UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

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

 

For the quarterly period ended MarchDecember 31, 2022

 

OR

 

☐ 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: 811-08387

 

WATERSIDE CAPITAL CORPORATIONMETAVESCO, INC.

(Exact name of registrant as specified in its charter)

 

Nevada 54-1694665

(State of

incorporation)

 

(I.R.S. Employer

Identification No.)

 

410 Peachtree Pkwy, Suite 4245, Cumming, GA 30041 (678) 341-5898
(Address of principal executive offices) (Registrant’s telephone number, including area code)

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

Title of each class:Trading Symbol(s)Name of each exchange on which registered:
NoneN/AN/A

 

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

 

Indicate by check mark whether the registrant has submitted electronically, if any, 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 ☒ No ☐

 

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☒
     
  Smaller reporting company ☒ Emerging growth company ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

 

The outstanding number of shares of common stock as of May 16, 2022February 14, 2023 was: 6,082,214.

 

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

Title of each class:Trading Symbol(s)Name of each exchange on which registered:
NoneN/AN/A

 

 

 

WATERSIDE CAPITAL CORPORATIONMETAVESCO, INC.

FORM 10-Q

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION 
   
ITEM 1.Financial Statements3
Balance Sheets as of March 31, 2022 (unaudited) and June 30, 20213
 Balance Sheets as of December 31, 2022 (unaudited) and June 30, 20223
Statements of Operations for the three and ninesix months ended MarchDecember 31, 2022 and 2021 (unaudited)4
 Statements of Stockholders’ Deficit for the three and ninesix months ended MarchDecember 31, 2022 and 2021 (unaudited)5
 Statements of Cash Flows for the ninesix months ended MarchDecember 31, 2022 and 2021 (unaudited)6
 Notes to Financial Statements7
   
ITEM 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations14
   
ITEM 3.Quantitative and Qualitative Disclosures About Market Risk1921
   
ITEM 4.Controls and Procedures1921
   
PART II. OTHER INFORMATION20 
   
ITEM 1.Legal Proceedings2022
   
ITEM 1A.Risk Factors2022
   
ITEM 2.Unregistered Sales of Equity Securities and Use of Proceeds2422
   
ITEM 3.Defaults Upon Senior Securities2422
   
ITEM 4.Mine Safety Disclosures2422
   
ITEM 5.Other Information2422
   
ITEM 6.Exhibits2523
   
 SIGNATURES2724

 

2

 

PART I

FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

WATERSIDE CAPITAL CORPORATIONMETAVESCO, INC.

CONDENSED BALANCE SHEETS

As of March 31, 2022 (Unaudited) and June 30, 2021

  1   2 
 March 31, 2022  June 30, 2021  December 31, 2022  June 30, 2022 
 (Unaudited)    (Unaudited)   
Assets                
Current assets:                
Cash and cash equivalents $496,527  $44  $972  $35,151 
Prepaid expenses  7,596   -   9,886   13,847 
Total current assets  10,858   48,998 
        
Digital assets held, net of impairment  755,880   -   350,712   434,642 
Total current assets  1,260,003   44 
Deposit on equipment  72,095   - 
                
Total assets $1,260,003  $44  $433,665  $483,640 
                
Liabilities and Stockholders’ Equity (Deficit)        
Liabilities and Stockholders’ Equity        
Current liabilities:                
Accounts payable and accrued liabilities $27,916  $22,089  $24,507  $26,549 
Promissory note - related party  100,000   - 
Accrued interest payable - related party  -   36,441 
Convertible note payable - related party  -   149,838 
Convertible promissory notes - related party (net of debt discount of $99,566 and $0, respectively)  1,294   - 
Promissory note (net of debt discount of $4,858 and $0, respectively)  20,625   - 
Promissory notes - related parties (net of debt discount of $6,311 and $0, respectively)  185,491   100,000 
Convertible promissory note (net of debt discount of $17,426 and $19,441, respectively)  2,994   559 
Convertible promissory notes - related party (net of debt discount of $258,363 and $328,658, respectively)  44,128   12,202 
Total current liabilities  129,210   208,368   277,745   139,310 
                
Stockholders’ Equity (Deficit):        
Preferred stock; $0.0001 par value; 20,000,000 shares authorized  -   - 
Series A Convertible Preferred Stock: 22 and 0 shares issued and outstanding at March 31, 2022 and June 30, 2021  -   - 
Common stock; $0.0001 par value; 100,000,000 shares authorized; 6,082,214 shares issued and outstanding at March 31, 2022 and June 30, 2021  608   608 
Stockholders’ Equity:        
Preferred stock: $0.0001 par value; 20,000,000 shares authorized  -   - 
Series A Convertible Preferred Stock: 22 and 0 shares issued and outstanding at December 31, 2022 and June 30, 2022, respectively  -   - 
Preferred stock, value        
Common stock: $0.0001 par value; 100,000,000 shares authorized; 6,082,214 shares issued and outstanding at December 31, 2022 and June 30, 2022, respectively  608   608 
Additional paid-in capital  19,129,924   17,721,420   19,357,840   19,389,924 
Shares to be issued  9,000   - 
Accumulated deficit  (17,999,739)  (17,930,352)  (19,211,528)  (19,046,202)
Total stockholders’ deficit  1,130,793   (208,324)
Total liabilities and stockholders’ equity (deficit) $1,260,003  $44 
Total stockholders’ equity  155,920   344,330 
Total liabilities and stockholders’ equity $433,665  $483,640 

 

The accompanying notes are an integral part of these unaudited condensed interim financial statements.

3

WATERSIDE CAPITAL CORPORATIONMETAVESCO, INC.

CONDENSED STATEMENTS OF OPERATIONS

For the three and nine months ended March 31, 2022 and 2021

(Unaudited)

 

  1   2   3   4                 
 Three month period ended
March 31,		  Nine month period ended
March 31,		  Three months ended
December 31,		  Six months ended
December 31,		 
 2022 2021 2022 2021  2022  2021  2022  2021 
Revenue:                                
Airdrops $17,439  $-  $17,439  $- 
Liquidity pool fees  22,772   -   22,772   -  $43,464  $-  $83,894  $- 
Total Revenue  40,211   -   40,211   -   43,464   -   83,894   - 
Expense                                
Administrative expenses  34,833   6,764   88,840   51,905   52,500   29,185   177,510   51,010 
Interest expense  1,294   7,560   1,294   36,353   24,991   -   48,533   2,997 
Impairment of digital assets held  51,983   -   51,983   -   256,018   -   281,317   - 
Total Expense  88,110   14,324   142,117   88,258   333,509   29,185   507,360   54,007 
                                
Other income (expense)                
Realized gain (loss) on sales/ exchange digital assets held  32,519   -   32,519   - 
Other income                
Other rewards  5,158   -   5,158   - 
Realized gain on sale/ exchange of digital assets held  177,872   -   252,982   - 
Total Other income (expense)  32,519   -   32,519   -   183,030   -   258,140   - 
                                
Net loss $(15,380) $(14,324) $(69,387) $(88,258) $(107,015) $(29,185) $(165,326) $(54,007)
                                
Net loss per share - basic and diluted $(0.00) $(0.00) $(0.01) $(0.01) $(0.02) $(0.00) $(0.03) $(0.01)
                                
Weighted average number of common shares outstanding - basic and diluted  6,082,214   6,082,214   6,082,214   6,082,214   6,082,214   6,082,214   6,082,214   6,082,214 

The accompanying notes are an integral part of these unaudited condensed interim financial statements.

4

WATERSIDE CAPITAL CORPORATIONMETAVESCO, INC.

CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

For the three and ninesix months ended MarchDecember 31, 2022 and 2021

(Unaudited)

                                                           
  Series A Convertible Preferred Stock
($0.0001 par value)		  Common Stock
($0.0001 par value)		  Additional
paid-in		  Accumulated  Total
stockholders’		 
  Shares  Par Value  Shares  Par Value  capital  deficit  equity 
Balance, December 31, 2021         -  $-   6,082,214  $608  $17,929,064  $(17,984,359) $(54,687)
                                                           
Issue of Series A Convertible Preferred Stock  22  $-   -   -   1,100,000   -   1,100,000 
Beneficial conversion feature  -   -   -   -   100,860   -   100,860 
Net loss  -   -   -   -   -   (15,380)  (15,380)
Balance, March 31, 2022  22  $-   6,082,214  $608  $19,129,924  $(17,999,739) $1,130,793 
                                 
  Series A Convertible Preferred Stock ($0.0001 par value)  Common Stock ($0.0001 par value)  

Additional

  

Shares

    

Total

 
  Shares  Par Value  Shares  Par Value  

paid-in

capital

  

to be

issued

  

Accumulated

deficit

  

stockholders’

equity

 
Balance at September 30, 2022  22  $        -   6,082,214  $608  $19,357,840  $9,000  $(19,104,513) $     262,935 
                                 
Net loss  -   -   -   -   -   -   (107,015)  (107,015)
Balance at December 31, 2022  22  $-   6,082,214  $608  $19,357,840  $9,000  $(19,211,528) $155,920 

 

  Series A Convertible Preferred Stock
($0.0001 par value)		  Common Stock
($0.0001 par value)		  Additional
paid-in		  Accumulated  Total
stockholders’		 
  Shares  Par Value  Shares  Par Value  capital  deficit  equity 
Balance at June 30, 2021  -  $-   6,082,214  $608  $17,721,420  $(17,930,352) $(208,324)
                                                           
Issue of Series A Convertible Preferred Stock  22  $-   -   -   1,100,000   -   1,100,000 
Beneficial conversion feature  -   -   -   -   100,860   -   100,860 
Forgiveness of convertible note payable, accrued interest and advances - related party  -   -   -   -   207,644   -   207,644 
Net loss  -   -   -   -   -   (69,387)  (69,387)
Balance, March 31, 2022  22  $-   6,082,214  $608  $19,129,924  $(17,999,739) $1,130,793 
  Series A Convertible Preferred Stock ($0.0001 par value)  Common Stock ($0.0001 par value)  

Additional

  

Shares

    

Total

 
  Shares  Par Value  Shares  Par Value  

paid-in

capital

  

to be

issued

  

Accumulated

deficit

  

stockholders’ equity

 
Balance at June 30, 2022  22  $-   6,082,214  $608  $19,389,924  $-  $(19,046,202) $344,330 
                                 
Warrants  -   -   -   -   7,916   -   -   7,916 
Shares to be issued  -   -   -   -   -   9,000   -   9,000 
Beneficial conversion feature  -   -   -   -   (40,000)  -   -   (40,000)
Net loss  -   -   -   -   -   -   (165,326)  (165,326)
Balance at December 31, 2022  22  $-   6,082,214  $608  $19,357,840  $9,000  $(19,211,528) $155,920 

 

  Series A Convertible Preferred Stock
($0.0001 par value)		  Common Stock
($0.0001 par value)		  Additional
paid-in		  Accumulated  Total
stockholders’		 
  Shares  Par Value  Shares  Par Value  capital  deficit  equity 
Balance, December 31, 2020  -  $-   6,082,214  $608  $17,713,087  $(17,887,624) $(173,929)
                                                          
Beneficial conversion feature  -   -   -   -   3,333   -   3,333 
Net loss  -   -   -   -   -   (14,324)  (14,324)
Balance, March 31, 2021  -  $-   6,082,214  $608  $17,716,420  $(17,901,948) $(184,920)
  Series A Convertible Preferred Stock ($0.0001 par value)  Common Stock ($0.0001 par value)  

Additional

  

