UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
| | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the quarterly period ended | |
or
| | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the transition period from ___________ to _____________ | |
| Commission file number | |
Integral Technologies, Inc.
(Exact name of registrant as specified in its charter)
| | | |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| | | |
| (Address of principal executive offices) | (Zip Code) |
(
(Registrant’s telephone number, including area code)
not applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| None | not applicable | not applicable |
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.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ | |
| | Smaller reporting company | |
| Emerging growth company |
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 Act). Yes
Indicate 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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| Item 1. |
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| Item 2. |
Management Discussion and Analysis of Financial Condition and Results of Operations. |
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| Item 4. |
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| Item 1. |
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| Item 1A. |
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| Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds. |
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| Item 3. |
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| Item 4. |
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| Item 5. |
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| Item 6. |
OTHER PERTINENT INFORMATION
Unless specifically set forth to the contrary, when used in this report the terms “we,” “our,” “us,” and similar terms refer to Integral Technologies, Inc., a Nevada corporation.
Condensed Consolidated Balance Sheets
|
| March 31, 2024 (Unaudited) | June 30, 2023 | ||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Related party payable | ||||||||
| Dividend payable | ||||||||
| Notes payable and accrued interest | ||||||||
| Mandatorily redeemable preferred stock, at redemption value | ||||||||
| Deferred revenue | ||||||||
| Convertible debentures | ||||||||
| Total liabilities | ||||||||
| Stockholders’ deficit: | ||||||||
| Common stock and paid in capital in excess of $ par value, shares authorized, issued and outstanding as of March 31, 2024 and June 30, 2023 | ||||||||
| Preferred stock and paid-in capital in excess of $ par value, shares authorized, and issued and outstanding as of March 31, 2024 and June 30, 2023 | ||||||||
| Share subscriptions and obligations to issue shares | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ deficit | ( | ) | ( | ) | ||||
| TOTAL LIABILITIES AND STOCKHOLDER'S DEFICIT | $ | $ | ||||||
The accompanying unaudited condensed notes are an integral part of the unaudited condensed consolidated financial statements.
Integral Technologies, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
| Three months ended March 31, 2024 |
Three months ended March 31, 2023 |
Nine months ended March 31, 2024 |
Nine months ended March 31, 2023 |
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| Revenue |
$ | $ | $ | $ | ||||||||||||
| Operating expenses |
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| Selling, general, and administrative expenses |
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| Total operating expense |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Loss from operations |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Other income (expense): |
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| Gain on troubled debt restructure |
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| Gain on extinguishment of preferred share obligations |
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| Interest expense |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Total other income (expense) |
( |
) | ( |
) | ( |
) | ||||||||||
| Income (loss) before income taxes |
( |
) | ( |
) | ( |
) | ||||||||||
| Provision for income tax |
||||||||||||||||
| Net income (loss) |
$ | ( |
) | $ | ( |
) | $ | $ | ( |
) | ||||||
| Net Income (Loss) per share – basic and diluted |
$ | $ | ( |
) | $ | $ | ( |
) | ||||||||
| Weighted average number of common shares outstanding |
||||||||||||||||
The accompanying unaudited condensed notes are an integral part of the unaudited condensed consolidated financial statements.
Integral Technologies, Inc.
