INTEGRATED VENTURES, INC. 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 may cause our actual results to differ materially from
the results contemplated by the forward-looking statements are contained in the
"Risk Factors" section of and elsewhere in our Annual Report on Form 10-K for
the year ended
GENERAL
We were incorporated in the
On
As of
The Company will continue to (1) raise capital to purchase new mining equipment, (2) sell older and no longer profitable models and (3) expand cryptocurrency mining operations to new locations.
Financial
As of
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Revenues from our cryptocurrency mining operations were
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
Historically, we have funded our operations primarily from cash generated from
our digital currency mining operations and proceeds from convertible notes
payable and preferred stock. During the six months ended
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
We are incurring increased costs because of being a publicly traded company. As
a public company, we incur significant legal, accounting, and other expenses
that we did not incur as a private company. We also have paid compensation
through the issuance of shares of our common stock, Series B preferred stock and
warrants, the valuation of which has resulted in significant stock-based
compensation. In addition, the Sarbanes-Oxley Act of 2002, as well as new rules
subsequently implemented by the
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To operate our digital currency mining facilities and to fund future operations, we will need to raise additional capital. The amount and timing of future funding requirements will depend on many factors, including the timing and results of our ongoing development efforts, the potential expansion of our current development programs, potential new development programs and related general and administrative support. We anticipate that we will seek to fund our operations through further liquidation of our marketable securities, public or private equity or debt financings or other sources, such as potential collaboration agreements. We cannot be certain that anticipated additional financing will be available to us on favorable terms, or at all.
RESULTS OF OPERATIONS
THREE MONTHS AND SIX MONTHS ENDED
Revenues
Our cryptocurrency mining revenues decreased to
We also have revenues from the sale of cryptocurrency mining equipment that have
been either newly purchased or refurbished for resale. Such sales totaled
Cost of Revenues
Cost of revenues was
Operating Expenses
Our general and administrative expenses decreased to
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Other Income (Expense)
Our other income (expense) was comprised of the following:
Three Months Ended December 31 Six Months Ended December 31
2022 2021 2022 2021
Interest
expense $ (109,049 ) $ (80 ) $ (217,901 ) $ (462 )
Realized gain
(loss) on
sale of
digital
currencies (43,899 ) (189,240 ) (67,914 ) 527,833
Loss on
disposition
of property
and equipment - - (46,715 ) -
Gain on
forgiveness
of debt - 5,924 - 5,924
Total other
income
(expense) $ (152,948 ) $ (183,396 ) $ (332,530 ) $ 533,295 Our interest expense includes the amortization of debt discount and original
issue discount for our convertible notes payable. These amounts vary from period
to period depending on the timing of new borrowings and the conversion of the
debt to common stock by the lenders. During the prior six months ended, we
entered two notes payable totaling
In addition to the currencies received as compensation for our mining services,
we purchased various digital currencies totaling
Net Income (Loss)
As a result, we reported net losses of
LIQUIDITY AND CAPITAL RESOURCES
Overview
As of
Sources and Uses of Cash
During the six months ended
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During the six months ended
During the six months ended
During the six months ended
We transferred mining equipment with a value of
During the three months ended
During the six months ended
We will have to raise funds to successfully operate our digital currency mining operations, purchase equipment and expand our operations to multiple facilities. We will have to borrow money from shareholders or issue debt or equity or enter a strategic arrangement with a third party. There can be no assurance that additional capital will be available to us.
Going Concern
The Company has reported recurring net losses since its inception. As of
The accompanying financial statements have been prepared in conformity with
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.
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SIGNIFICANT ACCOUNTING POLICIES
Our significant accounting policies are disclosed in Note 2 to the accompanying financial statements. The following is a summary of those accounting policies that involve significant estimates and judgment of management.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Because of the use of estimates inherent in the financial reporting process, actual results could differ significantly from those estimates.
Digital Currencies
Digital currencies consist mainly of Bitcoin, Ethereum and Litecoin, generally
received for the Company's own account as compensation for cryptocurrency mining
services, and other digital currencies purchased for short-term investment and
trading 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 -
Property and Equipment
Property and equipment, consisting primarily of computer and other cryptocurrency mining equipment (digital 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
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.
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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 periods ended
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.
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, net
of applicable network fees, which are recorded as revenue using the closing
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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
Operating Leases
As of
Power Purchase and Hosting Agreement
On
On
Tioga Property Lease and Power Purchase Agreement
On
RECENTLY ISSUED ACCOUNTING POLICIES
There were no new accounting pronouncements issued or proposed by the FASB
during the three months ended
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