Shares

    Total 
  Shares  Par Value  Shares  Par Value  

paid-in

capital

  

to be

issued

  

Accumulated

deficit

  

stockholders’

equity

 
Balance at September 30, 2021        -  $      -   6,082,214  $608  $17,929,064  $     -  $(17,955,174) $       (25,502)
                                 
Net loss  -   -   -   -   -   -   (29,185)  (29,185)
Balance at December 31, 2021  -  $-   6,082,214  $608  $17,929,064  $-  $(17,984,359) $(54,687)

 

  Series A Convertible Preferred Stock
($0.0001 par value)		  Common Stock
($0.0001 par value)		  Additional
paid-in		  Accumulated  Total
stockholders’		 
  Shares  Par Value  Shares  Par Value  capital  deficit  equity 
Balance at June 30, 2020  -  $-   6,082,214  $608  $17,691,420  $(17,813,690) $(121,662)
                                                           
Beneficial conversion feature  -   -   -   -   25,000   -   25,000 
Net loss  -   -   -   -   -   (88,258)  (88,258)
Balance, March 31, 2021  -  $-   6,082,214  $608  $17,716,420  $(17,901,948) $(184,920)
  Series A Convertible Preferred Stock ($0.0001 par value)  Common Stock ($0.0001 par value)  

Additional

  

Shares

    

Total

 
  Shares  Par Value  Shares  Par Value  

paid-in

capital

  

to be

issued

  

Accumulated

deficit

  

stockholders’

equity

 
Balance at June 30, 2021  -  $      -   6,082,214  $608  $17,721,420  $       -  $(17,930,352) $        (208,324)
                                 
Forgiveness of convertible note payable, accrued interest and advances - related party  -   -   -   -   207,644   -   -   207,644 
Net loss  -   -   -   -   -   -   (54,007)  (54,007)
Balance at December 31, 2021  -  $-   6,082,214  $608  $17,929,064  $-  $(17,984,359) $(54,687)

The accompanying notes are an integral part of these unaudited condensed interim financial statements.

5

WATERSIDE CAPITAL CORPORATIONMETAVESCO, INC.

CONDENSED STATEMENTS OF CASH FLOW

For the nine months ended March 31, 2022 and 2021

(Unaudited)

         
  Six months ended
December 31,		 
  2022  2021 
Cash Flows from Operating Activities:        
Net loss $(165,326) $(54,007)
Adjustments to reconcile net loss to net cash used in operating activities        
Impairment of digital assets held  281,317   - 
Realized (gain) loss on sales/ exchange digital assets held  (252,982)  - 
Digital assets received as revenue and other rewards  (89,052)  - 
Digital assets paid as expense  25,911   2,997 
Non-cash interest expense  42,393   - 
Forgiveness of interest - related party  -   - 
Changes in operating assets and liabilities:        
Increase in prepaid  10,217   (1,818)
Increase (decrease) in accounts payable and accrued liabilities  23,807   (7,099)
Net cash used in operating activities  (123,715)  (59,927)
         
Cash Flows from Investing Activities:        
Purchase of digital assets held  (55,000)  - 
Sale of digital assets held  69,536   - 
Net cash provided by investing activities  14,536   - 
         
Cash Flows from Financing Activities:        
Advances from related party  -   18,367 
Proceeds from issuance of promissory note payable  25,000   - 
Proceeds from issuance of promissory note payable  -   100,000 
Proceeds from issuance of convertible notes payable - related party  50,000   - 
Net cash provided by financing activities  75,000   118,367 
         
Net change in cash and cash equivalents  (34,179)  58,440 
Cash and cash equivalents, beginning of period  35,151   44 
Cash and cash equivalents, end of period $972  $58,484 
         
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION        
Cash paid during period for:        
Interest paid $6,140  $- 
Income taxes paid $-  $- 
         
Non-cash Investing and Financing Activities        
Purchase of digital assets held with other digital assets $4,548,043  $- 
Proceeds from sale of digital assets for other digital assets $4,682,228  $- 
Intrinsic value of embedded beneficial conversion feature on convertible note payable - related party $40,000  $- 
Deposit on equipment $72,095  $- 
Warrants issued in conjunction with promissory note $7,916  $- 
Shares to be issued in conjunction with the amendment of terms of promissory note - related party $9,000  $- 
Forgiveness of convertible note payable, accrued interest and advances - related party $-  $207,644 

   1   2 
  Nine month periods ended December 31, 
  2022  2021 
Cash Flows from Operating Activities:        
Net loss $(69,387) $(88,258)
Adjustments to reconcile net loss to net cash used in operating activities        
Amortization of debt discount  1,294   25,000 
Impairment of digital assets held  51,983   - 
Forgiveness of interest - related party  2,997   - 
Realized (gain) loss on sales/ exchange digital assets held  (32,519)  - 
Digital assets received as revenue  (40,211)  - 
Digital assets paid as expense  5,044   - 
Changes in operating assets and liabilities:        
Increase in prepaid  (7,596)  - 
(Decrease) increase in accounts payable and accrued liabilities  5,828   3,300 
Increase in accrued interest payable - related party  -   11,352 
Net cash used in operating activities  (82,567)  (48,606)
         
Cash Flows from Investing Activities:        
Purchase of digital assets held  (639,317)  - 
Net cash provided by financing activities  (639,317)  - 
         
Cash Flows from Financing Activities:        
Advances from related party  18,367   - 
Proceeds from issuance of promissory note payable - related party  100,000   - 
Proceeds from issuance of convertible note payable - related party  -   37,500 
Issuance of Series A Convertible Preferred Stock  1,100,000   - 
Net cash provided by financing activities  1,218,367   37,500 
         
Net change in cash and cash equivalents  496,483   (11,106)
Cash and cash equivalents, beginning of period  44   12,625 
Cash and cash equivalents, end of period $496,527  $1,519 
         
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION        
Cash paid during period for:        
Interest paid $-  $- 
Income taxes paid $-  $- 
         
Non-cash Investing and Financing Activities        
Purchase of digital assets held with convertible promissory notes - related party $100,860  $- 
Purchase of digital assets held with other digital assets $1,372,374  $- 
Proceeds from sale of digital assets for other digital assets $1,271,514  $- 
Intrinsic value of embedded beneficial conversion feature on convertible note payable - related party and convertible promissory notes - related party $100,860  $25,000 
Forgiveness of convertible note payable, accrued interest and advances - related party $207,644  $- 

The accompanying notes are an integral part of these unaudited condensed interim financial statements.

6

WATERSIDE CAPITAL CORPORATIONMETAVESCO, INC.

NOTES TO UNAUDITED FINANCIAL STATEMENTS

MarchDecember 31, 2022

 

NOTE 1 – ORGANIZATION AND OPERATIONS

 

Metavesco, Inc. (formerly Waterside Capital CorporationCorporation) (the “Company”) was incorporated in the Commonwealth of Virginia on July 13, 1993 and was a closed-end investment company licensed by the Small Business Administration (the “SBA”) as a Small Business Investment Company (“SBIC”). The Company previously made equity investments in, and provided loans to, small businesses to finance their growth, expansion, and development. Under applicable SBA regulations, the Company was restricted to investing only in qualified small businesses as contemplated by the Small Business Investment Act of 1958. As a registered investment company under the Investment Company Act of 1940, as amended (the “Investment Company Act”), the Company’s investment objective was to provide its shareholders with a high level of income, with capital appreciation as a secondary objective. The Company made its first investment in a small business in October 1996.

 

On May 28, 2014, with the Company’s consent, the United States District Court for the Eastern District of Virginia, having jurisdiction over an action filed by the SBA (the “Court”“Court”), entered a Consent Order and Judgment Dismissing Counterclaim, Appointing Receiver, Granting Permanent Injunctive Relief and Granting Money Judgment (the “Order”“Order”). The Order appointed the SBA receiver of the Company for the purpose of marshaling and liquidating in an orderly manner all of the Company’s assets and entered judgment in favor of the United States of America, on behalf of the SBA, against the Company in the amount of $11,770,722. The Court assumed jurisdiction over the Company and the SBA was appointed receiver effective May 28, 2014.

 

The Company effectively stopped conducting an active business upon the appointment of the SBA as the receiver and the commencement of the court-ordered receivership (the “Receivership”“Receivership”). Over the course of the Receivership, the activity of the Company was limited to the liquidation of the Company’s assets by the receiver and the payment of the proceeds therefrom to the SBA and for the expenses of the Receivership. On June 28, 2017, the Receivership was terminated with the entry of a Final Order by the Court. The Final Order specifically stated that “Control of Waterside shall be unconditionally transferred and returned to its shareholders c/o Roran Capital, LLC (“Roran”) upon notification of entry of this Order”. Upon termination of the Receivership, Roran took possession of all books and records made available to it by the SBA.

 

The Company filed with the SECSecurities and Exchange Commission (the “SEC”) an application pursuant to Section 8(f) of the Investment Company Act of 1940 for an order declaring that the Company hashad ceased to be a registered investment company. On April 22, 2020, the SEC issued an order under Section 8(f) of the Investment Company Act of 1940, as amended, declaring that the Company hashad ceased to be an investment company. As a result, the Company is now a reporting company under the Securities Exchange Act of 1934, as amended.

 

On September 2, 2021, the Company entered into a Stock Purchase Agreement (the “SPA”) by and between (i) the Company (ii) Ryan Schadel (“Buyer”) and (iii) Roran. Roran agreed to sell to the Buyer 4,247,666 shares of common stock of the Company held by Roran for a total purchase price of $385,000. In conjunction with the SPA, the Roran agreed to forgive all amounts due to Roran by the Company totaling $207,644, which is comprised of convertible note payable – related party, accrued interest payable – related party, and advances from related party. The Buyer acquired 4,247,666 shares of the Company’s Common Stock, representing 69.7% of the issued and outstanding shares of Common Stock. As such, the SPA resulted in a change of control of the Company.

 

Effective November 29, 2021, the Company converted from a Virginia corporation to a Nevada corporation.

 

On December 15, 2021, the Company filed with the Nevada Secretary of State amended and restated articles of incorporation. The amended and restated articles of incorporation had the effect of (i) increasing the Company’s authorized common stock to 100 million shares, (ii) increasing the Company’s authorized preferred stock to 20 million shares, and (iii) reducing the par value of each of the Company’s common stock and preferred stock to $0.0001 per share. Common stock and additional paid-in capital for all periods presented in these interim unaudited financial statements have been adjusted retroactively to reflect the reduction in par value.

 

On December 17, 2021, the majority shareholder and board of directors approved an amendment to the amended and restated articles of incorporation that would change the Company’s name from Waterside Capital Corporation to Metavesco, Inc. The name change will not bewas effective until it is clearedJune 3, 2022, following clearance by the Financial Industry Regulatory Authority (“FINRA”).

 

In March 2022, the Company commenced operations as a web3 enterprise. The Company generates income as a liquidity provider, via decentralized exchanges such as Uniswap. Additionally, the companyCompany farms tokens via Proof of Stake protocols on decentralized exchanges, as well as centralized exchanges including the Coinbase, Inc. (“Coinbase”) exchange. The Company also invests in what it considers promising non-fungible token (“NFT”) projects and virtual land, primarily on Ethereum virtual machine (“EVM”) protocols.

 

The interim unaudited financial statements herein have been prepared by the Company pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”).SEC. The accompanying interim unaudited financial statements have been prepared under the presumption that users of the interim financial information have either read or have access to the audited financial statements for the latest fiscal year ended June 30, 2021.2022. Accordingly, note disclosures which would substantially duplicate the disclosures contained on June 30, 2021,2022, audited financial statements have been omitted from these interim unaudited financial statements. The Company evaluated all subsequent events and transactions through the date of filing this report.

