I-ON Digital Corp. - Quarter Report: 2023 March (Form 10-Q)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| ☒ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For the quarterly period ended March 31, 2023
or
| ☐ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from ______________________ to ______________________
Commission file number: 000-54995
I-ON DIGITAL CORP.
(Exact name of registrant as specified in its charter)
(formerly known as I-ON Communications Corp.)
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Delaware
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46-3031328
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|
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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1244 N. Stone Street, Unit 3, Chicago, IL 60610
(Address of principal executive offices, including zip code)
(866) 440-2278
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Exchange Act: None
Securities registered pursuant to Section 12(g) of the Exchange Act: Common Stock, Par Value $0.0001
Indicate by check mark whether the registrant (1) has filed all reports required to be filed 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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐
Indicate by check mark whether
the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer ☐
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Accelerated filer ☐
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Non-accelerated filer ☒
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Smaller reporting company ☒
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Emerging growth company ☐
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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 ☒
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class
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Trading
Symbol(s)
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Name of each exchange on which
registered
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||
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Common Stock, $0.0001 par value per share
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IONI
|
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The number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
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Class
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Outstanding as of May _, 2023
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|
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Common Stock, $0.0001 par value per share
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[0] shares
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|
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PART I – FINANCIAL INFORMATION
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Item 1.
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3 |
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Item 2.
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17 |
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Item 3.
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20 |
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Item 4.
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20 |
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PART II – OTHER INFORMATION
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Item 1.
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21 |
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Item 2.
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21 |
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Item 3.
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21 |
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Item 4.
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21 |
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Item 5.
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21 |
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Item 6.
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21 |
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22 |
PART 1 – FINANCIAL INFORMATION
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Item 1.
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Interim Financial Statements
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The unaudited interim financial statements of I-ON Digital Corp. (“we”, “our”, “us”, the “Company”) follow. All currency references
in this report are to US dollars unless otherwise noted.
I-ON Digital Corp.
Table of Contents
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Financial Statements (UNAUDITED)
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I-ON Digital Corp.
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March 31,
2023
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December 31,
2022
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|||||||
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ASSETS
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||||||||
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Current assets:
|
||||||||
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Cash and cash equivalents
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$
|
350,000
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$
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-
|
||||
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Total current assets
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350,000
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-
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||||||
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|
||||||||
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Non-current assets:
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||||||||
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Intangible assets, net
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84,000
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-
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||||||
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Total non-current assets
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84,000
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-
|
||||||
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Total Assets
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$
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434,000
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$
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-
|
||||
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Liabilities and Stockholders’ Equity
|
||||||||
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Current liabilities:
|
||||||||
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Accrued expenses
|
$
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88,980
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$
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-
|
||||
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Deferred revenue - related party
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130,500
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-
|
||||||
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Due to related parties
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174,500
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-
|
||||||
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Other current liabilities - related party
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219,500
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-
|
||||||
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Total current liabilities
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613,480
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-
|
||||||
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Total liabilities
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613,480
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-
|
||||||
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Commitments and contingencies
|
||||||||
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Stockholders’ Equity
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||||||||
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Preferred stock Series A - $0.0001 par value;
authorized 6,000 shares And 3,600
shares and issued and outstanding at March 31, 2023 and December 31, 2022
|
-
|
-
|
||||||
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Common stock - $0.0001
par value; authorized 100,000,000 shares;25,723,870 shares and 19,724,220 issued and outstanding at March 31, 2023 and
December 31, 2022
|
2,572
|
1,972
|
||||||
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Additional paid-in-capital
|
2,688,791
|
2,689,391
|
||||||
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Accumulated retained earnings
|
(2,870,843
|
)
|
(2,691,363
|
)
|
||||
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Total stockholders’ equity (deficit)
|
(179,480
|
)
|
-
|
|||||
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Total Liabilities and Stockholders’ Equity
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$
|
434,000
|
$
|
-
|
||||
See accompanying notes to unaudited condensed financial statements.
I-ON Digital Corp.
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Three Months Ended March 31,
2023
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Three Months Ended March 31,
2022
(Consolidated)
|
|||||||
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Net sales
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$
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-
|
$
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-
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||||
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Cost of goods sold
|
-
|
-
|
||||||
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Gross profit
|
-
|
-
|
||||||
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Operating expense
|
||||||||
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Professional fees
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116,000
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-
|
||||||
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General and administrative expenses
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63,480
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-
|
||||||
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Total expenses from operations
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179,480
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-
|
||||||
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Income (loss) from continuing operations
|
(179,480
|
)
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-
|
|||||
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Income (loss) from discontinued operations
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-
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(702,192
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)
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|||||
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Income (loss) on equity investment and other income
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-
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974,151
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||||||
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Income (loss) from discontinued operations before income taxes and non-
controlling interest
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(179,480
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)
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271,959
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|||||
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Provision for income taxes
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-
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-
|
||||||
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Income (loss) before non-controlling interest
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(179,480
|
)
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271,959
|
|||||
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Non-controlling interest (loss)
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-
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(140,515
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)
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|||||
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Net loss from continued operations
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(179,480
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)
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-
|
|||||
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Net income attributable to Parent Company from discontinued operations
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$
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-
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$
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412,474
|
||||
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Comprehensive income statement:
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||||||||
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Net income (loss) from continuing operations
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$
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(179,480
|
)
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$ | - | |||
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Net income (loss) from discontinued operations
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-
|
271,959
|
||||||
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Foreign currency translation loss
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-
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(227,991
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)
|
|||||
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Total comprehensive income (loss) from discontinued operations
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$
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-
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$
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43,968
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||||
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Basic earnings per share from continuing operations
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||||||||
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Net loss before non-controlling interest
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$
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(0.01
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)
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$
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N/A
|
|||
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Non-controlling interest
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$
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0.00
|
$
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N/A
|
||||
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Earnings per share to stockholders
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$
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(0.01
|
)
|
$
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N/A
|
|||
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Basic earnings per share from discontinued operations
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||||||||
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Net loss before non-controlling interest
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$
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N/A
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$
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0.01
|
||||
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Non-controlling interest
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$
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N/A
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$
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0.00
|
||||
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Earnings per share to stockholders
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$
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N/A
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$
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0.01
|
||||
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Diluted earnings per share from discontinued operations
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||||||||
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Net loss before non-controlling interest
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$
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N/A
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$
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0.01
|
||||
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Non-controlling interest
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$
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N/A
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$
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0.00
|
||||
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Earnings per share to stockholders
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$
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N/A
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$
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0.01
|
||||
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Weighted average number of common shares outstanding:
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||||||||
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Basic
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22,657,308
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35,030,339
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||||||
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Diluted
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50,657,308
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35,030,339
|
||||||
See accompanying notes to unaudited condensed financial statements.