Condensed Consolidated Statements of Changes in Stockholder’s Deficit
Three and Nine months ended March 31, 2024 and 2023
(Unaudited)
| Number of Shares of Common Stock Issued |
Common Stock and Paid-in Capital in Excess of Par |
Number of Shares of Preferred Stock Issued |
Preferred Stock and Paid-in Capital in Excess of Par |
Shares Subscriptions and Obligations to Issue Shares |
Accumulated Other Comprehensive Income |
Accumulated Deficit |
Total Stockholders' Deficit |
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| Balance June 30, 2022 |
$ | $ | $ | $ | $ | ( |
) | $ | ( |
) | ||||||||||||||||||||||
| Net loss for the period |
- | - | ( |
) | ( |
) | ||||||||||||||||||||||||||
| Balance September 30, 2022 |
$ | $ | $ | $ | $ | ( |
) | $ | ( |
) | ||||||||||||||||||||||
| Net loss for the period |
- | - | ( |
) | ( |
) | ||||||||||||||||||||||||||
| Balance December 31, 2022 |
$ | $ | $ | $ | $ | ( |
) | $ | ( |
) | ||||||||||||||||||||||
| Net loss for the period |
- | - | ( |
) | ( |
) | ||||||||||||||||||||||||||
| Balance March 31, 2023 |
$ | $ | $ | $ | $ | ( |
) | $ | ( |
) | ||||||||||||||||||||||
| Balance June 30, 2023 |
$ | $ | $ | $ | $ | ( |
) | $ | ( |
) | ||||||||||||||||||||||
| Extinguishment of preferred share obligations |
( |
) | ||||||||||||||||||||||||||||||
| Net income for the period |
- | - | ||||||||||||||||||||||||||||||
| Balance September 30, 2023 |
$ | $ | $ | $ | $ | ( |
) | $ | ( |
) | ||||||||||||||||||||||
| Net loss for the period |
- | - | ( |
) | ( |
) | ||||||||||||||||||||||||||
| Balance December 31, 2023 |
$ | $ | $ | $ | $ | ( |
) | $ | ( |
) | ||||||||||||||||||||||
| Net loss for the period |
- | - | ( |
) | ( |
) | ||||||||||||||||||||||||||
| Balance March 31, 2024 |
$ | $ | $ | $ | $ | ( |
) | $ | ( |
) | ||||||||||||||||||||||
The accompanying unaudited condensed notes are an integral part of the unaudited condensed consolidated financial statements.
Integral Technologies, Inc.
Condensed Consolidated Statements of Cash Flows
Nine months ended March 31, 2024 and 2023
(Unaudited)
| Nine months ended March 31, 2024 |
Nine months ended March 31, 2023 |
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| Cash flows from operating activities: |
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| Net income (loss) |
$ | $ | ( |
) | ||||
| Items not involving cash |
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| Deferred revenues |
( |
) | ||||||
| Interest on convertible debentures |
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| Interest on debt |
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| Gain on troubled debt restructuring (Note 9 and 10) |
( |
) | ||||||
| Gain on extinguishment of preferred shares (Note 4) |
( |
) | ||||||
| Changes in working capital: |
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| Deferred revenue |
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| Accounts payable and accrued liabilities |
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| Related party payable |
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| Net cash used in operating activities |
( |
) | ( |
) | ||||
| Cash flows from financing activities: |
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| Proceeds from loans |
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| Repayment of loans |
( |
) | ( |
) | ||||
| Net cash provided by financing activities |
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| Increase (decrease) in cash |
( |
) | ( |
) | ||||
| Cash, beginning of period |
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| Cash, end of period |
$ | $ | ||||||
| Supplemental cash flow information: |
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| Interest paid |
$ | $ | ||||||
The accompanying unaudited condensed notes are an integral part of the unaudited condensed consolidated financial statements.
NOTE 1 - NATURE OF OPERATIONS
Integral Technologies, Inc. (the “Company” or “Integral”) was incorporated under the laws of the state of Nevada on and has recently relocated its head office to Evansville, Indiana, USA. The Company is in the business of researching, developing and commercializing new electrically-conductive resin-based materials called ElectriPlast.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (all of which are of a normal recurring nature) considered necessary for a fair presentation have been included. Operating results for the nine months ended March 31, 2024 are not necessarily indicative of the results that may be expected for the year ending June 30, 2024 or for any other future period. These unaudited consolidated financial statements and the unaudited condensed notes thereto should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2023 filed with the Securities and Exchange Commission on September 26, 2024.
Principles of consolidation
These consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated. The Company has no active subsidiaries.