7

 

Certain information and note disclosures normally included in financial statements prepared in accordance with the United States generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the three and ninesix months ended MarchDecember 31, 2022, are not necessarily indicative of the results that may be expected for the year ending June 30, 2022.2023. For further information, refer to the audited financial statements and notes for the year ended June 30, 2021,2022, included in the Company’s Annual Report on Form 10-K filed with the SEC on September 1, 2021.October 7, 2022.

 

7

Going Concern

 

The accompanyingCompany’s unaudited financial statements of our Company have beenare prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). The Company effectively ceased operations, has no significant liquid assets and continuesGAAP applicable to have net losses through the date of these financial statements. Our financial statements have been presented on the basis that our business is a going concern, whichconcern. This contemplates the realization of assets and the satisfactionliquidation of liabilities in the normal course of business. We are subject toDuring the risks and uncertainties associated with a business with no operating business or assets and no revenue, as well as limitations on our capital resources. We have incurred losses and negative operating cash flows since the Receivership, and we expect to continue to incur losses and negative operating cash flows at least through the near future. The Company on October 18, 2021, issued to Ryan Schadel, the Company’s Chief Executive Officer, sole director and majority stockholder, a demand promissory note for $100,000 in cash. On March 16,six months ended December 31, 2022, the Company entered into Stock Purchases Agreements wherebyincurred a net loss of $165,326 and used cash in operating activities of $123,715, and on December 31, 2022, had an accumulated deficit of $19,211,528. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern for a period one year from the date that the unaudited financial statements are issued. The Company will be dependent upon the raising of additional capital through placement of debt and its common stock in order to implement its business plan. There can be no assurance that the Company issued 22 shares to Series A Convertible Preferred Stock and various Warrants for $1,100,000will be successful in cash. At March 31, 2022, $95,854 of cash was in held at a financial institution and $400,673 was held at Coinbase, Inc.this situation. The Company expects over the next twelve months, cash held at a financial institution will be expended on professional fees, transfer agent, Edgar agent and other administrative costs. The cash held at Coinbase Inc. will be deployed to purchase crypto assets to generate staking rewards and liquidity pool fees. We hope to start paying some of our suppliers and contractors in crypto assets in the coming months. However, there can be no assurance we will be able to pay any of our suppliers and contractors in digital assets.

In December 2019, a novel coronavirus disease (“COVID-19”) was initially reported, and in March 2020, the World Health Organization characterized COVID-19 as a pandemic. COVID-19 has had a widespread and detrimental effect on the global economy as a result of the continued increase in the number of cases and affected countries and actions by public health and governmental authorities, businesses, other organizations, and individuals to address the outbreak, including travel bans and restrictions, quarantines, shelter in place, stay at home or total lock-down orders and business limitations and shutdowns. The ultimate impact of the COVID-19 pandemic on our business is unknown and will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration and severity of the COVID-19 pandemic and any additional preventative and protective actions that governments may direct. Management believes the capital markets have been negatively impacted by COVID-19, which negatively impacts the Company’s ability to consummate a merger transaction.

 

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

 

Significant Accounting Policies

 

There have been no material changes in the Company’s significant accounting policies to those previously disclosed in the Company’s June 30, 2021audited financial statements included in its 2021 Annual Report on Form 10-K.10-K for the fiscal year ended June 30, 2022, as filed with the SEC.

 

Fiscal Year-End

 

The Company elected June 30 as its fiscal year-end date.

 

Use of Estimates and Assumptions and Critical Accounting Estimates and Assumptions

 

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods.

 

These significant accounting estimates or assumptions bear the risk of change due to the fact that there are uncertainties attached to these estimates or assumptions, and certain estimates or assumptions are difficult to measure or value.

 

Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable in relation to the financial statements taken as a whole under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

 

Management regularly evaluates the key factors and assumptions used to develop the estimates utilizing currently available information, changes in facts and circumstances, historical experience, and reasonable assumptions. After such evaluations, if deemed appropriate, those estimates are adjusted accordingly.

 

Actual results could differ from those estimates.

 

Cash and cash equivalents

 

Cash and cash equivalents include cash and interest-bearing highly liquid investments held at financial institutions, cash on hand that is not restricted as to withdrawal or use with an initial maturity of three months or less, and cash held in accounts at crypto trading venues. At MarchDecember 31, 2022, $95,854 972of cash was at held a financial institution which is a member of the Federal Deposit Insurance Corporation (“FDIC”) and $400,6730 was held at Coinbase, Inc. (“Coinbase”).Coinbase. The contract with Coinbase Inc. requires USD balances in a client’s fiat wallet be held in an omnibus custodial account for the benefit of Coinbase’s customers. These accounts are either omnibus bank accounts insured by the FDIC (currently up to $250,000 per entity) or trust accounts holding short term U.S. treasuries.

8

 

Intangible Assets

Digital assets held by the Company are accounted for as intangible assets with indefinite useful lives, and are initially measured at cost. The Company assigns costs to transactions on a first-in, first-out basis (FIFO).

 

An intangible asset with an indefinite useful life is not amortized but assessed for impairment annually, or more frequently, when events or changes in circumstances occur indicating that it is more likely than not that the indefinite-lived asset is impaired. Impairment exists when the carrying amount exceeds its fair value, which is measured using the quoted price of the digital assets at the time its fair value is being measured.

 

CryptocurrenciesTokens are subject to impairment losses if the fair value a cryptocurrencytokens decreases below the carrying value at any time during the period. The fair value is measured using the quoted price in the principal market of the cryptocurrency.tokens. The Company currently obtains the quoted price of cryptocurrencytokens from www.coinmarketcap.comwww.cryptocompare.com.

Liquidity pool tokens and non-fungible tokens are subject to impairment losses if the fair value a token decreases below the carrying value at the end of each quarterly accounting period. The fair value of liquidity pool tokens is based on the quoted price on the last day of the quarter at 4PM Eastern Time. The fair value of NFTs is based on the average trading price on the last day of each quarter.

8

Impairment for liquidity pool tokens and NFTs is assessed quarterly due to each token being a unique asset and due to the illiquid markets in which these tokens trade. The Company is continuously reviewing available markets and information and its methodology when determining the fair value of tokens. digital assets.

The Company currently reviews quoted prices of its liquidity pool tokens, NFTs and comparable tokens at https://uniswap.org/uniswap.org/ and https://opensea.io. Impairment expense is reflected in total expense in the statements of operations. Subsequent reversal of impairment losses is not permitted.

 

The sales of digital assets held are included within investing activities in the accompanying statements of cash flows and any realized gains or losses from such sales are included in other income (expense) in the statements of operations.

 

Revenue recognition

 

ThereThe Company recognizes revenue under the Financial Accounting Standards Board’s (the “FASB”) Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers. The core principle of the revenue standard is currently no definitive guidance under GAAPthat a company should recognize revenue to depict the transfer of promised goods or alternative accounting frameworkservices to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for the accounting for digital assets recognized as revenuethose goods or held, and management has exercised significant judgment in determining the appropriate accounting treatment. In the event authoritative guidance is enacted by the FASB, the Company may be requiredservices. The following five steps are applied to change its policies, which could have an effect on the Company’s financial position and results from operations.achieve that core principle:

●Step 1: Identify the contract with the customer
●Step 2: Identify the performance obligations in the contract
●Step 3: Determine the transaction price
●Step 4: Allocate the transaction price to the performance obligations in the contract
●Step 5: Recognize revenue when the Company satisfies a performance obligation

 

Revenue is recognized when control of the awardpromised goods or services is claimed and depositedtransferred to customer, in an amount that reflects the Company wallet. The transaction consideration the Company receives is noncashexpects to be entitled to in the form of digital assets. Revenue is measured at the fair value of the digital assets awards received using the quoted price

Airdrop

Airdrop is the distribution of tokens without compensation generally undertaken with a view of increasing awareness of a new token, to encourage adoption of new tokenexchange for those goods or services. The Company generates revenue through liquidity pools and to increase liquidity in the early stages of a token project.staking rewards.

 

Liquidity Pools

Liquidity pools are a collection of digital assets locked in a smart contract that provide liquidity to decentralized exchanges. Liquidity allows digital assets to be converted to cash quickly and efficiently without drastic price swings. An important component of a liquidity pool are automated market makers (“AMMs”). An AMM is a protocol that uses liquidity pools to allow digital assets to be traded by a mathematical formula rather than though a traditional market of buyers and sellers.

 

The Company earns fees by providing liquidity on Uniswap V2 and Uniswap V3. The Company earns fees proportionate to the liquidity they have supplied to the exchange. The fee for each trade is set at 0.05% for stable coins, 0.3% for most pairs and 1.0% for exotic pairs. The fees earned by the Company dependsdepend on the risk characteristics of each pair of tokens selected and the price range liquidity is provided. Uniswap V2 requires users to provide liquidity over the entire price curve, whereas Uniswap V3 provides users with the provide liquidity over a price range.range.

Revenue is recognized from liquidity pools when the award is claimed and deposited in the Company wallet. The transaction consideration the Company receives is noncash in the form of digital assets. Revenue is measured at the fair value of the digital asset awards received.

Staking Rewards

Staking rewards are granted to holders of a crypto asset when the holders lock up that crypto asset as collateral to secure fairness when validating transactions or other network actions.

The Company participates in networks with proof-of-stake consensus algorithms, through creating or validating blocks on the network. In exchange for participating in the consensus mechanism of these networks, the Company earns rewards in the form of the native token of the network. Each block creation or validation is a performance obligation. Revenue is recognized at the point when the block creation or validation is complete and the rewards are transferred into a digital wallet that the Company controls. Revenue is measured based on the number of tokens received and the fair value of the token at contract inception.

Airdrops

Airdrops are the distribution of tokens without compensation generally undertaken with a view of increasing awareness of a new token, to encourage adoption of a new token and to increase liquidity in the early stages of a token project.

The Company recognizes crypto assets received through an airdrop if the crypto asset is expected to generate a probable future benefit and if the Company is able to support the trading, custody, or withdrawal of these assets.

Airdrops are accounted for in accordance with ASC 610-20, Sales and Transfer of Nonfinancial Assets, Receipt of a airdrops are classified as gains on the statement of operations.

 

Convertible Financial Instruments

 

The Company bifurcates conversion options from their host instruments and accounts for them as free-standing derivative financial instruments if certain criteria are met. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. An exception to this rule is when the host instrument is deemed to be conventional, as that term is described under applicable GAAP.

9

 

When the Company has determined that the embedded conversion options should not be bifurcated from their host instruments, discounts are recorded for the intrinsic value of conversion options embedded in the instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the transaction and the effective conversion price embedded in the instrument.

 

Beneficial conversion feature – The issuance of the convertible debt generated a beneficial conversion feature (“BCF”), which arises when a debt or equity security is issued with a non-separated embedded conversion option that is beneficial to the investor or in the money at inception because the conversion option has an effective strike price that is less than the market price of the underlying stock at the commitment date. The Company recognized the BCF by allocating the intrinsic value of the conversion option, which is the number of shares of common stock available upon conversion multiplied by the difference between the effective conversion price per share and the fair value of common stock per share on the commitment date, resulting in a discount on the convertible debt (recorded as a component of additional paid-in capital). The BCF is amortized into interest expense over the life of the related debt.

 

Related Parties

 

The Company follows subtopic 850-10 of the ASC for the identification of related parties and disclosure of related party transactions.

