UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

☒     QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2020

 

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

 

For the transition period from __________ to __________

 

Commission file number: 333-174759

 

INTEGRATED VENTURES, INC.

(Exact Name of Registrant as Specified in Its charter)

 

Nevada

 

82-1725385

(State or Other Jurisdiction of

Incorporation or Organization)

 

(I.R.S. Employer

Identification No.)

 

73 Buck Road, Suite 2, Huntingdon Valley, PA 19006

(Address of principal executive offices) (Zip Code)

 

 (215) 613-1111

(Registrant’s Telephone Number, Including Area Code)

 

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

 

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

  

Large accelerated filer

Accelerated filer

☐ 

Non-accelerated filer

Smaller reporting company

Emerging growth company

 

 

 

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

 

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

 

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

 

The number of shares outstanding of the issuer’s common stock, $0.001 par value per share, was 121,898,621 as of November 13, 2020. 

 

 

 

  

INTEGRATED VENTURES, INC.

FORM 10-Q

SEPTEMBER 30, 2020

 

TABLE OF CONTENTS

 

 

Page No. 

PART I: FINANCIAL INFORMATION

 

 

 

 

 

 

 

 

Item 1.

Financial Statements

 

3

 

Item 2.

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

 

22

 

Item 3.

Quantitative and Qualitative Disclosure About Market Risk

 

31

 

Item 4.

Controls and Procedures

 

31

 

 

 

 

 

PART II: OTHER INFORMATION

 

 

 

 

 

 

Item 1.

Legal Proceedings

 

33

 

Item 1A.

Risk Factors

 

34

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

34

 

Item 3.

Defaults Upon Senior Securities

 

34

 

Item 4.

Mine Safety Disclosures

 

34

 

Item 5.

Other Information

 

34

 

Item 6.

Exhibits

 

35

 

 

 

 

 

 

SIGNATURES

36

 

 
2

Table of Contents

 

PART I – FINANCIAL INFORMATION

 

INDEX TO FINANCIAL STATEMENTS

  

 

 

Page

 

 

 

 

 

Condensed Balance Sheets as of September, 2020 (unaudited) and June 30, 2020

 

4

 

 

 

 

 

Condensed Statements of Operations for the Three Months Ended September 30, 2020 and 2019 (unaudited)

 

5

 

 

 

 

 

Condensed Statement of Stockholders’ Deficit for the Three Months Ended September 30, 2020 (unaudited)

 

6

 

 

 

 

 

Condensed Statement of Stockholders’ Deficit for the Three Months Ended September 30, 2019 (unaudited)

 

7

 

 

 

 

 

Condensed Statements of Cash Flows for the Three Months Ended September 30, 2020 and 2019 (unaudited)

 

8

 

 

 

 

 

Notes to Condensed Financial Statements (unaudited)

 

10

 

 

 
3

Table of Contents

  

Integrated Ventures, Inc.

 

Condensed Balance Sheets

 

 

 

September 30,
2020

 

 

June 30,
2020

 

 

 

(Unaudited)

 

 

 

 

ASSETS

 

Current assets:

 

 

 

 

 

 

Cash

 

$ 102,435

 

 

$ 6,675

 

Prepaid expenses and other current assets

 

 

6,500

 

 

 

3,250

 

Total current assets

 

 

108,935

 

 

 

9,925

 

 

 

 

 

 

 

 

 

 

Non-current assets:

 

 

 

 

 

 

 

 

Property and equipment, net of accumulated depreciation and amortization of $319,962 and $805,421 as of September 30, 2020 and June 30, 2020

 

 

362,949

 

 

 

453,342

 

Digital currencies

 

 

89,741

 

 

 

82,855

 

Deposits

 

 

700

 

 

 

700

 

Total assets

 

$ 562,325

 

 

$ 546,822

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$ 100,356

 

 

$ 84,443

 

Accrued expenses

 

 

23,655

 

 

 

25,274

 

Due to related party

 

 

113,220

 

 

 

122,907

 

Derivative liabilities

 

 

209,338

 

 

 

164,834

 

Convertible notes payable, net of discounts of $56,590 and $88,449 as of September 30, 2020 and June 30, 2020

 

 

196,243

 

 

 

251,384

 

Notes payable

 

 

25,405

 

 

 

7,583

 

Total current liabilities

 

 

668,217

 

 

 

656,425

 

 

 

 

 

 

 

 

 

 

Long-term liabilities:

 

 

 

 

 

 

 

 

Convertible note payable, net of discount of $125,413 as of September 30, 2020

 

 

146,326

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Total liabilities

 

 

814,543

 

 

 

656,425

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ deficit:

 

 

 

 

 

 

 

 

Series A preferred stock, $0.001 par value, (1,000,000 shares authorized, 500,000 shares issued and outstanding as of September 30, 2020 and June 30, 2020)

 

 

500

 

 

 

500

 

Series B preferred stock, $0.001 par value, (500,000 shares authorized, 430,000 shares issued and outstanding as of September 30, 2020 and June 30, 2020, respectively)

 

 

430

 

 

 

430

 

Common stock, $0.001 par value, (750,000,000 shares authorized, 116,506,895 and 103,164,460 shares issued and outstanding as of September 30, 2020 and June 30, 2020, respectively)

 

 

116,508

 

 

 

103,165

 

Additional paid-in capital

 

 

22,084,104

 

 

 

21,851,284

 

Accumulated deficit

 

 

(22,453,760 )

 

 

(22,064,982 )

Total stockholders’ deficit

 

 

(252,218 )

 

 

(109,603 )

Total liabilities and stockholders’ deficit

 

$ 562,325

 

 

$ 546,822

 

 

See notes to condensed financial statements

 

 
4

Table of Contents

 

Integrated Ventures, Inc.

Condensed Statements of Operations

(Unaudited)

 

 

 

 

 

 

Three Months Ended
September 30,

 

 

 

2020

 

 

2019

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

Cryptocurrency mining

 

$ 67,337

 

 

$ 107,465

 

Sales of cryptocurrency mining equipment

 

 

14,890

 

 

 

-

 

Total revenues

 

 

82,227

 

 

 

107,465

 

 

 

 

 

 

 

 

 

 

Cost of revenues

 

 

189,011

 

 

 

227,083

 

 

 

 

 

 

 

 

 

 

Gross loss

 

 

(106,784 )

 

 

(119,618 )

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

General and administrative

 

 

99,717

 

 

 

107,385

 

 

 

 

 

 

 

 

 

 

Loss from operations

 

 

(206,501 )

 

 

(227,003 )

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

Interest expense

 

 

(100,872 )

 

 

(301,287 )

Realized gain (loss) on digital currencies

 

 

88,375

 

 

 

(3,361 )

Unrealized loss on digital currencies

 

 

(2,521 )

 

 

-

 

Loss on disposition of property and equipment

 

 

(207,281 )

 

 

-

 

Change in fair value of derivative liabilities

 

 

40,022

 

 

 

841,736

 

Loss on conversion of debt

 

 

-

 

 

 

(7,545 )

Digital currency theft loss

 

 

-

 

 

 

(33,037 )

 

 

 

 

 

 

 

 

 

Total other income (expense)

 

 

(182,277 )

 

 

496,506

 

 

 

 

 

 

 

 

 

 

Income (loss) before income taxes

 

 

(388,778 )

 

 

269,503

 

 

 

 

 

 

 

 

 

 

Provision for income taxes

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$ (388,778 )

 

$ 269,503

 

 

 

 

 

 

 

 

 

 

Net income (loss) per common share:

 

 

 

 

 

 

 

 

Basic

 

$ (0.00 )

 

$ 0.01

 

Diluted

 

$ (0.00 )

 

$ 0.00

 

 

 

 

 

 

 

 

 

 

Weighted average number of common shares outstanding:

 

 

 

 

 

 

 

 

Basic

 

 

111,986,110

 

 

 

35,499,687

 

Diluted

 

 

111,986,110

 

 

 

105,191,630

 

 

See notes to condensed financial statements

 

 
5

Table of Contents

  

Integrated Ventures, Inc.

Condensed Statement of Stockholders’ Deficit

Three Months Ended September 30, 2020 (Unaudited)

 

 

 

Series A
Preferred Stock

 

 

Series B
Preferred Stock

 

 

Common Stock

 

 

Additional
Paid-in

 

 

Accumulated

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, June 30, 2020

 

 

500,000

 

 

$ 500

 

 

 

430,000

 

 

$ 430

 

 

 

103,164,460

 

 

$ 103,165

 

 

$ 21,851,284

 

 

$ (22,064,982 )

 

$ (109,603 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common shares in conversion of convertible notes payable

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

13,342,435

 

 

 

13,343

 

 

 

162,524

 

 

 

-

 

 

 

175,867

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Settlement of derivative liabilities

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

70,296

 

 

 

-

 

 

 

70,296

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(388,778 )

 

 

(388,778 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, September 30, 2020

 

 

500,000

 

 

$ 500

 

 

 

430,000

 

 

$ 430

 

 

 

116,506,895

 

 

$ 116,508

 

 

$ 22,084,104

 

 

$ (22,453,760 )

 

$ (252,218 )

 

See notes to condensed financial statements

 

 
6

Table of Contents

 

Integrated Ventures, Inc.

Condensed Statement of Stockholders’ Deficit

Three Months Ended September 30, 2019 (Unaudited)

 

 

 

Series A
Preferred Stock

 

 

Series B
Preferred Stock

 

 

Common Stock

 

 

Additional
Paid-in

 

 

Accumulated

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, June 30, 2019

 

 

500,000

 

 

$ 500

 

 

 

300,000

 

 

$ 300

 

 

 

29,824,187

 

 

$ 29,825

 

 

$ 19,864,239

 

 

$ (20,983,207 )

 

$ (1,088,343 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common shares issued in Series B preferred stock Exchange Agreement

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

5,000,000

 

 

 

5,000

 

 

 

394,900

 

 

 

-

 

 

 

399,900

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common shares issued in conversion of
convertible notes payable

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

5,210,487

 

 

 

5,210

 

 

 

267,485

 

 

 

-

 

 

 

272,695

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Settlement of derivative liabilities

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

115,275

 

 

 

-

 

 

 

115,275

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

269,503

 

 

 

269,503

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, September 30, 2019

 

 

500,000

 

 

$ 500

 

 

 

300,000

 

 

$ 300

 

 

 

40,034,674

 

 

$ 40,035

 

 

$ 20,641,899

 

 

$ (20,713,704 )

 

$ (30,970 )

 

See notes to condensed financial statements

 

 
7

Table of Contents

  

Integrated Ventures, Inc.

