$(82,684,536)

 

$(1,483,252)

 

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

 

 
F-4

Table of Contents

  

INTEGRATED VENTURES, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

 

Nine Months Ended March 31,

 

 

 

 2024

 

 

 2023

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

Net income (loss)

 

$(9,142,158)

 

$(3,316,594)

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

2,171,938

 

 

 

2,291,301

 

Stock-based compensation - related party

 

 

8,300,000

 

 

 

497,500

 

Loss on exercise of warrants

 

 

-

 

 

 

11,000

 

Loss on disposition of property and equipment

 

 

121,670

 

 

 

510,634

 

Amortization of debt discount

 

 

-

 

 

 

114,564

 

Realized loss (gain) on sale of digital assets

 

 

-

 

 

 

12,514

 

Change in fair value of digital assets

 

 

(568,224)

 

 

-

 

Revenue recognized from Bitcoin mined

 

 

(4,770,422)

 

 

(2,398,464)

Operating expenses paid with digital assets

 

 

57,722

 

 

 

-

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

(1,235)

 

 

(8,880)

Deposits

 

 

-

 

 

 

(500,000)

Accounts payable

 

 

285,742

 

 

 

120,727

 

Accrued expenses

 

 

68,750

 

 

 

139,381

 

Due to related party

 

 

276,968

 

 

 

292,023

 

Net cash provided by (used in) operating activities

 

 

(3,199,249)

 

 

(2,234,294)

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Equipment deposits

 

 

-

 

 

 

(32,514)

Proceeds from the sale of digital assets

 

 

3,850,947

 

 

 

2,428,290

 

Purchase of digital assets

 

 

(332,934)

 

 

(302,951)

Purchase of property and equipment

 

 

(1,740)

 

 

-

 

Net cash provided by (used in) investing activities

 

 

3,516,273

 

 

 

2,092,825

 

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Repayment of related party advance

 

 

(118,150)

 

 

-

 

Repayment of accrued interest on note payable

 

 

(75,000)

 

 

(50,000)

Net cash provided by (used in) financing activities

 

 

(193,150)

 

 

(50,000)

 

 

 

 

 

 

 

 

 

Net increase (decrease) in cash

 

 

123,874

 

 

 

(191,469)

Cash, cash equivalents, and restricted cash - beginning of period

 

 

257,998

 

 

 

490,280

 

Cash, cash equivalents, and restricted cash - end of period

 

$381,872

 

 

$298,811

 

 

 

 

 

 

 

 

 

 

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

 

 

 

 

 

 

 

 

Cash paid during the period for:

 

 

 

 

 

 

 

 

Interest

 

$76,332

 

 

$50,237

 

Income taxes

 

$-

 

 

$-

 

Non-cash investing and financing activities:

 

 

 

 

 

 

 

 

Equipment deposits transferred to property and equipment

 

$-

 

 

$2,387,681

 

Common stock issued for purchase of bitcoin miners

 

$309,300

 

 

$-

 

Cumulative effect upon adoption of ASU 2023-08

 

$47,360

 

 

$-

 

Accrued preferred stock dividends

 

$487,871

 

 

$988,823

 

Conversion of Series B preferred stock for common stock

 

$2,001

 

 

$903

 

Payment of amounts due to related party with digital assets

 

$570,522

 

 

$-

 

Purchase of property and equipment with digital assets

 

$36,750

 

 

$-

 

Interest on notes payable paid with digital assets

 

$25,000

 

 

$-

 

Common stock issued for accrued dividends

 

$-

 

 

$293,639

 

Common stock issued with warrants

 

$-

 

 

$234

 

Deemed dividend for warrant modification

 

$-

 

 

$255,374

 

 

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

 

 
F-5

Table of Contents

 

 Integrated Ventures, Inc.

Notes to Financial Statements

Nine Months Ended March 31, 2024

(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 digital asset sector, mainly in digital asset 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 assets and block chain technologies. Digital assets 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, whereby the Company earns revenue by solving “blocks” to be added to the block chain. The Company also purchases certain digital assets for short-term investment purposes.

 

On April 17, 2023, the Board of Directors of the Company approved a 1-for-125 reverse split of the Company’s common shares. The reverse split has been given retroactive effect in the financial statements for all periods presented.

 

Basis of Presentation

 

The accompanying unaudited 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, 2024 shown in this report are not necessarily indicative of results to be expected for the full fiscal year ending June 30, 2024. 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 Amended Annual Report on Form 10-K/A for the year ended June 30, 2023 filed on May 10, 2024 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 for the year ended June 30, 2023 filed on September 28, 2023. 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.

 

 
F-6

Table of Contents

 

Cash and Cash Equivalents

 

The Company maintains cash balances in non-interest-bearing accounts that at times may exceed federally insured limits. For the statements of cash flows, all highly liquid investments with an original maturity of three months or less are considered to be cash equivalents. The Company had no cash equivalents at March 31, 2024.

 

Significant Accounting Policies

 

The Company maintains cash balances in non-interest-bearing accounts that at times may exceed federally insured limits. For the statements of cash flows, all highly liquid investments with an original maturity of three months or less are considered to be cash equivalents. The Company had no cash equivalents at March 31, 2024.

 

Digital Assets

 

Digital assets are included in current assets in the Consolidated Balance Sheets due to the Company’s ability to sell bitcoin in a highly liquid marketplace and the sale of bitcoin to fund operating expenses to support operations. The proceeds from the sale of digital assets and the purchase of digital assets are included within investing activities in the accompanying Consolidated Statement of Cash Flows. Digital Assets awarded to the Company through its mining activities are accounted for in connection with the Company’s revenue recognition policy. Following the adoption of ASU 2023-08 effective July 1, 2023, the Company measures digital assets at fair value with changes recognized in operating expenses in the Consolidated Statement of Comprehensive Income (Loss). The Company tracks its cost basis of digital assets by-wallet in accordance with the first-in-first-out (“FIFO”) method of accounting. Refer to NOTE 4. DIGITAL ASSETS, for further information regarding the Company’s impact of the adoption of ASU 2023-08.

 

Property and Equipment

 

Property and equipment, consisting primarily of computer and other digital asset mining equipment (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. 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 nine months ended March 31, 2024, the Company discontinued the use of damaged or non-serviceable mining equipment and wrote off its net book value of $121,670 to loss on disposition of property and equipment.

 

During the nine months ended March 31, 2023, the Company discontinued the use of damaged or non-serviceable mining equipment and wrote off its net book value of $510,634 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 as a result 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.

 

 
F-7

Table of Contents

 

Derivatives

 

As of March 31, 2024, and June 30, 2023, 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 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 three and nine months ended March 31, 2024 and 2023.

 

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.

 

 
F-8

Table of Contents

 

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, 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 digital asset mining revenues and revenues from the sale of digital asset 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.

 

To generate revenue from mining bitcoin, the Company has entered into digital asset mining pools by executing contracts, as amended from time to time, with the mining pool operators to provide computing power to the mining pool. The contracts are terminable at any time by either party without penalty and the Company’s enforceable right to compensation begins only when, and lasts as long as, the Company provides computing power to the mining pool operator. In exchange for providing computing power, we are entitled to a Full-Pay-Per-Share payout of Bitcoin based on a contractual formula, which primarily calculates the hash rate provided by us to the mining pool as a percentage of total network hash rate, and other inputs. We are entitled to consideration even if a block is not successfully placed by the mining pool operator.

