10-Q: Integrated Ventures Reports Increased Revenue but Continues to Face Losses in Q2 2024
Sentiment:
Quarterly Report
Integrated Ventures saw a significant increase in cryptocurrency mining revenue in the second quarter of fiscal year 2024, but the company still reported a net loss and faces going concern issues.
Capital raiseThe company states that it will need to raise additional capital to operate its digital currency mining operations, purchase equipment, and expand its operations.The company anticipates that it will seek to fund its operations through further liquidation of its marketable securities, public or private equity or debt financings or other sources, such as potential collaboration agreements.The company acknowledges that there can be no assurance that additional capital will be available to it.
Worse than expectedThe company's net loss of $9.39 million for the six months ended December 31, 2023, is significantly worse than the $1.55 million loss for the same period in 2022.The company's accumulated deficit has increased to $82.9 million, further worsening its financial position.The company's current liabilities exceed its current assets by $2,994,375, indicating a worsening liquidity situation.
Summary
- Integrated Ventures, Inc. reported a net loss of $9.39 million for the six months ended December 31, 2023, compared to a net loss of $1.55 million for the same period in 2022.
- The company's cryptocurrency mining revenue increased to $2.79 million for the six months ended December 31, 2023, up from $925,657 in the same period of 2022.
- Cost of revenues also increased to $3.49 million for the six months ended December 31, 2023, compared to $1.45 million in the same period of 2022.
- Operating expenses rose significantly to $8.8 million for the six months ended December 31, 2023, primarily due to an increase in non-cash stock-based compensation.
- The company's accumulated deficit reached $82.9 million as of December 31, 2023, raising substantial doubt about its ability to continue as a going concern.
- As of December 31, 2023, the company had total current assets of $31,667 and total current liabilities of $3,026,042.
Sentiment
Score: 3
Explanation: The document highlights significant revenue growth but is overshadowed by substantial losses, a large accumulated deficit, and a going concern warning. The company's financial position is weak, and its future is uncertain, leading to a negative sentiment.
Positives
- Cryptocurrency mining revenue saw a substantial increase year-over-year, indicating growth in the company's core operations.
- The company generated a realized gain of $162,691 on the sale of digital currencies during the six months ended December 31, 2023.
- The company relocated all mining equipment from Tioga, Pennsylvania to Granbury, Texas, consolidating operations.
Negatives
- The company continues to experience significant net losses, with a $9.39 million loss for the six months ended December 31, 2023.
- Operating expenses have increased substantially, primarily due to non-cash stock-based compensation.
- The company's accumulated deficit has grown to $82.9 million, raising concerns about its financial stability.
- The company's current liabilities significantly exceed its current assets, indicating a liquidity issue.
- The company has a going concern qualification from its auditors, expressing doubt about its ability to continue operations.
- The company wrote off $121,670 of non-serviceable mining equipment during the six months ended December 31, 2023.
Risks
- The company's ability to continue as a going concern is in doubt due to recurring losses and a significant accumulated deficit.
- The company is dependent on the volatile market value of Bitcoin and other cryptocurrencies.
- The company faces risks related to cyber security, potential theft of digital currencies, and the irreversibility of incorrect transactions.
- The company is reliant on third-party pools for the sale of mined cryptocurrencies.
- The company is subject to risks associated with its need for significant electrical power and potential restrictions from government regulators.
- The company's operations are vulnerable to natural disasters and geo-political events.
- 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 difficult for investors to sell their shares.
- The company is dependent on its CEO, Steve Rubakh, and his departure could harm the business.
Future Outlook
The company plans to raise capital to purchase new mining equipment, sell older models, and expand cryptocurrency mining operations to new locations. The company is also considering alternative sources of power, further consolidation of facilities, and potential hosting arrangements.
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 will review this estimate annually and will revise such estimates as and when data becomes available.
Industry Context
The company operates in the volatile cryptocurrency mining sector, which is subject to rapid technological changes, regulatory uncertainty, and market fluctuations. The company's performance is directly tied to the price of Bitcoin and other digital currencies, as well as the cost of electricity and mining equipment.
Comparison to Industry Standards
- The company's revenue growth in cryptocurrency mining is a positive sign, but its significant net losses and accumulated deficit are concerning when compared to more established players in the industry.
- Companies like Marathon Digital Holdings and Riot Platforms, which are also involved in Bitcoin mining, have reported varying results, but generally have stronger balance sheets and more established operations.
- The company's reliance on a single hosting facility and its high operating expenses, particularly stock-based compensation, are areas that need improvement to align with industry best practices.