Condensed Statements of Cash Flows

(Unaudited)

 

 

 

 

 

 

Three Months Ended
September 30,

 

 

 

2020

 

 

2019

 

 

 

 

 

 

 

 

Cash flows from operating activities:

 

 

 

 

 

 

Net income (loss)

 

$ (388,778 )

 

$ 269,503

 

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

 

 

 

 

 

 

 

 

Depreciation and amortization expense

 

 

110,572

 

 

 

144,612

 

Amortization of debt discount

 

 

91,007

 

 

 

282,390

 

Loss on disposition of property and equipment

 

 

207,281

 

 

 

-

 

Change in fair value of derivative liabilities

 

 

(40,022 )

 

 

(841,736 )

Realized (gain) loss on sale of digital currencies

 

 

(88,375 )

 

 

3,361

 

Unrealized loss on digital currencies

 

 

2,521

 

 

 

-

 

Loss on conversion of debt

 

 

-

 

 

 

7,545

 

Digital currency theft loss

 

 

-

 

 

 

33,037

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

Digital currencies

 

 

(67,699 )

 

 

(109,112 )

Prepaid expenses and other current assets

 

 

(3,250 )

 

 

(3,250 )

Accounts payable

 

 

(34,239 )

 

 

(77 )

Accrued expenses

 

 

10,248

 

 

 

17,987

 

Due to related party

 

 

(9,687 )

 

 

9,079

 

Net cash used in operating activities

 

 

(210,421 )

 

 

(186,661 )

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Proceeds from the sale of digital currencies

 

 

2,283,717

 

 

 

62,971

 

Purchase of digital currencies

 

 

(2,086,898 )

 

 

-

 

Purchase of property and equipment

 

 

(209,638 )

 

 

(110,281 )

Net cash used in investing activities

 

 

(12,819 )

 

 

(47,310 )

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from convertible notes payable

 

 

319,000

 

 

 

247,000

 

Net cash provided by financing activities

 

 

319,000

 

 

 

247,000

 

 

 

 

 

 

 

 

 

 

Net increase in cash

 

 

95,760

 

 

 

13,029

 

Cash, beginning of period

 

 

6,675

 

 

 

48,310

 

 

 

 

 

 

 

 

 

 

Cash, end of period

 

$ 102,435

 

 

$ 61,339

 

 

 

 

 

 

 

 

 

 

(Continued)

 

See notes to condensed financial statements

 

 
8

Table of Contents

 

Integrated Ventures, Inc.

Condensed Statements of Cash Flows (Continued)

(Unaudited)

 

 

 

 

 

 

Three Months Ended
September 30,

 

 

 

2020

 

 

2019

 

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

Cash paid for interest

 

$ -

 

 

$ -

 

Cash paid for income taxes

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Non-cash investing and financing activities:

 

 

 

 

 

 

 

 

Debt discount for derivative liabilities

 

$ 154,822

 

 

$ 119,157

 

Common shares issued for convertible notes payable

 

 

175,867

 

 

 

265,150

 

Settlement of derivative liabilities

 

 

70,296

 

 

 

115,275

 

Note payable issued for property and equipment

 

 

17,822

 

 

 

-

 

Equipment deposits for property and equipment

 

 

-

 

 

 

27,971

 

Common shares issued in Series B preferred stock Exchange Agreement

 

 

-

 

 

 

399,900

 

 

See notes to condensed financial statements

 

 
9

Table of Contents

 

Integrated Ventures, Inc.

Notes to Condensed Financial Statements

Three Months Ended September 30, 2020

(Unaudited)

 

1. ORGANIZATION AND BASIS OF PRESENTATION

 

Organization

 

Integrated Ventures, Inc. (the "Company," "we," "our," or "EMS Find") was incorporated in the State of Nevada on March 22, 2011, under the name of Lightcollar, Inc.On March 20, 2015, the Company amended its articles of incorporation and changed its name from Lightcollar, Inc. to EMS Find, Inc.On May 30, 2017, Integrated Ventures, Inc. (“Integrated Ventures”), a Nevada corporation, was formed as a wholly owned subsidiary of the Company.Pursuant to an Agreement and Plan of Merger dated May 30, 2017, Integrated Ventures was merged into the Company, with the Company being the surviving corporation and changing its name to Integrated Ventures, Inc.

 

The Company has discontinued its prior operations and changed its business focus from its prior technologies relating to the EMS Find platform to acquiring, launching and operating companies in the cryptocurrency sector, mainly in digital currency mining, equipment manufacturing, and sales of branded mining rigs, as well as blockchain software development.

 

The Company is developing and acquiring a diverse portfolio of digital currency assets and block chain technologies. Cryptocurrencies are a medium of exchange that uses decentralized control (a block chain) as opposed to a central bank to track and validate transactions. The Company is currently mining Bitcoin and Ethereum, whereby the Company earns revenue by solving “blocks” to be added to the block chain.The Company also purchases certain digital currencies for short-term investment purposes.

 

In May 2019, the Company consolidated all of its mining operations and signed a power supply and purchase agreement with PetaWatt Properties, LLC.

 

Basis of Presentation

 

The accompanying unaudited condensed financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles ("US GAAP") for interim financial information and the instructions to Form 10-Q and Article 8 of Regulation S-X. The results of operations for the interim periods ended September 30, 2020 shown in this report are not necessarily indicative of results to be expected for the full fiscal year ending June 30, 2021. In the opinion of the Company's management, the information contained herein reflects all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the Company's results of operations, financial position and cash flows. The unaudited interim financial statements should be read in conjunction with the audited financial statements in the Company's Annual Report on Form 10-K for the year ended June 30, 2020 filed on September 23, 2020 and Management's Discussion and Analysis of Financial Condition and Results of Operations.

 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

The significant accounting policies of the Company are disclosed in Notes to Financial Statements included in the Company’s Annual Report on Form 10-K. The following summary of significant accounting policies of the Company is presented to assist in understanding the Company’s interim financial statements. These accounting policies conform to accounting principles generally accepted in the United States of America and have been consistently applied in the preparation of the financial statements.

 

Use of Estimates

 

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period.Because of the use of estimates inherent in the financial reporting process, actual results could differ significantly from those estimates.

 

 
10

Table of Contents

 

Integrated Ventures, Inc.

Notes to Condensed Financial Statements

Three Months Ended September 30, 2020

(Unaudited)

 

Digital Currencies

 

Digital currencies consist of Bitcoin, Litecoin and Ethereum, generally received for the Company’s own account as compensation for cryptocurrency mining services, and Chainlink and other digital currencies purchased for short-term investment purposes.Given that there is limited precedent regarding the classification and measurement of cryptocurrencies under current Generally Accepted Accounting Principles (“GAAP”), the Company has determined to account for these digital currencies as indefinite-lived intangible assets in accordance with Accounting Standards Update ("ASU") No. 350, Intangibles – Goodwill and Other, for the period covered by this report and in future reports unless and until further guidance is issued by the Financial Accounting Standards Board (“FASB”).An intangible asset with an indefinite useful life is not amortized but assessed for impairment annually, or more frequently, when events or changes in circumstances occur indicating that it is more likely than not that the indefinite-lived asset is impaired.Impairment exists when the carrying amount exceeds its fair value.In testing for impairment, the Company has the option to first perform a qualitative assessment to determine whether it is more likely than not than an impairment exists.If it is determined that it is more likely than not that an impairment exists, a quantitative impairment test is not necessary.If the Company concludes otherwise, it is required to perform a quantitative impairment test.To the extent an impairment loss is recognized, the loss establishes the new cost basis of the asset.Subsequent reversal of impairment losses is not permitted.Realized gains or losses on the sale of digital currencies, net of transaction costs, are included in other income (expense) in the statements of operations. Changes in the fair value of digital currencies during the period are recorded as unrealized gains or losses in other income (expense) in the statements of operations.As of September 30, 2020, the Company’s cost basis of digital currencies exceeded the market value by $2,521, which amount is recorded as unrealized loss on investments.

 

Property and Equipment

 

Property and equipment, consisting primarily of computer and other cryptocurrency mining equipment (transaction verification servers), is stated at the lower of cost or estimated realizable value and is depreciated when placed into service using the straight-line method over estimated useful lives. The Company operates in an emerging industry for which limited data is available to make estimates of the useful economic lives of specialized equipment. Management has assessed the basis of depreciation of these assets and believes they should be depreciated over a three-year period due to technological obsolescence reflecting rapid development of hardware that has faster processing capacity and other factors. Maintenance and repairs are expensed as incurred and improvements are capitalized. Gains or losses on the disposition of property and equipment are recorded upon disposal.

 

During the three months ended September 30, 2020, the Company discontinued the use of damaged or non-serviceable mining equipment and wrote off its net book value of $207,281 to loss on disposition of property and equipment.

 

Management has determined that the three-year diminishing value best reflects the current expected useful life of transaction verification servers. This assessment takes into consideration the availability of historical data and management’s expectations regarding the direction of the industry including potential changes in technology. Management will review this estimate annually and will revise such estimates as and when data becomes available.

 

To the extent that any of the assumptions underlying management’s estimate of useful life of its transaction verification servers are subject to revision in a future reporting period, either as a result of changes in circumstances or through the availability of greater quantities of data, then the estimated useful life could change and have a prospective impact on depreciation expense and the carrying amounts of these assets.

 

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

 

 
11

Table of Contents

 

Integrated Ventures, Inc.

Notes to Condensed Financial Statements

Three Months Ended September 30, 2020

(Unaudited)

 

Derivatives

 

The Company evaluates its convertible debt, options, warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for. The result of this accounting treatment is that under certain circumstances the fair value of the derivative is marked-to-market each balance sheet date and recorded as a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the statement of operations as other income or expense. Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity. Equity instruments that are initially classified as equity that become subject to reclassification under this accounting standard are reclassified to liability at the fair value of the instrument on the reclassification date.

 

Where the number of warrants or common shares to be issued under these agreements is indeterminate, the Company has concluded that the equity environment is tainted, and all additional warrants and convertible debt are included in the value of the derivatives.

 

We estimate the fair value of the derivatives associated with our convertible notes payable, common stock issuable pursuant to a Series B preferred stock Exchange Agreement and a stock subscription payable using, as applicable, either the Black-Scholes pricing model or multinomial lattice models that value the derivative liability based on a probability weighted discounted cash flow model using future projections of the various potential outcomes.We estimate the fair value of the derivative liabilities at the inception of the financial instruments, and, in the case of our convertible notes payable, at the date of conversions to equity and at each reporting date, recording a derivative liability, debt discount, additional paid-in capital and a gain or loss on change in derivative liabilities as applicable. These estimates are based on multiple inputs, including the market price of our stock, interest rates, our stock price volatility, variable conversion prices based on market prices as defined in the respective agreements and probabilities of certain outcomes based on management projections. These inputs are subject to significant changes from period to period and to management’s judgment; therefore, the estimated fair value of the derivative liabilities will fluctuate from period to period, and the fluctuation may be material.