 

Providing computing power to solve complex cryptographic algorithms in support of the Bitcoin blockchain (in a process known as “solving a block”) is an output of the Company’s ordinary activities. The provision of providing such computing power is the only performance obligation in the Company’s contracts with mining pool operators. The transaction consideration the Company receives is net of digital asset transaction fees kept by the mining pool operator and is noncash, in the form of bitcoin, which the Company measures at fair value on the date Bitcoin is received. This value is not materially different than the fair value at the moment we meet the performance obligation, which can be recalculated based on the contractual formula. The consideration is variable. The amount of consideration recognized is constrained to the amount of consideration received, which is when it is probable a significant reversal will not occur. There is no significant financing component or risk of a significant revenue reversal in these transactions due to the performance obligations and settlement of the transactions being on a daily basis.

 

Income Taxes

 

We have adopted ASC Subtopic 740-10, Income Taxes, which requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statement or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.

 

Management judgment is required in determining our provision for income taxes, our deferred tax assets and liabilities, and any valuation allowance recorded against our deferred tax assets. Deferred tax assets are reduced by a valuation allowance if, based on the consideration of all available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. Changes in assumptions in future periods may require us to adjust our valuation allowance, which could materially impact our financial position and results of operations. The Company recognizes the benefit of an uncertain tax position that it has taken or expects to take on its income tax return, if such a position is more likely than not to be sustained. 

 

 
F-9

Table of Contents

 

Net 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 nine months ended March 31, 2024 and the three and nine months ended March 31, 2023, 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 following table illustrates the computation of diluted earnings per share for the three months ended March 31, 2024.

 

 

 

March 31, 2024

 

Net income

 

$297,283

 

Less: preferred dividends

 

 

(72,277 )

Net income available to common shareholders (numerator)

 

$225,006

 

 

 

 

 

 

Basic weighted average number of common shares outstanding

 

 

5,064,492

 

Dilutive impact of convertible preferred stock

 

 

13,233,588

 

Diluted weighted average number of common shares outstanding (denominator)

 

 

18,298,080

 

 

 

 

 

 

Diluted income per common share

 

$0.01

 

 

Fair Value of Financial Instruments 

 

Assets and liabilities measured at fair value on a recurring basis

 

We recognize financial instruments under the following fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three levels as follows:

 

 

Level 1: 

quoted prices (unadjusted) in active markets for identical assets or liabilities;

 

 

 

 

 

Level 2:  

observable inputs other than Level 1, quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, and model-derived prices whose inputs are observable or whose significant value drivers are observable; and

 

 

 

 

 

Level 3:  

assets and liabilities whose significant value drivers are unobservable.

 

The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. 

 

The Company will update its assumptions each reporting period based on new developments and record such amounts at fair value based on the revised assumptions until the agreements expire or contingency is resolved, as applicable.

 

 
F-10

Table of Contents

 

The following tables present the Company’s assets and liabilities measured at fair value on a recurring basis:

 

 

 

Fair value measured as of March 31, 2024

 

 

 

Total carrying value

 

 

Level 1 

 

 

Level 2 

 

 

Level 3 

 

Bitcoin (see NOTE 4)

 

$1,625,424

 

 

$1,625,424

 

 

$-

 

 

$-

 

 

The Company did not have assets or liabilities measured at fair value on a recurring basis as of June 30, 2023.

 

Assets and liabilities not measured at fair value on a recurring basis

 

In addition to assets and liabilities that are measured at fair value on a recurring basis, we also measure certain assets and liabilities at fair value on a nonrecurring basis. Our non-financial assets, including property and equipment, are measured at fair value when there is an indication of impairment and the carrying amount exceeds the asset’s projected undiscounted cash flows. These assets are recorded at fair value only when an impairment charge is recognized.

 

As of March 31, 2024 and June 30, 2023, the fair values of cash, prepaid expenses and other current assets, accounts payable, and accrued expenses approximated their carrying values because of their short-term nature.

 

Recently Issued Accounting Pronouncements

 

In December 2023, the FASB issued ASU No. 2023-08, Intangibles—Goodwill and Other—Crypto Assets (Subtopic 350-60): Accounting for and Disclosure of Crypto Assets. The amendments in ASU No. 2023-08 are intended to improve the accounting for certain crypto assets by requiring an entity to measure those crypto assets at fair value each reporting period with changes in fair value recognized in net income. The amendments also improve the information provided to investors about an entity’s crypto asset holdings by requiring disclosure about significant holdings, contractual sale restrictions, and changes during the reporting period. The amendments are effective for all entities for fiscal years beginning after December 15, 2024, including interim periods within those fiscal years. Early adoption is permitted for both interim and annual financial statements. The Company elected to early adopt ASU 2023-08 for the year ended June 30, 2024, effective as of July 1, 2023, which had a material impact on the Consolidated Financial Statements. Refer to Note 4. DIGITAL ASSETS, for further information.

 

There were no other new accounting pronouncements issued or proposed by the FASB during the nine months ended March 31, 2024 and through the date of filing this report which the Company believes will have a material impact on its financial statements.

 

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, 2024, the Company’s current liabilities exceeded its current assets by $1,290,415 and the Company had an accumulated deficit of $82,684,536. 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.

 

 
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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. DIGITAL ASSETS

 

Adoption of ASU 2023-08, Accounting for and Disclosure of Crypto Assets

 

Effective July 1, 2023, the Company early adopted ASU 2023-08, which requires entities to measure crypto assets at fair value with changes recognized in the Statement of Operations each reporting period. The Company’s digital assets are within the scope of ASU 2023-08 and the transition guidance requires a cumulative-effect adjustment as of the beginning of the current fiscal year for any difference between the carrying amount of the Company’s digital assets and fair value. As a result of the Company’s early adoption of ASU 2023-08, the Company recorded a $47,360 increase to digital assets and a $47,360 decrease to accumulated deficit on the Balance Sheets as of the beginning of the fiscal year ended June 30, 2024.

 

The following table presents the Company’s significant Digital Asset holdings as of March 31, 2024:

 

 

 

Quantity

 

 

Cost Basis

 

 

Fair Value

 

Bitcoin

 

 

22.79

 

 

$1,329,448

 

 

$1,625,424

 

Total digital assets held as of March 31, 2024

 

 

 

 

 

$1,329,448

 

 

$1,625,424

 

 

The following table presents a roll-forward of total digital assets for the period ended March 31, 2024, based on the fair value model under ASU 2023-08:

 

 

 

Fair Value

 

Balance as of June 30, 2023

 

$447,425

 

Cumulative effect upon adoption of ASU 2023-08

 

 

47,360

 

Revenue recognized from Bitcoin mined

 

 

4,770,422

 

Proceeds from sale of Digital Assets

 

 

(3,517,885 )

Operating expenses paid with Digital Assets

 

 

(331,234 )

Amount due to related party paid with Digital Assets

 

 

(297,138 )

Purchase of property and equipment with Digital Assets

 

 

(36,750 )

Accrued interest on notes payable paid with Digital Assets

 

 

(25,000 )

Change in fair value of Digital Assets

 

 

568,224

 

Balance as of March 31, 2024

 

$1,625,424

 

 

 

 

 

 

Realized gains for the nine months ended March 31, 2024

 

 

11,923

 

 

Prior to Adoption of ASU 2023-08, Accounting for and Disclosure of Crypto Assets

 

Digital assets

 

Prior to the adoption of ASU 2023-08, digital assets were accounted for as indefinite-lived intangible assets and were initially measured in accordance with ASC 350 - Intangible-Goodwill and Other. Digital assets were not amortized, but were 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 intangible asset is impaired. Whenever the exchange-traded price of digital assets declined below its carrying value, the Company was required to determine if an impairment existed and to record an impairment equal to the amount by which the carrying value exceeded the fair value.