- The company's going concern qualification is a significant red flag, indicating that it is not performing as well as many of its peers in the sector.
Corporate Governance
| Change Type | Description | Effective Date | Impact Assessment |
|---|---|---|---|
| Board Structure | The Board of Directors does not currently have any independent members and no director qualifies as an audit committee financial expert. | 2023-12-31 | This is a material weakness in internal control over financial reporting. |
| Related Party Transactions Policy | The company did not establish a written policy for the approval, identification and authorization of related party transactions. | 2023-12-31 | This is a material weakness in internal control over financial reporting. |
Legal Proceedings
- As of the date of filing of this report, there were no pending or threatened lawsuits.
Related Party Transactions
- The company's CEO, Steve Rubakh, is paid an annual salary, cash bonuses, and is issued shares of Series B preferred stock for additional compensation.
- During the six months ended December 31, 2023, the company issued 50,000 shares of Series B convertible preferred stock to Mr. Rubakh valued at $8.3 million.
- Amounts due to related party, consisting of accrued salary to Mr. Rubakh, totaled $29,864 as of December 31, 2023.
- Amounts due to related party, consisting of short-term advances from Mr. Rubakh, totaled $69,620 as of December 31, 2023.
- The company has a Property Lease and Power Purchase Agreement with Tioga Holding, LLC, a related party owned 50% by Mr. Rubakh.
Stakeholder Impact
- Shareholders face significant risk due to the company's financial instability and going concern issues.
- Employees may be affected by potential cost-cutting measures or operational changes.
- Customers may be impacted by the company's ability to maintain its mining operations.
- Suppliers and creditors face increased risk due to the company's financial difficulties.
Next Steps
- The company will continue to raise capital to purchase new mining equipment.
- The company will sell older and no longer profitable mining models.
- The company will expand cryptocurrency mining operations to new locations.
- The company will consider alternative sources of power.
- The company will consider further consolidation of facilities.
- The company will consider potential hosting arrangements.
Key Dates
| Date | Description |
|---|---|
| 2011-03-22 | Integrated Ventures, Inc. was incorporated in the State of Nevada under the name of Lightcollar, Inc. |
| 2015-03-20 | The Company amended its articles of incorporation and changed its name from Lightcollar, Inc. to EMS Find, Inc. |
| 2015-03-31 | Series B Preferred Stocks were issued. |
| 2015-12-01 | Series A Preferred Stock Shares were issued. |
| 2015-12-21 | The Company filed a Certificate of Designation for a new Series B convertible preferred stock. |
| 2017-05-30 | Integrated Ventures, Inc. was formed as a wholly owned subsidiary of the Company. |
| 2017-05-30 | Integrated Ventures was merged into the Company, with the Company being the surviving corporation and changing its name to Integrated Ventures, Inc. |
| 2021-01-14 | Series C Convertible Preferred Stock was issued. |
| 2021-02-01 | Series D Preferred Stock Shares were issued. |
| 2021-02-19 | The Company filed a Certificate of Designation of the Series D Convertible Preferred Stock. |
| 2021-03-01 | The Company and Compute North LLC entered into a Master Agreement for the colocation and management of the Company's cryptocurrency mining operations. |
| 2021-12-01 | The Company and Tioga Holding, LLC entered into a Property Lease and Power Purchase Agreement. |
| 2022-06-01 | The Company and Compute North entered into a second Master Agreement for the colocation and management of the Company's cryptocurrency mining operations. |
| 2022-06-15 | The Company entered into a Loan Agreement and Promissory Note with BHP Capital NY, Inc. |
| 2022-09-01 | The Company entered into Warrant Purchase Agreements. |
| 2023-04-17 | The Board of Directors of the Company approved a 1-for-125 reverse split of the Company's common shares. |
| 2023-06-03 | Series A, B, C and D Preferred Stock Shares were issued. |
| 2023-06-30 | Balance sheet date for comparison. |
| 2023-07-01 | Series A, B, C and D Preferred Stock Shares were issued. |
| 2023-09-30 | All miners previously located in Tioga, Pennsylvania were relocated to Granbury, Texas. |
| 2023-10-01 | Series A, B, C and D Preferred Stock Shares were issued. |
| 2023-12-31 | End of the reporting period for the financial statements. |
| 2024-02-09 | Date of the report, the company had 5,064,492 shares of its common stock issued and outstanding. |
Keywords
cryptocurrency mining, Bitcoin, digital currencies, blockchain, financial results, net loss, revenue, operating expenses, going concern, stock-based compensation
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