 

Impairment of Long-Lived Assets

 

All assets, including intangible assets subject to amortization, are reviewed for impairment when changes in circumstances indicate that the carrying amount of the asset may not be recoverable in accordance with ASC 350 and ASC 360. If the carrying amount of the asset exceeds the expected undiscounted cash flows of the asset, an impairment charge is recognized equal to the amount by which the carrying amount exceeds fair value or net realizable value. The testing of these intangibles under established guidelines for impairment requires significant use of judgment and assumptions. Changes in forecasted operations and other assumptions could materially affect the estimated fair values. Changes in business conditions could potentially require adjustments to these asset valuations. We reported no impairment expense for the three months ended September 30, 2020 and 2019.

 

Fair Value of Financial Instruments

 

Disclosures about fair value of financial instruments require disclosure of the fair value information, whether or not recognized in the balance sheet, where it is practicable to estimate that value.As of September 30, 2020 and June 30, 2020, the amounts reported for cash, prepaid expenses and other current assets, accounts payable, accrued expenses, due to related party and notes payable approximate fair value because of their short maturities.

 

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.ASC Topic 820 established a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value.The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1measurements) and the lowest priority to unobservable inputs (level 3 measurements).These tiers include:

 

 

·

Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets;

 

 

 

 

·

Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and

 

 

 

 

·

Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

 

 
12

Table of Contents

 

Integrated Ventures, Inc.

Notes to Condensed Financial Statements

Three Months Ended September 30, 2020

(Unaudited)

 

Our derivative liabilities are measured at fair value on a recurring basis and estimated as follows:

 

 

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

September 30, 2020:

 

 

 

 

 

 

 

 

 

 

 

 

Derivative liabilities

 

$ 209,338

 

 

$ -

 

 

$ -

 

 

$ 209,338

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total liabilities measured at fair value

 

$ 209,338

 

 

$ -

 

 

$ -

 

 

$ 209,338

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2020:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative liabilities

 

$ 164,834

 

 

$ -

 

 

$ -

 

 

$ 164,834

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total liabilities measured at fair value

 

$ 164,834

 

 

$ -

 

 

$ -

 

 

$ 164,834

 

 

Stock-Based Compensation

 

The Company accounts for all equity-based payments in accordance with ASC Topic 718, Compensation – Stock Compensation. ASC Topic 718 requires companies to recognize in the statement of operations the grant-date fair value of stock awards, stock options, warrants and other equity-based compensation issued to employees. The value of the portion of an award that is ultimately expected to vest is recognized as an expense over the requisite service periods using the straight-line attribution method. The fair value of a stock award is recorded at the fair market value of a share of the Company’s stock on the grant date. The Company estimates the fair value of stock options and warrants at the grant date by using an appropriate fair value model such as the Black-Scholes option pricing model or multinomial lattice models.

 

The Company accounts for non-employee share-based awards based upon ASC 505-50, Equity-Based Payments to Non-Employees. ASC 505-50 requires the costs of goods and services received in exchange for an award of equity instruments to be recognized using the fair value of the goods and services or the fair value of the equity award, whichever is more reliably measurable. The fair value of the equity award is determined on the measurement date, which is the earlier of the date that a performance commitment is reached or the date that performance is complete. Generally, our awards do not entail performance commitments. When an award vests over time such that performance occurs over multiple reporting periods, we estimate the fair value of the award as of the end of each reporting period and recognize an appropriate portion of the cost based on the fair value on that date. When the award vests, we adjust the cost previously recognized so that the cost ultimately recognized is equivalent to the fair value on the date the performance is complete.

 

Revenue Recognition

 

Effective July 1, 2018, we adopted ASC 606, Revenue from Contracts with Customers, as amended, using the modified retrospective method, which requires the cumulative effect of adoption to be recognized as an adjustment to opening retained earnings in the period of adoption. There was no cumulative effect of adopting the new standard and no impact on our financial statements. The new standard provides a single comprehensive model to be used in the accounting for revenue arising from contracts with customers and supersedes current revenue recognition guidance, including industry-specific guidance. The standard’s stated core principle is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve this core principle, ASC 606 includes provisions within a five-step model that includes identifying the contract with a customer, identifying the performance obligations in the contract, determining the transaction price, allocating the transaction price to the performance obligations, and recognizing revenue when, or as, an entity satisfies a performance obligation.

 

 
13

Table of Contents

 

Integrated Ventures, Inc.

Notes to Condensed Financial Statements

Three Months Ended September 30, 2020

(Unaudited)

 

Our revenues currently consist of cryptocurrency mining revenues and revenues from the sale of cryptocurrency mining equipment recognized in accordance with ASC 606 as discussed above. Amounts collected from customers prior to shipment of products are recorded as deferred revenue. 

 

The Company earns its cryptocurrency mining revenues by providing transaction verification services within the digital currency networks of cryptocurrencies, such as Bitcoin and Ethereum. The Company satisfies its performance obligation at the point in time that the Company is awarded a unit of digital currency through its participation in the applicable network and network participants benefit from the Company’s verification service. In consideration for these services, the Company receives digital currencies, which are recorded as revenue using the closing U.S. dollar price of the related cryptocurrency on the date of receipt. Expenses associated with running the cryptocurrency mining operations, such as equipment depreciation, rent, operating supplies, rent, utilities and monitoring services are recorded as cost of revenues.

 

There is currently no specific definitive guidance in GAAP or alternative accounting frameworks for the accounting for the production and mining of digital currencies and management has exercised significant judgment in determining appropriate accounting treatment for the recognition of revenue for mining of digital currencies. Management has examined various factors surrounding the substance of the Company’s operations and the guidance in ASC 606, including identifying the transaction price, when performance obligations are satisfied, and collectability is reasonably assured being the completion and addition of a block to a blockchain and the award of a unit of digital currency to the Company. In the event authoritative guidance is enacted by the FASB, the Company may be required to change its policies which could result in a change in the Company’s financial statements.

 

Income Taxes

 

The Company adopted the provisions of ASC 740-10, Accounting for Uncertain Income Tax Positions.  When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. In accordance with the guidance of ASC 740-10, the benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above should be reflected as a liability for unrecognized tax benefits in the accompanying balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination. The Company believes its tax positions are all highly certain of being upheld upon examination. As such, the Company has not recorded a liability for unrecognized tax benefits. As of September 30, 2020, tax years 2015 through 2020 remain open for IRS audit. The Company has received no notice of audit from the IRS for any of the open tax years.

 

The Company adopted ASC 740-10, Definition of Settlement in FASB Interpretation No. 48, (“ASC 740-10”), which was issued on May 2, 2007. ASC 740-10 amends FIN 48 to provide guidance on how an entity should determine whether a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits. The term “effectively settled” replaces the term “ultimately settled” when used to describe recognition, and the terms “settlement” or “settled” replace the terms “ultimate settlement” or “ultimately settled” when used to describe measurement of a tax position under ASC 740-10. ASC 740-10 clarifies that a tax position can be effectively settled upon the completion of an examination by a taxing authority without being legally extinguished. For tax positions considered effectively settled, an entity would recognize the full amount of tax benefit, even if the tax position is not considered more likely than not to be sustained based solely on the basis of its technical merits and the statute of limitations remains open. The adoption of ASC 740-10 did not have an impact on the accompanying financial statements.

 

 
14

Table of Contents

  

Integrated Ventures, Inc.

Notes to Condensed Financial Statements

Three Months Ended September 30, 2020

(Unaudited)

  

Income (Loss) Per Share

 

Basic net income or loss per share is calculated by dividing net income or loss by the weighted average number of common shares outstanding for the period.  Diluted income or loss per share reflects the potential dilution that could occur if securities or other contracts to issue common stock, such as “in-the-money” stock options and warrants, convertible debt and convertible preferred stock, were exercised or converted into common stock.  Equivalent shares are not utilized when the effect is anti-dilutive.  The common shares used in the computation of basic and diluted net income (loss) per share are reconciled as follows:

 

 

 

Three Months Ended
September 30,

 

 

 

2020

 

 

2019

 

 

 

 

 

 

 

 

Weighted average number of shares outstanding – basic

 

 

111,986,110

 

 

 

35,499,687

 

Dilutive effect of convertible debt

 

 

-

 

 

 

39,691,943

 

Dilutive effect of Series B convertible preferred stock

 

 

-

 

 

 

30,000,000

 

 

 

 

 

 

 

 

 

 

Net

 

 

111,986,110

 

 

 

105,191,630

 

 

Recently Issued Accounting Pronouncements

 

There were no new accounting pronouncements issued or proposed by the FASB during the three months ended September 30, 2020 and through the date of filing this report which the Company believes will have a material impact on its financial financial statements.

 

Reclassifications

 

Certain amounts in the condensed financial statements for the prior-year periods have been reclassified to conform to the presentation for the current-year periods.

 

3. GOING CONCERN

 

The Company has reported recurring operating losses since its inception and used net cash in operating activities of $210,421 in the three months ended September 30, 2020.  As of September 30, 2020, the Company had an accumulated deficit of $22,453,760 and a total stockholders’ deficit of $252,218.  These conditions raise substantial doubt about the Company's ability to continue as a going concern.

 

The accompanying financial statements have been prepared in conformity with U.S. GAAP, which contemplate continuation of the Company as a going concern and the realization of assets and satisfaction of liabilities in the normal course of business. The ability of the Company to reach a successful level of operations is dependent on the execution of management’s plans, which include the raising of capital through the debt and/or equity markets, until such time that funds provided by operations are sufficient to fund working capital requirements. If the Company were not to continue as a going concern, it would likely not be able to realize its assets at values comparable to the carrying value or the fair value estimates reflected in the balances set out in the preparation of the financial statements.

 

There can be no assurances that the Company will be successful in attaining a profitable level of operations or in generating additional cash from the equity/debt markets or other sources fund its operations. The financial statements do not include any adjustments relating to the recoverability of assets and classification of assets and liabilities that might be necessary. Should the Company not be successful in its business plan or in obtaining the necessary financing to fund its operations, the Company would need to curtail certain or all operational activities and/or contemplate the sale of its assets, if necessary.

 

 
15

Table of Contents

  

Integrated Ventures, Inc.

Notes to Condensed Financial Statements

Three Months Ended September 30, 2020

(Unaudited)

 

4. PROPERTY AND EQUIPMENT

 

Property and equipment consisted of the following at:

 

 

 

September 30,
2020

 

 

June 30,
2020

 

 

 

 

 

 

 

 

Cryptocurrency mining equipment

 

$ 666,545

 

 

$ 1,242,397

 

Furniture and equipment

 

 

16,366

 

 

 

16,366

 

Total

 

 

682,911

 

 

 

1,258,763

 

Less accumulated depreciation and amortization

 

 

(319,962 )

 

 

(805,421 )

Net

 

$ 362,949

 

 

$ 453,342

 

 

Depreciation and amortization expense, included in cost of revenues, was $110,572 and $144,612 for the three months ended September 30, 2020 and 2019, respectively.