 

 
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The following table presents a roll-forward of digital assets for the period ended March 31, 2023, based on the cost-impairment model under ASC 350:

 

 

 

Fair Value

 

Balance as of June 30, 2022

 

$72,885

 

Revenue recognized from Bitcoin mined

 

 

2,398,470

 

Proceeds from sale of Digital Assets

 

 

(2,062,691 )

Operating expenses paid with Digital Assets

 

 

(62,654 )

Realized (gain) loss on sale of digital assets

 

 

(12,514 )

Balance as of March 31, 2023

 

$333,496

 

 

5.  PROPERTY AND EQUIPMENT

 

Property and equipment consisted of the following as of:

 

 

 

March 31,

 2024

 

 

June 30,

2023

 

 

 

 

 

 

 

 

Digital asset mining equipment

 

$8,705,472

 

 

$8,668,025

 

Furniture and equipment

 

 

240,011

 

 

 

240,011

 

 

 

 

 

 

 

 

 

 

Total

 

 

8,945,483

 

 

 

8,908,036

 

Less accumulated depreciation and amortization

 

 

(5,591,467)

 

 

(3,608,202)

 

 

 

 

 

 

 

 

 

Net

 

$3,354,016

 

 

$5,299,834

 

 

Depreciation and amortization expense, for the three months ended March 31, 2024 and 2023 was $692,654 and $1,469,196, respectively and $2,171,938 and $2,291,301 for the nine months ended March 31, 2024 and 2023, respectively.

 

During the nine months ended March 31, 2024 and 2023, we disposed of and wrote off non-serviceable, defective mining equipment with a net book value of $121,670 and $510,634, respectively.

 

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. The Board of Directors establishes Mr. Rubakh’s annual salary, cash bonuses, and the number of Series B preferred stock to issue Mr. Rubakh as additional compensation. Effective January 1, 2024 the Board of Directors approved Mr. Rubakh’s annual salary to be $250,000, quarterly cash bonus to be $100,000, and canceled the quarterly Preferred B shares issuances.

 

During the nine months ended March 31, 2024, Mr. Rubakh’s annual salary was $250,000 ($62,500 quarterly). In addition, $200,000 of bonuses ($100,000 during the six months ended December 31, 2023 and $100,000 during the three months ended March 31, 2024) were approved by the Board of Directors. Last, the Company issued to Mr. Rubakh 50,000 shares (during the three months ended September 30, 2023) of Series B convertible preferred stock valued on an “as converted to common” basis at $8,300,000, using the closing market price of the Company’s common stock. 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.

 

 
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During the nine months ended March 31, 2023, Mr. Rubakh’s annual salary was $250,000 ($62,500 quarterly). In addition, $150,000 of bonuses ($50,000 quarterly) were approved by the Board of Directors. Last, the Company issued to Mr. Rubakh 150,000 shares (50,000 quarterly) of Series B convertible preferred stock valued on an “as converted to common” basis at $497,500, using the closing market price of the Company’s common stock. 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 $162,500 and $257,500 for the three months ended March 31, 2024 and 2023, respectively and $8,687,500 and $835,000 for the nine months ended March 31, 2024 and 2023, respectively. Amounts due to related party, consisting of accrued salary to Mr. Rubakh, totaled $3,584, and $297,138 as of March 31, 2024 and June 30, 2023, respectively.

 

In April 2022, Mr. Rubakh advanced $118,150 to a third-party vendor on behalf of the Company. The advance is due on demand, has no interest rate, and is unsecured. During the nine months ended March 31, 2024, repayments of $118,150 were made on the advance. Amounts due to related party, consisting of short-term advances from Mr. Rubakh, totaled $0 and $118,150 as of March 31, 2024 and June 30, 2023, respectively.

 

Total amount due to Mr. Rubakh for accrued salary and short-term advances as of March 31, 2024 and June 30, 2023 was $3,584, and $415,288, respectively.

 

During the nine months ended March 31, 2024, Mr. Rubakh converted 20,000 shares of Series B preferred stock into 2,000,000 shares of common stock in a transaction recorded at the par value of the shares.

 

During the nine months ended March 31, 2023, Mr. Rubakh converted 902,630 shares of Series B preferred stock into 722,104 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 digital asset mining operations. The term of the agreement was 36 months. Mining operations as this facility terminated in September 2023 due to the significant increase in power cost by local utility. During the nine months ended March 31, 2024 and 2023, the Company incurred power expense of $96,527 and $259,315, respectively. During the three months ended March 31, 2024 and 2023, the Company incurred power expense of $0 and $78,884, respectively. 

 

7. NOTES PAYABLE

 

On June 15, 2022, the Company entered into a Loan Agreement and Promissory Note with BHP Capital NY, Inc. (“BHP”) in the amount of $500,000. The note matured on January 15, 2023, and bares a flat interest charge of $130,000 that shall not be reduced or pro-rated in the event of prepayment. In addition, upon an event of default, the Note bares default interest of 18% per annum. This note is secured by assets and equipment of the Company. As further inducement to enter this note, the Company issued BHP 16,000 shares of restricted common stock. These shares were valued at $123,200 using the closing market price of the Company’s common stock on the date of issuance and were recorded as a debt discount that is being amortized to interest expense over the term of the note. The Company recorded $0 and $8,636 of interest expense for amortization of this debt discount and accrued $22,750 and $27,605 of interest expense during the three months ended March 31, 2024 and 2023, respectively and recorded $0 and $114,564 of interest expense for amortization of this debt discount and accrued $68,750 and $139,381 of interest expense during the nine months ended March 31, 2024 and 2023, respectively. The Company repaid $100,000 ($75,000 via cash and $25,000 via Bitcoin) and $50,000 (via cash) during the nine months ended March 31, 2024 and 2023, respectively. As of March 31, 2024, this note was in default due to nonpayment before the maturity date.

 

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 $8.50 per share.

 

 
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Each share of the Series C preferred stock is entitled to receive cumulative dividends of 12% per annum or 18% per annum in the event of default, payable monthly from the date of issuance of the shares. Starting one month after the issuance of the shares, they were in default due to the Company’s failure to pay the cumulative dividend monthly as required by the agreement. Dividends may be paid in cash or in shares of Series C preferred stock at the discretion of the Company. During the year ended June 30, 2023, the Company settled $293,639 of dividends owed in exchange for 78,304 shares of common stock. The shares of Common Stock were valued based on their value as of the settlement date which was $3.75 per share. As of March 31, 2024 and June 30, 2023, the Company accrued Series C preferred stock dividends of $378,207 and $245,088, 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.

 

As March 31, 2024 and June 30, 2023, 1,125 shares of Series C preferred stock were issued and outstanding and recorded at started value as mezzanine due to certain default provision 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 $37.50 per share.

 

Each share of the Series D preferred stock is entitled to receive cumulative dividends of 12% per annum or 18% per annum in the event of default, payable monthly from the date of issuance of the shares. Starting one month after the issuance of the shares, they were in default due to the Company’s failure to pay the cumulative dividend monthly as required by the agreement. Dividends may be paid in cash or in shares of Series D preferred stock at the discretion of the Company. As of March 31, 2024 and June 30, 2023, the Company accrued Series D preferred stock dividends of $1,754,874 and $1,400,122, 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.

 

As of March 31, 2024 and June 30, 2023, 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.

