10-K/A: Integrated Ventures Amends 10-K Filing Following SEC Comments, Cites Ongoing Losses and Market Volatility

Integrated Ventures, Inc. has filed an amendment to its annual report to address SEC comments, highlighting continued losses and challenges in the volatile cryptocurrency market.

Summary

• Integrated Ventures, Inc. filed an amendment to its annual report on Form 10-K/A to clarify disclosures in response to SEC comments.
• The company has shifted its focus to cryptocurrency mining and sales of mining equipment, discontinuing previous operations.
• As of June 30, 2023, the company owned approximately 2,427 miners across two locations in Pennsylvania and Texas.
• The company's mining operations in New York were discontinued due to financial difficulties with PetaWatts, and equipment was relocated to Pennsylvania.
• New Bitmain miners were delivered to Pennsylvania, Nebraska, and Texas, with the Nebraska miners later moved to Texas.
• The Granbury, Texas mining operations commenced on January 1, 2023.
• The company needs to raise capital to purchase new mining equipment, sell older models, and expand to new locations.
• The company's cryptocurrency mining revenues decreased to $3,862,849 in 2023 from $4,871,473 in 2022, due to weakening cryptocurrency markets.
• Sales of cryptocurrency mining equipment were $0 in 2023, compared to $1,678,660 in 2022.
• The company reported a net loss of $25,459,967 for the year ended June 30, 2023, compared to a net loss of $565,514 in the previous year.
• The company's operating expenses increased significantly to $22,717,919 in 2023, primarily due to stock-based compensation, losses on asset disposition, and impairment of equipment.
• The company's financial statements include a going concern qualification from its auditors, expressing doubt about its ability to continue operations.
• The company is dependent on the market value of Bitcoin, which is subject to volatility and halving events that could reduce mining rewards.
• The company is also subject to risks related to regulatory changes, cyber security, and the need for significant electrical power.

Sentiment

Score: 2

Explanation: The document presents a very negative outlook due to significant losses, a going concern qualification, and numerous risk factors. The company's financial performance is deteriorating, and there are serious concerns about its ability to continue operations.

Positives

• The company has successfully relocated mining equipment from New York to Pennsylvania.
• The company has expanded its mining operations to Granbury, Texas.
• The company is actively looking to expand its power capacity and is negotiating purchase or investment in multiple real estate properties.
• The company's service providers, Foundry Digital and Gemini, have passed SOC2 certification in 2023.

Negatives

• The company has incurred significant losses since its inception.
• The company's cryptocurrency mining revenues decreased in 2023.
• The company's sales of cryptocurrency mining equipment were $0 in 2023.
• The company's operating expenses increased significantly in 2023.
• The company's auditors have expressed doubt about its ability to continue as a going concern.
• The company is dependent on the volatile cryptocurrency market.
• The company is subject to risks related to regulatory changes, cyber security, and the need for significant electrical power.
• The company has a significant accumulated deficit of $73,101,867 as of June 30, 2023.

Risks

• The company's operations are dependent on the market value of Bitcoin, which is subject to extreme volatility.
• Bitcoin halving events could reduce mining rewards and negatively impact revenue.
• The company is subject to regulatory risks, including potential new laws and regulations that could affect its business.
• The company is vulnerable to cyber-attacks and data breaches.
• The company is reliant on third-party pools for the sale of mined cryptocurrencies.
• The company is dependent on a reliable and cost-effective power supply for its mining operations.
• The company may face difficulties in raising additional capital.
• The company's lack of internal controls over financial reporting may affect the market for and price of its common stock.
• The company's common stock is considered a penny stock, which may make it more difficult for investors to sell their shares.
• The company is heavily dependent on its CEO, Steve Rubakh, and his departure could harm the business.

Future Outlook

The company anticipates seeking to fund its operations through cryptocurrency mining, public or private equity or debt financings, or other sources such as potential collaboration agreements. The company will need to continue to raise capital to purchase new mining equipment, sell older models, and expand to new locations.

Management Comments

• 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.
• Management has determined that the three-year diminishing value best reflects the current expected useful life of transaction verification servers.
• Management plans to address the structure of the Board of Directors and discuss adding an audit committee during fiscal year 2023.

Industry Context

The document highlights the challenges faced by cryptocurrency mining companies due to market volatility, regulatory uncertainty, and the high costs of operations. The company's struggles reflect broader trends in the industry, where many companies are operating at a non-profitable status following record historic runs in market prices of digital currencies.

Comparison to Industry Standards

• The company's financial performance is significantly worse than many established players in the cryptocurrency mining industry, which have been able to maintain profitability despite market fluctuations.
• The company's reliance on a single executive officer and lack of independent directors is not in line with corporate governance standards of larger, more mature companies in the sector.
• The company's high operating expenses, particularly related to stock-based compensation, are not typical of companies with similar revenue levels.
• The company's going concern qualification is a significant deviation from industry norms, indicating a high level of financial distress.
• The company's lack of internal controls over financial reporting is a major concern, as most public companies in the sector have robust control systems in place.

Related Party Transactions

• The company has a Property Lease and Power Purchase Agreement with Tioga Holding, LLC, a related party owned 50% by the CEO, Steve Rubakh.
• The company issued 200,000 shares of Series B convertible preferred stock to Steve Rubakh as part of his compensation package.
• Steve Rubakh has provided short-term advances to the company.

Stakeholder Impact

• Shareholders face significant risk of loss due to the company's financial instability and the volatility of the cryptocurrency market.
• Employees, including the CEO, are subject to the risk of job loss if the company fails to continue operations.
• Customers may be impacted by the company's inability to fulfill orders or provide services.
• Suppliers and creditors face the risk of non-payment due to the company's financial difficulties.

Next Steps

• The company will need to raise additional capital to purchase new mining equipment.
• The company will need to sell older and no longer profitable mining models.
• The company will need to expand cryptocurrency mining equipment to new locations.
• The company plans to address the structure of the Board of Directors and discuss adding an audit committee during fiscal year 2023.

Key Dates

Keywords

cryptocurrency mining, Bitcoin, digital assets, blockchain, mining equipment, SEC, financial results, going concern, risk factors, capital raise