UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2022

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

For the transition period from ______________to ______________

Commission File Number 000-549995

I-ON DIGITAL CORP.

(Exact name of registrant as specified in its charter)
(formerly known as I-ON Communications Corp.)

Delaware
  
46-3031328
(State or Other Jurisdiction of Incorporation or Organization)
  
(I.R.S. Employer Identification Number)

1244 N. Stone Street, Unit #3, Chicago, IL
  
60610
(Address of Principal Executive Offices)
  
(Zip Code)

(866) 440-2278
(Registrant’s Telephone Number, Including Area Code)
 
Securities registered pursuant to Section 12(b) of the Act:
 
Title of each class
    
Trading
Symbol(s)
  
Name of each exchange on which registered
         
Common Stock, par value $0.0001 per share
   IONI  
OTC Markets LLC

Securities registered pursuant to Section 12(g) of the Act:
 
None

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

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirement for the past 90 days. Yes ☒ No ☐

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

Indicate by check mark if disclosure of delinquent filers in response to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐

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

Large accelerated filer ☐
Accelerated filer ☐
Non-accelerated filer ☒
Smaller reporting company ☒
 
Emerging growth company ☐

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

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7762(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

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

As of June 30, 2022 (the last business day of the registrant’s most recently completed second fiscal quarter), the aggregate market value of the common stock held by non-affiliates of the registrant was approximately $1.4 million based on the closing sales price of $0.071___ on the OTC Markets. All executive officers and directors of the registrant have been deemed, solely for the purpose of the foregoing calculation, to be “affiliates” of the registrant.

As of April 27, 2023, there were approximately 20,994,242 shares of the registrant’s common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE:

None.

TABLE OF CONTENTS

PART I
  
Page
     
Item 1.
2
Item 1A
5
Item 1B
 10
Item 2.
 10
Item 3.
 10
Item 4.
 10
     
PART II
    
     
Item 5.
11
Item 6.
 12
Item 7.
 12
Item 7A
  15
Item 8.
 16
Item 9.
 33
Item 9A
33
Item 9B.
 33
     
PART III
    
     
Item 10.
34
Item 11.
 35
Item 12.
36
Item 13.
36
Item 14.
 36
     
PART IV
    
     
Item 15.
37
     
39

PART I

 
 
SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS
 
The information in this report contains forward-looking statements. All statements other than statements of historical fact made in this report are forward looking. In particular, the statements herein regarding industry prospects and future results of operations or financial position are forward-looking statements. These forward-looking statements can be identified by the use of words such as “believes,” “estimates,” “intends”, “plans”, “could,” “possibly,” “probably,” anticipates,” “projects,” “expects,” “may,” “will,” or “should,” “designed to,” “designed for,” or other variations or similar words or language. No assurances can be given that the future results anticipated by the forward-looking statements will be achieved. Forward-looking statements reflect management’s current expectations and are inherently uncertain. Our actual results may differ significantly from management’s expectations.
 
Although these forward-looking statements reflect the good faith judgment of our management, such statements can only be based upon facts and factors currently known to us. Forward-looking statements are inherently subject to risks and uncertainties, many of which are beyond our control. As a result, our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth below under the caption “Risk Factors.” For these statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. You should not unduly rely on these forward-looking statements, which speak only as of the date on which they were made. They give our expectations regarding the future but are not guarantees. We undertake no obligation to update publicly or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless required by law.
 
  

Organization and Corporate History

I-ON Digital Corp. (formerly known as I-ON Communications Corp.) was incorporated under the laws of the State of Delaware on June 18, 2013 as ALPINE 3 Inc. Alpine 3 Inc. was set up to serve as a vehicle to effect an asset acquisition, merger, exchange of capital stock or other business combination with a domestic or foreign business. ALPINE 3 did not undertake any effort to cause a market to develop in its securities, either debt or equity, before it successfully concluded a business combination. On April 4, 2014, The Michael J. Rapport Trust (the “Trust”) purchased 10,000,000 shares of common stock which was all of the outstanding shares of Alpine 3, Inc., and subsequently changed the name to Evans Brewing Company Inc. (“EBC”) on May 29, 2014. On October 9, 2014 the Trust agreed to the cancellation of 9,600,000 of the shares of common stock that it had acquired and retained 400,000 shares of common stock.

On September 17, 2015, the independent Bayhawk shareholders approved an Asset Purchase and Share Exchange Agreement (the “Agreement”) and Bayhawk sold to EBC and EBC purchased from Bayhawk assets of Bayhawk, including but not limited to the assets relating to the Bayhawk Ales label and the Evans Brands (collectively, the “Transferred Assets”).

On January 25, 2018, Evans Brewing Company, Inc. consummated an Agreement of Merger and Plan of Reorganization (the “Merger Agreement”), with I-ON Digital Corp. a company organized under the laws of the Republic of Korea (South Korea) (“I-ON”) and I-ON Acquisition Corp., a wholly owned subsidiary of the Company (“Acquisition”). Pursuant to the terms of the Merger Agreement, Acquisition merged with and into I-ON in a statutory reverse triangular merger (the “Merger”) with I-ON surviving as a wholly owned subsidiary of the Registrant.  As consideration for the Merger, the Registrant agreed to issue the shareholders of I-ON (the “I-ON Holders”) an aggregate of 26,000,000 shares of our Common Stock, in accordance with their pro rata ownership of I-ON capital stock.  Following the Merger, the Registrant adopted the business plan of I-ON in information technology consultancy and software development.  On December 14, 2017, in connection with the Merger, the Company’s Board of Directors approved an amendment to its Certificate of Incorporation (the “Amendment”) to change its name to I-ON Digital Corp.

1
On March 21, 2019, the Company’s Board of Directors approved an amendment to the Company’s Certificate of Incorporation to change the name of the Company to I-ON Digital Corp. The Company filed a Certificate of Amendment to effectuate the name change on or about April 2, 2019.

On September 28, 2022, the Company entered into a Series A Preferred Stock Purchase Agreement (the “Purchase Agreement”) with I-ON Acquisition Corp., a Florida corporation (“IAC”). Pursuant to the terms of the Purchase Agreement, as amended, IAC acquired 3,600 shares of a newly created Series A Convertible Preferred Stock, par value $0.0001 per share  (the “Series A Preferred”) for proceeds in the amount of $250,000 (the “Subscription Amount”) in the form of a promissory note (the “Note”) which was secured by the pledge of the Series A Shares, the Series B Shares (as defined herein) and other assets of IAC in a Stock Pledge and Escrow Agreement (the “Pledge Agreement”).  Each Series A Preferred Share is convertible into Ten Thousand (10,000) shares of the Company’s common stock, par value $0.0001 per share (the “Common Stock” and is entitled to vote on matters as to which holders of the Common Stock shall be entitled to vote at a rate of One Hundred (100) votes per share of Series A Preferred.

ITEM I: BUSINESS

I-ON Digital Corp (“I-ON,” or the “Company”) designs, develops, and acquires technologies to deploy fully compliant, institutional-level ecosystems that fuel financial asset digitization, safe and secure wealth transfer, and data and identity sovereignty for a new generation of financial and data-driven transactions.

I-ON is fundamentally a technology company that currently is changing how we manage and interact with sensitive data. I-ON is revolutionizing identity, consent, and data security in healthcare, banking, and the payments industries through the thoughtful application of advanced blockchain, smart contracts, and artificial intelligence (“AI“) based technologies.

I-ON’s primary focus is the development of the world's most efficient, regulatory-compliant, institutional-grade digital asset ecosystem.  The Company's primary, targeted channels for value creation include service fees associated with asset digitization, escrow and custodial services, secure transactional revenues, and the licensing of the Company’s growing intellectual property portfolio for offerings to tier-one level institutional organizations within the financial, healthcare, and information technology services marketplace.

The Company goal is to create a secure, digital world where data is used responsibly without compromising individual or organizational privacy. To achieve this goal, I-ON has established strategic partnerships with leading companies such as Nodalium and INSTRUXI to optimize its digitized asset ecosystem.

These partnerships have enabled I-ON to develop robust data solutions allowing for secure transactions between users and service providers. Utilizing a global hosting backbone supported by two layers of distributed ledger technology (DLT) for maximum security and privacy, I-ON ensures that encrypted user data is protected in flight and at rest. A digital identity makes it impossible to identify or track people across multiple platforms or services without explicit permission from the user.

I-ON additionally leverages AI algorithms to analyze data sets quickly and accurately to provide enhanced user insights. Smart contracts are utilized to automate complex processes like asset ownership and custody, digital identity verification, and secure payment processing between individuals or businesses.

With its unique technology partnerships, its cutting-edge technology solutions, and its commitment to ethical practices in protecting user data privacy, I-ON hopes to become an emerging industry leader in providing secure identity management solutions for healthcare providers, banks, and financial institutions, as well as payment-service providers around the world.

2
COMPETITION

The Company competes with a range of US and global based digital solutions providers, many of which have greater name recognition and financial resources than the Company. The digitization of products and services is becoming increasingly transformative across US and global business sectors, the Company anticipates that, as the range of existing and potential digital product and service providers continues to grow, it will require I-ON to continuously differentiate itself by developing and improving on its core business platforms.

MANAGEMENT AND EMPLOYEES

As of December 31, 2022, I-ON had no employees other than its executive management.

PROPERTIES

The Company does not own any physical location.  I-ON currently leases its corporate headquarters in Chicago, Illinois for the amount of $2,925 per month which lease expires on July 1, 2023.

3
POTENTIAL FUTURE PROJECTS AND CONFLICTS OF INTEREST

Members of the Company’s management may serve in the future as an officer, director or investor in other entities.  Neither the Company nor any of its shareholders would have any interest in these other companies’ projects.  Management believes that it has sufficient resources to fully discharge its responsibilities for all current and future projects.

GOVERNMENT REGULATION

We believe we are in compliance with applicable federal, state and other regulations and that we have compliance programs in place to ensure compliance going forward.  There are no regulatory notifications or actions pending.

LEGAL MATTERS

None.

RELATED PARTY TRANSACTIONS

The Company has sold a total of 3,600 Series A Preferred shares to ION Acquisition Corp of which Carlos X Montoya is the majority shareholder, President and Chief Executive Officer; and Rod A. Smith is a shareholder and Corporate Secretary.  The purchase price paid was $250,000 for 3,600 Preferred A shares on January 20, 2023.

The Company entered into a technology Licensing Agreement with I-ON Acquisition Corp. (“IAC”) on March 30, 2023. Under the terms and conditions of the Company’s precedent I-ON Digital – Nodalium Inc. Channel Partnership Master Agreement, the Company has formally granted I-ON Acquisition Corp. full use and access, specifically licensing up to 65 workstations, empowered by the Nodalium Enterprise Workflow/ Intelligent Automation Platform. The enterprise software platform solution features Nodalium’s Digital Trust product suite. I-ON Acquisition paid an upfront price of $110,500, or $1,700 per workstation, plus a one-time setup and registration fee of $20,000 for combined transaction amount of $130,500.

The Company has reached an agreement in principle to purchase rights to an existing Asset Exchange Agreement involving the prior arms-length purchase by Orebits Acquisition Group and IAC involving ownership rights to 180 Orebits Gold-Backed Digital Assets (technically, 179.9742). Pursuant to the terms of the original  $335,700 transaction, the seller, an unrelated third-private party (as trustee), agreed to sell the Orebits Gold-Backed Digital Assets in exchange for a combination of cash and marketable securities. In acquiring the contractual rights I-ON will pay combination of $85,700 in cash and the equivalent of $250,000 in I-ON Digital Corp shares of the Company’s common stock. As calculated, this equates to 1,136,363.64 shares of I-ON Digital common stock at the previously published price of $0.22 to be issued to the original seller.

The subject 180 Orebits will be central to an asset digitization beta project involving the I-ON Digital Blockchain Platform, now under construction by I-ON Digital and technology partner INSTRUXI.

Available Information

We will make available free of charge any of our filings as soon as reasonably practicable after we electronically file these materials with, or otherwise furnish them to, the Securities and Exchange Commission (“SEC”). We are not including the information contained in our website as part of, or incorporating it by reference into, this report on Form 10-K.

The public may read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Room 1580, Washington, D.C. 20002. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at http://www.sec.gov.

4
Within our website’s “Investor” section, “SEC Filings” tab, all of our filings with the Commission and all amendments to these reports are available as soon as reasonably practicable after filing.