 

 
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9. STOCKHOLDERS’ EQUITY (DEFICIT)

 

Preferred Stock

 

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. Each share of Series A preferred stock has a par value of $0.001. 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 not subject to adjustment for a stock split or reverse stock split. 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, 2024 and June 30, 2023, 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 (“Conversion Ratio”). The Conversion Ratio is subject to adjustment if the Company enters into a merger or spin off transaction but is not subject to adjustment for a stock split or reverse stock split. 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.

 

During the nine months ended March 31, 2024, Mr. Rubakh converted 20,000 shares of Series B preferred stock into 2,000,000 shares of common stock in a transaction recorded at the par value of the shares.

 

During the nine months ended March 31, 2023, Mr. Rubakh converted 902,630 shares of Series B preferred stock into 722,104 shares of common stock in a transaction recorded at the par value of the shares.

 

For services provided during the nine months ended March 31, 2024, the Company issued to Mr. Rubakh 50,000 shares of Series B convertible preferred stock valued on an “as converted to common” basis at $8,300,000, using the closing market price of the Company’s common stock. 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.

 

For services provided during the nine months ended March 31, 2023, the Company issued to Mr. Rubakh 150,000 shares of Series B convertible preferred stock valued on an “as converted to common” basis at $497,500, using the closing market price of the Company’s common stock. 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.

 

The Company had 130,000 and 100,000 shares issued and outstanding as of March 31, 2024 and June 30, 2023, respectively.

 

 
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Common Stock

 

As of March 31, 2024, we were authorized to issue up to 300,000,000 shares of common stock with a par value of $0.001.

 

The Company had 5,064,492 and 2,864,492 common shares issued and outstanding as of March 31, 2024 and June 30, 2023, respectively.

 

During the nine months ended March 31, 2024, the Company issued a total of 2,200,000 shares of its common stock: 2,000,000 in conversion of Series B preferred stock recorded at par value of $2,001 and 200,000 shares for the purchase of bitcoin miners recorded at the fair value of the shares or $309,300.

 

During the nine months ended March 31, 2023, the Company issued a total of 1,122,634 shares of its common stock: 722,104 shares issued in conversion of Series B preferred stock recorded at $72,278,304 shares issued for settlement of accrued dividends for a fair value of $293,639,234,215 shares for the cash-less exercise of warrants recorded at par value of $23,488,000 shares issued valued at $11,000 recorded as a loss on exercise of warrants, and 11 shares issued due to rounding from the Reverse Split.

 

10. WARRANTS

 

The Company issued warrants to purchase 88,000 shares of its common stock in February 2021 in connection with the sale of Series D preferred stock.

 

On January 19, 2023, the Company and the Purchaser entered into a letter agreement whereby the Company agreed to amend the terms of such Purchaser’s Warrants to purchase up to 88,000 shares to provide effective as of August 30, 2022. The amendment reduced the exercise price thereof to $0.125, subject to adjustment therein, and waived the “exploding feature” of the Anti-Dilution Provision in the Warrant that would otherwise have effected an increase in the number of warrant shares as a result of an exercise price reduction so as to result in the same aggregate value of the warrant shares multiplied by the exercise price.

 

The effect of this modification was measured as the excess of the fair value of the amended Purchaser’s Warrants over the fair value of the Purchaser’s Warrants immediately before the amendments which amounted to $93,337 and was recognized as a dividend due to the substance of the modification not indicating the issuer has incurred a cost that should be expensed.

 

During the nine months ended March 31, 2023, we issued 88,000 shares of common stock for the exercise of these 88,000 warrants. As the Company agreed to not receive cash for the exercise of these warrants, an $11,000 Loss on Exercise of Warrant was recorded in the Other Income (Expense) section of the Consolidated Statements of Operations.

 

The Company also issued warrants to purchase 240,000 shares of its common stock in April 2021 in connection with the sale of common stock. During the nine months ended March 31, 2023, the Company entered into two letter agreements in connection with this sale described as follows.

 

On September 13, 2022, the Company and one of the Purchasers entered into a letter agreement (the “September 13 Amendment Agreement”) whereby the Company agreed to amend the terms of such Purchaser’s Warrants to purchase up to 120 thousand shares to provide effective as of June 29, 2022. The amendment reduced the exercise price thereof to $0.125, subject to adjustment therein, and waived the “exploding feature” of the Anti-Dilution Provision in the Warrant that would otherwise have effected an increase in the number of warrant shares as a result of an exercise price reduction so as to result in the same aggregate value of the warrant shares multiplied by the exercise price. Additionally, other than an Exempt Issuance, as defined in the Warrants, from the date hereof until 90 days after the date hereof, neither the Company nor any subsidiary of the Company may issue, enter into any agreement to issue or announce the issuance or proposed issuance of any shares of Common Stock or Common Stock Equivalents (as defined in the Warrants).

 

On September 15, 2022, the Company and the other Purchaser entered into a letter agreement (the “September 15 Amendment Agreement”) whereby the Company agreed to amend the terms of such Purchaser’s Warrants to purchase up to 120 thousand shares, effective as of August 30, 2022. The amendment reduced the exercise price thereof to $0.125, subject to adjustment therein, and waived the “exploding feature” of the Anti-Dilution Provision in the Warrant that would otherwise have effected an increase in the number of warrant shares as a result of an exercise price reduction so as to result in the same aggregate value of the warrant shares multiplied by the exercise price. Additionally, other than an Exempt Issuance, as defined in the Warrants, from the date hereof until 90 days after the date hereof, neither the Company nor any subsidiary of the Company may issue, enter into any agreement to issue or announce the issuance or proposed issuance of any shares of Common Stock or Common Stock Equivalents (as defined in the Warrants).

 

 
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The effect of these modifications was measured as the excess of the fair value of the amended Purchaser’s Warrants over the fair value of the Purchaser’s Warrants immediately before the amendments which amounted to $162,037 and was recognized as a dividend due to the substance of the modification not indicating the issuer has incurred a cost that should be expensed.

 

During the nine months ended March 31, 2023, we issued 234,215 shares of common stock for the cash-less exercise of 240,000 warrants.

 

There were no warrants outstanding as of March 31, 2024 and June 30, 2023.

 

11. IMPACTS OF ADOPTION OF ASU 2023-08

 

The following tables present a summary of the impacts of the adoption of ASU 2023-08, effective July 1, 2023, on the Company’s interim Condensed Statements of Operations for the three months ended September 30, 2023 and the three and six months ended December 31, 2023 (all amounts are unaudited):

 

 

 

For the three months ended September 30, 2023

 

Statements of Operations

 

As previously reported

 

 

Effects of adoption

 

 

As adjusted

 

Total Revenue

 

 

1,059,064

 

 

 

-

 

 

 

1,059,064

 

Realized gain (loss) on sale of digital assets

 

 

(20,455 )

 

 

15,625

 

 

 

(4,830 )

Change in fair value of digital assets

 

 

-

 

 

 

(60,325 )

 

 

(60,325 )

Operating income (loss)

 

 

(8,991,693 )

 

 

(44,700 )

 

 

(9,036,393 )

Net income (loss)

 

 

(9,035,177 )

 

 

(44,700 )

 

 

(9,079,877 )

Basic and diluted net income (loss) per share

 

 

(2.73 )

 

 

(0.01 )

 

 

(2.74 )

Basic and diluted weighted average number of shares outstanding

 

 

3,308,818

 

 

 

-

 

 

 

3,608,818

 

 

 

 

For the three months ended December 31, 2023

 

Statements of Operations

 

As previously reported

 

 

Effects of adoption

 

 

As adjusted

 

Total Revenue

 

 

1,728,108

 