Use of estimates
The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant areas requiring the use of management estimates include valuation allowance for deferred income tax assets and the determination of the assumptions used in calculating the fair value of stock-based compensation. Actual results could differ from those estimates and could impact future results of operations and cash flows.
Basic and diluted net earnings (loss) per share
Basic net loss per common share is computed by dividing the net loss attributable to common stockholders by the weighted-average number of common shares outstanding during the year. Diluted net loss per common share is computed by dividing the net loss by the weighted-average number of common shares and dilutive common share equivalents outstanding during the period. There were no common stock equivalents outstanding for the three and nine months ended March 31, 2024.
Revenue recognition
The Company has not generated significant revenue since inception. Although the Company has begun to receive revenue from the sale of material for commercial applications, the Company is devoting substantially all its efforts to developing the business.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Revenue recognition (continued)
For license agreement that the Company enters into, revenue is measured based on the amount of consideration that is expected to be received by the Company under a contract with a customer, which is initially estimated with pricing specified in the agreement and adjusted for any discounts or other credits at contract inception then updated each reporting period, and excludes any sales incentives and amounts collected on behalf of third parties. The Company recognizes revenue when persuasive evidence of a contract with a customer exists and a performance obligation is identified and satisfied as the customer obtains control of the good or services.
The Company’s license agreements can provide for upfront license fees, maintenance payments, and/or substantive milestone payments. In accordance with revenue recognition guidance, the Company identifies all of the deliverables at inception of the agreement. License fees, which are non-refundable fees will be evaluated for standalone value to the licensor and may be recognized upon delivery pursuant to terms of the agreement. Upfront non-refundable fees associated with license and development agreements where the Company has continuing involvement that do not meet the requirement of a separate deliverable are recorded as deferred revenue and recognized over the estimated service period. The Company may also enter into agreements to provide engineering services. The Company recognizes revenue from engineering services as the service has been performed and amounts are reasonably assured of collection.
The Company recognizes revenues from royalties when they become due.
Advertising
Advertising costs are charged to operations when incurred. Advertising expense was for the three and nine months ended March 31, 2024, and 2023, respectively.
Research and development
The Company expenses all research and development related expenditures as incurred.
Financial instruments
The Company’s balance sheet includes financial instruments, specifically cash, accounts payable and accrued expenses, related party payable, dividend payable, mandatorily redeemable preferred stock and loans payable. The carrying amounts of current assets and current liabilities approximate their fair value because of the relatively short period of time between the origination of these instruments and their expected realization.
Fair value measurements
ASC 820 Fair Value Measurements and Disclosures, defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). Their fair value hierarchy consists of three board levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:
| ● | Level 1 – Quoted prices in active markets for identical securities; |
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Fair value measurements (continued)
| ● | Level 2 – Other significant observable inputs that are observable through corroboration with market data (including quoted prices in active markets for similar securities); and |
| ● | Level 3 – Significant unobservable inputs that reflect management’s best estimate of what market participants would use in pricing the asset or liability. |
The fair value measurement of the derivative liability with reset provisions are classified as a Level 3 measurement.
Income taxes
The Company uses the asset and liability approach in its method of accounting for income taxes that requires the recognition of deferred tax liabilities and assets for expected future tax consequences of temporary differences between the carrying amounts and the tax basis of assets and liabilities. A valuation allowance against deferred tax assets is recorded if, based upon weighted available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.
The impact of an uncertain tax position that is more likely than not of being sustained upon audit by the relevant taxing authority is recognized at the largest amount that is more likely than not to be sustained. No portion of an uncertain tax position will be recognized if the position has less than a 50% likelihood of being sustained.
Property and Equipment
Property and equipment are recorded at cost and depreciated over the estimated useful lives using the straight-line method of depreciation. Amortization of the leasehold improvements is computed using the straight-line method over the lesser of the estimated useful lives of the underlying assets and the term of the related lease.
