I-ON Digital (IONI) 10-K2023 FY Annual report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

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.)

(866) 440-2278

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes ☐ No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirement for the past 90 days. Yes ☒ No ☐

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). Yes ☒ No ☐

Indicate by check mark if disclosure of delinquent filers in response to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐

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,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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 has filed a report on and attestation to its management’s assessment of the effectiveness of internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7762(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b) ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

As of June 30, 2023 (the last business day of the registrant’s most recently completed second fiscal quarter), the aggregate market value of the common stock held by non-affiliates of the registrant was approximately $8.1 million based on the closing sales price of $0.296 on the OTC Markets. All executive officers and directors of the registrant have been deemed, solely for the purpose of the foregoing calculation, to be “affiliates” of the registrant.

As of June 6, 2024, there were 27,410,234 shares of the registrant’s common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

None

TABLE OF CONTENTS

PART I

Item 1. Business.

About I-ON

I-ON is a leading-edge provider of asset-digitization and securitization solutions engineered to provide a secure, fast, transparent, and institutional-grade ecosystem that digitizes documentary evidence of ownership, in accordance with a rigorous onboarding and acceptance process, into secure, asset-backed digital certificates that bring liquidity and accepted value to a wide-array of asset classes.

I-ON develops, acquires, and deploys a portfolio of novel and patented next-generation technologies that have been integrated and engineered into a comprehensive ecosystem built on a zero-trust, hybrid blockchain architecture that utilizes state-of-the-art smart contracts and sophisticated workflow management and artificial intelligence-enabled technologies to digitize ownership records of recoverable gold, precious metal, and mineral reserves into digital certificates that facilitate wealth transfer through new asset-backed financial instruments and asset classes that provide reserve owners and investors a new channel to maximize portfolio liquidity.

Strategy Overview

In 2023, I-ON continued to navigate the challenging but evolving digital asset landscape, achieving strategic milestones while maintaining a focus on innovation and operational efficiency. We successfully integrated key acquisitions, expanded our technological infrastructure, and made significant strides in our digital asset management solutions. Financially, we sustained stable growth in revenue streams and managed operational costs effectively, despite ongoing market volatilities and regulatory complexities.

For 2024, I-ON is poised to further our innovation in digital asset management, with plans to expand our offerings in new geographic markets and sectors. These initiatives are expected to drive our revenue growth and diversify our income streams. Additionally, we plan to enhance our customer service capabilities to support our expanding client base and improve operational efficiencies through strategic investments in AI technologies.

Products and Services

Secure and Transparent Ecosystem – I-ON’s solutions are engineered to support a secure, transparent, institutional-level ecosystem employing advanced smart contract and blockchain technologies to identify, secure and perfect evidence of ownership, Proof-of-Reserves (“POR”), ensuring compliant digital asset capture, usage, transaction settlement and reporting across all relevant channels.

Proprietary Hybrid Blockchain Technology – Deploying proprietary technology, in accordance with rigorous onboarding, asset acceptance and management protocols, the Company further employs unique hybrid blockchain technology to ensure the integrity of its highly secure and efficient asset-backed digital certificates that are designed to enhance investor and institutional value and bring liquidity to a wide-array of asset classes.

Continuous Technological Innovation – I-ON will continue to develop, acquire and deploy a portfolio of novel and, where applicable, patented next-generation technologies that can be integrated and engineered as part of a comprehensive ecosystem built on zero-trust protocols and hybrid blockchain architecture. I-ON is further committed to utilizing state-of-the-art workflow management technologies to build on a legacy of digitizing ownership records, deeds and instrumentation, specifically tied to proven and recoverable gold, precious metals and mineral reserves, into compliant digital tokens or certificates are designed to facilitate wealth transfer through an ever-increasing level of marketplace acceptance and enhanced fluidity associated with this new class of asset-backed financial instrumentation.

Commitment to Industry Leadership and Data Security – I-ON is fundamentally a technology company that is committed to innovation, efficiency and improvement in how we manage, deploy and interact with sensitive financial data. I-ON is helping change the manner in which we use identity, consent, and data security in the banking, financial services, payments and data management industries – through the thoughtful application of advanced blockchain, smart contract and artificial intelligence (“AI”) enabled financial technologies.

Strategic Partnerships and Market Expansion – The Company’s targeted channels for value creation include licensing, usage and service fees associated with asset digitization, escrow and custodial services, transactional capture, and the greater licensing of the Company’s growing intellectual property portfolio. This portfolio is strategically designed for further use and deployment by recognized and equally reputable institutional organizations in the banking, financial services, and information technology marketplaces.

Strategic Partnerships and Market Expansion – The Company´s further goal is to help create a secure, digital world where data is used responsibly and without compromising individual or organizational privacy. To advance this goal, I-ON has established strategic partnerships with industry leading companies to optimize its digitized asset ecosystem.

Emerging Leadership in Digital Identity Management – By means of unique technology partnerships, cutting-edge technology solutions, and a commitment to protecting user-based data privacy, I-ON is looking to become an emerging industry leader in providing secure-identity digital management solutions for its partnering banks, financial institutions and financial technology providers having both US and global reach.

Competition

The Company competes with a range of U.S. and global based digital solutions providers, many of which have greater name recognition and financial resources than the Company. The digitization of products and services is becoming increasingly transformative across U.S. and global business sectors, the Company anticipates that, as the range of existing and potential digital product and service providers continues to grow, it will require I-ON to continuously differentiate itself by developing and improving on its core business platforms.

Research and Development

Given the very nature of the Company’s underlying IT platform, inclusive of Hybrid Blockchain and related Digital Asset Workflow platforms, we place a high degree of focus and emphasis on continuing the development of new and increasingly effective technological means. This is particularly important as new regulatory standards for digital asset movement, acceptance, capture, POR, custody, settlement and reporting continue to evolve, with purveyors, institutions and, ultimately speaking, individuals, by necessity, adapting to new and ever-expanding guidelines that govern the use or deployment of digital asset. The Company will continue to partner with strategic service providers that meet the highest standards of integrity, expertise and capacity in the development of the Company’s specialized product and services offerings.

Sales and Marketing

Our Sales and Marketing strategy is designed with two primary groups in mind. The first group consists of claim holders who possess validated rights to proven gold reserves—gold that has been both discovered and is economically feasible to mine—and are interested in creating digital assets that serve as placeholders or representations of their ownership. These digital assets are intended for buying, selling, trading, or using as collateral (hypothecation).

The second group includes institutional entities or high net worth investors within the banking and financial services sector, who have an interest in acquiring a gold-backed digital asset for deployment or use within their respective investment management portfolios.

