美國
證券交易委員會
華盛頓特區 20549
表格
| 根據1934年證券交易法的第13或15(d)條款，季報。 |
截至年度季度結束
或
| 根據1934年證券交易法第13或15(d)條的過渡報告 |
從______________________過渡期到______________________
委員會
檔案編號：
(根據公司章程所述的註冊人的正確名稱)
(以前 稱爲 I-ON 通信-半導體 Corp.)
(州 或其他司法管轄區 的 公司註冊或組織） |
（I.R.S. 僱主 識別 沒有。） |
(主要執行辦事處地址，包括郵遞區號)
（申報人的電話號碼，包括區號）
根據交易所法案第12（b）節註冊的證券：無
勾選表示公司已按照證券交易法第13或15(d)條款的規定，在過去12個月（或公司需要提交此類報告的較短期限內）提交了所有所需的報告；並且公司在過去90天內一直受到此類提交報告的要求。
請打勾表示在過去12個月內（或在登記人必須提交和張貼此類文件的較短時期內），其是否已電子提交並發帖其公司網站（如果有的話），根據S-t法規405條規定（本章節§232.405）所需提交和張貼的所有互動數據文件。
請通過勾選標記指明註冊人是大型加速報告人、加速報告人、非加速報告人、較小的報告公司或新興成長公司。有關“大型加速報告人”、“加速報告人”、“較小報告公司”和“新興成長公司”的定義，請參見交易法第120億2條。
| 大型加速文件申報者 ☐ | 加速申報者 ☐ |
| 較小的報告公司 | |
| 新興成長型企業 |
若屬新興成長公司，則請在適用於依據第13(a)款擬定的任何新或修訂財務會計準則時，打勾表示註冊人已選擇不使用過度過渡期遵守該準則。 ☐
請勾選是否登記者為外殼公司（依照交易所法規120億2的定義）。是 ☐ 否
請指明截至最新可行日期，每類發行人的普通股的已發行股份數量。
| Class | 傑出 截至2024年11月8日 | |
| 普通股，每股$ 每股面值 | shares |
部分 1 – 財務信息
I-ON Digital Corp.（“我們”，“我們的”，“我們”，“公司”）的未經審計的中期基本報表如下。除非另有說明，否則本報告中的所有貨幣參考均爲美元。
| 2 |
I-ON數字corp
目 錄
| 簡明的 合併基本報表（未經審計） | |
| 簡明合併資產負債表（未經審計） | 4 |
| 簡明合併運營報表（未經審計） | 5 |
| 簡明合併股東權益報表（未經審計） | 6 |
| 簡明合併現金流量表（未經審計） | 7 |
| 簡明合併基本報表附註（未經審計） | 8 |
| 3 |
I-ON 數字業務
縮短的 合併資產負債表
九月三十日， 2024 | 12月31日, 2023 | |||||||
| (未經審計) | ||||||||
| 資產 | ||||||||
| 流動資產: | ||||||||
| 現金及現金等價物 | $ | $ | ||||||
| 預付款 | ||||||||
| 流動資產總額 | ||||||||
| 非流動資產： | ||||||||
| 無形資產，扣除累計攤銷 | ||||||||
| 總非流動資產 | ||||||||
| 總資產 | $ | $ | ||||||
| 550,714 | ||||||||
| 流動負債： | ||||||||
| 應計費用 | $ | $ | ||||||
| 應計利息 | ||||||||
| 遞延收入 – 關聯方 | ||||||||
| 因為關聯方 | ||||||||
| 應付貸款 | ||||||||
| 流動負債總額 | ||||||||
| 總負債 | ||||||||
| 合約和可能負債 | ||||||||
| 股東權益 | ||||||||
| 優先股，面額$0.01，授權股數為5,000,000股，發行且流通股數為截至2024年6月30日和2023年12月31日之184,668,188股和181,364,180股。 面值； 授權的股份； 指定爲A系列可轉換證券， 指定爲B系列可轉換證券， 指定爲C系列可轉換證券 | ||||||||
| 優先股系列A - $ 面值； 授權的股份； 於2024年9月30日和2023年12月31日發行並流通的股份 | ||||||||
| 將發行優先股A系列（ 截至2024年9月30日和2023年12月31日的股份） | ||||||||
| 優先股B系列 - $ 面值； 授權的股份； 於2024年9月30日和2023年12月31日發行並流通的股份 | ||||||||
| 優先股C系列 - $ 面值； 授權的股份； 於2024年9月30日和2023年12月31日發行並流通的股份 | ||||||||
| 普通股 - $ 面值； 授權的股份； 於2024年9月30日和2023年12月31日發行並流通的股份 | ||||||||
| 資本溢額 | ||||||||
| 累積保留盈餘 | ( | ) | ( | ) | ||||
| 股東權益總額 | ||||||||
| 負債總額和股東權益總額 | $ | $ | ||||||
See accompanying notes to unaudited condensed consolidated financial statements.
| 4 |
I-ON Digital Corp.