 

 

-

 

 

 

1,728,108

 

Realized gain (loss) on sale of digital assets

 

 

183,146

 

 

 

(180,965 )

 

 

2,181

 

Change in fair value of digital assets

 

 

-

 

 

 

175,741

 

 

 

175,741

 

Operating income (loss)

 

 

(513,602 )

 

 

(5,224 )

 

 

(518,826 )

Net income (loss)

 

 

(354,340 )

 

 

(5,224 )

 

 

(359,564 )

Basic and diluted net income (loss) per share

 

 

(0.08 )

 

 

(0.01 )

 

 

(0.09 )

Basic and diluted weighted average number of shares outstanding

 

 

4,228,742

 

 

 

-

 

 

 

4,228,742

 

 

 

 

For the six months ended December 31, 2023

 

Statements of Operations

 

As previously reported

 

 

Effects of adoption

 

 

As adjusted

 

Total Revenue

 

 

2,787,172

 

 

 

-

 

 

 

2,787,172

 

Realized gain (loss) on sale of digital assets

 

 

162,691

 

 

 

(165,340 )

 

 

(2,649 )

Change in fair value of digital assets

 

 

-

 

 

 

115,416

 

 

 

115,416

 

Operating income (loss)

 

 

(9,505,294 )

 

 

(49,924 )

 

 

(9,555,218 )

Net income (loss)

 

 

(9,389,517 )

 

 

(49,924 )

 

 

(9,439,441 )

Basic and diluted net income (loss) per share

 

 

(2.49 )

 

 

(0.01 )

 

 

(2.50 )

Basic and diluted weighted average number of shares outstanding

 

 

3,768,780

 

 

 

-

 

 

 

3,768,780

 

 

 
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12. 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.

 

13. SUBSEQUENT EVENTS

 

Management has evaluated subsequent events according to the requirements of ASC TOPIC 855, and has none to report.

 

 
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Item 2. Management’s Discussion and Analysis or 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 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 might 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, 2023 filed on September 28, 2023 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 digital asset sector, mainly in digital asset mining and sales of branded mining rigs. Our offices are located at 73 Buck Road, Suite 2, Huntingdon Valley, Pennsylvania 19006.

 

 
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As of March 31, 2024, the Company owned a total of approximately 2,582 miners in one location, Granbury, Texas. All miners previously located in Tioga, Pennsylvania were relocated to Granbury, Texas during the three months ended September 30, 2023.

 

The Company will continue to (1) raise capital to purchase new mining equipment, (2) sell older and no longer profitable models and (3) expand digital asset mining operations to new locations.

 

On April 17, 2023, the Board of Directors of the Company approved a 1-for-125 reverse split of the Company’s common shares. The reverse split has been given retroactive effect in the financial statements for all periods presented.

 

Financial

 

As of March 31, 2024, we operated our digital asset mining operations in one hosted facility in Wolf Hollow, Texas. The hosting and power purchase agreement for this facility requires the Company to pay monthly a contractual rate per kilowatt hour of electricity consumed in the Company’s digital asset mining operations.

 

Revenues from our digital asset mining operations were $1,983,250 and $1,472,813 for the three months ended March 31, 2024 and 2023, respectively and $4,770,422 and $2,398,470 for the nine months ended March 31, 2024 and 2023, respectively.

 

When funds are available and market conditions allow, we also invest in certain denominations of digital assets to complement our mining operations. As of March 31, 2024, our digital assets at fair market value totaled $1,625,424 and were comprised 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, 2024, we generated negative cash flow from operations and a gain on the change in fair value of digital assets. We 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 digital asset mining operators, is currently operating at a non-profitable status following record historic runs in market prices of digital assets. Market prices of digital currencies have not been high enough to cover the operating costs of mining companies, including significant power costs 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.

 

 
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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, Series B preferred stock and warrants, 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 asset mining facilities and to fund future operations, we will need to 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, 2024 COMPARED TO THE THREE MONTHS AND NINE MONTHS ENDED MARCH 31, 2023

 

Revenues

 

Our digital asset mining revenues increased to $1,983,250 in the three months ended March 31, 2024 from $1,472,813 in the three months ended March 31, 2023 and increased to $4,770,422 in the nine months ended March 31, 2024 from $2,398,470 in the nine months ended March 31, 2023. This increase in revenues resulted primarily due to the strengthening of the Bitcoin market and increased miners.

 

Costs and expenses

 

Cost of revenues was $1,197,523 and $976,958 in the three months ended March 31, 2024 and 2023, respectively and $3,209,083 and $1,602,434 in the nine months ended March 31, 2024 and 2023, respectively. Expenses associated with running our digital asset mining operations, such as energy and hosting costs, operating supplies, and consulting services are recorded as cost of revenues, but excluding depreciation and amortization, which are separately stated. The increase in cost of revenues in the current fiscal period is due primarily to an increase in energy and hosting costs.

 

General and administrative expenses decreased to $240,002 in the three months ended March 31, 2024 from $337,475 in the three months ended March 31, 2023. Our general and administrative expenses increased to $8,919,954 in the nine months ended March 31, 2024 from $1,032,999 in the nine months ended March 31, 2023. The decrease for the three-month period and the increase for the nine-month period resulted primarily from non-cash stock-based compensation expense. We reported non-cash, related party stock-based compensation of $0 and $145,000 in the three months ended March 31, 2024 and 2023, respectively and $8,300,000 and $497,500 in the nine months ended March 31, 2024 and 2023, respectively.

 

Depreciation and amortization decreased to $692,654 in the three months ended March 31, 2024 from $1,469,195 in the three months ended March 31, 2023. Depreciation and amortization decreased to $2,171,938 in the nine months ended March 31, 2024 from $2,291,301 in the nine months ended March 31, 2023. The decrease is depreciation and amortization in the current fiscal year is due primarily to a reduction in the cost basis of the Company’s digital asset minors.

 

 
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Change in fair value of Bitcoin for the three and nine months ended March 31, 2024, was a gain of $452,808 and $568,224, respectively, and was recognized as a result of adopting Accounting Standards Update (“ASU”) No. 2023-08, Intangibles-Goodwill and Other-Crypto Assets (Subtopic 350-60): Accounting for and Disclosure of Crypto Assets (“ASU 2023-08”), effective July 1, 2023, under which Bitcoin is recognized at fair value with changes in fair value recognized in net income. The gain recognized was attributable to increases in the price of Bitcoin and the increased quantity of Bitcoin held as of March 31, 2024, as compared to June 30, 2023.

 

In addition to the currencies received as compensation for our mining services, we purchased various digital currencies totaling $332,934 and $302,951 during the nine months ended March 31, 2024 and 2023, respectively. We also 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, 2024 and 2023, we received total proceeds of $3,850,947 and $2,428,290, respectively, from the sale of digital currencies and incurred transactions fees totaling $62,654 and $32,099, respectively, which are recorded in General and administrative expenses in our Statement of Operations. We realized a gain (loss) on sale of digital currencies of $11,923 and $(12,514) in the nine months ended March 31, 2024 and 2024, respectively.

 

During the nine months ended March 31, 2024 and 2023, we disposed of and write off non-serviceable, defective mining equipment with a net book value of $121,670 and $510,634 respectively. During the three months ended March 31, 2024 and 2023, we disposed of and write off non-serviceable, defective mining equipment with a net book value of $0 and $463,919 respectively.

