UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

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

 

For the quarterly period ended March 31, 2021

 

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

 

For the transition period from __________ to __________

 

Commission file number: 333-174759

 

INTEGRATED VENTURES, INC.

(Exact Name of Registrant as Specified in Its charter)

 

Nevada

 

82-1725385

(State or Other Jurisdiction of

Incorporation or Organization)

 

(I.R.S. Employer

Identification No.)

 

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

(Address of principal executive offices) (Zip Code)

 

(215) 613-1111

(Registrant’s Telephone Number, Including Area Code)

 

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

 

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

 

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

 

 

 

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

 

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

 

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

 

The number of shares outstanding of the issuer’s common stock, $0.001 par value per share, was 194,487,662 as of May 14, 2021.

 

 

 

 

INTEGRATED VENTURES, INC.

FORM 10-Q

MARCH 31, 2021

 

TABLE OF CONTENTS

 

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

26

 

Item 3.

Quantitative and Qualitative Disclosure About Market Risk

36

 

Item 4.

Controls and Procedures

36

 

 

 

PART II: OTHER INFORMATION

 

 

Item 1.

Legal Proceedings

38

 

Item 1A.

Risk Factors

38

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

38

 

Item 3.

Defaults Upon Senior Securities

39

 

Item 4.

Mine Safety Disclosures

39

 

Item 5.

Other Information

39

 

Item 6.

Exhibits

39

 

 

 

 

 

SIGNATURES

40

  

 
2

Table of Contents

 

PART I – FINANCIAL INFORMATION

 

INDEX TO FINANCIAL STATEMENTS

 

 

Page

 

 

Condensed Balance Sheets as of March 31, 2021 (unaudited) and June 30, 2020

4

 

 

Condensed Statements of Operations for the Three Months and Nine Months Ended March 31, 2021 and 2020 (unaudited)

5

 

 

Condensed Statement of Stockholders’ Equity (Deficit) for the Nine Months Ended March 31, 2021 (unaudited)

6

 

 

Condensed Statement of Stockholders’ Equity (Deficit) for the Three Months Ended March 31, 2020 (unaudited)

7

 

 

Condensed Statements of Cash Flows for the Nine Months Ended March 31, 2021 and 2020 (unaudited)

8

 

 

Notes to Condensed Financial Statements (unaudited)

10

  

 
3

Table of Contents

  

Integrated Ventures, Inc.

Condensed Balance Sheets

 

 

 

March 31,
2021

 

 

June 30,
2020

 

 

(Unaudited)

 

 

 

ASSETS

Current assets:

 

 

 

 

 

 

Cash

 

$ 99,974

 

 

$ 6,675

 

Prepaid expenses and other current assets

 

 

7,500

 

 

 

3,250

 

Equipment deposits

 

 

2,528,392

 

 

 

-

 

Total current assets

 

 

2,635,866

 

 

 

9,925

 

 

 

 

 

 

 

 

 

 

Non-current assets:

 

 

 

 

 

 

 

 

Property and equipment, net of accumulated depreciation and amortization of $498,854 and $805,421 as of March 31, 2021 and June 30, 2020, respectively

 

 

994,171

 

 

 

453,342

 

Digital currencies

 

 

1,515,201

 

 

 

82,855

 

Deposits

 

 

700

 

 

 

700

 

Total assets

 

$ 5,145,938

 

 

$ 546,822

 

 

 

 

 

 

 

 

 

 

LIABILITIES, MEZZANINE AND STOCKHOLDERS' EQUITY (DEFICIT)

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$ 146,766

 

 

$ 84,443

 

Accrued preferred stock dividends

 

 

66,311

 

 

 

-

 

Accrued expenses

 

 

6,859

 

 

 

25,274

 

Due to related party

 

 

57,170

 

 

 

122,907

 

Notes payable

 

 

33,868

 

 

 

7,583

 

Convertible notes payable, net of discounts of $0 and $88,449 as of March 31, 2021 and June 30, 2020, respectively

 

 

-

 

 

 

251,384

 

Derivative liabilities

 

 

-

 

 

 

164,834

 

Total current liabilities

 

 

310,974

 

 

 

656,425

 

Total liabilities

 

 

310,974

 

 

 

656,425

 

 

 

 

 

 

 

 

 

 

Mezzanine:

 

 

 

 

 

 

 

 

Series C preferred stock, $0.001 par value, (3,000 shares authorized, 1,125 and 0 shares issued and outstanding outstanding as of March 31, 2021 and June 30, 2020, respectively)

 

 

1,125,000

 

 

 

-

 

Series D preferred stock, $0.001 par value, (4,000 shares authorized, 3,000 and 0 shares issued and outstanding outstanding as of March 31, 2021 and June 30, 2020, respectively)

 

 

3,000,000

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity (deficit):

 

 

 

 

 

 

 

 

Series A preferred stock, $0.001 par value, (1,000,000 shares authorized, 500,000 shares issued and outstanding as of March 31, 2021 and June 30, 2020, respectively)

 

 

500

 

 

 

500

 

Series B preferred stock, $0.001 par value, (1,000,000 shares authorized, 727,370 and 430,000 shares issued and outstanding as of March 31, 2021 and June 30, 2020, respectively)

 

 

727

 

 

 

430

 

Common stock, $0.001 par value, (750,000,000 shares authorized, 164,422,662 and 103,164,460 shares issued and outstanding as of March 31, 2021 and June 30, 2020, respectively)

 

 

164,423

 

 

 

103,165

 

Additional paid-in capital

 

 

40,235,439

 

 

 

21,851,284

 

Accumulated deficit

 

 

(39,691,125 )

 

 

(22,064,982 )

Total stockholders’ equity (deficit)

 

 

709,964

 

 

 

(109,603 )

Total liabilities and stockholders’ equity (deficit)

 

$ 5,145,938

 

 

$ 546,822

 

 

See notes to condensed financial statements

 

 
4

Table of Contents

 

Integrated Ventures, Inc.

Condensed Statements of Operations

(Unaudited)

 

 

 

 

 

 

 

 

 

Three Months Ended
March 31,

 

 

Nine Months Ended
March 31,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Cryptocurrency mining

 

$ 682,706

 

 

$ 130,062

 

 

$ 885,931

 

 

$ 363,541

 

Sales of cryptocurrency mining equipment

 

 

14,099

 

 

 

848

 

 

 

75,221

 

 

 

10,511

 

Total revenues

 

 

696,805

 

 

 

130,910

 

 

 

961,152

 

 

 

374,052

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenues

 

 

266,897

 

 

 

261,484

 

 

 

618,954

 

 

 

753,703

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit (loss)

 

 

429,908

 

 

 

(130,574 )

 

 

342,198

 

 

 

(379,651 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General and administrative

 

 

181,165

 

 

 

85,465

 

 

 

372,910

 

 

 

279,990

 

Related party stock-based compensation

 

 

16,537,500

 

 

 

120,000

 

 

 

16,537,500

 

 

 

120,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total operating expenses

 

 

16,718,665

 

 

 

205,465

 

 

 

16,910,410

 

 

 

399,990

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss from operations

 

 

(16,288,757 )

 

 

(336,039 )

 

 

(16,568,212 )

 

 

(779,641 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(239,435 )

 

 

(90,824 )

 

 

(430,049 )

 

 

(573,561 )

Realized gain (loss) on digital currencies

 

 

54,920

 

 

 

(562 )

 

 

106,497

 

 

 

(6,158 )

Change in fair value of derivative liabilities

 

 

(113,599 )

 

 

(27,414 )

 

 

(76,687 )

 

 

823,409

 

Loss on disposition of property and equipment

 

 

-

 

 

 

-

 

 

 

(207,281 )

 

 

-

 

Gain (loss) on conversion of debt

 

 

-

 

 

 

10,168

 

 

 

-

 

 

 

(4,592 )

Digital currency theft loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(33,037 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total other income (expense)

 

 

(298,114 )

 

 

(108,632 )

 

 

(607,520 )

 

 

206,061

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss before income taxes

 

 

(16,586,871 )

 

 

(444,671 )

 

 

(17,175,732 )

 

 

(573,580 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for income taxes

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$ (16,586,871 )

 

$ (444,671 )

 

$ (17,175,732 )

 

$ (573,580 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per common share – basic and diluted:

 

$ (0.11 )

 

$ (0.01 )

 

$ (0.13 )

 

$ (0.01 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of common shares outstanding – basic and diluted

 

 

154,411,922

 

 

 

80,513,126

 

 

 

130,057,332

 

 

 

56,552,143

 

  

See notes to condensed financial statements

 

 
5

Table of Contents

  

Integrated Ventures, Inc.

Condensed Statement of Stockholders’ Equity (Deficit)

Nine Months Ended March 31, 2021 (Unaudited)

 

 

 

Series C
Preferred Stock

 

 

Series D
Preferred Stock

 

 

Series A
Preferred Stock

 

 

Series B
Preferred Stock

 

 

Common Stock

 

 

Additional Paid-in

 

 

Accumulated

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, June 30, 2020

 

 

-

 

 

$ -

 

 

 

-

 

 

$ -

 

 

 

500,000

 

 

$ 500

 

 

 

430,000

 

 

$ 430

 

 

 

103,164,460

 

 

$ 103,165

 

 

$ 21,851,284

 

 

$ (22,064,982 )

 

$ (109,603 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common shares in conversion
of convertible notes payable

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

52,723,031

 

 

 

52,723

 

 

 

947,146

 

 

 

-

 

 

 

999,869

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common shares for stock
subscription

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

55,555

 

 

 

56

 

 

 

33,832

 

 

 

-

 

 

 

33,888

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock for services

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

216,616

 

 

 

217

 

 

 

24,043

 

 

 

-

 

 

 

24,260

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock for conversion
of Series B preferred stock

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(52,630 )

 

 

(53 )

 

 

5,263,000

 

 

 

5,262

 

 

 

(5,209 )

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of Series B preferred stock
for officeer compensation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

350,000

 

 

 

350

 

 

 

-

 

 

 

-

 

 

 

16,537,150

 

 

 

-

 

 

 

16,537,500

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of Series C preferred stock for cash

 

 

1,125

 

 

 

1,125,000

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock as equity incentive for Series C preferred stock

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

3,000,000

 

 

 

3,000

 

 

 

381,100

 

 

 

(384,100 )

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of Series D preferred stock for cash

 

 

-

 

 

 

-

 

 

 

3,000

 

 

 

3,000,000

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Settlement of derivative liabilities

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

466,093

 

 

 

-

 

 

 

466,093

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred stock dividends

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(66,311 )

 

 

(66,311 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(17,175,732 )

 

 

(17,175,732 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, March 31, 2021

 

 

1,125

 

 

$ 1,125,000

 

 

 

3,000

 

 

$ 3,000,000

 

 

 

500,000

 

 

$ 500

 

 

 

727,370

 

 

$ 727

 

 

 

164,422,662

 

 

$ 164,423

 

 

$ 40,235,439

 

 

$ (39,691,125 )

 

$ 709,964

 

 

See notes to condensed financial statements

 

 
6

Table of Contents

 

Integrated Ventures, Inc.