Condensed Consolidated Statements of Operations (Unaudited)
Three Months Ended September 30, 2024 | Three Months Ended September 30, 2023 | Nine Months Ended September 30, 2024 | Nine Months Ended September 30, 2023 | |||||||||||||
| Net sales – related party | $ | $ | $ | $ | ||||||||||||
| Cost of sales | ||||||||||||||||
| Gross profit | ||||||||||||||||
| Operating expenses | ||||||||||||||||
| Professional fees | ||||||||||||||||
| General and administrative expenses | ||||||||||||||||
| Total expenses from operations | ||||||||||||||||
| Income (loss) from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expenses) | ||||||||||||||||
| Gain on sale of intangible assets | ||||||||||||||||
| Gain on exchange of intangible assets | ||||||||||||||||
| Interest expenses | ( | ) | ( | ) | ||||||||||||
| Total other income (expenses) | ( | ) | ( | ) | ||||||||||||
| Income (loss) before income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Provision for income taxes | ||||||||||||||||
| Net income (loss) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net income (loss) per share, basic and diluted | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
| Weighted average number of shares outstanding, basic and diluted | ||||||||||||||||
See accompanying notes to unaudited condensed consolidated financial statements.
| 5 |
I-ON Digital Corp.
Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)
For the three and nine months ended September 30, 2023 and 2024
| Preferred Stock | Total | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Common Stock | Series A | Series A to be issued | Series B | Series C | Additional Paid-in | Retained | Company Stockholders’ | |||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital | Earnings | Equity | ||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2022 | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||||||||||||||||
| Issuance of preferred stock - series A | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||
| Distribution | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||||
| Issuance of preferred stock - series B | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||
| Preferred stock series B conversion to Common Stock | - | - | ( | ) | ( | ) | - | ( | ) | |||||||||||||||||||||||||||||||||||||||||||
| Common stock cancellation | ( | ) | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||
| Net income (loss) | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||||
| Balance at March 31, 2023 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Common stock issued for services | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||
| Common stock issued for intangible asset | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of preferred stock A | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||
| Net income (loss) | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2023 | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Preferred stock to be issued | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||||
| Balance at September 30, 2023 | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||||||||||||||||
| Preferred Stock | Total | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Common Stock | Series A | Series A to be issued | Series B | Series C | Additional Paid-in | Retained | Company Stockholders’ | |||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital | Earnings | Equity | ||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2023 | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||||
| Balance at March 31, 2024 | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2024 | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||||
| Balance at September 30, 2024 | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||||||||||||||||
See accompanying notes to unaudited condensed consolidated financial statements.
| 6 |
I-ON Digital Corp.
Condensed Consolidated Statements of Cash Flows (Unaudited)
Nine Months Ended September 30, 2024 | Nine Months Ended September 30, 2023 | |||||||
| Cash flows from operating activities: | ||||||||
| Net income (loss) | $ | ( | ) | $ | ( | ) | ||
| Adjustments: | ||||||||
| Stock compensation | ||||||||
| Amortization | ||||||||
| Accretion of debt discount | ||||||||
| Gain on sale of intangible assets | ( | ) | ||||||
| Changes in assets and liabilities: | ||||||||
| Prepaid expenses and other current assets | ( | ) | ||||||
| Accrued expenses | ( | ) | ||||||
| Accrued interest | ||||||||
| Deferred revenue – related party | ( | ) | ||||||
| Net cash provided by (used in) operating activities | ( | ) | ||||||
| Cash flows from investing activities: | ||||||||
| Proceeds from sale of intangible assets | ||||||||
| Gain on exchange of intangible assets | ( | ) | ||||||
| Purchase of intangible assets | ( | ) | ||||||
| Total net cash provided by (used in) investing activities | ( | ) | ||||||
| Cash flows from financing activities: | ||||||||
| Proceeds from issuance of preferred stock Series A | ||||||||
| Proceeds for preferred stock A to be issued | ||||||||
| Proceeds from issuance of preferred stock Series B | ||||||||
| Distribution per stock purchase agreement | ( | ) | ||||||
| Advances from related parties | ||||||||
| Total net cash provided by (used in) financing activities | ||||||||
| Net increase (decrease) in cash and cash equivalents | ||||||||
| Cash and cash equivalents, beginning of period | ||||||||
| Cash and cash equivalents, end of period | $ | $ | ||||||
| Supplemental disclosure of cash flow information: | ||||||||
| Interest paid | $ | $ | ||||||
| Taxes paid | $ | $ | ||||||
| Supplemental disclosure of non-cash flow information: | ||||||||
| Continuing operations: | ||||||||
| Issuance of common stock for intangible assets | $ | $ | ||||||
See accompanying notes to unaudited condensed consolidated financial statements.
| 7 |
I-ON Digital Corp.