 

Other Income (Expense)

 

Our other income (expense) was comprised of the following for the three and nine months ended March 31:

 

 

 

Three Months Ended March 31

 

 

Nine Months Ended March 31

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

$(23,168)

 

$(36,281)

 

$(70,082)

 

$(254,182)

Loss on exercise of warrants

 

 

-

 

 

 

(11,000)

 

 

-

 

 

 

(11,000)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total other income (expense)

 

$(23,168)

 

$(47,281)

 

$(70,082)

 

$(265,182)

 

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. During the prior nine months ended, we had one note payable outstanding for $500,000 which we had recorded $114,564 of interest for debt discount. During the current nine months ended we had the same note payable outstanding with a fully amortized debt discount, thus resulting in a decrease in interest expense compared to the prior period.

 

During the nine months ended March 31, 2024 and 2023, we recognized $0 and $11,000 loss on exercise of warrants.

 

Net Loss

 

As a result, we reported net income (loss) of $297,283 and ($1,766,615) in the three months ended March 31, 2024 and 2023, respectively and net losses of $9,142,158 and $3,316,594 in the nine months ended March 31, 2024 and 2023, respectively.

 

 
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LIQUIDITY AND CAPITAL RESOURCES

 

Overview

 

As of March 31, 2024, we had total current assets of $2,015,696, including cash of $381,872, digital assets of $1,625,424, and prepaid expenses and other current assets of $8,400 and total current liabilities of $3,306,111. We had total stockholders’ deficit of $1,483,252 as of March 31, 2024 compared to a stockholders’ deficit of $509,883 as of June 30, 2023.

 

Sources and Uses of Cash

 

During the nine months ended March 31, 2024, we used cash in operations of $3,199,249 as a result of our net loss of $9,142,158, a non-cash gain on the change in the fair value of digital assets of $568,224, non-cash revenue recognized from Bitcoin mined of $4,770,422, and an increase in prepaid expenses and other current assets of $1,235 partially offset by non-cash stock-based compensation-related party of $8,300,000, other non-cash expenses of $2,293,608, the payment of operating expenses with digital assets worth $57,722, and increases in accounts payable of $285,742, accrued expenses of $68,750, and amounts due to related party of $276,968.

 

During the nine months ended March 31, 2023, we used cash in operations of $2,234,294 as a result of our net loss of $3,316,594, increases in digital currencies of $2,398,464, prepaid expenses of $8,880, deposits of $500,000, accounts payable of $120,727, accrued expenses of $139,381 and amounts due to related party of $292,023 partially offset by non-cash losses on sale of digital currencies of $12,514, other non-cash expenses of $3,424,999.

 

During the nine months ended March 31, 2024, we provided net cash in investing activities of $3,516,273, comprised of net proceeds from the sale of digital currencies of $3,850,947, offset by the purchase of digital currencies of $332,934 and the purchase of mining equipment for $1,740.

 

During the nine months ended March 31, 2023, we provided net cash in investing activities of $2,092,825, comprised of net proceeds from the sale of digital currencies of $2,428,290, offset by the increase in equipment deposits of $32,514 and the purchase of digital currencies of $302,951.

 

During the nine months ended March 31, 2024, we used net cash in financing activities of $193,150, comprised of the repayment of the related party short term advance of $118,150 and the repayment of accrued interest on a note payable of $75,000.

 

During the nine months ended March 31, 2023, we used net cash in financing activities of $50,000, comprised of repayment of accrued interest on a note payable.

 

We will have to raise funds to successfully operate our digital currency mining operations, purchase equipment and expand our operations to multiple facilities. We will have to borrow money from shareholders or issue debt or equity or enter a strategic arrangement with a third party. There can be no assurance that additional capital will be available to us.

 

Going Concern

 

The Company has reported recurring net losses since its inception. As of March 31, 2024, the Company had an accumulated deficit of $82,684,536. 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 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.

 

 
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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.

 

CRITICAL ACCOUNTING POLICIES

 

Our significant accounting policies are disclosed in Note 2 to the accompanying financial statements.  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 Assets

 

Digital assets are included in current assets in the Consolidated Balance Sheets due to the Company’s ability to sell bitcoin in a highly liquid marketplace and the sale of bitcoin to fund operating expenses to support operations. The proceeds from the sale of digital assets and the purchase of digital assets are included within investing activities in the accompanying Consolidated Statement of Cash Flows. Digital Assets awarded to the Company through its mining activities are accounted for in connection with the Company’s revenue recognition policy. Following the adoption of ASU 2023-08 effective July 1, 2023, the Company measures digital assets at fair value with changes recognized in operating expenses in the Consolidated Statement of Comprehensive Income (Loss). The Company tracks its cost basis of digital assets by-wallet in accordance with the first-in-first-out (“FIFO”) method of accounting.

 

Property and Equipment

 

Property and equipment, consisting primarily of computer and other digital asset mining equipment (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. 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 nine months ended March 31, 2024, the Company discontinued the use of damaged or non-serviceable mining equipment and wrote off its net book value of $121,670 to loss on disposition of property and equipment.

 

During the nine months ended March 31, 2023, the Company discontinued the use of damaged or non-serviceable mining equipment and wrote off its net book value of $510,634 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 as a result 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.

 

 
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Payments to equipment suppliers prior to shipment of the equipment are recorded as equipment deposits.

 

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 three and nine months ended March 31, 2024 and 2023.

 

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, 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 digital asset mining revenues and revenues from the sale of digital asset 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.

 

 
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To generate revenue from mining bitcoin, the Company has entered into digital asset mining pools by executing contracts, as amended from time to time, with the mining pool operators to provide computing power to the mining pool. The contracts are terminable at any time by either party without penalty and the Company’s enforceable right to compensation begins only when, and lasts as long as, the Company provides computing power to the mining pool operator. In exchange for providing computing power, we are entitled to a Full-Pay-Per-Share payout of Bitcoin based on a contractual formula, which primarily calculates the hash rate provided by us to the mining pool as a percentage of total network hash rate, and other inputs. We are entitled to consideration even if a block is not successfully placed by the mining pool operator.

 

Providing computing power to solve complex cryptographic algorithms in support of the Bitcoin blockchain (in a process known as “solving a block”) is an output of the Company’s ordinary activities. The provision of providing such computing power is the only performance obligation in the Company’s contracts with mining pool operators. The transaction consideration the Company receives is net of digital asset transaction fees kept by the mining pool operator and is noncash, in the form of bitcoin, which the Company measures at fair value on the date Bitcoin is received. This value is not materially different than the fair value at the moment we meet the performance obligation, which can be recalculated based on the contractual formula. The consideration is variable. The amount of consideration recognized is constrained to the amount of consideration received, which is when it is probable a significant reversal will not occur. There is no significant financing component or risk of a significant revenue reversal in these transactions due to the performance obligations and settlement of the transactions being on a daily basis.

 

OFF BALANCE SHEET ARRANGEMENTS

 

We do not have any off-balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, revenues, and results of operations, liquidity, or capital expenditures.

 

RECENTLY ISSUED ACCOUNTING POLICIES

 

In December 2023, the FASB issued ASU No. 2023-08, Intangibles—Goodwill and Other—Crypto Assets (Subtopic 350-60): Accounting for and Disclosure of Crypto Assets. The amendments in ASU No. 2023-08 are intended to improve the accounting for certain crypto assets by requiring an entity to measure those crypto assets at fair value each reporting period with changes in fair value recognized in net income. The amendments also improve the information provided to investors about an entity’s crypto asset holdings by requiring disclosure about significant holdings, contractual sale restrictions, and changes during the reporting period. The amendments are effective for all entities for fiscal years beginning after December 15, 2024, including interim periods within those fiscal years. Early adoption is permitted for both interim and annual financial statements. The Company elected to early adopt ASU 2023-08 for the year ended June 30, 2024, effective as of July 1, 2023, which had a material impact on the Consolidated Financial Statements.

