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, 2021
☐ TRANSITION REPORT UNDER SECTION13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number: 333-174759
INTEGRATED VENTURES, INC.
|
(Exact Name of
Registrant as Specified in Its charter)
|
Nevada
|
|
82-1725385
|
(State or Other
Jurisdiction of
Incorporation or
Organization)
|
|
(I.R.S. Employer
Identification No.)
|
73 Buck Road, Suite 2, Huntingdon Valley, PA
19006
(Address of principal executive offices) (Zip Code)
(215) 613-1111
(Registrant’s Telephone Number, Including Area Code)
Indicate by check mark whether the registrant (1) has filed all
reports required by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90
days. Yes ☒ No ☐
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer,
or a smaller reporting company. See definitions of “large
accelerated filer,” “accelerated filer,” “smaller reporting
company,” and “emerging growth company” in Rule 12b-2 of the
Exchange Act.
Large accelerated filer
|
☐
|
Accelerated filer
|
☐
|
Non-accelerated filer
|
☐
|
Smaller reporting company
|
☒
|
Emerging growth company
|
☒
|
|
|
Indicate by check mark whether the registrant has submitted
electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T during the preceding 12
months (or such shorter period that the registrant was required to
submit such files. Yes ☒ No ☐.
If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act
☐
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
☒
The number of shares outstanding of the issuer’s common stock,
$0.001 par value per share, was 194,487,662 as of May 14, 2021.
INTEGRATED VENTURES, INC.
FORM 10-Q
MARCH 31, 2021
TABLE OF
CONTENTS
PART I –
FINANCIAL INFORMATION
INDEX TO
FINANCIAL STATEMENTS
Integrated
Ventures, Inc.
|
Condensed Balance
Sheets
|
|
|
|
March 31,
2021
|
|
|
June 30,
2020
|
|
|
|
(Unaudited)
|
|
|
|
|
ASSETS
|
Current assets:
|
|
|
|
|
|
|
Cash
|
|
$ |
99,974 |
|
|
$ |
6,675 |
|
Prepaid expenses and other
current assets
|
|
|
7,500 |
|
|
|
3,250 |
|
Equipment deposits
|
|
|
2,528,392 |
|
|
|
-
|
|
Total current assets
|
|
|
2,635,866 |
|
|
|
9,925 |
|
|
|
|
|
|
|
|
|
|
Non-current assets:
|
|
|
|
|
|
|
|
|
Property and
equipment, net of accumulated depreciation and amortization of
$498,854 and $805,421 as of March 31, 2021 and June 30, 2020,
respectively
|
|
|
994,171 |
|
|
|
453,342 |
|
Digital currencies
|
|
|
1,515,201 |
|
|
|
82,855 |
|
Deposits
|
|
|
700 |
|
|
|
700 |
|
Total assets
|
|
$ |
5,145,938 |
|
|
$ |
546,822 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES,
MEZZANINE AND STOCKHOLDERS' EQUITY (DEFICIT)
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$ |
146,766 |
|
|
$ |
84,443 |
|
Accrued preferred stock
dividends
|
|
|
66,311 |
|
|
|
- |
|
Accrued expenses
|
|
|
6,859 |
|
|
|
25,274 |
|
Due to related party
|
|
|
57,170 |
|
|
|
122,907 |
|
Notes payable
|
|
|
33,868 |
|
|
|
7,583 |
|
Convertible notes payable, net
of discounts of $0 and $88,449 as of March 31, 2021 and June 30,
2020, respectively
|
|
|
- |
|
|
|
251,384 |
|
Derivative liabilities
|
|
|
- |
|
|
|
164,834 |
|
Total current liabilities
|
|
|
310,974 |
|
|
|
656,425 |
|
Total liabilities
|
|
|
310,974 |
|
|
|
656,425 |
|
|
|
|
|
|
|
|
|
|
Mezzanine:
|
|
|
|
|
|
|
|
|
Series C preferred stock, $0.001
par value, (3,000 shares authorized, 1,125 and 0 shares issued and
outstanding outstanding as of March 31, 2021 and June 30, 2020,
respectively)
|
|
|
1,125,000 |
|
|
|
- |
|
Series D preferred stock, $0.001
par value, (4,000 shares authorized, 3,000 and 0 shares issued and
outstanding outstanding as of March 31, 2021 and June 30, 2020,
respectively)
|
|
|
3,000,000 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ equity (deficit):
|
|
|
|
|
|
|
|
|
Series A preferred stock, $0.001
par value, (1,000,000 shares authorized, 500,000 shares issued and
outstanding as of March 31, 2021 and June 30, 2020,
respectively)
|
|
|
500 |
|
|
|
500 |
|
Series B preferred stock, $0.001
par value, (1,000,000 shares authorized, 727,370 and 430,000 shares
issued and outstanding as of March 31, 2021 and June 30, 2020,
respectively)
|
|
|
727 |
|
|
|
430 |
|
Common stock, $0.001 par value, (750,000,000 shares authorized,
164,422,662 and 103,164,460 shares issued and outstanding as of
March 31, 2021 and June 30, 2020, respectively)
|
|
|
164,423 |
|
|
|
103,165 |
|
Additional paid-in capital
|
|
|
40,235,439 |
|
|
|
21,851,284 |
|
Accumulated deficit
|
|
|
(39,691,125 |
) |
|
|
(22,064,982 |
) |
Total stockholders’ equity
(deficit)
|
|
|
709,964 |
|
|
|
(109,603 |
) |
Total liabilities and
stockholders’ equity (deficit)
|
|
$ |
5,145,938 |
|
|
$ |
546,822 |
|
See notes to condensed financial statements
Integrated
Ventures, Inc.
|
Condensed Statements of
Operations
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
March 31,
|
|
|
Nine Months
Ended
March 31,
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cryptocurrency mining
|
|
$ |
682,706 |
|
|
$ |
130,062 |
|
|
$ |
885,931 |
|
|
$ |
363,541 |
|
Sales of cryptocurrency mining
equipment
|
|
|
14,099 |
|
|
|
848 |
|
|
|
75,221 |
|
|
|
10,511 |
|
Total revenues
|
|
|
696,805 |
|
|
|
130,910 |
|
|
|
961,152 |
|
|
|
374,052 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues
|
|
|
266,897 |
|
|
|
261,484 |
|
|
|
618,954 |
|
|
|
753,703 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit (loss)
|
|
|
429,908 |
|
|
|
(130,574 |
) |
|
|
342,198 |
|
|
|
(379,651 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative
|
|
|
181,165 |
|
|
|
85,465 |
|
|
|
372,910 |
|
|
|
279,990 |
|
Related party stock-based
compensation
|
|
|
16,537,500 |
|
|
|
120,000 |
|
|
|
16,537,500 |
|
|
|
120,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
16,718,665 |
|
|
|
205,465 |
|
|
|
16,910,410 |
|
|
|
399,990 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(16,288,757 |
) |
|
|
(336,039 |
) |
|
|
(16,568,212 |
) |
|
|
(779,641 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(239,435 |
) |
|
|
(90,824 |
) |
|
|
(430,049 |
) |
|
|
(573,561 |
) |
Realized gain (loss) on digital
currencies
|
|
|
54,920 |
|
|
|
(562 |
) |
|
|
106,497 |
|
|
|
(6,158 |
) |
Change in fair value of
derivative liabilities
|
|
|
(113,599 |
) |
|
|
(27,414 |
) |
|
|
(76,687 |
) |
|
|
823,409 |
|
Loss on disposition of property
and equipment
|
|
|
- |
|
|
|
- |
|
|
|
(207,281 |
) |
|
|
- |
|
Gain (loss) on conversion of
debt
|
|
|
- |
|
|
|
10,168 |
|
|
|
- |
|
|
|
(4,592 |
) |
Digital currency theft loss
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(33,037 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income (expense)
|
|
|
(298,114 |
) |
|
|
(108,632 |
) |
|
|
(607,520 |
) |
|
|
206,061 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
|
(16,586,871 |
) |
|
|
(444,671 |
) |
|
|
(17,175,732 |
) |
|
|
(573,580 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$ |
(16,586,871 |
) |
|
$ |
(444,671 |
) |
|
$ |
(17,175,732 |
) |
|
$ |
(573,580 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per common share – basic and
diluted:
|
|
$ |
(0.11 |
) |
|
$ |
(0.01 |
) |
|
$ |
(0.13 |
) |
|
$ |
(0.01 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares
outstanding – basic and diluted
|
|
|
154,411,922 |
|
|
|
80,513,126 |
|
|
|
130,057,332 |
|
|
|
56,552,143 |
|
See notes to condensed financial statements
Integrated Ventures, Inc.
Condensed
Statement of Stockholders’ Equity (Deficit)
Nine Months Ended March 31, 2021 (Unaudited)
|
|
Series C
Preferred Stock
|
|
|
Series D
Preferred Stock
|
|
|
Series A
Preferred Stock
|
|
|
Series B
Preferred Stock
|
|
|
Common
Stock
|
|
|
Additional
Paid-in
|
|
|
Accumulated
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2020
|
|
|
- |
|
|
$ |
- |
|
|
|
- |
|
|
$ |
- |
|
|
|
500,000 |
|
|
$ |
500 |
|
|
|
430,000 |
|
|
$ |
430 |
|
|
|
103,164,460 |
|
|
$ |
103,165 |
|
|
$ |
21,851,284 |
|
|
$ |
(22,064,982 |
) |
|
$ |
(109,603 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common shares in conversion
of convertible notes payable
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
52,723,031 |
|
|
|
52,723 |
|
|
|
947,146 |
|
|
|
- |
|
|
|
999,869 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common shares for stock
subscription
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
55,555 |
|
|
|
56 |
|
|
|
33,832 |
|
|
|
- |
|
|
|
33,888 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock for services
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
216,616 |
|
|
|
217 |
|
|
|
24,043 |
|
|
|
- |
|
|
|
24,260 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock for conversion
of Series B preferred stock
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(52,630 |
) |
|
|
(53 |
) |
|
|
5,263,000 |
|
|
|
5,262 |
|
|
|
(5,209 |
) |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of Series B preferred stock
for officeer compensation
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
350,000 |
|
|
|
350 |
|
|
|
- |
|
|
|
- |
|
|
|
16,537,150 |
|
|
|
- |
|
|
|
16,537,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of Series C preferred stock for
cash
|
|
|
1,125 |
|
|
|
1,125,000 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock as equity incentive
for Series C preferred stock
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
3,000,000 |
|
|
|
3,000 |
|
|
|
381,100 |
|
|
|
(384,100 |
) |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of Series D preferred stock for
cash
|
|
|
- |
|
|
|
- |
|
|
|
3,000 |
|
|
|
3,000,000 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Settlement of derivative liabilities
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
-
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
466,093 |
|
|
|
- |
|
|
|
466,093 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock dividends
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
-
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(66,311 |
) |
|
|
(66,311 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
-
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(17,175,732 |
) |
|
|
(17,175,732 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31, 2021
|
|
|
1,125 |
|
|
$ |
1,125,000 |
|
|
|
3,000 |
|
|
$ |
3,000,000 |
|
|
|
500,000 |
|
|
$ |
500 |
|
|
|
727,370 |
|
|
$ |
727 |
|
|
|
164,422,662 |
|
|
$ |
164,423 |
|
|
$ |
40,235,439 |
|
|
$ |
(39,691,125 |
) |
|
$ |
709,964 |
|
See notes to condensed financial statements
Integrated Ventures, Inc.
Condensed Statement of Stockholders’ Equity
(Deficit)
Nine Months Ended March 31, 2020 (Unaudited)
|
|
Series A
Preferred Stock
|
|
|
Series B
Preferred Stock
|
|
|
Common
Stock
|
|
|
Additional
Paid-in
|
|
|
Accumulated
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2019
|
|
|
500,000 |
|
|
$ |
500 |
|
|
|
300,000 |
|
|
$ |
300 |
|
|
|
29,824,187 |
|
|
$ |
29,825 |
|
|
$ |
19,864,239 |
|
|
$ |
(20,983,207 |
) |
|
$ |
(1,088,343 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares issued in Series B
preferred
stock Exchange Agreement
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
8,000,000 |
|
|
|
8,000 |
|
|
|
471,800 |
|
|
|
- |
|
|
|
479,800 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares issued in conversion of
convertible notes payable
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
53,129,993 |
|
|
|
53,130 |
|
|
|
675,386 |
|
|
|
- |
|
|
|
728,516 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return and cancellation of common shares
and reissuance of Series B preferred stock
|
|
|
- |
|
|
|
- |
|
|
|
30,000 |
|
|
|
30 |
|
|
|
(3,000,000 |
) |
|
|
(3,000 |
) |
|
|
2,970 |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of Series B preferred stock
for officeer compensation
|
|
|
- |
|
|
|
- |
|
|
|
100,000 |
|
|
|
100 |
|
|
|
- |
|
|
|
- |
|
|
|
119,900 |
|
|
|
- |
|
|
|
120,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Settlement of derivative liabilities
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
330,391 |
|
|
|
- |
|
|
|
330,391 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(573,580 |
) |
|
|
(573,580 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31, 2020
|
|
|
500,000 |
|
|
$ |
500 |
|
|
|
430,000 |
|
|
$ |
430 |
|
|
|
87,954,180 |
|
|
$ |
87,955 |
|
|
$ |
21,464,696 |
|
|
$ |
(21,556,787 |
) |
|
$ |
(3,216 |
) |
See notes to condensed financial statements
Integrated
Ventures, Inc.