Notes to Condensed Consolidated Financial Statements (Unaudited)
NOTE 1: Organization and Operations
I-ON Digital Corp. (the “Company”) is engaged in providing digital-based enterprise solutions, including the digitization and distribution of digital tokens, primarily proven gold reserves, and other asset-based digital securities on the block chain.
In January 2023, the Company entered into a Series A Preferred Stock Purchase Agreement (the “Purchase Agreement”) with I-ON Acquisition Corp. (“IAC”), a related party, pursuant to which IAC received shares of the Company’s Series A Convertible Preferred Stock (“Series A Preferred Stock”) for consideration of $. Each share of Series A Preferred Stock is convertible into shares of the Company’s common stock (“Common Stock”). The shares of Series A Preferred Stock were subsequently distributed to IAC’s sole stockholder Carlos Montoya, the Company’s Chief Executive Officer. The Company’s total authorized Series A Preferred Stock is of which a total of shares are issued and outstanding.
On
December 15, 2023, the Company consummated its previously announced transaction contemplated by that certain Contribution and Exchange
Agreement, dated as of October 30, 2023 (the “Contribution and Exchange Agreement”), by and between the Company and Orebits
Acquisition Group (“OAG”), a Wyoming limited liability company and an entity owned and controlled by Carlos Montoya, the
CEO and controlling shareholder, pursuant to which the Company acquired shares of outstanding common stock of Orebits Corp. (“Orebits”),
representing the
The
acquisition of Orebits has had a significant impact on the Company’s consolidated balance sheets. Prior to consummation of the
Transaction, Orebits carried only one asset – Orebits AU gold-backed digital assets having a post-transaction value of $
| 8 |
NOTE 2. Summary of Significant Accounting Policies
The summary of significant accounting policies of the Company is presented to assist in understanding the Company’s financial statements. The financial statements and notes are representations of the Company’s management, who is responsible for integrity and objectivity. 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.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared by management in accordance with both accounting principles generally accepted in the United States (“GAAP”), and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Certain information and note disclosures normally included in audited financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading.
In the opinion of management, the balance sheet as of December 31, 2023, which has been derived from audited financial statements, and these unaudited condensed financial statements reflect all normal and recurring adjustments considered necessary to state fairly the results for the periods presented. The results for the period ended September 30, 2024 are not necessarily indicative of the results to be expected for the entire fiscal year ending December 31, 2024 or for any future period.
These unaudited condensed consolidated financial statements and notes thereto should be read in conjunction with the Management’s Discussion and the audited financial statements and notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2023.
Basis of Consolidation
The consolidated financial statements include the accounts of I-On Digital Corp. and its wholly owned subsidiary Orebits (collectively, the “Company”). All significant intercompany transactions and balances have been eliminated in consolidation. Subsidiaries are entities over which the Company has control, typically through a majority voting interest. The Company consolidates entities in which it holds a controlling financial interest, as defined by Accounting Standards Codification (ASC) 810, Consolidation.
Going Concern
The accompanying consolidated financial statements have been prepared in conformity with GAAP, which contemplate continuation of the Company as a going concern. The Company has had limited revenues since the Company, under the prior ownership group, sold-off of its subsidiaries in September 2022. In addition, the Company has limited cash and has reported recurring losses. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.
As of September 30, 2024, the Company has completed two digital platforms that we believe will establish a stabilized source of revenue which it believes will be sufficient to cover operating costs for the next twelve months. Those platforms are still in the testing stage as of the date these consolidated financial statements were ready to be issued. The implementation of these platforms will take time to cover the full cost of operations.
The Company’s business prospects have changed since the new management took control of operations in January 2023. Since the new ownership took over the Company, management commenced new initiatives in technology development and acquisitions. In connection with these initiatives, management plans to prepare the Company for capital formation and new business development through capital raising vehicles. There can be no assurances that the Company will be successful in this or any of its endeavors. In addition, the Company is also funded by its related parties for its operations. It is expected that the related parties will continue funding the Company’s operations until we are able to raise capital or increase revenue to cover operating costs.
Use of Estimates in the Preparation of Financial Statements
The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. As a result, actual results could materially differ from these estimates.
| 9 |
Revenue Recognition
The Company recognizes revenue under ASC 606, Revenue from Contracts with Customers. The core principle of the revenue standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The following five steps are applied to achieve that core principle: 1: Identify the contract with the customer; 2: Identify the performance obligations in the contract; 3: Determine the transaction price; 4: Allocate the transaction price to the performance obligations in the contract; and Step 5: Recognize revenue when the Company satisfies a performance obligation.