I-ON Digital Corp.
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Preferred Stock
|
||||||||||||||||||||||||||||||||||||
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Common Stock
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Series A
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Series B
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||||||||||||||||||||||||||||||||||
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Shares
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Amount
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Shares
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Amount
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Shares
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Amount
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Additional
Paid-in
Capital
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Retained
Earnings
|
Total
Stockholders’
Equity
|
||||||||||||||||||||||||||||
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Balance at December 31, 2022
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19,724,220
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$
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1,972
|
-
|
-
|
-
|
$
|
-
|
$
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2,689,391
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$
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(2,691,363
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)
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$
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-
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|||||||||||||||||||||
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Issuance of preferred stock - series A
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-
|
- |
3,600
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$
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-
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-
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-
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214,286
|
- |
214,286
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||||||||||||||||||||||||||
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Distribution
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-
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- |
-
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-
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-
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-
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(250,000
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)
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- |
(250,000
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)
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|||||||||||||||||||||||||
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Issuance of preferred stock - series B
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-
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- |
-
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-
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6,000
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1
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35,713
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-
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35,714
|
|||||||||||||||||||||||||||
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Preferred stock series B conversion to Common Stock
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6,000,000
|
600
|
-
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-
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(6,000
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)
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(1
|
)
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(599
|
)
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-
|
-
|
||||||||||||||||||||||||
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Common stock cancellation
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(350
|
)
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-
|
-
|
-
|
-
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-
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-
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-
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-
|
||||||||||||||||||||||||||
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Net income (loss)
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(179,480
|
)
|
(179,480
|
)
|
|||||||||||||||||||||||||
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|
||||||||||||||||||||||||||||||||||||
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Balance at March 31, 2023
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25,723,870
|
$
|
2,572
|
3,600
|
$
|
-
|
-
|
$
|
-
|
$
|
2,688,791
|
$
|
(2,870,843
|
)
|
$
|
(179,480
|
)
|
|||||||||||||||||||
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Common Stock
|
(Consolidated)
|
|||||||||||||||||||||||||||||||||||||||
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Shares
|
Amount
|
Additional
Paid-In
Capital
|
Retained
Earnings
|
Treasury
Stock
|
Accumulated
Other
Comprehensive
Income (Loss)
|
Total
Company
Stockholders’
Equity
|
Non-
Controlling
Interest
|
Preferred
Stock
|
Total
Stockholders’
Equity
|
|||||||||||||||||||||||||||||||
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|
||||||||||||||||||||||||||||||||||||||||
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Balance at December 31, 2021
|
35,030,339
|
$
|
3,503
|
$
|
3,713,370
|
$
|
7,681,661
|
$
|
(709,478
|
)
|
$
|
(726,500
|
)
|
$
|
9,962,556
|
$
|
(165,796
|
)
|
$
|
1,093,569
|
$
|
10,890,392
|
||||||||||||||||||
|
Foreign currency translation
|
-
|
-
|
-
|
-
|
-
|
(227,991
|
)
|
(227,991
|
)
|
-
|
-
|
(227,991
|
)
|
|||||||||||||||||||||||||||
|
Net income (loss)
|
- |
-
|
-
|
412,474
|
-
|
-
|
412,474
|
30,682
|
-
|
443,156
|
||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||
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Balance at March 31, 2022
|
35,030,339
|
$
|
3,503
|
$
|
3,713,370
|
$
|
8,094,135
|
$
|
(709,478
|
)
|
$
|
(954,491
|
)
|
$
|
10,147,039
|
$
|
(135,114
|
)
|
$
|
1,093,569
|
$
|
11,105,494
|
||||||||||||||||||
See accompanying notes to unaudited condensed financial statements.