Website

Our website address is www.iondigital.com

Our Information

Our principal executive offices are located at 1244 N. Stone Street, Unit #3, Chicago, IL 60610 and our telephone number is (866) 440-2278. We can be contacted by email at info@iondigital.com

ITEM 1A. RISK FACTORS

Our business, financial condition, operating results and prospects are subject to the following risks. Additional risks and uncertainties not presently foreseeable to us may also impair our business operations. If any of the following risks actually occurs, our business, financial condition or operating results could be materially adversely affected. In such case, the trading price of our common stock could decline, and our stockholders may lose all or part of their investment in the shares of our common stock.

This Form 10-K contains forward-looking statements that involve risks and uncertainties. These forward-looking statements can be identified by the use of words such as “believes,” “estimates,” “intends”, “plans”, “could,” “possibly,” “probably,” anticipates,” “projects,” “expects,” “may,” “will,” or “should,” “designed to,” “designed for,” or other variations or similar words or language. Actual results could differ materially from those discussed in the forward-looking statements as a result of certain factors, including those set forth below and elsewhere in this Form 10-K.

Risks Related to Pandemics

The recent COVID-19 coronavirus pandemic may adversely affect our business, results of operations, financial condition, liquidity, and cash flow.

While the impact on our business from the recent outbreak of the COVID-19 coronavirus is unknown at this time and difficult to predict, various aspects of our business could be adversely affected by it.

As of the date of this Annual Report, COVID-19 coronavirus has been declared a pandemic by the World Health Organization, has been declared a National Emergency by the United States Government and has resulted in several states being designated disaster zones. COVID-19 coronavirus caused significant volatility in global markets, including the market price of our securities. The spread of COVID-19 coronavirus has caused public health officials to recommend precautions to mitigate the spread of the virus, especially as to travel and congregating in large numbers. In addition, certain states and municipalities have enacted, and additional cities are considering, quarantining and “shelter-in-place” regulations which severely limit the ability of people to move and travel, and require non-essential businesses and organizations to close.

It is unclear how such restrictions, which will contribute to a general slowdown in the global economy, will affect our business, results of operations, financial condition and our future strategic plans.

Shelter-in-place and essential-only travel regulations have negatively impacted many of our customers. In addition, while our digesters are manufactured in the United States, we still could experience significant supply chain disruptions due to interruptions in operations at any or all of our suppliers’ facilities. If we experience significant delays in receiving our products we will experience delays in fulfilling orders and ultimately receiving payment, which could result in loss of sales and a loss of customers, and adversely impact our financial condition and results of operations.

5
In addition, our headquarters are located in Seoul, South Korea, which was also subject to large COVID-19 outbreak requiring its government to enact travel and work restrictions.  While these restrictions were lessened as of the date of this Annual Report, it is unclear at this time how these restrictions will affect our operations and revenues.

Risks Specific to Our Business

If we fail to successfully execute on our business plan or if digital assets and blockchain do not become widely used on a mass scale, our results of operations could be adversely affected.

We currently design, develop, and acquire technologies to deploy fully compliant, institutional-level ecosystems that fuel financial asset digitization, safe and secure wealth transfer, and data and identity sovereignty for financial and data-driven transactions.  Our ability to succeed depends on the success of our continued development and expansion of our product and service offerings. There are various risks related to these efforts, including the risk that these efforts may not provide the expected benefits in our anticipated time frame, if at all, and may prove costlier than expected; and the risk of adverse effects to our business, results of operations and liquidity if past and future undertakings, and the associated changes to our business, do not prove to be cost effective or do not result in benefits at the levels that we anticipate. There is no assurance that a digital asset ecosystem will develop as we anticipate or develop on a mass scale at all, or that our business model will achieve the expected results. To be successful over time, we may need to change our business model. Any such efforts may not be successful.

Due to unfamiliarity and some negative publicity associated with digital asset and blockchain technology, the general public may lose confidence in digital asset or blockchain technology.

Products and services that are based on digital assets are relatively new. Many players in the industry are unlicensed, unregulated, operate without supervision by any governmental authorities, or do not provide the public with significant information regarding their ownership structure, management team, corporate practices, cybersecurity, and regulatory compliance. As a result, the general public may lose confidence in digital asset and blockchain technology, including associated data center operations like ours.

Since the inception of the cryptoeconomy, numerous digital asset and digital asset businesses and platforms have been sued, investigated, or shut down due to fraud, illegal activities, the sale or issuance of unregistered securities, manipulative practices, business failure, and security breaches.
 
In addition, there have been reports that a significant amount of digital asset trading volume is fabricated and false in nature, with a specific focus on unregulated platforms, products and services located outside the United States. Such reports may indicate that the market for products and services utilizing digital assets and other digital assets is significantly smaller than otherwise understood.
 
Negative perception, a lack of stability and standardized regulation in the cryptoeconomy, and the closure or temporary shutdown of platforms utilizing digital assets due to fraud, business failure, hackers or malware, or government mandated regulation may reduce confidence in the cryptoeconomy and result in greater volatility of the prices of assets, including significant depreciation in value. Any of these events could have a material and adverse impact on our business, financial condition and results of operations.

Concerns about the environmental impacts of blockchain technology could adversely impact usage and perceptions digital assets or our services and offerings.

Because we are unable to influence or predict future regulatory actions taken by federal, state, local or foreign governments, we may have little opportunity or ability to respond to rapidly evolving regulatory positions which may have a materially adverse effect on our industry and, therefore, our business and results of operations. If further extreme regulatory action is taken by various government entities, our business may be negatively affected.

6
Risks Related to Securities Markets and Investments in Our Securities

General securities market uncertainties resulting from the COVID-19 pandemic.

 Since the outset of the pandemic the US and worldwide national securities markets have undergone unprecedented stress due to the uncertainties of the pandemic and the resulting reactions and outcomes of government, business and the general population. These uncertainties have resulted in declines in all market sectors, increases in volumes due to flight to safety and governmental actions to support the markets. As a result, until the pandemic has stabilized, the markets may not be available to the Company for purposes of raising required capital.  Should we not be able to obtain financing when required, in the amounts necessary to execute on our plans in full, or on terms which are economically feasible we may be unable to sustain the necessary capital to pursue our strategic plan and may have to reduce the planned future growth and scope of our operations.

Our executive officers and certain stockholders possess the majority of our voting power, and through this ownership, control our Company and our corporate actions.

Our current executive officers, directors and largest stockholders of the Company, held approximately 64% of the voting power of the outstanding shares of our capital stock as of December 31, 2022. These officers, directors and certain stockholders have a controlling influence in determining the outcome of any corporate transaction or other matters submitted to our stockholders for approval, including mergers, consolidations and the sale of all or substantially all of our assets, election of directors, and other significant corporate actions.  The interests of our executive officers and certain shareholders may give rise to a conflict of interest with the Company and the Company’s stockholders. For additional details concerning voting power please refer to the section below entitled “Description of Securities.”

Liquidity of our common stock has been limited.

Our common stock is quoted on OTC Markets under the symbol “IONI”.  The liquidity of our common stock is very limited and is affected by our limited trading market. The OTC Markets is an inter-dealer market much less regulated than the major exchanges, and is subject to abuses, volatilities and shorting. There is currently no broadly followed and established trading market for our common stock. An established trading market may never develop or be maintained. Active trading markets generally result in lower price volatility and more efficient execution of buy and sell orders. Absence of an active trading market reduces the liquidity of the shares traded.

The trading volume of our common stock may be limited and sporadic. This situation is attributable to a number of factors, including the fact that we are a small company that is relatively unknown to stock analysts, stock brokers, institutional investors and others in the investment community that generate or influence sales volume, and that even if we came to the attention of such persons, they may tend to be risk-averse and would be reluctant to follow an unproven company such as ours or purchase or recommend the purchase of our shares until such time as we became more seasoned and viable. As a consequence, there may be periods of several days or more when trading activity in our shares is minimal, as compared to a seasoned issuer that has a large and steady volume of trading activity that will generally support continuous sales without an adverse effect on share price.  We cannot give any assurance that a broader or more active public trading market for our common stock will develop or be sustained, or that current trading levels will be sustained. As a result of such trading activity, the quoted price for our common stock while on the OTC Markets may not necessarily be a reliable indicator of its fair market value.

Because we became public by means of a “reverse business combination,” we may not be able to attract the attention of major brokerage firms.

There may be risks associated with us becoming public through a “reverse business combination.” Securities analysts of major brokerage firms and securities institutions may not provide coverage of us because there were no broker-dealers who sold our stock in a public offering that would be incentivized to follow or recommend the purchase of our common stock. The absence of such research coverage could limit investor interest in our common stock, resulting in decreased liquidity.  No assurance can be given that established brokerage firms will, in the future, want to cover our securities or conduct any secondary offerings or other financings on our behalf.

7
Our stock price may be volatile.

The market price of our common stock is likely to be highly volatile and could fluctuate widely in price in response to various factors, many of which are beyond our control, including the following:


 •
the concentration of the ownership of our shares by a limited number of affiliated stockholders may limit interest in our securities;

•
limited “public float” with a small number of persons whose sales or lack of sales could result in positive or negative pricing pressure on the market price for our common stock;

•
additions or departures of key personnel;


•
loss of a strategic relationship;

•
variations in operating results from the expectations of securities analysts or investors;


•
announcements of new products or services by us or our competitors;


•
reductions in the market share of our products;


•
announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments;


•
investor perception of our industry or prospects;


•
insider selling or buying;

•
investors entering into short sale contracts;


•
regulatory developments affecting our industry; and


•
changes in our industry;


•
competitive pricing pressures;


•
our ability to obtain working capital financing;


•
sales of our common stock;


•
our ability to execute our business plan;


•
operating results that fall below expectations;


•
revisions in securities analysts’ estimates or reductions in security analysts’ coverage; and


•
economic and other external factors.

Many of these factors are beyond our control and may decrease the market price of our common stock, regardless of our operating performance. We cannot make any predictions or projections as to what the prevailing market price for our common stock will be at any time, including as to whether our common stock will sustain current market prices, or as to what effect that the sale of shares or the availability of common stock for sale at any time will have on the prevailing market price.

In addition, the securities markets have from time to time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies.  These market fluctuations may also materially and adversely affect the market price of our common stock.

8
Our common stock is subject to price volatility unrelated to our operations.

The market price of our common stock could fluctuate substantially due to a variety of factors, including market perception of our ability to achieve our planned growth, quarterly operating results of other companies in the same industry, trading volume in our common stock, changes in general conditions in the economy and the financial markets or other developments affecting the Company’s competitors or the Company itself.

A decline in the price of our common stock could affect our ability to raise working capital and adversely impact our ability to continue operations.

A prolonged decline in the price of our common stock could result in a reduction in the liquidity of our common stock and a reduction in our ability to raise capital.  A decline in the price of our common stock could be especially detrimental to our liquidity, our operations and strategic plans.  Such reductions may force us to reallocate funds from other planned uses and may have a significant negative effect on our business plan and operations, including our ability to develop new services and continue our current operations.  If our common stock price declines, we can offer no assurance that we will be able to raise additional capital or generate funds from operations sufficient to meet our obligations.  If we are unable to raise sufficient capital in the future, we may not be able to have the resources to continue our normal operations.

Concentrated ownership of our common stock creates a risk of sudden changes in our common stock price.

The sale by any shareholder of a significant portion of their holdings could have a material adverse effect on the market price of our common stock.

Sales of our currently issued and outstanding stock may become freely tradable pursuant to Rule 144 and may dilute the market for your shares and have a depressive effect on the price of the shares of our common stock.

A substantial majority of the outstanding shares of Common Stock are “restricted securities” within the meaning of Rule 144 under the Securities Act of 1933, as amended (the “Securities Act”) (“Rule 144”).  As restricted shares, these shares may be resold only pursuant to an effective registration statement or under the requirements of Rule 144 or other applicable exemptions from registration under the Securities Act and as required under applicable state securities laws. Rule 144 provides in essence that a non-affiliate who has held restricted securities for a period of at least six months may sell their shares of common stock.  Under Rule 144, affiliates who have held restricted securities for a period of at least six months may, under certain conditions, sell every three months, in brokerage transactions, a number of shares that does not exceed the greater of 1% of a company’s outstanding shares of common stock or the average weekly trading volume during the four calendar weeks prior to the sale.  A sale under Rule 144 or under any other exemption from the Securities Act, if available, or pursuant to subsequent registrations of our shares of common stock, may have a depressive effect upon the price of our shares of common stock in any active market that may develop.

We do not plan to declare or pay any dividends to our stockholders in the near future.