Recent Accounting Pronouncements
In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments. ASU 2016-13 requires entities to use a forward-looking approach based on current expected credit losses (“CECL”) to estimate credit losses on certain types of financial instruments, including trade receivables. This may result in the earlier recognition of allowances for losses. ASU 2016-13 is effective for the Company beginning July 1, 2023, and early adoption is permitted. The Company adopted this standard on July 1, 2023 and there was no effect on the adoption.
In August 2020, the FASB issued ASU No. 2020-06 (“ASU 2020-06”) “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40).” ASU 2020-06 reduces the number of accounting models for convertible debt instruments by eliminating the cash conversion and beneficial conversion models. The diluted net income per share calculation for convertible instruments will require the Company to use the if-converted method. For contracts in an entity’s own equity, the type of contracts primarily affected by this update are freestanding and embedded features that are accounted for as derivatives under the current guidance due to a failure to meet the settlement conditions of the derivative scope exception. This update simplifies the related settlement assessment by removing the requirements to (i) consider whether the contract would be settled in registered shares, (ii) consider whether collateral is required to be posted, and (iii) assess shareholder rights. ASU 2020-06 is effective July 1, 2024, for the Company and the provisions
of this update can be adopted using either the modified retrospective method or a fully retrospective method. Early adoption is permitted, but no earlier than January 1, 2021, including interim periods within that year.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Recent Accounting Pronouncements (continued)
Other recent accounting pronouncements issued by the FASB, its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company’s present or future financial statements
NOTE 3 - GOING CONCERN
These consolidated financial statements have been prepared on a going concern basis, which assumes the Company will continue in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities in the ordinary course of business. The Company’s operations have resulted in a net income (loss) of $
These consolidated financial statements do not reflect adjustments that would be necessary if the going concern assumption were not appropriate because management believes that the actions already taken or planned will mitigate the adverse conditions and events that raise doubts about the validity of the going concern assumption used in preparing these consolidated financial statements. Management intends to raise additional capital through stock and debt issuances to finance operations. If none of these events occur, there is a risk that the business will fail.
NOTE 4 – TERMINATION AGREEMENT AND RETURN OF PREFERRED SHARES
On September 9, 2019, the Company entered into a technology and asset purchase agreement (the “Asset Purchase Agreement”) with Pivotal Battery Corp. (“Pivotal”), a company with management in common. On June 30, 2022, the Company amended the Asset purchase Agreement to terminate the promissory note agreement and amend the terms.
The Company determined that due to uncertainty of collection, any payments received under the agreement are recognized on date of receipt. Total revenues recognized pursuant to the Asset Purchase Agreement with Pivotal for the nine months ended March 31, 2024 was $
On September 15, 2023, Pivotal and the Company entered into a termination agreement; whereby the Company will forgive and mutually release Pivotal from any and all obligations under the Asset Purchase Agreement, in exchange for terminating its
NOTE 5 - STOCKHOLDERS’ DEFICIT
Common stock
During the nine months ended March 31, 2024 and 2023, there were
On September 19, 2023, the Company increased the number of authorized shares of Common Stock to
Series B Preferred stock
On December 10, 2018, the Company issued
On January 14, 2019, the Company issued
Each Preferred Share carries an annual
The Shares were convertible into shares of common stock of the Company at the option of the holder on a basis (subject to adjustments for stock dividends, splits, combinations and similar events) at any time within
The Company also has the option to call the Shares and purchase some or all of the Series B Preferred Stock owned by investors at any time at on a pro rata, nearest whole share basis. The redemption value of the Shares is $
The mandatorily redeemable preferred stock liability (“MRPSL”) of $
Series C Preferred Stock
On September 18, 2023, the Company issued
The Series C Preferred Stock held voting power equal to
Stock options, warrants and restricted shares
The Company has
Share obligations
| (a) | Pursuant to a separation agreement with a previous CFO, the Company will issue |
| (b) | Pursuant to director’s agreements, the Company is obligated to issue |
| (c) | On February 21, 2019, the Company entered into a promissory note for total proceeds of $ |
NOTE 6 -RISK MANAGEMENT AND FINANCIAL INSTRUMENTS
Fair value
The loans payable balance approximates fair value due its short-term nature.