 

The financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. The disclosures shall include: (a) the nature of the relationship(s) involved; (b) a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; (c) the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and, (d) amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.

 

9

Commitments and Contingencies

 

The Company follows ASC 450-20 to report accounting for contingencies. Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. Management assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or un-asserted claims that may result in such proceedings, management evaluates the perceived merits of any legal proceedings or un-asserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.

 

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.

 

Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed.

 

Deferred Tax Assets and Income Taxes Provision

 

The Company follows the provisions of ASC 740-10-25-13, which addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under ASC 740-10-25-13, the Company may 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 should be measured based on the largest benefit that has a greater than fifty percent (50%)50% likelihood of being realized upon ultimate settlement. ASC 740-10-25-13 also provides guidance on de-recognition, classification, interest, and penalties on income taxes, accounting in interim periods and requires increased disclosures. The Company had no material adjustments to its liabilities for unrecognized income tax benefits.

 

The estimated future tax effects of temporary differences between the tax basis of assets and liabilities are reported in the accompanying balance sheets, as well as tax credit carry-backs and carry-forwards. The Company periodically reviews the recoverability of deferred tax assets recorded on its balance sheets and provides valuation allowances as management deems necessary.

 

Management makes judgments as to the interpretation of the tax laws that might be challenged upon an audit and cause changes to previous estimates of tax liability. In addition, the Company operates within multiple taxing jurisdictions and is subject to audit in these jurisdictions. In management’s opinion, adequate provisions for income taxes have been made for all years. If actual taxable income by tax jurisdiction varies from estimates, additional allowances or reversals of reserves may be necessary.

 

Tax years that remain subject to examination by major tax jurisdictions are generally the prior three (3) years for federal purposes, and the prior four (4) years for state purposes; however, as a result of the Company’s operating losses, all tax years remain subject to examination by tax authorities.authorities.

 

10

Net Loss Per Common Share

 

The Company computes net income or loss per share in accordance with ASC 260 Earnings Per Share. Under the provisions of the Earnings per Share Topic ASC 260, basic net loss per share is computed by dividing the net loss available to common stockholders for the period by the weighted average number of shares of common stock outstanding during the period. The calculation of diluted net loss per share gives effect to common stock equivalents; however, potential common shares are excluded if their effect is anti-dilutive.

Fair Value of Financial Instruments

The Company follows paragraph 825-10-50-10 of ASC for disclosures about fair value of its financial instruments and has adopted paragraph 820-10-35-37 of ASC (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America (U.S. GAAP),GAAP, and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:

 

 Level 1: Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.
 
Level 2: Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.
 Level 3: Pricing inputs that are generally unobservable inputs and not corroborated by market data.

 

Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.

 

The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

 

Transactions involving related parties cannot be presumed to be carried out on an arms-length basis, as the requisite conditions of competitive, free-market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm’s-length transactions unless such representations can be substantiated.

 

10

Recently Issued Accounting Pronouncements

 

From time to time, newIn August 2020, the FASB issued Accounting Standards Update (“ASU”) 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40). This update amends the guidance on convertible instruments and the derivatives scope exception for contracts in an entity’s own equity and improves and amends the related earnings per share guidance for both Subtopics. This standard is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2023, which means it will be effective for our fiscal year beginning July 1, 2024. Early adoption is permitted but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. We are currently evaluating the impact of ASU 2020-06 on our financial statements.

Other recent accounting pronouncements are issued by the FASB, or other standard-setting bodies that are adopted byincluding its Emerging Issues Task Force, the Company asAmerican Institute of Certified Public Accountants, and the specified effective date. Unless otherwise discussed, we believe that the impact of recently issued standards thatSEC did not or are not yet effective will notbelieved by management to have a material impact on ourthe Company’s present or future financial position or results of operations upon adoption.statements.

 

NOTE 3 – DIGITAL ASSETS HELD, NET OF IMPAIRMENT

Digital assets held, net of impairment have consisted of:

SCHEDULE OF DIGITAL ASSETS HELD NET OF IMPAIRMENT

             
  Cryptocurrency  Tokens  Total 
Balance, July 1, 2021 $-  $-  $- 
             
Purchase of digital assets  1,638,345   373,346   2,011,691 
Proceeds from sale of digital assets  (1,164,272)  (107,242)  (1,271,514)
Realized gain loss on sales/ exchange digital assets  13,148   19,371   32,519 
Acquired digital assets by Airdrop  17,439   -   17,439 
Acquired digital assets by Liquidity Pools  22,772   -   22,772 
Digital assets used to pay fees  (5,044)  -   (5,044)
Impairment charges  (36,473)  (15,510)  (51,983)
Balance, March 31, 2022 $485,915  $269,965  $755,880 
  Digital Assets 
Balance, June 30, 2022 $434,642 
Beginning balance $434,642 
     
Purchase of digital assets  4,533,507 
Proceeds from sale of digital assets  (4,573,913)
Realized gain on sale/ exchange of digital assets held  252,982 
Acquired digital assets by liquidity pools and other rewards  89,052 
Digital assets used to pay prepaid, deposit and expenses  (104,241)
Impairment charges  (281,317)
Balance, December 31, 2022 $350,712 
Ending balance $350,712 

 

11

As at MarchDecember 31, 2022, the Company’s holdings of digital assets held, net of impairment consists of:

SCHEDULE OF ASSETS DIGITAL HOLDING IMPAIRMENTS

  Units held  Carrying value, at cost less impairment 
Cryptocurrency        
APE  20,175.35  $224,447 
ETH  72.34509   209,992 
SOL  200   24,040 
USDC  12,557.37   12,595 
EFI  20,602.95   8,624 
DAO  2,438.682   5,829 
STG  116.4718   388 
Cryptocurrency Total     $485,915 
Liquidity Pool Tokens        
 Uniswap V3  3  $151,304 
Liquidity Pool Tokens Total     $151,304 
Non-Fungible Tokens        
Mutant Ape Yacht Club  1  $49,470 
Dour Darcels  4   8,588 
Council of Kingz  3   2,199 
Board Ape Kennel Club  1   23,099 
Meebits  2   35,305 
Non-Fungible Tokens Total     $118,661 

11
  Units held  Carrying value, at cost less impairment 
Cryptocurrency      
ETH  66.84  $74,646 
MATIC  7,640.09   5,711 
DYDX  4,257.72   4,432 
USDC  3,152.85   3,141 
CRV  5,604.03   2,924 
LDO  2,289.96   2,090 
Other      976 
Cryptocurrency Total     $93,920 
Liquidity Pool Tokens        
Uniswap V3  3.2  $154,949 
CAKE  4,570.35   11,472 
Liquidity Pool Tokens Total     $166,421 
         
Non-Fungible Tokens        
Other Deed  14  $50,904 
Mutant Ape Yacht Club  1   19,573 
Meebits  2   10,006 
Art Gobblers  3   9,886 
Other NFT      2 
Non-Fungible Tokens Total     $90,371 
         
Total digital assets, net of impairment     $350,712 

 

NOTE 4 – DEPOSIT ON EQUIPMENT

On August 22, 2022, the Company made a deposit of $72,095 with USD Coin (“USDC”) to purchase 18 Antminer S19j Pro 100TH Bitcoin mining machines. These machines were deployed, became operational and started to generate revenue on February 7, 2023.

NOTE 5 – NOTES PAYABLE – RELATED PARTIES

 

Roran Obligations

On September 19, 2017, the Company entered into a Convertible Loan Agreement with Roran (the “Loan Agreement”). Pursuant to the Loan Agreement, Roran agreed to loan the Company an amount not to exceed a total of $150,000 in principal over 18 months. On June 17, 2019, the Company amended the Loan Agreement increasing the loan amount to $200,000 and extending the maturity date to September 19, 2019. Each advance under the Loan Agreement will be documented under a ConvertibleDemand Promissory Note issued by the Company in favor of Roran (the “Note”). The Note bears interest at the rate of 12% per annum. Roran has the right to convert all or any portion of the Note into shares of the Company’s common stock at a conversion price equal to 60% of the share price. The Company recorded a BCF due to the conversion option of $116,800, which has been fully amortized as of September 30, 2019. The debt discount has been amortized as interest expense through September 30, 2019. On December 13, 2019, the Company amended its Loan Agreement Note with Roran as follows: (i) the total amount to be loaned was increased to $250,000, and (ii) the maturity date was extended to June 19, 2020. Although the maturity date has passed, Roran has agreed to extend the loan and advance additional funds until further negotiations have been concluded. On June 8, 2020, Roran converted $124,500 principal amount of its promissory note with the Company and $25,500 of accrued and unpaid interest thereon, totaling $150,000, into 4,166,666 shares of Company Common Stock at the stated conversion price per share of $0.036. The remaining balance due on the promissory note, as of the conversion date, was $104,838 in principal and $19,988 in interest. As a result of the advances made pursuant to the Loan Agreement, the Company has incurred total obligations of $149,838 as of June 30, 2021 (net of debt discounts and exclusive of accrued interest).

During the nine months ended March 31, 2022, Roran made non-interest bearing, unsecured, short-term cash advances to the Company totaling $18,367 for the purpose of paying all accounts payable before the closing date of the SPA.

On September 2, 2021, in conjunction with the SPA, Roran agreed to forgive all obligations due to Roran by the Company totaling $207,644 which is comprised of convertible note payable – related party, accrued interest payable – related party, and advances from related party.

SCHEDULE OF AMOUNTS OWNED TO RELATED PARTIES

  Debts forgiven by Roran
on September 2, 2021		 
Convertible note payable – related party $149,838 
Interest on convertible note payable – related party  39,439 
Advance from related party  18,367 
Forgiveness of convertible note payable, accrued interest and advances – related party $207,644 

As a result of Roran agreeing to forgive all obligations, as of March 31, 2022, no obligations are due to Roran.

Demand Promissory NoteRelated Parties

 

On October 18, 2021, the Company issued a Promissory Note in the principal amount of $100,000 (the “Promissory Note”) for cash to Ryan Schadel, the Company’s Chief Executive Officer, sole director and majority stockholder. The Promissory Note bears interest at the rate of 0.01% per annum. Any unpaid principal amount and any accrued interest was due on October 18, 2022. On August 29, 2022, the Company entered into an Amendment to Promissory Note, dated August 29, 2022, with the Holder. Pursuant to the terms of the note amendment, the maturity date of the Promissory Note was extended to October 23, 2023, and the interest rate of the Promissory Note was increased to 5% as of and following August 29, 2022. As consideration for extension of the maturity date, the Company agreed to issue to Mr. Schadel 15,000 shares of the Company’s common stock with a fair value of $9,000. These shares were payable and reported as shares to be issued as of the date of this Report. The note amendment resulted in a change in the cash flows of less than 10%. Therefore, the Promissory Note is not considered to be substantially different in accordance with ASC 470-50-10-10 and applied the modification accounting model in accordance with ASC-50-40-17 (b). During the three and six months ended December 31, 2022, $1,995 and $2,689, respectively, of discount amortization is included in interest expense. At December 31, 2022 and June 30, 2022, there was an unamortized discount balance of $6,311 and $0, respectively, to be amortized through October 2023 and accrued interest payable of $835 and $0, respectively.

On June 29, 2022, the Company issued a Promissory Note in the principal amount of $40,000(the “Holder”“Promissory Note”), for cash to Mr. Schadel, the Company’s Chief Executive Officer, sole director and majority stockholder. The Promissory Note bears interest at the rate of 0.01% per annum. Any unpaid principal amount and any accrued interest is due on October 18, 2022. The HolderJune 29, 2023. Mr. Schadel may demand payment of all or any portion of the outstanding principal and interest at any time. The Promissory Note is unsecured and there is no prepayment penalty. At December 31, 2022 and June 30, 2022, there was accrued interest payable of $1 and $0, respectively.