|
Three months ended March 31,
|
2023
|
2022
(Consolidated)
|
||||||
|
Cash flows from operating activities:
|
||||||||
|
Net income (loss)
|
$
|
(179,480
|
)
|
$
|
-
|
|||
|
Changes in assets and liabilities
|
||||||||
|
Accrued expenses
|
88,980
|
-
|
||||||
|
Deferred revenue - related party
|
130,500
|
-
|
||||||
|
Other current liabilities - related party
|
219,500
|
-
|
||||||
|
Net cash provided by (used in) continuing operations
|
259,500
|
-
|
||||||
|
Net cash provided by (used in) discontinued operations
|
-
|
(105,460
|
)
|
|||||
|
Total net cash provided by (used in) operating activities
|
259,500
|
(105,460
|
)
|
|||||
|
Cash flows from investing activities:
|
||||||||
|
Purchase of intangible assets
|
(84,000
|
)
|
-
|
|||||
|
Total net cash provided by (used in) continuing investing activities
|
(84,000
|
)
|
-
|
|||||
|
Total net cash provided by (used in) discontinued investing activities
|
-
|
55,477
|
||||||
|
Total net cash provided by (used in) investing activities
|
(84,000
|
)
|
55,477
|
|||||
|
Cash flows from financing activities:
|
||||||||
|
Proceeds from issuance of preferred stock Series A
|
214,286
|
-
|
||||||
|
Proceeds from issuance of preferred stock Series B
|
35,714
|
-
|
||||||
|
Distribution
|
(250,000
|
)
|
-
|
|||||
|
Advances from related parties
|
174,500
|
-
|
||||||
|
Total net cash provided by (used in) continuing financing activities
|
174,500
|
-
|
||||||
|
Total net cash provided by (used in) discontinued financing activities
|
-
|
(7,444
|
)
|
|||||
|
Total net cash provided by (used in) financing activities
|
174,500
|
(7,444
|
)
|
|||||
|
Effect of foreign currency translation on cash and cash equivalents
|
-
|
(22,749
|
)
|
|||||
|
Net increase (decrease) in cash and cash equivalents
|
350,000
|
(80,176
|
)
|
|||||
|
Cash and cash equivalents including restricted cash, beginning of period
|
-
|
5,308,644
|
||||||
|
Cash and cash equivalents including restricted cash, end of period
|
$
|
350,000
|
$
|
5,228,468
|
||||
|
Supplemental disclosure of cash flow information:
|
||||||||
|
Continuing operations:
|
||||||||
|
Interest paid
|
$
|
-
|
$
|
-
|
||||
|
Taxes paid
|
$
|
-
|
$
|
-
|
||||
|
Discontinued operations:
|
||||||||
|
Interest paid
|
$
|
-
|
$
|
7,039
|
||||
|
Taxes paid
|
$
|
-
|
$
|
2,162
|
||||
See accompanying notes to unaudited condensed financial statements.
| NOTE 1: |
Organization and Operations
|
I-ON
Digital Corp. (“the Company”) was incorporated on July 5, 1999 and is engaged in developing and supplying computerized system. The corporate headquarter was located at 15 Teheran-ro 10-gil Gangnam-gu Seoul, South Korea. The Company
provided enterprise content management services to customers primarily in Korea, Japan and Indonesia, by developing industry-leading products such as ICS (web content management system), iDrive (e-document management system), LAMS
(load aggregator’s management system), e.Form (mobile contract system), IDAS (digital asset management system) and ICE (content delivery system).
On or
about August 1, 2021, the Company’s wholly-owned subsidiary I-ON Communications, Ltd. (“Communications”) formed a new subsidiary named eformworks Co., Ltd. (“e.Form”) into which Communications moved its electronic signature
operations. Communications contributed approximately $253,000 on August 1, 2021 and $77,000 on September 30, 2022 to e.Form to subscribe for its founders shares and owns 59.82% of the outstanding capital stock of e.Form.
On June 28, 2022, the board of directors of the Company’s wholly-owned subsidiary I-ON Communications, Ltd. (“Communications”) approved to form a new subsidiary named EIPGRID, which provides the
community energy service platforms. Hence Communications contributed approximately $773,000 to EIPGRID to subscribe
for its founders’ shares, and considered a subsidiary to consolidate.
On
September 29, 2022, the Company effectuated an Equity Transfer Agreement (the “Sell-Off Agreement”) 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 15,306,119 shares of the Company’s Common
Stock held by Jae Cheol Oh and Hong Rae Kim, the Company’s principal executive officer and members of the Board of Directors (the “Sell-Off”). Pursuant to the Sell-Off Agreement, in addition to acquiring all of the outstanding
capital stock of Communications, JFJ assumed all responsibilities for any debts, obligations and liabilities of Communications and acquire all rights to any assets of Communications, including, but not limited to, the
Subscription Amount.
As a result of the
Sell-Off, Communications ceased being a subsidiary of the Company. Accordingly, the operating results of Communications are reported in pretax income (loss), income tax, income (loss) before loss on equity investment, loss on
equity investment, income (loss) before non-controlling interest, non-controlling interest income (loss), and net loss from discontinued operations, in the Consolidated Statements of Operations for all periods presented. In
addition, the related assets and liabilities held prior to the Sell-Off are reported as Assets and Liabilities of Discontinued Operations on the Consolidated Balance Sheets. All amounts and disclosures included in the Notes to
Consolidated Financial Statements reflect only the Company’s continuing operations unless otherwise noted. For additional information, see Note 3 “Discontinued Operations” and Note 5 “Deconsolidation of Subsidiaries.”