Cash and Cash Equivalents
The
Company considers all money market funds and highly liquid financial investments with maturities of three months or less when acquired
to be cash equivalents. As of September 30, 2024 and December 31, 2023 there were
Intangible Assets
Intangible assets represent non-physical assets that lack a physical substance but have value. These assets are typically long-term in nature and can include items such as patents, trademarks, copyrights, digital assets, and software. When the Company acquires an intangible asset, it is recorded either at fair value or at historical cost. The fair value is used if the asset is acquired from an entity not under common control in a business combination, and the historical cost is used if the asset is acquired from an entity under common control. Intangible assets with a finite life are amortized using the straight-line method over their estimated useful lives.
The estimated useful lives of the respective asset categories are as follows:
| Development costs | ||
| Intangible assets excluding development costs | ||
| Other Intangible assets – Core technology platforms |
The Company follows ASC 350-30-35 and recognizes costs incurred to renew or extend the term of a recognized intangible asset as an expense in the period in which they are incurred. These costs are not capitalized but are instead treated as operating expenses, ensuring that the financial statements accurately reflect the current period’s operational activities.
Impairment Analysis for Long-lived Assets and Intangible Assets
The Company’s long-lived assets and other assets (consisting of property and equipment and purchased intangible assets) are reviewed for impairment in accordance with the guidance of the FASB ASC 360, Property, Plant, and Equipment and FASB ASC 205 Presentation of Financial Statements. The Company tests for impairment losses on long-lived assets used in operations whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. Recoverability of an asset to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated by the asset. If such asset is considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds its fair value. Impairment evaluations involve management’s estimates on asset useful lives and future cash flows. Actual useful lives and cash flows could be different from those estimated by management which could have a material effect on our reporting results and financial positions. Fair value is determined through various valuation techniques including undiscounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary. The Company had not experienced impairment losses on its long-lived assets and intangible assets during any of the periods presented.
| 10 |
Digital Assets
Digital assets are accounted for as indefinite-lived intangible assets, and are initially measured at cost, in accordance with ASC 350 – “Intangibles-Goodwill and Other” (“ASC 350”). The Company does not intend to sell the digital assets in the near future so they are classified as non-current assets.
These digital assets are not amortized, but are assessed for impairment annually, or upon a triggering event that indicates it is more likely than not that the indefinite-lived intangible asset is impaired. Whenever the exchange-traded price of digital assets declines below its carrying value, the Company has determined that impairment exists and records impairment equal to the amount by which the carrying value exceeds the fair value. Once the intangible asset is impaired, the loss is not reversed if the fair value subsequently increases.
FASB ASC Topic 260, Earnings Per Share, requires a reconciliation of the numerator and denominator of the basic and diluted earnings (loss) per share (EPS) computations. Basic earnings (loss) per share are computed by dividing net earnings available to common shareholders by the weighted-average number of common shares outstanding during the period. Diluted earnings (loss) per share is computed similar to basic earnings per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. In periods where losses are reported, the weighted-average number of common stock outstanding excludes common stock equivalents, because their inclusion would be anti-dilutive.
Fair Value Measurements
The Company follows FASB ASC Topic 820, Fair Value Measurements. ASC 820 defines fair value, establishes a framework for measuring fair value under generally accepted accounting principles and enhances disclosures about fair value measurements. Fair value is defined under ASC 820 as the exchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants.
ASC 820 establishes a hierarchy of valuation inputs based on the extent to which the inputs are observable in the marketplace. Observable inputs reflect market data obtained from sources independent of the reporting entity and unobservable inputs reflect the entity’s own assumptions about how market participants would value an asset or liability based on the best information available.
Valuation techniques used to measure fair value under ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs. The standard describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value.
The following describes the hierarchy of inputs used to measure fair value and the primary valuation methodologies used by the Company for financial instruments measured at fair value on a recurring basis.
The three levels of inputs are as follows:
| Level 1 | Quoted prices in active markets for identical assets or liabilities that the Company has an ability to access as of the measurement date. | |
| Level 2 | Inputs that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the same term of the assets or liabilities. | |
| Level 3 | Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. |
| 11 |
A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Our financial instruments include cash and cash equivalents, short-term financial instruments, short-term loans, accounts receivable, investments, accounts payables and debt. The carrying values of these financial instruments approximate their fair value due to their short maturities. The carrying amount of our debt approximates fair value because the interest rates on these instruments approximate the interest rate on debt with similar terms available to us.
Income Taxes
Income taxes are provided for the tax effects of transactions reported in the financial statements and consists of taxes currently due and deferred taxes. Deferred taxes are recognized for the differences between the basis of assets and liabilities for financial statement and income tax purposes.