We have not declared any dividends in the past, and we do not intend to distribute dividends in the near future. The declaration, payment and amount of any future dividends will be made at the discretion of the board of directors and will depend upon, among other things, the results of operations, cash flows and financial condition, operating and capital requirements, and other factors as the board of directors considers relevant.  There is no assurance that future dividends will be paid, and if dividends are paid, there is no assurance with respect to the amount of any such dividend.

9
The requirements of being a public company may strain our resources and distract management.

As a public company, we are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), and the Securities Act. These rules, regulations and requirements are extensive. We may incur significant costs associated with our public company corporate governance and reporting requirements.  This may divert management’s attention from other business concerns, which could have a material adverse effect on our business, financial condition and results of operations.  We also expect that these applicable rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage.  As a result, it may be more difficult for us to attract and retain qualified individuals to serve on our board of directors or as executive officers.

Future changes in financial accounting standards or practices may cause adverse unexpected financial reporting fluctuations and affect reported results of operations.

A change in accounting standards or practices can have a significant effect on our reported results and may even affect our reporting of transactions completed before the change is effective.  New accounting pronouncements and varying interpretations of accounting pronouncements have occurred and may occur in the future.  Changes to existing rules or the questioning of current practices may adversely affect our reported financial results or the way we conduct business.

“Penny Stock” rules may make buying or selling our common stock difficult.

Trading in our common stock has previously been subject to the “penny stock” rules. The SEC has adopted regulations that generally define a penny stock to be any equity security that has a market price of less than $5.00 per share, subject to certain exceptions. These rules require that any broker-dealer that recommends our common stock to persons other than prior customers and accredited investors, must, prior to the sale, make a special written suitability determination for the purchaser and receive the purchaser’s written agreement to execute the transaction. Unless an exception is available, the regulations require the delivery, prior to any transaction involving a penny stock, of a disclosure schedule explaining the penny stock market and the risks associated with trading in the penny stock market. In addition, broker-dealers must disclose commissions payable to both the broker-dealer and the registered representative and current quotations for the securities they offer. The additional burdens imposed upon broker-dealers by such requirements may discourage broker-dealers from effecting transactions in our common stock, which could severely limit the market price and liquidity of our common stock.

SHOULD ONE OR MORE OF THE FOREGOING RISKS OR UNCERTAINTIES MATERIALIZE, OR SHOULD THE UNDERLYING ASSUMPTIONS PROVE INCORRECT, ACTUAL RESULTS MAY DIFFER SIGNIFICANTLY FROM THOSE ANTICIPATED, BELIEVED, ESTIMATED, EXPECTED, INTENDED OR PLANNED

ITEM 1B: UNRESOLVED COMMENTS.

None.

ITEM 2: PROPERTIES.

We do not own any physical location.  I-ON currently leases its corporate headquarters and other offices in Chicago, Illinois for the rent of $2,925 per month which lease expires on July 1 , 2023.  We believe that our current offices are sufficient in size for current and future operations.

ITEM 3: LEGAL PROCEEDINGS.

From time to time, we are a party to, or otherwise involved in, legal proceedings arising in the normal and ordinary course of business. As of the date of this report, we are not aware of any other proceeding, threatened or pending, against us which, if determined adversely, would have a material effect on our business, results of operations, cash flows or financial position.

ITEM 4: MINE SAFETY DISCLOSURES.

Not applicable.

10
PART II

ITEM 5: MARKET FOR REGISTRANT’S COMMON EQUITY RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

(a)
Market Information

Our common stock first became quoted on the OTC Markets under the trading symbol “EVBW” on March 27, 2014. On February 24, 2016, our common stock began trading under the name Evans Brewing Company, Inc. and under the trading symbol “ALES”. On April 21, 2016, the common stock was uplisted to the OTCQB Venture Marketplace and on August 2, 2018 our trading symbol was changed to IONI. Over the counter market quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not necessarily represent actual transactions.  The following table lists the high and low sale information for our common stock as quoted on the OTC Markets for the fiscal years ended 2022 and 2021:

Quarter Ended
  
Price
Range
High ($)
    
Low ($)
  
December 31, 2022
  
$
0.106
      
0.064
  
September 30, 2022
  
$
0.078
      
0.063
  
June 30, 2022
  
$
0.075
      
0.055
  
March 31, 2022
  
$
0.098
      
0.065
  
December 31, 2021
  
$
0.19
      
0.14
  
September 30, 2021
  
$
0.24
      
0.18
  
June 30, 2021
  
$
0.36
      
0.17
  
March 31, 2021
  
$
0.49
      
0.10
  



The above quotations from the OTC Markets reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not represent actual transactions.

(b) Holders

The number of record holders of our common stock as of December 31, 2022, was approximately 300 based on information received from our transfer agent. This amount excludes an indeterminate number of shareholders whose shares are held in “street” or “nominee” name with a brokerage firm or other fiduciary.

(c) Dividends

We have not paid or declared any cash dividends on our common stock and we do not anticipate paying dividends on our common stock for the foreseeable future.

RECENT SALES OF UNREGISTERED SECURITIES

On September 28, 2022, the Company entered into a Series A Preferred Stock Purchase Agreement (the “Purchase Agreement”) with I-ON Acquisition Corp., a Florida corporation (“IAC”). Pursuant to the terms of the Purchase Agreement, as amended, IAC acquired 3,600 shares of a newly created Series A Convertible Preferred Stock, par value $0.0001 per share  (the “Series A Preferred”) for proceeds in the amount of $250,000 (the “Subscription Amount”) in the form of a promissory note (the “Note”) which was secured by the pledge of the Series A Shares, the Series B Shares (as defined herein) and other assets of IAC in a Stock Pledge and Escrow Agreement (the “Pledge Agreement”).  Each Series A Preferred Share is convertible into Ten Thousand (10,000) shares of the Company’s common stock, par value $0.0001 per share (the “Common Stock” and is entitled to vote on matters as to which holders of the Common Stock shall be entitled to vote at a rate of One Hundred (100) votes per share of Series A Preferred.

11
Also on September 28, 2022, the Company entered into a Contribution Agreement (the “Contribution Agreement”) with certain Purchasers (the “Purchasers”) pursuant to which the Purchasers agreed to purchase 6,000 shares of a newly created Series B Convertible Preferred Stock, par value $0.0001 per share (the “Series B Preferred”), in exchange for the Purchasers’ rights and title to certain assets of the Purchasers described in the Contribution Agreement. Each Series B Preferred Share is convertible into One Thousand (1,000) shares of Common Stock and entitled to vote on matters as to which holders of the Common stock shall be entitled to vote at a rate of One Thousand (1,000) votes per Series B Preferred Share.

All of the securities referred to above were offered and sold without registration under the Securities Act of 1933, as amended (the “Securities Act”) in reliance on the exemptions provided by Section 4(a)(2) of the Securities Act as provided in Rule 506(b) of Regulation D and/or Regulations promulgated thereunder. The securities have not been registered under the Securities Act or any other applicable securities laws, and unless so registered, may not be offered or sold in the United States except pursuant to an exemption from the registration requirements of the Securities Act.

ITEM 6: SELECTED FINANCIAL DATA

We are a smaller reporting company as defined by 17 C.F.R. 229(10)(f)(i) and are not required to provide the information under this heading.
ITEM 7: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the information contained in the consolidated financial statements of the Company and the notes thereto appearing elsewhere herein and in conjunction with the Management’s Discussion and Analysis of Financial Condition and Results of Operations set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. Readers should carefully review the risk factors disclosed in this Form 10-K and other documents filed by the Company with the SEC.

As used in this report, the terms “Company”, “we”, “our”, and “us” refer to I-ON Digital Corp., a Delaware corporation.

PRELIMINARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report contains forward-looking statements within the meaning of the federal securities laws. These forward-looking statements can be identified by the use of words such as “believes,” “estimates,” “intends”, “plans”, “could,” “possibly,” “probably,” anticipates,” “projects,” “expects,” “may,” “will,” or “should,” “designed to,” “designed for,” or other variations or similar words or language. The forward-looking statements are based on the current expectations of the Company and are subject to certain risks, uncertainties and assumptions, including those set forth in the discussion under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this report. Actual results may differ materially from results anticipated in these forward-looking statements. We base the forward-looking statements on information currently available to us, and we assume no obligation to update them

12
Organization and Corporate History

I-ON Digital Corp. (formerly known as I-ON Communications Corp.) was incorporated under the laws of the State of Delaware on June 18, 2013 as ALPINE 3 Inc. Alpine 3 Inc. was set up to serve as a vehicle to effect an asset acquisition, merger, exchange of capital stock or other business combination with a domestic or foreign business. ALPINE 3 did not undertake any effort to cause a market to develop in its securities, either debt or equity, before it successfully concluded a business combination. On April 4, 2014, The Michael J. Rapport Trust (the “Trust”) purchased 10,000,000 shares of common stock which was all of the outstanding shares of Alpine 3, Inc., and subsequently changed the name to Evans Brewing Company Inc. (“EBC”) on May 29, 2014. On October 9, 2014 the Trust agreed to the cancellation of 9,600,000 of the shares of common stock that it had acquired and retained 400,000 shares of common stock.

On September 17, 2015, the independent Bayhawk shareholders approved an Asset Purchase and Share Exchange Agreement (the “Agreement”) and Bayhawk sold to EBC and EBC purchased from Bayhawk assets of Bayhawk, including but not limited to the assets relating to the Bayhawk Ales label and the Evans Brands (collectively, the “Transferred Assets”).

On January 25, 2018, Evans Brewing Company, Inc. consummated an Agreement of Merger and Plan of Reorganization (the “Merger Agreement”), with I-ON Digital Corp.., a company organized under the laws of the Republic of Korea (South Korea) (“I-ON”) and I-ON Acquisition Corp., a wholly-owned subsidiary of the Company (“Acquisition”). Pursuant to the terms of the Merger Agreement, Acquisition merged with and into I-ON in a statutory reverse triangular merger (the “Merger”) with I-ON surviving as a wholly-owned subsidiary of the Registrant.  As consideration for the Merger, the Registrant agreed to issue the shareholders of I-ON (the “I-ON Holders”) an aggregate of 26,000,000 shares of our Common Stock, in accordance with their pro rata ownership of I-ON capital stock.  Following the Merger, the Registrant adopted the business plan of I-ON in information technology consultancy and software development.  On December 14, 2017, in connection with the Merger, the Company’s Board of Directors approved an amendment to its Certificate of Incorporation (the “Amendment”) to change its name to I-ON Digital Corp.

On March 21, 2019, the Company’s Board of Directors approved an amendment to the Company’s Certificate of Incorporation to change the name of the Company to I-ON Digital Corp. The Company filed a Certificate of Amendment to effectuate the name change on or about April 2, 2019.

On September 28, 2022, the Company entered into a Series A Preferred Stock Purchase Agreement (the “Purchase Agreement”) with I-ON Acquisition Corp., a Florida corporation (“IAC”). Pursuant to the terms of the Purchase Agreement, as amended, IAC acquired 3,600 shares of a newly created Series A Convertible Preferred Stock, par value $0.0001 per share  (the “Series A Preferred”) for proceeds in the amount of $250,000 (the “Subscription Amount”) in the form of a promissory note (the “Note”) which was secured by the pledge of the Series A Shares, the Series B Shares (as defined herein) and other assets of IAC in a Stock Pledge and Escrow Agreement (the “Pledge Agreement”).  Each Series A Preferred Share is convertible into Ten Thousand (10,000) shares of the Company’s common stock, par value $0.0001 per share (the “Common Stock” and is entitled to vote on matters as to which holders of the Common Stock shall be entitled to vote at a rate of One Hundred (100) votes per share of Series A Preferred.

I-ON Digital

Following the Merger but prior to the Sell-Off, as described more fully herein, the Company adopted the business plan of I-ON. I-ON was founded by Jae Cheol Oh, who served as CEO. The Company’s roots are in IT consultancy and software development. I-ON services South Korea’s enterprise content management system’s (CMS) market and specializes in advancing market-leading internet software applications to capitalize on rapidly growing market sectors.

On September 29, 2022, the Company effectuated an Equity Transfer Agreement (the “Sell-Off Agreement”) among the Company, Communications and JFJ Digital Corp., a Delaware corporation (“JFJ”), whereby all of the outstanding equity of Communications was transferred to JFJ in exchange for the return of 15,306,119 shares of the Company’s Common Stock held by Jae Cheol Oh and Hong Rae Kim, the Company’s principal executive officer and members of the Board of Directors (the “Sell-Off”) .  Pursuant to the Sell-Off Agreement, in addition to acquiring all of the outstanding capital stock of Communications, JFJ assumed all responsibilities for any debts, obligations and liabilities of Communications and acquire all rights to any assets of Communications, including, but not limited to, the Subscription Amount.