Condensed Statement of Stockholders’ Equity (Deficit)

Nine Months Ended March 31, 2020 (Unaudited)

 

 

 

Series A
Preferred Stock

 

 

Series B
Preferred Stock

 

 

Common Stock

 

 

Additional
Paid-in

 

 


Accumulated

 

 

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, June 30, 2019

 

 

500,000

 

 

$ 500

 

 

 

300,000

 

 

$ 300

 

 

 

29,824,187

 

 

$ 29,825

 

 

$ 19,864,239

 

 

$ (20,983,207 )

 

$ (1,088,343 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common shares issued in Series B preferred
stock Exchange Agreement

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

8,000,000

 

 

 

8,000

 

 

 

471,800

 

 

 

-

 

 

 

479,800

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common shares issued in conversion of
convertible notes payable

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

53,129,993

 

 

 

53,130

 

 

 

675,386

 

 

 

-

 

 

 

728,516

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Return and cancellation of common shares
and reissuance of Series B preferred stock

 

 

-

 

 

 

-

 

 

 

30,000

 

 

 

30

 

 

 

(3,000,000 )

 

 

(3,000 )

 

 

2,970

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of Series B preferred stock
for officeer compensation

 

 

-

 

 

 

-

 

 

 

100,000

 

 

 

100

 

 

 

-

 

 

 

-

 

 

 

119,900

 

 

 

-

 

 

 

120,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Settlement of derivative liabilities

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

330,391

 

 

 

-

 

 

 

330,391

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(573,580 )

 

 

(573,580 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, March 31, 2020

 

 

500,000

 

 

$ 500

 

 

 

430,000

 

 

$ 430

 

 

 

87,954,180

 

 

$ 87,955

 

 

$ 21,464,696

 

 

$ (21,556,787 )

 

$ (3,216 )

 

See notes to condensed financial statements

 

 
7

Table of Contents

 

Integrated Ventures, Inc.

Condensed Statements of Cash Flows

(Unaudited)

 

 

 

 

 

 

Nine Months Ended
March 31,

 

 

 

2021

 

 

2020

 

 

 

 

 

 

 

 

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$ (17,175,732 )

 

$ (573,580 )

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization expense

 

 

289,464

 

 

 

438,166

 

Amortization of debt discount

 

 

404,387

 

 

 

513,950

 

Related party stock-based compensation

 

 

16,537,500

 

 

 

120,000

 

Common shares issued for services

 

 

24,260

 

 

 

-

 

Loss on disposition of property and equipment

 

 

207,281

 

 

 

-

 

Change in fair value of derivative liabilities

 

 

76,687

 

 

 

(823,409 )

Realized (gain) loss on sale of digital currencies

 

 

(106,497 )

 

 

5,911

 

Loan fees added to debt principal

 

 

-

 

 

 

20,000

 

Loss on conversion of debt

 

 

-

 

 

 

4,592

 

Digital currency theft loss

 

 

-

 

 

 

33,037

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

(4,250 )

 

 

(3,250 )

Digital currencies

 

 

(903,163 )

 

 

(453,070 )

Accounts payable

 

 

(42,840 )

 

 

(2,021 )

Accrued expenses

 

 

21,143

 

 

 

41,060

 

Due to related party

 

 

(65,737 )

 

 

39,535

 

Net cash used in operating activities

 

 

(737,497 )

 

 

(639,079 )

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Proceeds from the sale of digital currencies

 

 

3,835,173

 

 

 

411,763

 

Purchase of digital currencies

 

 

(4,156,874 )

 

 

-

 

Purchase of property and equipment

 

 

(975,574 )

 

 

(123,349 )

Equipment deposits

 

 

(2,528,392 )

 

 

-

 

Net cash provided by (used in) investing activities

 

 

(3,825,667 )

 

 

288,414

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from convertible notes payable

 

 

563,000

 

 

 

534,000

 

Proceeds from the issuance of Series C preferred shares

 

 

1,125,000

 

 

 

-

 

Proceeds from the issuance of Series D preferred shares

 

 

3,000,000

 

 

 

-

 

Repayment of notes payable

 

 

(31,537 )

 

 

(130,308 )

Net cash provided by financing activities

 

 

4,656,463

 

 

 

403,692

 

 

 

 

 

 

 

 

 

 

Net increase in cash

 

 

93,299

 

 

 

53,027

 

Cash, beginning of period

 

 

6,675

 

 

 

48,310

 

 

 

 

 

 

 

 

 

 

Cash, end of period

 

$ 99,974

 

 

$ 101,337

 

 

 

 

 

 

 

 

 

 

(Continued)

 

See notes to condensed financial statements

 

 
8

Table of Contents

 

Integrated Ventures, Inc.

Condensed Statements of Cash Flows (Continued)

(Unaudited)

 

 

 

 

 

Nine Months Ended
March 31,

 

 

 

2021

 

 

2020

 

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

Cash paid for interest

 

$ 2,479

 

 

$ 1,160

 

Cash paid for income taxes

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Non-cash investing and financing activities:

 

 

 

 

 

 

 

 

Debt discount for derivative liabilities

 

$ 258,460

 

 

$ 270,354

 

Common shares issued for convertible notes payable

 

 

999,869

 

 

 

723,924

 

Common shares issued for stock subscription

 

 

33,888

 

 

 

-

 

Settlement of derivative liabilities

 

 

466,093

 

 

 

330,391

 

Notes payable issued for property and equipment

 

 

57,822

 

 

 

-

 

Property and equipment purchased with digital currencies

 

 

4,178

 

 

 

-

 

Accrued preferred stock dividends

 

 

66,311

 

 

 

-

 

Common shares issued for Series C equity incentive

 

 

384,100

 

 

 

-

 

Conversion of Series B preferred shares for common shares

 

 

5,263

 

 

 

-

 

Equipment deposits for property and equipment

 

 

-

 

 

 

27,971

 

Common shares issued in Series B preferred stock Exchange Agreement

 

 

-

 

 

 

479,800

 

Return and cancellation of common shares and reissuance of Series B preferred shares

 

 

-

 

 

 

3,000

 

  

See notes to condensed financial statements

 

 
9

Table of Contents

 

Integrated Ventures, Inc.

Notes to Condensed Financial Statements

Nine Months Ended March 31, 2021

(Unaudited)

  

1. ORGANIZATION AND BASIS OF PRESENTATION

 

Organization

 

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

 

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

 

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

 

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

 

Basis of Presentation

 

The accompanying unaudited condensed financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles ("US GAAP") for interim financial information and the instructions to Form 10-Q and Article 8 of Regulation S-X. The results of operations for the interim periods ended December 31, 2020 shown in this report are not necessarily indicative of results to be expected for the full fiscal year ending June 30, 2021. In the opinion of the Company's management, the information contained herein reflects all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the Company's results of operations, financial position and cash flows. The unaudited interim financial statements should be read in conjunction with the audited financial statements in the Company's Annual Report on Form 10-K for the year ended June 30, 2020 filed on September 23, 2020 and Management's Discussion and Analysis of Financial Condition and Results of Operations.

 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

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

 

Use of Estimates

 

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

 

 
10

Table of Contents

 

Integrated Ventures, Inc.

Notes to Condensed Financial Statements

Nine Months Ended March 31, 2021

(Unaudited)

 

Digital Currencies

 

Digital currencies consist of Bitcoin, Litecoin, ZCash and Ethereum, generally received for the Company’s own account as compensation for cryptocurrency mining services, and Chainlink and other digital currencies purchased for short-term investment purposes. Given that there is limited precedent regarding the classification and measurement of cryptocurrencies under current Generally Accepted Accounting Principles (“GAAP”), the Company has determined to account for these digital currencies as indefinite-lived intangible assets in accordance with Accounting Standards Update ("ASU") No. 350, Intangibles – Goodwill and Other, for the period covered by this report and in future reports unless and until further guidance is issued by the Financial Accounting Standards Board (“FASB”). An intangible asset with an indefinite useful life is not amortized but assessed for impairment annually, or more frequently, when events or changes in circumstances occur indicating that it is more likely than not that the indefinite-lived asset is impaired. Impairment exists when the carrying amount exceeds its fair value. In testing for impairment, the Company has the option to first perform a qualitative assessment to determine whether it is more likely than not than an impairment exists. If it is determined that it is more likely than not that an impairment exists, a quantitative impairment test is not necessary. If the Company concludes otherwise, it is required to perform a quantitative impairment test. To the extent an impairment loss is recognized, the loss establishes the new cost basis of the asset. Subsequent reversal of impairment losses is not permitted. Realized gains or losses on the sale of digital currencies, net of transaction costs, are included in other income (expense) in the statements of operations. The Company had a realized gain on the sale of digital currencies of $106,497 in the nine months ended March 31, 2021.

 

Property and Equipment

 

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

 

During the nine months ended March 31, 2021, the Company discontinued the use of damaged or non-serviceable mining equipment and wrote off its net book value of $207,281 to loss on disposition of property and equipment.

 

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

 

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

 

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

 

Derivatives

 

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

 

 
11

Table of Contents

 

Integrated Ventures, Inc.

Notes to Condensed Financial Statements

Nine Months Ended March 31, 2021

(Unaudited)

 

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

 

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

 

Impairment of Long-Lived Assets

 

All assets, including intangible assets subject to amortization, are reviewed for impairment when changes in circumstances indicate that the carrying amount of the asset may not be recoverable in accordance with ASC 350 and ASC 360. If the carrying amount of the asset exceeds the expected undiscounted cash flows of the asset, an impairment charge is recognized equal to the amount by which the carrying amount exceeds fair value or net realizable value. The testing of these intangibles under established guidelines for impairment requires significant use of judgment and assumptions. Changes in forecasted operations and other assumptions could materially affect the estimated fair values. Changes in business conditions could potentially require adjustments to these asset valuations. We reported no impairment expense for the three months and nine months ended March 31, 2021 and 2020.