  

5. RELATED PARTY TRANSACTIONS

 

We have one executive officer, Steve Rubakh, who is currently our only full-time employee and sole member of our Board of Directors. Mr. Rubakh is paid an annual salary established by the Board of Directors and is issued shares of Series B preferred stock for additional compensation. The number of shares issued, generally on a quarterly basis, is at the discretion of the Board of Directors.

 

The Board of Directors of the Company has set the current annual compensation for Steve Rubakh to include annual salary of $150,000 per year and the issuance of shares of Series B preferred stock as determined by the Board.  The Company recorded salary expense to Mr. Rubakh of $37,500 for the three months ended September 30, 2020 and 2019.  No shares of Series B preferred stock were issued to Mr. Rubakh during the three months ended September 30, 2020 and 2019.

 

Amounts due to related party, consisting of accrued salary to Mr. Rubakh, totaled $113,220 and $122,907 as of September 30, 2020 and 2019, respectively.

 

 
16

Table of Contents

 

Integrated Ventures, Inc.

Notes to Condensed Financial Statements

Three Months Ended September 30, 2020

(Unaudited)

 

6. CONVERTIBLE NOTES PAYABLE

 

Current Convertible Notes Payable

 

Current convertible notes payable consist of the following:

 

 

 

September 30, 2020

 

 

June 30, 2020

 

 

 

 

 

Debt

 

 

 

 

 

 

Debt

 

 

 

 

 

Principal

 

 

Discount

 

 

Net

 

 

Principal

 

 

Discount

 

 

Net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BHP Capital NY, Inc. #4 

 

$ -

 

 

$ -

 

 

$ -

 

 

$ 66,000

 

 

$ 13,193

 

 

$ 52,807

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Armada Investment Fund, LLC #5 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

20,000

 

 

 

2,739

 

 

 

17,261

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Armada Investment Fund, LLC #6 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

22,000

 

 

 

4,167

 

 

 

17,833

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BHP Capital NY, Inc. #5 

 

 

83,333

 

 

 

7,540

 

 

 

75,793

 

 

 

83,333

 

 

 

21,141

 

 

 

62,192

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BHP Capital NY, Inc. #6 

 

 

60,500

 

 

 

12,041

 

 

 

48,459

 

 

 

60,500

 

 

 

19,188

 

 

 

41,312

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Armada Investment Fund, LLC #7 

 

 

32,000

 

 

 

2,904

 

 

 

29,096

 

 

 

88,000

 

 

 

28,021

 

 

 

59,979

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

JSJ Investments Inc. #1

 

 

77,000

 

 

 

34,105

 

 

 

42,895

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

$ 252,833

 

 

$ 56,590

 

 

$ 196,243

 

 

$ 339,833

 

 

$ 88,449

 

 

$ 251,384

 

 

In consideration for an agreement to limit conversions of a prior convertible note, the Company issued to Armada Investment Fund, LLC (“Armada”) a fifth convertible promissory note in the principal amount of $20,000.  The note matures on November 1, 2020 and bears interest at 8%.  A debt discount of $8,082 was recorded, consisting of a derivative liability.  Armada has the right beginning on the date that is 31 days following the date of the note to convert principal and accrued interest into shares of the Company’s common stock.  The conversion price is 70% of the average of the five lowest trading prices (lowest bid prices) of the Company’s common stock during the fifteen trading days ending on the latest complete trading day prior to the date of conversion.  During the three months ended September 30, 2020, Armada converted the entire principal of $20,000, accrued interest payable of $1,184 and conversion fees of $500 into common shares of the Company, extinguishing the debt in full.  As of September 30, 2020, the debt discount had been amortized in full to interest expense.

 

On November 21, 2019, the Company entered into a sixth convertible promissory note with Armada in the principal amount of $22,000, with an original issue discount of $2,000. The note matures on November 21, 2020 and bears interest at 8%.  A debt discount of $10,590 was recorded, including a derivative liability of $8,090. Armada has the right beginning on the date that is 31 days following the date of the note to convert principal and accrued interest into shares of the Company’s common stock.  The conversion price is 70% of the average of the five lowest trading prices (lowest bid prices) of the Company’s common stock during the fifteen trading days ending on the latest complete trading day prior to the date of conversion.  During the three months ended September 30, 2020, Armada converted the entire principal of $22,000, accrued interest payable of $1,109 and conversion fees of $500 into common shares of the Company, extinguishing the debt in full.  As of September 30, 2020, the debt discount had been amortized in full to interest expense.

 

On December 2, 2019, the Company entered into a fourth convertible promissory note with BHP Capital NY, Inc. (“BHP”) in the principal amount of $66,000, with an original issue discount of $6,000. The note matures on December 2, 2020 and bears interest at 8%.  A debt discount of $31,153 was recorded, including a derivative liability of $24,153. BHP has the right beginning on the date that is 31 days following the date of the note to convert principal and accrued interest into shares of the Company’s common stock.  The conversion price is 70% of the average of the three lowest trading prices (lowest bid prices) of the Company’s common stock during the fifteen trading days ending on the latest complete trading day prior to the date of conversion.  During the three months ended September 30, 2020, BHP converted the entire principal of $66,000, accrued interest payable of $3,467 and conversion fees of $1,000 into common shares of the Company, extinguishing the debt in full.  As of September 30, 2020, the debt discount had been amortized in full to interest expense.

 

 
17

Table of Contents

 

 

Integrated Ventures, Inc.

Notes to Condensed Financial Statements

Three Months Ended September 30, 2020

(Unaudited)

 

On February 20, 2020, the Company entered into a fifth convertible promissory note with BHP in the principal amount of $83,333, with an original issue discount of $8,333. The note matures on November 20, 2020, and bears interest at 8%.  A debt discount of $40,507 was recorded, including a derivative liability of $30,674. BHP has the right beginning on the date that is 31 days following the date of the note to convert principal and accrued interest into shares of the Company’s common stock.  The conversion price is 70% of the average of the three lowest trading prices (lowest bid prices) of the Company’s common stock during the fifteen trading days ending on the latest complete trading day prior to the date of conversion.  As of September 30, 2020, $32,967 of the debt discount had been amortized to interest expense and there was accrued interest payable of $4,073. The Company recorded a derivative liability of $36,140 as of September 30, 2020.

 

On March 4, 2020, the Company entered into a sixth convertible promissory note with BHP in the principal amount of $60,500, with an original issue discount of $5,500. The note matures on March 4, 2021, and bears interest at 8%.  A debt discount of $28,354 was recorded, including a derivative liability of $22,854. BHP has the right beginning on the date that is 31 days following the date of the note to convert principal and accrued interest into shares of the Company’s common stock.  The conversion price is 70% of the average of the five lowest trading prices (lowest bid prices) of the Company’s common stock during the fifteen trading days ending on the latest complete trading day prior to the date of conversion.  As of September 30, 2020, $16,313 of the debt discount had been amortized to interest expense and there was accrued interest payable of $2,785. The Company recorded a derivative liability of $23,595 as of September 30, 2020.

 

On March 4, 2020, the Company entered into a seventh convertible promissory note with Armada in the principal amount of $88,000, with an original issue discount of $8,000. The note matures on March 4, 2021, and bears interest at 8%.  A debt discount of $41,408 was recorded, including a derivative liability of $33,408. Armada has the right beginning on the date that is 181 days following the date of the note to convert principal and accrued interest into shares of the Company’s common stock.  The conversion price is 70% of the average of the five lowest trading prices (lowest bid prices) of the Company’s common stock during the fifteen trading days ending on the latest complete trading day prior to the date of conversion.  During the three months ended September 30, 2020, Armada converted the principal of $56,000, accrued interest payable of $3,107 and conversion fees of $1,000 into common shares of the Company, resulting in a principal balance of $32,000 and accrued interest payable of $175 as of September 30, 2020.   As of September 30, 2020, $38,504 of the debt discount had been amortized to interest expense.  The Company recorded a derivative liability of $13,213 as of September 30, 2020.

 

On July 6, 2020, the Company entered into a convertible promissory note with JSJ Investments Inc. (“JSJ”) in the principal amount of $77,000. The note matures on July 6, 2021, and bears interest at 8%.  A debt discount $44,617 was recorded, including a derivative liability of $42,617. JSJ has the right beginning on the date that is 31 days following the date of the note to convert principal and accrued interest into shares of the Company’s common stock.  The conversion price is 70% of the average of the three lowest trading prices of the Company’s common stock during the fifteen trading days ending on the latest complete trading day prior to the date of conversion.  As of September 30, 2020, $10,512 of the debt discount had been amortized to interest expense.  The Company recorded a derivative liability of $33,581 as of September 30, 2020.

 

Long-Term Convertible Note Payable

 

On August 4, 2020, the Company entered into a Securities Purchase Agreement with Eagle Equities, LLC (“Eagle”), providing for the issuance and sale by the Company and the purchase by Eagle of a 6% convertible note of the Company (the “Note”) in the aggregate principal amount of $1,086,957. The Note provides for an 8% original issue discount (“OID”) such that the aggregate purchase price for Note will be $1,000,000. The Note will be purchased by Eagle in various tranches on defined closing dates.

 

 
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Integrated Ventures, Inc.

Notes to Condensed Financial Statements

Three Months Ended September 30, 2020

(Unaudited)

 

The first closing date under the Note was held on August 4, 2020, when the Company sold, and the Buyer purchased the first tranche under the Note for a $271,739 portion of the aggregate $1,086,957, resulting in proceeds to the Company of $250,000 and reflecting the OID of 8%. A subsequent closing of a second tranche of $271,739 portion of the Note shall occur on the filing of the Company’s resale registration statement under the Securities Act of 1933, as amended, covering the entire principal amount of the Note. Eagle has retained the right to purchase the unfunded balance of the Note through February 4, 2022, provided that each purchase must be in an amount of not less than $108,696 ($100,000 after the OID).

 

The Note matures on February 4, 2022, and bears interest at 6%.A debt discount $139,943 was recorded for the first tranche, including a derivative liability of $112,204. Eagle has at any time to convert principal and accrued interest into shares of the Company’s common stock.The conversion price is 70% of the lowest closing bid price of the Company’s common stock during the fifteen trading days ending on the latest complete trading day prior to the date of conversion.As of September 30, 2020, $14,530 of the debt discount had been amortized to interest expense. The Company recorded a derivative liability of $102,003 as of September 30, 2020.