|
Condensed Statements of Cash
Flows
|
(Unaudited)
|
|
|
|
|
|
|
Nine Months
Ended
March 31,
|
|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
Net loss
|
|
$ |
(17,175,732 |
) |
|
$ |
(573,580 |
) |
Adjustments to reconcile net
loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
expense
|
|
|
289,464 |
|
|
|
438,166 |
|
Amortization of debt
discount
|
|
|
404,387 |
|
|
|
513,950 |
|
Related party stock-based
compensation
|
|
|
16,537,500 |
|
|
|
120,000 |
|
Common shares issued for
services
|
|
|
24,260 |
|
|
|
- |
|
Loss on disposition of property
and equipment
|
|
|
207,281 |
|
|
|
- |
|
Change in fair value of
derivative liabilities
|
|
|
76,687 |
|
|
|
(823,409 |
) |
Realized (gain) loss on sale of
digital currencies
|
|
|
(106,497 |
) |
|
|
5,911 |
|
Loan fees added to debt
principal
|
|
|
- |
|
|
|
20,000 |
|
Loss on conversion of debt
|
|
|
- |
|
|
|
4,592 |
|
Digital currency theft loss
|
|
|
- |
|
|
|
33,037 |
|
Changes in operating assets and
liabilities:
|
|
|
|
|
|
|
|
|
Prepaid expenses and other
current assets
|
|
|
(4,250 |
) |
|
|
(3,250 |
) |
Digital currencies
|
|
|
(903,163 |
) |
|
|
(453,070 |
) |
Accounts payable
|
|
|
(42,840 |
) |
|
|
(2,021 |
) |
Accrued expenses
|
|
|
21,143 |
|
|
|
41,060 |
|
Due to related party
|
|
|
(65,737 |
) |
|
|
39,535 |
|
Net cash used in operating
activities
|
|
|
(737,497 |
) |
|
|
(639,079 |
) |
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
Proceeds from the sale of
digital currencies
|
|
|
3,835,173 |
|
|
|
411,763 |
|
Purchase of digital
currencies
|
|
|
(4,156,874 |
) |
|
|
- |
|
Purchase of property and
equipment
|
|
|
(975,574 |
) |
|
|
(123,349 |
) |
Equipment deposits
|
|
|
(2,528,392 |
) |
|
|
-
|
|
Net cash provided by (used in)
investing activities
|
|
|
(3,825,667 |
) |
|
|
288,414 |
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Proceeds from convertible notes
payable
|
|
|
563,000 |
|
|
|
534,000 |
|
Proceeds from the issuance of
Series C preferred shares
|
|
|
1,125,000 |
|
|
|
- |
|
Proceeds from the issuance of
Series D preferred shares
|
|
|
3,000,000 |
|
|
|
- |
|
Repayment of notes payable
|
|
|
(31,537 |
) |
|
|
(130,308 |
) |
Net cash provided by financing
activities
|
|
|
4,656,463 |
|
|
|
403,692 |
|
|
|
|
|
|
|
|
|
|
Net increase in cash
|
|
|
93,299 |
|
|
|
53,027 |
|
Cash, beginning of period
|
|
|
6,675 |
|
|
|
48,310 |
|
|
|
|
|
|
|
|
|
|
Cash, end of period
|
|
$ |
99,974 |
|
|
$ |
101,337 |
|
|
|
|
|
|
|
|
|
|
(Continued)
|
|
See notes to condensed
financial statements
|
Integrated
Ventures, Inc.
|
Condensed
Statements of Cash Flows (Continued)
|
(Unaudited)
|
|
|
|
|
|
|
Nine Months
Ended
March 31,
|
|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow
information:
|
|
|
|
|
|
|
Cash paid for interest
|
|
$ |
2,479 |
|
|
$ |
1,160 |
|
Cash paid for income taxes
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Non-cash investing and financing
activities:
|
|
|
|
|
|
|
|
|
Debt discount for derivative
liabilities
|
|
$ |
258,460 |
|
|
$ |
270,354 |
|
Common shares issued for
convertible notes payable
|
|
|
999,869 |
|
|
|
723,924 |
|
Common shares issued for stock
subscription
|
|
|
33,888 |
|
|
|
- |
|
Settlement of derivative
liabilities
|
|
|
466,093 |
|
|
|
330,391 |
|
Notes payable issued for
property and equipment
|
|
|
57,822 |
|
|
|
- |
|
Property and equipment purchased
with digital currencies
|
|
|
4,178 |
|
|
|
- |
|
Accrued preferred stock
dividends
|
|
|
66,311 |
|
|
|
- |
|
Common shares issued for Series
C equity incentive
|
|
|
384,100 |
|
|
|
- |
|
Conversion of Series B preferred
shares for common shares
|
|
|
5,263 |
|
|
|
- |
|
Equipment deposits for property
and equipment
|
|
|
- |
|
|
|
27,971 |
|
Common shares issued in Series B
preferred stock Exchange Agreement
|
|
|
- |
|
|
|
479,800 |
|
Return and cancellation of
common shares and reissuance of Series B preferred shares
|
|
|
- |
|
|
|
3,000 |
|
See notes to condensed financial statements
Integrated Ventures, Inc.
Notes to
Condensed Financial Statements
Nine Months Ended March 31, 2021
(Unaudited)
1. ORGANIZATION AND BASIS OF PRESENTATION
Organization
Integrated Ventures, Inc. (the "Company," "we," "our," or "EMS
Find") was incorporated in the State of Nevada on March 22, 2011,
under the name of Lightcollar, Inc. On March 20, 2015, the Company
amended its articles of incorporation and changed its name from
Lightcollar, Inc. to EMS Find, Inc. On May 30, 2017, Integrated
Ventures, Inc. (“Integrated Ventures”), a Nevada corporation, was
formed as a wholly owned subsidiary of the Company. Pursuant to an
Agreement and Plan of Merger dated May 30, 2017, Integrated
Ventures was merged into the Company, with the Company being the
surviving corporation and changing its name to Integrated Ventures,
Inc.
The Company has discontinued its prior operations and changed its
business focus from its prior technologies relating to the EMS Find
platform to acquiring, launching and operating companies in the
cryptocurrency sector, mainly in digital currency mining, equipment
manufacturing, and sales of branded mining rigs, as well as
blockchain software development.
The Company is developing and acquiring a diverse portfolio of
digital currency assets and block chain technologies.
Cryptocurrencies are a medium of exchange that uses decentralized
control (a block chain) as opposed to a central bank to track and
validate transactions. The Company is currently mining Bitcoin and
Ethereum, whereby the Company earns revenue by solving “blocks” to
be added to the block chain. The Company also purchases certain
digital currencies for short-term investment purposes.
In May 2019, the Company consolidated all of its mining operations
and signed a power supply and purchase agreement with PetaWatt
Properties, LLC.
Basis of Presentation
The accompanying unaudited condensed financial statements of the
Company have been prepared in accordance with U.S. generally
accepted accounting principles ("US GAAP") for interim financial
information and the instructions to Form 10-Q and Article 8 of
Regulation S-X. The results of operations for the interim periods
ended December 31, 2020 shown in this report are not necessarily
indicative of results to be expected for the full fiscal year
ending June 30, 2021. In the opinion of the Company's management,
the information contained herein reflects all adjustments
(consisting of normal recurring adjustments) necessary for a fair
presentation of the Company's results of operations, financial
position and cash flows. The unaudited interim financial statements
should be read in conjunction with the audited financial statements
in the Company's Annual Report on Form 10-K for the year ended June
30, 2020 filed on September 23, 2020 and Management's Discussion
and Analysis of Financial Condition and Results of Operations.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies of the Company are disclosed in
Notes to Financial Statements included in the Company’s Annual
Report on Form 10-K. The following summary of significant
accounting policies of the Company is presented to assist in
understanding the Company’s interim financial statements. These
accounting policies conform to accounting principles generally
accepted in the United States of America and have been consistently
applied in the preparation of the financial statements.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenue and expenses during the reporting
period. Because of the use of estimates inherent in the financial
reporting process, actual results could differ significantly from
those estimates.
Integrated Ventures, Inc.
Notes to Condensed Financial Statements
Nine Months Ended March 31, 2021
(Unaudited)
Digital Currencies
Digital currencies consist of Bitcoin, Litecoin, ZCash and
Ethereum, generally received for the Company’s own account as
compensation for cryptocurrency mining services, and Chainlink and
other digital currencies purchased for short-term investment
purposes. Given that there is limited precedent regarding the
classification and measurement of cryptocurrencies under current
Generally Accepted Accounting Principles (“GAAP”), the Company has
determined to account for these digital currencies as
indefinite-lived intangible assets in accordance with Accounting
Standards Update ("ASU") No. 350, Intangibles – Goodwill and
Other, for the period covered by this report and in future
reports unless and until further guidance is issued by the
Financial Accounting Standards Board (“FASB”). An intangible asset
with an indefinite useful life is not amortized but assessed for
impairment annually, or more frequently, when events or changes in
circumstances occur indicating that it is more likely than not that
the indefinite-lived asset is impaired. Impairment exists when the
carrying amount exceeds its fair value. In testing for impairment,
the Company has the option to first perform a qualitative
assessment to determine whether it is more likely than not than an
impairment exists. If it is determined that it is more likely than
not that an impairment exists, a quantitative impairment test is
not necessary. If the Company concludes otherwise, it is required
to perform a quantitative impairment test. To the extent an
impairment loss is recognized, the loss establishes the new cost
basis of the asset. Subsequent reversal of impairment losses is not
permitted. Realized gains or losses on the sale of digital
currencies, net of transaction costs, are included in other income
(expense) in the statements of operations. The Company had a
realized gain on the sale of digital currencies of $106,497 in the
nine months ended March 31, 2021.
Property and Equipment
Property and equipment, consisting primarily of computer and other
cryptocurrency 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. The Company operates in an emerging
industry for which limited data is available to make estimates of
the useful economic lives of specialized equipment. Management has
assessed the basis of depreciation of these assets and believes
they should be depreciated over a three-year period due to
technological obsolescence reflecting rapid development of hardware
that has faster processing capacity and other factors. Maintenance
and repairs are expensed as incurred and improvements are
capitalized. Gains or losses on the disposition of property and
equipment are recorded upon disposal.
During the nine months ended March 31, 2021, the Company
discontinued the use of damaged or non-serviceable mining equipment
and wrote off its net book value of $207,281 to loss on disposition
of property and equipment.
Management has determined that the three-year diminishing value
best reflects the current expected useful life of transaction
verification servers. This assessment takes into consideration the
availability of historical data and management’s expectations
regarding the direction of the industry including potential changes
in technology. Management will review this estimate annually and
will revise such estimates as and when data becomes available.
To the extent that any of the assumptions underlying management’s
estimate of useful life of its transaction verification servers are
subject to revision in a future reporting period, either 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.
Derivatives
The Company evaluates its convertible debt, options, warrants or
other contracts to determine if those contracts or embedded
components of those contracts qualify as derivatives to be
separately accounted for. The result of this accounting treatment
is that under certain circumstances the fair value of the
derivative is marked-to-market each balance sheet date and recorded
as a liability. In the event that the fair value is recorded as a
liability, the change in fair value is recorded in the statement of
operations as other income or expense. Upon conversion or exercise
of a derivative instrument, the instrument is marked to fair value
at the conversion date and then that fair value is reclassified to
equity. Equity instruments that are initially classified as equity
that become subject to reclassification under this accounting
standard are reclassified to liability at the fair value of the
instrument on the reclassification date.
Integrated Ventures, Inc.
Notes to Condensed Financial Statements
Nine Months Ended March 31, 2021
(Unaudited)
Where the number of warrants or common shares to be issued under
these agreements is indeterminate, the Company has concluded that
the equity environment is tainted, and all additional warrants and
convertible debt are included in the value of the derivatives.
We estimate the fair value of the derivatives associated with our
convertible notes payable, common stock issuable pursuant to a
Series B preferred stock Exchange Agreement and a stock
subscription payable using, as applicable, either the Black-Scholes
pricing model or multinomial lattice models that value the
derivative liability based on a probability weighted discounted
cash flow model using future projections of the various potential
outcomes. We estimate the fair value of the derivative liabilities
at the inception of the financial instruments, and, in the case of
our convertible notes payable, at the date of conversions to equity
and at each reporting date, recording a derivative liability, debt
discount, additional paid-in capital and a gain or loss on change
in derivative liabilities as applicable. These estimates are based
on multiple inputs, including the market price of our stock,
interest rates, our stock price volatility, variable conversion
prices based on market prices as defined in the respective
agreements and probabilities of certain outcomes based on
management projections. These inputs are subject to significant
changes from period to period and to management’s judgment;
therefore, the estimated fair value of the derivative liabilities
will fluctuate from period to period, and the fluctuation may be
material.
Impairment of Long-Lived Assets
All assets, including intangible assets subject to amortization,
are reviewed for impairment when changes in circumstances indicate
that the carrying amount of the asset may not be recoverable in
accordance with ASC 350 and ASC 360. If the carrying amount of the
asset exceeds the expected undiscounted cash flows of the asset, an
impairment charge is recognized equal to the amount by which the
carrying amount exceeds fair value or net realizable value. The
testing of these intangibles under established guidelines for
impairment requires significant use of judgment and assumptions.
Changes in forecasted operations and other assumptions could
materially affect the estimated fair values. Changes in business
conditions could potentially require adjustments to these asset
valuations. We reported no impairment expense for the three months
and nine months ended March 31, 2021 and 2020.
Fair Value of Financial Instruments
Disclosures about fair value of financial instruments require
disclosure of the fair value information, whether or not recognized
in the balance sheet, where it is practicable to estimate that
value. As of March 31, 2021 and June 30, 2020, the amounts reported
for cash, prepaid expenses and other current assets, equipment
deposits, accounts payable, accrued preferred stock dividends,
accrued expenses, due to related party and notes payable
approximate fair value because of their short maturities.
Fair value is defined as the price that would be received to sell
an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. ASC Topic 820
established a three-tier fair value hierarchy, which prioritizes
the inputs used in measuring fair value. The hierarchy gives the
highest priority to unadjusted quoted prices in active markets for
identical assets or liabilities (level 1measurements) and the
lowest priority to unobservable inputs (level 3 measurements).