On September 28, 2022, I-On Digital Corp. (the “Company,” “we,” “us” or “our”) entered into a Series A Preferred Stock Purchase Agreement (the “Purchase Agreement”) with I-ON Acquisition Corp., a Florida corporation (“IAC”). In January 2023, the Purchase Agreement was executed and the ownership changed to IAC. The Company adopted the operations of IAC. Accordingly, the Company is in the business of providing digital-based enterprise solutions, including the digitization and distribution of precious metals, primarily gold and other asset-based digital securities on the Blockchain.
In March 2023, the Company signed a marketing consulting service agreement with a marketing consulting service company (the “Consultant”). According to the agreement, the Consultant will provide a comprehensive marketing, branding, and investor relation team focused on amplifying, growing, and refining the Company’s brand messaging and thought leadership position in the precious metals, web 3.0 and overall financial market place. The term is eighteen (18) months and renew automatically in six (6) month increments. The Company pays $11,000 for the monthly fees.
| 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 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, 2022, 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 March 31, 2023 are not necessarily indicative
of the results to be expected for the entire fiscal year ending December 31, 2023 or for any future period.
These unaudited condensed 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, 2022.
Going Concern
The accompanying financial statements have been prepared in conformity with GAAP, which contemplate continuation of the Company as a
going concern. However, the Company had no revenues since the Sell-off of its subsidiaries in September 2022. As of March 31, 2023, the Company has not completed its efforts to establish a stabilized source of revenues sufficient to cover
operating costs over an extended period of time. Therefore, there is a remaining concern about the Company’s ability to continue as a going concern.
The Company’s business prospects have changed since new
management took control of operations in January 2023. During the period ended March 31, 2023, 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. Management’s efforts are noted, though there
can be no assurances that the Company will be successful in this or any of its endeavors.
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.
Foreign Currency Transaction and Translation
The Company’s principal country of operations was Korea. The financial position and results of operations of the Company were
determined using the local currency, Korean Won (“KRW”), as the functional currency.
| ● |
I-ON, Ltd (Japanese subsidiary) – The financial position and results of operations of I-ON, Ltd, the Japanese subsidiary of the Company, were initially recorded using its local
currency, Japanese Yen (“JPY”). Assets and liabilities denominated in foreign currency were translated to the functional currency at the functional currency rate of exchange at the balance sheet date. The results of operations
denominated in foreign currency were translated at the average rate of exchange during the reporting period. All differences were reflected in profit or loss.
|
| ● |
Consolidation – Assets and liabilities denominated in foreign currencies at the balance sheet date were translated at the exchange rates prevailing at the balance
sheet date. The results of operations were translated from KWR to US Dollar at the weighted average rate of exchange during the reporting period. The registered equity capital denominated in the functional currency was translated at the
historical rate of exchange at the time of capital contribution. All translation adjustments resulting from the translation of the financial statements into the reporting currency, US Dollar, were dealt with as a component of
accumulated other comprehensive income.
|
Segment Reporting
FASB ASC 280, Segment Reporting, requires public companies to report financial and descriptive information about their reportable
operating segments. Operating segments are defined as components of an enterprise about which separate financial information is available and that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources
and in assessing performance. The Company’s chief executive officer has been identified as the chief decision maker.
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.
Property and Equipment
Property and equipment are recorded at cost. Depreciation of property and equipment is computed using the double declining balance
method, based on the estimated useful lives as follows:
|
Facility equipment
|
4 years
|
|
Automobile
|
4 years
|
|
Office equipment
|
4 years
|
Repairs and maintenance are expensed as incurred. Expenditures that increase the value or productive capacity of assets are
capitalized. When property and equipment are retired, sold, or otherwise disposed of, the asset’s carrying amount and related accumulated depreciation are removed from the accounts, and any gain or loss is included in operations.
Intangible Assets
When the Company acquires an intangible asset, it is recorded at acquisition cost (the purchase price of the intangible asset and the
costs directly related to the preparation of the asset for its intended purpose). The cost of an intangible asset acquired in a business combination is measured at the fair value at the acquisition date according to the accounting standards for
business combinations. 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
|
3 years
|
|
Intangible assets excluding development costs
|
10 years
|
|
Other Intangible assets
|
3 to 5 years
|
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.
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”). Digital assets can be sold at will, held for investment as such, are classified as a non-current asset.
These digital assets are not amortized, but are 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 intangible asset is impaired. Whenever the exchange-traded price of digital assets declines below its carrying value, the Company has determined that an
impairment exists and records impairment equal to the amount by which the carrying value exceeds the fair value.
Earnings Per Share
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.
|
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 for the three months ended March 31, 2023 and 2022.
Contingencies
Accounting guidance requires that the Company record an estimated loss from a loss contingency when information available prior to
issuance of the 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 and trade receivable arising from
its normal business activities. The Company currently does not have a cash account. The Company will deposit its cash in high credit quality institutions. The Company performs ongoing credit evaluations to its customers and establishes allowances
when appropriate.
Advertising
Costs associated with advertising and promotions are expensed as incurred.
Employee Stock Based Compensation
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 three years.
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.
Non-controlling Interests
Non-controlling interests are measured at their proportionate share of the acquiree’s identifiable net assets at the acquisition date
and is adjusted at each reporting date for the net income (loss) attributable to that non-controlling interest during that period.
Recently Issued Accounting Pronouncements
In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848)—Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This standard provides optional guidance for a limited time to ease the potential burden in accounting
for (or recognizing the effects of) reference rate reform on financial reporting. The amendments in this standard apply only to contracts and hedging relationships that reference LIBOR or another reference rate expected to be discontinued due to
reference rate reform. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after March 31, 2023. The amendments in this standard are elective and
are effective upon issuance for all entities. The Company is evaluating the expedients and exceptions provided by the amendments in this standard to determine their impact.