On August 12, 2022, the Company issued a Promissory Note in the principal amount of $50,000 (the “Promissory Note”) for cash to Laborsmart Inc. (“Laborsmart”). Laborsmart is owned by Mr. Schadel, the Company’s Chief Executive Officer, sole director and majority stockholder. The Promissory Note bears interest at the rate of 5.00% per annum. Any unpaid principal amount and any accrued interest is due on August 12, 2023. Laborsmart may demand payment of all or any portion of the outstanding principal and interest at any time. The Promissory Note is unsecured and there is no prepayment penalty. In event the Promissory Note is not paid when due, any outstanding principal and interest will accrue interest of 12% per annum. At December 31, 2022 and June 30, 2022, there was accrued interest payable of $966 and $0, respectively.

 

Demand Promissory Note and Common Stock Purchase Warrant

On August 12, 2022, the Company issued a Promissory Note in the principal amount of $25,000 (the “Promissory Note”) for cash to Tom Zarro. The Promissory Note bears interest at the rate of 5.00% per annum. Any unpaid principal amount and any accrued interest is due on August 12, 2023. Mr. Zarro may demand payment of all or any portion of the outstanding principal and interest at any time. The Promissory Note is unsecured and there is no prepayment penalty. In event the Promissory Note is not paid when due, any outstanding principal and interest will accrue interest of 12% per annum. In conjunction with the issue of the Promissory Note, the Company issued Mr. Zarro a common stock purchase warrant (the “Warrant”). The terms of the Warrant state that, Mr. Zarro may, at any time on or after August 12, 2022 and until August 12, 2025, exercise the Warrant to purchase 20,000 shares of the Company’s common stock for an exercise price per share of $0.75, subject to adjustment as provided in the Warrant. The fair value of Warrant was calculated using volatility of 157%, interest-free rate of 3.18%, nil expected dividend yield and expected life of 3 years. The fair value of the debt and warrant is allocated based on their relative fair values. During the three and six months ended December 31, 2022, $1,995 and $3,058, respectively, of discount amortization is included in interest expense. At December 31, 2022 and June 30, 2022, there was an unamortized discount balance of $4,858 and $0, respectively, to be amortized through May 2027 and accrued interest payable of $483 and $0, respectively.

.

Convertible Promissory Notes

On May 10, 2022, the Company issued a Convertible Promissory Note in the principal amount of $20,000 (the “Convertible Promissory Note”), for cash, to Timothy Hackbart. The Convertible Promissory Note bears interest at the rate of 3.25% per annum. Any unpaid principal amount and any accrued interest is due on May 10, 2027. The Convertible Promissory Note is unsecured and there is no prepayment penalty. At the option of the Holder, the Convertible Promissory Note is convertible into shares of the Company’s common stock at a conversion price of $0.50 per share. The closing price of the Company’s common stock was $1.40 per share on the date the Convertible Promissory Note was issued. As a result of the conversion price being lower than the market price of the Company’s common stock on the date of issuance, the Company recognized a beneficial conversion feature of $20,000 upon issuance. The Company recorded the beneficial conversion feature as a discount (up to the face amount of the applicable note) to be amortized over the life of the related note. During the three and six months ended December 31, 2022, $1,008 and $2,016, respectively, of discount amortization is included in interest expense. At December 31, 2022 and June 30, 2022, there was an unamortized discount balance of $17,426 and $19,441, respectively, to be amortized through May 2027 and accrued interest payable of $418 and $0, respectively.

12

Convertible Promissory Notes – Related Party

 

On March 4, 2022, the Company issued a Convertible Promissory Note in the principal amount of $40,874 (the “Promissory Convertible“Convertible Promissory Note”), for value received being comprised of 1 (one)one bitcoin, to RyanMr. Schadel, (the “Holder”), the Company’s Chief Executive Officer, sole director and majority stockholder. The Convertible Promissory Note bears interest at the rate of 3.5% per annum. Any unpaid principal amount and any accrued interest is due on March 4, 2027. The Convertible Promissory Note is unsecured and there is no prepayment penalty. At the option of Mr. Schadel, the Holder, theConvertible Promissory Convertible Note is convertible into shares of the Company’s common stock at a conversion price of $0.50 per share. The closing price of the Company’s common stock was $1.25 per share on the date the Convertible Promissory Convertible Note was issued. As a result of the conversion price being lower than the market price of the Company’s common stock on the date of issuance, the Company recognized a beneficial conversion feature of $40,874 upon issuance. The Company recorded the beneficial conversion feature as a discount (up to the face amount of the applicable note) to be amortized over the life of the related note. During the three and ninesix months ended MarchDecember 31, 2022, $2,059 and $6044,118 of discount amortization is included in interest expense. At MarchDecember 31, 2022 and June 30, 2022, there was an unamortized discount balance of $40,27034,114 and $38,233, respectively, to be amortized through March 2027.2027 and accrued interest payable of $222 and $0, respectively.

 

On March 10, 2022, the Company issued a Convertible Promissory Note in the principal amount of $59,986 (the “Promissory Convertible“Convertible Promissory Note”), for value received being comprised of 22.86012412 Ether, to RyanMr. Schadel, (the “Holder”), the Company’s Chief Executive Officer, sole director and majority stockholder. The Convertible Promissory Note bears interest at the rate of 3.53.25% per annum. Any unpaid principal amount and any accrued interest is due on March 10, 2027. The Convertible Promissory Note is unsecured and there is no prepayment penalty. At the option of Mr. Schadel, the Holder, theConvertible Promissory Convertible Note is convertible into shares of the Company’s common stock at a conversion price of $0.50 per share. The closing price of the Company’s common stock was $1.42 per share on the date the Convertible Promissory Convertible Note was issued. As a result of the conversion price being lower than the market price of the Company’s common stock on the date of issuance, the Company recognized a beneficial conversion feature of $59,986 upon issuance. The Company recorded the beneficial conversion feature as a discount (up to the face amount of the applicable note) to be amortized over the life of the related note. During the three and ninesix months ended MarchDecember 31, 2022, $3,022 and $6906,044, respectively, of discount amortization is included in interest expense. At MarchDecember 31, 2022 and June 30, 2022, there was an unamortized discount balance of $59,29650,262 and $56,307, respectively, to be amortized through March 2027.2027 and accrued interest payable of $326

and $0

12

NOTE 5 - RELATED PARTY TRANSACTIONS, respectively.

 

On May 6, 2022, the Company issued a Convertible Promissory Note in the principal amount of $100,000 (the “Convertible Promissory Note”), for cash, to Mr. Schadel, the Company’s Chief Executive Officer, sole director and majority stockholder. The following individualsConvertible Promissory Note bears interest at the rate of 3.25% per annum. Any unpaid principal amount and entities have been identified as related parties basedany accrued interest is due on their family affiliation with our former CEOMay 6, 2027. The Convertible Promissory Note is unsecured and former Chairmanthere is no prepayment penalty. At the option of Mr. Schadel, the Convertible Promissory Note is convertible into shares of the Board:Company’s common stock at a conversion price of $0.50 per share. The closing price of the Company’s common stock was $1.45 per share on the date the Convertible Promissory Note was issued. As a result of the conversion price being lower than the market price of the Company’s common stock on the date of issuance, the Company recognized a beneficial conversion feature of $100,000 upon issuance. The Company recorded the beneficial conversion feature as a discount (up to the face amount of the applicable note) to be amortized over the life of the related note. During the three and six months ended December 31, 2022, $5,038 and $10,076, respectively, of discount amortization is included in interest expense. At December 31, 2022 and June 30, 2022, there was an unamortized discount balance of $86,911 and $96,988, respectively, to be amortized through May 2027 and accrued interest payable of $543 and $0, respectively.

 

Yitzhak ZelmanovitchOn May 9, 2022, the Company issued a Convertible Promissory Note in the principal amount of $100,000

Roran Capital LLC

(the “Convertible Promissory Note”), for cash, to Mr. Schadel, the Company’s Chief Executive Officer, sole director and majority stockholder. The following amounts were owed to related parties affiliated withConvertible Promissory Note bears interest at the former CEOrate of 3.25% per annum. Any unpaid principal amount and former Chairmanany accrued interest is due on May 9, 2027. The Convertible Promissory Note is unsecured and there is no prepayment penalty. At the option of Mr. Schadel, the Convertible Promissory Note is convertible into shares of the Board,Company’s common stock at a conversion price of $0.50 per share. The closing price of the dates indicated:Company’s common stock was $1.415 per share on the date the Convertible Promissory Note was issued. As a result of the conversion price being lower than the market price of the Company’s common stock on the date of issuance, the Company recognized a beneficial conversion feature of $100,0000 upon issuance. The Company recorded the beneficial conversion feature as a discount (up to the face amount of the applicable note) to be amortized over the life of the related note. During the three and six months ended December 31, 2022, $5,038 and $10,076, respectively, of discount amortization is included in interest expense. At December 31, 2022 and June 30, 2022, there was an unamortized discount balance of $87,076 and $97,152, respectively, to be amortized through May 2027 and accrued interest payable of $543 and $0, respectively.

SCHEDULE OF CONVERTIBLE DEBTS

  March 31, 2022  June 30, 2021 
Convertible Note Payable $-  $149,838 
                     
Interest on Convertible Note Payable  -   36,441 
Total $-  $186,279 

 

NOTE 6 – SHAREHOLDER DEFICIT

 

On September 2, 2021, the Company entered into a Stock Purchase Agreement (the “SPA”) by and between (i) the Company (ii) Ryan Schadel (“Buyer”) and (iii) Roran Capital LLC (“Roran”). Roran agreed to sell to the Buyer 4,247,666 shares of common stock of the Company held by Roran for a total purchase price of $385,000. In conjunction with the SPA, Roran agreed to forgive all amounts due to Roran by the Company totaling $207,644, which is comprised of convertible note payable – related party, accrued interest payable – related party and advances from related party. In accordance with ASC 470-50-40-2, the resulting forgiveness of convertible note payable, accrued interest and advances – related party of $207,644 is recorded as an increase in additional paid-in capital within the statements of shareholders’ deficit, as the debt forgiven is in essence a capital transaction.

On December 15, 2021, the Company filed with the Nevada Secretary of State amended and restated articles of incorporation. The amended and restated articles had the effect of (i) increasing the Company’s authorized common stock to 100 million shares, (ii) increasing the Company’s authorized preferred stock to 20 million shares, and (iii) reducing the par value of each of the Company’s common stock and preferred stock to $0.0001 per share. Common stock and additional paid-in capital for all periods presented in these interim unaudited financial statements have been adjusted retroactively to reflect the reduction in par value.

 

On March 11, 2022, the Company filed with the State of Nevada a certificate of designations for the Company’s Series A Convertible Preferred Stock (“Series A Stock”). The Series A Certificate of Designations provides (i) thethe number of authorized shares will be 100. 100, (ii) each share will have a stated value of $50,000, (iii) each share is convertible into 100,000shares of Company common stock, subject to a 9.99% equity blocker, (iv) shares are non-voting, and (v) shares are not entitled to receive dividends or distributions.