The Company follows FASB ASC 740, Income Taxes, which require the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates, applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
FASB ASC 740-10-25 provides criteria for the recognition, measurement, presentation and disclosure of uncertain tax position. The Company must recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate resolution. The Company did not recognize additional liabilities for uncertain tax positions pursuant to FASB ASC 740-10-25 as of September 30, 2024.
Contingencies
Accounting guidance requires that the Company record an estimated loss from a loss contingency when information available prior to issuance of the consolidated financial statements indicates that it is probable that an asset has been impaired or a liability has been incurred at the date of the financial statements and the amount of the loss can be reasonably estimated. Accounting for contingencies such as legal matters requires significant judgment. Many of these legal matters can take years to resolve. Generally, as the time period increases over which the uncertainties are resolved, the likelihood of changes to the estimate of the ultimate outcome increases.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk are cash arising from its normal business activities. The Company has its cash in high credit quality institutions. The Company currently does not provide for or issue extensions of credit to its clients, vendors or employees. If the Company’s board of directors elected to make a change in current policy, management, pursuant to policy and procedure implementation of the same, would establish methodologies for monitoring and assessing corresponding risks, inclusive of the potential for concentrations and the related adequacy of loss reserves going forward.
Advertising
Costs associated with advertising and promotions are expensed as incurred.
The Company accounts for its share-based compensation plan in accordance with FASB ASC 718, Stock Compensation, which establishes a fair value method of accounting for stock-based compensation plans. The Company records stock compensation expense based on the value of the number of shares vesting specified periods over .
Stock-based compensation issued to employees and members of our board of directors is measured at the date of grant based on the estimated fair value of the award, net of estimated forfeitures. The grant date fair value of a stock-based award is recognized as an expense over the requisite service period of the award on a straight-line basis.
For purposes of determining the variables used in the calculation of stock-based compensation issued to employees, the Company performs an analysis of current market data and historical data to calculate an estimate of implied volatility, the expected term of the option and the expected forfeiture rate. With the exception of the expected forfeiture rate, which is not an input, we use these estimates as variables in the Black-Scholes option pricing model. Depending upon the number of stock options granted any fluctuations in these calculations could have a material effect on the results presented in our statements of operations. In addition, any differences between estimated forfeitures and actual forfeitures could also have a material impact on our financial statements.
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Recently Issued Accounting Pronouncements
On December 13, 2023, the FASB issued ASU No. 2023-08, Intangibles - Goodwill and Other - Crypto Assets (Topic 350-60): Accounting for and Disclosure of Crypto Assets. ASU 2023-08 requires entities to measure crypto assets that meet specific criteria at fair value with changes recognized in net income each reporting period. Additionally, ASU 2023-08 requires an entity to present crypto assets measured at fair value separately from other intangible assets in the balance sheets and record changes from remeasurement of crypto assets separately from changes in the carrying amounts of other intangible assets in the income statement. The new standard is effective for all entities for the fiscal years beginning after December 15, 2024, including interim periods within those fiscal years. Early adoption is permitted. Where applicable the Company plans to adopt ASU 2023-08 when it is effective from its fiscal year beginning January 1, 2025. The adoption of ASU 2023-08 is expected to have a material impact on the Consolidated Financial Statements.
Other recently issued accounting updates are not expected to have a material impact on the Company’s Financial Statements.
The
Company calculates earnings per share in accordance with FASB ASC 260, Earnings Per Share, which requires a dual presentation
of basic and diluted earnings per share. Basic earnings per share are computed using the weighted average number of shares outstanding
during the fiscal year. Due to the net loss recorded for the three and nine months ended September 30, 2024 and 2023, the consolidated
financial statements excluded potentially dilutive securities from the computation of diluted earnings per share because the inclusion
would have been anti-dilutive. Potentially dilutive securities as of September 30, 2024 and 2023 include the following securities that
are convertible into shares of Common Stock: shares of Series A Convertible Preferred Stock convertible into shares
of Common Stock; shares of Series C Convertible Preferred Stock convertible into shares of Common Stock; and outstanding
warrants to purchase
Nine Months Ended September 30, | Three Months Ended September 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Net income (loss) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average shares of common stock outstanding – Basic and diluted | ||||||||||||||||
| Net loss per share: | ||||||||||||||||
| Earnings per share – Basic and diluted | ) | ) | ) | ) | ||||||||||||
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NOTE 4. Prepaid Expenses
In
August 2023, the Company signed an agreement with M2 Compliance LLC (M2) for M2 to provide EDGAR filing services for the Company. The
term of the services is from August 19, 2023 to August 18, 2024. The annual fee is $
Also
in August 2023, the Company paid the annual fees to OCT Markets for two categories of services. The fee is $
In
December 2023, the Company hired a consultant to work on the patents related to the token business operations and paid a $
In
May 2024, the Company overpaid one of their vendors $
As
of September 30, 2024, the balance of prepaid expenses was $
NOTE 5. Intangible Assets
In
January 2023, the Company entered into a service agreement with Nodalium, Inc. through which Nodalium, Inc. (“Nodalium”)
will provide continuing services for the Architectural Plan Project, Core IT Platform & Digital Asset Ecosystem and Workflow management.