 

7.  NOTES PAYABLE

 

With an effective date of April 20, 2020, a loan to the Company was approved under the terms and conditions of the Paycheck Protection Program (“PPP”) of the United States Small Business Administration (“SBA”) and the CARES Act (2020) (H.R. 748) (15 U.S.C. 636 et seq.) ( the “Act” ) in the amount of $7,583. The loan matures 24 months from inception, bears interest at 1% and had a balance of $7,583 as of September 30, 2020 and June 30, 2020.The loan may be forgiven pursuant to the provisions of the Act.

 

On September 10, 2020, the Company issued a secured promissory note payable for the purchase of digital mining equipment to Wattum Management Inc. with a principal balance of $17,822.The note matures on October 10, 2021 and bears interest at 10%.The note is secured by the equipment purchased and is payable in twelve equal consecutive monthly installments of $1,567.

 

8. STOCKHOLDERS’ DEFICIT

 

Preferred Stock

 

Series A Preferred Stock

 

On January 25, 2019, the Board of Directors of the Company approved a resolution to increase the number of authorized preferred shares to 20,000,000 shares.

 

In March 2015, the Company filed with the State of Nevada a Certificate of Designation establishing the designations, preferences, limitations and relative rights of 1,000,000 shares of the Company's Series A preferred stock.  Holders of the Series A preferred stock have the right to vote in aggregate, on all shareholder matters equal to 1,000 votes per share of Series A preferred stock.  The shares of Series A preferred stock are not convertible into shares of common stock.

 

The Company has 1,000,000 shares of Series A preferred stock authorized, with 500,000 shares issued and outstanding as of September 30, 2020 and June 30, 2020, which were to members of the Company’s Board of Directors in consideration for services.

 

 
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Integrated Ventures, Inc.

Notes to Condensed Financial Statements

Three Months Ended September 30, 2020

(Unaudited)

 

Series B Preferred Stock

 

On December 21, 2015, the Company filed a Certificate of Designation for a new Series B convertible preferred stock with the State of Nevada following approval by the board of directors of the Company. Five Hundred Thousand (500,000) shares of the Company's authorized preferred stock are designated as the Series B convertible preferred stock, par value of $0.001 per share and with a stated value of $0.001 per share (the "Stated Value"). Holders of Series B preferred stock shall be entitled to receive dividends, when and as declared by the Board of Directors out of funds legally available therefor. At any time and from time to time after the issuance of shares of the Series B preferred stock, each issued share of Series B preferred stock is convertible into 100 shares of the Company’s common stock.  The holders of the Series B preferred stock shall have the right to vote together with holders of common stock, on an as "converted basis", on any matter that the Company's shareholders may be entitled to vote on, either by written consent or by proxy. Upon any liquidation, dissolution or winding-up of the Company, the holders of the Series B preferred stock shall be entitled to receive out of the assets of the Company, whether such assets are capital or surplus, for each share of Series B preferred stock an amount equal to the Stated Value, and all other amounts in respect thereof then due and payable prior to any distribution or payment shall be made to the holders of any junior securities.

 

The Company has 500,000 shares of Series B preferred stock authorized, with 430,000 shares issued and outstanding as of September 30, 2020 and June 30, 2020.

 

Steve Rubakh, President of the Company, is issued shares of Series B preferred stock as part of his compensation arrangement.  The number of shares issued, generally on a quarterly basis, is at the discretion of the Board of Directors.  No shares of Series B preferred stock were issued to Mr. Rubakh during the three months ended September 30, 2020 and 2019..

 

Common Stock

 

On August 13, 2020, the Board of Directors of the Company approved a resolution to increase the number of authorized common shares to 750,000,000.  The Company had 116,506,895 and 103,164,460 shares issued and outstanding as of September 30, 2020 and June 30, 2020, respectively.

 

During the three months ended September 30, 2020, the Company issued a total of 13,342,435 shares of its common stock in conversion of $164,000 note principal, $8,867 accrued interest payable,  and $3,000 in fees, resulting in the extinguishment of derivative liabilities totaling $70,296.  No gain or loss was recorded as the conversions were completed within the terms of the debt agreements.

 

During the three months ended September 30, 2019, the Company issued a total of 10,210,487 shares of its common stock: 5,000,000 shares valued at $399,900 were issued pursuant to a Series B preferred stock Exchange Agreement entered into on May 21, 2019 and a total of 5,210,487 shares were issued valued at $272,695 were issued in conversion of $263,000 note principal, $2,150 accrued interest payable, and loss on conversion of debt of $7,545, resulting in the extinguishment of derivative liabilities totaling $115,275.

 

9. COMMITMENTS AND CONTINGENCIES

 

Legal Matters

 

From time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business. As of the date of filing of this report, there were no pending or threatened lawsuits.

 

Power Supply and Purchase Agreement

 

The Company has consolidated it cryptocurrency operations in one facility in Carthage, New York.The Carthage power supply and purchase agreement was entered into on May 10, 2019 for an initial term of 90 days, with an option to continue the agreement for a subsequent 36 months, which option the Company has exercised. The Company’s sole obligation under the agreement is to pay a contractual rate per kilowatt hour of electricity consumed in the Company’s cryptocurrency mining operations.

 

As of September 30, 2020, the Company had no obligation for future lease payments under non-cancelable operating leases.

 

 
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Integrated Ventures, Inc.

Notes to Condensed Financial Statements

Three Months Ended September 30, 2020

(Unaudited)

 

10. DERIVATIVE LIABILITIES

 

The Company has issued convertible notes payable, warrants and Series B preferred stock with put back rights and has entered into exchange and subscription agreements that contain certain provisions that have been identified as derivatives.The Company has determined that the number of common shares to be issued under these agreements is indeterminate; therefore, the Company concluded that the equity environment is tainted and all additional warrants, stock options convertible debt and obligations to issue common shares are included in the value of derivative liabilities.

 

The Company estimates the fair value of the derivative liabilities at the issuance date and at each subsequent reporting date, using a multinomial lattice model simulation. The model is based on a probability weighted discounted cash flow model using projections of the various potential outcomes.

 

During the three months ended September 30, 2020, we had the following activity in our derivative liabilities:

 

 

 

Convertible
Notes Payable

 

 

Common Stock Subscription

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

Derivative liabilities at June 30, 2020

 

$ 163,664

 

 

$ 1,170

 

 

$ 164,834

 

Addition to liabilities for new debt

 

 

154,822

 

 

 

-

 

 

 

154,822

 

Decrease due to conversions/assignments

 

 

(70,296 )

 

 

-

 

 

 

(70,296 )

Change in fair value

 

 

(39,658 )

 

 

(364 )

 

 

(40,022 )

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative liabilities at September 30, 2020

 

$ 208,532

 

 

$ 806

 

 

$ 209,338

 

 

Key inputs and assumptions used in valuing the Company’s derivative liabilities as of September 30, 2020 are as follows:

 

 

·

Stock prices on all measurement dates were based on the fair market value

 

 

 

 

·

Risk-free interest rate of 0.07% to 0.15%

 

 

 

 

·

The probability of future financing was estimated at 100%

 

 

 

 

·

Computed volatility ranging from 147% to 230%

  

These inputs are subject to significant changes from period to period and to management's judgment; therefore, the estimated fair value of the derivative liabilities will fluctuate from period to period, and the fluctuation may be material.

 

11. DIGITAL CURRENCY THEFT LOSS

 

During the three months ended September 30, 2019, we incurred a digital currency theft loss of $33,037 where a hacker obtained unauthorized access to our online digital currency processing service and transferred digital currencies out of our account.The theft loss has been included as an other expense in the accompanying statement of operations for the three months ended September 30, 2020.

  

12. SUBSEQUENT EVENTS

 

Management has evaluated subsequent events according to the requirements of ASC TOPIC 855, and has reported the following:

 

On October 12, 2020, the Company issued a 5,391,726 shares of its common stock in the conversion of $50,000 convertible note principal, $4,352 accrued interest and $500 of conversion fees.

 

On October 22, 2020, the Company closed the second tranche of its note payable to Eagle (see Note 6) subsequent to the Company filing the required Form S-1 registration statement..  The second tranche was for $271,739, with proceeds to the Company of $250,000 after the original issue discount.

  

 
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ITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

SPECIAL NOTE CONCERNING FORWARD-LOOKING STATEMENTS

 

We believe that it is important to communicate our future expectations to our security holders and to the public. This report, therefore, contains statements about future events and expectations which are "forward-looking statements" within the meaning of Sections 27A of the Securities Act of 1933 and 21E of the Securities Exchange Act of 1934, including the statements about our plans, objectives, expectations and prospects under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations." You can expect to identify these statements by forward-looking words such as "may," "might," "could," "would," "will," "anticipate," "believe," "plan," "estimate," "project," "expect," "intend," "seek" and other similar expressions. Any statement contained in this report that is not a statement of historical fact may be deemed to be a forward-looking statement. Although we believe that the plans, objectives, expectations and prospects reflected in or suggested by our forward-looking statements are reasonable, those statements involve risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements, and we can give no assurance that our plans, objectives, expectations and prospects will be achieved.

 

Important factors that might cause our actual results to differ materially from the results contemplated by the forward-looking statements are contained in the "Risk Factors" section of and elsewhere in our Annual Report on Form 10-K for the fiscal year ended June 30, 2019 and in our subsequent filings with the Securities and Exchange Commission. The following discussion of our results of operations should be read together with our financial statements and related notes included elsewhere in this report.

 

GENERAL

 

We were incorporated in the State of Nevada on March 22, 2013 under the name Lightcollar, Inc. On March 22, 2015, we changed our name to EMS Find, Inc., and in May 2017, we changed our name to Integrated Ventures, Inc.We have licensed our Ems Find platform and related technologies to EpicMD, Inc. via a Licensing Agreement and management has determined to focus our business on developing and operating digital currency assets.Our offices are located at 73 Buck Road, Suite 2, Huntingdon Valley, Pennsylvania 19006.

 

We have discontinued our prior operations and changed our business focus, from our prior technologies relating to the EMS Find platform to acquiring, launching and operating companies in the cryptocurrency sector, mainly in digital currency mining, equipment manufacturing, and sales of branded mining rigs, as well as blockchain software development.  The Company also purchases certain digital currencies for short-term investment purposes. 

 

Financial

 

We have consolidated our cryptocurrency operations in facility, located in Carthage, New York. The power supply and purchase agreement was entered into on May 10, 2019 for an initial term of 90 days, with an option to continue for a subsequent 36 months, which option the Company has exercised. The Company’s sole obligation under the Agreement is to pay the PetaWatt Properties, LLC, contractual rate per kilowatt hour of electricity, consumed by the Company’s cryptocurrency mining operations.