These tiers include:
|
·
|
Level 1, defined as observable
inputs such as quoted prices for identical instruments in active
markets; |
|
|
|
|
·
|
Level 2, defined as inputs other
than quoted prices in active markets that are either directly or
indirectly observable such as quoted prices for similar instruments
in active markets or quoted prices for identical or similar
instruments in markets that are not active; and |
|
|
|
|
·
|
Level 3, defined as unobservable
inputs in which little or no market data exists, therefore
requiring an entity to develop its own assumptions, such as
valuations derived from valuation techniques in which one or more
significant inputs or significant value drivers are
unobservable. |
Integrated Ventures, Inc.
Notes to Condensed Financial Statements
Nine Months Ended March 31, 2021
(Unaudited)
Our derivative liabilities are measured at fair value on a
recurring basis and estimated as follows:
|
|
Total
|
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
March 31,
2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative
liabilities
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities measured at fair value
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative
liabilities
|
|
$ |
164,834 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
164,834 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities measured at fair value
|
|
$ |
164,834 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
164,834 |
|
Mezzanine
Series C and D preferred stock that contain certain default
provisions requiring mandatory cash redemption that are outside the
control of the Company are recorded as Mezzanine in the
accompanying balance sheets.
Stock-Based Compensation
The Company accounts for all equity-based payments in accordance
with ASC Topic 718, Compensation – Stock Compensation. ASC
Topic 718 requires companies to recognize in the statement of
operations the grant-date fair value of stock awards, stock
options, warrants and other equity-based compensation issued to
employees. The value of the portion of an award that is ultimately
expected to vest is recognized as an expense over the requisite
service periods using the straight-line attribution method. The
fair value of a stock award is recorded at the fair market value of
a share of the Company’s stock on the grant date. The Company
estimates the fair value of stock options and warrants at the grant
date by using an appropriate fair value model such as the
Black-Scholes option pricing model or multinomial lattice
models.
The Company accounts for non-employee share-based awards based upon
ASC 505-50, Equity-Based Payments to Non-Employees. ASC
505-50 requires the costs of goods and services received in
exchange for an award of equity instruments to be recognized using
the fair value of the goods and services or the fair value of the
equity award, whichever is more reliably measurable. The fair value
of the equity award is determined on the measurement date, which is
the earlier of the date that a performance commitment is reached or
the date that performance is complete. Generally, our awards do not
entail performance commitments. When an award vests over time such
that performance occurs over multiple reporting periods, we
estimate the fair value of the award as of the end of each
reporting period and recognize an appropriate portion of the cost
based on the fair value on that date. When the award vests, we
adjust the cost previously recognized so that the cost ultimately
recognized is equivalent to the fair value on the date the
performance is complete.
Revenue Recognition
We recognize revenue in accordance with ASC 606, Revenue from
Contracts with Customers. This standard provides a single
comprehensive model to be used in the accounting for revenue
arising from contracts with customers and supersedes current
revenue recognition guidance, including industry-specific guidance.
The standard’s stated core principle is that an entity should
recognize revenue to depict the transfer of promised goods or
services to customers in an amount that reflects the consideration
to which the entity expects to be entitled in exchange for those
goods or services. To achieve this core principle, ASC 606 includes
provisions within a five-step model that includes identifying the
contract with a customer, identifying the performance obligations
in the contract, determining the transaction price, allocating the
transaction price to the performance obligations, and recognizing
revenue when, or as, an entity satisfies a performance
obligation.
Integrated Ventures, Inc.
Notes to Condensed Financial Statements
Nine Months Ended March 31, 2021
(Unaudited)
Our revenues currently consist of cryptocurrency mining revenues
and revenues from the sale of cryptocurrency mining equipment
recognized in accordance with ASC 606 as discussed above. Amounts
collected from customers prior to shipment of products are recorded
as deferred revenue.
The Company earns its cryptocurrency mining revenues by providing
transaction verification services within the digital currency
networks of cryptocurrencies, such as Bitcoin, Litecoin, ZCash and
Ethereum. The Company satisfies its performance obligation at the
point in time that the Company is awarded a unit of digital
currency through its participation in the applicable network and
network participants benefit from the Company’s verification
service. In consideration for these services, the Company receives
digital currencies, which are recorded as revenue using the closing
U.S. dollar price of the related cryptocurrency on the date of
receipt. Expenses associated with running the cryptocurrency mining
operations, such as equipment depreciation, rent, operating
supplies, rent, utilities and monitoring services are recorded as
cost of revenues.
There is currently no specific definitive guidance in GAAP or
alternative accounting frameworks for the accounting for the
production and mining of digital currencies and management has
exercised significant judgment in determining appropriate
accounting treatment for the recognition of revenue for mining of
digital currencies. Management has examined various factors
surrounding the substance of the Company’s operations and the
guidance in ASC 606, including identifying the transaction price,
when performance obligations are satisfied, and collectability is
reasonably assured being the completion and addition of a block to
a blockchain and the award of a unit of digital currency to the
Company. In the event authoritative guidance is enacted by the
FASB, the Company may be required to change its policies which
could result in a change in the Company’s financial statements.
Income Taxes
The Company adopted the provisions of ASC 740-10, Accounting
for Uncertain Income Tax Positions. When tax returns are
filed, it is highly certain that some positions taken would be
sustained upon examination by the taxing authorities, while others
are subject to uncertainty about the merits of the position taken
or the amount of the position that would be ultimately sustained.
In accordance with the guidance of ASC 740-10, the benefit of a tax
position is recognized in the financial statements in the period
during which, based on all available evidence, management believes
it is more likely than not that the position will be sustained upon
examination, including the resolution of appeals or litigation
processes, if any. Tax positions taken are not offset or aggregated
with other positions. Tax positions that meet the
more-likely-than-not recognition threshold are measured as the
largest amount of tax benefit that is more than 50 percent likely
of being realized upon settlement with the applicable taxing
authority. The portion of the benefits associated with tax
positions taken that exceeds the amount measured as described above
should be reflected as a liability for unrecognized tax benefits in
the accompanying balance sheets along with any associated interest
and penalties that would be payable to the taxing authorities upon
examination. The Company believes its tax positions are all highly
certain of being upheld upon examination. As such, the Company has
not recorded a liability for unrecognized tax benefits. As of March
31, 2021, tax years 2015 through 2020 remain open for IRS audit.
The Company has received no notice of audit from the IRS for any of
the open tax years.
The Company adopted ASC 740-10, Definition of Settlement in
FASB Interpretation No. 48, (“ASC 740-10”). ASC 740-10
provides guidance on how an entity should determine whether a tax
position is effectively settled for the purpose of recognizing
previously unrecognized tax benefits. The term “effectively
settled” replaces the term “ultimately settled” when used to
describe recognition, and the terms “settlement” or “settled”
replace the terms “ultimate settlement” or “ultimately settled”
when used to describe measurement of a tax position under ASC
740-10. ASC 740-10 clarifies that a tax position can be effectively
settled upon the completion of an examination by a taxing authority
without being legally extinguished. For tax positions considered
effectively settled, an entity would recognize the full amount of
tax benefit, even if the tax position is not considered more likely
than not to be sustained based solely on the basis of its technical
merits and the statute of limitations remains open. The adoption of
ASC 740-10 has not had an impact on our financial statements.
Integrated Ventures, Inc.
Notes to Condensed Financial Statements
Nine Months Ended March 31, 2021
(Unaudited)
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, convertible debt and convertible preferred
stock, were exercised or converted into common stock. Equivalent
shares are not utilized when the effect is anti-dilutive. For the
three months and nine months ended March 31, 2021 and 2020,
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.
Recently Issued Accounting Pronouncements
There were no new accounting pronouncements issued or proposed by
the FASB during the nine months ended March 31, 2021 and through
the date of filing this report which the Company believes will have
a material impact on its financial financial statements.
Reclassifications
Certain amounts in the condensed financial statements for the
prior-year periods have been reclassified to conform to the
presentation for the current-year periods.
3. GOING CONCERN
The Company has reported recurring operating losses since its
inception and used net cash in operating activities of $737,497 in
the nine months ended March 31, 2021. As of March 31, 2021, the
Company had an accumulated deficit of $39,691,125. 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.
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.
Integrated Ventures, Inc.
Notes to Condensed Financial Statements
Nine Months Ended March 31, 2021
(Unaudited)
4. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following at:
|
|
March 31,
2021
|
|
|
June 30,
2020
|
|
|
|
|
|
|
|
|
Cryptocurrency mining equipment
|
|
$ |
1,324,659 |
|
|
$ |
1,242,397 |
|
Mobile mining containers
|
|
|
152,000 |
|
|
|
- |
|
Furniture and equipment
|
|
|
16,366 |
|
|
|
16,366 |
|
Total
|
|
|
1,493,025 |
|
|
|
1,258,763 |
|
Less accumulated depreciation and
amortization
|
|
|
(498,854 |
) |
|
|
(805,421 |
) |
Net
|
|
$ |
994,171 |
|
|
$ |
453,342 |
|
Depreciation and amortization expense, included in cost of
revenues, was $111,672 and $143,924 for the three months ended
March 31, 2021 and 2020, respectively, and $289,464, and $438,166
for the nine months ended March 31, 2021 and 2020,
respectively.
As of March 31, 2021, the Company had paid $2,528,392 in equipment
deposits.
5. RELATED PARTY TRANSACTIONS
We have one executive officer, Steve Rubakh, who is currently our
only full-time employee and sole member of our Board of Directors.
Mr. Rubakh is paid an annual salary established by the Board of
Directors and is issued shares of Series B preferred stock on a
quarterly basis for additional compensation. The number and timing
of Series B preferred shares issued to Mr. Rubakh is at the
discretion of the Board of Directors.
The Board of Directors of the Company has set the current annual
compensation for Steve Rubakh to include annual salary of $150,000
per year and the issuance of shares of Series B preferred stock as
determined by the Board. The Company recorded salary expense to Mr.
Rubakh of $37,500 for the three months ended March 31, 2021 and
2020 and $112,500 for the nine months ended March 31, 2021 and
2020. Amounts due to related party, consisting of accrued salary to
Mr. Rubakh, totaled $57,170 and $122,907 as of March 31, 2021 and
June 30, 2020, respectively.
On February 26, 2021 the Company issued to Mr. Rubakh 350,000 total
shares of Series B convertible preferred stock valued on an “as
converted to common” basis at $16,537,500, using the closing market
price of the Company’s common stock on that date. 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 did not issue any shares of Series B preferred stock as
compensation to Mr. Rubakh during the nine months ended March 31,
2020.
On February 19, 2021, Mr. Rubakh converted 52,630 shares of Series
B preferred stock into 5,263,000 shares of common stock in a
transaction recorded at the par value of the shares.
Integrated Ventures, Inc.
Notes to Condensed Financial Statements
Nine Months Ended March 31, 2021
(Unaudited)
6. CONVERTIBLE NOTES PAYABLE
As of March 31, 2021, all convertible notes payable had been fully
converted and the obligations extinguished. All related derivative
liabilities were settled.
As of June 30, 2020, current convertible notes payable consisted of
the following:
|
|
|
|
|
Debt
|
|
|
|
|
|
|
Principal
|
|
|
Discount
|
|
|
Net
|
|
|
|
|
|
|
|
|
|
|
|
BHP Capital NY, Inc. #4
|
|
$ |
66,000 |
|
|
$ |
13,193 |
|
|
$ |
52,807 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Armada Investment Fund, LLC #5
|
|
|
20,000 |
|
|
|
2,739 |
|
|
|
17,261 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Armada Investment Fund, LLC #6
|
|
|
22,000 |
|
|
|
4,167 |
|
|
|
17,833 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BHP Capital NY, Inc. #5
|
|
|
83,333 |
|
|
|
21,141 |
|
|
|
62,192 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BHP Capital NY, Inc. #6
|
|
|
60,500 |
|
|
|
19,188 |
|
|
|
41,312 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Armada Investment Fund, LLC #7
|
|
|
88,000 |
|
|
|
28,021 |
|
|
|
59,979 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
339,833 |
|
|
$ |
88,449 |
|
|
$ |
251,384 |
|
In consideration for an agreement to limit conversions of a prior
convertible note, the Company issued to Armada Investment Fund, LLC
(“Armada”) a fifth convertible promissory note in the principal
amount of $20,000. The note matures on November 1, 2020 and bears
interest at 8%. A debt discount of $8,082 was recorded, consisting
of a derivative liability. Armada has the right beginning on the
date that is 31 days following the date of the note to convert
principal and accrued interest into shares of the Company’s common
stock. The conversion price is 70% of the average of the five
lowest trading prices (lowest bid prices) of the Company’s common
stock during the fifteen trading days ending on the latest complete
trading day prior to the date of conversion. During the nine months
ended March 31, 2021, Armada converted the entire principal of
$20,000, accrued interest payable of $1,184 and conversion fees of
$500 into common shares of the Company, extinguishing the debt in
full. As of March 31, 2021, the debt discount had been amortized in
full to interest expense.
On November 21, 2019, the Company entered into a sixth convertible
promissory note with Armada in the principal amount of $22,000,
with an original issue discount of $2,000. The note matures on
November 21, 2020 and bears interest at 8%. A debt discount of
$10,590 was recorded, including a derivative liability of $8,090.
Armada has the right beginning on the date that is 31 days
following the date of the note to convert principal and accrued
interest into shares of the Company’s common stock. The conversion
price is 70% of the average of the five lowest trading prices
(lowest bid prices) of the Company’s common stock during the
fifteen trading days ending on the latest complete trading day
prior to the date of conversion. During the nine months ended March
31, 2021, Armada converted the entire principal of $22,000, accrued
interest payable of $1,109 and conversion fees of $500 into common
shares of the Company, extinguishing the debt in full. As of March
31, 2021, the debt discount had been amortized in full to interest
expense.