The consideration for this project is $
In
February 2023, ION Acquisition Corp., a company owned 100% by Carlos Montoya, the Company’s Chief Executive Officer and controlling
stockholder, signed a purchase agreement with Nahla Jacobs and Nahla Saleh Jacobs Trust and Orebits Acquisition Group LLC, to purchase
180 Orebits AU Certificates, valued at $
In
March 2023 the Company paid, through OAG (a related party), $
In
March 2023, the Company signed an agreement with Instruxi Limited, through which Instruxi Limited will build a technology stack for the
tokenization of precious metal, mineral, and/or commodity asset rights for unextracted deposits. The technology stack will allow the
Company to provide specialist consultation, through its ION’s Digital Architecture & Hybrid Blockchain Platform. The Company
paid $
In
December 2023, the Company obtained Orebits AU Certificates through the acquisition of Orebits. Pursuant to the purchase agreement,
I-ON Digital Corp. issued shares of Series C Preferred Stock in exchange for Orebits’
As
of September 30, 2024, the net value of the intangible assets was $
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NOTE 6. Related-Party Transactions
As
described in NOTE 1 and NOTE 7, in January 2023, the Company sold shares of its Series A Preferred Stock to related parties for
proceeds of $
As described in NOTE 5 the Company purchased certain intangible assets from related parties.
Through
an entity controlled by Carlos Montoya, the Company’s CEO and controlling stockholder, Mr. Montoya currently pays substantially
all the expenses for the Company’s operations and certain capital expenditures. For the nine months ended September 30, 2024 and
2023, the related party deposited cash into the Company and/or paid Company expenses of $
On
March 30, 2023, the Company sub-leased its Enterprise Workflow/Intelligent Automation Platform, as allowed under a relicensing provision
within that certain master software license agreement, to I-ON Acquisition Corp., an entity owned by Carlos Montoya, the Company’s
Chief Executive Officer, for annual fees of $
NOTE 7. Convertible Notes
In
November 2023, the Company issued Convertible Notes payable in the amount of $
For
the nine months ended September 30, 2024, the Company amortized debt discount of $
For
the nine months ended September 30, 2024, the Company recorded interest expense of $
NOTE 8. Stockholders’ Equity
On September 29, 2022, the Company effectuated an Equity Transfer Agreement (the “Sell-Off Agreement”) by and among the Company, Communications and JFJ Digital Corp., a Delaware corporation (“JFJ”), whereby all of the outstanding equity of Communications was transferred to JFJ in exchange for the return of shares of Common Stock held by Jae Cheol Oh, the Company’s-then Chief Executive Officer and Chief Financial Officer, and Hong Rae Kim, a founder and then-director of the Company (the “Sell-Off”). After the “Sell-off”, the Company had common shares outstanding.
In
September 2022, the Company established the Series A Preferred Stock. The authorized number of shares of Series A Preferred Stock is
six thousand (). Each share has a par value of $. In January 2023, pursuant to a certain purchase agreement, the Company issued
shares of Series A Preferred Stock for $
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In
September 2022, the Company established a series of preferred stock known as Series B Convertible Preferred Stock (“Series B Preferred
Stock”). The authorized number of shares of Series B Preferred Stock is six thousand () with a par value of $. In January
2023, the Company issued shares of Series B Preferred Sock according to a Contribution Agreement (the “Contribution Agreement”)
with certain Purchasers (the “Purchasers”) pursuant to which the Purchasers agreed to purchase shares of Series B Preferred
Stock for the consideration of cash $
Also in January 2023, all issued and outstanding shares of Series B Preferred Stock were converted into shares of Common Stock.
In January 2023, the Company cancelled shares of Common Stock issued to a stockholder.
In
May 2023, the Company issued shares of Series A Preferred Stock for the value of $
In
May 2023, the Company issued shares of Common Stock to Nahla Jacobs according to the service agreement signed with Nahla Jacobs
and Nahla Saleh Jacobs Trust and Orbits Acquisition Group LLC. The share price was $ per share and the total value was $
Also
in May 2023, the Company issued shares of Common Stock pursuant to the service agreement the Company signed with Dutchess Group
LLC at $ per share for a total of $
In
May and June 2023, the Company received $
In
November 2023, the Company issued
In
December 2023, the Company issued shares of Series C Preferred Stock in exchange for shares of Orebits. The authorized
number of shares of Series C Preferred Stock is with a par value of $ per share.