Credit risk
Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. The Company’s financial asset that is exposed to credit risk consists of cash, which is placed with US financial institutions, and trust account with the Company’s legal council.
Concentration of credit risk exists with respect to the Company’s cash, as certain amounts are held at US and financial institutions.
All U.S. institution amounts are covered by FDIC insurance as of March 31, 2024. Management deems any related risk to be minimal.
Interest rate risk
The Company is not exposed to significant interest rate risk due to the short-term maturity of its monetary current assets and current liabilities.
Currency risk
The Company translates the results of non-US transactions into US dollars using rates of exchange on the date of the transaction. The exchange rate varies from time to time. This risk is considered nominal as the Company does not incur significant transactions in currencies other than US dollars.
Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulty in satisfying financial obligations as they become due. The Company’s approach to managing liquidity risk is to provide reasonable assurance that it will have sufficient funds to meet liabilities when due. The Company manages its liquidity risk by forecasting cash flows required for operations and anticipated investing and financing activities.
The Company requires significant additional funding to meet its operational costs in fiscal year 2024 and 2025.
Financing transactions may include the issuance of equity securities, obtaining additional credit facilities, licensing proprietary technology or other financing mechanisms. However, the Company’s shares are not currently trading which has made it more difficult to obtain equity financing.
NOTE 7 - RELATED PARTY TRANSACTIONS
As of March 31, 2024, $
During the nine months ended March 31, 2024, the Company accrued salaries of $
On September 9, 2019, the Company entered into a technology and asset purchase agreement with a Company with management in common, refer to Note 4 for details. During the three and nine months ended March 31, 2024, the Company received payments of and $
NOTE 8 - SEGMENT INFORMATION
The Company operates primarily in business segment, the development of electronically-conductive resin-based materials, with operations located in the US.
NOTE 9 - CONVERTIBLE DEBENTURES
On July 1, 2023, all of the issued and outstanding Convertible debt of $
As of June 30, 2023, the Company’s convertible debentures have been summarized as follows:
SBI Investments LLC (“SBI”)
| Original debt | Total penalties | Accrued interest as of June 30, 2023 | Total balance settled through issuance of shares | Balance due as of June 30, 2023 | Original interest rate* | Inception | Original due date | ||||||||||||||||
| $ | $ | $ | $ | $ | |||||||||||||||||||
| ( | ) | % | | | |||||||||||||||||||
| % | | | |||||||||||||||||||||
| % | | | |||||||||||||||||||||
| ( | ) | % | | | |||||||||||||||||||
| % | | | |||||||||||||||||||||
| % | | | |||||||||||||||||||||
| % | | | |||||||||||||||||||||
| ( | ) | ||||||||||||||||||||||
On June 30, 2023, SBI acquired all of the issued and outstanding convertible debt of L2 Capital, reflected above and on July 1, 2023, exchanged all of the convertible debt for an
JMJ Financial
On November 16, 2017, the Company entered into a debt agreement with JMJ Financial. A total of $
The note becomes convertible in the event the Company breaches any of the default provisions. On January 16, 2018, the note was in default and accordingly became convertible. The conversion price is the lesser of $
A reconciliation of the Company’s convertible debenture is as follows:
| Balance, June 30, 2023 | $ | |||
| Conversion of SBI to promissory note | ( | ) | ||
| Balance, March 31, 2024 | $ |
On March 25, 2021, the Company’s common shares were suspended from trading. As a result, the Company is not able to satisfy the conversion rights under the convertible debt agreements, the fair values of all derivative liabilities have been measured at as at March 31, 2024 and June 30, 2023.