 

Revenues from our cryptocurrency mining operations were $67,337 and $107,465 for the three months ended September 30, 2020 and 2019, respectively.  Revenues from the sales of used equipment and parts were $14,890 and $0 for the three months ended September 30, 2020 and 2019, respectively.

 

When funds are available and market conditions allow, we also invest in certain denominations of cryptocurrencies to complement our mining operations.We consider these investments similar to marketable securities where we purchase and hold the cryptocurrencies for sale.  We report realized gains and losses on the sales of cryptocurrencies (net of transaction costs) and mark our portfolio of cryptocurrencies to market at the end of each quarterly reporting period, reporting unrealized gains or losses on the investments. As of September 30, 2020, our investments at market value totaled $89,741 and were comprised primarily of LINK (Chainlink), with a smaller portfolio of Bitcoin (BTC), Litecoin (LTC) and Ethereum (ETH).

 

 
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We have funded our operations primarily from cash generated from our digital currency mining operations and proceeds from convertible notes payable.  During the three months ended September 30, 2020 we received proceeds from convertible notes payable of $319,000. 

 

The Digital Asset Market

 

The Company is focusing on the mining of digital assets, as well as blockchain applications (“blockchain”) and related technologies. A blockchain is a shared immutable ledger for recording the history of transactions of digital assets—a business blockchain provides a permissioned network with known identities. A Bitcoin is the most recognized type of a digital asset that is issued by, and transmitted through, an open source, math-based protocol platform using cryptographic security that is known as the “Bitcoin Network.” The Bitcoin Network is an online, peer-to-peer user network that hosts the public transaction ledger, known as the blockchain, and the source code that comprises the basis for the cryptography and math-based protocols governing the Bitcoin Network.

 

Bitcoins, for example, can be used to pay for goods and services or can be converted to fiat currencies, such as the US Dollar, at rates determined on Bitcoin exchanges or in individual end-user-to-end-user transactions under a barter system. The networks utilized by digital coins are designed to operate without any company or government in charge, governed by a collaboration of volunteer programmers and computers that maintain all the records. These blockchains are typically maintained by a network of participants which run servers while securing their blockchain. Third party service providers such as Bitcoin exchanges and bitcoin third party payment processing services may charge significant fees for processing transactions and for converting, or facilitating the conversion of, bitcoins to or from fiat currency.

 

This market is rapidly evolving and there can be no assurances that we will remain competitive with industry participants that have or may have greater resources or experience in in this industry than us, nor that the unproven digital assets that we mine will ever have any significant market value.

 

The Company, like many cryptocurrency mining operators, is currently operating at a non-profitable status following record historic runs in market prices of digital currencies. Market prices of digital currencies have not been high enough to cover the operating costs of mining companies, including significant power costs and high levels of equipment depreciation. The Company is addressing these operational challenges through considering alternative sources of power, further consolidation of facilities, and potential hosting arrangements. There can be no assurance that the Company will be successful in these efforts and attain profitable levels of operations.

 

FINANCIAL OPERATIONS REVIEW

 

November 2017, revenues commenced from our cryptocurrency mining operations and from sales of cryptocurrency mining equipment. Prior to that date, revenues were generated substantially from the now discontinued Ambulance services, which we have discontinued to focus on new revenue sources. 

 

We are incurring increased costs as a result of being a publicly traded company. As a public company, we incur significant legal, accounting and other expenses that we did not incur as a private company. We also have paid compensation through the issuance of shares of our common stock and warrants, the valuation of which has resulted in significant stock-based compensation. In addition, the Sarbanes-Oxley Act of 2002, as well as new rules subsequently implemented by the Securities and Exchange Commission, have required changes in corporate governance practices of public companies and will require us to comply with these rules. These new rules and regulations have will increase our legal and financial compliance costs and have made some activities more time-consuming and costlier. In addition, these new rules and regulations have made it more difficult and more expensive for us to obtain director and officer liability insurance, which we currently cannot afford to do. As a result of the new rules, it may become more difficult for us to attract and retain qualified persons to serve on our Board of Directors or as executive officers. We cannot predict or estimate the amount of additional costs we may incur as a result of being a public company or the timing of such costs.

 

 
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To operate our digital currency mining facilities and to fund future operations, we will need to raise additional capital. The amount and timing of future funding requirements will depend on many factors, including the timing and results of our ongoing development efforts, the potential expansion of our current development programs, potential new development programs and related general and administrative support. We anticipate that we will seek to fund our operations through further liquidation of our marketable securities, public or private equity or debt financings or other sources, such as potential collaboration agreements. We cannot be certain that anticipated additional financing will be available to us on favorable terms, or at all.

 

RESULTS OF OPERATIONS

 

THREE MONTHS ENDED SEPTEMBER 30, 2020 COMPARED TO THE THREE MONTHS ENDED SEPTEMBER 30, 2019

 

Revenues

 

Our cryptocurrency mining revenues decreased to $67,337 in the three months ended September 30, 2020 from $107,465 in the three months ended September 30, 2019.  This decrease in revenues resulted primarily from the Company discontinuing the use of under-performing, non-serviceable mining equipment during the current year period, with new replacement equipment purchased and deployed later in the period.  In addition, the Company’s mining revenue reward rates have been reduced in the current fiscal year.

 

We also have revenues from the sale of cryptocurrency mining units that have been assembled or refurbished for resale and spare parts.  Such sales totaled $14,890 and $0 in the three months ended September 30, 2020 and 2019, respectively.  Sales of equipment and parts will fluctuate from period to period depending on the current retail demand for our model of cryptocurrency mining units and parts.

 

Cost of Revenues

 

Cost of revenues was $189,011 and $227,083 in the three months ended September 30, 2020 and 2019, respectively. The decrease in cost of revenues in the current fiscal year is due primarily to a decrease in depreciation and amortization expense.   Expenses associated with running our cryptocurrency mining operations, such as equipment depreciation and amortization, operating supplies, utilities and consulting services are recorded as cost of revenues. Also included in cost of revenues are the costs of purchasing or assembling the cryptocurrency mining units sold. We currently are experiencing a gross loss on revenues primarily due to high utility costs and a conservative, short useful life for mining equipment depreciation and amortization.

 

Operating Expenses

 

General and administrative expenses decreased to $99,717 in the three months ended September 30, 2020 from $107,385 in the three months ended September 30, 2019. The decreases are due primarily to decreases in consulting and professional fees and travel expenses.

 

 
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Other Income (Expense)

 

Our other income (expense) was comprised of the following:

 

 

 

Three Months Ended
 September:

 

 

 

2020

 

 

2019

 

 

 

 

 

 

 

 

Interest expense

 

$ (100,872 )

 

$ (301,287 )

Realized gain (loss) on digital currencies (net of transaction costs)

 

 

88,375

 

 

 

(3,361 )

Unrealized loss on digital currencies

 

 

(2,521 )

 

 

-

 

Loss on disposition of property and equipment

 

 

(207,281 )

 

 

-

 

Change in fair value of derivative liabilities

 

 

40,022

 

 

 

841,736

 

Loss on conversion of debt

 

 

-

 

 

 

(7,545 )

Digital currency theft loss

 

 

-

 

 

 

(33,037 )

 

 

 

 

 

 

 

 

 

Total other income (expense)

 

$ (182,277 )

 

$ 496,506

 

 

The decrease in our interest expense in the three months ended September 30, 2020, which includes the amortization of debt discount and original issue discount, resulted from multiple conversions of notes payable in full to common stock during the period.  In addition, the amortization of debt discount was significantly less during the current year period.

 

During the three months ended September 30, 2020 we significantly increased our investing efforts in digital currencies.  In addition to the currencies received as compensation for our mining services, we purchased various digital currencies totaling $2,086,898 and also converted currencies from one denomination to another based on our assessment of market conditions for each respective currency.  We received total proceeds of $2,283,717 from the sale of digital currencies during the three months ended September 30, 2020 and realized a gain on $138,527 for the period.  After deducting transaction costs of $50,152, we reported a net realized gain of $88,375.

 

The realized loss on investments in the three months ended September 30, 2019 resulted primarily from losses recorded on our digital currencies, as we experienced the negative impact of fluctuating market values.  Our purchases of digital currencies for investment purposes were minimal during this period.

 

During the three months ended September 30, 2020, we disposed of and wrote off non-serviceable, defective mining equipment with a net book value of $207,281.  The equipment disposed of was replaced during the period with new, more efficient mining equipment.  We did not report any loss on disposition of property and equipment during the three months ended September 30, 2019.

 

We estimate the fair value of the derivatives associated with our convertible notes payable, warrants, put-back rights associated with two asset purchase agreements, common stock issuable pursuant to a Series B preferred stock Exchange Agreement and a stock subscription payable using, as applicable, either the Black-Scholes pricing model or multinomial lattice models that value the derivative liability based on a probability weighted discounted cash flow model using future projections of the various potential outcomes.  We estimate the fair value of the derivative liabilities at the inception of the financial instruments, and, in the case of our convertible notes payable, at the date of conversions to equity and at each reporting date, recording a derivative liability, debt discount, additional paid-in capital and a gain or loss on change in derivative liabilities as applicable. These estimates are based on multiple inputs, including the market price of our stock, interest rates, our stock price volatility, variable conversion prices based on market prices as defined in the respective agreements and probabilities of certain outcomes based on management projections. These inputs are subject to significant changes from period to period and to management’s judgment; therefore, the estimated fair value of the derivative liabilities will fluctuate from period to period, and the fluctuation may be material. 

 

 
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The loss on extinguishment of debt of $7,545 in the three months ended September 30, 2019 resulted from conversion of convertible notes to common stock where the conversion terms were outside the related agreements.We did not report any gain or loss on extinguishment of debt during the three months ended September 30, 2019

 

During the three months ended September 30, 2019, we incurred a digital currency theft loss of $33,037 where a hacker obtained unauthorized access to our online digital currency processing service and transferred digital currencies out of our account.

 

Net Loss

 

As a result, we reported a net loss of $388,778 for the three months ended September 30, 2020 and net income of $269,503 for the three months ended September 30, 2019.

 

LIQUIDITY AND CAPITAL RESOURCES

 

Overview

 

As of September 30, 2020, we had total current assets of $108,935, including cash of $102,435, and total current liabilities of $668,217, resulting in a working capital deficit of $559,282.  Included in current liabilities as of September 30, 2020 are derivative liabilities totaling $209,338, which we do not anticipate will require the payment of cash to settle.  In addition, we had a total stockholders’ deficit of $252,218 as of September 30, 2020.

 

We have funded our operations primarily from cash generated from our digital currency mining operations, gains on sale of digital currencies and proceeds from convertible notes payable.  During the three months ended September 30, 2020, we received net proceeds from convertible notes payable of $319,000. 