As of September 30, 2024, the Company had shares of Common Stock issued and outstanding.
NOTE 9. Subsequent Events
The Company follows the guidance in FASB ASC 855-10 for the disclosure of subsequent events. The Company evaluated subsequent events through the date the financial statements were available to be issued and determined the Company did not have any reportable subsequent events except the following:
After
the nine months ended September 30, 2024, related parties continue to fund the Company’s operations. Subsequent to September 30,
2024, the Company received total advances of $
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| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
Forward Looking Statements
This quarterly report on Form 10-Q contains forward-looking statements that involve risks and uncertainties. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions.
While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested in this report. Except as required by applicable law, we do not intend to update any of the forward-looking statements to conform these statements to actual results.
Our unaudited interim financial statements for the three and nine months ended September 30, 2024 and 2023 and as of September 30, 2024 and December 31, 2023 are expressed in US dollars and are prepared in accordance with GAAP. They reflect all adjustments (all of which are normal and recurring in nature) that, in the opinion of management, are necessary for fair presentation of our interim financial information. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for any subsequent quarter. Our unaudited financial statements and notes included therein have been prepared on a basis consistent with and should be read in conjunction with our audited financial statements and notes for the year ended December 31, 2023, as filed in our annual report on Form 10-K.
The following discussion should be read in conjunction with our interim financial statements and the related notes that appear elsewhere in this quarterly report.
Business Overview
Organization and Corporate History
I-ON is a leading-edge provider of asset-digitization and securitization solutions engineered to provide a secure, fast, transparent, and institutional-grade ecosystem. We specialize in digitizing documentary evidence of ownership into secure, asset-backed digital certificates, thus bringing liquidity and recognized value to a diverse array of asset classes. Our cutting-edge technology includes a zero-trust, hybrid blockchain architecture that incorporates state-of-the-art smart contracts and sophisticated workflow management AI technologies. This system enables the digitization of ownership records for recoverable gold, precious metals, and mineral reserves, transforming them into digital certificates that facilitate wealth transfer through innovative asset-backed financial instruments.
In 2023, I-ON continued to expand its market presence and product offerings. We notably acquired Orebits’ gold digitization patent portfolio, trademarks, brand marks, and core intellectual property (see Note 1 of the Notes to Financial Statements). This acquisition has allowed us to enhance our capabilities and broaden our service offerings, particularly through a new SaaS platform designed for banks, broker-dealers, and other financial intermediaries. This platform supports the receipt, management, and reporting of digital assets, reinforcing our commitment to innovation in the banking, financial technology, and mineral asset industries.
Results of Operations
Net Sales – Related Party
The related party sales for the nine months ended September 30, 2024 and 2023 were $32,625 and $65,250, respectively. The sales for the three months ended September 30, 2024 and 2023 were $0 and $32,625, respectively. The Company subleased its license to a related party for one year from April 2023 through March 2024 for an annual fee of $130,500. The Company received the full amount and recorded it as deferred revenue which was recognized ratably into revenue over the twelve-month licensing period beginning in April 2023.
Cost of Sales
The cost of sales for the nine months ended September 30, 2024 and 2023 were $21,000 and $48,667, respectively. The cost of sales for the three months ended September 30, 2024 and 2023 were $0 and $27,667, respectively. The costs were recognized over the same period revenue was generated, from April 2023 through March 2024.
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Gross Profit
The gross profit for the nine months ended September 30, 2024 and 2023 was $11,625 and $16,583, respectively. The gross profit for the three months ended September 30, 2024 and 2023 was $0 and $4,958, respectively. This is aligned to the sales in the same periods.
Operating Expenses
Operating expenses consist of professional fees and general and administrative expenses.
Operating expenses for the nine months ended September 30, 2024 was $771,208, containing $334,469 of professional fees and $436,739 of general and administrative expenses. Comparing with the nine months ended September 30, 2023, the operating expenses were $458,498, containing $225,590 of professional fees, and $232,908 of general and administrative expenses.
Operating expenses for the three months ended September 30, 2024 was $344,289, containing $142,890 of professional fees and $201,399 of general and administrative expenses. Comparing with the three months ended December 30, 2023, the operating expenses were $119,068, containing $41,830 of professional fees, and $72,238 of general and administrative expenses.
The increase in operating expenses was due to more costs incurred such as professional fees, computer and internet expenses, franchise tax, travel and payroll expenses, etc. during the three and nine months ended September 30, 2024.
Other Income (Expense)
For the three and nine months ended September 30, 2024, the Company had interest expenses of $160,623 and $478,856. There were no such expenses for the three and nine months ended September 30, 2023, as the Company obtained loans of $550,000, recorded with debt discount at inception, in November 2023, and did not recognize any interest or amortization of debt discount before that date.