 

Fair Value of Financial Instruments

 

Disclosures about fair value of financial instruments require disclosure of the fair value information, whether or not recognized in the balance sheet, where it is practicable to estimate that value. As of March 31, 2021 and June 30, 2020, the amounts reported for cash, prepaid expenses and other current assets, equipment deposits, accounts payable, accrued preferred stock dividends, accrued expenses, due to related party and notes payable approximate fair value because of their short maturities.

 

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

 

 

·

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

 

 

 

 

·

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

 

 

 

 

·

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

  

 
12

Table of Contents

 

Integrated Ventures, Inc.

Notes to Condensed Financial Statements

Nine Months Ended March 31, 2021

(Unaudited)

 

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

 

 

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

March 31, 2021:

 

 

 

 

 

 

 

 

 

 

 

 

Derivative liabilities

 

$ -

 

 

$ -

 

 

$ -

 

 

$ -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total liabilities measured at fair value

 

$ -

 

 

$ -

 

 

$ -

 

 

$ -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2020:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative liabilities

 

$ 164,834

 

 

$ -

 

 

$ -

 

 

$ 164,834

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total liabilities measured at fair value

 

$ 164,834

 

 

$ -

 

 

$ -

 

 

$ 164,834

 

 

Mezzanine

 

Series C and D preferred stock that contain certain default provisions requiring mandatory cash redemption that are outside the control of the Company are recorded as Mezzanine in the accompanying balance sheets.

 

Stock-Based Compensation

 

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

 

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

 

Revenue Recognition

 

We recognize revenue in accordance with ASC 606, Revenue from Contracts with Customers. This standard provides a single comprehensive model to be used in the accounting for revenue arising from contracts with customers and supersedes current revenue recognition guidance, including industry-specific guidance. The standard’s stated core principle is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve this core principle, ASC 606 includes provisions within a five-step model that includes identifying the contract with a customer, identifying the performance obligations in the contract, determining the transaction price, allocating the transaction price to the performance obligations, and recognizing revenue when, or as, an entity satisfies a performance obligation.

 

 
13

Table of Contents

 

Integrated Ventures, Inc.

Notes to Condensed Financial Statements

Nine Months Ended March 31, 2021

(Unaudited)

 

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

 

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

 

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

 

Income Taxes

 

The Company adopted the provisions of ASC 740-10, Accounting for Uncertain Income Tax Positions. When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. In accordance with the guidance of ASC 740-10, the benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above should be reflected as a liability for unrecognized tax benefits in the accompanying balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination. The Company believes its tax positions are all highly certain of being upheld upon examination. As such, the Company has not recorded a liability for unrecognized tax benefits. As of March 31, 2021, tax years 2015 through 2020 remain open for IRS audit. The Company has received no notice of audit from the IRS for any of the open tax years.

 

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

  

 
14

Table of Contents

  

Integrated Ventures, Inc.

Notes to Condensed Financial Statements

Nine Months Ended March 31, 2021

(Unaudited)

 

Income (Loss) Per Share

 

Basic net income or loss per share is calculated by dividing net income or loss by the weighted average number of common shares outstanding for the period. Diluted income or loss per share reflects the potential dilution that could occur if securities or other contracts to issue common stock, such as “in-the-money” stock options and warrants, convertible debt and convertible preferred stock, were exercised or converted into common stock. Equivalent shares are not utilized when the effect is anti-dilutive. For the three months and nine months ended March 31, 2021 and 2020, potential dilutive securities had an anti-dilutive effect and were not included in the calculation of diluted net loss per common share; therefore, basic net loss per share is the same as diluted net loss per share.

 

Recently Issued Accounting Pronouncements

 

There were no new accounting pronouncements issued or proposed by the FASB during the nine months ended March 31, 2021 and through the date of filing this report which the Company believes will have a material impact on its financial financial statements.

 

Reclassifications

 

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

 

3. GOING CONCERN

 

The Company has reported recurring operating losses since its inception and used net cash in operating activities of $737,497 in the nine months ended March 31, 2021. As of March 31, 2021, the Company had an accumulated deficit of $39,691,125. These conditions raise substantial doubt about the Company's ability to continue as a going concern.

 

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

 

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

 

 
15

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Integrated Ventures, Inc.

Notes to Condensed Financial Statements

Nine Months Ended March 31, 2021

(Unaudited)

 

4. PROPERTY AND EQUIPMENT

 

Property and equipment consisted of the following at:

 

 

 

March 31,
2021

 

 

June 30,
2020

 

 

 

 

 

 

 

 

Cryptocurrency mining equipment

 

$ 1,324,659

 

 

$ 1,242,397

 

Mobile mining containers

 

 

152,000

 

 

 

-

 

Furniture and equipment

 

 

16,366

 

 

 

16,366

 

Total

 

 

1,493,025

 

 

 

1,258,763

 

Less accumulated depreciation and amortization

 

 

(498,854 )

 

 

(805,421 )

Net

 

$ 994,171

 

 

$ 453,342

 

 

Depreciation and amortization expense, included in cost of revenues, was $111,672 and $143,924 for the three months ended March 31, 2021 and 2020, respectively, and $289,464, and $438,166 for the nine months ended March 31, 2021 and 2020, respectively.

 

As of March 31, 2021, the Company had paid $2,528,392 in equipment deposits.

 

5. RELATED PARTY TRANSACTIONS

 

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

 

The Board of Directors of the Company has set the current annual compensation for Steve Rubakh to include annual salary of $150,000 per year and the issuance of shares of Series B preferred stock as determined by the Board. The Company recorded salary expense to Mr. Rubakh of $37,500 for the three months ended March 31, 2021 and 2020 and $112,500 for the nine months ended March 31, 2021 and 2020. Amounts due to related party, consisting of accrued salary to Mr. Rubakh, totaled $57,170 and $122,907 as of March 31, 2021 and June 30, 2020, respectively.

 

On February 26, 2021 the Company issued to Mr. Rubakh 350,000 total shares of Series B convertible preferred stock valued on an “as converted to common” basis at $16,537,500, using the closing market price of the Company’s common stock on that date. Each share of Series B preferred stock is convertible into 100 shares of the Company’s common stock. This non-cash, related party stock-based compensation is included in operating expenses in the accompanying statements of operations.

 

The Company did not issue any shares of Series B preferred stock as compensation to Mr. Rubakh during the nine months ended March 31, 2020.

 

On February 19, 2021, Mr. Rubakh converted 52,630 shares of Series B preferred stock into 5,263,000 shares of common stock in a transaction recorded at the par value of the shares.

 

 
16

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Integrated Ventures, Inc.

Notes to Condensed Financial Statements

Nine Months Ended March 31, 2021

(Unaudited)

 

6. CONVERTIBLE NOTES PAYABLE

 

As of March 31, 2021, all convertible notes payable had been fully converted and the obligations extinguished. All related derivative liabilities were settled.

 

As of June 30, 2020, current convertible notes payable consisted of the following:

 

 

 

 

 

Debt

 

 

 

 

 

Principal

 

 

Discount

 

 

Net

 

 

 

 

 

 

 

 

 

 

 

BHP Capital NY, Inc. #4

 

$ 66,000

 

 

$ 13,193

 

 

$ 52,807

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Armada Investment Fund, LLC #5

 

 

20,000

 

 

 

2,739

 

 

 

17,261

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Armada Investment Fund, LLC #6

 

 

22,000

 

 

 

4,167

 

 

 

17,833

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BHP Capital NY, Inc. #5

 

 

83,333

 

 

 

21,141

 

 

 

62,192

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BHP Capital NY, Inc. #6

 

 

60,500

 

 

 

19,188

 

 

 

41,312

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Armada Investment Fund, LLC #7

 

 

88,000

 

 

 

28,021

 

 

 

59,979

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

$ 339,833

 

 

$ 88,449

 

 

$ 251,384

 

 

In consideration for an agreement to limit conversions of a prior convertible note, the Company issued to Armada Investment Fund, LLC (“Armada”) a fifth convertible promissory note in the principal amount of $20,000. The note matures on November 1, 2020 and bears interest at 8%. A debt discount of $8,082 was recorded, consisting of a derivative liability. Armada has the right beginning on the date that is 31 days following the date of the note to convert principal and accrued interest into shares of the Company’s common stock. The conversion price is 70% of the average of the five lowest trading prices (lowest bid prices) of the Company’s common stock during the fifteen trading days ending on the latest complete trading day prior to the date of conversion. During the nine months ended March 31, 2021, Armada converted the entire principal of $20,000, accrued interest payable of $1,184 and conversion fees of $500 into common shares of the Company, extinguishing the debt in full. As of March 31, 2021, the debt discount had been amortized in full to interest expense.

 

On November 21, 2019, the Company entered into a sixth convertible promissory note with Armada in the principal amount of $22,000, with an original issue discount of $2,000. The note matures on November 21, 2020 and bears interest at 8%. A debt discount of $10,590 was recorded, including a derivative liability of $8,090. Armada has the right beginning on the date that is 31 days following the date of the note to convert principal and accrued interest into shares of the Company’s common stock. The conversion price is 70% of the average of the five lowest trading prices (lowest bid prices) of the Company’s common stock during the fifteen trading days ending on the latest complete trading day prior to the date of conversion. During the nine months ended March 31, 2021, Armada converted the entire principal of $22,000, accrued interest payable of $1,109 and conversion fees of $500 into common shares of the Company, extinguishing the debt in full. As of March 31, 2021, the debt discount had been amortized in full to interest expense.

 

On December 2, 2019, the Company entered into a fourth convertible promissory note with BHP Capital NY, Inc. (“BHP”) in the principal amount of $66,000, with an original issue discount of $6,000. The note matures on December 2, 2020 and bears interest at 8%. A debt discount of $31,153 was recorded, including a derivative liability of $24,153. BHP has the right beginning on the date that is 31 days following the date of the note to convert principal and accrued interest into shares of the Company’s common stock. The conversion price is 70% of the average of the three lowest trading prices (lowest bid prices) of the Company’s common stock during the fifteen trading days ending on the latest complete trading day prior to the date of conversion. During the nine months ended March 31, 2021, BHP converted the entire principal of $66,000, accrued interest payable of $3,467 and conversion fees of $1,000 into common shares of the Company, extinguishing the debt in full. As of March 31, 2021, the debt discount had been amortized in full to interest expense.