At this early stage, our marketing strategy is focused on building awareness of our products and services through content marketing, targeted audience segmentation, and educational initiatives via digital marketing and social media content development. In targeting our audience, we place a strong emphasis on reaching institutional clients, crafting messages that highlight transparency, trust, and the high level of service they expect.

Market and Industry Analysis

In 2023, the digital asset industry continued to experience significant growth, driven by increased institutional acceptance and technological advancements. I-ON has strategically positioned itself at the forefront of this expanding market through key acquisitions and technology development, particularly in the gold-backed digital securities sector.

Our acquisition of Orebits Corp. and its innovative technologies has strengthened our competitive position, allowing us to offer unique asset digitization and securitization solutions that are distinct in the marketplace. This strategic move not only enhances our product offerings but also broadens our appeal in the financial technology and banking sectors, where demand for robust, secure digital asset management solutions is increasing.

Technological advancements such as our enhanced SaaS platform and next-generation blockchain integration cater directly to the needs of banks and financial intermediaries, offering them unprecedented security and efficiency in digital transactions. These advancements are critical as they provide us with a competitive edge in a market where reliability and trust are paramount.

Intellectual Property

We are active in protecting and licensing our intellectual property related to digital asset infrastructure. This includes technologies for securing and facilitating gold and precious metal digitization. Our strategy is focused on creating a secure, fast, transparent, and institutional-grade ecosystem for digital securitization and banking. The Company generates revenue from transaction fees associated with these services and continually seeks to innovate and expand its IP portfolio to support new transactional models in the financial sector.

Our commercial success depends, in part, on obtaining and maintaining patent protection for our technologies, products and processes, successfully defending these patents against third-party challenges and successfully enforcing these patents against third-party competitors. Proprietary rights relating to our current and potential products will be protected from unauthorized use by third parties only to the extent that they are covered by valid and enforceable patents or are effectively maintained as trade secrets. Patents owned by or licensed to us may not afford protection against competitors, and our pending patent applications now or hereafter filed by or licensed to us may not result in patents being issued.

We currently rely on trade secrets, trademarks, service marks, trade names, copyrights, and other intellectual property rights, and on licenses to use intellectual property rights owned and controlled by others.

Technology and Innovation

In 2023, I-ON significantly advanced its technological capabilities, particularly in the digitization and securitization of asset classes, primarily focusing on precious metals. Following the strategic acquisition of Orebits Corp., we integrated a robust gold digitization patent portfolio, enhancing our existing blockchain solutions and establishing a stronger presence in the digital asset market.

We expanded our SaaS platform capabilities, offering new levels of service to banks and financial intermediaries, facilitating advanced asset management, receipt, and reporting of digital securities. This platform leverages our next-generation blockchain technology, improving transaction security and processing speed, and underscoring our commitment to innovation and leadership in financial technology services.

Our technology initiatives also emphasize environmental responsibility, enabling the monetization of gold reserves without the need for physical extraction, supporting global sustainability efforts. Through strategic partnerships, we continue to refine our technology offerings, ensuring that they meet institutional and regulatory standards while setting new benchmarks in the financial technology sector.

Looking ahead, I-ON is poised to explore further innovations in asset digitization, with plans to expand into new markets and enhance our technological infrastructure, aiming to drive growth and improve operational efficiencies across our platforms.

These advancements are expected to impact our financial outlook, contributing to sustained revenue growth and diversifying our income streams, as we continue to evolve our product and service offerings to meet the dynamic needs of the market.

Government Regulation

I-ON operates in a highly regulated environment and is subject to a variety of federal, state, and international regulations. These regulations govern various aspects of our operations, including but not limited to the use of digital assets, data security, and privacy. We believe we are in compliance with applicable federal, state and other regulations and that we have compliance programs in place to ensure compliance going forward. Our compliance framework includes but it’s not limited to, audits and monitoring systems designed to detect and address potential regulatory issues proactively.

The regulatory landscape for digital assets and blockchain technology is subject to rapid change, and regulatory changes could materially impact our business model. We are closely monitoring developments in legislation and regulatory policy that could affect our operations, particularly those related to the security and usability of digital assets.

To date, there have been no regulatory notifications or actions pending against us. We remain committed to maintaining high standards of regulatory compliance and will continue to invest in our compliance capabilities to safeguard our operations and shareholder interests.

Employees

As of December 31, 2023, I-ON had one full-time employee and one part-time employee.

Our History and Corporate Information

I-ON Digital 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) 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 $250,000 (the “Subscription Amount”) in the form of a promissory note (the “IAC 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.

In the fourth quarter of 2023, the Company acquired a controlling interest in Orebits Corporation, pursuant to the terms and conditions of a Contribution and Exchange Agreement, entered on October 30, 2023, between the Company and Orebits Acquisition Group LLC (“OAG”). The latter entity being a special purpose vehicle (SPV), controlled by Carlos Montoya, our CEO, that acquired controlling interest in Orebits Corp. in June 2023. During its prior years of operations, Orebits Corp actively deployed proprietary technology to digitize, market and manage gold-backed digital securities. In consummating the Agreement, effective December 15, 2023, I-ON Digital exchanged 910,000 C Preferred Shares of I-ON Digital Corp. in exchange for 910,000 Common Shares of Orebits Corp. With the transaction, the Company assumed ownership of 9,700 1-ounce Gold Backed Digital Assets. The Company further assumed control of trademarks, patent & patent-pending rights previously owned or controlled by Orebits Corp. In assuming control of the 9,700 Orebits.AU Gold Backed Digital Assets, when combined with 180 Gold Backed digital assets previously residing on the books of the Company, the total number of all Gold Backed Digital Assets held by the Company now stands at 9,880 1 oz. digital assets. Residing on the Company’s proprietary Hybrid Blockchain Platform, the asset is now formally referred to by the Company as the ION.au Gold Backed Digital Asset.

Other Information

Our principal executive offices are located at 1244 N. Stone Street, Unit #3, Chicago, IL 60610 and our telephone number is (866) 440-2278. We can be contacted by email at info@iondigital.com. Our corporate website address is www.iondigitalcorp.com, to which we regularly post copies of our press releases as well as links to reports that we have filed with the SEC, which are available free of charge as soon as reasonably practicable after being filed electronically or furnished to the Securities and Exchange Commission (“SEC”). Information contained on or accessible through our website is not a part of this Annual Report on Form 10-K or our other filings with the SEC.

The public may read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, Room 1580, NE Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at http://www.sec.gov.

Item 1.A Risk Factors.