On December 2, 2019, the Company entered into a fourth convertible
promissory note with BHP Capital NY, Inc. (“BHP”) in the principal
amount of $66,000, with an original issue discount of $6,000. The
note matures on December 2, 2020 and bears interest at 8%. A debt
discount of $31,153 was recorded, including a derivative liability
of $24,153. BHP has the right beginning on the date that is 31 days
following the date of the note to convert principal and accrued
interest into shares of the Company’s common stock. The conversion
price is 70% of the average of the three lowest trading prices
(lowest bid prices) of the Company’s common stock during the
fifteen trading days ending on the latest complete trading day
prior to the date of conversion. During the nine months ended March
31, 2021, BHP converted the entire principal of $66,000, accrued
interest payable of $3,467 and conversion fees of $1,000 into
common shares of the Company, extinguishing the debt in full. As of
March 31, 2021, the debt discount had been amortized in full to
interest expense.
Integrated Ventures, Inc.
Notes to Condensed Financial Statements
Nine Months Ended March 31, 2021
(Unaudited)
On
February 20, 2020, the Company entered into a fifth convertible
promissory note with BHP in the principal amount of $83,333, with
an original issue discount of $8,333. The note matures on November
20, 2020, and bears interest at 8%. A debt discount of $40,507 was
recorded, including a derivative liability of $30,674. BHP has the
right beginning on the date that is 31 days following the date of
the note to convert principal and accrued interest into shares of
the Company’s common stock. The conversion price is 70% of the
average of the three lowest trading prices (lowest bid prices) of
the Company’s common stock during the fifteen trading days ending
on the latest complete trading day prior to the date of conversion.
During the nine months ended March 31, 2021, BHP converted the
entire principal of $83,333, accrued interest payable of $4,663 and
conversion fees of $1,000 into common shares of the Company,
extinguishing the debt in full. As of March 31, 2021, the debt
discount had been amortized in full to interest expense.
On March 4, 2020, the Company entered into a sixth convertible
promissory note with BHP in the principal amount of $60,500, with
an original issue discount of $5,500. The note matures on March 4,
2021, and bears interest at 8%. A debt discount of $28,354 was
recorded, including a derivative liability of $22,854. BHP has the
right beginning on the date that is 31 days following the date of
the note to convert principal and accrued interest into shares of
the Company’s common stock. The conversion price is 70% of the
average of the five lowest trading prices (lowest bid prices) of
the Company’s common stock during the fifteen trading days ending
on the latest complete trading day prior to the date of conversion.
During the nine months ended March 31, 2021, BHP converted the
entire principal of $60,500, accrued interest payable of $3,872 and
conversion fees of $500 into common shares of the Company,
extinguishing the debt in full. As of March 31, 2020, the debt
discount had been amortized in full to interest expense.
On March 4, 2020, the Company entered into a seventh convertible
promissory note with Armada in the principal amount of $88,000,
with an original issue discount of $8,000. The note matures on
March 4, 2021, and bears interest at 8%. A debt discount of $41,408
was recorded, including a derivative liability of $33,408. Armada
has the right beginning on the date that is 181 days following the
date of the note to convert principal and accrued interest into
shares of the Company’s common stock. The conversion price is 70%
of the average of the five lowest trading prices (lowest bid
prices) of the Company’s common stock during the fifteen trading
days ending on the latest complete trading day prior to the date of
conversion. During the nine months ended March 31, 2021, Armada
converted the entire principal of $88,000, accrued interest payable
of $3,808 and conversion fees of $1,500 into common shares of the
Company, extinguishing the debt in full. As of March 31, 2021, the
debt discount had been amortized in full to interest expense.
On July 6, 2020, the Company entered into a convertible promissory
note with JSJ Investments Inc. (“JSJ”) in the principal amount of
$77,000. The note matures on July 6, 2021, and bears interest at
8%. A debt discount $44,617 was recorded, including a derivative
liability of $42,617. JSJ has the right beginning on the date that
is 31 days following the date of the note to convert principal and
accrued interest into shares of the Company’s common stock. The
conversion price is 70% of the average of the three lowest trading
prices of the Company’s common stock during the fifteen trading
days ending on the latest complete trading day prior to the date of
conversion. During the nine months ended March 31, 2021, JSJ
converted the entire principal of $77,000, accrued interest payable
of $3,122 and conversion fees of $300 into common shares of the
Company, extinguishing the debt in full. As of March 31, 2021, the
debt discount had been amortized in full to interest expense.
On August 4, 2020, the Company entered into a Securities Purchase
Agreement with Eagle Equities, LLC (“Eagle”), providing for the
issuance and sale by the Company and the purchase by Eagle of a 6%
convertible note of the Company (the “Note”) in the aggregate
principal amount of $1,086,957. The Note provides
for an 8% original issue discount (“OID”) such that the aggregate
purchase price for Note will be $1,000,000. The Note will be
purchased by Eagle in various tranches on defined closing
dates.
The first closing date under the Note was held on August 4, 2020,
when the Company sold, and the Buyer purchased the first tranche
under the Note for a $271,739 portion of the aggregate $1,086,957,
resulting in proceeds to the Company of $250,000 and reflecting the
OID of 8%. A subsequent closing of a second tranche of $271,739
portion of the Note shall occur on the filing of the Company’s
resale registration statement under the Securities Act of 1933, as
amended, covering the entire principal amount of the Note. Eagle
has retained the right to purchase the unfunded balance of the Note
through February 4, 2022, provided that each purchase must be in an
amount of not less than $108,696 ($100,000 after the OID).
Integrated Ventures, Inc.
Notes to Condensed Financial Statements
Nine Months Ended March 31, 2021
(Unaudited)
On
October 22, 2020, the Company closed the second tranche of the Note
subsequent to the Company filing the required Form S-1 registration
statement.. The second tranche was for $271,739, with proceeds to
the Company of $250,000 after the original issue discount.
The Note matures on February 4, 2022, and bears interest at 6%.
Eagle has at any time to convert principal and accrued interest
into shares of the Company’s common stock. The conversion price is
70% of the lowest closing bid price of the Company’s common stock
during the fifteen trading days ending on the latest complete
trading day prior to the date of conversion.
A debt discount $139,943 was recorded for the first tranche,
including a derivative liability of $112,204. During the nine
months ended March 31, 2021, Eagle converted the entire principal
of the first tranche of $271,739 and accrued interest payable of
$4,155 into common shares of the Company, extinguishing the debt in
full. As of March 31, 2021, the debt discount had been amortized in
full to interest expense.
A debt discount $131,378 was recorded for the second tranche,
including a derivative liability of $103,639. During the nine
months ended March 31, 2021, Eagle converted the entire principal
of the second tranche of $271,739 and accrued interest payable of
$8,877 into common shares of the Company, extinguishing the debt in
full. As of March 31, 2021, the debt discount had been amortized in
full to interest expense.
7. NOTES PAYABLE
With an effective date of April 20, 2020, a loan to the Company was
approved under the terms and conditions of the Paycheck Protection
Program (“PPP”) of the United States Small Business Administration
(“SBA”) and the CARES Act (2020) (H.R. 748) (15 U.S.C. 636 et seq.)
( the “Act” ) in the amount of $7,583. The loan matures 24 months
from inception, bears interest at 1% and had a balance of $7,583 as
of December 31, 2020 and June 30, 2020. The loan may be forgiven
pursuant to the provisions of the Act.
In August and September 2020, the Company entered into two
agreements for the purchase of digital
mining equipment with Wattum Management Inc. resulting in
two promissory notes in the principal amounts of $17,822 and
$40,000. The notes are secured by the equipment purchased and bear
interest at 10%.
The $17,822 note is payable in twelve equal consecutive monthly
installments of $1,567 and matures in September 2021. The note had
a principal balance of $9,133 as of March 31, 2021.
The $40,000 note is payable in twelve equal consecutive monthly
installments of $3,516 and matures in August 2021. The note had a
principal balance of $17,152 as of March 31, 2021.
8. MEZZANINE
Series C Preferred Stock
Effective January 14, 2021, the Company filed a Certificate of
Designation of the Series C Convertible Preferred Stock with the
Nevada Secretary of State. The Company has authorized the issuance
of an aggregate of 3,000 shares of the Series C preferred stock.
Each share of Series C preferred stock has a par value of $0.001
per share and a stated value of $1,100 per share. The shares of
Series C preferred stock are convertible into shares of the
Company’s common stock at a conversion price of $0.068 per
share.
Each share of the Series C preferred stock is entitled to receive
cumulative dividends of 12% per annum, payable monthly and accruing
and compounding daily from the date of issuance of the shares.
Dividends may be paid in cash or in shares of Series C preferred
stock at the discretion of the Company.
Integrated Ventures, Inc.
Notes to Condensed Financial Statements
Nine Months Ended March 31, 2021
(Unaudited)
The Company, at its sole discresion, has the right to redeem all,
but not less than all, shares of the Series C preferred stok issued
and outstanding upon 5 days notice at a defined redemption price.
The holders of the Series C preferred stock do not have a right to
put the shares to the Company.
The holders of the Series C preferred stock shall have the right to
vote together with holders of common stock, on an as “converted
basis”, on any matter that the Company’s shareholders may be
entitled to vote on, either by written consent or by proxy.
On January 14, 2021, the Company entered into a Securities Purchase
Agreement (the “Series C Agreement”) with BHP Capital NY, Inc.
(“BHP”), providing for the issuance and sale by the Company and the
purchase by BHP of newly designated shares of Series C Convertible
preferred stock issued by the Company at a purchase price per share
of $1,000. The first closing under the Series C Agreement was held
on January 22, 2021, at which the Company sold, and BHP purchased
750 shares of Series C preferred stock for $750,000. The Company
received net proceeds of $740,000 after payment of legal fees. The
Company also on that date issued 2,000,000 shares of its common
stock to BHP as equity incentive shares, which shares were valued
at $295,000 based on the closing market price of the Company’s
common stock and recorded to accumulated deficit as a deemed
dividend.
Pursuant to a second Series C Agreement effective February 5, 2021,
BHP purchased a second tranche consisting of 375,000 shares of
Series C preferred stock for $375,000. As an equity incentive to
this purchase of Series C preferred stock, the Company issued
1,000,000 shares of the Company’s common stock to BHP, which shares
were valued at $89,100 based on the closing market price of the
Company’s common stock and recorded to accumulated deficit as a
deemed dividend.
In addition to the requirement of the Company to cause a
registration statement convering the shares issued to be declared
effective by the SEC within 180 days, the Series C Agreement and
the terms of the Series C Certificate of Designation contain
multiple defined triggoring events or events of default that may
require the Company to redeem in cash the Series C preferred stock.
Such events include, but are not limited to the following: (i) the
suspension, cessation from trading or delisting of the Company’s
Common Stock on the Principal Market for a period of two (2)
consecutive trading days or more; (ii) the failure by the Company
to timely comply with the reporting requirements of the Exchange
Act (including applicable extension periods); (iii) the failure for
any reason by the Company to issue Commitment Shares, Dividends or
Conversion Shares to the Purchaser within three trading days; (iv)
the Company breaches any representation warranty, covenant or other
term of condition contained in the definitive agreements between
the parties; (v) the Company files for Bankruptcy or receivership
or any money judgment writ, liquidation or a similar process is
entered by or filed against the Company for more than $50,000 and
remains unvacated, unbonded or unstayed for a period of twenty (20)
calendar days; (vi) conduct its business; (vii) the Company shall
lose the “bid” price for its Common stock on the Principal Market;
(viii) if at any time the Common Stock is no longer DWAC eligible;
(ix) the Company must have a registration statement covering the
Preferred Shares declared effective by the SEC within one hundred
eighty (180) days of the Effective Date hereof; (x) the Company
must complete deposits to secure power supply contracts and
purchase mining equipment within ninety (90) days from the
Effective Date hereof; (xi) the Company shall cooperate and provide
the necessary information for the Purchaser to file the appropriate
UCC filings to be filed promptly after each of the pieces of mining
equipment is purchased as required under section (x) of this
section, giving Purchaser a priority lien on any and all said
purchased mining equipment; and (xii) any other event specifically
listed as an Event of Default under any section in the Transaction
Documents.
As of March 31, 2021, 1,125 shares of Series C preferred stock were
issued and outstanding and recorded at stated value as mezzanine
due to certain default provisions requiring mandatory cash
redemption that are outside the control of the Company.
Series D Preferred Stock
On February 19, 2021, the Company filed a Certificate of
Designation of the Series D Convertible Preferred Stock with the
Nevada Secretary of State authorizing the issuance of an aggregate
of 4,000 shares of the Series D preferred stock. Each share of
Series D preferred stock has a par value of $0.001 per share and a
stated value of $1,100 per share. The shares of Series D preferred
stock are convertible into shares of the Company’s common stock at
a conversion price of $0.30 per share.
Integrated Ventures, Inc.
Notes to Condensed Financial Statements
Nine Months Ended March 31, 2021
(Unaudited)
Each share of the Series D preferred stock is entitled to receive
cumulative dividends of 12% per annum, payable monthly and accruing
and compounding daily from the date of issuance of the shares.
Dividends may be paid in cash or in shares of Series D preferred
stock at the discretion of the Company.
The Company, at its sole discresion, has the right to redeem all,
but not less than all, shares of the Series D preferred stok issued
and outstanding upon 5 days notice at a defined redemption price.
The holders of the Series D preferred stock do not have a right to
put the shares to the Company.
The holders of the Series D preferred stock shall have the right to
vote together with holders of common stock, on an as “converted
basis”, on any matter that the Company’s shareholders may be
entitled to vote on, either by written consent or by proxy.