As a result of the Sell-Off, Communications ceased being a subsidiary of the Company. Accordingly, the operating results of Communications are reported in net loss from discontinued operations, net of income taxes in the Consolidated Statements of Operations for all periods presented. In addition, the related assets and liabilities held prior to the Sell-Off are reported as Assets and Liabilities of Discontinued Operations on the Consolidated Balance Sheets. All amounts and disclosures included in the Notes to Consolidated Financial Statements reflect only the Company's continuing operations unless otherwise noted.

13
Results of Operations

Comparison of results of operations for the year ended December 31, 2022 as Compared to the year ended December 31, 2021

The following table sets forth selected items from our consolidated statements of operations by dollar and as a percentage of our net sales for the periods indicated:

   
Years Ended December 31,
        
   
2022
    
2021
    
Change
  
   
Amount
    
% of
Revenue
    
Amount
    
% of
Revenue
    
Amount
    
%
  
                                     
Net sales
  
$
7,578,685
      
100.0
%
  
$
16,199,710
      
100.0
%
  
$
(8,621,025
)
    
-53.2
%
Cost of goods sold
    
6,923,957
      
91.4
%
    
10,834,719
      
66.9
%
    
(3,910,762
)
    
-36.1
%
Gross profit
    
654,728
      
8.6
%
    
5,364,991
      
33.1
%
    
(4,710,263
)
    
-87.8
%
                                                 
Operating expense
    
2,714,315
      
35.8
%
    
3,558,698
      
22.0
%
    
(844,383
)
    
-23.7
%
                                                 
Other income (expense)
    
1,807,581
      
23.9
%
    
(120,825
)
    
(0.7
)%
    
1,928,406
      
-1,596.0
%
                                                 
Income (loss) before provision for income taxes, loss on equity investment, and non-controlling interest
    
(252,006
)
    
(3.3
)%
    
1,685,468
      
10.4
%
    
(1,937,474
)
    
-115.0
%
Provision for (benefit from) income tax
    
30,002
      
0.4
%
    
(306,780
)
    
(1.9
)%
    
336,782
      
-109.8
%
Income (loss) before loss on equity investment and non-controlling interest
    
(282,008
)
    
(3.7
)%
    
1,992,248
      
12.3
%
    
(2,274,256
)
    
-114.2
%
Loss on equity investment
    
(18,725
)
    
(0.2
)%
    
-
      
0.00
%
    
(18,725
)
    
N/A
  
Income (loss) before non-controlling interest
    
(300,733
)
    
(4.0
)%
    
1,992,248
      
12.3
%
    
(2,292,981
)
    
-115.1
%
Non-controlling interest income (loss)
    
(273,108
)
    
(3.6
)%
    
(171,628
)
    
1.1
%
    
(101,480
)
    
59.1
%
Net income (loss) attributable to Parent Company from discontinued operations
    
(27,625
 )
    
0.4
%
    
2,163,876
      
13.4
%
    
(2,191,501
)
    
-101.3
%
                                                 
Comprehensive income statement:
                                                
Net income (loss)
    
(300,733
)
    
(4.0
)%
    
1,992,248
      
12.3
%
    
(2,292,981
)
    
-115.1
%
Foreign currency translation loss
    
(1,691,420
)
    
(22.3
)%
    
(1,016,433
)
    
(6.3
)%
    
(674,987
)
    
66.4
%
Total comprehensive income (loss)
  
$
(1,992,153
)
    
(26.3
)%
  
$
975,815
      
6.0
%
    
(2,967,968
)
    
-304.2
%

14
Net Sale

Net sales decreased by $8,621,025 or 53.2%, to $7,578,685 for the year ended December 31, 2022 from$16,199,710 for the year ended December 31, 2021. The change in net sales reflected the following:

- Customization revenue decreased by approximately $3,854,000 from approximately $8,722,000 for the year ended December 31, 2021 to $4,868,000 for the year ended December 31, 2022 mainly due to decrease in new contracts and  discontinued operation since September 30, 2022.

- Installation revenue decreased by approximately $2,559,000 from approximately $3,153,000 for the year ended December 31, 2021 to $594,000 for the year ended December 31, 2022 mainly due to decrease in new contracts and discontinued operation since September 30, 2022.

Cost of Goods Sold

Cost of goods sold decreased by $3,910,762 or 36.1%, to $6,923,957 for the year ended December 31, 2022 from $10,834,719 for the year ended December 31, 2021.  The decrease was in aligned with the decrease of the revenue as illustrated above resulting from the discontinued operation.

Gross Profit

Gross profit decreased by $4,710,263 to $654,728, or 8.6% of net sales, for the year ended December 31, 2022, from $5,364,991 or 33.1% of net sales, for the year ended December 31 , 2021. The decrease in gross profit for the compared periods was primarily driven by decreased net sales.

Operating Expenses

Operating expenses consist of research and development expenses and general and administrative expenses.

Research and development expenses decreased by $975,606 or 65.0%, to $524,611 for the year ended December 31, 2022 from $1,500,217 for the year ended December 31, 2021.  The decrease was due to decrease in head count computer programmers at the research and development department.

General and administrative expenses increased by $131,223 or 6.4%, to $2,189,704 for the year ended December 31, 2022 from $2,058,481 for the year ended December 31, 2021. The expenses have been continuously increased mainly due to an increase in salary.

Other Income (Expense)

The increase in other income was primarily due to the $1,736,227 received from SK E&S for small businesses’ research & development projects.

Comprehensive income - Foreign currency translation

Foreign currency translation loss was $1,691,420 for the year ended December 31, 2022 compared to loss of $1,016,433 for the year ended December 31, 2021.  The change was due to devaluation of Korean Won compared to US dollar in year ended December 31, 2022 compared to December 31, 2021.  The average exchange rate for the year ended December 31, 2022 and 2021 was KRW 1,278.7 and KRW 1,143.7, respectively.

Liquidity and Capital Resources

As of the Sell-Off date, which was September 29, 2022, the Company had approximately $12.6 million of total assets and $3.6 million of total liabilities on its consolidated balance sheet. Those assets and liabilities were owned by Communications or Communications’ subsidiaries, such as I-ON, Ltd (Japanese subsidiary), eformworks Co., Ltd. (Korean subsidiary) and EIPGRID (Korean subsidiary). As a result of the Sell-Off Agreement, all assets and liabilities were transferred to JFJ.

Critical Accounting Estimates

Our consolidated financial statements are affected by the accounting policies used and the estimates and assumptions made by management during their preparation. A complete summary of these policies is included in Note 2 of the notes to our consolidated financial statements. We have identified below the accounting policies that are of particular importance in the presentation of our financial position, results of operations and cash flows, and which require the application of significant judgment by our management.  Management has carefully considered the recently issued accounting pronouncements that altered generally accepted accounting principles and does not believe that any other new or modified principles will have a material impact on the Company’s reported financial position or operations in the near term.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are a smaller reporting company as defined by 17 C.F.R. 229 (10)(f)(i) and are not required to provide information under this item.

15
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

I-ON Digital Corp. and Subsidiaries

I-ON Digital Corp. and Subsidiaries

 Table of Contents

17
    
Consolidated Financial Statements
  
    
18
    
19
    
20
    
21
    
22

16
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors
and Stockholders of I-ON Digital Corp. and Subsidiaries

Opinion on the Consolidated Financial Statements`

We have audited the accompanying consolidated balance sheets of I-ON Digital Corp. and subsidiaries (the “Company”) as of December 31, 2022 and 2021, and the related statements of operation, stockholders’ equity (deficit), and cash flows for each of the two years in the period ended December 31, 2022, and the related notes and schedules (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

Explanatory Paragraph – Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As more fully described in Note 3 to the consolidated financial statements, the Company sold its subsidiaries on September 29, 2022. As a result of the Sell-Off, the Company discontinued operations by the subsidiaries. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans regarding these matters are described in Note 2. The consolidated financial statements do not include any adjustments that might become necessary should the Company be unable to continue as a going concern.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

●          Revenue recognition for certain long-term fixed-price contracts

Critical Audit Matter Description

As discussed in Notes 2 to the consolidated financial statements, the Company has a few long-term fixed-price contracts whereby the Company recognizes revenue over the contract period using actual days incurred on a monthly basis.  The Company provides long-term fixed-price contracts to customers based on estimated days to complete the services to fulfill the contract requirements.  Accordingly, the Company recognizes revenue on a monthly basis based on percentage completion over the contract period based on actual days incurred.  Estimates regarding the Company’s costs, which is primarily labor costs, associated with the service are used in determining the estimated days to complete the contract.  The Company has historically been materially accurate in estimating the days over the contract period compared to actual days incurred.

We identified the evaluation of revenue recognition for certain long-term fixed-price contracts as a critical audit matter as the Company’s estimated days to incur over the contract period to complete services require a high degree of subjective auditor judgment given the nature and complexity of the work to be performed.  The determination of, and changes to, those estimates may have a material impact on revenue recorded.

How the Critical Audit Matter was Addressed in the Audit

The following are the primary procedures we performed to address this critical audit matter.  We inquired of financial and operational personnel of the Company and inspected supporting documents to identify factors on how the Company estimates days over the contract period.  We evaluated the Company’s revenue recognition for long-term fixed-price contracts as follows:

o
reading the underlying contracts and related amendments to obtain an understanding of the contractual requirements and related performance obligations,
o
considering days incurred to-date and the relative progress towards completion of the contracts,
o
considering, if relevant, the estimated reserves on specific contracts that include estimation uncertainty based on the nature of the contract, and
o
evaluating the Company’s assessment of contract performance risks included within the estimated days to complete.


/s/ Kreit & Chiu CPA LLP
(Formerly Paris, Kreit & Chiu CPA LLP)

We have served as the Company’s auditor since 2019.
Los Angeles, CA
PCAOB ID 6651

April 27 2023

17
I-ON Digital Corp. and Subsidiaries

Consolidated Balance Sheets

December 31,
  
2022
    
2021
  
 
            
ASSETS
            
 
            
Current assets:
            
Cash and cash equivalents
  
$
-
    
$
-
  
Restricted cash
    
-
      
-
  
Short-term financial instruments
    
-
      
-
  
Short-term loan receivable
    
-
      
-
  
Accounts receivables, net of allowance for doubtful accounts $0 and $0, respectively
    
-
      
-
  
Deferred tax assets - current
    
-
      
-
  
Prepaid expenses and other current assets
    
-
      
-
  
Current assets of discontinued operations
     -       12,440,710  
Total current assets
    
-
      
12,440,710
  
           
　 　
  
Non-current assets:
                
Investments
    
-
      
-
  
Property and equipment, net
    
-
      
-
  
Intangible assets, net
    
-
      
-
  
Deposits
    
-
      
-
  
Deferred tax assets - non current
    
-
      
-
  
Non-current assets of discontinued operations
     -       1,965,736  
Total non-current assets
    
-
      
1,965,736
  
                 
Total Assets
  
$
-
    
$
14,406,446
  
 
                
Liabilities and Stockholders’ Equity
                
 
                
Current liabilities:
                
Accounts payable
  
$
-
    
$
-
  
Accrued expenses and other
    
-
      
-
  
Value added tax payable
    
-
      
-
  
Income tax payable
    
-
      
-
  
Short-term loan payable
    
-
      
-
  
Government grants outstanding for usage of future projects
    
-
      
-
  
Current liabilities of discontinued operations
     -
       3,516,117  
Total current liabilities
    
-
      
3,516,117
  
                 
Total liabilities
    
-
      
3,516,117
  
 
                
Commitments and contingencies
            
 
                
Stockholders’ Equity
                
Common stock -  $0.0001 par value; authorized 100,000,000 shares;19,724,220 shares and 35,030,339 issued and outstanding at December 31, 2022 and December 31, 2021
    
1,972
      
3,503
  
Treasury stock
    
-
      
(709,478
)
Additional paid-in-capital
    
2,689,391
      
3,713,370
  
Accumulated other comprehensive loss
    
-
   
(726,500
)
Accumulated retained earnings
    
(2,691,363
)
    
7,681,661
  
Total company stockholders’ equity
    
-
      
9,962,556
  
Preferred stock (I-ON Korea and eformworks) - $0.4380 par value; authorized 2,000,000 shares; zero share issued and outstanding at December 31, 2022 and 600,742 shares issued and outstanding at December 31, 2021
    
-
      
1,093,569
  
Non-controlling interests
    
-
      
(165,796
)
Total stockholders’ equity
    
-
      
10,890,329
  
                 
Total Liabilities and Stockholders’ Equity
  
$
-
    
$
14,406,446
  

See accompanying notes to consolidated financial statements.
 