Our business, financial condition, operating results and prospects are subject to the following risks. Additional risks and uncertainties not presently foreseeable to us may also impair our business operations. If any of the following risks actually occurs, our business, financial condition or operating results could be materially adversely affected. In such case, the trading price of our common stock could decline, and our stockholders may lose all or part of their investment in the shares of our common stock.

Risks Specific to Our Business

If we fail to successfully execute on our business plan or if digital assets and blockchain do not become widely used on a mass scale, our results of operations could be adversely affected.

We currently design, develop, and acquire technologies to deploy fully compliant, institutional-level ecosystems that fuel financial asset digitization, safe and secure wealth transfer, and data and identity sovereignty for financial and data-driven transactions. Our ability to succeed depends on the success of our continued development and expansion of our product and service offerings. There are various risks related to these efforts, including the risk that these efforts may not provide the expected benefits in our anticipated time frame, if at all, and may prove costlier than expected; and the risk of adverse effects to our business, results of operations and liquidity if past and future undertakings, and the associated changes to our business, do not prove to be cost effective or do not result in benefits at the levels that we anticipate. There is no assurance that a digital asset ecosystem will develop as we anticipate or develop on a mass scale at all, or that our business model will achieve the expected results. To be successful over time, we may need to change our business model. Any such efforts may not be successful.

Due to unfamiliarity and some negative publicity associated with digital asset and blockchain technology, the general public may lose confidence in digital asset or blockchain technology.

Products and services that are based on digital assets are relatively new. Many players in the industry are unlicensed, unregulated, operate without supervision by any governmental authorities, or do not provide the public with significant information regarding their ownership structure, management team, corporate practices, cybersecurity, and regulatory compliance. As a result, the general public may lose confidence in digital asset and blockchain technology, including associated data center operations like ours.

Since the inception of the crypto economy, numerous digital asset and digital asset businesses and platforms have been sued, investigated, or shut down due to fraud, illegal activities, the sale or issuance of unregistered securities, manipulative practices, business failure, and security breaches.

In addition, there have been reports that a significant amount of digital asset trading volume is fabricated and false in nature, with a specific focus on unregulated platforms, products and services located outside the United States. Such reports may indicate that the market for products and services utilizing digital assets and other digital assets is significantly smaller than otherwise understood.

Negative perception, a lack of stability and standardized regulation in the crypto economy, and the closure or temporary shutdown of platforms utilizing digital assets due to fraud, business failure, hackers or malware, or government mandated regulation may reduce confidence in the crypto economy and result in greater volatility of the prices of assets, including significant depreciation in value. Any of these events could have a material and adverse impact on our business, financial condition and results of operations.

Market acceptance of digital assets and blockchain technology is critical to our success and revenue generation. Our products and services involve innovative technologies that may not gain widespread adoption among our target user base. Negative public perception, a lack of understanding of blockchain technologies, or a decline in the use of digital assets due to regulatory, technological, or competitive factors could significantly limit our ability to attract or retain customers. Furthermore, our growth depends not only on the acceptance of our current technology but also on our ability to anticipate and develop new technologies that meet evolving market demands. Failure to achieve broad market acceptance can limit our revenue streams and adversely impact our financial condition and operational results.

Concerns about the environmental impacts of blockchain technology could adversely impact usage and perceptions digital assets or our services and offerings.

Because we are unable to influence or predict future regulatory actions taken by federal, state, local or foreign governments, we may have little opportunity or ability to respond to rapidly evolving regulatory positions which may have a materially adverse effect on our industry and, therefore, our business and results of operations. If further extreme regulatory action is taken by various government entities, our business may be negatively affected.

Regulatory environments across jurisdictions are rapidly evolving, and we are subject to laws and regulations affecting the blockchain and digital assets industry, which are often complex and contradictory. The lack of harmonization in regulations can create challenges, including limitations on our operations and increased compliance costs. Future legislative or regulatory actions could severely impact our business model, requiring extensive changes to our operations and strategies. This uncertainty in the regulatory landscape poses a significant risk to our ongoing and future business initiatives.

Cybersecurity breaches and data privacy violations could significantly disrupt our operations and expose us to financial liability and reputational harm.

Cybersecurity and data privacy are critical aspects of our operations, given our reliance on digital technologies to provide services and interact with clients. We face significant risks related to security breaches, data loss, and other cyber incidents that could compromise the integrity and confidentiality of our proprietary and customer data. Such incidents could expose us to legal penalties, financial losses, and reputational damage. Despite our efforts to enhance our cybersecurity measures and comply with applicable data protection laws, the inherent risks associated with cybersecurity breaches continue to pose a significant threat to our operations. As we expand our digital offerings, the potential vectors for attacks increase. A breach could result in substantial financial and reputational damage, including legal liabilities and erosion of customer trust. Our continued investment in advanced security measures and training is critical to mitigate these risks.

Rapid Advancements in Technology May Outpace Our Current Cybersecurity Measures

The technology sector continues to evolve at a rapid pace, with significant advancements in areas such as quantum computing and artificial intelligence. These technologies, while offering numerous benefits, also pose new security challenges that could potentially compromise our existing cybersecurity measures. Quantum computing, in particular, could render traditional encryption methods obsolete, exposing us to increased risks of cyber attacks and data breaches. Our ability to continually update our cybersecurity infrastructure in line with these advancements is critical to protecting our assets and maintaining customer trust. Failure to effectively adapt to these technological changes could result in significant operational disruptions and financial losses.

The potential impact of rapid advancements in technology includes operational disruptions, increased compliance costs, and potential loss of revenue. Additionally, failure to adequately address this risk could harm our reputation and investor confidence. We are actively monitoring these developments and are committed to implementing strategies designed to mitigate these risks, including investing in advanced security technologies.

Risks Related to Securities Markets and Investments in Our Securities

Our executive officers and certain stockholders possess the majority of our voting power, and through this ownership, control our Company and our corporate actions.

Our current executive officers, directors and largest stockholders of the Company, held approximately 64% of the voting power of the outstanding shares of our capital stock as of December 31, 2023. These officers, directors and certain stockholders have a controlling influence in determining the outcome of any corporate transaction or other matters submitted to our stockholders for approval, including mergers, consolidations and the sale of all or substantially all of our assets, election of directors, and other significant corporate actions. The interests of our executive officers and certain shareholders may give rise to a conflict of interest with the Company and the Company’s stockholders. For additional details concerning voting power please refer to the section below entitled “Description of Securities.”

Liquidity of our common stock has been limited.