On February 18, 2021, the Company entered into a Securities
Purchase Agreement, dated as of February 18, 2021 (the “Series D
Agreement”) with BHP providing for the issuance and sale by the
Company and the purchase by BHP of shares of Series D preferred
stock. At a closing held February 19, 2021, BHP initially purchased
3,000 shares of Series D preferred stock at a price of $1,000 per
per share for a total purchase price of $3,000,000. Included in the
purchase price was a five-year warrant granting BHP the right to
purchase up to one hundred percent (100%) warrant coverage,
exercisable into shares of the Company’s common stock at a per
share $0.60 per share. Warrants exercisable for 5,000,000 common
shares were issued.
In addition to the requirement of the Company to cause a
registration statement convering the shares issued to be declared
effective by the SEC within 180 days, the Series D Agreement and
the terms of the Series D Certificate of Designation contain
multiple defined triggoring events or events of default that may
require the Company to redeem in cash the Series D preferred stock.
Such events include, but are not limited to the following: (i) the
suspension, cessation from trading or delisting of the Company’s
Common Stock on the Principal Market for a period of two (2)
consecutive trading days or more; (ii) the failure by the Company
to timely comply with the reporting requirements of the Exchange
Act (including applicable extension periods); (iii) the failure for
any reason by the Company to issue Commitment Shares, Dividends or
Conversion Shares to the Purchaser within three trading days; (iv)
the Company breaches any representation warranty, covenant or other
term of condition contained in the definitive agreements between
the parties; (v) the Company files for Bankruptcy or receivership
or any money judgment writ, liquidation or a similar process is
entered by or filed against the Company for more than $50,000 and
remains unvacated, unbonded or unstayed for a period of twenty (20)
calendar days; (vi) conduct its business; (vii) the Company shall
lose the “bid” price for its Common stock on the Principal Market;
(viii) if at any time the Common Stock is no longer DWAC eligible;
(ix) the Company must have a registration statement covering the
Preferred Shares declared effective by the SEC within one hundred
eighty (180) days of the Effective Date hereof; (x) the Company
must complete deposits to secure power supply contracts and
purchase mining equipment within ninety (90) days from the
Effective Date hereof; (xi) the Company shall cooperate and provide
the necessary information for the Purchaser to file the appropriate
UCC filings to be filed promptly after each of the pieces of mining
equipment is purchased as required under section (x) of this
section, giving Purchaser a priority lien on any and all said
purchased mining equipment; and (xii) any other event specifically
listed as an Event of Default under any section in the Transaction
Documents.
As of March 31, 2021, 3,000 shares of Series D preferred stock were
issued and outstanding and recorded as mezzanine due to certain
default provisions requiring mandatory cash redemption that are
outside the control of the Company.
Integrated Ventures, Inc.
Notes to Condensed Financial Statements
Nine Months Ended March 31, 2021
(Unaudited)
9. STOCKHOLDERS’ EQUITY
Preferred Stock
Series A Preferred Stock
On
January 25, 2019, the Board of Directors of the Company approved a
resolution to increase the number of authorized preferred shares to
20,000,000 shares.
In March 2015, the Company filed with the State of Nevada a
Certificate of Designation establishing the designations,
preferences, limitations and relative rights of 1,000,000 shares of
the Company's Series A preferred stock. Holders of the Series A
preferred stock have the right to vote in aggregate, on all
shareholder matters equal to 1,000 votes per share of Series A
preferred stock. The shares of Series A preferred stock are not
convertible into shares of common stock.
The Company has 1,000,000 shares of Series A preferred stock
authorized, with 500,000 shares issued and outstanding as of March
31, 2021 and June 30, 2020, which were issued to members of the
Company’s Board of Directors in consideration for services.
Series B Preferred Stock
On December 21, 2015, the Company filed a Certificate of
Designation for a new Series B convertible preferred stock with the
State of Nevada following approval by the board of directors of the
Company. Five Hundred Thousand (500,000) shares of the Company's
authorized preferred stock are designated as the Series B
convertible preferred stock, par value of $0.001 per share and with
a stated value of $0.001 per share (the "Stated Value"). Holders of
Series B preferred stock shall be entitled to receive dividends,
when and as declared by the Board of Directors out of funds legally
available therefor. At any time and from time to time after the
issuance of shares of the Series B preferred stock, each issued
share of Series B preferred stock is convertible into 100 shares of
the Company’s common stock. The holders of the Series B preferred
stock shall have the right to vote together with holders of common
stock, on an as "converted basis", on any matter that the Company's
shareholders may be entitled to vote on, either by written consent
or by proxy. Upon any liquidation, dissolution or winding-up of the
Company, the holders of the Series B preferred stock shall be
entitled to receive out of the assets of the Company, whether such
assets are capital or surplus, for each share of Series B preferred
stock an amount equal to the Stated Value, and all other amounts in
respect thereof then due and payable prior to any distribution or
payment shall be made to the holders of any junior securities. The
number of authorized Series B preferred stock was later increased
to 1,000,000 shares.
The Company has 1,000,000 shares of Series B preferred stock
authorized, with 727,370 and 430,000 shares issued and outstanding
as of March 31, 2021 and June 30, 2020, respectively.
Steve Rubakh, President of the Company, is issued shares of Series
B preferred stock as part of his compensation arrangement. The
number and timing of Series B preferred shares issued to Mr. Rubakh
is at the discretion of the Board of Directors.
On February 26, 2021 the Company issued to Mr. Rubakh 350,000 total
shares of Series B convertible preferred stock valued on an “as
converted to common” basis at $16,537,500, using the closing market
price of the Company’s common stock on that date. This non-cash,
related party stock-based compensation is included in general and
administrative expenses in the accompanying statements of
operations.
The Company did not issue any shares of Series B preferred stock as
compensation to Mr. Rubakh during the nine months ended March 31,
2020.
On February 19, 2021, Mr. Rubakh converted 52,630 shares of Series
B preferred stock into 5,263,000 shares of common stock in a
transaction recorded at the par value of the shares.
No shares of Series B preferred stock were issued to Mr. Rubakh
during the nine months ended December 31, 2020.
Integrated Ventures, Inc.
Notes to Condensed Financial Statements
Nine Months Ended March 31, 2021
(Unaudited)
Common Stock
On August 13, 2020, the Board of Directors of the Company approved
a resolution to increase the number of authorized common shares to
750,000,000. The Company had 164,422,662 and 103,164,460 shares
issued and outstanding as of March 31, 2021 and June 30, 2020,
respectively.
During the nine months ended March 31, 2021, the Company issued a
total of 61,258,202 shares of its common stock: 52,723,031 shares
in conversion of $960,311 note principal, $34,258 accrued interest
payable, and $5,300 in fees; 55,555 shares in the repayment of a
stock subscription payable of $33,888, 216,616 shares for services
valued at $24,260; 5,263,000 shares issued in conversion of Series
B preferred stock recorded at par value of $5,262; and 3,000,000
shares issued as equity incentive shares in the sale of Series C
and D preferred stock recorded at total market value of $384,100
and recorded as a cost of capital. No gain or loss was recorded as
the conversions were completed within the terms of the debt
agreements and the transactions resulted in the extinguishment of
derivative liabilities totaling $466,093.
During the nine months ended March 31, 2020, the Company issued a
total of 58,129,993 shares of its common stock: 8,000,000 shares
valued at $479,800 were issued pursuant to a Preferred Stock Asset
Agreement entered into on May 21, 2019 and a total of 53,129,993
shares valued at $728,516 were issued in conversion of $683,992
note principal, $35,432 accrued interest payable, $4,500 in fees
and loss on conversion of debt of $4,592, resulting in the
extinguishment of derivative liabilities totaling $330,391. In
addition as discussed above, Mr. Rubakh returned 3,000,000 shares
of the Company’s common stock and was issued 30,000 shares of the
Company’s Series B preferred stock. The common shares returned were
previously issued to Mr. Rubakh in conversion of 30,000 shares of
Series B preferred stock. The common shares were canceled and the
transaction was recorded at the par value of the common and Series
B preferred stock.
10. WARRANTS
As discussed in Note 8, the Company issued warrants in February
2021 to purchase 5,000,000 shares of its common stock in connection
with the sale of Series D preferred stock. A summary of the
Company’s warrants as of March 31, 2021, and changes during the
nine months then ended is as follows:
|
|
Shares
|
|
|
Weighted
Average
Exercise Price
|
|
|
Weighted
Average
Remaining
Contract Term
(Years)
|
|
|
Aggregate
Intrinsic
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at June 30, 2020
|
|
|
- |
|
|
$ |
- |
|
|
|
|
|
|
|
Granted
|
|
|
5,000,000 |
|
|
$ |
0.60 |
|
|
|
|
|
|
|
Exercised
|
|
|
- |
|
|
$ |
- |
|
|
|
|
|
|
|
Forfeited or expired
|
|
|
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding and exercisable at March 31,
2021
|
|
|
5,000,000 |
|
|
$ |
0.060 |
|
|
|
4.89 |
|
|
$ |
- |
|
The aggregate intrinsic value in the preceding table represents the
total pretax intrinsic value, based on the closing price of our
common stock of $0.38 as of March 31, 2021, which would have been
received by the holders of in-the-money warrants had the holders
exercised their warrants as of that date.
11. COMMITMENTS AND CONTINGENCIES
Legal Matters
From time to time, we may be involved in litigation relating to
claims arising out of our operations in the normal course of
business. As of the date of filing of this report, there were no
pending or threatened lawsuits.
Integrated Ventures, Inc.
Notes to Condensed Financial Statements
Nine Months Ended March 31, 2021
(Unaudited)
Power Supply and Purchase Agreement
The Company has consolidated it cryptocurrency operations in one
facility in Carthage, New York.The Carthage power supply and
purchase agreement was entered into on May 10, 2019 for an initial
term of 90 days, with an option to continue the agreement for a
subsequent 36 months, which option the Company has exercised. The
Company’s sole obligation under the agreement is to pay a
contractual rate per kilowatt hour of electricity consumed in the
Company’s cryptocurrency mining operations.
As of March 31, 2021, the Company had no obligation for future
lease payments under non-cancelable operating leases.
12. DERIVATIVE LIABILITIES
The Company has issued convertible notes payable, warrants and
Series B preferred stock with put back rights and has entered into
exchange and subscription agreements that contain certain
provisions that have been identified as derivatives. The Company
determined that the number of common shares to be issued under
these agreements is indeterminate; therefore, the Company concluded
that the equity environment was tainted and all additional
warrants, stock options convertible debt and obligations to issue
common shares were included in the value of derivative liabilities.
During the three months ended March 31, 2021, all convertible notes
payable and other equity instruments with provisions identified as
derivatives were extinguished through conversion to common shares
and all related derivative liabilities were settled. Consequently,
as of March 31, 2021, the Company concluded that the equity
environment was no longer tainted.
The Company estimates the fair value of the derivative liabilities
at the issuance date and at each subsequent reporting date, using a
multinomial lattice model simulation. The model is based on a
probability weighted discounted cash flow model using projections
of the various potential outcomes.
During the nine months ended March 31, 2021, we had the following
activity in our derivative liabilities:
|
|
Convertible
Notes Payable
|
|
|
Common Stock
Subscription
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities at June 30, 2020
|
|
$ |
163,664 |
|
|
$ |
1,170 |
|
|
$ |
164,834 |
|
Addition to liabilities for new debt
|
|
|
258,460 |
|
|
|
- |
|
|
|
258,460 |
|
Decrease due to conversions/issuances
|
|
|
(466,093 |
) |
|
|
(33,888 |
) |
|
|
(499,981 |
) |
Change in fair value
|
|
|
43,969 |
|
|
|
32,718 |
|
|
|
76,687 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities at March 31, 2021
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
Key inputs and assumptions used in valuing the Company’s derivative
liabilities 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.
13. DIGITAL CURRENCY THEFT LOSS
During the nine months ended March 31, 2020, we incurred a digital
currency theft loss of $33,037 where a hacker obtained unauthorized
access to our online digital currency processing service and
transferred digital currencies out of our account. The theft loss
has been included as an other expense in the accompanying statement
of operations for the nine months ended March 31, 2020.
Integrated Ventures, Inc.
Notes to Condensed Financial Statements
Nine Months Ended March 31, 2021
(Unaudited)
14. SUBSEQUENT EVENTS
Management has evaluated subsequent events according to the
requirements of ASC TOPIC 855, and has reported the following:
Security Purchase Agreements
On March 30, 2021, the Company entered into securities purchase
agreements (the “Purchase Agreements”) with two institutional
investors (the “Purchasers”), for the offering (the “Offering”) of
(i) 30,000,000 shares of common stock (“Shares”), par value $0.001
per share, of the Company (“Common Stock”) and (ii) common stock
purchase warrants (“Warrants”) to purchase up to an aggregate of
30,000,000 shares of Common Stock, which are exercisable for a
period of five years after issuance at an initial exercise price of
$0.30 per share, subject to certain adjustments, as provided in the
Warrants. Each of the Purchasers received Warrants in the amount
equal to 100% of the number of Shares purchased by such Purchaser.
Each Share and accompanying Warrant were offered at a combined
offering price of $0.30. Pursuant to the Purchase Agreements, the
Purchasers purchased the Shares and accompanying Warrants for an
aggregate purchase price of $9,000,000. The transaction closed on
April 1, 2021, with the Company receiving proceeds of $8,135,000
after payment of expenses.
Amendment to Series C Preferred Stock Securities Purchase
Agreement
On May 3, 2021, the Company and BHP amended the Series C Agreement
to eliminate further purchases of Series C preferred stock by BHP
except as the parties may subsequently agree upon.
Common Stock Issuances
Subsequent to March 31, 2021, the Company issued 65,000 shares of
its common stock to a consultant for services valued at
$20,000.