Other recently issued accounting updates are not expected to have a material impact on the Company’s Financial Statements.
| NOTE 3. |
Discontinued
Operations
|
On September 29, 2022, the Company effectuated an Equity Transfer Agreement (the “Sell-Off Agreement”) 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 15,306,119 shares of the Company’s Common Stock held by Jae Cheol Oh and Hong Rae Kim, the Company’s principal executive officer and
members of the Board of Directors (the “Sell-Off”) . Pursuant to the Sell-Off Agreement, in addition to acquiring all of the outstanding capital stock of Communications, JFJ will assume all responsibilities for any debts, obligations and
liabilities of Communications and acquire all rights to any assets of Communications.
As a result of the Sell-Off, Communications ceased being a subsidiary of the Company. Accordingly, the operating results of Communications are
reported in pretax income (loss), income tax, income (loss) before loss on equity investment, loss on equity investment, income (loss) before non-controlling interest, non-controlling interest income (loss), and net income (loss) from discontinued
operations in the Statements of Operations for all periods presented. In addition, the related assets and liabilities held prior to the Sell-Off are reported as Assets and Liabilities of Discontinued Operations on the Balance Sheets.
In accordance with FASB ASC 805, Business Combinations, the transaction was determined to be transfers and exchanges between entities under the
common control. Accordingly, the difference between the proceeds received by the Company and the book value of the Communications and Communication’s subsidiaries has been recognized as an equity transaction and no gain or loss has been recorded.
The following table presents the components of discontinued operations in relation to Communications reported in the statements of
operations:
|
|
Three months ended March 31,
|
|||||||
|
|
2023
|
2022 (Consolidated)
|
||||||
|
|
||||||||
|
Net Sales
|
-
|
2,465,628
|
||||||
|
Operating costs and expenses
|
-
|
3,167,820
|
||||||
|
Income (loss) from operations before other income and income taxes
|
-
|
(702,192
|
)
|
|||||
|
Other income (loss)
|
-
|
974,151
|
||||||
|
Income (loss) from discontinued operations before income taxes, loss on equity investment,
and non-controlling interest
|
-
|
271,959
|
||||||
|
Income tax
|
-
|
-
|
||||||
|
Income (loss) from discontinued operations before loss on equity investment and
non-controlling interest
|
-
|
271,959
|
||||||
|
Loss on equity investment
|
-
|
-
|
||||||
|
Income (loss) from discontinued operations before non-controlling interest
|
-
|
271,959
|
||||||
|
Non-controlling interest income (loss) from discontinued operations
|
-
|
(140,515
|
)
|
|||||
|
Net income (loss) attributable to Parent Company from discontinued operations
|
-
|
412,474
|
||||||
|
Comprehensive income statement
|
||||||||
|
Net income (loss) from discontinued operations
|
-
|
271,959
|
||||||
|
Foreign currency translation loss
|
-
|
(227,991
|
)
|
|||||
|
Total comprehensive income (loss) from discontinued operations
|
-
|
43,968
|
||||||
| NOTE 4. |
Earnings Per Share
|
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. Potentially dilutive common shares consist of stock options outstanding (using the treasury method).
The following table
sets forth the computation of basic and diluted net income per common share:
|
Three Months
Ended March 31,
|
||||||||
|
Periods Ended
|
2023
|
2022
(Consolidated)
|
||||||
|
Net income (loss)
|
$
|
(179,480
|
)
|
$
|
271,959
|
|||
|
Net income (loss) from continuing operations
|
(179,480
|
)
|
-
|
|||||
|
Net income (loss) from discontinued operations
|
-
|
271,959
|
||||||
|
Weighted-average shares of common stock outstanding:
|
||||||||
|
Basic
|
22,657,308
|
35,030,339
|
||||||
|
Convertible notes
|
28,000,000
|
-
|
||||||
|
Dilutive shares
|
50,657,308
|
35,030,339
|
||||||
|
Net income (loss) from continuing operations:
|
||||||||
|
Earnings per share - Basic
|
||||||||
|
Net income (loss) before non-controlling interest
|
$
|
(0.01
|
)
|
$
|
0.01
|
|||
|
Non-controlling interest
|
$
|
0.00
|
$
|
0.00
|
||||
|
Earnings per share to stockholders
|
$
|
(0.01
|
)
|
$
|
0.01
|
|||
|
Earnings per share - Diluted
|
||||||||
|
Net income (loss) before non-controlling interest
|
$
|
0.00
|
$
|
0.01
|
||||
|
Non-controlling interest
|
$
|
0.00
|
$
|
0.00
|
||||
|
Earnings per share to stockholders
|
$
|
0.00
|
$
|
0.01
|
||||
|
Net income (loss) from discontinued operations:
|
||||||||
|
Earnings per share - Basic
|
||||||||
|
Net income (loss) before non-controlling interest
|
$
|
|
$
|
0.01
|
||||
|
Non-controlling interest
|
$
|
|
$
|
0.00
|
||||
|
Earnings per share to stockholders
|
$
|
|
$
|
0.01
|
||||
|
Earnings per share - Diluted
|
||||||||
|
Net income (loss) before non-controlling interest
|
$
|
0.00
|
$
|
0.01
|
||||
|
Non-controlling interest
|
$
|
0.00
|
$
|
0.00
|
||||
|
Earnings per share to stockholders
|
$
|
0.00
|
$
|
0.01
|
||||
| NOTE 5. |
Deconsolidation of Subsidiaries
|
As of the Sell-Off date, which was September 29, 2022, the Company had approximately $12.6 million of total assets and $3.6
million of total liabilities on its consolidated balance sheet. As part of deconsolidation, we removed the balance of Accumulated Other Comprehensive Income (loss)
which contains $2.4 million of foreign currency translation gain related to the Sell-Off companies. Those assets and liabilities
were owned by Communications or Communications’ subsidiaries, such as I-ON, Ltd (Japanese subsidiary), eformworks Co., Ltd. (Korean subsidiary) and EIPGRID (Korean subsidiary). As a result of the Sell-Off Agreement, all assets and liabilities were transferred to JFJ.