Our common stock is quoted on OTC Markets under the symbol “IONI”. The liquidity of our common stock is very limited and is affected by our limited trading market. The OTC Markets is an inter-dealer market much less regulated than the major exchanges, and is subject to abuses, volatilities and shorting. There is currently no broadly followed and established trading market for our common stock. An established trading market may never develop or be maintained. Active trading markets generally result in lower price volatility and more efficient execution of buy and sell orders. Absence of an active trading market reduces the liquidity of the shares traded.

The trading volume of our common stock may be limited and sporadic. This situation is attributable to a number of factors, including the fact that we are a small company that is relatively unknown to stock analysts, stock brokers, institutional investors and others in the investment community that generate or influence sales volume, and that even if we came to the attention of such persons, they may tend to be risk-averse and would be reluctant to follow an unproven company such as ours or purchase or recommend the purchase of our shares until such time as we became more seasoned and viable. As a consequence, there may be periods of several days or more when trading activity in our shares is minimal, as compared to a seasoned issuer that has a large and steady volume of trading activity that will generally support continuous sales without an adverse effect on share price. We cannot give any assurance that a broader or more active public trading market for our common stock will develop or be sustained, or that current trading levels will be sustained. As a result of such trading activity, the quoted price for our common stock while on the OTC Markets may not necessarily be a reliable indicator of its fair market value.

Because we became public by means of a “reverse business combination,” we may not be able to attract the attention of major brokerage firms.

There may be risks associated with us becoming public through a “reverse business combination.” Securities analysts of major brokerage firms and securities institutions may not provide coverage of us because there were no broker-dealers who sold our stock in a public offering that would be incentivized to follow or recommend the purchase of our common stock. The absence of such research coverage could limit investor interest in our common stock, resulting in decreased liquidity. No assurance can be given that established brokerage firms will, in the future, want to cover our securities or conduct any secondary offerings or other financings on our behalf.

Our stock price may be volatile.

The market price of our common stock is likely to be highly volatile and could fluctuate widely in price in response to various factors, many of which are beyond our control, including the following:

Many of these factors are beyond our control and may decrease the market price of our common stock, regardless of our operating performance. We cannot make any predictions or projections as to what the prevailing market price for our common stock will be at any time, including as to whether our common stock will sustain current market prices, or as to what effect that the sale of shares or the availability of common stock for sale at any time will have on the prevailing market price.

In addition, the securities markets have from time to time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of our common stock.

Our common stock is subject to price volatility unrelated to our operations.

Our operations are significantly influenced by the economic conditions and the stability of the financial markets. Fluctuations in these markets, especially those impacting digital assets, can adversely affect our investment value, operational costs, and revenue streams. Economic downturns, increased market volatility, and adverse financial market conditions could have a disproportionate impact on our strategic operations and financial performance.

A decline in the price of our common stock could affect our ability to raise working capital and adversely impact our ability to continue operations.

A prolonged decline in the price of our common stock could result in a reduction in the liquidity of our common stock and a reduction in our ability to raise capital. A decline in the price of our common stock could be especially detrimental to our liquidity, our operations and strategic plans. Such reductions may force us to reallocate funds from other planned uses and may have a significant negative effect on our business plan and operations, including our ability to develop new services and continue our current operations. If our common stock price declines, we can offer no assurance that we will be able to raise additional capital or generate funds from operations sufficient to meet our obligations. If we are unable to raise sufficient capital in the future, we may not be able to have the resources to continue our normal operations.

Concentrated ownership of our common stock creates a risk of sudden changes in our common stock price.

The sale by any shareholder of a significant portion of their holdings could have a material adverse effect on the market price of our common stock.

Sales of our currently issued and outstanding stock may become freely tradable pursuant to Rule 144 and may dilute the market for your shares and have a depressive effect on the price of the shares of our common stock.

A substantial majority of the outstanding shares of Common Stock are “restricted securities” within the meaning of Rule 144 under the Securities Act of 1933, as amended (the “Securities Act”) (“Rule 144”). As restricted shares, these shares may be resold only pursuant to an effective registration statement or under the requirements of Rule 144 or other applicable exemptions from registration under the Securities Act and as required under applicable state securities laws. Rule 144 provides in essence that a non-affiliate who has held restricted securities for a period of at least six months may sell their shares of common stock. Under Rule 144, affiliates who have held restricted securities for a period of at least six months may, under certain conditions, sell every three months, in brokerage transactions, a number of shares that does not exceed the greater of 1% of a company’s outstanding shares of common stock or the average weekly trading volume during the four calendar weeks prior to the sale. A sale under Rule 144 or under any other exemption from the Securities Act, if available, or pursuant to subsequent registrations of our shares of common stock, may have a depressive effect upon the price of our shares of common stock in any active market that may develop.

We do not plan to declare or pay any dividends to our stockholders in the near future.

We have not declared any dividends in the past, and we do not intend to distribute dividends in the near future. The declaration, payment and amount of any future dividends will be made at the discretion of the board of directors and will depend upon, among other things, the results of operations, cash flows and financial condition, operating and capital requirements, and other factors as the board of directors considers relevant. There is no assurance that future dividends will be paid, and if dividends are paid, there is no assurance with respect to the amount of any such dividend.

The requirements of being a public company may strain our resources and distract management.

As a public company, we are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), and the Securities Act. These rules, regulations and requirements are extensive. We may incur significant costs associated with our public company corporate governance and reporting requirements. This may divert management’s attention from other business concerns, which could have a material adverse effect on our business, financial condition and results of operations. We also expect that these applicable rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified individuals to serve on our board of directors or as executive officers.

Future changes in financial accounting standards or practices may cause adverse unexpected financial reporting fluctuations and affect reported results of operations.

A change in accounting standards or practices can have a significant effect on our reported results and may even affect our reporting of transactions completed before the change is effective. New accounting pronouncements and varying interpretations of accounting pronouncements have occurred and may occur in the future. Changes to existing rules or the questioning of current practices may adversely affect our reported financial results or the way we conduct business.

“Penny Stock” rules may make buying or selling our common stock difficult.

Trading in our common stock has previously been subject to the “penny stock” rules. The SEC has adopted regulations that generally define a penny stock to be any equity security that has a market price of less than $5.00 per share, subject to certain exceptions. These rules require that any broker-dealer that recommends our common stock to persons other than prior customers and accredited investors, must, prior to the sale, make a special written suitability determination for the purchaser and receive the purchaser’s written agreement to execute the transaction. Unless an exception is available, the regulations require the delivery, prior to any transaction involving a penny stock, of a disclosure schedule explaining the penny stock market and the risks associated with trading in the penny stock market. In addition, broker-dealers must disclose commissions payable to both the broker-dealer and the registered representative and current quotations for the securities they offer. The additional burdens imposed upon broker-dealers by such requirements may discourage broker-dealers from effecting transactions in our common stock, which could severely limit the market price and liquidity of our common stock.