Equipment Purchase Agreement
On April 12, 2021, we entered into non-fixed price sales and
purchase agreement with Bitmain Technologies Limited (“Bitmain”)
(the “Bitmain Agreement”) to purchase from Bitmain cryptocurrency
mining hardware and other equipment in accordance with the terms
and conditions of the Agreement. Bitmain is scheduled to
manufacture and ship miners on monthly basis, in 12 equal batches
of 400 units, starting on August 2021 and through July 2022. The
Purchase Agreement remains in effect until the delivery of the last
batch of products. The total purchase price was approximately
$34,047,600, subject to price adjustments and related offsets. The
total purchase price is payable as follows: (i) 25% of the total
purchase price is due upon the execution of the Agreement or no
later than April 19, 2021; (ii) 35% of the total purchase price, is
due by May 30, 2021; and (iii) the remaining 40% of the total
purchase price, is payable on a monthly basis starting in June
2021.
ITEM 2:
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
SPECIAL NOTE CONCERNING FORWARD-LOOKING
STATEMENTS
We believe that it is important to communicate our future
expectations to our security holders and to the public. This
report, therefore, contains statements about future events and
expectations which are "forward-looking statements" within the
meaning of Sections 27A of the Securities Act of 1933 and 21E of
the Securities Exchange Act of 1934, including the statements about
our plans, objectives, expectations and prospects under the heading
"Management's Discussion and Analysis of Financial Condition and
Results of Operations." You can expect to identify these statements
by forward-looking words such as "may," "might," "could," "would,"
"will," "anticipate," "believe," "plan," "estimate," "project,"
"expect," "intend," "seek" and other similar expressions. Any
statement contained in this report that is not a statement of
historical fact may be deemed to be a forward-looking statement.
Although we believe that the plans, objectives, expectations and
prospects reflected in or suggested by our forward-looking
statements are reasonable, those statements involve 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
fiscal year ended June 30, 2020 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 May 2017, we changed our name to
Integrated Ventures, Inc.We have licensed our Ems Find platform and
related technologies to EpicMD, Inc. via a Licensing Agreement and
management has determined to focus our business on developing and
operating digital currency assets.Our offices are located at 73
Buck Road, Suite 2, Huntingdon Valley, Pennsylvania 19006.
On November 22, 2017, we successfully launched our cryptocurrency
operations, and revenues commenced from cryptocurrency mining
operations and from sales of cryptocurrency mining equipment. As of
March 31, 2021, the Company owned and operated approximately 761
miners that mine Bitcoin, Litecoin, ZCash and
Ethereum. In addition, the Company paid deposits
of $2,528,392 for 300 additional miners to be placed into service
subsequent to March 31, 2021.
The Company will continue to (1) raise capital to purchase new
mining equipment and (2) retire older and no longer profitable
models.
Financial
We have consolidated our cryptocurrency operations in one facility,
located in Carthage, New York. The power supply and purchase
agreement was entered into on May 10, 2019 for an initial term of
90 days, with an option to continue for a subsequent 36 months,
which option the Company has exercised. The Company’s sole
obligation under the Agreement is to pay the PetaWatt Properties,
LLC, a contractual rate per kilowatt hour of electricity, consumed
by the Company’s cryptocurrency mining operations.
Revenues from our cryptocurrency mining operations were $682,706
and $130,062 for the three months ended March 31, 2021 and 2020 and
$885,931 and $363,541 for the nine months ended March 31, 2021 and
2020, respectively. Revenues from the sales of used equipment and
parts were $14,099 and $848 for the three months ended March 31,
2021 and 2020 and $75,221 and $10,511 for the nine months ended
March 31, 2021 and 2020, respectively.
When funds are available and market conditions allow, we also
invest in certain denominations of cryptocurrencies to complement
our mining operations.We consider these investments similar to
marketable securities where we purchase and hold the
cryptocurrencies for sale. We report realized gains and losses on
the sales of cryptocurrencies (net of transaction costs. As of
March 31, 2021, our digital currencies at cost totaled $1,515,201
and were comprised primarily of Bitcoin (BTC), Ethereum (ETH),
Chainlink (LINK) and Bancor (BNT).
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, 2021, we received proceeds from convertible
notes payable of $563,000, Series C preferred stock of $1,125,000
and Series D preferred stock of $3,000,000.
The Digital Asset Market
The Company is focusing on the mining of digital assets, as well as
blockchain applications (“blockchain”) and related technologies. A
blockchain is a shared immutable ledger for recording the history
of transactions of digital assets—a business blockchain provides a
permissioned network with known identities. A Bitcoin is the most
recognized type of a digital asset that is issued by, and
transmitted through, an open source, math-based protocol platform
using cryptographic security that is known as the “Bitcoin
Network.” The Bitcoin Network is an online, peer-to-peer user
network that hosts the public transaction ledger, known as the
blockchain, and the source code that comprises the basis for the
cryptography and math-based protocols governing the Bitcoin
Network.
Bitcoins, for example, can be used to pay for goods and services or
can be converted to fiat currencies, such as the US Dollar, at
rates determined on Bitcoin exchanges or in individual
end-user-to-end-user transactions under a barter system. The
networks utilized by digital coins are designed to operate without
any company or government in charge, governed by a collaboration of
volunteer programmers and computers that maintain all the records.
These blockchains are typically maintained by a network of
participants which run servers while securing their blockchain.
Third party service providers such as Bitcoin exchanges and bitcoin
third party payment processing services may charge significant fees
for processing transactions and for converting, or facilitating the
conversion of, bitcoins to or from fiat currency.
This market is rapidly evolving and there can be no assurances that
we will remain competitive with industry participants that have or
may have greater resources or experience in in this industry than
us, nor that the unproven digital assets that we mine will ever
have any significant market value.
The Company, like many cryptocurrency mining operators, is
currently operating at a non-profitable status following record
historic runs in market prices of digital currencies. Market prices
of digital currencies have not been high enough to cover the
operating costs of mining companies, including significant power
costs and high levels of equipment depreciation. The Company is
addressing these operational challenges through considering
alternative sources of power, further consolidation of facilities,
and potential hosting arrangements. There can be no assurance that
the Company will be successful in these efforts and attain
profitable levels of operations.
FINANCIAL OPERATIONS REVIEW
In November 2017, revenues commenced from our cryptocurrency mining
operations and from sales of cryptocurrency mining equipment. Prior
to that date, revenues were generated substantially from the now
discontinued Ambulance services, which we have discontinued to
focus on new revenue sources.
We are incurring increased costs as a result 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 currency 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 AND NINE MONTHS ENDED MARCH 31, 2021 COMPARED TO THE
THREE MONTHS AND NINE MONTHS ENDED MARCH 31, 2020
Revenues
Our cryptocurrency mining revenues increased to $682,706 in the
three months ended March 31, 2021 from $130,062 in the three months
ended March 31, 2020. On a year-to-date basis, our crypto currency
mining revenues increased to $885,931 in the nine months ended
March 31, 2021 from $363,541 in the nine months ended March 31,
2020. This increase in revenues resulted primarily from the Company
replacing under-performing, non-serviceable mining equipment during
the current fiscal year with new more efficient mining equipment
and increasing the number of miners.
We also have revenues from the sale of cryptocurrency mining units
that have been assembled or refurbished for resale and the sale of
spare parts. Such sales totaled $14,099 and $848 in the three
months ended March 31, 2021 and 2020 and $75,221 and $10,511 in the
nine months ended March 31, 2021 and 2020, respectively. The
increase in sales of unused equipment and parts was due to the
replacement of under-performing, non-serviceable mining equipment
during the current fiscal year with new more efficient equipment.
Sales of equipment and parts will fluctuate from period to period
depending on the current retail demand for our model of
cryptocurrency mining units and parts.
Cost of Revenues
Cost of revenues was $266,897 and $261,484 in the three months
ended March 31, 2021 and 2020 and $618,654 and $753,703 in the nine
months ended March 31, 2021 and 2020, respectively. The decrease in
cost of revenues in the current fiscal year is due primarily to a
decrease in depreciation and amortization expense. Expenses
associated with running our cryptocurrency mining operations, such
as equipment depreciation and amortization, operating supplies,
utilities and consulting services are recorded as cost of revenues.
Also included in cost of revenues are the costs of purchasing or
assembling the cryptocurrency mining units sold. We reported a
gross profit on revenues of $429,908 and 342,198 in the three
months and nine months ended March 31, 2021, respectively.
Previously in prior periods, we have reported a gross loss on
revenues primarily due to high utility costs and a conservative,
short useful life for mining equipment depreciation and
amortization. Higher eryptocurrency mining revenues in the current
year resulting from the implementation of more efficient mining
equipment and the increase in the number of miners purchased also
contributed to the gross profit on revenues in the current fiscal
year.
Operating Expenses
Our general and administrative expenses increased to $181,165 in
the three months ended March 31, 2021 from $85,465 and increased to
$372,911 in the nine months ended March 31, 2021 from $279,990 in
the nine months ended March 31, 2020. The increases resulted
primarily from higher professional and consulting fees relating to
debt and equity financings and the increase in levels of
cryptocurrency mining operations. Fluctuations in operating
expenses from period to period result primarily from changes in
consulting and professional fees and travel expenses.
We reported non-cash, related party stock-based compensation of
$16,537,500 in the three months and nine months ended March 31,
2021. On February 26, 2021 the Company issued to Steve Rubakh, our
President, 350,000 total shares of Series B convertible preferred
stock valued on an “as converted to common” basis at $16,537,500,
using the closing market price of the Company’s common stock on
that date. Each share of Series B preferred stock is convertible
into 100 shares of the Company’s common stock.
Other Income (Expense)
Our other income (expense) was comprised of the following:
|
|
Three Months
Ended
March 31,:
|
|
|
Nine Months
Ended
March 31,:
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
$ |
(239,435 |
) |
|
$ |
(90,824 |
) |
|
$ |
(430,049 |
) |
|
$ |
(573,561 |
) |
Realized gain (loss) on digital
currencies
|
|
|
54,920 |
|
|
|
(562 |
) |
|
|
106,497 |
|
|
|
(6,158 |
) |
Change in fair value of derivative
liabilities
|
|
|
(113,599 |
) |
|
|
(27,414 |
) |
|
|
(76,687 |
) |
|
|
823,409 |
|
Loss on disposition of property and
equipment
|
|
|
- |
|
|
|
- |
|
|
|
(207,281 |
) |
|
|
- |
|
Loss on conversion of debt
|
|
|
- |
|
|
|
10,168 |
|
|
|
- |
|
|
|
(4,592 |
) |
Digital currency theft loss
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(33,037 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income (expense)
|
|
$ |
(298,114 |
) |
|
$ |
(108,632 |
) |
|
$ |
(607,520 |
) |
|
$ |
206,061 |
|
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. In the three months ended March 31, 2021, our lenders
completed the full conversion of our convertible notes payable,
resulting in increased amortization of debt discount and interest
expenses in that quarter compared to the prior year quarter. For
the nine months ended March 31, 2021, the amortization of debt
discount and interest expense was less than in the comparative
prior year period.
In the current fiscal year we have significantly increased our
investing efforts in digital currencies. In addition to the
currencies received as compensation for our mining services, we
purchased various digital currencies totaling $4,156,874 and also
converted currencies from one denomination to another based on our
assessment of market conditions for each respective currency. The
market value of individual currency denominations continually
fluctuates and the fluctuations may be material from day to day.
During the nine months ended March 31, 2021, we received total
proceeds of $3,835,173 from the sale of digital currencies and
incurred transactions fees totaling $105,163, which are deducted
from the gain or loss realized. We realized a gain on digital
currencies, after deducting transaction costs, of $54,920 and
$106,497 in the three months and nine months ended March 31, 2021,
respectively. We realized losses on digital currencies, after
deducting transaction costs, of $562 and $6,158 in the three months
and nine months ended March 31, 2020, respectively.ended December
31, 2020 and 2019, respectively, as we experienced the negative
impact of fluctuating market values. As of March 31, 2021, we held
digital currencies with a total book value of $1,515,201 and a
total market value of $1,870,453.
During the nine months ended March 31, 2020, we disposed of and
wrote off non-serviceable, defective mining equipment with a net
book value of $207,281. The equipment disposed of was replaced
during the period with new, more efficient mining equipment. We did
not report any loss on disposition of property and equipment during
the three months ended March 31, 2021 and 2020 or the nine months
ended March 31, 2021.
We estimate the fair value of the derivatives associated with our
convertible debt, options, warrants and other contracts using, as
applicable, either the Black-Scholes pricing model or multinomial
lattice models that value the derivative liability based on a
probability weighted discounted cash flow model using future
projections of the various potential outcomes. We estimate the fair
value of the derivative liabilities at the inception of the
financial instruments, and, in the case of our convertible notes
payable, at the date of conversions to equity and at each reporting
date, recording a derivative liability, debt discount, additional
paid-in capital and a gain or loss on change in derivative
liabilities as applicable. These estimates are based on multiple
inputs, including the market price of our stock, interest rates,
our stock price volatility, variable conversion prices based on
market prices as defined in the respective agreements and
probabilities of certain outcomes based on management projections.
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. During the three
months ended March 31, 2021, all convertible notes payable and
other equity instruments with provisions identified as derivatives
were extinguished through conversion to common shares and all
related derivative liabilities were settled.
We reported a gain on conversion of debt of $10,168 in the three
months ended March 31, 2020 and a loss on conversion of debt of
$4,592 in the nine months ended March 31, 2020. Gains or losses on
extinguishment of debt result from conversion of convertible notes
to common stock where the conversion terms were outside the related
agreements. We did not report any gain or loss on extinguishment of
debt during the three months or nine months ended March 31,
2021.
During the nine months ended March 31, 2020, we incurred a digital
currency theft loss of $33,037 where a hacker obtained unauthorized
access to our online digital currency processing service and
transferred digital currencies out of our account.