Warrants

 

On March 16, 2022, the Company entered into Stock Purchases Agreements whereby the Company issued 22 shares to Series A Stock and various Warrants for $1,100,000 in cash. The Warrants comprise of 2,200,000 Company common stock issuable at $1.30 per share, 2,200,000 Company common stock issuable at $1.50 per share and 2,200,000 Company common stock issuable at $1.75 per share,share. Upon issuance on March 16, 2022, the Warrant remainremains exercisable for a period of five years. years.

On August 12, 2022, the Company issued a common stock purchase warrant in conjunction with a Promissory Note. The Warrant comprise of 20,000 Company common stock issuable at $0.75 per share. Upon issuance on August 12, 2022, the Warrant remains exercisable for a period of three years.

The weighted average remaining legal life of the warrants outstanding at MarchDecember 31, 2022 is 4.964.20 years.

 

NOTE 7 – SUBSEQUENT EVENTSForward Stock Split

On May 6,July 15, 2022, the Company issued a Convertible Promissory Note in the principal amountCompany’s director and shareholders approved an amendment of $100,000 (the “Promissory Convertible Note”), for cash, to Ryan Schadel (the “Holder”), the Company’s Chief Executive Officer, sole director and majority stockholder. The Convertible Promissory Note bears interest at the rateArticles of Incorporation that, if filed, would effect a 3.2510-for-1 forward stock split% per annum. Any unpaid principal amount and any accrued interest is due on May 6, 2027. The Promissory Note is unsecured and there is no prepayment penalty. At the option of the Holder, the Promissory Convertible Note is convertible into shares of the Company’s common stock at a conversion price of $0.50 per share.

On May 9, 2022,(the “Forward Split”). The Forward Split is subject to clearance by the Financial Industry Regulatory Authority (“FINRA”), and the Company issued a Convertible Promissory Note inwill not effect the principal amount of $100,000 (the “Promissory Convertible Note”),Forward Split until it is cleared by FINRA. The Board retains authority to abandon the Forward Split for cash,any reason at any time prior to Ryan Schadel (the “Holder”),effecting the Company’s Chief Executive Officer, sole director and majority stockholder. The Convertible Promissory Note bears interest at the rate of 3.25% per annum. Any unpaid principal amount and any accrued interest is due on May 9, 2027. The Promissory Note is unsecured and there is no prepayment penalty. At the option of the Holder, the Promissory Convertible Note is convertible into shares of the Company’s common stock at a conversion price of $0.50 per share.

On May 10, 2022, the Company issued a Convertible Promissory Note in the principal amount of $20,000 (the “Promissory Convertible Note”), for cash, to Timothy Hackbart (the “Holder”). The Convertible Promissory Note bears interest at the rate of 3.25% per annum. Any unpaid principal amount and any accrued interest is due on May 10, 2027. The Promissory Note is unsecured and there is no prepayment penalty. At the option of the Holder, the Promissory Convertible Note is convertible into shares of the Company’s common stock at a conversion price of $0.50 per share.

Forward Split.

 

13

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Forward-Looking Statements

 

This Quarterly Report on Form 10-Q, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 2 of Part I of this report, include forward-looking statements. Information in this report contains “forward-looking statements” which may be identified by the use of forward-looking terminology, such as “may”, “shall”, “will”, “could”, “expect”, “estimate”, “anticipate”, “predict”, “probable”, “possible”, “should”, “continue”, “believes”, “estimates”, “projects”, “targets”, or similar terms, variations of those terms or the negative of those terms. Our management has compiled the forward-looking statements specified in the following information based on assumptions made by management and considered by management to be reasonable. Our future operating results, however, are impossible to predict and no representation, guaranty, or warranty is to be inferred from those forward-looking statements. Statements in this report concerning the following, without limitation, are forward-looking statements:

 

 ●future financial and operating results;
   
 ●our ability to fund operations and business plans, and the timing of any funding or corporate development transactions we may pursue;
   
 ●our ability to either (i) enter into a new business; or (ii) merge with, or otherwise acquire, an active business which would benefit from operating as a public entity;
   
 ●current and future economic and political conditions;
   
 ●overall industry and market trends;
   
 ●management’s goals and plans for future operations; and
   
 ●other assumptions described in this report underlying or relating to any forward-looking statements.

 

All references to “Waterside”“Metavesco”, “we”, “our,” “us” and the “Company” in this Item 2 refer to Waterside Capital Corporation.Metavesco, Inc..

 

The discussion in this section contains forward-looking statements. These statements relate to future events or our future financial performance. We have attempted to identify forward-looking statements by terminology such as “anticipate,” “believe,” “can,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “should,” “would” or “will” or the negative of these terms or other comparable terminology, but their absence does not mean that a statement is not forward-looking. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, which could cause our actual results to differ from those projected in any forward-looking statements we make. You should understand that it is not possible to predict or identify all risks and uncertainties and you should not consider the risks and uncertainties identified by us to be a complete set of all potential risks or uncertainties that could materially affect us. You should not place undue reliance on the forward-looking statements we make herein because some or all of them may turn out to be wrong. We undertake no obligation to update any of the forward-looking statements contained herein to reflect future events and developments, except as required by law.

 

The following discussion of the results of operations for the three and ninesix months ended MarchDecember 31, 2022 and 2021, respectively, should be read in conjunction with our unaudited financial statements and the notes to those financial statements that are included elsewhere in this Quarterly Report on Form 10-Q. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements because of a number of factors. An investment in our common stock involves a high degree of risk. Readers of this Quarterly Report on Form 10-Q should carefully consider the risks set forth in the Risk Factors and Business sections of our Annual Report on Form 10-K for the year ended June 30, 2021,2022, filed with the SEC on September 1, 2021.October 7, 2022. Our management has compiled the forward-looking statements specified in the following information based on assumptions made by management and considered by management to be reasonable. Our future operating results, however, are impossible to predict and no representation, guaranty, or warranty is to be inferred from those forward-looking statements.

 

The assumptions used for purposes of the forward-looking statements specified in the following information represent estimates of future events and are subject to uncertainty as to possible changes in economic, legislative, industry, and other circumstances. As a result, the identification and interpretation of data and other information and their use in developing and selecting assumptions from and among reasonable alternatives require the exercise of judgment. To the extent that the assumed events do not occur, the outcome may vary substantially from anticipated or projected results, and, accordingly, no opinion is expressed on the achievability of those forward-looking statements. No assurance can be given that any of the assumptions relating to the forward-looking statements specified in the following information are accurate, and we assume no obligation to update any such forward-looking statements.

 

Overview & Management Plans

 

The Company was formed in the Commonwealth of Virginia on July 13, 1993 and was a closed-end investment company licensed by the SBA as an SBIC. The Company previously made equity investments in and provided loans to, small businesses to finance their growth, expansion, and development. Under applicable SBA regulations, the Company was restricted to investing only in qualified small businesses as contemplated by the Small Business Investment Act of 1958. As a registered investment company under the Investment Company Act, the Company’s investment objective was to provide its shareholders with a high level of income, with capital appreciation as a secondary objective. The Company made its first investment in a small business in October 1996.

In May 2014, the Company effectively ceased operations. The Company consented to a court order appointing the SBA as receiver of the Company to marshal and liquidate in an orderly manner all of the Company’s assets. That order also entered judgment in favor of the United States of America, on behalf of the SBA, against the Company in the amount of $11,770,722. The SBA was appointed receiver effective May 28, 2014.

14

Over the course of the Receivership, the activity of the Company was limited to the liquidation of the Company’s assets by the receiver and the payment of the proceeds therefrom to the SBA and for the expenses of the Receivership. The SBIC license granted to the Company by the SBA was revoked by the SBA effective March 20, 2017. On June 28, 2017, the Receivership was terminated. The Final Order specifically stated that “Control of Waterside shall be unconditionally transferred and returned to its shareholders c/o Roran Capital, LLC (“Roran”) upon notification of entry of this Order.

Upon termination of the Receivership, Roran took possession of all books and records made available to it by the SBA. With no assets and no SBIC license from the SBA, no income, and liabilities, at that time, in excess of $10,000,000, it became clear to the Company that continuing to operate as a registered investment company was impossible. The Company and Roran entered into a Convertible Loan Agreement on September 19, 2017, as amended, to fund the Company’s expenses while it sought a new business to undertake or to merge with an existing business. The New Board has continued to work toward achieving that goal.

On April 22, 2020, the SEC issued an order under Section 8(t) of the Investment Company Act 1940, as amended, declaring that the Company has ceased to be an investment company. As a result, the Company is now a reporting company under the Securities Exchange Act of 1934, as amended.

On September 2, 2021, the Company entered into a Stock Purchase Agreement (the “SPA”) by and between (i) the Company (ii) Ryan Schadel (“Buyer”) and (iii) Roran Capital, LLC (“Roran”). Roran agreed to sell to the Buyer 4,247,666 shares of common stock of the Company held by Roran for a total purchase price of $385,000. In conjunction with the SPA, Roran agreed to forgive all amounts due to Roran by the Company totaling $207,644 which is comprised of convertible note payable – related party, accrued interest payable – related party and advances from related party. The Buyer acquired 4,247,666 shares of the Company’s Common Stock, representing 69.7% of the issued and outstanding shares of Common Stock. As such, the Schadel SPA resulted in a change of control of the Company.

In March 2022, the Company commenced operations as a web3 enterprise. The Company generates incomerevenue as a liquidity provider, via decentralized exchanges such as Uniswap. Additionally, the Company farms tokens via Proof-of-Stake (“PoS”) protocols on decentralized exchanges, as well as centralized exchanges, including Coinbase. Yield farmers provide liquidity to various token pairs and earn rewards in cryptocurrencies. The Company also invests in non-fungible token (“NFT”) projects and virtual land that it believes are promising, primarily on Ethereum Virtual Machine (“EVM”) protocols.

Web3 includes many different technologies but is generally defined as the use of internet protocols incentivized with token-based rewards built on top of open source, decentralized and distributed systems. Examples of web3 technologies include blockchain networks, cryptocurrencies, NFTs and smart contracts.

The Company primarily invests in NFT collections from Yuga Labs which includes the Mutant Ape Yacht Club and the metaverse platform. As of December 31, 2022, we are invested in 20 NFT tokens with a carrying value of $90,371. If sold, our NFTs may require the payment of a royalty to the creator. Our NFTs currently do not generated royalties or other income.

EVM protocols.is a computation engine that facilitates the deployment and operation of smart contracts.

14

The Company has four areas of focus:

●Liquidity Provider - In decentralized finance (“DeFi”), the ability to trade assets from one to another is facilitated by Liquidity Pools (“LPs”) which generally contain a 50/50 balance between both underlying tokens. The Company expects to invest substantially in LPs to generate ongoing revenue. The Company earns income based on a percentage of the value of each trade for providing liquidity. We expect that this revenue will fuel our other initiatives as we build the Company.
●Staking - Like LPs, staking can provide potential revenue to the Company. Purchasing large blocks of lucrative PoS assets to grow the passive income portfolio is expected to be a major cornerstone to our success. This is a much greener approach to the traditional Proof of Work model, which is used by Bitcoin.
●NFTs - The Company holds NFTs for capital appreciation and for potential income from IP licensing.
●Bitcoin Mining Operations

At December 31, 2022, the Company was invested in Uniswap V3 (liquidity pool), CAKE (staking) and NFTs.

On August 29, 2022, the Company announced its plan to begin bitcoin mining operations. Bitcoin mining has been part of the Company roadmap since entering the web3 space in March 2022, although our plans have been accelerated with the recent decrease in the price of Bitcoin. Mining equipment has become much more affordable as overleveraged miners are forced to sell equipment at reduced prices. In August 2022, the Company began its Bitcoin mining operations by purchasing cryptocurrency mining machines and arranging hosting space in Texas. We anticipate the Company will eventually open a second site in Georgia.