Risk Related to our Intellectual Property Rights

It may be difficult and costly to protect our intellectual property rights, and we cannot ensure the protection of these rights.

Our commercial success depends, in part, on obtaining and maintaining patent protection for our technologies, products and processes, successfully defending these patents against third-party challenges and successfully enforcing these patents against third-party competitors. Proprietary rights relating to our current and potential products will be protected from unauthorized use by third parties only to the extent that they are covered by valid and enforceable patents or are effectively maintained as trade secrets. Patents owned by or licensed to us may not afford protection against competitors, and our pending patent applications now or hereafter filed by or licensed to us may not result in patents being issued.

Our patents or patent applications, or those licensed to us, if issued, may be challenged, invalidated or circumvented, and the rights granted thereunder may not provide proprietary protection or competitive advantages to us against competitors with similar technology. Furthermore, our competitors may independently develop similar technologies or duplicate any technology developed by us.

If we cannot maintain the confidentiality of our proprietary technology and other confidential information, our ability to receive patent protection and our ability to protect valuable information owned by us may be imperiled. Litigation may be necessary to assert claims of infringement, to enforce patents issued to us, to protect trade secrets or know-how owned by us, or to determine the scope and validity of the proprietary rights of others. In addition, interference, derivation, post-grant oppositions, and similar proceedings may be necessary to determine rights to inventions in our patents and patent applications. Litigation or similar proceedings could result in substantial costs to and diversion of effort by us and could have a material adverse effect on our business, financial condition and results of operations. These efforts by us may not be successful.

We also rely on our know-how, trade secrets, and continuing technological innovation to develop and maintain our proprietary position. However, know-how and trade secrets are difficult to protect. While we require and continue to intend to require employees, academic collaborators, consultants and other contractors to enter into confidentiality agreements, we may not be able to adequately protect our trade secrets or other proprietary or licensed information. There can be no assurance that these agreements will not be breached, that we will have adequate remedies for any breach, or that our trade secrets will not otherwise become known or be independently discovered by competitors. To the extent that our employees, consultants or contractors use intellectual property owned by others in their work for us, disputes may also arise as to the rights in related or resulting know-how and inventions.

We may not be able to protect our intellectual property rights throughout the world.

Filing, prosecuting and defending patents on product candidates in all countries and jurisdictions throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the United States could be less extensive than those offered in the United States. Consequently, we may not be able to prevent third parties from practicing our inventions in all countries outside the United States, or from selling or importing products made using our inventions in and into the United States or other jurisdictions.

Competitors may use our technologies in jurisdictions where we do not have, or where we do not pursue and obtain, patent protection to develop their own products and further, may export otherwise infringing products to territories where we have patent protection, but enforcement is not as strong as that in the United States. These products may compete with our product and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing. Even if we pursue and obtain issued patents in particular jurisdictions, our patent claims or other intellectual property rights may not be effective or sufficient to prevent third parties from so competing.

Further, the laws of some foreign countries do not protect intellectual property rights to the same extent as the laws of the United States. Many companies have encountered significant problems in protecting and defending intellectual property rights in certain foreign jurisdictions. The legal systems of some countries, particularly developing countries, do not favor the enforcement of patents and other intellectual property protection. This could make it difficult for us to stop the infringement of our patents, if obtained, or the misappropriation of our other intellectual property rights. For example, many foreign countries have compulsory licensing laws under which a patent owner must grant licenses to third parties. In addition, many countries limit the enforceability of patents against third parties, including government agencies or government contractors. In these countries, patents may provide limited or no benefit. Patent protection must ultimately be sought on a country-by-country basis, which is an expensive and time-consuming process with uncertain outcomes. Accordingly, we may choose not to seek patent protection in certain countries, and we will not have the benefit of patent protection in such countries.

Moreover, proceedings to enforce our patent rights, or those of our licensors or partners, in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our in-licensed patents, or any patents that we may own in the future, at risk of being invalidated or interpreted narrowly, could put our owned or in-licensed patent applications at risk of not issuing and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate, and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.

If we fail to obtain or maintain patent protection or trade secret protection for our product candidates or our technologies, third parties could use our proprietary information, which could impair our ability to compete in the market and adversely affect our ability to generate revenues and attain profitability.

We may also rely on the trademarks we may develop to distinguish our products from the products of our competitors. We cannot guarantee that any trademark applications filed by us or our business partners will be approved. Third parties may also oppose such trademark applications, or otherwise challenge our use of the trademarks. In the event that the trademarks we use are successfully challenged, we could be forced to rebrand our products, which could result in loss of brand recognition, and could require us to devote resources to advertising and marketing new brands. Further, we cannot provide assurance that competitors will not infringe the trademarks we use, or that we will have adequate resources to enforce these trademarks.

Risks Related to Governmental Regulation and Enforcement

Regulatory changes or actions may alter the nature of an investment in us or restrict the use of digital assets in a manner that adversely affects our business, prospects, or operations.

As digital assets have grown in both popularity and market size, governments around the world have reacted differently to digital assets; certain governments have deemed them illegal, and others have allowed their use and trade without restriction, while some jurisdictions, such as the United States, subject the mining, ownership and exchange of digital assets to extensive, and in some cases overlapping, unclear and evolving regulatory requirements.

For example, in January 2023, the Federal Reserve, Office of the Comptroller of the Currency, and FDIC issued a joint statement effectively discouraging banks from doing business with clients in digital-asset industries, which could potentially create challenges regarding access to financial services. In January 2023, the Federal Reserve also issued a policy statement broadening its authority to cover state-chartered institutions. Moreover, in January 2023, the White House issued a statement cautioning deepening ties between digital-assets and the broader financial system. Meanwhile, the SEC has announced several actions aimed at curtailing activities it deems sales of unregistered securities.

However, also during January 2023, the U.S. House of Representatives announced its first ever Financial Services Subcommittee on Digital Assets and the intention to develop a regulatory framework for the use and trade of digital assets and related financial services products in the United States. Bipartisan leadership of the Senate Banking Committee announced a similar objective.

Given the difficulty of predicting the outcomes of ongoing and future regulatory actions and legislative developments, it is possible that they could have a material adverse effect on our business, prospects or operations.

Our interactions with a blockchain may expose us to specially designated nationals (“SDN”) or blocked persons and new legislation or regulation could adversely impact our business or the market for digital assets.