 

Sources and Uses of Cash

 

We used net cash in operations of $210,421 in the three months ended September 30, 2020 as a result of our net loss of $388,778, non-cash gains totaling $128,397, increases in digital currencies of $67,699 and prepaid expenses and other current assets of $3,250 and decreases in accounts payable of $34,239 and due to related party of $9,687, partially offset by non-cash expenses totaling $411,381 and increase accrued expenses of $10,248.

 

We used net cash in operations of $186,661 in the three months ended September 30, 2019 as a result of our net income of $269,503, non-cash expenses totaling $470,945, and increases in accrued expenses of $17,987 and due to related party of $9,079, partially offset by non-cash gain of $841,736, increases in digital currencies of $109,112, prepaid expenses and other current assets of $3,250 and a decrease in accounts payable of $77.

 

During the three months ended September 30, 2020, we had net cash provided used in investing activities of $12,819, comprised of the purchase of digital currencies of $2,086,898 and the purchase of property and equipment of $209,638, partially offset by proceeds from the sale of digital currencies of $2,283,717.

 

During the three months ended September 30, 2019, we used net cash of $47,310 in investing activities comprised of the purchase of property and equipment of $110,281, partially offset by net proceeds from the sale of digital currencies of $62,971.

 

During the three months ended September 30, 2020, we had net cash provided by financing activities of $319,000 comprised of proceeds from convertible notes payable.   

 

During the three months ended September 30, 2019, we had net cash provided by financing activities of $247,000 comprised of proceeds from convertible notes payable.

 

We will have to raise funds to successfully operate our digital currency mining operations and to fund our operating expenses. We will have to borrow money from shareholders or issue debt or equity or enter into a strategic arrangement with a third party. There can be no assurance that additional capital will be available to us. We currently have no arrangements or understandings with any person to obtain funds through bank loans, lines of credit or any other sources. Since we have no such arrangements or plans currently in effect, our inability to raise funds for our operations will have a severe negative impact on our ability to remain a viable company.

 

 
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Going Concern

 

The Company has reported recurring operating losses since its inception and used net cash in operating activities of $210,421 in the three months ended September 30, 2020.  As of September 30, 2020, the Company had an accumulated deficit of $22,453,760 and a total stockholders’ deficit of $252,218.  These conditions raise substantial doubt about the Company's ability to continue as a going concern.

 

The accompanying financial statements have been prepared in conformity with U.S. GAAP, which contemplate continuation of the Company as a going concern and the realization of assets and satisfaction of liabilities in the normal course of business. The ability of the Company to reach a successful level of operations is dependent on the execution of management’s plans, which include the raising of capital through the debt and/or equity markets, until such time that funds provided by operations are sufficient to fund working capital requirements. If the Company were not to continue as a going concern, it would likely not be able to realize its assets at values comparable to the carrying value or the fair value estimates reflected in the balances set out in the preparation of the financial statements.

 

There can be no assurances that the Company will be successful in attaining a profitable level of operations or in generating additional cash from the equity/debt markets or other sources fund its operations. The financial statements do not include any adjustments relating to the recoverability of assets and classification of assets and liabilities that might be necessary. Should the Company not be successful in its business plan or in obtaining the necessary financing to fund its operations, the Company would need to curtail certain or all operational activities and/or contemplate the sale of its assets, if necessary.

 

Current and Future Impact of Covid-19

 

The Covid-19 pandemic continues to have a material negative impact on capital markets.  While we continue to incur operating losses, we are currently dependent on debt or equity financing to fund our operations and execute our business plan. We believe that the impact on capital markets of Covid-19 may make it more costly and more difficult for us to access these sources of funding. 

 

SIGNIFICANT ACCOUNTING POLICIES

 

Our significant accounting policies are disclosed in Note 2 to our condensed financial statements and in the notes to our audited financial statements included in our Annual Report on Form 10-K for the year ended June 30, 2020.  The following is a summary of those accounting policies that involve significant estimates and judgment of management.

 

Use of Estimates

 

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period.  Because of the use of estimates inherent in the financial reporting process, actual results could differ significantly from those estimates.

 

Digital Currencies

 

Digital currencies consist of Bitcoin and Ethereum, generally received for the Company’s own account as compensation for cryptocurrency mining services, and Chainlink and other digital currencies purchased for short-term investment purposes.  Given that there is limited precedent regarding the classification and measurement of cryptocurrencies under current Generally Accepted Accounting Principles (“GAAP”), the Company has determined to account for these digital currencies as indefinite-lived intangible assets in accordance with Accounting Standards Update ("ASU") No. 350, Intangibles – Goodwill and Other, for the period covered by this report and in future reports unless and until further guidance is issued by the Financial Accounting Standards Board (“FASB”).  An intangible asset with an indefinite useful life is not amortized but assessed for impairment annually, or more frequently, when events or changes in circumstances occur indicating that it is more likely than not that the indefinite-lived asset is impaired.  Impairment exists when the carrying amount exceeds its fair value.  In testing for impairment, the Company has the option to first perform a qualitative assessment to determine whether it is more likely than not than an impairment exists.  If it is determined that it is more likely than not that an impairment exists, a quantitative impairment test is not necessary.  If the Company concludes otherwise, it is required to perform a quantitative impairment test.  To the extent an impairment loss is recognized, the loss establishes the new cost basis of the asset.  Subsequent reversal of impairment losses is not permitted.  Realized gains or losses on the sale of digital currencies, net of transaction costs, are included in other income (expense) in the statements of operations. Changes in the fair value of digital currencies during the period are recorded as unrealized gains or losses in other income (expense) in the statements of operations.  As of September 30, 2020, the Company’s cost basis of digital currencies exceeded the market value by $2,521, which amount is recorded as unrealized loss on investments.

 

 
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Property and Equipment

 

Property and equipment, consisting primarily of computer and other cryptocurrency mining equipment (transaction verification servers), is stated at the lower of cost or estimated realizable value and is depreciated when placed into service using the straight-line method over estimated useful lives. The Company operates in an emerging industry for which limited data is available to make estimates of the useful economic lives of specialized equipment. Management has assessed the basis of depreciation of these assets and believes they should be depreciated over a three-year period due to technological obsolescence reflecting rapid development of hardware that has faster processing capacity and other factors.  Maintenance and repairs are expensed as incurred and improvements are capitalized. Gains or losses on the disposition of property and equipment are recorded upon disposal.

 

During the three months ended September 30, 2020, the Company discontinued the use of damaged or non-serviceable mining equipment and wrote off its net book value of $207,281 to loss on disposition of property and equipment.

 

Management has determined that the three-year diminishing value best reflects the current expected useful life of transaction verification servers. This assessment takes into consideration the availability of historical data and management’s expectations regarding the direction of the industry including potential changes in technology. Management will review this estimate annually and will revise such estimates as and when data becomes available.

 

To the extent that any of the assumptions underlying management’s estimate of useful life of its transaction verification servers are subject to revision in a future reporting period, either as a result of changes in circumstances or through the availability of greater quantities of data, then the estimated useful life could change and have a prospective impact on depreciation expense and the carrying amounts of these assets.

 

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

 

Derivatives

 

The Company evaluates its convertible debt, options, warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for. The result of this accounting treatment is that under certain circumstances the fair value of the derivative is marked-to-market each balance sheet date and recorded as a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the statement of operations as other income or expense. Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity. Equity instruments that are initially classified as equity that become subject to reclassification under this accounting standard are reclassified to liability at the fair value of the instrument on the reclassification date.

 

Where the number of warrants or common shares to be issued under these agreements is indeterminate, the Company has concluded that the equity environment is tainted, and all additional warrants and convertible debt are included in the value of the derivatives.

 

 
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We estimate the fair value of the derivatives associated with our convertible notes payable, common stock issuable pursuant to a Series B preferred stock Exchange Agreement and a stock subscription payable using, as applicable, either the Black-Scholes pricing model or multinomial lattice models that value the derivative liability based on a probability weighted discounted cash flow model using future projections of the various potential outcomes.  We estimate the fair value of the derivative liabilities at the inception of the financial instruments, and, in the case of our convertible notes payable, at the date of conversions to equity and at each reporting date, recording a derivative liability, debt discount, additional paid-in capital and a gain or loss on change in derivative liabilities as applicable. These estimates are based on multiple inputs, including the market price of our stock, interest rates, our stock price volatility, variable conversion prices based on market prices as defined in the respective agreements and probabilities of certain outcomes based on management projections. These inputs are subject to significant changes from period to period and to management’s judgment; therefore, the estimated fair value of the derivative liabilities will fluctuate from period to period, and the fluctuation may be material. 

 

Impairment of Long-Lived Assets

 

All assets, including intangible assets subject to amortization, are reviewed for impairment when changes in circumstances indicate that the carrying amount of the asset may not be recoverable in accordance with ASC 350 and ASC 360. If the carrying amount of the asset exceeds the expected undiscounted cash flows of the asset, an impairment charge is recognized equal to the amount by which the carrying amount exceeds fair value or net realizable value. The testing of these intangibles under established guidelines for impairment requires significant use of judgment and assumptions. Changes in forecasted operations and other assumptions could materially affect the estimated fair values. Changes in business conditions could potentially require adjustments to these asset valuations. We reported no impairment expense for the three months ended September 30, 2020 and 2019.

 

Fair Value of Financial Instruments

 

Disclosures about fair value of financial instruments require disclosure of the fair value information, whether or not recognized in the balance sheet, where it is practicable to estimate that value.  As of September 30, 2020 and June 30, 2020, the amounts reported for cash, prepaid expenses and other current assets, accounts payable, accrued expenses, due to related party and notes payable approximate fair value because of their short maturities.

 

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  ASC Topic 820 established a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value.  The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1measurements) and the lowest priority to unobservable inputs (level 3 measurements).  These tiers include:

 

 

·

Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets;

 

 

 

 

·

Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and

 

 

 

 

·

Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

  

Our derivative liabilities are measured at fair value on a recurring basis and estimated as follows:

 

 

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

September 30, 2020:

 

 

 

 

 

 

 

 

 

 

 

 

Derivative liabilities

 

$ 209,338

 

 

$ -

 

 

$ -

 

 

$ 209,338

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total liabilities measured at fair value

 

$ 209,338

 

 

$ -

 

 

$ -

 

 

$ 209,338

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2020:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative liabilities

 

$ 164,834

 

 

$ -

 

 

$ -

 

 

$ 164,834

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total liabilities measured at fair value

 

$ 164,834

 

 

$ -

 

 

$ -

 

 

$ 164,834

 

 

 
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Stock-Based Compensation

 

The Company accounts for all equity-based payments in accordance with ASC Topic 718, Compensation – Stock Compensation. ASC Topic 718 requires companies to recognize in the statement of operations the grant-date fair value of stock awards, stock options, warrants and other equity-based compensation issued to employees. The value of the portion of an award that is ultimately expected to vest is recognized as an expense over the requisite service periods using the straight-line attribution method. The fair value of a stock award is recorded at the fair market value of a share of the Company’s stock on the grant date. The Company estimates the fair value of stock options and warrants at the grant date by using an appropriate fair value model such as the Black-Scholes option pricing model or multinomial lattice models.