Bitcoin Mining Operations

On August 22, 2022, the Company made a deposit of $72,095 with USDC to purchase 18 Antminer S19j Pro 100TH Bitcoin mining machines. The Company originally expected delivery and deployment of these machines in December 2022. These machines were deployed, became operational and started to generate revenue on February 7, 2023. The delay is due to the lack of electric power at the host. The host was seeking permission from the electric utility to turn the power on for these machines.

The Company plans to earn transaction fees with its crypto mining machines by validating requesting customers’ transactions to a distributing ledger. We joined a mining pool and expect to receive a pro-rata share of a bitcoin award for completing a blockchain.

 

The Company has three areasentered into digital asset mining pools by entering into an agreement with one mining pool operator The agreement is terminable at any time by either party. In exchange for providing computing power, the Company is entitled to a fractional share of the fixed cryptocurrency award the mining pool operator receives (less digital asset transaction fees to the mining pool operator which are immaterial and are recorded as a deduction from revenue), for successfully adding a block to the blockchain. The Company’s fractional share is based on which it will focus:the proportion of computing power the Company contributed to the mining pool operator to the total computing power contributed by all mining pool participants in solving the current algorithm.

 

Liquidity Provider - In decentralized finance (DeFi),Providing computing power in digital asset transaction verification services is an output of the ability to trade assetsCompany’s ordinary activities. The provision of providing such computing power is the only performance obligation in the Company’s contracts with mining pool operators. The transaction consideration the Company receives, if any, is noncash consideration, which the Company measures at fair value on the date received, which is not materially different than the fair value at contract inception or the time the Company has earned the award from one to anotherthe pools. The consideration is facilitated by Liquidity Pools (“LPs”) which generally containall variable. Because it is not probable that a 50/50 balance between both underlying tokens. The Company expects to invest substantially in LPs to generate ongoing revenue. We expect that thissignificant reversal of cumulative revenue will fuel our other initiatives as we buildnot occur, the Company.consideration is constrained until the mining pool operator successfully places a block (by being the first to solve an algorithm) and the Company receives confirmation of the consideration it will receive, at which time revenue is recognized. There is no significant financing component in these transactions.

 

Staking - Like LPs, staking can provide potential passive revenue toFair value of the Company. Purchasing large blockscryptocurrency award received is determined using the quoted price of lucrative PoS assets to grow the passive income portfolio is expected to be a major cornerstone to our success. This is a much greener approach torelated cryptocurrency at the traditional Prooftime of Work model, which is used by Bitcoin and Ethereum. Ethereum 2.0 is expected to be on PoS in the near future and our goal is to eventually become a validator on the network.

NFTs - The Company intends to build a world-class NFT project research team that will guide the strategic investments for the overall portfolio. We anticipate that our portfolio will contain digital assets known as NFTs, including digital real estate in multiple metaverse platforms such as The Sandbox and Otherside. These assets are expected to be used for licensing and royalty income. NFT assets have multiple use cases, in addition to the potential appreciation in the underlying digital asset. We believe that we can harness the power of acquired assets through the metaverse to grow our portfolio faster and stronger than traditional asset acquisitions typically allow.receipt.

 

Critical Accounting Policies

 

Critical Accounting Policies and Significant Judgments and Estimates

 

Our management’s discussion and analysis of our financial condition and results of operations are based on our unaudited financial statements which we have been prepared in accordance with the U.S. generally accepted accounting principles (“GAAP”). In preparing our financial statements, we are required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.

 

Critical accounting estimates are estimates for which (a) the nature of the estimate is material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change and (b) the impact of the estimate on financial condition or operating performance is material. These significant accounting estimates or assumptions bear the risk of change due to the fact that there are uncertainties attached to these estimates or assumptions, and certain estimates or assumptions are difficult to measure or value.

 

Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable in relation to the financial statements taken as a whole under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Management regularly evaluates the key factors and assumptions used to develop the estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such evaluations, if deemed appropriate, those estimates are adjusted accordingly.

 

Actual results could differ from those estimates.

 

While our significant accounting policies are described in more detail in Note 2 to our unaudited financial statements included in this Quarterly Report, we believe the following accounting policies to be critical to the judgments and estimates used in the preparation of our unaudited financial statements:

 

15

Assumption as a Going Concern

Management prepares the Company’s financial statements on the basis that the Company will continue as a going concern, which contemplates continuity of operations, the realization of assets, and liquidation of liabilities in the normal course of business. However, given our current financial position and lack of liquidity, there is substantial doubt about our ability to continue as a going concern.

 

Convertible Financial Instruments

The Company bifurcates conversion options from their host instruments and accounts for them as free-standing derivative financial instruments if certain criteria are met. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. An exception to this rule is when the host instrument is deemed to be conventional, as that term is described under applicable GAAP.

 

15

When the Company has determined that the embedded conversion options should not be bifurcated from their host instruments, discounts are recorded for the intrinsic value of conversion options embedded in the instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the transaction and the effective conversion price embedded in the instrument.

 

Intangible Assets

Digital assets held by the Company are accounted for as intangible assets with indefinite useful lives, and are initially measured at cost. The Company assigns costs to transactions on a first-in, first-out basis (FIFO).

 

An intangible asset with an indefinite useful life is not amortized but assessed for impairment annually, or more frequently, when events or changes in circumstances occur indicating that it is more likely than not that the indefinite-lived asset is impaired. Impairment exists when the carrying amount exceeds its fair value, which is measured using the quoted price of the digital assets at the time its fair value is being measured.

 

CryptocurrenciesTokens are subject to impairment losses if the fair value a cryptocurrencytokens decreases below the carrying value at any time during the period. The fair value is measured using the quoted price in the principal market of the cryptocurrency.tokens. The Company currently obtains the quoted price of cryptocurrencytokens from www.coinmarketcap.comwww.cryptocompare.com.

Liquidity pool tokens and non-fungible tokens are subject to impairment losses if the fair value a token decreases below the carrying value at the end of each quarterly accounting period. The fair value of liquidity pool tokens is based on the quoted price on the last day of the quarter at 4PM Eastern Time. The fair value of NFTs is based on the average trading price on the last day of each quarter.

Impairment for liquidity pool tokens and non-fungible tokens is assessed quarterly due to each token being a unique asset and due to the illiquid markets in which these tokens trade. The Company is continuously reviewing available markets and information and its methodology when determining the fair value of tokens. digital assets.

The Company currently reviews quoted prices of its liquidity pool tokens, non-fungible tokens and comparable tokens at https://uniswap.org/and https://opensea.io. Impairment expense is reflected in total expense in the statements of operations. Subsequent reversal of impairment losses is not permitted.

 

The sales of digital assets held are included within investing activities in the accompanying statements of cash flows and any realized gains or losses from such sales are included in other income (expense) in the statements of operations.

Revenue recognition

 

ThereThe Company recognizes revenue under Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers. The core principle of the revenue standard is currently no definitive guidance under GAAPthat a company should recognize revenue to depict the transfer of promised goods or alternative accounting frameworkservices to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for the accounting for digital assets recognized as revenuethose goods or held, and management has exercised significant judgment in determining the appropriate accounting treatment. In the event authoritative guidance is enacted by the FASB, the Company may be requiredservices. The following five steps are applied to change its policies, which could have an effect on the Company’s financial position and results from operations.achieve that core principle:

●Step 1: Identify the contract with the customer
●Step 2: Identify the performance obligations in the contract
●Step 3: Determine the transaction price
●Step 4: Allocate the transaction price to the performance obligations in the contract
●Step 5: Recognize revenue when the Company satisfies a performance obligation

 

Revenue is recognized when control of the awardpromised goods or services is claimed and depositedtransferred to customer, in an amount that reflects the Company wallet. The transaction consideration the Company receives is noncashexpects to be entitled to in the form of digital assets. Revenue is measured at the fair value of the digital assets awards received using the quoted priceexchange for those goods or services. The Company generates revenue through liquidity pools and staking rewards.

 

16

Airdrop

Liquidity Pools

 

Airdrop is the distributionLiquidity pools are a collection of tokensdigital assets locked in a smart contract that provide liquidity to decentralized exchanges. Liquidity allows digital assets to be converted to cash quickly and efficiently without compensation generally undertaken with a view of increasing awarenessdrastic price swings. An important component of a new token,liquidity pool are automated market makers (AMM). An AMM is a protocol that uses liquidity pools to encourage adoptionallow digital assets to be traded by a mathematical formula rather than though a traditional market of new tokenbuyers and to increase liquidity in the early stages of a token project.

Liquidity Poolssellers.

 

The Company earns fees by providing liquidity on Uniswap V2 and Uniswap V3. The Company earns fees proportionate to the liquidity they have supplied to the exchange. The fee for each trade is set at 0.05% for stable coins, 0.3% for most pairs and 1.0% for exotic pairs. The fees earned by the Company depends on the risk characteristics of each pair of tokens selected and the price range liquidity is provided. Uniswap V2 requires users to provide liquidity over the entire price curve, whereas Uniswap V3 provides users with the provide liquidity over a price range.

 

Revenue is recognized from liquidity pools when the award is claimed and deposited in the Company wallet. The transaction consideration the Company receives is noncash in the form of digital assets. Revenue is measured at the fair value of the digital asset awards received.

Staking Rewards

Staking rewards are granted to holders of a crypto asset when the holders lock up that crypto asset as collateral to secure fairness when validating transactions or other network actions.

The Company participates in networks with proof-of-stake consensus algorithms, through creating or validating blocks on the network. In exchange for participating in the consensus mechanism of these networks, the Company earns rewards in the form of the native token of the network. Each block creation or validation is a performance obligation. Revenue is recognized at the point when the block creation or validation is complete and the rewards are transferred into a digital wallet that the Company controls. Revenue is measured based on the number of tokens received and the fair value of the token at contract inception.

Airdrops

Airdrops are the distribution of tokens without compensation generally undertaken with a view of increasing awareness of a new token, to encourage adoption of a new token and to increase liquidity in the early stages of a token project.

The Company recognizes crypto assets received through an airdrop if the crypto asset is expected to generate a probable future benefit and if the Company is able to support the trading, custody, or withdrawal of these assets.

Airdrops are accounted for in accordance with ASC 610-20, Sales and Transfer of Nonfinancial Assets, Receipt of a airdrops are classified as gains on the statement of operations.

Beneficial Conversion Feature

 

The issuance of the convertible debt issued by the Company generated a beneficial conversion feature (“BCF”), which arises when a debt or equity security is issued with an embedded conversion option that is beneficial to the investor or in the money at inception because the conversion option has an effective strike price that is less than the market price of the underlying stock at the commitment date. The Company recognized the BCF by allocating the intrinsic value of the conversion option, which is the number of shares of common stock available upon conversion multiplied by the difference between the effective conversion price per share and the fair value of common stock per share on the commitment date, resulting in a discount on the convertible debt (recorded as a component of additional paid-in capital).

 

16

Fair Value of Financial Instruments

 

The Company follows paragraph 825-10-50-10 of the FASB ASC for disclosures about fair value of its financial instruments and has adopted paragraph 820-10-35-37 of the ASC (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in GAAP, and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:

 

 Level 1: Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.
 
Level 2: Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.
 Level 3: Pricing inputs that are generally unobservable inputs and not corroborated by market data.

 

Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.

 

The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

 

Transactions involving related parties cannot be presumed to be carried out on an arms-length basis, as the requisite conditions of competitive, free-market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm’s-length transactions unless such representations can be substantiated.