 

 
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Integrated Ventures, Inc.

Notes to Condensed Financial Statements

Nine Months Ended March 31, 2021

(Unaudited)

 

On February 20, 2020, the Company entered into a fifth convertible promissory note with BHP in the principal amount of $83,333, with an original issue discount of $8,333. The note matures on November 20, 2020, and bears interest at 8%. A debt discount of $40,507 was recorded, including a derivative liability of $30,674. BHP has the right beginning on the date that is 31 days following the date of the note to convert principal and accrued interest into shares of the Company’s common stock. The conversion price is 70% of the average of the three lowest trading prices (lowest bid prices) of the Company’s common stock during the fifteen trading days ending on the latest complete trading day prior to the date of conversion. During the nine months ended March 31, 2021, BHP converted the entire principal of $83,333, accrued interest payable of $4,663 and conversion fees of $1,000 into common shares of the Company, extinguishing the debt in full. As of March 31, 2021, the debt discount had been amortized in full to interest expense.

 

On March 4, 2020, the Company entered into a sixth convertible promissory note with BHP in the principal amount of $60,500, with an original issue discount of $5,500. The note matures on March 4, 2021, and bears interest at 8%. A debt discount of $28,354 was recorded, including a derivative liability of $22,854. BHP has the right beginning on the date that is 31 days following the date of the note to convert principal and accrued interest into shares of the Company’s common stock. The conversion price is 70% of the average of the five lowest trading prices (lowest bid prices) of the Company’s common stock during the fifteen trading days ending on the latest complete trading day prior to the date of conversion. During the nine months ended March 31, 2021, BHP converted the entire principal of $60,500, accrued interest payable of $3,872 and conversion fees of $500 into common shares of the Company, extinguishing the debt in full. As of March 31, 2020, the debt discount had been amortized in full to interest expense.

 

On March 4, 2020, the Company entered into a seventh convertible promissory note with Armada in the principal amount of $88,000, with an original issue discount of $8,000. The note matures on March 4, 2021, and bears interest at 8%. A debt discount of $41,408 was recorded, including a derivative liability of $33,408. Armada has the right beginning on the date that is 181 days following the date of the note to convert principal and accrued interest into shares of the Company’s common stock. The conversion price is 70% of the average of the five lowest trading prices (lowest bid prices) of the Company’s common stock during the fifteen trading days ending on the latest complete trading day prior to the date of conversion. During the nine months ended March 31, 2021, Armada converted the entire principal of $88,000, accrued interest payable of $3,808 and conversion fees of $1,500 into common shares of the Company, extinguishing the debt in full. As of March 31, 2021, the debt discount had been amortized in full to interest expense.

 

On July 6, 2020, the Company entered into a convertible promissory note with JSJ Investments Inc. (“JSJ”) in the principal amount of $77,000. The note matures on July 6, 2021, and bears interest at 8%. A debt discount $44,617 was recorded, including a derivative liability of $42,617. JSJ has the right beginning on the date that is 31 days following the date of the note to convert principal and accrued interest into shares of the Company’s common stock. The conversion price is 70% of the average of the three lowest trading prices of the Company’s common stock during the fifteen trading days ending on the latest complete trading day prior to the date of conversion. During the nine months ended March 31, 2021, JSJ converted the entire principal of $77,000, accrued interest payable of $3,122 and conversion fees of $300 into common shares of the Company, extinguishing the debt in full. As of March 31, 2021, the debt discount had been amortized in full to interest expense.

 

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

 

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

 

 
18

Table of Contents

 

Integrated Ventures, Inc.

Notes to Condensed Financial Statements

Nine Months Ended March 31, 2021

(Unaudited)

 

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

 

The Note matures on February 4, 2022, and bears interest at 6%. Eagle has at any time to convert principal and accrued interest into shares of the Company’s common stock. The conversion price is 70% of the lowest closing bid price of the Company’s common stock during the fifteen trading days ending on the latest complete trading day prior to the date of conversion.

 

A debt discount $139,943 was recorded for the first tranche, including a derivative liability of $112,204. During the nine months ended March 31, 2021, Eagle converted the entire principal of the first tranche of $271,739 and accrued interest payable of $4,155 into common shares of the Company, extinguishing the debt in full. As of March 31, 2021, the debt discount had been amortized in full to interest expense.

 

A debt discount $131,378 was recorded for the second tranche, including a derivative liability of $103,639. During the nine months ended March 31, 2021, Eagle converted the entire principal of the second tranche of $271,739 and accrued interest payable of $8,877 into common shares of the Company, extinguishing the debt in full. As of March 31, 2021, the debt discount had been amortized in full to interest expense.

 

7. NOTES PAYABLE

 

With an effective date of April 20, 2020, a loan to the Company was approved under the terms and conditions of the Paycheck Protection Program (“PPP”) of the United States Small Business Administration (“SBA”) and the CARES Act (2020) (H.R. 748) (15 U.S.C. 636 et seq.) ( the “Act” ) in the amount of $7,583. The loan matures 24 months from inception, bears interest at 1% and had a balance of $7,583 as of December 31, 2020 and June 30, 2020. The loan may be forgiven pursuant to the provisions of the Act.

 

In August and September 2020, the Company entered into two agreements for the purchase of digital mining equipment with Wattum Management Inc. resulting in two promissory notes in the principal amounts of $17,822 and $40,000. The notes are secured by the equipment purchased and bear interest at 10%.

 

The $17,822 note is payable in twelve equal consecutive monthly installments of $1,567 and matures in September 2021. The note had a principal balance of $9,133 as of March 31, 2021.

 

The $40,000 note is payable in twelve equal consecutive monthly installments of $3,516 and matures in August 2021. The note had a principal balance of $17,152 as of March 31, 2021.

 

8. MEZZANINE

 

Series C Preferred Stock

 

Effective January 14, 2021, the Company filed a Certificate of Designation of the Series C Convertible Preferred Stock with the Nevada Secretary of State. The Company has authorized the issuance of an aggregate of 3,000 shares of the Series C preferred stock. Each share of Series C preferred stock has a par value of $0.001 per share and a stated value of $1,100 per share. The shares of Series C preferred stock are convertible into shares of the Company’s common stock at a conversion price of $0.068 per share.

 

Each share of the Series C preferred stock is entitled to receive cumulative dividends of 12% per annum, payable monthly and accruing and compounding daily from the date of issuance of the shares. Dividends may be paid in cash or in shares of Series C preferred stock at the discretion of the Company.

 

 
19

Table of Contents

 

Integrated Ventures, Inc.

Notes to Condensed Financial Statements

Nine Months Ended March 31, 2021

(Unaudited)

 

The Company, at its sole discresion, has the right to redeem all, but not less than all, shares of the Series C preferred stok issued and outstanding upon 5 days notice at a defined redemption price. The holders of the Series C preferred stock do not have a right to put the shares to the Company.

 

The holders of the Series C preferred stock shall have the right to vote together with holders of common stock, on an as “converted basis”, on any matter that the Company’s shareholders may be entitled to vote on, either by written consent or by proxy.

 

On January 14, 2021, the Company entered into a Securities Purchase Agreement (the “Series C Agreement”) with BHP Capital NY, Inc. (“BHP”), providing for the issuance and sale by the Company and the purchase by BHP of newly designated shares of Series C Convertible preferred stock issued by the Company at a purchase price per share of $1,000. The first closing under the Series C Agreement was held on January 22, 2021, at which the Company sold, and BHP purchased 750 shares of Series C preferred stock for $750,000. The Company received net proceeds of $740,000 after payment of legal fees. The Company also on that date issued 2,000,000 shares of its common stock to BHP as equity incentive shares, which shares were valued at $295,000 based on the closing market price of the Company’s common stock and recorded to accumulated deficit as a deemed dividend.

 

Pursuant to a second Series C Agreement effective February 5, 2021, BHP purchased a second tranche consisting of 375,000 shares of Series C preferred stock for $375,000. As an equity incentive to this purchase of Series C preferred stock, the Company issued 1,000,000 shares of the Company’s common stock to BHP, which shares were valued at $89,100 based on the closing market price of the Company’s common stock and recorded to accumulated deficit as a deemed dividend.

 

In addition to the requirement of the Company to cause a registration statement convering the shares issued to be declared effective by the SEC within 180 days, the Series C Agreement and the terms of the Series C Certificate of Designation contain multiple defined triggoring events or events of default that may require the Company to redeem in cash the Series C preferred stock. Such events include, but are not limited to the following: (i) the suspension, cessation from trading or delisting of the Company’s Common Stock on the Principal Market for a period of two (2) consecutive trading days or more; (ii) the failure by the Company to timely comply with the reporting requirements of the Exchange Act (including applicable extension periods); (iii) the failure for any reason by the Company to issue Commitment Shares, Dividends or Conversion Shares to the Purchaser within three trading days; (iv) the Company breaches any representation warranty, covenant or other term of condition contained in the definitive agreements between the parties; (v) the Company files for Bankruptcy or receivership or any money judgment writ, liquidation or a similar process is entered by or filed against the Company for more than $50,000 and remains unvacated, unbonded or unstayed for a period of twenty (20) calendar days; (vi) conduct its business; (vii) the Company shall lose the “bid” price for its Common stock on the Principal Market; (viii) if at any time the Common Stock is no longer DWAC eligible; (ix) the Company must have a registration statement covering the Preferred Shares declared effective by the SEC within one hundred eighty (180) days of the Effective Date hereof; (x) the Company must complete deposits to secure power supply contracts and purchase mining equipment within ninety (90) days from the Effective Date hereof; (xi) the Company shall cooperate and provide the necessary information for the Purchaser to file the appropriate UCC filings to be filed promptly after each of the pieces of mining equipment is purchased as required under section (x) of this section, giving Purchaser a priority lien on any and all said purchased mining equipment; and (xii) any other event specifically listed as an Event of Default under any section in the Transaction Documents.