Net Loss
As a result, primarily from the non-cash related party stock-based
compensation, we reported a net loss of $16,586,871 and $17,175,732
for the three months and nine months ended March 31, 2021,
respectively, compared to net losses of $444,671 and $573,580 for
the three months and nine months ended March 31, 2020,
respectively.
LIQUIDITY AND CAPITAL RESOURCES
Overview
As of March 31, 2021, we had total current assets of $2,635,866,
including cash of $99,974 and equipment deposits of $2,528,392, and
total current liabilities of $310,974. During the three months
ended March 31, 2021, our lenders converted in full their
convertible notes payable and the related derivative liabilities
were settled. We had total stockholders’ equity of $709,964 as of
March 31, 2021 compared to a stockholders’ deficit of $109,603 as
of June 30, 2020.
Most recently, we have funded our operations primarily from
convertible notes payable, the issuance of Series C and D preferred
stock, and cash generated from our digital currency mining
operations. The Series C and D preferred stock are recorded at
total face value of $4,125,000 as mezzanine equity due to certain
mandatory redemption features of the stock.
During the nine months ended March 31, 2021, we received net
proceeds from convertible notes payable of $563,000, which debt was
converted in full into shares of our common stock. We also funded
the purchase of cryptocurrency mining equipment through short-term
installment debt totaling $57,822.
On January 14, 2021, the Company entered into a Securities Purchase
Agreement (the “Series C Agreement”) with BHP Capital NY, Inc.
(“BHP”), providing for the issuance and sale by the Company and the
purchase by BHP of newly designated shares of Series C Convertible
preferred stock issued by the Company at a purchase price per share
of $1,000. The first closing under the Series C Agreement was held
on January 22, 2021, at which the Company sold, and BHP purchased
750 shares of Series C preferred stock for $750,000. The Company
received net proceeds of $740,000 after payment of legal fees. The
Company also on that date issued 2,000,000 shares of its common
stock to BHP as equity incentive shares.
Pursuant to a second Series C Securities Purchase Agreement
effective February 5, 2021, BHP purchased a second tranche
consisting of 375,000 shares of Series C preferred stock for
$375,000. As an equity incentive to this purchase of Series C
preferred stock, the Company issued 1,000,000 shares of the
Company’s common stock to BHP.
On February 18, 2021, the Company entered into a Securities
Purchase Agreement, dated as of February 18, 2021 (the “Series D
Agreement”) with BHP providing for the issuance and sale by the
Company and the purchase by BHP of shares of Series D preferred
stock. At a closing held February 19, 2021, BHP initially purchased
3,000 shares of Series D preferred stock at a price of $1,000 per
per share for a total purchase price of $3,000,000. Included in the
purchase price was a five-year warrant granting BHP the right to
purchase 5,000,000 warrants, exercisable into shares of the
Company’s common stock at a per share $0.60 per share.
Sources and Uses of Cash
We used net cash in operations of $737,497 in the nine months ended
March 31, 2021 as a result of our net loss of $17,175,732, non-cash
gain of $106,497, increases in prepaid expenses and other current
assets of $4,250 and digital currencies of $903,163 and decreases
in accounts payable of $42,840 and due to related party of $65,737,
partially offset by non-cash expenses totaling $17,539,579 and
increase accrued expenses of $21,143.
We used net cash in operations of $639,079 in the nine months ended
March 31, 2020 as a result of our net loss of $573,580, non-cash
gain of $823,409, increase in digital currencies of $453,070,
increase in prepaid expenses and other current assets of $3,250 and
decrease in accounts payable of $2,021, partially offset by
non-cash expenses totaling $1,135,656 and increases in accrued
expenses of $41,060 and due to related party of $39,535.
During the nine months ended March 31, 2021, we used net cash in
investing activities of $3,825,667, comprised of the purchase of
digital currencies of $4,156,874, the purchase of property and
equipment of $975,574 and equipment deposits of $2,528,392,
partially offset by proceeds from the sale of digital currencies of
$3,835,173.
During the nine months ended March 31, 2020, we had net cash
provided by investing activities of $288,414 comprised of net
proceeds from the sale of investments of $411,763, partially offset
by the purchase of property and equipment of $123,349.
During the nine months ended March 31, 2021, we had net cash
provided by financing activities of $4,656,463 comprised of
proceeds from convertible notes payable of $563,000, proceeds from
the issuance of Series C preferred stock of $1,125,000 and
$3,000,000 proceeds from the issuance of Series D preferred stock,
partially offset by repayment of notes payable of $31,537.
During the nine months ended March 31, 2020, we had net cash
provided by financing activities of $403,692 comprised of proceeds
from convertible notes payable of $534,000, partially offset by
repayment of convertible notes payable of $130,308.
We will have to raise funds to successfully operate our digital
currency mining operations and to fund our operating expenses. We
will have to borrow money from shareholders or issue debt or equity
or enter into a strategic arrangement with a third party. There can
be no assurance that additional capital will be available to
us.
Subsequent Funding
On March 30, 2021, the Company entered into securities purchase
agreements (the “Purchase Agreements”) with two institutional
investors (the “Purchasers”), for the offering (the “Offering”) of
(i) 30,000,000 shares of common stock (“Shares”), par value $0.001
per share, of the Company (“Common Stock”) and (ii) common stock
purchase warrants (“Warrants”) to purchase up to an aggregate of
30,000,000 shares of Common Stock, which are exercisable for a
period of five years after issuance at an initial exercise price of
$0.30 per share, subject to certain adjustments, as provided in the
Warrants. Each of the Purchasers received Warrants in the amount
equal to 100% of the number of Shares purchased by such Purchaser.
Each Share and accompanying Warrant were offered at a combined
offering price of $0.30. Pursuant to the Purchase Agreements, the
Purchasers purchased the Shares and accompanying Warrants for an
aggregate purchase price of $9,000,000. The transaction closed on
April 1, 2021, with the Company receiving proceeds of $8,135,000
after payment of expenses.
Equipment Purchase Agreement
On April 12, 2021, we entered into non-fixed price sales and
purchase agreement with Bitmain Technologies Limited (“Bitmain”)
(the “Bitmain Agreement”) to purchase from Bitmain cryptocurrency
mining hardware and other equipment in accordance with the terms
and conditions of the Agreement. Bitmain is scheduled to
manufacture and ship miners on monthly basis, in 12 equal batches
of 400 units, starting on August 2021 and through July 2022. The
Purchase Agreement remains in effect until the delivery of the last
batch of products. The total purchase price was approximately
$34,047,600, subject to price adjustments and related offsets. The
total purchase price is payable as follows: (i) 25% of the total
purchase price is due upon the execution of the Agreement or no
later than April 19, 2021; (ii) 35% of the total purchase price, is
due by May 30, 2021; and (iii) the remaining 40% of the total
purchase price, is payable on a monthly basis starting in June
2021.
Going Concern
The Company has reported recurring operating losses since its
inception and used net cash in operating activities of $737,497 in
the nine months ended March 31, 2021. As of March 31, 2021, the
Company had an accumulated deficit of $39,691,125. 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.
There can be no assurances that the Company will be successful in
attaining a profitable level of operations or in generating
additional cash from the equity/debt markets or other sources fund
its operations. The financial statements do not include any
adjustments relating to the recoverability of assets and
classification of assets and liabilities that might be necessary.
Should the Company not be successful in its business plan or in
obtaining the necessary financing to fund its operations, the
Company would need to curtail certain or all operational activities
and/or contemplate the sale of its assets, if necessary.
Current and Future Impact of COVID-19
The COVID-19 pandemic continues to have a material negative impact
on capital markets. While we continue to incur operating losses, we
are currently dependent on debt or equity financing to fund our
operations and execute our business plan. We believe that the
impact on capital markets of COVID-19 may make it more costly and
more difficult for us to access these sources of funding.
SIGNIFICANT ACCOUNTING POLICIES
Our significant accounting policies are disclosed in Note 2 to our
condensed financial statements and in the notes to our audited
financial statements included in our Annual Report on Form 10-K for
the year ended June 30, 2020. The following is a summary of those
accounting policies that involve significant estimates and judgment
of management.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenue and expenses during the reporting
period. Because of the use of estimates inherent in the financial
reporting process, actual results could differ significantly from
those estimates.
Digital Currencies
Digital currencies consist of Bitcoin, Litecoin, ZCash and
Ethereum, generally received for the Company’s own account as
compensation for cryptocurrency mining services, and Chainlink and
other digital currencies purchased for short-term investment
purposes. Given that there is limited precedent regarding the
classification and measurement of cryptocurrencies under current
Generally Accepted Accounting Principles (“GAAP”), the Company has
determined to account for these digital currencies as
indefinite-lived intangible assets in accordance with Accounting
Standards Update ("ASU") No. 350, Intangibles – Goodwill and
Other, for the period covered by this report and in future
reports unless and until further guidance is issued by the
Financial Accounting Standards Board (“FASB”). An intangible asset
with an indefinite useful life is not amortized but assessed for
impairment annually, or more frequently, when events or changes in
circumstances occur indicating that it is more likely than not that
the indefinite-lived asset is impaired. Impairment exists when the
carrying amount exceeds its fair value. In testing for impairment,
the Company has the option to first perform a qualitative
assessment to determine whether it is more likely than not than an
impairment exists. If it is determined that it is more likely than
not that an impairment exists, a quantitative impairment test is
not necessary. If the Company concludes otherwise, it is required
to perform a quantitative impairment test. To the extent an
impairment loss is recognized, the loss establishes the new cost
basis of the asset. Subsequent reversal of impairment losses is not
permitted. Realized gains or losses on the sale of digital
currencies, net of transaction costs, are included in other income
(expense) in the statements of operations. The Company had a
realized gain on the sale of digital currencies of $106,497 in the
nine months ended March 31, 2021.
Property and Equipment
Property and equipment, consisting primarily of computer and other
cryptocurrency 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. The Company operates in an emerging
industry for which limited data is available to make estimates of
the useful economic lives of specialized equipment. Management has
assessed the basis of depreciation of these assets and believes
they should be depreciated over a three-year period due to
technological obsolescence reflecting rapid development of hardware
that has faster processing capacity and other factors. Maintenance
and repairs are expensed as incurred and improvements are
capitalized. Gains or losses on the disposition of property and
equipment are recorded upon disposal.
During the six months ended December 31, 2020, the Company
discontinued the use of damaged or non-serviceable mining equipment
and wrote off its net book value of $207,281 to loss on disposition
of property and equipment.
Management has determined that the three-year diminishing value
best reflects the current expected useful life of transaction
verification servers. This assessment takes into consideration the
availability of historical data and management’s expectations
regarding the direction of the industry including potential changes
in technology. Management will review this estimate annually and
will revise such estimates as and when data becomes available.
To the extent that any of the assumptions underlying management’s
estimate of useful life of its transaction verification servers are
subject to revision in a future reporting period, either 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.
Derivatives
The Company evaluates its convertible debt, options, warrants or
other contracts to determine if those contracts or embedded
components of those contracts qualify as derivatives to be
separately accounted for. The result of this accounting treatment
is that under certain circumstances the fair value of the
derivative is marked-to-market each balance sheet date and recorded
as a liability. In the event that the fair value is recorded as a
liability, the change in fair value is recorded in the statement of
operations as other income or expense. Upon conversion or exercise
of a derivative instrument, the instrument is marked to fair value
at the conversion date and then that fair value is reclassified to
equity. Equity instruments that are initially classified as equity
that become subject to reclassification under this accounting
standard are reclassified to liability at the fair value of the
instrument on the reclassification date.
Where the number of warrants or common shares to be issued under
these agreements is indeterminate, the Company has concluded that
the equity environment is tainted, and all additional warrants and
convertible debt are included in the value of the derivatives.
We estimate the fair value of the derivatives associated with our
convertible notes payable, common stock issuable pursuant to a
Series B preferred stock Exchange Agreement and a stock
subscription payable using, as applicable, either the Black-Scholes
pricing model or multinomial lattice models that value the
derivative liability based on a probability weighted discounted
cash flow model using future projections of the various potential
outcomes. We estimate the fair value of the derivative liabilities
at the inception of the financial instruments, and, in the case of
our convertible notes payable, at the date of conversions to equity
and at each reporting date, recording a derivative liability, debt
discount, additional paid-in capital and a gain or loss on change
in derivative liabilities as applicable. These estimates are based
on multiple inputs, including the market price of our stock,
interest rates, our stock price volatility, variable conversion
prices based on market prices as defined in the respective
agreements and probabilities of certain outcomes based on
management projections. These inputs are subject to significant
changes from period to period and to management’s judgment;
therefore, the estimated fair value of the derivative liabilities
will fluctuate from period to period, and the fluctuation may be
material.
Impairment of Long-Lived Assets
All assets, including intangible assets subject to amortization,
are reviewed for impairment when changes in circumstances indicate
that the carrying amount of the asset may not be recoverable in
accordance with ASC 350 and ASC 360. If the carrying amount of the
asset exceeds the expected undiscounted cash flows of the asset, an
impairment charge is recognized equal to the amount by which the
carrying amount exceeds fair value or net realizable value. The
testing of these intangibles under established guidelines for
impairment requires significant use of judgment and assumptions.
Changes in forecasted operations and other assumptions could
materially affect the estimated fair values. Changes in business
conditions could potentially require adjustments to these asset
valuations. We reported no impairment expense for the three months
or nine months ended March 31, 2021 and 2020.
Fair Value of Financial Instruments
Disclosures about fair value of financial instruments require
disclosure of the fair value information, whether or not recognized
in the balance sheet, where it is practicable to estimate that
value. As of December 31, 2020 and June 30, 2020, the amounts
reported for cash, prepaid expenses and other current assets,
equipment deposits, accounts payable, accrued preferred stock
dividends, accrued expenses, due to related party and notes payable
approximate fair value because of their short maturities.