NOTE 10 – NOTES PAYABLE
As of March 31, 2024, the Company had the following loan agreements outstanding, summarized as follows:
| Original debt | Accrued interest as of March 31, 2024 | Cumulative Total | Balance due as of March 31, 2024 | Interest rate | Inception | Original due date | |||||||||||||
| $ | $ | $ | $ | ||||||||||||||||
| ( | ) | % |
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| ( | ) |
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| % |
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| % |
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| ( | ) | ||||||||||||||||||
* As of March 31, 2024, these notes were in default and are due on demand.
** on July 8, 2024, this note became in default and became due on demand.
*** on August 23, 2024, this note was in default and became due on demand.
As of June 30, 2023, the Company had the following loan agreements outstanding, summarized as follows:
| Original | Interest | Accrued | Total | Balance due as of | Interest rate | Inception | Original due date | ||||||||||||||||
| $ | $ | $ | $ | $ | |||||||||||||||||||
| ( | ) | % |
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| ( | ) |
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| % | Multiple | Multiple**** | |||||||||||||||||||||
| ( | ) | ||||||||||||||||||||||
****The Company has entered into multiple promissory notes with one lender on an as needed basis. Each note bears interest at
NOTE 11 - SUBSEQUENT EVENTS
The Company entered into promissory notes for an additional funding. Each note bears interest at
| August 8, 2024 | $ | |
|
| October 18, 2024 | $ | |
| February 13, 2025 | $ |
See Note 10 for loan defaults.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis should be read in conjunction with our unaudited condensed consolidated interim financial statements (the “financial statements”), and the notes thereto, and other financial information appearing elsewhere in this Quarterly Report on Form 10-Q and the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2023. The following discussion and analysis compares our consolidated results of operations for the three and nine months ended March 31, 2024 (the “2024 Quarter”) with those for the three and nine months ended March 31, 2023 (the “2022 Quarter”). All dollar amounts and percentages presented herein have been rounded to approximate values.
Cautionary Note Regarding Forward-Looking Statements
This report contains “forward-looking statements”. These statements include, among other things, statements regarding our anticipation of ramping up our search for target or partner, as well as other statements regarding our future operations, financial condition and prospects, and business strategies. Forward-looking statements generally can be identified by words such as "anticipates," "believes," "estimates," "expects," "intends," "plans," "predicts," "projects," "will be," "will continue," "will likely result," and similar expressions. These forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties, which could cause our actual results to differ materially and adversely from those reflected in the forward-looking statements. These risks include the inability of our consultant or management to locate an acquisition target and even if successful that management will be able to negotiate any such transaction on favorable terms and the lack of funding to continue meeting our SEC filing obligations as well as other ongoing costs. No assurance can be given that the actual results will be consistent with the forward-looking statements. Investors should read carefully the factors described in the “Risk Factors” section of the Company’s filings with the SEC, including the Company’s Form 10-K for the year ended June 30, 2023 for information regarding risk factors that could affect the Company’s results. We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements, except as required by law. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.
Overview
Integral Technologies, Inc. (“Integral,” the “Company” or “we”) was incorporated under the laws of the State of Nevada on February 12, 1996. The Company currently has little operations and is evaluating a number of strategic alternatives including, but not limited to, seeking to acquire a new business in the United States, including potentially by means of a reverse merger with an operating entity. We have not generated material revenues since 2018 and do not expect to do so in the short-term.
At present, the Company has nominal sources of revenue and has no specific business plan or purpose. The Company’s business plan is to seek a business combination. As a result, the Company is a “blank check” or “shell” company. Management does not intend to undertake any efforts to cause a market to develop in the Company’s securities until such time as the Company has successfully implemented its business plan and closed on a suitable business combination.