 

As of March 31, 2021, 1,125 shares of Series C preferred stock were issued and outstanding and recorded at stated value as mezzanine due to certain default provisions requiring mandatory cash redemption that are outside the control of the Company.

 

Series D Preferred Stock

 

On February 19, 2021, the Company filed a Certificate of Designation of the Series D Convertible Preferred Stock with the Nevada Secretary of State authorizing the issuance of an aggregate of 4,000 shares of the Series D preferred stock. Each share of Series D preferred stock has a par value of $0.001 per share and a stated value of $1,100 per share. The shares of Series D preferred stock are convertible into shares of the Company’s common stock at a conversion price of $0.30 per share.

 

 
20

Table of Contents

 

Integrated Ventures, Inc.

Notes to Condensed Financial Statements

Nine Months Ended March 31, 2021

(Unaudited)

 

Each share of the Series D preferred stock is entitled to receive cumulative dividends of 12% per annum, payable monthly and accruing and compounding daily from the date of issuance of the shares. Dividends may be paid in cash or in shares of Series D preferred stock at the discretion of the Company.

 

The Company, at its sole discresion, has the right to redeem all, but not less than all, shares of the Series D preferred stok issued and outstanding upon 5 days notice at a defined redemption price. The holders of the Series D preferred stock do not have a right to put the shares to the Company.

 

The holders of the Series D preferred stock shall have the right to vote together with holders of common stock, on an as “converted basis”, on any matter that the Company’s shareholders may be entitled to vote on, either by written consent or by proxy.

 

On February 18, 2021, the Company entered into a Securities Purchase Agreement, dated as of February 18, 2021 (the “Series D Agreement”) with BHP providing for the issuance and sale by the Company and the purchase by BHP of shares of Series D preferred stock. At a closing held February 19, 2021, BHP initially purchased 3,000 shares of Series D preferred stock at a price of $1,000 per per share for a total purchase price of $3,000,000. Included in the purchase price was a five-year warrant granting BHP the right to purchase up to one hundred percent (100%) warrant coverage, exercisable into shares of the Company’s common stock at a per share $0.60 per share. Warrants exercisable for 5,000,000 common shares were issued.

 

In addition to the requirement of the Company to cause a registration statement convering the shares issued to be declared effective by the SEC within 180 days, the Series D Agreement and the terms of the Series D Certificate of Designation contain multiple defined triggoring events or events of default that may require the Company to redeem in cash the Series D preferred stock. Such events include, but are not limited to the following: (i) the suspension, cessation from trading or delisting of the Company’s Common Stock on the Principal Market for a period of two (2) consecutive trading days or more; (ii) the failure by the Company to timely comply with the reporting requirements of the Exchange Act (including applicable extension periods); (iii) the failure for any reason by the Company to issue Commitment Shares, Dividends or Conversion Shares to the Purchaser within three trading days; (iv) the Company breaches any representation warranty, covenant or other term of condition contained in the definitive agreements between the parties; (v) the Company files for Bankruptcy or receivership or any money judgment writ, liquidation or a similar process is entered by or filed against the Company for more than $50,000 and remains unvacated, unbonded or unstayed for a period of twenty (20) calendar days; (vi) conduct its business; (vii) the Company shall lose the “bid” price for its Common stock on the Principal Market; (viii) if at any time the Common Stock is no longer DWAC eligible; (ix) the Company must have a registration statement covering the Preferred Shares declared effective by the SEC within one hundred eighty (180) days of the Effective Date hereof; (x) the Company must complete deposits to secure power supply contracts and purchase mining equipment within ninety (90) days from the Effective Date hereof; (xi) the Company shall cooperate and provide the necessary information for the Purchaser to file the appropriate UCC filings to be filed promptly after each of the pieces of mining equipment is purchased as required under section (x) of this section, giving Purchaser a priority lien on any and all said purchased mining equipment; and (xii) any other event specifically listed as an Event of Default under any section in the Transaction Documents.

 

As of March 31, 2021, 3,000 shares of Series D preferred stock were issued and outstanding and recorded as mezzanine due to certain default provisions requiring mandatory cash redemption that are outside the control of the Company.

  

 
21

Table of Contents

 

Integrated Ventures, Inc.

Notes to Condensed Financial Statements

Nine Months Ended March 31, 2021

(Unaudited)

 

9. STOCKHOLDERS’ EQUITY

 

Preferred Stock

 

Series A Preferred Stock

 

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

 

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

 

The Company has 1,000,000 shares of Series A preferred stock authorized, with 500,000 shares issued and outstanding as of March 31, 2021 and June 30, 2020, which were issued to members of the Company’s Board of Directors in consideration for services.

 

Series B Preferred Stock

 

On December 21, 2015, the Company filed a Certificate of Designation for a new Series B convertible preferred stock with the State of Nevada following approval by the board of directors of the Company. Five Hundred Thousand (500,000) shares of the Company's authorized preferred stock are designated as the Series B convertible preferred stock, par value of $0.001 per share and with a stated value of $0.001 per share (the "Stated Value"). Holders of Series B preferred stock shall be entitled to receive dividends, when and as declared by the Board of Directors out of funds legally available therefor. At any time and from time to time after the issuance of shares of the Series B preferred stock, each issued share of Series B preferred stock is convertible into 100 shares of the Company’s common stock. The holders of the Series B preferred stock shall have the right to vote together with holders of common stock, on an as "converted basis", on any matter that the Company's shareholders may be entitled to vote on, either by written consent or by proxy. Upon any liquidation, dissolution or winding-up of the Company, the holders of the Series B preferred stock shall be entitled to receive out of the assets of the Company, whether such assets are capital or surplus, for each share of Series B preferred stock an amount equal to the Stated Value, and all other amounts in respect thereof then due and payable prior to any distribution or payment shall be made to the holders of any junior securities. The number of authorized Series B preferred stock was later increased to 1,000,000 shares.

 

The Company has 1,000,000 shares of Series B preferred stock authorized, with 727,370 and 430,000 shares issued and outstanding as of March 31, 2021 and June 30, 2020, respectively.

 

Steve Rubakh, President of the Company, is issued shares of Series B preferred stock as part of his compensation arrangement. The number and timing of Series B preferred shares issued to Mr. Rubakh is at the discretion of the Board of Directors.

 

On February 26, 2021 the Company issued to Mr. Rubakh 350,000 total shares of Series B convertible preferred stock valued on an “as converted to common” basis at $16,537,500, using the closing market price of the Company’s common stock on that date. This non-cash, related party stock-based compensation is included in general and administrative expenses in the accompanying statements of operations.

 

The Company did not issue any shares of Series B preferred stock as compensation to Mr. Rubakh during the nine months ended March 31, 2020.

 

On February 19, 2021, Mr. Rubakh converted 52,630 shares of Series B preferred stock into 5,263,000 shares of common stock in a transaction recorded at the par value of the shares.

 

No shares of Series B preferred stock were issued to Mr. Rubakh during the nine months ended December 31, 2020.

 

 
22

Table of Contents

 

Integrated Ventures, Inc.

Notes to Condensed Financial Statements

Nine Months Ended March 31, 2021

(Unaudited)

 

Common Stock

 

On August 13, 2020, the Board of Directors of the Company approved a resolution to increase the number of authorized common shares to 750,000,000. The Company had 164,422,662 and 103,164,460 shares issued and outstanding as of March 31, 2021 and June 30, 2020, respectively.

 

During the nine months ended March 31, 2021, the Company issued a total of 61,258,202 shares of its common stock: 52,723,031 shares in conversion of $960,311 note principal, $34,258 accrued interest payable, and $5,300 in fees; 55,555 shares in the repayment of a stock subscription payable of $33,888, 216,616 shares for services valued at $24,260; 5,263,000 shares issued in conversion of Series B preferred stock recorded at par value of $5,262; and 3,000,000 shares issued as equity incentive shares in the sale of Series C and D preferred stock recorded at total market value of $384,100 and recorded as a cost of capital. No gain or loss was recorded as the conversions were completed within the terms of the debt agreements and the transactions resulted in the extinguishment of derivative liabilities totaling $466,093.

 

During the nine months ended March 31, 2020, the Company issued a total of 58,129,993 shares of its common stock: 8,000,000 shares valued at $479,800 were issued pursuant to a Preferred Stock Asset Agreement entered into on May 21, 2019 and a total of 53,129,993 shares valued at $728,516 were issued in conversion of $683,992 note principal, $35,432 accrued interest payable, $4,500 in fees and loss on conversion of debt of $4,592, resulting in the extinguishment of derivative liabilities totaling $330,391. In addition as discussed above, Mr. Rubakh returned 3,000,000 shares of the Company’s common stock and was issued 30,000 shares of the Company’s Series B preferred stock. The common shares returned were previously issued to Mr. Rubakh in conversion of 30,000 shares of Series B preferred stock. The common shares were canceled and the transaction was recorded at the par value of the common and Series B preferred stock.

 

10. WARRANTS

 

As discussed in Note 8, the Company issued warrants in February 2021 to purchase 5,000,000 shares of its common stock in connection with the sale of Series D preferred stock. A summary of the Company’s warrants as of March 31, 2021, and changes during the nine months then ended is as follows:

 

 

 


Shares

 

 


Weighted
Average
Exercise Price

 

 

Weighted Average
Remaining
Contract Term
(Years)

 

 


Aggregate
Intrinsic
Value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding at June 30, 2020

 

 

-

 

 

$ -

 

 

 

 

 

 

 

Granted

 

 

5,000,000

 

 

$ 0.60

 

 

 

 

 

 

 

Exercised

 

 

-

 

 

$ -

 

 

 

 

 

 

 

Forfeited or expired

 

 

-

 

 

$ -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding and exercisable at March 31, 2021

 

 

5,000,000

 

 

$ 0.060

 

 

 

4.89

 

 

$ -

 

 

The aggregate intrinsic value in the preceding table represents the total pretax intrinsic value, based on the closing price of our common stock of $0.38 as of March 31, 2021, which would have been received by the holders of in-the-money warrants had the holders exercised their warrants as of that date.

 

11. COMMITMENTS AND CONTINGENCIES

 

Legal Matters

 

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

 

 
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Integrated Ventures, Inc.

Notes to Condensed Financial Statements

Nine Months Ended March 31, 2021

(Unaudited)

 

Power Supply and Purchase Agreement

 

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

 

As of March 31, 2021, the Company had no obligation for future lease payments under non-cancelable operating leases.