Mr. Oh and Mr. Kim returned their shares of the Company, total 15,306,119 approximately 43% of total
outstanding shares, to the Company in exchange for the transfer of all outstanding equity of Communications to JFJ. Stock price on September 29, 2022 was $0.067;
therefore, the fair market value the proceeds was $1,025,510 which was calculated by multiplying the number of shares transferred to the
stock price on September 29, 2022.
In accordance with FASB ASC 805, Business Combinations, the transaction was determined as transfers and
exchanges between entities that are under the common control. Accordingly, the difference between the proceeds received by the Company and the book value of the Communications and Communication’s subsidiaries will be recognized as an equity
transaction and no gain or loss would be recorded.
|
NOTE 6.
|
Intangible Assets
|
In March 2023, the Company paid, through Orebits Acquisition Group (a related party), $84,000 to Oktane Media for
Nodalium Channel Partnership Agreement & Transaction Costs, through which the Company obtain certain license that allow the Company to resell the license. The license fee covers one year. The asset will be amortized over the next twelve months
starting from April 2023.
| NOTE 7. |
Related Party Transactions
|
The Company’s major shareholder pays the expenses for the company’s operations and certain capital expenditures. For the three months
ended March 31, 2023 and 2022, the major shareholder paid expense of $174,500 and $0, respectively. As of March 31, 2023 and December 31, 2022, the balances due to the major shareholder were $174,500 and $0, respectively. These advances from the
major shareholder are unsecured, non-interest bearing and payable on demand. There are no written agreements for these advances.
In March 30, 2023, the Company sub-leased its software license to I-ON Acquisition Inc. for the annual fees of $130,500. The Company received the full amount and recorded as deferred revenue. The Company will recognize the revenue over the next twelve months starting from April 2023.
|
NOTE 8.
|
Stockholders’ Equity
|
As indicated in NOTE 3, on September 29, 2022, the Company effectuated an Equity Transfer Agreement (the “Sell-Off
Agreement”) 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 15,306,119 shares of the Company’s Common Stock held by Jae Cheol Oh and Hong Rae Kim, the Company’s principal executive officer and members of the
Board of Directors (the “Sell-Off”). After the “Sell-off”, the Company had 19,724,220 common shares outstanding.
In September 2022, the Company established a series of preferred stock as “Series A Convertible Preferred Stock”. The
authorized number of Series A Preferred Shares is six thousand (6,000). Each Series A Convertible Preferred Share has a par value of $0.0001. In January 2023, the Company issued 3,600
shares of convertible preferred stock – Series A for $214,286 cash consideration . Also according to SPA, the $214,286 was distributed to the former major shareholder. Each Series A Preferred Share is convertible into Ten Thousand (10,000) shares of the Company’s common stock, par value $0.0001
per share (the “Common Stock”) and is entitled to vote on matters as to which holders of the Common Stock shall be entitled to vote at a rate of Ten Thousand (10,000) votes per share of Series A Preferred.
In September 2022, the Company established a series of preferred stock as “Series B Convertible Preferred Stock”. The
authorized number of Series B Preferred Shares is six thousand (6,000). Each Series B Convertible Preferred Share has a par value of $0.0001. In January 2023, the Company issued 6,000
shares of preferred stock Series B according to a Contribution Agreement (the “Contribution Agreement”) with certain Purchasers (the “Purchasers”) pursuant to which the Purchasers agreed to purchase 6,000 shares of a newly created Series B Convertible Preferred Stock, par value $0.0001
per share (the “Series B Preferred”), for the consideration of cash $35,714. Each Series B Convertible Preferred Share is convertible
into one thousand (1,000) shares of the Company’s common stock, par value $0.0001 per share (the “Common Stock”).
Also in January 2023, the 6,000
preferred stock Series B were converted to 6,000,000 common shares.
Again in January 2023, the Company cancelled 350 shares of common stock per shareholders’ request.