The Office of Financial Assets Control (“OFAC”) of the U.S. Department of Treasury requires us to comply with its sanction program and not conduct business with persons named on its SDN list. However, because of the pseudonymous nature of blockchain transactions we may inadvertently and without our knowledge engage in transactions with persons named on OFAC’s SDN list. Our Company’s policy prohibits any transactions with such SDN individuals, and we take all commercially reasonable steps to avoid such transactions, but we may not be adequately capable of determining the ultimate identity of the individual with whom we transact with respect to selling our digital assets. Moreover, there is a risk that some bad actors will continue to attempt to use digital assets, as a potential means of avoiding federally imposed sanctions, such as those imposed in connection with the Russian invasion of Ukraine.

We are unable to predict the nature or extent of new and proposed legislation and regulation affecting the digital asset industry, or the potential impact of the use of digital assets by SDN or other blocked or sanctioned persons, which could have material adverse effects on our business and our industry more broadly. Further, we may be subject to investigation, administrative or court proceedings, and civil or criminal monetary fines and penalties as a result of any regulatory enforcement actions, all of which could harm our reputation and affect the value of our common stock.

Item 1B. Unresolved Staff Comments.

None.

Item 1C. Cybersecurity.

Risk Management and Strategy

Managing cybersecurity risk is critical to supporting our vision, enabling our strategy, and safely operating our business. We recognize the importance of assessing, identifying, and managing material risks associated with cybersecurity threats. Our process for identifying and assessing material risks from cybersecurity threats operates alongside our broader overall risk assessment process which covers all Company risks. As part of this process, appropriate personnel collaborate with third-party subject matter experts to gather insights for identifying and assessing material risks associated with cybersecurity threats, their severity, and potential mitigations. Further, we provide periodic training for all personnel regarding cybersecurity threats, with such training appropriate to the roles, responsibilities and access of the relevant Company personnel. Our policies require all workers to report any real or suspected cybersecurity event.

We have a cybersecurity risk assessment process that involves the activities listed below, among others:

As part of the above process, we engage third-party services to provide 24-hour, 365-day monitoring, escalation, and response to cyber events. In addition to consulting on best practices, we leverage a third-party expert security firm for independent evaluations of our security controls through penetration testing. These evaluations test both the design and the operational effectives of security controls.

Our process also addresses material risks from cybersecurity threats associated with our use of third-party service providers, including those in our supply chain, our product development partners, or those who have access to sensitive data or our systems. Third-party risks are included within our broader overall risk assessment process, and cybersecurity considerations are considered during the selection and oversight of our third-party service providers.

Governance

Our board of directors, in coordination with the Audit Committee, oversees our risk management program, including the management of risks associated with cybersecurity threats. Our board of directors and Audit Committee receive periodic updates on developments in our cybersecurity risk management practices, evolving standards, third-party vulnerability assessments, and information security issues. On an annual basis, our board of directors and the Audit Committee discuss our approach to overseeing cybersecurity threats with senior management, including our Chief Executive Officer (“CEO”).

Senior management works collaboratively across the organization to implement a program designed to protect our information systems from cybersecurity threats and to respond to any cybersecurity incidents in accordance with our incident response and recovery plans. A cross-functional team addresses cybersecurity threats and responds to cybersecurity incidents through communications within the team and with third-party experts to stay informed about and monitor the prevention, detection, mitigation, and remediation of cybersecurity threats and incidents and report such incidents to the board of directors and the Audit Committee when appropriate.

As of the date of this Form 10-K, we are not aware of cybersecurity incidents that have materially affected or are reasonably likely to materially affect the Company, including our business, strategy, results of operations, or financial condition at this time. For further discussion of the risks associated with cybersecurity incidents, see Part I, Item 1A of this Form 10-K under the risk factor entitled.

Item 2. Properties.

Our principal place of business and corporate headquarters is located at 1244 N. Stone Street, Unit #3, Chicago, IL, which we lease on a month-to-month basis. We believe that our current office is sufficient in size for current and future operations.

Item 3. Legal Proceedings.

None.

Item 4. Miney Safety Disclosures.

Not applicable.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Market Information

Our common stock is traded on the OTC Markets under the trading symbol “IONI.” The following table lists the high and low sale information for our common stock as quoted on the OTC Markets for the fiscal years ended December 31, 2023 and 2022:

The above quotations from the OTC Markets reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not represent actual transactions.

Holders

The number of record holders of our common stock as of December 31, 2023, was approximately 300 based on information received from our transfer agent. This amount excludes an indeterminate number of shareholders whose shares are held in “street” or “nominee” name with a brokerage firm or other fiduciary.

Dividends

We have not paid or declared any cash dividends on our common stock and we do not anticipate paying dividends on our common stock for the foreseeable future.

Purchases of Equity Securities

Orebits Transaction

On December 15, 2023, the Company consummated its previously announced transaction contemplated by that certain Contribution and Exchange Agreement, dated as of October 30, 2023 (the “Contribution and Exchange Agreement”), by and between the Company and Orebits Acquisition Group, a Wyoming limited liability company (“OAG”), pursuant to which the Company acquired 910,000 shares of currently outstanding common stock of Orebits Corp. (“Orebits”), representing a controlling interest in Orebits, in exchange for 910,000 shares of Series C Preferred Stock of the Company (“Series C Stock” and such transaction, the “ Orebits Transaction”).

As part of the Contribution and Exchange Agreement, upon and by virtue of the consummation of the Orebits Transaction, OAG transferred all its right, title and interest in and to approximately 9,700 Orebits.AU gold-backed digital assets to the Company, which have an estimated value of $18.2 million. The disinterested members of the Board of Directors determined that the consideration paid for the 910,000 shares of Orebits approximated their fair market value.

Sale of Series A Convertible Preferred Stock

On April 13, 2023, the Company sold a total of 700 shares of Series A Convertible Preferred Stock to IAC for $150,000.

Sell-Off of I-ON Communications Co., Ltd.

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 HongRae Kim, the Company’s the 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 acquired 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.

IAC Transaction

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, IAC acquired 3,000 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 $250,000 (the “Subscription Amount”) in the form of a promissory 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”).

The Purchase Agreement was subsequently amended to include the subscription for 3,600 Series A Shares. 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.

Also on September 28, 2022, the Company entered into 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”), in exchange for the Purchasers’ rights and title to certain assets of the Purchasers described in the Contribution Agreement. Each Series B Preferred Share is convertible into one thousand (1,000) shares of common stock and entitled to vote on matters as to which holders of the common stock shall be entitled to vote at a rate of one thousand (1,000) votes per Series B Preferred Share.