 

12. DERIVATIVE LIABILITIES

 

The Company has issued convertible notes payable, warrants and Series B preferred stock with put back rights and has entered into exchange and subscription agreements that contain certain provisions that have been identified as derivatives. The Company determined that the number of common shares to be issued under these agreements is indeterminate; therefore, the Company concluded that the equity environment was tainted and all additional warrants, stock options convertible debt and obligations to issue common shares were included in the value of derivative liabilities. During the three months ended March 31, 2021, all convertible notes payable and other equity instruments with provisions identified as derivatives were extinguished through conversion to common shares and all related derivative liabilities were settled. Consequently, as of March 31, 2021, the Company concluded that the equity environment was no longer tainted.

 

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

 

During the nine months ended March 31, 2021, we had the following activity in our derivative liabilities:

 

 

 

Convertible
Notes Payable

 

 

Common Stock Subscription

 

 


Total

 

 

 

 

 

 

 

 

 

 

 

Derivative liabilities at June 30, 2020

 

$ 163,664

 

 

$ 1,170

 

 

$ 164,834

 

Addition to liabilities for new debt

 

 

258,460

 

 

 

-

 

 

 

258,460

 

Decrease due to conversions/issuances

 

 

(466,093 )

 

 

(33,888 )

 

 

(499,981 )

Change in fair value

 

 

43,969

 

 

 

32,718

 

 

 

76,687

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative liabilities at March 31, 2021

 

$ -

 

 

$ -

 

 

$ -

 

 

Key inputs and assumptions used in valuing the Company’s derivative liabilities are subject to significant changes from period to period and to management's judgment; therefore, the estimated fair value of the derivative liabilities will fluctuate from period to period, and the fluctuation may be material.

 

13. DIGITAL CURRENCY THEFT LOSS

 

During the nine months ended March 31, 2020, we incurred a digital currency theft loss of $33,037 where a hacker obtained unauthorized access to our online digital currency processing service and transferred digital currencies out of our account. The theft loss has been included as an other expense in the accompanying statement of operations for the nine months ended March 31, 2020.

 

 
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Integrated Ventures, Inc.

Notes to Condensed Financial Statements

Nine Months Ended March 31, 2021

(Unaudited)

 

14. SUBSEQUENT EVENTS

 

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

 

Security Purchase Agreements

 

On March 30, 2021, the Company entered into securities purchase agreements (the “Purchase Agreements”) with two institutional investors (the “Purchasers”), for the offering (the “Offering”) of (i) 30,000,000 shares of common stock (“Shares”), par value $0.001 per share, of the Company (“Common Stock”) and (ii) common stock purchase warrants (“Warrants”) to purchase up to an aggregate of 30,000,000 shares of Common Stock, which are exercisable for a period of five years after issuance at an initial exercise price of $0.30 per share, subject to certain adjustments, as provided in the Warrants. Each of the Purchasers received Warrants in the amount equal to 100% of the number of Shares purchased by such Purchaser. Each Share and accompanying Warrant were offered at a combined offering price of $0.30. Pursuant to the Purchase Agreements, the Purchasers purchased the Shares and accompanying Warrants for an aggregate purchase price of $9,000,000. The transaction closed on April 1, 2021, with the Company receiving proceeds of $8,135,000 after payment of expenses.

 

Amendment to Series C Preferred Stock Securities Purchase Agreement

 

On May 3, 2021, the Company and BHP amended the Series C Agreement to eliminate further purchases of Series C preferred stock by BHP except as the parties may subsequently agree upon.

 

Common Stock Issuances

 

Subsequent to March 31, 2021, the Company issued 65,000 shares of its common stock to a consultant for services valued at $20,000.

 

Equipment Purchase Agreement

 

On April 12, 2021, we entered into non-fixed price sales and purchase agreement with Bitmain Technologies Limited (“Bitmain”) (the “Bitmain Agreement”) to purchase from Bitmain cryptocurrency mining hardware and other equipment in accordance with the terms and conditions of the Agreement. Bitmain is scheduled to manufacture and ship miners on monthly basis, in 12 equal batches of 400 units, starting on August 2021 and through July 2022. The Purchase Agreement remains in effect until the delivery of the last batch of products. The total purchase price was approximately $34,047,600, subject to price adjustments and related offsets. The total purchase price is payable as follows: (i) 25% of the total purchase price is due upon the execution of the Agreement or no later than April 19, 2021; (ii) 35% of the total purchase price, is due by May 30, 2021; and (iii) the remaining 40% of the total purchase price, is payable on a monthly basis starting in June 2021.

  

 
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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, 2020 and in our subsequent filings with the Securities and Exchange Commission. The following discussion of our results of operations should be read together with our financial statements and related notes included elsewhere in this report.

 

GENERAL

 

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

 

On November 22, 2017, we successfully launched our cryptocurrency operations, and revenues commenced from cryptocurrency mining operations and from sales of cryptocurrency mining equipment. As of March 31, 2021, the Company owned and operated approximately 761 miners that mine Bitcoin, Litecoin, ZCash and Ethereum. In addition, the Company paid deposits of $2,528,392 for 300 additional miners to be placed into service subsequent to March 31, 2021.

 

The Company will continue to (1) raise capital to purchase new mining equipment and (2) retire older and no longer profitable models.

 

Financial

 

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

 

Revenues from our cryptocurrency mining operations were $682,706 and $130,062 for the three months ended March 31, 2021 and 2020 and $885,931 and $363,541 for the nine months ended March 31, 2021 and 2020, respectively. Revenues from the sales of used equipment and parts were $14,099 and $848 for the three months ended March 31, 2021 and 2020 and $75,221 and $10,511 for the nine months ended March 31, 2021 and 2020, respectively.

 

 
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When funds are available and market conditions allow, we also invest in certain denominations of cryptocurrencies to complement our mining operations.We consider these investments similar to marketable securities where we purchase and hold the cryptocurrencies for sale. We report realized gains and losses on the sales of cryptocurrencies (net of transaction costs. As of March 31, 2021, our digital currencies at cost totaled $1,515,201 and were comprised primarily of Bitcoin (BTC), Ethereum (ETH), Chainlink (LINK) and Bancor (BNT).

 

We have funded our operations primarily from cash generated from our digital currency mining operations and proceeds from convertible notes payable and preferred stock. During the nine months ended March 31, 2021, we received proceeds from convertible notes payable of $563,000, Series C preferred stock of $1,125,000 and Series D preferred stock of $3,000,000.

 

The Digital Asset Market

 

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

 

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

 

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

 

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

 

FINANCIAL OPERATIONS REVIEW

 

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

 

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

 

 
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Table of Contents

 

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

 

RESULTS OF OPERATIONS

 

THREE AND NINE MONTHS ENDED MARCH 31, 2021 COMPARED TO THE THREE MONTHS AND NINE MONTHS ENDED MARCH 31, 2020

 

Revenues

 

Our cryptocurrency mining revenues increased to $682,706 in the three months ended March 31, 2021 from $130,062 in the three months ended March 31, 2020. On a year-to-date basis, our crypto currency mining revenues increased to $885,931 in the nine months ended March 31, 2021 from $363,541 in the nine months ended March 31, 2020. This increase in revenues resulted primarily from the Company replacing under-performing, non-serviceable mining equipment during the current fiscal year with new more efficient mining equipment and increasing the number of miners.

 

We also have revenues from the sale of cryptocurrency mining units that have been assembled or refurbished for resale and the sale of spare parts. Such sales totaled $14,099 and $848 in the three months ended March 31, 2021 and 2020 and $75,221 and $10,511 in the nine months ended March 31, 2021 and 2020, respectively. The increase in sales of unused equipment and parts was due to the replacement of under-performing, non-serviceable mining equipment during the current fiscal year with new more efficient equipment. Sales of equipment and parts will fluctuate from period to period depending on the current retail demand for our model of cryptocurrency mining units and parts.

 

Cost of Revenues

 

Cost of revenues was $266,897 and $261,484 in the three months ended March 31, 2021 and 2020 and $618,654 and $753,703 in the nine months ended March 31, 2021 and 2020, respectively. The decrease in cost of revenues in the current fiscal year is due primarily to a decrease in depreciation and amortization expense. Expenses associated with running our cryptocurrency mining operations, such as equipment depreciation and amortization, operating supplies, utilities and consulting services are recorded as cost of revenues. Also included in cost of revenues are the costs of purchasing or assembling the cryptocurrency mining units sold. We reported a gross profit on revenues of $429,908 and 342,198 in the three months and nine months ended March 31, 2021, respectively. Previously in prior periods, we have reported a gross loss on revenues primarily due to high utility costs and a conservative, short useful life for mining equipment depreciation and amortization. Higher eryptocurrency mining revenues in the current year resulting from the implementation of more efficient mining equipment and the increase in the number of miners purchased also contributed to the gross profit on revenues in the current fiscal year.

 

Operating Expenses

 

Our general and administrative expenses increased to $181,165 in the three months ended March 31, 2021 from $85,465 and increased to $372,911 in the nine months ended March 31, 2021 from $279,990 in the nine months ended March 31, 2020. The increases resulted primarily from higher professional and consulting fees relating to debt and equity financings and the increase in levels of cryptocurrency mining operations. Fluctuations in operating expenses from period to period result primarily from changes in consulting and professional fees and travel expenses.

 

 
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Table of Contents

 

We reported non-cash, related party stock-based compensation of $16,537,500 in the three months and nine months ended March 31, 2021. On February 26, 2021 the Company issued to Steve Rubakh, our President, 350,000 total shares of Series B convertible preferred stock valued on an “as converted to common” basis at $16,537,500, using the closing market price of the Company’s common stock on that date. Each share of Series B preferred stock is convertible into 100 shares of the Company’s common stock.