18
I-ON Digital Corp. and Subsidiaries

Consolidated Statements of Operations and Comprehensive Income (Loss)

   
Years Ended December 31,
  
    2022    
2021
  
             
Net sales
  
$
-
    
$
-
  
Cost of goods sold
    
-
      
-
  
Gross profit
    
-
      
-
  
                 
Operating expense
     -       -  
                 
Income (loss) from operations
    
-
      
-
  
                 
Other income (expense)
     -       -  
                 
Income (loss) from discontinued operations before income taxes, loss on equity investment, and non-controlling interest
    
(252,006
)
    
1,685,468
  
Provision for (benefit from) income tax
    
30,002
      
(306,780
)
Income (loss) from discontinued operations before loss on equity investment and non-controlling interest
     (282,008 )     1,992,248  
Loss on equity investment
     (18,725 )     -  
Income (loss) from discontinued operations before non-controlling interest
    
(300,733
)
    
1,992,248
  
Non-controlling interest income (loss) from discontinued operations
    
(273,108
)
    
(171,628
)
                 
Net income (loss) attributable to Parent Company from discontinued operations
  
$
(27,625
)
  
$
2,163,876
  
                 
Comprehensive income statement:
                
Net income (loss) from discontinued operations
  
$
(300,733
)
  
$
1,992,248
  
Foreign currency translation loss
    
(1,691,420
)
    
(1,016,433
)
Total comprehensive income (loss) from discontinued operations
  
$
(1,992,153
)
  
$
975,815
  
                 
Basic earnings per share from continuing operations
                
Net loss before non-controlling interest
  
$
0.00
    
$
0.00
  
Non-controlling interest
   $ 0.00     $ 0.00  
Earnings per share to stockholders
  
$
0.00
    
$
0.00
  
                 
Diluted earnings per share from continuing operations
                
Net loss before non-controlling interest
  
$
0.00
    
$
0.00
  
Non-controlling interest
   $ 0.00     $ 0.00  
Earnings per share to stockholders
  
$
0.00
    
$
0.00
  
                 
Basic earnings per share from discontinued operations
                
Net loss before non-controlling interest
   $ (0.01 )   $ 0.06  
Non-controlling interest
   $ (0.01 )   $ 0.00  
Earnings per share to stockholders
   $ 0.00     $ 0.06  
                 
Diluted earnings per share from discontinued operations
                
Net loss before non-controlling interest
   $ (0.01 )   $ 0.06  
Non-controlling interest
   $ (0.01 )   $ 0.00  
Earnings per share to stockholders
   $ 0.00     $ 0.06  
                 
Weighted average number of common shares outstanding:
                
Basic
    
19,724,220
      
35,030,339
  
Diluted
    
19,724,220
      
35,030,339
  
 
See accompanying notes to consolidated financial statements.
 
19
I-ON Digital Corp. and Subsidiaries
Consolidated Statements of Stockholders’ Equity



  
Common Stock
                                                
   
Shares
    
Amount
    
Additional Paid-In Capital
    
Retained Earnings
    
Treasury Stock
    
Accumulated Other Comprehensive Income (Loss)
    
Total Company Stockholders' Equity
    
Non-Controlling Interest
    
Preferred Stock
    
Total Stockholders' Equity
  
                                                             
Balance at December 31, 2020
    
35,030,339
    
$
3,503
    
$
3,713,370
    
$
5,517,785
    
$
(709,478
)
  
$
289,933
    
$
8,815,113
    
$
5,832
    
$
475,036
    
$
9,295,981
  
Issuance of preferred stock
                                                                     618,533       618,533  
Foreign currency translation
     -       -       -       -       -       (1,016,433 )     (1,016,433 )     -       -       (1,016,433 )
Net income (loss)
     -       -       -       2,163,876       -       -       2,163,876       (171,628 )     -       1,992,248  
                                                                                 
Balance at December 31, 2021
    
35,030,339
    
$
3,503
    
$
3,713,370
    
$
7,681,661
    
$
(709,478
)
  
$
(726,500
)
  
$
9,962,556
    
$
(165,796
)
  
$
1,093,569
    
$
10,890,329
  
                                                                                 
Cancellation of common stock in connection with equity purchase
     (15,306,119 )     (1,531 )     (1,023,979 )     -       -       -       (1,025,510 )     -       -       (1,025,510 )
Adjustment from deconsolidation
                             (10,345,399 )     709,478       2,417,920       (7,218,001 )     165,796       (1,093,569 )     (8,145,774 )
Foreign currency translation
     -       -       -       -       -       (1,691,420 )     (1,691,420 )     -       -       (1,691,420 )
Net income (loss) from discontinued operations
     -       -       -       (27,625 )     -       -       (27,625 )     -     -       (27,625 )
                                                                                 
Balance at December 31, 2022
     19,724,220     $ 1,972     $ 2,689,391     $ (2,691,363 )   $ -     $ -     $ -     $ -     $ -     $ -  

See accompanying notes to consolidated financial statements.

20
I-ON Digital Corp. and Subsidiaries

Consolidated Statements of Cash Flows

Year ended December 31,
  
2022
    
2021
  
             
Cash flows from operating activities:
            
Net income (loss)
  
$
(300,733
)
  
$
1,992,248
  
Less: Net income (loss) from discontinued operations    
(27,625
)
    
2,163,876
  
Net income (loss) from continuing operations
    
-
      
-
  
Net cash provided by (used in) operating activities from discontinued operations
    
(519,828
)
    
307,989
  
Total net cash provided by (used in) operating activities
    
(792,936
)
    
136,361
  
                 
Cash flows from investing activities:
                
Net cash used in investing activities from discontinued operations
     (705,692 )     (347,492 )
Total net cash used in investing activities
    
(705,692
)
    
(347,492
)
                 
Cash flows from financing activities:
                
Net cash provided by (used in) financing activities from discontinued operations
     (3,078,447 )     (81,099 )
Total net cash used in financing activities
    
(3,078,447
)
    
(81,099
)
                 
Effect of foreign currency translation on cash and cash equivalents
    
(731,569
)
    
(666,778
)
                 
Net decrease in cash and cash equivalents
    
(5,308,644
)
    
(959,008
)
                 
Cash and cash equivalents including restricted cash, beginning of period
    
5,308,644
      
6,267,652
  
                 
Cash and cash equivalents including restricted cash, end of period
  
$
-
    
$
5,308,644
  
                 
Supplemental disclosure of cash flow information:
                
Continuing operations:
                
Interest paid
  
$
-
    
$
-
  
Taxes paid
  
$
-
    
$
-
  
 
                
Discontinued operations:
                
Interest paid
   $ 6,218     $ 12,891  
Taxes paid
   $ 13,667     $ 39,418  
Significant noncash items:
                
Cancellation of common stocks
   $ 1,025,510     $ -  
                 

See accompanying notes to consolidated financial statements.

21
I-ON Digital Corp. and Subsidiaries
Notes to Consolidated Financial Statements
NOTE 1.
Organization and Operations

I-ON Digital Corp. (“the Company”) was incorporated on July 5, 1999 and is engaged in developing and supplying computerized system. The corporate headquarter was located at 15 Teheran-ro 10-gil Gangnam-gu Seoul, South Korea.  The Company provided enterprise content management services to customers primarily in Korea, Japan and Indonesia, by developing industry-leading products such as ICS (web content management system), iDrive (e-document management system), LAMS (load aggregator’s management system), e.Form (mobile contract system), IDAS (digital asset management system) and ICE (content delivery system).
On or about August 1, 2021, the Company’s wholly-owned subsidiary I-ON Communications, Ltd. (“Communications”) formed a new subsidiary named eformworks Co., Ltd. (“e.Form”) into which Communications moved its electronic signature operations. Communications contributed approximately $253,000 on August 1, 2021 and $77,000 on September 30, 2022 to e.Form to subscribe for its founders shares and owns 59.82% of the outstanding capital stock of e.Form.
On June 28, 2022, the board of directors of the Company’s wholly-owned subsidiary I-ON Communications, Ltd. (“Communications”) approved to form a new subsidiary named EIPGRID, which provides the community energy service platforms. Hence Communications contributed approximately $773,000 to EIPGRID to subscribe for its founders’ shares, and considered a subsidiary to consolidate.

On September 29, 2022, the Company effectuated an Equity Transfer Agreement (the “Sell-Off Agreement”) among the Company, Communications and JFJ Digital Corp., a Delaware corporation (“JFJ”), whereby all of the outstanding equity of Communications was transferred to JFJ in exchange for the return of 15,306,119 shares of the Company’s Common Stock held by Jae Cheol Oh and Hong Rae Kim, the Company’s principal executive officer and members of the Board of Directors (the “Sell-Off”). Pursuant to the Sell-Off Agreement, in addition to acquiring all of the outstanding capital stock of Communications, JFJ assumed all responsibilities for any debts, obligations and liabilities of Communications and acquire all rights to any assets of Communications, including, but not limited to, the Subscription Amount.

As a result of the Sell-Off, Communications ceased being a subsidiary of the Company. Accordingly, the operating results of Communications are reported in pretax income (loss), income tax, income (loss) before loss on equity investment, loss on equity investment, income (loss) before non-controlling interest, non-controlling interest income (loss), and net loss from discontinued operations, in the Consolidated Statements of Operations for all periods presented. In addition, the related assets and liabilities held prior to the Sell-Off are reported as Assets and Liabilities of Discontinued Operations on the Consolidated Balance Sheets. All amounts and disclosures included in the Notes to Consolidated Financial Statements reflect only the Company’s continuing operations unless otherwise noted. For additional information, see Note 3 “Discontinued Operations” and Note 5 “Deconsolidation of Subsidiaries.”
NOTE 2.
Summary of Significant Accounting Policies

The summary of significant accounting policies of the Company is presented to assist in understanding the Company’s consolidated financial statements. The consolidated financial statements and notes are representations of the Company’s management, who is responsible for integrity and objectivity. 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 consolidated financial statements.

Principles of Consolidation and Basis of Presentation

The consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany accounts, transactions, and profits have been eliminated upon consolidation. The accompanying consolidated financial statements and the notes hereto are reported in US Dollars. The consolidated financial statements were prepared and presented in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 810. Non-controlling interests represent the portion of earnings that is not within the parent Company’s control. These amounts are required to be reported as equity instead of as a liability on the consolidated balance sheet. ASC requires net income or loss from non-controlling interests to be shown separately on the consolidated statements of operations. The consolidated financial statements included herein have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in the financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been omitted pursuant to such rules and regulations.
22
I-ON Digital Corp. and Subsidiaries

Notes to Consolidated Financial Statements 


Going Concern



The accompanying consolidated financial statements have been prepared in conformity with GAAP, which contemplate continuation of the Company as a going concern.  However, the Company had no revenues since the Sell-off of its subsidiaries in September 2022. As of December 31, 2022, the Company has not completed its efforts to establish a stabilized source of revenues sufficient to cover operating costs over an extended period of time. Therefore, there is substantial doubt about the Company’s ability to continue as a going concern.



Management anticipates that the Company will be dependent, for the near future, on additional investment capital to fund operating expenses. The Company intends to position itself so that it will be able to raise additional funds through the capital markets. The Company also line up strategies to raise the funds through merging with operating entities.


Use of Estimates in the Preparation of Financial Statements



The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting periods. As a result, actual results could materially differ from these estimates.


Foreign Currency Transaction and Translation

The Company’s principal country of operations is Korea. The financial position and results of operations of the Company are determined using the local currency, Korean Won (“KRW”), as the functional currency.


 ●
I-ON, Ltd (Japanese subsidiary) – The financial position and results of operations of I-ON, Ltd, the Japanese subsidiary of the Company, are initially recorded using its local currency, Japanese Yen (“JPY”). Assets and liabilities denominated in foreign currency are translated to the functional currency at the functional currency rate of exchange at the balance sheet date. The results of operations denominated in foreign currency are translated at the average rate of exchange during the reporting period. All differences are reflected in profit or loss.  As of December 31, 2022 and 2021, the exchange rate was JPY 9.32 and JPY 10.30 per KRW, respectively.  The average exchange rate for the years ended December 31, 2022 and 2021 was JPY 9.91 and JPY 10.41 per KRW, respectively.