Although we have been in discussions with potential partners or targets, we have not entered into any definitive agreements. The evaluation and selection of a business opportunity is a complex and uncertain process, and we have not yet identified a target operating business for acquisition. Business opportunities that we believe are in the best interests of the Company and its shareholders may be scarce, or we may be unable to attract the businesses we identify as viable for our objectives, including due to competitive forces in the marketplace beyond our control. During January 2021, the Company engaged Ascentaur, LLC, a business consulting firm to assist in identifying prospective partners to enhance the Company’s future business opportunities. The Company has not paid a retainer related to the engagement. The Company was focused on becoming a reporting company under the Securities Exchange Act of 1934 (the “Exchange Act”). Now that the Company is subject to the reporting requirements of the U.S. Securities and Exchange Commission (the “SEC”), it anticipates ramping up its search for a qualified acquisition partner seeking to merge with a SEC reporting company. There is no assurance that we will be able to locate compatible business opportunities for the Company.
Going concern
We have experienced losses from operations since inception and have never generated positive cash flow. The success of our business plan during the next 12 months and beyond will be contingent upon obtaining sufficient financing to cover our operating costs and growth initiatives. This is because we do not anticipate generating material revenue from operations in the short term nor being able to raise capital (prior to consummating a business combination). As of the filing date of this report, the Company had approximately $4,000,000 of outstanding debt, including accrued interest, penalties and other fees due under the notes and convertible debentures. The reports from our independent registered public accounting firm for the fiscal year ended June 30, 2023, and prior years include an explanatory paragraph stating the Company has recurring net losses from operations, negative operating cash flows, does not yet generate revenue from operations and will need additional working capital for ongoing operations. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. If we are unable to obtain sufficient funding and/or generate material revenue to fund our operations and business plan, our business, prospects, financial condition and results of operations will be materially and adversely affected, we may be unable to continue as a going concern in which case you in turn would lose your investment.
Results of Operations
During the nine months ended March 31, 2024, the Company’s net income of $3,065,404 increased by $4,278,032 compared to a net loss of $1,212,628 for the nine months ended March 31, 2023, primarily as a result of the following:
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Selling, general and administrative expenses decreased by $65,397 due to the Company limiting all spending to focus on catching up its financial statement filing obligations; |
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Interest expense decreased by $725,158 due primarily to a $3,371,441 reduction in the carrying value of convertible debt and promissory notes; |
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During the nine months ended March 31, 2024, the Company recognized a gain on troubled debt restructure of debt of $3,371,441 and gain on extinguishment of preferred share obligations of $136,481; |
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The gain on troubled debt restructure arose due to SBI exchanging its convertible debt with a balance of $6,142,793 together with existing promissory notes totaling $228,648 for a new $3,000,000, 8% interest promissory note. |
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On September 15, 2023, the Company cancelled and returned to treasury, 40 preferred shares resulting in a gain on extinguishment of preferred share redemption value liability of $100,000 and dividend payable liability of $36,481. |
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Revenues decreased by $20,445 due to the Company terminating its contract with Pivotal; |
During the three months ended March 31, 2024, the Company’s net loss of $120,921 decreased by $267,299 compared to a net loss of $388,220 for the three months ended March 31, 2023, primarily as a result of the following:
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Selling, general and administrative expenses decreased by $37,924 due to the Company limiting all spending to focus on catching up its financial statement filing obligations; |
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Interest expense decreased by $241,875 due primarily to a $3,371,441 reduction in the carrying value of convertible debt and promissory notes; |
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Revenues decreased by $12,500 due to the Company terminating its contract with Pivotal; |
Liquidity and Capital Resources
We are out of cash, and for the past two years we have been relying on loans from our current lenders. We currently have approximately $4.0 million in outstanding debt including accrued interest. Management has expressed substantial doubt about our ability to continue as a going concern during the nine months ended March 31, 2024, unless we can raise the required capital or generate material revenue to fund our operations. We do not believe that we will be able to raise any capital until such time as we are able to execute on a new business plan.
Net Cash used in Operating Activities:
During the nine months ended March 31, 2024, net cash used in operating activities was $46,797 as compared to $33,102 for the nine months ended March 31, 2023, due to fluctuations in the timing of professional and filing fees incurred.
Cash Used in Investing Activities:
During the nine months ended March 31, 2024 and 2023, there were no investing activities.