All of the securities referred to above were offered and sold 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 Regulation D and/or Regulations promulgated thereunder. The securities have not been registered under the Securities Act or any other applicable securities laws, 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 6. [Reserved]

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

You should read the following discussion and analysis together with our financial statements and the related notes thereto included in “Item 8. Financial Statements and Supplementary Data” in this Annual Report on Form 10-K. The following discussion contains forward-looking statements that involve risks and uncertainties. For a complete discussion of forward-looking statements, see the section above entitled “Forward Looking Statements.” Our actual results could differ materially from those expressed or implied in any forward-looking statements as a result of various factors, including those set forth under the caption “Item 1A. Risk Factors.”

Overview

I-ON is a leading-edge provider of asset-digitization and securitization solutions engineered to provide a secure, fast, transparent, and institutional-grade ecosystem. We specialize in digitizing documentary evidence of ownership into secure, asset-backed digital certificates, thus bringing liquidity and recognized value to a diverse array of asset classes. Our cutting-edge technology includes a zero-trust, hybrid blockchain architecture that incorporates state-of-the-art smart contracts and sophisticated workflow management AI technologies. This system enables the digitization of ownership records for recoverable gold, precious metals, and mineral reserves, transforming them into digital certificates that facilitate wealth transfer through innovative asset-backed financial instruments.

In the fiscal year 2023, I-ON continued to expand its market presence and product offerings. We notably acquired Orebits’ gold digitization patent portfolio, trademarks, brand marks, and core intellectual property in the Orebits Transaction. This acquisition has allowed us to enhance our capabilities and broaden our service offerings, particularly through a new SaaS platform designed for banks, broker-dealers, and other financial intermediaries. This platform supports the receipt, management, and reporting of digital assets, reinforcing our commitment to innovation in the banking, financial technology, and mineral asset industries.

Results of Operations

Results of operations for the year ended December 31, 2023 as compared to the year ended December 31, 2022

Net Sale

The sales for the years ended December 31, 2023 and 2022 were $97,875 and $7,578,685, respectively. Due to the “Sell-off” of its subsidiaries in September 2022, there are very limited sales since then.

Cost of Goods Sold

The costs for the years ended December 31, 2023 and 2022 were $63,000 and 6,923,957, respectively. For the same reason explained above, there was very limited cost for the year ended December 31, 2023.

Gross Profit

The gross profit for the years ended December 31, 2023 and 2022 was $34,875 and $654,728, respectively. For the same reason, there was very limited gross profit for the year ended December 31, 2023.

Operating Expenses

Operating expenses consist of professional fees, research and development expenses and general and administrative expenses.

Operating expenses for the years ended December 31, 2023 was $740,404, containing $388,540 of professional fees and $351,864 of general and administrative expenses. Comparing with the year ended December 31, 2022, the operating expenses were $2,714,315, containing $524,611 of research and development, and $2,189,704 of general and administrative expenses.

The significant decrease in operating expenses was due to the “Sell-off” of the Company’s subsidiaries and not many activities since then.

Other Income (Expense)

For the year ended December 31, 2022, the Company had other income of $1,807,581. For the year ended December 31, 2023, there were other expenses of $98,784 (interest and impairment). The difference was due to various changes of the Company, mainly because 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 year ended December 31, 2023 compared to loss of $1,691,420 for the year ended December 31, 2022. There were no foreign currency transactions for the year ended December 31, 2023 after the Sell-off of its Korean subsidiaries, so that there was no foreign currency translation gain or loss since then.

Liquidity and Capital Resources

As of December 31, 2023 the Company had cash of $36,075 in its bank account.

Operating Activities

Cash of $498,834 used in the year ended December 31, 2023, compared to the cash used in operating activities of $792,936 for the year ended December 31, 2022, a change of $294,102. The change was due to the “Sell-off” of the Company’s subsidiaries and there were not many activities since then.

Investing Activities

Cash used in investing activities for the year ended December 31, 2023 was $578,842, compared to cash used in investing activities of $705,692 for the year ended December 31, 2022, a decrease of $126,850. The decrease in cash in investing activities was due to the ownership change in January 2023. The new owner started to establish its business and scale of investing activities is smaller.

Financing Activities

Cash provided by financing activities for the year ended December 31, 2023 was $1,113,751, compared to cash used in financing activities of $3,078,447 for the year ended December 31, 2022. The increase was primarily due to the proceeds from stock issuance and loans obtained.

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 the financial statements. We have identified the accounting policies in Note 2 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 7A. Quantitative and Qualitative Disclosures About Market Risk.

Not applicable.

Item 8. Financial Statements and Supplementary Data

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders

I-ON Digital Corp.

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of I-ON Digital Corp. (the “Company”) as of December 31, 2023 and 2022, and the related consolidated statements of operations and comprehensive income (loss), shareholders’ equity, and cash flows for each of the years then ended and the related notes (collectively referred to as the “financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of I-ON Digital Corp. as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the years then ended in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the entity’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Going Concern

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates, among other things, the realization of assets and satisfaction of liabilities in the normal course of business. As discussed in Note 2, the Company had an accumulated deficit of $3,496,501 and $2,691,363 at December 31, 2023 and 2022, respectively, had working capital deficits of $707,969 and $0 at December 31, 2023 and 2022, respectively, had a net loss of $805,138 and $27,625 for the years ended December 31, 2023 and 2022, respectively, and net cash used in operating activities of approximately $498,834 and $792,936 for the years ended December 31, 2023 and 2022, respectively. These matters raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

Intangible assets, net – Valuation

Description of the Matter

As discussed in Notes 2 and 7 of the consolidated financial statements the Company has approximately $18.4 million of intangible assets as of December 31, 2023. Intangible assets are recorded at cost and intangible assets with a finite life are amortized using the straight-line method over their estimated useful lives. Intangible assets are assessed for impairment at least annually or when events and circumstances indicate the carrying amount of the asset may not be recoverable.

Approximately $18.0 million of the Company’s intangible assets consist of the ION.au digital asset (formerly known as Orebits.au). The estimation of the value of this asset is subjective because the asset is thinly traded and a price is not quoted on any reputable digital asset exchange.

How We Addressed the Matter in Our Audit

/s/ Kreit & Chiu CPA LLP

We have served as the Company’s auditor since 2019.

New York, New York

June 6, 2024

I-ON Digital Corp. and Subsidiaries

Consolidated Balance Sheets

See accompanying notes to the consolidated financial statements.

I-ON Digital Corp. and Subsidiaries

Consolidated Statements of Operations and Comprehensive Income (Loss)

See accompanying notes to the consolidated financial statements.

I-ON Digital Corp. and Subsidiaries

Consolidated Statements of Shareholders’ Equity

See accompanying notes to the consolidated financial statements.