●
Consolidation – Assets and liabilities denominated in foreign currencies at the balance sheet date are translated at the exchange rates prevailing at the balance sheet date.  The results of operations are translated from KWR to US Dollar at the weighted average rate of exchange during the reporting period. The registered equity capital denominated in the functional currency is translated at the historical rate of exchange at the time of capital contribution.  All translation adjustments resulting from the translation of the financial statements into the reporting currency, US Dollar, are dealt with as a component of accumulated other comprehensive income.   As of December 31, 2022, and December 31, 2021, the exchange rate was KRW 1,252.61 and KRW 1,185.50 per US Dollar, respectively.  The average exchange rate for the nine months ended December 31, 2022 and 2021 was KRW 1,278.70 and KRW 1,144.42, respectively.

Segment Reporting

FASB ASC 280, Segment Reporting, requires public companies to report financial and descriptive information about their reportable operating segments. Operating segments are defined as components of an enterprise about which separate financial information is available and that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company’s chief executive officer has been identified as the chief decision maker.

23
I-ON Digital Corp. and Subsidiaries

Notes to Consolidated Financial Statements 
Revenue Recognition

Revenues are recognized when control of the promised services is transferred to the Company’s customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services.

The Company’s revenue consisted of services provided and commissions. These revenue sources are as follows:

 
●
Royalty – the Company receives a fixed amount of royalties from a company in Japan for providing rights to sell the Company’s products in Japanese market. Revenue is recognized over the contract and service period.

 
●
License Solution & Services – the Company recognizes revenue on installation of the web-content management software, services provided for installation, and customization.

 
●
Customizing Services – the Company recognizes revenue from processing transactions between businesses and their customers. Revenue is recognized over the contract and service period and when service for the contract is completed.

 
●
Maintenance – the Company recognizes revenue over the contract term based on percentage-of-completion method.

Cash and Cash Equivalents

The Company considers all money market funds and highly liquid financial investments with maturities of three months or less when acquired to be cash equivalents.

Property and Equipment

Property and equipment are recorded at cost. Depreciation of property and equipment is computed using the double declining balance method, based on the estimated useful lives as follows:

Facility equipment
4 years
Automobile
4 years
Office equipment
4 years

Repairs and maintenance are expensed as incurred. Expenditures that increase the value or productive capacity of assets are capitalized. When property and equipment are retired, sold, or otherwise disposed of, the asset’s carrying amount and related accumulated depreciation are removed from the accounts, and any gain or loss is included in operations.

The Company is working on a government research project and many other technical innovation projects. The Company receives government grants that it uses to offset the amount of assets acquired or expenses incurred.

Research and Development

Research and development costs are expensed as incurred. Research and development costs include travel, payroll, and other general expenses specific to research and development activities.

24
I-ON Digital Corp. and Subsidiaries

Notes to Consolidated Financial Statements 
Intangible Assets

When the Company acquires an intangible asset, it is recorded at acquisition cost (the purchase price of the intangible asset and the costs directly related to the preparation of the asset for its intended purpose). The cost of an intangible asset acquired in a business combination is measured at the fair value at the acquisition date according to the accounting standards for business combinations. Intangible assets with a finite life are amortized using the straight-line method over their estimated useful lives.

The estimated useful lives of the respective asset categories are as follows:

Development costs
3 years
Intangible assets excluding development costs
10 years
Other Intangible assets
3 to 5 years

Severance and Retirement Benefits

In accordance with the Korean Labor Standard Law, employees and directors with at least one year of service are entitled to receive a lump-sum payment upon termination of their employment, based on their length of service and rate of pay at the time of termination. Accrued severance benefits represent an amount which would be payable assuming all eligible employees and directors were to terminate their employment as of the balance sheet date. The annual severance benefits expense charged to operations is calculated based upon the net change in the accrued severance benefits payable at the balance sheet date based on the guidance of FASB ASC 960, Accounting – Defined Benefit Pension Plans.

Impairment analysis for long-lived assets and intangible assets

The Company’s long-lived assets and other assets (consisting of property and equipment and purchased intangible assets) are reviewed for impairment in accordance with the guidance of the FASB ASC 360, Property, Plant, and Equipment and FASB ASC 205 Presentation of Financial Statements.  The Company tests for impairment losses on long-lived assets used in operations whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable.  Recoverability of an asset to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated by the asset.  If such asset is considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds its fair value.  Impairment evaluations involve management’s estimates on asset useful lives and future cash flows.  Actual useful lives and cash flows could be different from those estimated by management which could have a material effect on our reporting results and financial positions.  Fair value is determined through various valuation techniques including undiscounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary. The Company had not experienced impairment losses on its long-lived assets and intangible assets during any of the periods presented.

Earnings Per Share

FASB ASC Topic 260, Earnings Per Share, requires a reconciliation of the numerator and denominator of the basic and diluted earnings (loss) per share (EPS) computations. Basic earnings (loss) per share are computed by dividing net earnings available to common shareholders by the weighted-average number of common shares outstanding during the period. Diluted earnings (loss) per share is computed similar to basic earnings per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. In periods where losses are reported, the weighted-average number of common stock outstanding excludes common stock equivalents, because their inclusion would be anti-dilutive.

Fair Value Measurements

25
I-ON Digital Corp. and Subsidiaries

Notes to Consolidated Financial Statements 
The Company follows FASB ASC Topic 820, Fair Value Measurements. ASC 820 defines fair value, establishes a framework for measuring fair value under generally accepted accounting principles and enhances disclosures about fair value measurements. Fair value is defined under ASC 820 as the exchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants.

ASC 820 establishes a hierarchy of valuation inputs based on the extent to which the inputs are observable in the marketplace. Observable inputs reflect market data obtained from sources independent of the reporting entity and unobservable inputs reflect the entity’s own assumptions about how market participants would value an asset or liability based on the best information available.

Valuation techniques used to measure fair value under ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs. The standard describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value.

The following describes the hierarchy of inputs used to measure fair value and the primary valuation methodologies used by the Company for financial instruments measured at fair value on a recurring basis.

The three levels of inputs are as follows:


 Level 1
Quoted prices in active markets for identical assets or liabilities that the Company has an ability to access as of the measurement date.


Level 2
Inputs that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the same term of the assets or liabilities.


Level 3
Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Our financial instruments include cash and cash equivalents, restricted cash, short-term financial instruments, short-term loans, accounts receivable, investments, accounts payables and debt. The carrying values of these financial instruments approximate their fair value due to their short maturities.  The carrying amount of our debt approximates fair value because the interest rates on these instruments approximate the interest rate on debt with similar terms available to us.

Income Taxes

Income taxes are provided for the tax effects of transactions reported in the financial statements and consists of taxes currently due and deferred taxes. Deferred taxes are recognized for the differences between the basis of assets and liabilities for financial statement and income tax purposes.

The Company follows FASB ASC 740, Income Taxes, which require the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates, applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

FASB ASC 740-10-25 provides criteria for the recognition, measurement, presentation and disclosure of uncertain tax position. The Company must recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate resolution. The Company did not recognize additional liabilities for uncertain tax positions pursuant to FASB ASC 740-10-25 for the years ended December 31, 2022 and 2021.

26
I-ON Digital Corp. and Subsidiaries

Notes to Consolidated Financial Statements 
Contingencies

Accounting guidance requires that the Company record an estimated loss from a loss contingency when information available prior to issuance of the consolidated financial statements indicates that it is probable that an asset has been impaired or a liability has been incurred at the date of the consolidated financial statements and the amount of the loss can be reasonably estimated. Accounting for contingencies such as legal matters requires significant judgment. Many of these legal matters can take years to resolve. Generally, as the time period increases over which the uncertainties are resolved, the likelihood of changes to the estimate of the ultimate outcome increases.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk are cash and trade receivable arising from its normal business activities. The Company deposits its cash in high credit quality institutions. The Company performs ongoing credit evaluations to its customers and establishes allowances when appropriate.

Cash and cash equivalents are maintained at various financial institutions located in Korea and Japan. The Company has never experienced any losses related to these balances.

Advertising

Costs associated with advertising and promotions are expensed as incurred.

Employee Stock Based Compensation

The Company accounts for its share-based compensation plan in accordance with FASB ASC 718, Stock Compensation, which establishes a fair value method of accounting for stock-based compensation plans. The Company records stock compensation expense based on the value of the number of shares vesting specified periods over three years.

Stock-based compensation issued to employees and members of our board of directors is measured at the date of grant based on the estimated fair value of the award, net of estimated forfeitures. The grant date fair value of a stock-based award is recognized as an expense over the requisite service period of the award on a straight-line basis.

For purposes of determining the variables used in the calculation of stock-based compensation issued to employees, the Company performs an analysis of current market data and historical data to calculate an estimate of implied volatility, the expected term of the option and the expected forfeiture rate. With the exception of the expected forfeiture rate, which is not an input, we use these estimates as variables in the Black-Scholes option pricing model. Depending upon the number of stock options granted any fluctuations in these calculations could have a material effect on the results presented in our consolidated statements of operations. In addition, any differences between estimated forfeitures and actual forfeitures could also have a material impact on our consolidated financial statements.

Non-controlling Interests


Non-controlling interests are measured at their proportionate share of the acquiree’s identifiable net assets at the acquisition date and is adjusted at each reporting date for the net income (loss) attributable to that non-controlling interest during that period.

27
I-ON Digital Corp. and Subsidiaries

Notes to Consolidated Financial Statements 
Recently Issued Accounting Pronouncements

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848)—Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This standard provides optional guidance for a limited time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. The amendments in this standard apply only to contracts and hedging relationships that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022. The amendments in this standard are elective and are effective upon issuance for all entities. The Company is evaluating the expedients and exceptions provided by the amendments in this standard to determine their impact.
 
Other recently issued accounting updates are not expected to have a material impact on the Company’s Financial Statements.
 

NOTE 3.
Discontinued Operations



On September 29, 2022, the Company effectuated an Equity Transfer Agreement (the “Sell-Off Agreement”) among the Company, Communications and JFJ Digital Corp., a Delaware corporation (“JFJ”), whereby all of the outstanding equity of Communications was transferred to JFJ in exchange for the return of 15,306,119 shares of the Company’s Common Stock held by Jae Cheol Oh and Hong Rae Kim, the Company’s principal executive officer and members of the Board of Directors (the “Sell-Off”) .  Pursuant to the Sell-Off Agreement, in addition to acquiring all of the outstanding capital stock of Communications, JFJ will assume all responsibilities for any debts, obligations and liabilities of Communications and acquire all rights to any assets of Communications.



As a result of the Sell-Off, Communications ceased being a subsidiary of the Company. Accordingly, the operating results of Communications are reported in pretax income (loss), income tax, income (loss) before loss on equity investment, loss on equity investment, income (loss) before non-controlling interest, non-controlling interest income (loss), and net income (loss) from discontinued operations in the Consolidated Statements of Operations for all periods presented. In addition, the related assets and liabilities held prior to the Sell-Off are reported as Assets and Liabilities of Discontinued Operations on the Consolidated Balance Sheets.



In accordance with FASB ASC 805, Business Combinations, the transaction was determined to be transfers and exchanges between entities under the common control. Accordingly, the difference between the proceeds received by the Company and the book value of the Communications and Communication’s subsidiaries has been recognized as an equity transaction and no gain or loss has been recorded.