As of March 31, 2023, the Company had 25,723,870 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 issued and determined the Company did not have any material subsequent event except the following:
On March 31, 2023, a Securities and Purchase Agreement (the “Agreement”) was entered between the Company and I-ON Acquisition
Corp. (the “Purchaser”). According to the Agreement, the Company agreed to sell, and the Purchaser agreed to purchase, $1,000 shares
of Series A Convertible Preferred Stock, par value $0.0001 per share at the price of $219.50 per share. Meanwhile, the Purchasers delivered to the bank account of the Company, via wire transfer immediately available funds equal to the purchase price of Two
Hundred Nineteen Thousand and five Hundred Dollars ($219,500). The 1,000 shares of Series A Preferred Shares were issued in May 2023 before the issuance of the condensed financial statements.
| 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 months ended March 31, 2023 and 2022 and as of March 31, 2023 and December 31, 2022 are expressed in US dollars and are prepared in accordance with generally
accepted accounting principles in the United States of America. 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, 2022, 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 Digital Corp. (formerly known as I-ON Communications Corp.) was incorporated under the laws of the State of Delaware on June 18, 2013 as ALPINE 3 Inc. Alpine 3 Inc. was set up to serve as a
vehicle to effect an asset acquisition, merger, exchange of capital stock or other business combination with a domestic or foreign business. ALPINE 3 did not undertake any effort to cause a market to develop in its securities, either debt or
equity, before it successfully concluded a business combination. On April 4, 2014, The Michael J. Rapport Trust (the “Trust”) purchased 10,000,000 shares of common stock which was all of the outstanding shares of Alpine 3, Inc., and subsequently
changed the name to Evans Brewing Company Inc. (“EBC”) on May 29, 2014. On October 9, 2014 the Trust agreed to the cancellation of 9,600,000 of the shares of common stock that it had acquired and retained 400,000 shares of common stock.
On September 17, 2015, the independent Bayhawk shareholders approved an Asset Purchase and Share Exchange Agreement (the “Agreement”) and Bayhawk sold to EBC and EBC purchased from Bayhawk assets of
Bayhawk, including but not limited to the assets relating to the Bayhawk Ales label and the Evans Brands (collectively, the “Transferred Assets”).
On January 25, 2018, Evans Brewing Company, Inc. consummated an Agreement of Merger and Plan of Reorganization (the “Merger Agreement”), with I-ON Digital Corp.., a company organized under the laws
of the Republic of Korea (South Korea) (“I-ON”) and I-ON Acquisition Corp., a wholly-owned subsidiary of the Company (“Acquisition”). Pursuant to the terms of the Merger Agreement, Acquisition merged with and into I-ON in a statutory reverse
triangular merger (the “Merger”) with I-ON surviving as a wholly-owned subsidiary of the Registrant. As consideration for the Merger, the Registrant agreed to issue the shareholders of I-ON (the “I-ON Holders”) an aggregate of 26,000,000 shares
of our Common Stock, in accordance with their pro rata ownership of I-ON capital stock. Following the Merger, the Registrant adopted the business plan of I-ON in information technology consultancy and software development. On December 14, 2017,
in connection with the Merger, the Company’s Board of Directors approved an amendment to its Certificate of Incorporation (the “Amendment”) to change its name to I-ON Digital Corp.
On March 21, 2019, the Company’s Board of Directors approved an amendment to the Company’s Certificate of Incorporation to change the name of the Company to I-ON Digital Corp. The Company filed a
Certificate of Amendment to effectuate the name change on or about April 2, 2019.
On September 28, 2022, the Company entered into a Series A Preferred Stock Purchase Agreement (the “Purchase Agreement”) with I-ON Acquisition Corp., a Florida corporation (“IAC”). Pursuant to the
terms of the Purchase Agreement, as amended, IAC acquired 3,600 shares of a newly created Series A Convertible Preferred Stock, par value $0.0001 per share (the “Series A Preferred”) for proceeds in the amount of $214,286 (the “Subscription
Amount”) in the form of a promissory note (the “Note”) which was secured by the pledge of the Series A Shares, the Series B Shares (as defined herein) and other assets of IAC in a Stock Pledge and Escrow Agreement (the “Pledge Agreement”). Each
Series A Preferred Share is convertible into Ten Thousand (10,000) shares of the Company’s common stock, par value $0.0001 per share (the “Common Stock” and is entitled to vote on matters as to which holders of the Common Stock shall be entitled
to vote at a rate of One Hundred (100) votes per share of Series A Preferred.
I-ON Digital
Following the Merger but prior to the Sell-Off, as described more fully herein, the Company adopted the business plan of I-ON. I-ON was founded by Jae Cheol Oh, who served as CEO. The Company’s
roots are in IT consultancy and software development. I-ON services South Korea’s enterprise content management system’s (CMS) market and specializes in advancing market-leading internet software applications to capitalize on rapidly growing
market sectors.
On September 29, 2022, the Company effectuated an Equity Transfer Agreement (the “Sell-Off Agreement”) 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 15,306,119 shares of the Company’s Common Stock held by Jae Cheol Oh and Hong Rae Kim, the Company’s principal executive officer and
members of the Board of Directors (the “Sell-Off”) . Pursuant to the Sell-Off Agreement, in addition to acquiring all of the outstanding capital stock of Communications, JFJ assumed all responsibilities for any debts, obligations and liabilities
of Communications and acquire all rights to any assets of Communications, including, but not limited to, the Subscription Amount.
As a result of the Sell-Off, Communications ceased being a subsidiary of the Company. Accordingly, the operating results of Communications are reported in net loss from discontinued operations, net
of income taxes in the Statements of Operations for all periods presented. In addition, the related assets and liabilities held prior to the Sell-Off are reported as Assets and Liabilities of Discontinued Operations on the Balance Sheets. All
amounts and disclosures included in the Notes to Financial Statements reflect only the Company's continuing operations unless otherwise noted.