I-ON Digital Corp. and Subsidiaries

Consolidated Statements of Cash Flows

See accompanying notes to the consolidated financial statements.

I-ON Digital Corp. and Subsidiaries

Notes to Consolidated Financial Statements

NOTE 1: Organization and Operations

I-ON Digital Corp. (“the Company”) was incorporated on July 5, 1999 and is engaged in providing digital-based enterprise solutions, including the digitization and distribution of precious metals, primarily gold and other asset-based digital securities on the blockchain.

On September 29, 2022, the Company effectuated an Equity Transfer Agreement (the “Sell-Off Agreement”) among the Company, the Company’s wholly-owned subsidiary I-ON Communications, Ltd. (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 were 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 Statements of Operations for year ended December 31, 2022 presented. All amounts and disclosures included in the Notes to 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.

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 renews automatically in six (6) month increments. The Company pays $11,000 for the monthly fees. The service agreement ended at the end of June 2023 by mutual agreement.

On December 15, 2023, the Company consummated its previously announced transaction contemplated by that certain Contribution and Exchange Agreement, dated as of October 30, 2023 (the “Contribution and Exchange Agreement”), by and between the Company and Orebits Acquisition Group, a Wyoming limited liability company (“OAG”), pursuant to which the Company acquired 910,000 shares of currently outstanding common stock of Orebits Corp. (“Orebits”), representing the 100% controlling interest in Orebits Corp., in exchange for 910,000 shares of Series C Preferred Stock of the Company (“Series C Stock” and such transaction, the “Transaction”). As part of the Contribution and Exchange Agreement, upon and by virtue of the consummation of the Transaction, OAG transferred all its right, title and interest in and to approximately 9,700 Orebits.AU gold-backed digital assets to the Company, which have an estimated value of $17.6 million. The disinterested members of the Board of Directors determined that the consideration paid for the 910,000 shares of Orebits approximated their fair market value.

To determine if the acquisition is a business combination or an acquisition of assets, Management considered the specific criteria outlined in the generally accepted accounting principles (GAAP), particularly those related to business combinations as defined by Accounting Standards Codification (ASC) 805. According to GAAP (ASC 805-10-20), a business consists of inputs, processes applied to those inputs, and the ability to create outputs. Orebits Corp. has been inactive for years and possesses only one asset without generating revenues or conducting significant activities, so it does not meet the definition of a business under GAAP. Orebits Corp. does not meet the definition of a business and only holds a single asset, so the transaction was treated as an acquisition of assets rather than a business combination.

The acquisition of Orebits Corp. has had a significant impact on the Company’s consolidated balance sheets. The acquiree Orebits Corp. carried only one asset – 9,700 Orebits AU with the value of $17.6 million. After the acquisition, the value of the assets on the consolidated balance sheets increased by $17,643,284 and there was no increase in liabilities.

Orebits Corp. did not have any operations so there is no impact to the consolidated statements of operations for the Company.

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.

Principles of Consolidation and Basis of Presentation

The consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany accounts, transactions, and profits have been eliminated upon consolidation. The accompanying consolidated financial statements and the notes hereto are reported in US Dollars. The consolidated financial statements were prepared and presented in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 810. Non-controlling interests represent the portion of earnings that is not within the parent Company’s control. These amounts are required to be reported as equity instead of as a liability on the consolidated balance sheet. ASC requires net income or loss from non-controlling interests to be shown separately on the consolidated statements of operations. The consolidated financial statements included herein have been prepared by the Company pursuant to accounting principles generally accepted in the United States of America (GAAP) and the rules and regulations of the Securities and Exchange Commission (the “SEC”).

Going Concern

The accompanying consolidated financial statements have been prepared in conformity with GAAP, which contemplate continuation of the Company as a going concern. However, the Company had limited revenues since the Sell-off of its subsidiaries in September 2022. In addition, the Company has limited cash and it had consecutive losses in the last two years. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.

As of December 31, 2023, the Company has completed two digital platforms to establish a stabilized source of revenues sufficient to cover operating costs over an extended period of time. Those platforms are still in the testing stage as of now when the consolidated financial statements were ready to be issued. The implementation of these platforms will take time to cover the full operation costs.

The Company’s business prospects have changed since the new management took control of operations in January 2023. During the year ended December 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. 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

During 2022, 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.

Segment Reporting

FASB ASC 280, Segment Reporting, requires public companies to report financial and descriptive information about their reportable operating segments. The Company operates in one segment – financial technology services. The Company’s chief executive officer has been identified as the chief operating 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 original maturities of three months or less when acquired to be cash equivalents.

Intangible Assets

Intangible assets represent non-physical assets that lack a physical substance but have value. These assets are typically long-term in nature and can include items such as patents, trademarks, copyrights, digital assets, and software. When the Company acquires an intangible asset, it is recorded either at fair value or at historical cost. The fair value is used if the asset is acquired from an entity not under common control in a business combination, and the historical cost is used if the asset is acquired from an entity under common control. s. 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:

Schedule of Estimated Useful Lives of Asset Categories

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”). The Company does not intend to sell the digital assets in the near future so they are classified as non-current assets.

These digital assets are not amortized, but are assessed for impairment annually, or upon a triggering event that indicates it is more likely than not that the indefinite-lived intangible asset is impaired. Whenever the exchange-traded price of digital assets declines below its carrying value, the Company has determined that impairment exists and records impairment equal to the amount by which the carrying value exceeds the fair value. Once the intangible asset is impaired, the loss is not reversed if the fair value subsequently increases.

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:

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, accrued expenses and other 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 years ended December 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 consolidated financial statements indicates that it is probable that an asset has been impaired or a liability has been incurred at the date of the financial statements and the amount of the loss can be reasonably estimated. Accounting for contingencies such as legal matters requires significant judgment. Many of these legal matters can take years to resolve. Generally, as the time period increases over which the uncertainties are resolved, the likelihood of changes to the estimate of the ultimate outcome increases.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk are cash arising from its normal business activities. The Company has its cash in high credit quality institutions. The Company currently does not provide for or issue extensions of credit to its clients, vendors or employees. If the Company’s board of directors elected to make a change in current policy, management, pursuant to policy and procedure implementation of the same, would establish methodologies for monitoring and assessing corresponding risks, inclusive of the potential for concentrations and the related adequacy of loss reserves going forward.

Advertising

Costs associated with advertising and promotions are expensed as incurred.

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 grant-date fair value of the stock options or other equity-based compensation issued to employees.

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 consolidated 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

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 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:

Schedule of Components of Discontinued Operations