The following table presents the components of discontinued operations in relation to Communications reported in the consolidated statements of operations:


   
Years ended December 31,
  
   
2022
    
2021
  
             
Net Sales
    
7,578,685
      
16,199,710
  
Operating costs and expenses
    
9,638,272
      
14,393,417
  
Income (loss) from operations before other income and income taxes
    
(2,059,587
)
    
1,806,293
  
Other income (loss)
    
1,807,581
      
(120,825
)
Income (loss) from discontinued operations before income taxes, loss on equity investment, and non-controlling interest
    
(252,006
)
    
1,685,468
  
Income tax
    
30,002
      
(306,780
)
Income (loss) from discontinued operations before loss on equity investment and non-controlling interest
    
(282,008
)
    
1,992,248
  
Loss on equity investment
    
(18,725
)
    
-
  
Income (loss) from discontinued operations before non-controlling interest
    
(300,733
)
    
1,992,248
  
Non-controlling interest income (loss) from discontinued operations
    
(273,108
)
    
(171,628
)
Net income (loss) attributable to Parent Company from discontinued operations
    
(27,625
)
    
2,163,876
  
Comprehensive income statement                
Net income (loss)from discontinued operations     (300,733 )     1,992,248  
Foreign currency translation loss     (1,691,420 )     (1,016,433 )

               
Total comprehensive income (loss) from discontinued operations     (1,992,153 )     975,815  


28
I-ON Digital Corp. and Subsidiaries

Notes to Consolidated Financial Statements 

The following table presents the major classes of assets and liabilities of discontinued operations of Communications reported in the consolidated balance sheets:


   
December 31,
2022
    
December 31,
2021
  
Cash and cash equivalents
  
$
-
    
$
3,705,945
  
Restricted cash
    
-
      
1,602,699
  
Short-term financial instruments
    
-
      
716,154
  
Short-term loan receivable
    
-
      
126,529
  
Accounts receivables, net of allowance for doubtful accounts $0 and $645,335, respectively
    
-
      
5,299,951
  
Deferred tax assets - current
    
-
      
410,259
  
Prepaid expenses and other current assets
    
-
      
579,173
  
Total current assets of discontinued operations
    
-
      
12,440,710
  
                 
Investments
    
-
      
93,168
  
Property and equipment, net
    
-
      
105,445
  
Intangible assets, net
    
-
      
438,781
  
Deposits
    
-
      
737,909
  
Deferred tax assets – non-current
    
-
      
590,433
  
Total non-current assets of discontinued operations
    
-
      
1,965,736
  
                 
Accounts payable
  
$
-
    
$
320,251
  
Accrued expenses and other
    
-
      
2,546,062
  
Value added tax payable
    
-
      
202,857
  
Income tax payable
    
-
      
79,106
  
Short-term loan payable
    
-
      
337,410
  
Government grants outstanding for usage of future projects
    
-
      
30,431
  
Total current liabilities of discontinued operations
    
-
      
3,516,117
  

NOTE 4.
Earnings Per Share

The Company calculates earnings per share in accordance with FASB ASC 260, Earnings Per Share, which requires a dual presentation of basic and diluted earnings per share. Basic earnings per share are computed using the weighted average number of shares outstanding during the fiscal year. Potentially dilutive common shares consist of stock options outstanding (using the treasury method).

The following table sets forth the computation of basic and diluted net income per common share:

   
Years
Ended December 31,
  
Periods Ended
  
2022
    
2021
  
             
Net income (loss)
  
$
(27,625
)
  
$
2,163,876
  
Net income (loss) from continuing operations
    
-
      
-
  
Net income (loss) from discontinued operations
    
(27,625
)
    
2,163,876
  
                 
Weighted-average shares of common stock outstanding:
                
Basic
    
19,724,220
      
35,030,339
  
Dilutive effect of common stock equivalents arising from share option, excluding antidilutive effect from loss
    
-
      
-
  
Dilutive shares
    
19,724,220
      
35,030,339
  
                 
Net income (loss) from continuing operations:
                
Earnings per share - Basic
                
Net income (loss) before non-controlling interest
  
$
0.00
    
$
0.00
  
Non-controlling interest
  
$
0.00
    
$
0.00
  
Earnings per share to stockholders
  
$
0.00
    
$
0.00
  
                 
Earnings per share - Diluted
                
Net income (loss) before non-controlling interest
  
$
0.00
    
$
0.00
  
Non-controlling interest
  
$
0.00
    
$
0.00
  
Earnings per share to stockholders
  
$
0.00
    
$
0.00
  
                 
Net income (loss) from discontinued operations:
                
Earnings per share - Basic
                
Net income (loss) before non-controlling interest
  
$
(0.01
)
  
$
0.06
  
Non-controlling interest
  
$
(0.01
)
  
$
0.00
  
Earnings per share to stockholders
  
$
0.00
    
$
0.06
  
                 
Earnings per share - Diluted
                
Net income (loss) before non-controlling interest
   $ (0.01 )   $ 0.06  
Non-controlling interest
   $ (0.01 )   $ 0.00  
Earnings per share to stockholders
   $ 0.00     $ 0.06  

No non-vested share awards or non-vested share unit awards were dilutive for the years ended December 31, 2022 and 2021.

29
I-ON Digital Corp. and Subsidiaries

Notes to Consolidated Financial Statements 

NOTE 5.
Deconsolidation of Subsidiaries



As of the Sell-Off date, which was September 29, 2022, the Company had approximately $12.6 million of total assets and $3.6 million of total liabilities on its consolidated balance sheet. As part of deconsolidation, we removed the balance of Accumulated Other Comprehensive Income (loss) which contains $2.4 million of foreign currency translation gain related to the Sell-Off companies. Those assets and liabilities were owned by Communications or Communications’ subsidiaries, such as I-ON, Ltd (Japanese subsidiary), eformworks Co., Ltd. (Korean subsidiary) and EIPGRID (Korean subsidiary). As a result of the Sell-Off Agreement, all assets and liabilities were transferred to JFJ.

Mr. Oh and Mr. Kim returned their shares of the Company, total 15,306,119 approximately 43% of total outstanding shares, to the Company in exchange for the transfer of all outstanding equity of Communications to JFJ. Stock price on September 29, 2022 was $0.067; therefore, the fair market value the proceeds was $1,025,510 which was calculated by multiplying the number of shares transferred to the stock price on September 29, 2022.

In accordance with FASB ASC 805, Business Combinations, the transaction was determined as transfers and exchanges between entities that are under the common control. Accordingly, the difference between the proceeds received by the Company and the book value of the Communications and Communication’s subsidiaries will be recognized as an equity transaction and no gain or loss would be recorded.


NOTE 6.
Subsequent Events



The Company evaluates subsequent events and transactions that occur after the balance sheet date up to the date that the financial statements are issued. Any material events that occur between the balance sheet date and the date that the financial statements were issued are disclosed as subsequent events, while the financial statements are adjusted to reflect any conditions that existed at the balance sheet date. Based upon this review, except as disclosed below or within the footnotes, the Company did not identify any recognized or non-recognized subsequent events that would have required adjustment or disclosure in the consolidated financial statements.


30
I-ON Digital Corp. and Subsidiaries

Notes to Consolidated Financial Statements 

As previously disclosed, the Company entered into a Series A Preferred Stock Purchase Agreement (the “Purchase Agreement”) with I-ON Acquisition Corp., a Florida corporation (“IAC”) on September 28, 2022. Pursuant to the terms of the Purchase Agreement, IAC acquired 3,000 shares of a newly created Series A Convertible Preferred Stock, par value $0.0001 per share (the “Series A Preferred”) for proceeds in the amount of $250,000 (the “Subscription Amount”) in the form of a promissory note (the “Note”) which is secured by the pledge of the Series A Shares, the Series B Shares (as defined herein) and other assets of IAC in a Stock Pledge and Escrow Agreement (the “Pledge Agreement”). The Purchase Agreement was subsequently amended to include the subscription for 3,600 Series A Shares. Each Series A Preferred Share is convertible into Ten Thousand (10,000) shares of the Company’s common stock, par value $0.0001 per share (the “Common Stock” and is entitled to vote on matters as to which holders of the Common Stock shall be entitled to vote at a rate of Ten Thousand (10,000) votes per share of Series A Preferred.


On January 20, 2023, the Note was fully paid and the Series A Preferred Shares were issued and released to IAC and the Series B Shares were issued and released to the respective purchasers thereof.



The Company adopted the operations of IAC. Accordingly, the Company is in the business of providing digital-based enterprise solutions, including the digitization and distribution of precious metals, primarily gold, and other asset-based digital securities on the Blockchain.



Asset digitization includes gold and precious metals with proven reserves that the Company may acquire and for similar assets of independent claim owners. Services to be provided by the Company are to be managed and administered via Distributed Ledger Technology, also referred to as an independent Node Verification Network, in the form of digital tokens or certificates. The Company’s technology will allow tier-one and institutional-level financial managers or owners of the assets to fully transact or interface for exchange, settlement, transfer or financial reporting purposes with any regulatory-compliant, blockchain enabled Bank, Financial Institution, Asset Manager or secure Payment Intermediary. The Company is also engaged in the development of U.S. and global markets, commercial distribution channels and digitization opportunities.



On February 1, 2023, the Company accepted the resignations of Jae Cheol Oh, as the Chief Executive Officer, Treasurer and Chairman, and Jae Ho Cho, Hong Rae Kim, Eugene Hong, Jean Koh and Charlie Baik as directors of the Company.



To fill the vacancies created by these resignations, Carlos X. Montoya was appointed to the Board of Directors on February 1, 2023.  Mr. Montoya was also appointed as the Company’s President and Rod Smith was appointed Secretary of the Company, both effective immediately.



The Company entered into a technology Licensing Agreement with I-ON Acquisition Corp. (“IAC”) on March 30, 2023. Under the terms and conditions of the Company’s precedent I-ON Digital – Nodalium Inc. Channel Partnership Master Agreement, the Company has formally granted I-ON Acquisition Corp. full use and access, specifically licensing up to 65 workstations, empowered by the Nodalium Enterprise Workflow/ Intelligent Automation Platform. The enterprise software platform solution features Nodalium’s Digital Trust product suite. I-ON Acquisition paid an upfront price of $110,500, or $1,700 per workstation, plus a one-time setup and registration fee of $20,000 for combined transaction amount of $130,500.


31
I-ON Digital Corp. and Subsidiaries

Notes to Consolidated Financial Statements 

The Company has reached an agreement in principle to purchase rights to an existing Asset Exchange Agreement involving the prior arms-length purchase by Orebits Acquisition Group and IAC involving ownership rights to 180 Orebits Gold-Backed Digital Assets (technically, 179.9742). Pursuant to the terms of the original  $335,700 transaction, the seller, an unrelated third-private party (as trustee), agreed to sell the Orebits Gold-Backed Digital Assets in exchange for a combination of cash and marketable securities. In acquiring the contractual rights I-ON will pay combination of $85,700 in cash and the equivalent of $250,000 in I-ON Digital Corp shares of the Company’s common stock. As calculated, this equates to 1,136,363.64 shares of I-ON Digital common stock at the previously published price of $0.22 to be issued to the original seller.



The subject 180 Orebits will be central to an asset digitization beta project involving the I-ON Digital Blockchain Platform, now under construction by I-ON Digital and technology partner INSTRUXI.

32
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES

Not applicable.

ITEM 9A. CONTROLS AND PROCEDURES

Management’s Report on Disclosure Controls and Procedures

Our management is responsible for establishing and maintaining a system of disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) that is designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the 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 Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

An evaluation was conducted under the supervision and with the participation of our management of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2022. Based on that evaluation, our management concluded that our disclosure controls and procedures were not effective as of such date to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms. The Company had no audit committee. Such officer also confirmed that there was no change in our internal control over financial reporting during the fiscal year period ended December 31, 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B. Other Information

The Company entered into a technology Licensing Agreement with I-ON Acquisition Corp. (“IAC”) on March 30, 2023. Under the terms and conditions of the Company’s precedent I-ON Digital – Nodalium Inc. Channel Partnership Master Agreement, the Company has formally granted I-ON Acquisition Corp. full use and access, specifically licensing up to 65 workstations, empowered by the Nodalium Enterprise Workflow/ Intelligent Automation Platform. The enterprise software platform solution features Nodalium’s Digital Trust product suite. I-ON Acquisition paid an upfront price of $110,500, or $1,700 per workstation, plus a one-time setup and registration fee of $20,000 for combined transaction amount of $130,500.

The Company has reached an agreement in principle to purchase rights to an existing Asset Exchange Agreement involving the prior arms-length purchase by Orebits Acquisition Group and IAC involving ownership rights to 180 Orebits Gold-Backed Digital Assets (technically, 179.9742). Pursuant to the terms of the original  $335,700 transaction, the seller, an unrelated third-private party (as trustee), agreed to sell the Orebits Gold-Backed Digital Assets in exchange for a combination of cash and marketable securities. In acquiring the contractual rights I-ON will pay combination of $85,700 in cash and the equivalent of $250,000 in I-ON Digital Corp shares of the Company’s common stock. As calculated, this equates to 1,136,363.64 shares of I-ON Digital common stock at the previously published price of $0.22 to be issued to the original seller.

The subject 180 Orebits will be central to an asset digitization beta project involving the I-ON Digital Blockchain Platform, now under construction by I-ON Digital and technology partner INSTRUXI.

All of the securities referred to above were offered and sold without registration under the Securities Act of 1933, as amended (the “Securities Act”) in reliance on the exemptions provided by Section 4(a)(2) of the Securities Act as provided in Rule 506(b) of Regulation D and/or Regulations promulgated thereunder. The securities have not been registered under the Securities Act or any other applicable securities laws, and unless so registered, may not be offered or sold in the United States except pursuant to an exemption from the registration requirements of the Securities Act.