 

There were no other new accounting pronouncements issued or proposed by the FASB during the nine months ended March 31, 2024 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.

 

 
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ITEM 4. CONTROLS AND PROCEDURES.

 

Evaluation of Disclosure Controls and Procedures

 

We carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)). Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of the end of the period covered in this report, our disclosure controls and procedures were not effective to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the required time periods and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

 

Our management, including our principal executive officer and principal financial officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all error or fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. To address the material weaknesses, we performed additional analysis and other post-closing procedures in an effort to ensure our consolidated financial statements included in this quarterly report have been prepared in accordance with generally accepted accounting principles. Accordingly, management believes that the financial statements included in this report fairly present in all material respects our financial condition, results of operations and cash flows for the periods presented.

 

Management’s Report on Internal Control over Financial Reporting

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Securities Exchange Act, as amended. Our management assessed the effectiveness of our internal control over financial reporting as of March 31, 2024. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. We have identified the following material weaknesses:

 

1.

As of March 31, 2024, 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-K. Since these entity level programs have a pervasive effect across the organization, management has determined that these circumstances constitute a material weakness.

2.

As of March 31, 2024, due to the inherent issue 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.

 

 

 

 

3.

As of March 31, 2024, 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.

 

Because of these material weaknesses, management has concluded that the Company did not maintain effective internal control over financial reporting as of March 31, 2024, 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, 2024, that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

Corrective Action

 

Management plans to address the structure of the Board of Directors and discuss adding an audit committee during fiscal year 2024.

 

 
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PART II

 

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. 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 directors, officers or affiliates, any owner of record or beneficiary of more than 5% of any class of our voting securities is a party adverse to us or has a material interest adverse to us.

 

ITEM 1A. RISK FACTORS 

 

Risks Related to Our Business

 

Because we are an early-stage company with minimal revenue and a history of losses and we expect to continue to incur substantial losses for the foreseeable future, we cannot assure you that we can or will be able to operate profitably.

 

We have incurred losses since our organization, and are subject to the risks common to start-up, pre-revenue enterprises, including, among other factors, undercapitalization, cash shortages, limitations with respect to personnel, financial and other resources and lack of revenues. We cannot assure you that we will be able to operate profitably or generate positive cash flow. If we cannot achieve profitability, we may be forced to cease operations and you may suffer a total loss of your investment.

 

An investment in the company must be considered speculative since our operations are dependent on the market value of Bitcoin.

 

Our operations are dependent on the continued viable market performance of cryptocurrencies that we market and, in particular, the market value of Bitcoin. The decision to pursue blockchain and digital currency businesses exposes the Company to risks associated with a new and untested strategic direction. Under the current accounting rules, cryptocurrency is not cash, currency or a financial asset, but an indefinite-lived intangible asset; declines in the market price of cryptocurrencies would be included in earnings, whereas increases in value beyond the original cost or recoveries of previous declines in value would not be captured. The prices of digital currencies have varied wildly in recent periods and reflects “bubble” type volatility, meaning that high prices may have little or no merit, may be subject to rapidly changing investor sentiment, and may be influenced by factors such as technology, regulatory void or changes, fraudulent actors, manipulation and media reporting.

 

Natural disasters and geo-political events could adversely affect our business.

 

Natural disasters, including hurricanes, cyclones, typhoons, tropical storms, floods, earthquakes and tsunamis, weather conditions, including winter storms, droughts and tornados, whether as a result of climate change or otherwise, and geo-political events, including civil unrest or terrorist attacks, that affect us, or other service providers could adversely affect our business. Specifically, if the weather conditions in Tioga, Pennsylvania, Kearney, Nebraska or Wolf Hollow, TX, become too hot, or too humid, we may be required to install additional AC units to cool the cryptocurrency mining equipment which will greatly affect our profit margins. In addition, too much humidity in the air may damage our equipment or require us to install expensive dehumidifiers further lowering our profit margins.

 

 
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Raising additional capital may cause dilution to our existing stockholders, restrict our operations or require us to relinquish rights.

 

We may seek additional capital through a combination of private and public equity offerings, debt financings collaborations and strategic and licensing arrangements. To the extent that we raise additional capital through the sale of common stock or securities convertible or exchangeable into common stock, current stockholders’ ownership interest in the Company will be diluted. In addition, the terms may include liquidation or other preferences that materially adversely affect their rights as a stockholder. Debt financing, if available, would increase our fixed payment obligations and may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through collaboration, strategic alliance and licensing arrangements with third parties, we may have to relinquish valuable rights to our product candidates, our intellectual property, future revenue streams or grant licenses on terms that are not favorable to us.

 

We are increasingly dependent on information technology systems and infrastructure (cyber security).

 

Our operations are potentially vulnerable to breakdown or other interruption by fire, power loss, system malfunction, unauthorized access and other events such as computer hackings, cyber-attacks, computer viruses, worms or other destructive or disruptive software. Likewise, data privacy breaches by employees and others with permitted access to our systems may pose a risk that sensitive data may be exposed to unauthorized persons or to the public. It is critical that our systems provide a continued and uninterrupted performance for our business to generate revenues. There can be no assurance that our efforts will prevent significant breakdowns, breaches in our systems or other cyber incidents that could have a material adverse effect upon our business, operations or financial condition of the Company.

 

If we are unable to attract, train and retain technical and financial personnel, our business may be materially and adversely affected.

 

Our future success depends, to a significant extent, on our ability to attract, train and retain key management, technical, regulatory and financial personnel. Recruiting and retaining capable personnel with experience in pharmaceutical products is vital to our success. There is substantial competition for qualified personnel, and competition is likely to increase. We cannot assure you we will be able to attract or retain the technical and financial personnel we require. If we are unable to attract and retain qualified employees, our business may be materially and adversely affected.

 

We depend heavily on our chief executive officer, and his departure could harm our business.

 

The expertise and efforts of Steve Rubakh, our Chief Executive Officer, are critical to the success of our business. The loss of Mr. Rubakh’s services could significantly undermine our management expertise and our ability to operate our Company.

 

Our auditors’ report includes a going concern paragraph.

 

Our financial statements include a going-concern qualification from our auditors, which expresses doubt about our ability to continue as a going concern. We have operated at a loss since inception. Our ability to operate profitably is dependent upon, among other things, obtaining additional financing for our operations. These factors, among others, raise substantial doubt about our ability to continue as a going concern. The accompanying financial statements do not include any adjustments that take into consideration the uncertainty of our ability to continue operations.

 

 
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Risks Relating Generally to Our Operations and Technology

 

Currently, there is relatively limited use of Bitcoin in the retail and commercial marketplace in comparison to relatively large use by speculators, thus contributing to price volatility that could adversely affect our results of operations.

 

Bitcoin has only recently become accepted as a means of payment for goods and services by certain major retail and commercial outlets and use of Bitcoin by consumers to pay such retail and commercial outlets remains limited. Conversely, a significant portion of Bitcoin demand is generated by speculators and investors seeking to profit from the short- or long-term holding of Bitcoin. Many industry commentators believe that Bitcoin’s best use case is as a store of wealth, rather than as a currency for transactions, and that other cryptocurrencies having better scalability and faster settlement times will better serve as currency. This could limit Bitcoin’s acceptance as transactional currency. A lack of expansion by Bitcoin into retail and commercial markets, or a contraction of such use, may result in increased volatility or a reduction in the Bitcoin Index Price, either of which could adversely affect our results of operations.