 

The Company accounts for non-employee share-based awards based upon ASC 505-50, Equity-Based Payments to Non-Employees. ASC 505-50 requires the costs of goods and services received in exchange for an award of equity instruments to be recognized using the fair value of the goods and services or the fair value of the equity award, whichever is more reliably measurable. The fair value of the equity award is determined on the measurement date, which is the earlier of the date that a performance commitment is reached or the date that performance is complete. Generally, our awards do not entail performance commitments. When an award vests over time such that performance occurs over multiple reporting periods, we estimate the fair value of the award as of the end of each reporting period and recognize an appropriate portion of the cost based on the fair value on that date. When the award vests, we adjust the cost previously recognized so that the cost ultimately recognized is equivalent to the fair value on the date the performance is complete.

 

Revenue Recognition

 

Effective July 1, 2018, we adopted ASC 606, Revenue from Contracts with Customers, as amended, using the modified retrospective method, which requires the cumulative effect of adoption to be recognized as an adjustment to opening retained earnings in the period of adoption. There was no cumulative effect of adopting the new standard and no impact on our financial statements. The new standard provides a single comprehensive model to be used in the accounting for revenue arising from contracts with customers and supersedes current revenue recognition guidance, including industry-specific guidance. The standard’s stated core principle is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve this core principle, ASC 606 includes provisions within a five-step model that includes identifying the contract with a customer, identifying the performance obligations in the contract, determining the transaction price, allocating the transaction price to the performance obligations, and recognizing revenue when, or as, an entity satisfies a performance obligation.

 

Our revenues currently consist of cryptocurrency mining revenues and revenues from the sale of cryptocurrency mining equipment recognized in accordance with ASC 606 as discussed above. Amounts collected from customers prior to shipment of products are recorded as deferred revenue. 

 

The Company earns its cryptocurrency mining revenues by providing transaction verification services within the digital currency networks of cryptocurrencies, such as Bitcoin, Litecoin and Ethereum. The Company satisfies its performance obligation at the point in time that the Company is awarded a unit of digital currency through its participation in the applicable network and network participants benefit from the Company’s verification service. In consideration for these services, the Company receives digital currencies, which are recorded as revenue using the closing U.S. dollar price of the related cryptocurrency on the date of receipt. Expenses associated with running the cryptocurrency mining operations, such as equipment depreciation, rent, operating supplies, rent, utilities and monitoring services are recorded as cost of revenues.

 

There is currently no specific definitive guidance in GAAP or alternative accounting frameworks for the accounting for the production and mining of digital currencies and management has exercised significant judgment in determining appropriate accounting treatment for the recognition of revenue for mining of digital currencies. Management has examined various factors surrounding the substance of the Company’s operations and the guidance in ASC 606, including identifying the transaction price, when performance obligations are satisfied, and collectability is reasonably assured being the completion and addition of a block to a blockchain and the award of a unit of digital currency to the Company. In the event authoritative guidance is enacted by the FASB, the Company may be required to change its policies which could result in a change in the Company’s financial statements.

 

 
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OFF BALANCE SHEET ARRANGEMENTS

 

The Company has consolidated it cryptocurrency operations in one facility in Carthage, New York.  The Carthage lease and power purchase agreement was entered into on May 10, 2019 for an initial term of 90 days, with an option to continue the lease for a subsequent 36 months, which option the Company has exercised.  The Company’s sole obligation under the lease is to pay the lessor a contractual rate per kilowatt hour of electricity consumed in the Company’s cryptocurrency mining operations. 

 

We currently have no other material off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

 

RECENTLY ISSUED ACCOUNTING POLICIES

 

There were no new accounting pronouncements issued or proposed by the FASB during the three months ended September 30, 2020 and through the date of filing this report which the Company believes will have a material impact on its financial financial statements.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

 

As a smaller reporting company, as defined by Item 10 of Regulation S-K, the Company is not required to provide the information required by this item.

 

ITEM 4. CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

The Securities and Exchange Commission defines the term "disclosure controls and procedures" to mean a company's controls and other procedures of an issuer that are designed to ensure that information required to be disclosed in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Securities Exchange Act of 1934 is accumulated and communicated to the issuer's management, including its chief executive and chief financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. The Company maintains such a system of controls and procedures in an effort to ensure that all information which it is required to disclose in the reports it files under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified under the SEC's rules and forms and that information required to be disclosed is accumulated and communicated to the chief executive and interim chief financial officer to allow timely decisions regarding disclosure.

 

 
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As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company's disclosure controls and procedures are not effective as of such date. The Chief Executive Officer and Chief Financial Officer have determined that the Company continues to have the following deficiencies which represent a material weakness:

 

1.

As of September 30, 2020, we did not maintain effective controls over the control environment. Specifically, the Board of Directors does not currently have any independent members and no director qualifies as an audit committee financial expert as defined in Item 407(d)(5)(ii) of Regulation S-B. Since these entity level programs have a pervasive effect across the organization, management has determined that these circumstances constitute a material weakness.

2.

As of September 30, 2020, due to the inherent issue of segregation of duties in a small company, we have relied heavily on entity or management review controls and engaged an outside financial consultant to lessen the issue of segregation of duties over accounting, financial close procedures and controls over financial statement disclosure.  Accordingly, management has determined that this control deficiency constitutes a material weakness.

 

 

 

 

3.

As of September 30, 2020, we did not establish a written policy for the approval, identification and authorization of related party transactions.  Accordingly, management has determined that this control deficiency constitutes a material weakness.

  

Because of these material weaknesses, management has concluded that the Company did not maintain effective internal control over financial reporting as of September 30, 2020, based on the criteria established in "Internal Control-Integrated Framework" issued by the COSO.

 

Changes in Internal Control Over Financial Reporting. 

 

There have been no changes in the Company's internal control over financial reporting through the date of this report or during the quarter ended September 30, 2020, that materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

 

 
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PART II – OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS.

 

There are no pending legal proceedings in which we are a party or in which any of our directors, officers or affiliates, any owner of record or beneficiary of more than 5% of any class of our voting securities is a party adverse to us or has a material interest adverse to us, except as stated below. Our property is not the subject of any pending legal proceedings.

 

ITEM 1A. RISK FACTORS

 

The future impact of the Covid-19 pandemic on companies is evolving and we are currently unable to assess with certainty the broad effects of Covid-19 on our business.

 

The future impact of the Covid-19 pandemic on companies is evolving and we are currently unable to assess with certainty the broad effects of Covid-19 on our business, particularly on the digital currency markets. As of September 30, 2020, our investment in property and equipment of $362,949 could be subject to impairment or change in valuation due to Covid-19 if our crypocurrency mining revenues significantly decrease or we are not able to raise capital sufficient to fund our operations. In addition, current travel restrictions and social distancing requirements make it difficult for our management to access and oversee our operations in the State of New York.

 

As of September 30, 2020, the reported values of the Company’s material convertible debt and derivative liabilities are based on multiple factors, including the market price of our stock, interest rates, our stock price volatility, variable conversion prices based on market prices as defined in the respective agreements and probabilities of certain outcomes based on management projections. We believe these inputs will be subject to even more significant changes due to the impact on capital markets of Covid-19, and the future estimated fair value of these liabilities may fluctuate materially from period to period.

 

The Covid-19 pandemic continues to have a material negative impact on capital markets, including the market prices of digital currencies.  While we continue to incur operating losses, we are currently dependent on debt or equity financing to fund our operations and execute our business plan, including ongoing requirements to replace old and nonprofitable mining machines. We believe that the impact on capital markets of Covid-19 may make it more costly and more difficult for us to access these sources of funding. 

 

Our business can potentially be impacted by the effects of the COVID-19 as follows: (1) effect our financial condition, operating results and reduce cash flows; (2) cause disruption to the activities of equipment suppliers; (3) negatively effect the Company's mining activities due to imposition of related public health measures and travel and business restrictions; (4) create disruptions to our core operations in New York due to quarantines and self-isolations; (5) restrict the Company's ability and that of its employees to access facilities and perform equipment maitenance, repairs, and programming which will lead to inability to monitor and service miners, resulting in reduced ability to mine cryptocurrencies due to miners being offline.

 

 
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In addition, our partners such as manufacturers, suppliers and sub-contractors will be disrupted by absenteeism, quarantines and travel restrictions resulting in their employees’ ability to work.  The Company's supply chain, shipments of parts and purchases of new products may be negatively affected. Such disruptions could have a material adverse effect on our operations.

 

The coronavirus pandemic is an emerging serious threat to health and economic wellbeing affecting our employees, investors and our sources of supply.

 

The sweeping nature of the novel Coronavirus (COVID-19) pandemic makes it extremely difficult to predict how the Company’s business and operations will be affected in the long run. However, the likely overall economic impact of the pandemic is viewed as highly negative to the general economy.  To date, we have not been classified as an essential business in the New York, and we may not be allowed to access our mining facilities. The duration of such impact cannot be predicted.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

 

During the three months ended Septemnber 30, 2020, the Company issued a total of 13,342,435 shares of its common stock in conversion of $164,000 note principal, $8,867 accrued interest payable,  and $2,000 in fees, resulting in the extinguishment of derivative liabilities totaling $70,296.  

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURES.

 

Not applicable.

 

ITEM 5. OTHER INFORMATION.

 

None.

 

 
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ITEM 6. EXHIBITS.

 

(a) Exhibits.

 

Exhibit Number

Exhibit Description

31.1

Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer and Principal Financial Officer. Filed herewith.

32.1

Section 1350 Certification of Chief Executive Officer and Principal Financial Officer. Filed herewith.

 

101.INS

XBRL Instance Document *

101.SCH

XBRL Taxonomy Extension Schema *

101.CAL

XBRL Taxonomy Extension Calculation Linkbase *

101.DEF

XBRL Taxonomy Extension Definition Linkbase *

101.LAB

XBRL Taxonomy Extension Label Linkbase *

101.PRE

XBRL Taxonomy Extension Presentation Linkbase *

______________

* Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed “furnished” and not “filed” or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, or deemed “furnished” and not “filed” for purposes of Section 18 of the Securities and Exchange Act of 1934, and otherwise is not subject to liability under these sections.

 

 
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SIGNATURES

 

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

 

 

INTEGRATED VENTURES, INC.

 

 

 

Dated: November 13, 2020

By:

/s/ Steve Rubakh

 

 

 

President and Chief Executive Officer and Principal Financial Officer

 

 
36

 

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