For the three and nine months ended September 30, 2024, the Company exchanged 50 units of Orebits for 2 units of Bitcoin, resulting in a gain on exchange of intangible assets of $25,682, and sold the 2 units of Bitcoin for cash of $120,425 resulting in a gain on sale of intangible assets of $3,795.
Liquidity and Capital Resources
As of September 30, 2024 the Company had its cash of $199,959 in its bank account.
Operating Activities
Cash of $745,920 was used in operating activities for the nine months ended September 30, 2024, compared to the cash provided by operating activities of $12,107 for the nine months ended September 30, 2023. The change was mainly due to the net loss that more than doubled for the nine months ended September 30, 2024 compared to the net loss for the nine months ended September 30, 2023.
Investing Activities
Cash provided by investing activities for the nine months ended September 30, 2024 was $94,743, compared to cash used in investing activities $560,353 for the nine months ended September 30, 2023. The change was due to the Company selling and exchanging intangible assets during the current period versus investing in intangible assets during the prior period.
Financing Activities
Cash provided by financing activities for the nine months ended September 30, 2024 was $815,061, compared to cash provided in financing activities of $548,532 for the nine months ended September 30, 2023. The increase was due to more funds being needed for the Company’s operations in the current period.
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Critical Accounting Estimates
Our financial statements are affected by the accounting policies used and the estimates and assumptions made by management during their preparation. A complete summary of these policies is included in Note 2 of the notes to our financial statements. We have identified below the accounting policies that are of particular importance in the presentation of our financial position, results of operations and cash flows, and which require the application of significant judgment by our management. Management has carefully considered the recently issued accounting pronouncements that altered generally accepted accounting principles and does not believe that any other new or modified principles will have a material impact on the Company’s reported financial position or operations in the near term.
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk |
We are a smaller reporting company as defined by 17 C.F.R. 229 (10)(f)(i) and are not required to provide information under this item.
| Item 4. | Controls and Procedures |
Disclosure Controls and Procedures
As required by Rule 15d-15(b) under the Exchange Act, our management, including our principal executive and financial officer, carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 15d-15(e) under the Exchange Act) as of September 30, 2024, the last day of the period covered by this Quarterly Report. Based on this evaluation, our management, including our principal executive and financial officer, concluded that, as of September 30, 2024, our disclosure controls and procedures were not fully effective at the reasonable assurance level.
Limitations on Effectiveness of Controls
Our management, including our principal executive and financial officer, does not expect that our disclosure controls and procedures, or our system of internal control over financial reporting (as defined in Rule 15d-15(f) under the Exchange Act), will prevent or detect all errors and all fraud. A control system, no matter how well designed or operated, can provide only reasonable, but not absolute, assurance that the objectives of the system are met. The design of our control system reflects the fact that there are resource constraints, and that the benefits of such control system must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control failures and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the intentional acts of individuals, by collusion of two or more people, or by management override of the controls. The design of any system of controls is also based in part on certain assumptions about the likelihood of future events, and there can be no assurance that the design of any particular control will always succeed in achieving its objective under all potential future conditions.
Changes in Internal Control over Financial Reporting
There has not been any change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the three-month period ended September 30, 2024 that has materially affected, or is reasonably likely to materially affect our internal control over financial reporting.
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PART II – OTHER INFORMATION
| Item 1. | Legal Proceedings |
None of our directors, officers, affiliates, any owner of record or beneficially of more than 5% of our voting securities, or any associate of any such director, officer, affiliate or security holder are (i) a party adverse to us in any legal proceedings, or (ii) have a material interest adverse to us in any legal proceedings. We are not aware of any other legal proceedings that have been threatened against us.
| Item 2. | Unregistered Sales of Equity Securities |
None.
| Item 3. | Defaults Upon Senior Securities |
None.
| Item 4. | Mine Safety Disclosures |
Not applicable.
| Item 5. | Other Information |
Rule
10b-5(1) Trading Plans. During the three months ended September 30, 2024, no director or officer of the Company
| Item 6. | Exhibits |
Exhibit Number |
Exhibit Description | |
| 31.1 | Certification of Chief Executive and Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as amended, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act Of 2002 | |
| 31.2 | Certification of Chief Executive and Financial Officer Pursuant to 18 U.S.C. 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002** | |
| ** | The certifications furnished in Exhibit 32.1 hereto are deemed to accompany this Form 10-Q and are not deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, nor shall they be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act. |
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Date: November 12, 2024 | ||
| I-ON DIGITAL CORP. | ||
| By: | /s/ Carlos X. Montoya | |
| Carlos X. Montoya | ||
Chairman, President (Principal Executive, Financial and Accounting Officer) | ||
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