Fair value is defined as the price that would be received to sell
an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. ASC Topic 820
established a three-tier fair value hierarchy, which prioritizes
the inputs used in measuring fair value. The hierarchy gives the
highest priority to unadjusted quoted prices in active markets for
identical assets or liabilities (level 1measurements) and the
lowest priority to unobservable inputs (level 3 measurements).
These tiers include:
|
·
|
Level 1, defined as observable
inputs such as quoted prices for identical instruments in active
markets; |
|
|
|
|
·
|
Level 2, defined as inputs other
than quoted prices in active markets that are either directly or
indirectly observable such as quoted prices for similar instruments
in active markets or quoted prices for identical or similar
instruments in markets that are not active; and |
|
|
|
|
·
|
Level 3, defined as unobservable
inputs in which little or no market data exists, therefore
requiring an entity to develop its own assumptions, such as
valuations derived from valuation techniques in which one or more
significant inputs or significant value drivers are
unobservable. |
Our derivative liabilities are measured at fair value on a
recurring basis and estimated as follows:
|
|
Total
|
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
March 31,
2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative
liabilities
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities measured at
fair value
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative
liabilities
|
|
$ |
164,834 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
164,834 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities measured at
fair value
|
|
$ |
164,834 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
164,834 |
|
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
Effective July 1, 2018, we adopted ASC 606, Revenue from Contracts
with Customers, as amended, using the modified retrospective
method, which requires the cumulative effect of adoption to be
recognized as an adjustment to opening retained earnings in the
period of adoption. There was no cumulative effect of adopting the
new standard and no impact on our financial statements. The new
standard provides a single comprehensive model to be used in the
accounting for revenue arising from contracts with customers and
supersedes current revenue recognition guidance, including
industry-specific guidance. The standard’s stated core principle is
that an entity should recognize revenue to depict the transfer of
promised goods or services to customers in an amount that reflects
the consideration to which the entity expects to be entitled in
exchange for those goods or services. To achieve this core
principle, ASC 606 includes provisions within a five-step model
that includes identifying the contract with a customer, identifying
the performance obligations in the contract, determining the
transaction price, allocating the transaction price to the
performance obligations, and recognizing revenue when, or as, an
entity satisfies a performance obligation.
Our revenues currently consist of cryptocurrency mining revenues
and revenues from the sale of cryptocurrency mining equipment
recognized in accordance with ASC 606 as discussed above. Amounts
collected from customers prior to shipment of products are recorded
as deferred revenue.
The Company earns its cryptocurrency mining revenues by providing
transaction verification services within the digital currency
networks of cryptocurrencies, such as Bitcoin, Litecoin, ZCash and
Ethereum. The Company satisfies its performance obligation at the
point in time that the Company is awarded a unit of digital
currency through its participation in the applicable network and
network participants benefit from the Company’s verification
service. In consideration for these services, the Company receives
digital currencies, which are recorded as revenue using the closing
U.S. dollar price of the related cryptocurrency on the date of
receipt. Expenses associated with running the cryptocurrency mining
operations, such as equipment depreciation, rent, operating
supplies, rent, utilities and monitoring services are recorded as
cost of revenues.
There is currently no specific definitive guidance in GAAP or
alternative accounting frameworks for the accounting for the
production and mining of digital currencies and management has
exercised significant judgment in determining appropriate
accounting treatment for the recognition of revenue for mining of
digital currencies. Management has examined various factors
surrounding the substance of the Company’s operations and the
guidance in ASC 606, including identifying the transaction price,
when performance obligations are satisfied, and collectability is
reasonably assured being the completion and addition of a block to
a blockchain and the award of a unit of digital currency to the
Company. In the event authoritative guidance is enacted by the
FASB, the Company may be required to change its policies which
could result in a change in the Company’s financial statements.
OFF BALANCE SHEET ARRANGEMENTS
The Company has consolidated it cryptocurrency operations in one
facility in Carthage, New York. The Carthage lease and power
purchase agreement was entered into on May 10, 2019 for an initial
term of 90 days, with an option to continue the lease for a
subsequent 36 months, which option the Company has exercised. The
Company’s sole obligation under the lease is to pay the lessor a
contractual rate per kilowatt hour of electricity consumed in the
Company’s cryptocurrency mining operations.
On April 12, 2021, we entered into non-fixed price sales and
purchase agreement with Bitmain Technologies Limited (“Bitmain”)
(the “Bitmain Agreement”) to purchase from Bitmain cryptocurrency
mining hardware and other equipment in accordance with the terms
and conditions of the Agreement. Bitmain is scheduled to
manufacture and ship miners on monthly basis, in 12 equal batches
of 400 units, starting on August 2021 and through July 2022. The
Purchase Agreement remains in effect until the delivery of the last
batch of products. The total purchase price was approximately
$34,047,600, subject to price adjustments and related offsets. The
total purchase price is payable as follows: (i) 25% of the total
purchase price is due upon the execution of the Agreement or no
later than April 19, 2021; (ii) 35% of the total purchase price, is
due by May 30, 2021; and (iii) the remaining 40% of the total
purchase price, is payable on a monthly basis starting in June
2021.
RECENTLY ISSUED ACCOUNTING POLICIES
There were no new accounting pronouncements issued or proposed by
the FASB during the nine months ended March 31, 2021 and through
the date of filing this report which the Company believes will have
a material impact on its financial financial statements.
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK.
As a smaller reporting company, as defined by Item 10 of Regulation
S-K, the Company is not required to provide the information
required by this item.
ITEM 4.
CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and
Procedures
The Securities and Exchange Commission defines the term "disclosure
controls and procedures" to mean a company's controls and other
procedures of an issuer that are designed to ensure that
information required to be disclosed in the reports that it files
or submits under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported, within the time periods
specified in the Securities and Exchange Commission's rules and
forms. Disclosure controls and procedures include, without
limitation, controls and procedures designed to ensure that
information required to be disclosed by an issuer in the reports
that it files or submits under the Securities Exchange Act of 1934
is accumulated and communicated to the issuer's management,
including its chief executive and chief financial officers, or
persons performing similar functions, as appropriate to allow
timely decisions regarding required disclosure. The Company
maintains such a system of controls and procedures in an effort to
ensure that all information which it is required to disclose in the
reports it files under the Securities Exchange Act of 1934 is
recorded, processed, summarized and reported within the time
periods specified under the SEC's rules and forms and that
information required to be disclosed is accumulated and
communicated to the chief executive and interim chief financial
officer to allow timely decisions regarding disclosure.
As of the end of the period covered by this report, we carried out
an evaluation, under the supervision and with the participation of
our Chief Executive Officer and Chief Financial Officer, of the
effectiveness of the design and operation of our disclosure
controls and procedures. Based on this evaluation, the Chief
Executive Officer and Chief Financial Officer have concluded that
the Company's disclosure controls and procedures are not effective
as of such date. The Chief Executive Officer and Chief Financial
Officer have determined that the Company continues to have the
following deficiencies which represent a material weakness:
|
1.
|
As of March 31, 2021,
we did not maintain effective controls over the control
environment. Specifically, the Board of Directors does not
currently have any independent members and no director qualifies as
an audit committee financial expert as defined in Item
407(d)(5)(ii) of Regulation S-B. Since these entity level programs
have a pervasive effect across the organization, management has
determined that these circumstances constitute a material
weakness.
|
|
|
|
|
2.
|
As of March 31, 2021,
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, 2021,
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, 2021, 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, 2021, that materially affected, or are
reasonably likely to materially affect, the Company's internal
control over financial reporting.
PART II –
OTHER INFORMATION
ITEM
1. LEGAL PROCEEDINGS.
We are currently not involved in any litigation that we believe
could have a material adverse effect on our financial condition or
results of operations, except as set forth below. There is no
action, suit, proceeding, inquiry or investigation before or by any
court, public board, government agency, self-regulatory
organization or body pending or, to the knowledge of the executive
officers of our company, threatened against or affecting our
company, our common stock, or our company’s officers or directors
in their capacities as such, in which an adverse decision could
have a material adverse effect.
ITEM 1A. RISK FACTORS
The future impact of the Coronavirus (COVID-19) pandemic on
companies is evolving and we are currently unable to assess with
certainty the broad effects of COVID-19 on our
business.
The future impact of the COVID-19 pandemic on companies is evolving
and we are currently unable to assess with certainty the broad
effects of COVID-19 on our business, particularly on the digital
currency markets. As of December 31, 2020, our investment in
property and equipment of $511,512 could be subject to impairment
or change in valuation due to COVID-19 if our crypocurrency mining
revenues significantly decrease or we are not able to raise capital
sufficient to fund our operations. In addition, current
travel restrictions and social distancing requirements make it
difficult for our management to access and oversee our operations
in the State of New York.
The COVID-19 pandemic continues to have a material negative impact
on capital markets, including the market prices of digital
currencies. While we continue to incur operating losses, we
are currently dependent on debt or equity financing to fund our
operations and execute our business plan, including ongoing
requirements to replace old and nonprofitable mining machines. We
believe that the impact on capital markets of COVID-19 may make it
more costly and more difficult for us to access these sources of
funding.
Our business can potentially be impacted by the effects of the
COVID-19 as follows: (1) effect our financial condition, operating
results and reduce cash flows; (2) cause disruption to the
activities of equipment suppliers; (3) negatively effect the
Company's mining activities due to imposition of related public
health measures and travel and business restrictions; (4) create
disruptions to our core operations in New York due to quarantines
and self-isolations; (5) restrict the Company's ability and that of
its employees to access facilities and perform equipment
maintenance, repairs, and programming which will lead to inability
to monitor and service miners, resulting in reduced ability to mine
cryptocurrencies due to miners being offline.
In addition, our partners such as manufacturers, suppliers and
sub-contractors will be disrupted by absenteeism, quarantines and
travel restrictions resulting in their employees’ ability to work.
The Company's supply chain, shipments of parts and purchases
of new products may be negatively affected. Such disruptions could
have a material adverse effect on our operations.
The coronavirus pandemic is an emerging serious threat to
health and economic wellbeing affecting our employees, investors
and our sources of supply.
The sweeping nature of the novel COVID-19 pandemic makes it
extremely difficult to predict how the Company’s business and
operations will be affected in the long run. However, the likely
overall economic impact of the pandemic is viewed as highly
negative to the general economy. To date, we have not been
classified as an essential business in the New York, and we may not
be allowed to access our mining facilities. The duration of such
impact cannot be predicted.
ITEM
2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS.
During the three months ended March 31, 2021, we issued securities
that were not registered under the Securities Act, and were not
previously disclosed in a Current Report on Form 8-K or Quarterly
Report on Form 10-Q as listed below. All of the securities
discussed in this Item 2 were issued in reliance on the exemption
under Section 4(a)(2) of the Securities Act.
On January 11, 2021, the Company issued 4,980,010 shares of its
common stock in conversion of $77,000 note principal, $3,122
accrued interest payable, and $300 in fees, resulting in the
extinguishment of derivative liabilities of $41,073.
On January 14, 2021, the Company issued 6,635,790 shares of its
common stock in conversion of $115,000 note principal and $1,591
accrued interest payable, resulting in the extinguishment of
derivative liabilities of $51,576.
On January 14, 2021, the Company issued 2,000,000 shares of its
common stock valued at $295,000 as an equity incentive in the sale
of Series C Preferred Stock.
On January 19, 2021, the Company issued 216,616 shares of its
common stock for services valued at $24,260.
On January 25, 2021, the Company issued 3,400,670 shares of its
common stock in conversion of $75,000 note principal and $1,175
accrued interest payable, resulting in the extinguishment of
derivative liabilities of $36,695.
On February 2, 2021, the Company issued 2,351,590 shares of its
common stock in conversion of $81,739 note principal and $1,390
accrued interest payable, resulting in the extinguishment of
derivative liabilities of $40,046.
On February 5, 2021, the Company issued 1,000,000 shares of its
common stock valued at $89,100 as an equity incentive in the sale
of Series C Preferred Stock.
On February 16, 2021, the Company issued 5,454,148 shares of its
common stock in conversion of $271,739 note principal and $8,877
accrued interest payable, resulting in the extinguishment of
derivative liabilities of $154,954.
On February 19, 2021, the Company issued 5,263,000 shares of its
common stock, having a stated value of $5,263, for conversion of
52,630 shares of Series B Preferred Stock.
On February 24, 2021, the Company issued 55,555 shares of its
common stock to extinguish a stock subscription payable of
$33,888.
ITEM
3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM
4. MINE SAFETY DISCLOSURES.
Not applicable.
ITEM
5. OTHER INFORMATION.
There is no other information required to be disclosed under this
item which was not previously disclosed.
ITEM 6.
EXHIBITS.
(a) Exhibits.
101.INS
|
|
XBRL Instance
Document
|
101.SCH
|
|
XBRL Taxonomy Extension
Schema
|
101.CAL
|
|
XBRL Taxonomy Extension
Calculation Linkbase
|
101.DEF
|
|
XBRL Taxonomy Extension
Definition Linkbase *
|
101.LAB
|
|
XBRL Taxonomy Extension
Label Linkbase *
|
101.PRE
|
|
XBRL Taxonomy Extension
Presentation Linkbase *
|
______________
* Filed herewith.
**This certification is being furnished rather than filed and shall
not be deemed incorporated by reference into any filing, in
accordance with Item 601 of Regulation S-K.
SIGNATURES
In accordance with the requirements of the Exchange Act, the
Company has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
|
INTEGRATED VENTURES,
INC.
|
|
|
|
|
|
Dated: May 14, 2021
|
By:
|
/s/ Steve Rubakh
|
|
|
|
President and Chief Executive Officer and
Principal Financial Officer
|
|
Integrated Ventures (QB) (USOTC:INTV)
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