 

Other Income (Expense)

 

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

 

 

 

Three Months Ended
March 31,:

 

 

Nine Months Ended
March 31,:

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

$ (239,435 )

 

$ (90,824 )

 

$ (430,049 )

 

$ (573,561 )

Realized gain (loss) on digital currencies

 

 

54,920

 

 

 

(562 )

 

 

106,497

 

 

 

(6,158 )

Change in fair value of derivative liabilities

 

 

(113,599 )

 

 

(27,414 )

 

 

(76,687 )

 

 

823,409

 

Loss on disposition of property and equipment

 

 

-

 

 

 

-

 

 

 

(207,281 )

 

 

-

 

Loss on conversion of debt

 

 

-

 

 

 

10,168

 

 

 

-

 

 

 

(4,592 )

Digital currency theft loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(33,037 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total other income (expense)

 

$ (298,114 )

 

$ (108,632 )

 

$ (607,520 )

 

$ 206,061

 

 

Our interest expense includes the amortization of debt discount and original issue discount for our convertible notes payable. These amounts vary from period to period depending on the timing of new borrowings and the conversion of the debt to common stock by the lenders. In the three months ended March 31, 2021, our lenders completed the full conversion of our convertible notes payable, resulting in increased amortization of debt discount and interest expenses in that quarter compared to the prior year quarter. For the nine months ended March 31, 2021, the amortization of debt discount and interest expense was less than in the comparative prior year period.

 

In the current fiscal year we have significantly increased our investing efforts in digital currencies. In addition to the currencies received as compensation for our mining services, we purchased various digital currencies totaling $4,156,874 and also converted currencies from one denomination to another based on our assessment of market conditions for each respective currency. The market value of individual currency denominations continually fluctuates and the fluctuations may be material from day to day. During the nine months ended March 31, 2021, we received total proceeds of $3,835,173 from the sale of digital currencies and incurred transactions fees totaling $105,163, which are deducted from the gain or loss realized. We realized a gain on digital currencies, after deducting transaction costs, of $54,920 and $106,497 in the three months and nine months ended March 31, 2021, respectively. We realized losses on digital currencies, after deducting transaction costs, of $562 and $6,158 in the three months and nine months ended March 31, 2020, respectively.ended December 31, 2020 and 2019, respectively, as we experienced the negative impact of fluctuating market values. As of March 31, 2021, we held digital currencies with a total book value of $1,515,201 and a total market value of $1,870,453.

 

During the nine months ended March 31, 2020, we disposed of and wrote off non-serviceable, defective mining equipment with a net book value of $207,281. The equipment disposed of was replaced during the period with new, more efficient mining equipment. We did not report any loss on disposition of property and equipment during the three months ended March 31, 2021 and 2020 or the nine months ended March 31, 2021.

 

 
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We estimate the fair value of the derivatives associated with our convertible debt, options, warrants and other contracts using, as applicable, either the Black-Scholes pricing model or multinomial lattice models that value the derivative liability based on a probability weighted discounted cash flow model using future projections of the various potential outcomes. We estimate the fair value of the derivative liabilities at the inception of the financial instruments, and, in the case of our convertible notes payable, at the date of conversions to equity and at each reporting date, recording a derivative liability, debt discount, additional paid-in capital and a gain or loss on change in derivative liabilities as applicable. These estimates are based on multiple inputs, including the market price of our stock, interest rates, our stock price volatility, variable conversion prices based on market prices as defined in the respective agreements and probabilities of certain outcomes based on management projections. These inputs are subject to significant changes from period to period and to management’s judgment; therefore, the estimated fair value of the derivative liabilities will fluctuate from period to period, and the fluctuation may be material. During the three months ended March 31, 2021, all convertible notes payable and other equity instruments with provisions identified as derivatives were extinguished through conversion to common shares and all related derivative liabilities were settled.

 

We reported a gain on conversion of debt of $10,168 in the three months ended March 31, 2020 and a loss on conversion of debt of $4,592 in the nine months ended March 31, 2020. Gains or losses on extinguishment of debt result from conversion of convertible notes to common stock where the conversion terms were outside the related agreements. We did not report any gain or loss on extinguishment of debt during the three months or nine months ended March 31, 2021.

 

During the nine months ended March 31, 2020, we incurred a digital currency theft loss of $33,037 where a hacker obtained unauthorized access to our online digital currency processing service and transferred digital currencies out of our account.

 

Net Loss

 

As a result, primarily from the non-cash related party stock-based compensation, we reported a net loss of $16,586,871 and $17,175,732 for the three months and nine months ended March 31, 2021, respectively, compared to net losses of $444,671 and $573,580 for the three months and nine months ended March 31, 2020, respectively.

 

LIQUIDITY AND CAPITAL RESOURCES

 

Overview

 

As of March 31, 2021, we had total current assets of $2,635,866, including cash of $99,974 and equipment deposits of $2,528,392, and total current liabilities of $310,974. During the three months ended March 31, 2021, our lenders converted in full their convertible notes payable and the related derivative liabilities were settled. We had total stockholders’ equity of $709,964 as of March 31, 2021 compared to a stockholders’ deficit of $109,603 as of June 30, 2020.

 

Most recently, we have funded our operations primarily from convertible notes payable, the issuance of Series C and D preferred stock, and cash generated from our digital currency mining operations. The Series C and D preferred stock are recorded at total face value of $4,125,000 as mezzanine equity due to certain mandatory redemption features of the stock.

 

During the nine months ended March 31, 2021, we received net proceeds from convertible notes payable of $563,000, which debt was converted in full into shares of our common stock. We also funded the purchase of cryptocurrency mining equipment through short-term installment debt totaling $57,822.

 

On January 14, 2021, the Company entered into a Securities Purchase Agreement (the “Series C Agreement”) with BHP Capital NY, Inc. (“BHP”), providing for the issuance and sale by the Company and the purchase by BHP of newly designated shares of Series C Convertible preferred stock issued by the Company at a purchase price per share of $1,000. The first closing under the Series C Agreement was held on January 22, 2021, at which the Company sold, and BHP purchased 750 shares of Series C preferred stock for $750,000. The Company received net proceeds of $740,000 after payment of legal fees. The Company also on that date issued 2,000,000 shares of its common stock to BHP as equity incentive shares.

 

Pursuant to a second Series C Securities Purchase Agreement effective February 5, 2021, BHP purchased a second tranche consisting of 375,000 shares of Series C preferred stock for $375,000. As an equity incentive to this purchase of Series C preferred stock, the Company issued 1,000,000 shares of the Company’s common stock to BHP.

 

 
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On February 18, 2021, the Company entered into a Securities Purchase Agreement, dated as of February 18, 2021 (the “Series D Agreement”) with BHP providing for the issuance and sale by the Company and the purchase by BHP of shares of Series D preferred stock. At a closing held February 19, 2021, BHP initially purchased 3,000 shares of Series D preferred stock at a price of $1,000 per per share for a total purchase price of $3,000,000. Included in the purchase price was a five-year warrant granting BHP the right to purchase 5,000,000 warrants, exercisable into shares of the Company’s common stock at a per share $0.60 per share.

 

Sources and Uses of Cash

 

We used net cash in operations of $737,497 in the nine months ended March 31, 2021 as a result of our net loss of $17,175,732, non-cash gain of $106,497, increases in prepaid expenses and other current assets of $4,250 and digital currencies of $903,163 and decreases in accounts payable of $42,840 and due to related party of $65,737, partially offset by non-cash expenses totaling $17,539,579 and increase accrued expenses of $21,143.

 

We used net cash in operations of $639,079 in the nine months ended March 31, 2020 as a result of our net loss of $573,580, non-cash gain of $823,409, increase in digital currencies of $453,070, increase in prepaid expenses and other current assets of $3,250 and decrease in accounts payable of $2,021, partially offset by non-cash expenses totaling $1,135,656 and increases in accrued expenses of $41,060 and due to related party of $39,535.

 

During the nine months ended March 31, 2021, we used net cash in investing activities of $3,825,667, comprised of the purchase of digital currencies of $4,156,874, the purchase of property and equipment of $975,574 and equipment deposits of $2,528,392, partially offset by proceeds from the sale of digital currencies of $3,835,173.

 

During the nine months ended March 31, 2020, we had net cash provided by investing activities of $288,414 comprised of net proceeds from the sale of investments of $411,763, partially offset by the purchase of property and equipment of $123,349.

 

During the nine months ended March 31, 2021, we had net cash provided by financing activities of $4,656,463 comprised of proceeds from convertible notes payable of $563,000, proceeds from the issuance of Series C preferred stock of $1,125,000 and $3,000,000 proceeds from the issuance of Series D preferred stock, partially offset by repayment of notes payable of $31,537.

 

During the nine months ended March 31, 2020, we had net cash provided by financing activities of $403,692 comprised of proceeds from convertible notes payable of $534,000, partially offset by repayment of convertible notes payable of $130,308.

 

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

 

Subsequent Funding

 

On March 30, 2021, the Company entered into securities purchase agreements (the “Purchase Agreements”) with two institutional investors (the “Purchasers”), for the offering (the “Offering”) of (i) 30,000,000 shares of common stock (“Shares”), par value $0.001 per share, of the Company (“Common Stock”) and (ii) common stock purchase warrants (“Warrants”) to purchase up to an aggregate of 30,000,000 shares of Common Stock, which are exercisable for a period of five years after issuance at an initial exercise price of $0.30 per share, subject to certain adjustments, as provided in the Warrants. Each of the Purchasers received Warrants in the amount equal to 100% of the number of Shares purchased by such Purchaser. Each Share and accompanying Warrant were offered at a combined offering price of $0.30. Pursuant to the Purchase Agreements, the Purchasers purchased the Shares and accompanying Warrants for an aggregate purchase price of $9,000,000. The transaction closed on April 1, 2021, with the Company receiving proceeds of $8,135,000 after payment of expenses.

 

 
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Equipment Purchase Agreement

 

On April 12, 2021, we entered into non-fixed price sales and purchase agreement with Bitmain Technologies Limited (“Bitmain”) (the “Bitmain Agreement”) to purchase from Bitmain cryptocurrency mining hardware and other equipment in accordance with the terms and conditions of the Agreement. Bitmain is scheduled to manufacture and ship miners on monthly basis, in 12 equal batches of 400 units, starting on August 2021 and through July 2022. The Purchase Agreement remains in effect until the delivery of the last batch of products. The total purchase price was approximately $34,047,600, subject to price adjustments and related offsets. The total purchase price is payable as follows: (i) 25% of the total purchase price is due upon the execution of the Agreement or no later than April 19, 2021; (ii) 35% of the total purchase price, is due by May 30, 2021; and (iii) the remaining 40% of the total purchase price, is payable on a monthly basis starting in June 2021.