 

We are reliant on pools of users or miners that are the sole outlet for sales of cryptocurrencies that we mine.

 

We do not have the ability to sell our cryptocurrency production directly on the exchanges or markets that are currently where cryptocurrencies are purchased and traded. Pools are operated to pool the production on a daily of companies mining cryptocurrencies, and these pools are our sole means of selling our production of cryptocurrencies. Absent access to such pools, we would be forced to seek a different method of access to the cryptocurrency markets. There is no assurance that we could arrange any alternate access to dispose of our mining production.

 

We may not be able to respond quickly enough to changes in technology and technological risks, and to develop our intellectual property into commercially viable products.

 

Changes in legislative, regulatory or industry requirements or in competitive technologies may render certain of our planned products obsolete or less attractive. Our mining equipment may become obsolete, and our ability to anticipate changes in technology and regulatory standards and to successfully develop and introduce new and enhanced products on a timely basis will be a significant factor in our ability to remain competitive. We cannot provide assurance that we will be able to achieve the technological advances that may be necessary for us to remain competitive or that certain of our products will not become obsolete.

 

The SEC is continuing its probes into public companies that appear to incorporate and seek to capitalize on blockchain technology, and may increase those efforts with novel regulatory regimes and determine to issue additional regulations applicable to the conduct of our business or broadening disclosures in our filings under the Securities Exchange Act of 1934.

 

As the SEC stated previously, it is continuing to scrutinize and commence enforcement actions against companies, advisors and investors involved in the offering of cryptocurrencies and related activities. At least one Federal Court has held that cryptocurrencies are “securities” for certain purposes under the Federal Securities Laws.

 

According to a report published by Lex Machina, securities litigation in general and those that are related to blockchain, cryptocurrency or bitcoin specifically, showed a marked increase during the first two quarters of 2018 as compared to 2017. The total number of securities cases that referenced “blockchain,” “cryptocurrency” or “bitcoin” in the pleadings tripled in the first half of 2018 alone compared to 2017. On the same day, the SEC announced its first charge against unregistered broker-dealers for selling digital tokens after the SEC issued The DAO Report in 2017. The SEC charged TokenLot LLC (TokenLot), a self-described “ICO Superstore”, and its owners, Lenny Kugel and Eli L. Lewitt, with failing to register as broker-dealers. On November 16, 2018 the SEC settled with two cryptocurrency startups, and reportedly has more than 100 investigations into cryptocurrency related ventures, according to a codirector of the SEC’s enforcement. As the regulatory and legal environment evolves, the Company may in its mining activities become subject to new laws, and further regulation by the SEC and other federal and state agencies.

 

On February 11, 2020, the SEC filed charges against an Ohio-based businessman who allegedly orchestrated a digital asset scheme that defrauded approximately 150 investors, including many physicians. The agency alleges that Michael W. Ackerman, along with two business partners, raised at least $33 million by claiming to investors that he had developed a proprietary algorithm that allowed him to generate extraordinary profits while trading in cryptocurrencies. The SEC’s complaint alleges that Ackerman misled investors about the performance of his digital currency trading, his use of investor funds, and the safety of investor funds in the Q3 trading account. The complaint further alleges that Ackerman doctored computer screenshots taken of Q3’s trading account to create. In reality, as alleged, at no time did Q3’s trading account hold more than $6 million and Ackerman was personally enriching himself by using $7.5 million of investor funds to purchase and renovate a house, purchase high end jewelry, multiple cars, and pay for personal security services.

 

 
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On March 16, 2020, the SEC obtained an asset freeze and other emergency relief to halt an ongoing securities fraud perpetrated by a former state senator and two others who bilked investors in and outside the U.S. and obtained an asset freeze and other emergency relief to halt an ongoing securities fraud perpetrated by a former state senator and two others who bilked investors in and outside the U.S. The SEC’s complaint alleges that Florida residents Robert Dunlap and Nicole Bowdler worked with former Washington state senator David Schmidt to market and sell a purported digital asset called the “Meta 1 Coin” in an unregistered securities offering, conducted through the Meta 1 Coin Trust. The complaint alleges that the defendants made numerous false and misleading statements to potential and actual investors, including claims that the Meta 1 Coin was backed by a $1 billion art collection or $2 billion of gold, and that an accounting firm was auditing the gold assets. The defendants also allegedly told investors that the Meta 1 Coin was risk-free, would never lose value and could return up to 224,923%. According to the complaint, the defendants never distributed the Meta 1 Coins and instead used investor funds to pay personal expenses and for other personal purposes. The SEC continues to actively prosecute cases involving digital assets, digital securities, cryptocurrencies or other operations involving blockchain technology.

 

Banks and financial institutions may not provide banking services, or may cut off services, to businesses that provide digital currency-related services or that accept digital currencies as payment, including financial institutions of investors in our securities.

 

A number of companies that provide bitcoin and/or other digital currency-related services have been unable to find banks or financial institutions that are willing to provide them with bank accounts and other services. Similarly, a number of companies and individuals or businesses associated with digital currencies may have had and may continue to have their existing bank accounts closed or services discontinued with financial institutions in response to government action, particularly in China, where regulatory response to digital currencies has been particularly harsh. We also may be unable to obtain or maintain these services for our business. The difficulty that many businesses that provide bitcoin and/or derivatives on other digital currency-related services have and may continue to have in finding banks and financial institutions willing to provide them services may be decreasing the usefulness of digital currencies as a payment system and harming public perception of digital currencies, and could decrease their usefulness and harm their public perception in the future.

 

It may be illegal now, or in the future, to acquire, own, hold, sell or use Bitcoin, Ethereum, or other cryptocurrencies, participate in the blockchain or utilize similar digital assets in one or more countries, the ruling of which could adversely affect the company.

 

Although currently Bitcoin, Ethereum, and other cryptocurrencies, the Blockchain and digital assets generally are not regulated or are lightly regulated in most countries, including the United States, one or more countries such as China and Russia may take regulatory actions in the future that could severely restrict the right to acquire, own, hold, sell or use these digital assets or to exchange for fiat currency. Such restrictions may adversely affect the Company. Such circumstances could have a material adverse effect on the ability of the Company to continue as a going concern or to pursue this segment at all, which could have a material adverse effect on the business, prospects or operations of the Company and potentially the value of any cryptocurrencies the Company holds or expects to acquire for its own account and harm investors.

 

If regulatory changes or interpretations require the regulation of Bitcoin or other digital assets under the securities laws of the United States or elsewhere, including the Securities Act of 1933, as amended (the “Securities Act”), the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and the Investment Company Act of 1940 or similar laws of other jurisdictions and interpretations by the SEC, the Commodity Futures Trading Commission (the “CFTC”), the Internal Revenue Service (“IRS”), Department of Treasury or other agencies or authorities, the Company may be required to register and comply with such regulations, including at a state or local level. To the extent that the Company decides to continue operations, the required registrations and regulatory compliance steps may result in extraordinary expense or burdens to the Company. The Company may also decide to cease certain operations. Any disruption of the Company’s operations in response to the changed regulatory circumstances may be at a time that is disadvantageous to the Company.

 

 
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Our digital currencies may be subject to loss, theft or restriction on access.

 

There is a risk that some or all of our digital currencies could be lost or stolen. Digital currencies are stored in digital currency sites commonly referred to as “wallets” by holders of digital currencies which may be accessed to exchange a holder’s digital currency assets. Hackers or malicious actors may launch attacks