On September 28, 2022, I-On Digital Corp. (the “Company,” “we,” “us” or “our”) entered into a Series A Preferred Stock Purchase Agreement (the “Purchase Agreement”) with I-ON Acquisition Corp., a
Florida corporation (“IAC”). In January 2023, the Purchase Agreement was executed and the ownership changed to IAC. The Company adopted the operations of IAC. Accordingly, the Company is in the business of providing digital-based enterprise
solutions, including the digitization and distribution of precious metals, primarily gold, and other asset-based digital securities on the Blockchain.
Results of Operations
Net Sale
The sales for the three months ended March 31, 2023 and 2022 were $0 and $2,465,628, respectively. Due to the “Sell-off” its subsidiaries in September 2022, there is no sales since then.
Cost of Goods Sold
The costs for the three months ended March 31, 2023 and 2022 were $0 and 2,292,526, respectively. For the same reason explained above, there was no cost for the three months ended March 31, 2023.
Gross Profit
The gross profit for the three months ended March 31, 2022 was $173,102. For the same reason, there was not gross profit for the three months ended March 31, 2023.
Operating Expenses
Operating expenses consist of research and development expenses and general and administrative expenses.
Operating expenses for the three months ended March 31, 2022 contains $200,308 of research and development and $674,986 of general and administrative expenses. Comparing with the three ended March
31, 2022, the operating expenses for the three months ended March 31, 2023 was $179,480, containing $116,000 of professional fees and $63,480 of general and administrative expenses.
The significant decrease in operating expenses was due to the “Sell-off” the Company’s subsidiaries and not many activities since then.
Other Income (Expense)
For the three months ended March 31, 2022, the Company had other income of $941,118 received from SK E&S for small businesses research and development projects. For the three months ended
March 31, 2023, there was no such an income due to various changes of the Company, mainly the Company sold its former business and the change of the ownership. The Company, under the new ownership and management, changed its business operations.
Comprehensive income - Foreign currency translation
Foreign currency translation loss was $0 for the three months ended March 31, 2023 compared to loss of $227,991 for the three months ended March 31, 2022. There was no foreign currency translation
gain/loss for the three months ended March 31, 2023 was due to the Sell-off of its subsidiaries so that there were no foreign currency transactions since then.
Liquidity and Capital Resources
As of March 31, 2023 the Company had established its own cash/bank account
Operating Activities
Cash provided by operating activities for the three months ended March 31, 2023 was $259,500, compared to the cash used in operating activities $105,460 for the three months ended March 31, 2022, an
increase of $365,660. The increase was mainly due to $130,500 cash received for deferred revenue and $219,500 cash received for the pending issuance of preferred stock.
Investing Activities
Cash used in investing activities for the three months ended March 31, 2023 was $84,000, compared to cash provided by investing activities $55,477 for the three months ended March 31, 2022, a
decrease of $139,477. The decrease in cash in investing activities was due to the purchase of intangible assets of $84,000.
Financing Activities
Cash provided by financing activities for the three months ended March 31, 2023 was $174,500, compared to cash used in financing activities $7,444 for the three months ended March 31, 2022, an
increase of $181,944. The increase was primarily due to the advances of $174,500 from its major shareholder.
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
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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
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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 March 31, 2023, 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 March 31, 2023, our disclosure controls and procedures were 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
Due to the Company’s recent change of control during the period, there were significant changes in our internal control over financial reporting. Most significantly was
the return of all financial transactions to occur in the United States than were previously being effected in the Republic of Korea. In addition, the Company has established formal iterative review processes which provide oversight to the
Company’s efforts for ensuring appropriate and timely internal control over financial reporting including the formation of an audit committee, implementation of controls and multiple approval requirements to all bank accounts, dual approval
requirements for certain expenses and requiring governance training of all directors and executive officers.
PART II – OTHER INFORMATION
| Item 1. |
Legal Proceedings
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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
|
In January 2023, 6,000 shares of the Company’s Series B Convertible Preferred Stock, par value $0.0001 per share, were converted to 6,000,000 common shares.
On March 31, 2023, the Company and I-ON Acquisition Corp. (the “Purchaser”) entered into a Securities and Purchase Agreement (the “Agreement”). Pursuant to the terms of the Agreement, the Company
agreed to sell, and the Purchaser agreed to purchase, 1,000 shares of Series A Convertible Preferred Stock, par value $0.0001 per share, at the price of $219.50 per share for the purchase price of Two Hundred Nineteen Thousand and five Hundred
Dollars ($219,500). The 1,000 shares of Series A Preferred Shares were issued in May 2023 before the issuance of the condensed financial statements.
All of the securities referred to above were issued without registration under the Securities Act of 1933, as amended (the “Securities Act”) in reliance on the exemptions provided by Section 4(a)(2)
of the Securities Act as provided in Rule 506(b) of Regulation D promulgated thereunder. None of the foregoing securities as well the Common Stock issuable upon conversion or exercise of such securities, have been registered under the Securities
Act or any other applicable securities laws and are deemed restricted securities, and unless so registered, may not be offered or sold in the United States except pursuant to an exemption from the registration requirements of the Securities Act.
| Item 3. |
Defaults Upon Senior Securities
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None.
| Item 4. |
Mine Safety Disclosures
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Not applicable.
| Item 5. |
Other Information
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None.
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Exhibit
Number
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Exhibit
Description
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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
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||
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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**
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**
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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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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.
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Date: May 22, 2023
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I-ON DIGITAL CORP.
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By:
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/s/ Carlos X. Montoya
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Carlos X. Montoya
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Chairman, President
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(Principal Executive, Financial and Accounting Officer)
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22