33
PART III

Item 10. Directors, Executive Officers and Corporate Governance

The table below lists all current officers and directors of the Company as of the date of this report.  All officers serve at the discretion of the Board of Directors. The term of office of each of our directors expire at our next Annual Meeting of Shareholders or until their successors are duly elected and qualified.

Name
Age
Position
Charles X. Montoya
64
Director, President
     
Rod Smith
67
Secretary

Carlos X. Montoya, 64, the former President and CEO of Republic Bank of Chicago (current assets: $2.2B), is the Founder and Managing Member of Tall Ship Resource Development LLC and its affiliate, Tall Ship Partners Fund, LLC (www.tallshippartnersfund.com) each is engaged in the development of U.S. and global markets, product & service enhancements, and expanded asset circulation opportunities for the Orebits Digital Asset. Mr. Montoya also serves as the Manager and Founder of MCM Advisors, LLC, a Bank and Financial Service-Bureau platform specializing in institutional level Banking, Capital and Strategic Advisory services. MCM is recognized for achieving several marketplace firsts in establishing an institutional-level Financial Ecosystem for the Orebits Digital Asset, incorporating a highly-secure Distributed Ledger Platform with Global Custody & Treasury Management Services enabled by a Blockchain interface for institutional level transaction capture, monitoring and reporting.

Rod Smith, 67, has amassed extensive executive leadership, market development expertise, and acumen along his entrepreneurial path, including negotiating and closing multi-million-dollar commercial real estate transactions and serving as the Founder and CEO of a public company that became a billion-dollar company.

Code of Ethics

As part of our system of corporate governance, the Company adopted a Code of Business Conduct and Ethics (the “Code”) for directors and executive officers of the Company.  This Code is intended to focus each director and executive officer on areas of ethical risk, provide guidance to directors and executive officer to help them recognize and deal with ethical issues, provide mechanisms to report unethical conduct, and help foster a culture of honesty and accountability.  Each director and executive officer must comply with the letter and spirit of this Code.  We intend to disclose any changes in or waivers from our Code of Business Conduct and Ethics and our Code of Ethics for Financial Executives by filing a Form 8-K or by posting such information on our website.

34
Item 11. Executive Compensation

The following tables list the compensation of the Company’s principal executive officers and board members for the years ended December 31, 2022 and 2021.  The following information includes the dollar value of base salaries, bonus awards, the number of non-qualified Company Options granted and certain other compensation, if any, whether paid or deferred.

Name and
Principal
Position
Year
  
Salary
($)
          
Option
Awards
    
All
Other
Comp.
($)
        
Total
($)
                  
                                                     
Carlos X. Montoya Director, President(1)
2022
  
─
          
─
    
─
    
─
  
─
                  
                                                     
                                                     
Rod Smith Secretary(1)
2022
  
─
          
─
    
─
    
─
  
─
                  
                                                     
                                                     
Jae Cheol Oh, Chairman, Chief Executive Officer, Chief Financial Officer (2)
2022
  
$
88,166
      
-
    
$
-
      
-
      
-
        
-
      
-
    
$
88,166
  

2021
  
$
85,928
      
-
    
$
-
      
-
      
-
        
-
      
-
    
$
85,928
  
                                                                     
Hong Rae Kim, Director (2)
2022
  
$
90,001
      
-
    
$
-
      
-
      
-
        
-
      
-
    
$
90,001
  
 
2021
  
$
79,022
      
-
    
$
-
      
-
      
-
        
-
      
-
    
$
79,022
  
                                                                     
Jae Ho Cho, Director (2)
2022
  
$
104,157
            
$
-
      
-
      
-
        
-
      
-
    
$
104,157
  
 
 2021
 
$
83,132
      
-
    
$
-
      
-
      
-
        
-
      
-
    
$
83,132
  
                                                                     
Eugene Hong, Director (3)
2022
  
$
-
      
-
    
$
-
      
-
      
-
        
-
      
-
    
$
-
  
 
 2021
 
$
-
      
-
    
$
-
      
-
      
-
        
-
      
-
    
$
-
  
                                                                     
Jean Koh, Director (3)
2022
  
$
-
      
-
    
$
-
      
-
      
-
        
-
      
-
    
$
-
  
 
 2021
 
$
-
      
-
    
$
-
      
-
      
-
        
-
      
-
    
$
-
  
                                                                     
Charlie Baik, Director (3)
2022
  
$
5,242
      
-
    
$
-
      
-
      
-
        
-
      
-
    
$
5,242
  
 
 2021
 
$
5,084
      
-
    
$
-
      
-
      
-
        
-
      
-
    
$
5,084
  

(1) Appointed February 1, 2023.
(2) Appointed January 25, 2018, resigned February 1, 2023.
(3) Appointed August 10, 2018, resigned February 1, 2023.

Compensation of Directors

Option Grants Table

There were no individual grants of stock options to purchase our common stock made to the executive officers named in the Summary Compensation Table through to date.

Aggregated Option Exercises and Fiscal Year-End Option Value Table

There were no stock options exercised during periods ending December 31, 2022 and December 31, 2021 by the executive officer named in the Summary Compensation Table.

Long-Term Incentive Plan (‘LTIP’) Awards Table

There were no awards made to a named executive officer in the last completed fiscal year under any LTIP.

Compensation Arrangements with Executive Management

There were no compensation contracts for any of the executives of the Company at the end of December 31, 2022.

35
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters

The following tables set forth, as of the date of this Annual Report, the beneficial ownership of Common Stock for: (1) each director currently serving on our Board of Directors; (2) each of our named executive officers; (3) our directors and executive officers as a group; and (3) each person known to the Company to beneficially own more than 5% of the outstanding shares of Common Stock.  As of April 27, 2023, there were 20,994,242 shares of Common Stock outstanding.  Except as otherwise noted, each stockholder has sole voting and investment power with respect to the shares beneficially owned. Beneficial ownership consists of a direct interest in the shares of common stock, except as otherwise indicated.

Shareholder (1)
Beneficial
Ownership
  
Percent of
Class (2)
  
Carlos X. Montoya
─
    
*
%
Rod Smith
─
    
*
%
Officers and Directors as a Group (3 persons)
─
    
*
%

(1) The address for all officers, directors and beneficial owners is 1244 N. Stone Street, Unit #3, Chicago, Illinois 60610.
(2) Does not include the 36,000,000 shares of Common Stock underlying the conversion of 3,600 shares of Series A Convertible Preferred Stock, par value $0.0001 per share which is convertible into Common Stock at the rate of ten thousand (10,000) per share, held by I-ON Acquisition Corp., over which Mr. Montoya holds voting and dispositive control.

Item 13. Certain Relationships and Related Transactions, and Director Independence

The Company receives loan guarantees from the chief executive officer with regards to its long-term borrowing, and the Company’s restricted cash provided as collateral to the Company’s chief executive officer’s loans.

Item 14. Principal Accountant Fees and Services

Audit and Non-Audit Fees

The following table sets forth the fees for professional audit services and the fees billed for other services rendered by our auditors, in connection with the audit of our financial statements for the years ended December 31, 2022 and 2021, and any other fees billed for services rendered by our auditors during these periods.

 
  
Year Ended
December 31,
2022 ($)
    
Year Ended
December 31,
2021 ($)
  
Audit fees
  
$
74,000
    
$
75,000
  
Audit-related fees
    
0
      
-0-
  
Tax fees
            
8,000
  
All other fees
    
0
      
-0-
  
Total
  
$
74,000
    
$
82,000
  

Since our inception, our Board of Directors, performing the duties of the audit committee, has reviewed all audit and non-audit related fees at least annually. The Board, acting as the audit committee, pre-approved all audit related services for the year ended December 31, 2022.

36
PART IV

ITEM 15. EXHIBITS

Number
  
Description
 
Agreement of Merger and Plan of Reorganization among Evans Brewing Company, Inc., I-ON Digital Corp.., I-ON Acquisition Corp. and I-on Digital, Ltd. (previously filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on December 26, 2017, and incorporated herein by reference)
     
 
Spin-Off Agreement among Evans Brewing Company, Inc., Michael J. Rapport Trust, Evans Brewing Company, Inc. and EBC Public House, Inc. (previously filed as Exhibit 2.2 to the Company’s Current Report on Form 8-K, filed on February 1, 2018, and incorporated herein by reference)
     
 
Certificate of Incorporation of the Company (previously filed as Exhibit 3.1 to the Company’s Registration Statement on Form 10, filed on July 3, 2013, and incorporated herein by reference)
     
 
Certificate of Amendment of Certificate of Incorporation (previously filed as Exhibit 3.3 to the Company’s Current Report on Form 8-K, filed on April 22, 2014, and incorporated herein by reference)
     
 
Certificate of Amendment of Certificate of Incorporation (previously filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed on October 23, 2015, and incorporated herein by reference)
     
 
Certificate of Amendment of Certificate of Incorporation (previously filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed on February 1, 2018, and incorporated herein by reference)
     
 
Certificate of Amendment of Certificate of Incorporation (previously filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed on April 3, 2019, and incorporated herein by reference)
     
 
By-laws of the Company (previously filed as Exhibit 3.2 to the Company’s Registration Statement on Form 10, filed on July 3, 2013, and incorporated herein by reference)
     
 
Certificate of Designation of Rights and Preferences for Series A Convertible Preferred Stock (previously filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed on December 15, 2015, and incorporated herein by reference)
     
 
Convertible Note Debenture in favor of Peak One Opportunity Fund, L.P., due August 13, 2021 (previously filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K, filed on August 28, 2018, and incorporated herein by reference)
     
 
Common Stock Purchase Warrant of Peak One Opportunity Fund, L.P. (previously filed as Exhibit 4.2 to the Company’s Current Report on Form 8-K, filed on August 28, 2018, and incorporated herein by reference)
     
 
Securities Purchase Agreement between the Company and Peak One Opportunity Fund, L.P. (previously filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on August 28, 2018, and incorporated herein by reference)
     
 
Equity Purchase Agreement between the Company and Peak One Opportunity Fund, L.P. (previously filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed on August 28, 2018, and incorporated herein by reference)

 
Registration Rights Agreement between the Company and Peak One Opportunity Fund, L.P. (previously filed as Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed on August 28, 2018, and incorporated herein by reference)
     
 
Agreement of Merger and Plan of Reorganization (previously filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on May 4, 2021, and incorporated herein by reference)
     
 
Amendment No. 1 to Agreement and Plan of Merger and Reorganization (previously filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q, filed on November 15, 2021, and incorporated herein by reference)

37
 
Amendment No. 2 to Agreement and Plan of Merger and Reorganization (previously filed as Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q, filed on November 15, 2021, and incorporated herein by reference)
     
 
Series A Preferred Securities Purchase Agreement, dated as of September 28 2022 (previously filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on October 5, 2022, and incorporated herein by reference)
     
 
Series B Preferred Securities Contribution Agreement, dated as of September 28 2022 (previously filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on October 5, 2022, and incorporated herein by reference)
     
 
Promissory Note dated September 28, 2012 (previously filed as Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on October 5, 2022, and incorporated herein by reference)
     
 
Stock Pledge and Escrow Agreement dated September 28, 2022 (previously filed as Exhibit 10.4 to the Company’s Current Report on Form 8-K filed on October 5, 2022, and incorporated herein by reference)
     
 
Equity Transfer Agreement among I-ON Digital Corp., I-On Communications Co., Ltd. and JFJ Digital Corp. (previously filed as Exhibit 10.5 to the Company’s Current Report on Form 8-K filed on October 5, 2022, and incorporated herein by reference)
 
 
 
 
Code of Business Conduct and Ethics (previously filed as Exhibit 14.1 to the Company’s Registration Statement on Form S-1, filed on September 27, 2017, and incorporated herein by reference)
 
 
 
 
List of Subsidiaries*
 
 
 
 
Certification of Chief Executive and Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as amended*
 
 
 
 
Certification of Chief Executive Officer required by Rule 13a-14(b) or Rule 15d-14(b) under the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*

101.INS
XBRL Instance Document*
     
101.SCH
  
XBRL Schema Document*
     
101.CAL
  
XBRL Calculation Linkbase Document*
     
101.DEF
  
XBRL Definition Linkbase Document*
     
101.LAB
  
XBRL Label Linkbase Document*
     
101.PRE
  
XBRL Presentation Linkbase Document*


*
Furnished herewith.


**
Filed herewith.

38
SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated: April 27, 2023
  

 

I-ON DIGITAL CORP.

 

By:
/s/   Carlos X. Montoya

 
Name:  Carlos X. Montoya

 
Title:
 Chairman, President
(Principal Executive, Financial and Accounting Officer)


39
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