 

Going Concern

 

The Company has reported recurring operating losses since its inception and used net cash in operating activities of $737,497 in the nine months ended March 31, 2021. As of March 31, 2021, the Company had an accumulated deficit of $39,691,125. These conditions raise substantial doubt about the Company's ability to continue as a going concern.

 

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

 

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

 

Current and Future Impact of COVID-19

 

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

 

SIGNIFICANT ACCOUNTING POLICIES

 

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

 

Use of Estimates

 

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

 

 
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Digital Currencies

 

Digital currencies consist of Bitcoin, Litecoin, ZCash and Ethereum, generally received for the Company’s own account as compensation for cryptocurrency mining services, and Chainlink and other digital currencies purchased for short-term investment purposes. Given that there is limited precedent regarding the classification and measurement of cryptocurrencies under current Generally Accepted Accounting Principles (“GAAP”), the Company has determined to account for these digital currencies as indefinite-lived intangible assets in accordance with Accounting Standards Update ("ASU") No. 350, Intangibles – Goodwill and Other, for the period covered by this report and in future reports unless and until further guidance is issued by the Financial Accounting Standards Board (“FASB”). An intangible asset with an indefinite useful life is not amortized but assessed for impairment annually, or more frequently, when events or changes in circumstances occur indicating that it is more likely than not that the indefinite-lived asset is impaired. Impairment exists when the carrying amount exceeds its fair value. In testing for impairment, the Company has the option to first perform a qualitative assessment to determine whether it is more likely than not than an impairment exists. If it is determined that it is more likely than not that an impairment exists, a quantitative impairment test is not necessary. If the Company concludes otherwise, it is required to perform a quantitative impairment test. To the extent an impairment loss is recognized, the loss establishes the new cost basis of the asset. Subsequent reversal of impairment losses is not permitted. Realized gains or losses on the sale of digital currencies, net of transaction costs, are included in other income (expense) in the statements of operations. The Company had a realized gain on the sale of digital currencies of $106,497 in the nine months ended March 31, 2021.

 

Property and Equipment

 

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

 

During the six months ended December 31, 2020, the Company discontinued the use of damaged or non-serviceable mining equipment and wrote off its net book value of $207,281 to loss on disposition of property and equipment.

 

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

 

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

 

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

 

Derivatives

 

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

 

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

 

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

 

Impairment of Long-Lived Assets

 

All assets, including intangible assets subject to amortization, are reviewed for impairment when changes in circumstances indicate that the carrying amount of the asset may not be recoverable in accordance with ASC 350 and ASC 360. If the carrying amount of the asset exceeds the expected undiscounted cash flows of the asset, an impairment charge is recognized equal to the amount by which the carrying amount exceeds fair value or net realizable value. The testing of these intangibles under established guidelines for impairment requires significant use of judgment and assumptions. Changes in forecasted operations and other assumptions could materially affect the estimated fair values. Changes in business conditions could potentially require adjustments to these asset valuations. We reported no impairment expense for the three months or nine months ended March 31, 2021 and 2020.

 

Fair Value of Financial Instruments

 

Disclosures about fair value of financial instruments require disclosure of the fair value information, whether or not recognized in the balance sheet, where it is practicable to estimate that value. As of December 31, 2020 and June 30, 2020, the amounts reported for cash, prepaid expenses and other current assets, equipment deposits, accounts payable, accrued preferred stock dividends, accrued expenses, due to related party and notes payable approximate fair value because of their short maturities.

 

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

 

 

·

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

 

 

 

 

·

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

 

 

 

 

·

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

  

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

 

 

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

March 31, 2021:

 

 

 

 

 

 

 

 

 

 

 

 

Derivative liabilities

 

$ -

 

 

$ -

 

 

$ -

 

 

$ -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total liabilities measured at fair value

 

$ -

 

 

$ -

 

 

$ -

 

 

$ -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2020:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative liabilities

 

$ 164,834

 

 

$ -

 

 

$ -

 

 

$ 164,834

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total liabilities measured at fair value

 

$ 164,834

 

 

$ -

 

 

$ -

 

 

$ 164,834

 

 

Stock-Based Compensation

 

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

 

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

 

Revenue Recognition

 

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

  

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

 

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

 

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

 

OFF BALANCE SHEET ARRANGEMENTS

 

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

 

On April 12, 2021, we entered into non-fixed price sales and purchase agreement with Bitmain Technologies Limited (“Bitmain”) (the “Bitmain Agreement”) to purchase from Bitmain cryptocurrency mining hardware and other equipment in accordance with the terms and conditions of the Agreement. Bitmain is scheduled to manufacture and ship miners on monthly basis, in 12 equal batches of 400 units, starting on August 2021 and through July 2022. The Purchase Agreement remains in effect until the delivery of the last batch of products. The total purchase price was approximately $34,047,600, subject to price adjustments and related offsets. The total purchase price is payable as follows: (i) 25% of the total purchase price is due upon the execution of the Agreement or no later than April 19, 2021; (ii) 35% of the total purchase price, is due by May 30, 2021; and (iii) the remaining 40% of the total purchase price, is payable on a monthly basis starting in June 2021.

 

RECENTLY ISSUED ACCOUNTING POLICIES

 

There were no new accounting pronouncements issued or proposed by the FASB during the nine months ended March 31, 2021 and through the date of filing this report which the Company believes will have a material impact on its financial financial statements.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

 

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

 

ITEM 4. CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

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

 

 
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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 March 31, 2021, we did not maintain effective controls over the control environment. Specifically, the Board of Directors does not currently have any independent members and no director qualifies as an audit committee financial expert as defined in Item 407(d)(5)(ii) of Regulation S-B. Since these entity level programs have a pervasive effect across the organization, management has determined that these circumstances constitute a material weakness.

2.

As of March 31, 2021, due to the inherent issue of segregation of duties in a small company, we have relied heavily on entity or management review controls and engaged an outside financial consultant to lessen the issue of segregation of duties over accounting, financial close procedures and controls over financial statement disclosure. Accordingly, management has determined that this control deficiency constitutes a material weakness.

 

 

 

 

3.

As of March 31, 2021, we did not establish a written policy for the approval, identification and authorization of related party transactions. Accordingly, management has determined that this control deficiency constitutes a material weakness.

 

Because of these material weaknesses, management has concluded that the Company did not maintain effective internal control over financial reporting as of March 31, 2021, based on the criteria established in "Internal Control-Integrated Framework" issued by the COSO.

 

Changes in Internal Control Over Financial Reporting.

 

There have been no changes in the Company's internal control over financial reporting through the date of this report or during the quarter ended March 31, 2021, that materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

 

 
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PART II – OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS.

 

We are currently not involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations, except as set forth below. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our company, threatened against or affecting our company, our common stock, or our company’s officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.

 

ITEM 1A. RISK FACTORS

 

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

 

The future impact of the COVID-19 pandemic on companies is evolving and we are currently unable to assess with certainty the broad effects of COVID-19 on our business, particularly on the digital currency markets. As of December 31, 2020, our investment in property and equipment of $511,512 could be subject to impairment or change in valuation due to COVID-19 if our crypocurrency mining revenues significantly decrease or we are not able to raise capital sufficient to fund our operations.  In addition, current travel restrictions and social distancing requirements make it difficult for our management to access and oversee our operations in the State of New York. 

 

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

 

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

 

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

 

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

 

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

 

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

 

During the three months ended March 31, 2021, we issued securities that were not registered under the Securities Act, and were not previously disclosed in a Current Report on Form 8-K or Quarterly Report on Form 10-Q as listed below. All of the securities discussed in this Item 2 were issued in reliance on the exemption under Section 4(a)(2) of the Securities Act.

 

On January 11, 2021, the Company issued 4,980,010 shares of its common stock in conversion of $77,000 note principal, $3,122 accrued interest payable, and $300 in fees, resulting in the extinguishment of derivative liabilities of $41,073.

 

On January 14, 2021, the Company issued 6,635,790 shares of its common stock in conversion of $115,000 note principal and $1,591 accrued interest payable, resulting in the extinguishment of derivative liabilities of $51,576.

 

On January 14, 2021, the Company issued 2,000,000 shares of its common stock valued at $295,000 as an equity incentive in the sale of Series C Preferred Stock.

 

On January 19, 2021, the Company issued 216,616 shares of its common stock for services valued at $24,260. 

 

 
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On January 25, 2021, the Company issued 3,400,670 shares of its common stock in conversion of $75,000 note principal and $1,175 accrued interest payable, resulting in the extinguishment of derivative liabilities of $36,695.

 

On February 2, 2021, the Company issued 2,351,590 shares of its common stock in conversion of $81,739 note principal and $1,390 accrued interest payable, resulting in the extinguishment of derivative liabilities of $40,046.

 

On February 5, 2021, the Company issued 1,000,000 shares of its common stock valued at $89,100 as an equity incentive in the sale of Series C Preferred Stock.

 

On February 16, 2021, the Company issued 5,454,148 shares of its common stock in conversion of $271,739 note principal and $8,877 accrued interest payable, resulting in the extinguishment of derivative liabilities of $154,954.

 

On February 19, 2021, the Company issued 5,263,000 shares of its common stock, having a stated value of $5,263, for conversion of 52,630 shares of Series B Preferred Stock.

  

On February 24, 2021, the Company issued 55,555 shares of its common stock to extinguish a stock subscription payable of $33,888.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURES.

 

Not applicable.

 

ITEM 5. OTHER INFORMATION.

 

There is no other information required to be disclosed under this item which was not previously disclosed.

 

ITEM 6. EXHIBITS.

 

(a) Exhibits.

 

Exhibit Number

Exhibit Description

31.1

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

32.1

Section 1350 Certification of Principal Executive Officer and Principal Financial Officer.**

 

101.INS

XBRL Instance Document

101.SCH

XBRL Taxonomy Extension Schema

101.CAL

XBRL Taxonomy Extension Calculation Linkbase

101.DEF

XBRL Taxonomy Extension Definition Linkbase *

101.LAB

XBRL Taxonomy Extension Label Linkbase *

101.PRE

XBRL Taxonomy Extension Presentation Linkbase *

______________

* Filed herewith.

**This certification is being furnished rather than filed and shall not be deemed incorporated by reference into any filing, in accordance with Item 601 of Regulation S-K.

  

 
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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: May 14, 2021

By:

/s/ Steve Rubakh

 

 

 

President and Chief Executive Officer and Principal Financial Officer

    

 
40

 

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