Cash Flows from Financing Activities:
During the nine months ended March 31, 2024, net cash provided by financing activities was $32,700 as compared to $6,900 for the nine months ended March 31, 2023, attributable to debt financing raised, offset by debt repayments.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenue and expenses during the reported periods. For the nine months ended March 31, 2024, there were no accounting estimates the Company considers critical.
We also have other key accounting policies, which involve the use of estimates, judgments and assumptions that are significant to understanding our results, which are described in Note 2 to our unaudited condensed consolidated financial statements for the nine months ended March 31, 2024, and Note 2 to our audited consolidated financial statements appearing in our 2023 10-K.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures. We are required to maintain “disclosure controls and procedures” as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”). Based on their evaluation as of the end of the period covered by this report, our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures were not effective to ensure that the information relating to our company, required to be disclosed in our Securities and Exchange Commission (“SEC”) reports (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure as a result of material weaknesses in our internal control over financial reporting result from limited segregation of duties and limited multiple levels of review in the financial close process, along with a lack of well-established policies and procedures to identify, approve, and report related party transactions.
We will continue to monitor our internal control over financial reporting on an ongoing basis and are committed to taking further action and implementing additional enhancements or improvements, as necessary and as funds allow. We do not, however, expect that the material weaknesses in our disclosure controls will be remediated until such time as we have added additional personnel, including additional accounting and administrative staff, allowing improved internal control over financial reporting.
Changes in Internal Control Over Financial Reporting. There were no changes in our internal control over financial reporting as defined in Rule 13a-15(f) and Rule 15d-15(f) under the Exchange Act that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
From time to time, we may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm business. We currently have legal proceedings or claims from unpaid bills that may not likely have, individually or in the aggregate, a material adverse effect on business, financial condition or operating results.
Not applicable to smaller reporting companies.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
No officers, as defined in Rule 16a-1(f), or directors adopted or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement,” as defined in Regulation S-K Item 408, during the last fiscal quarter.
| No. |
Exhibit Description |
Form |
Date Filed |
Number |
Herewith |
|||||
| 3.1 |
10-12G |
7/24/23 |
3.1 |
|||||||
| 3.1(a) |
8-K |
12/4/18 |
3.1 |
|||||||
| 3.1(b) |
10-K |
9/26/24 |
3.1(B) |
|||||||
| 3.2 |
10-QSB |
3/31/06 |
3.04 |
|||||||
| 10.1 |
10-K |
9/26/24 |
10.12 |
|||||||
| 31.1 |
Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer and Chief Financial Officer |
Filed |
||||||||
| 32.1 |
Furnished** |
|||||||||
| 101.INS |
Inline XBRL Instance Document |
Filed |
||||||||
| 101.SCH |
Inline XBRL Taxonomy Extension Schema Document |
Filed |
||||||||
| 101.CAL |
Inline XBRL Taxonomy Extension Calculation Linkbase Document |
Filed |
||||||||
| 101.DEF |
Inline XBRL Taxonomy Extension Definition Linkbase Document |
Filed |
||||||||
| 101.LAB |
Inline XBRL Taxonomy Extension Label Linkbase Document |
Filed |
||||||||
| 101.PRE |
Inline XBRL Taxonomy Extension Presentation Linkbase Document |
Filed |
||||||||
| 104 |
Cover Page Interactive Data File (embedded within the Inline XBRL document) |
+ Exhibits and/or Schedules have been omitted. The Company hereby agrees to furnish to the Staff of the Securities and Exchange Commission upon request any omitted information.
** This exhibit is being furnished rather than filed and shall not be deemed incorporated by reference into any filing, in accordance with Item 601 of Regulation S-K.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Integral Technologies, Inc. |
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| February 18, 2025 |
By: |
/s/ Douglas Bathauer |
| Douglas Bathauer, Chief Executive Officer and Chief Financial Officer (Principal Executive Officer and Principal Financial Officer) |
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