 

17

Deferred Tax Assets and Income Taxes Provision

 

The Company adopted the provisions of paragraph 740-10-25-13 of the ASC. Paragraph 740-10-25-13 which addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under paragraph 740-10-25-13, the Company may 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 should be measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. Paragraph 740-10-25-13 also provides guidance on de-recognition, classification, interest, and penalties on income taxes, accounting in interim periods and requires increased disclosures. The Company had no material adjustments to its liabilities for unrecognized income tax benefits according to the provisions of paragraph 740-10-25-13.

 

The estimated future tax effects of temporary differences between the tax basis of assets and liabilities are reported in the accompanying balance sheets, as well as tax credit carry-backs and carry-forwards. The Company periodically reviews the recoverability of deferred tax assets recorded on its balance sheets and provides valuation allowances as management deems necessary.

 

Management makes judgments as to the interpretation of the tax laws that might be challenged upon an audit and cause changes to previous estimates of tax liability. In addition, the Company operates within multiple taxing jurisdictions and is subject to audit in these jurisdictions. In management’s opinion, adequate provisions for income taxes have been made for all years. If actual taxable income by tax jurisdiction varies from estimates, additional allowances or reversals of reserves may be necessary.

 

Management assumes that the realization of the Company’s net deferred tax assets resulting from its net operating loss (“NOL”) carryforwards for Federal income tax purposes that may be offset against future taxable income was not considered more likely than not and accordingly, a full valuation allowance offsets the potential tax benefits of the net loss carry-forwards. Management made this assumption based on (a) the Company has incurred recurring losses and presently has no revenue-producing business, (b) general economic conditions, and (c) its ability to raise additional funds to support its daily operations by way of a public or private offering, among other factors.

 

Comparison of Three Months Ended MarchDecember 31, 2022 and 2021

 

Revenue

 

In March 2022, the Company commenced operations as a web3 enterprise and purchasing digital assets. Revenue for the three months ended MarchDecember 31, 2022 and 2021 was derived from airdrops and liquidity pool fees of $17,439$43,464 and $22,772,$0, respectively.

 

Our business plan includes earning income from liquidity fees and staking. Airdrop revenue represents APE coin awards received as a result of holding the stakingMutant Ape Yacht Club NFT. Airdrop revenue is generally a one-time award and the Company does not have expectations of further airdrop revenue.. The Company seeks higher returns from liquidity pool fees by selecting pairs with higher risk and good volumes.

 

Our high trade volume is due to adjusting parameters on our liquidity pools. Each trade generates a realized gain or loss.

Administrative Expenses

 

Administrative expenses totaled $34,833$52,500 and $6,764$29,185 for the three months ended MarchDecember 31, 2022 and 2021, respectively. These expenses are primarily costs related to keeping the Company current in its SEC filingsaccounting, audit, legal and costs incurred for legal expenses related to the issuance of Series A Convertible Preferred Stock.investor relations.

 

Interest Expense

 

Interest expense totaled $1,294$24,991 and $7,560$0 for the three months ended MarchDecember 31, 2022 and 2021, respectively. The decreaseincrease in interest expense is due to the settlementamortization of thedebt discount and accrued interest on new promissory notes and new convertible note payable.promissory notes issued since October 2021.

 

1718

 

Impairment of Digital Assets Held

 

Impairment of digital assets held totaled $51,983$256,018 and $0 for the three months ended MarchDecember 31, 2022 and 2021, respectively. Digital assets are accounted for as intangible assets are subject to impairment losses if the fair value of digital assets decreases below the carrying value at any time during the period. Subsequent reversal of impairment losses is not permitted. We will not recognize any increases in the fair value of digital assets held until a gain is recognized on sale.

Impairment losses are a non-cash expense.

Realized Gain (Loss) on Sales/ Exchange Digital Assets Held

Other Income (Expense)

 

Other rewards – we earned $GOO tokens as a result of holding an Art Gobblers NFT.

Realized Gain on Sale/ Exchange on Digital Assets Held - We generally do not seek to earn income from actively trading digital assetassets held. We will dispose of assets in circumstances when there is a significant increase in the fair value of an asset or when holding an asset is no longer consistent with our business plan.

Net Loss

 

We reported a net loss of $15,380$107,015 and $14,324 during$29,185 for the three months ended MarchDecember 31, 2022 and 2021, respectively. Any increase in revenue and gainsrealized gain on sales ofsales/ exchange on digital assets held was offset by an increase in administrative, interest and impairment expenses.

Our losses were primarily due to a steep drop in market price of crypto assets, high volatility of prices and a broad deterioration of the crypto-currency market. During 2022, there has been a sustained period of lower prices. The broad deterioration of the crypto-currency market has been highlighted by well publicized business failures such as FTX Exchange and BlockFi and the price collapse of TerraUSD and LUNA. We have not suffered direct losses as a counterparty in a contract as a result of recent business failures. The broad deterioration in prices has reduced the capital we can invest and, therefore, reduced our revenue from liquidity pools and staking rewards. We are unable to predict if or when prices will recover.

 

Comparison of NineSix Months Ended MarchDecember 31, 2022 and 2021

 

Revenue

 

In March 2022, the Company commenced operations as a web3 enterprise and purchasing digital assets. Revenue for the ninesix months ended MarchDecember 31, 2022 and 2021 was derived from airdrops and liquidity pool fees of $17,439$83,894 and $22,772,$0, respectively.

 

Our business plan includes earning income from liquidity fees and staking. Airdrop revenue represents APE coin awards received as a result of holding the stakingMutant Ape Yacht Club NFT. Airdrop revenue is generally a one-time award and the Company does not have expectations of airdrop further revenue.. The Company seeks higher returns from liquidity pool fees by selecting pairs with higher risk and good volumes.

 

Our high trade volume is due to adjusting parameters on our liquidity pools. Each trade generates a realized gain or loss.

Administrative Expenses

 

Professional feesAdministrative expenses totaled $88,840$177,510 and $51,905$51,010 for the ninesix months ended MarchDecember 31, 2022 and 2021, respectively. These expenses are primarily costs related to keeping the Company current in its SEC filingsaccounting, audit, legal and costs incurred for legal expenses related to conversion from a Virginia corporation to a Nevada corporation, amendments to the amended and restated articles of incorporation and the issuance of Series A Convertible Preferred Stock.investor relations.

 

Interest Expense

 

Interest expense totaled $1,294$48,533 and $36,353$2,997 for the ninesix months ended MarchDecember 31, 2022 and 2021, respectively. The decreaseincrease in interest expense is due to the settlementamortization of thedebt discount and accrued interest on new promissory notes and new convertible note payable.promissory notes issued since October 2021.

 

19

Impairment of Digital Assets Held

 

Impairment of digital assets held totaled $51,983$281,317 and $0 for the ninesix months ended MarchDecember 31, 2022 and 2021, respectively. Digital assets are accounted for as intangible assets are subject to impairment losses if the fair value of digital assets decreases below the carrying value at any time during the period. Subsequent reversal of impairment losses is not permitted. We will not recognize any increases in the fair value of digital assets held until a gain is recognized on sale.

Impairment losses are a non-cash expense.

Realized Gain (Loss) on Sales/ Exchange Digital Assets Held

Other Income (Expense)

 

Other rewards – we earned $GOO tokens as a result of holding an Art Gobblers NFT.

Realized Gain on Sale/ Exchange on Digital Assets Held - We generally do not seek to earn income from actively trading digital asset held. We will dispose of assets in circumstances when there is a significant increase in the fair value of an asset or when holding an asset is no longer consistent with our business plan.

Net Loss

 

We reported a net loss of $69,387$165,326 and $88,258$54,007 during the ninesix months ended MarchDecember 31, 2022 and 2021, respectively. Any increase in revenue and gainsrealized gain on sales ofsales/ exchange on digital assets held was offset by an increase in administrative, interest and impairment expenses.

Our losses were primarily due to a steep drop in market price of crypto assets, high volatility of prices and a broad deterioration of the crypto-currency market. During 2022, there has been a sustained period of lower prices. The broad deterioration of the crypto-currency market has been highlighted by well publicized business failures such as FTX Exchange and BlockFi and the price collapse of TerraUSD and LUNA. We have not suffered direct losses as a counterparty in a contract as a result of recent business failures. The broad deterioration in prices has reduced the capital we can invest and, therefore, reduced our revenue from liquidity pools and staking rewards. We are unable to predict if or when prices will recover.

 

Liquidity and Capital Resources

 

We have incurred recurring operating losses and negative operating cash flows through MarchDecember 31, 2022, and we expect to continue to incur losses and negative operating cash flows at least through the near future. We haveDuring the six months ended December 31, 2022, we obtained $100,000$75,000 of funding by issuing a demand promissory note on October 18, 2021 to Ryan Schadel, the Company’s Chief Executive Officer, sole director and majority stockholder,promissory note – related party to meet our most critical cash requirements. The Company on October 18, 2021, issued to Ryan Schadel, the Company’s Chief Executive Officer, sole director and majority stockholder, a demand promissory note for $100,000 in cash. On March 16, 2022, the Company entered into Stock Purchases Agreements whereby the Company issued 22 shares to Series A Convertible Preferred Stock and various Warrants for $1,100,000 in cash. At MarchDecember 31, 2022, $95,854$972 of cash was in held at a financial institution and $400,673$0 was held at Coinbase, Inc. The Company expects over the next twelve months, cash held at a financial institution will be expended on professional fees, transfer agent, Edgar agent and other administrative costs. We estimate $200,000 of cash per annum will be required to maintain current operations and remain in business. We hope that we can generate enough revenue from liquidity pools and staking rewards to pay ongoing expenses. In order to remain in business we may have to sell digital assets for cash or issue additional debt order equity. The cash held at Coinbase Inc. will be deployed to purchase digital assets to generate staking rewards and liquidity pool fees. We hope to start paying some of our suppliers and contractors in digital assets in the coming months. However, there can be no assurance we will be able to pay any of our suppliers and contractors in digital assets.

 

On August 22, 2022, the Company made a deposit of $72,095 with USDC to purchase 18 Antminer S19j Pro 100TH Bitcoin mining machines.

As a result of the aforementioned factors, management has concluded that there is substantial doubt about our ability to continue as a going concern. Our independent registered public accounting firm, in its report on our fiscal 20212022 financial statements, expressed substantial doubt about our ability to continue as a going concern. Our financial statements as of and for the periodyear ended March 31,June 30, 2022, do not contain any adjustments for this uncertainty. In response to our Company’s cash needs, we raised funding as described in Note 45 and Note 6 to our unaudited financial statements. Any additional amounts raised will be used for our future investing and operating cash flow needs. However, there can be no assurance that we will be successful in raising additional amounts of financing.

 

20

Off-Balance Sheet Arrangements

 

There are no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

18

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

 

Not applicable.

 

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures

 

Our management is responsible for establishing and maintaining a system of disclosure controls and procedures (as defined in Rule 13a-15(e)) under the Exchange Act) that is designed to ensure that information required to be disclosed by our Company in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time specified in the Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

 

Pursuant to Rule 13a-15(b) under the Exchange Act, our Company carried out an evaluation as of MarchDecember 31, 2022 with the participation of our Company’s management, including our Company’s Chief Executive Officer (“CEO”) and our Company’s Chief Financial Officer (“CFO”), of the effectiveness of our Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act). Based upon that evaluation, our Company’s CEO and CFO concluded that our Company’s disclosure controls and procedures were not effective as of MarchDecember 31, 2022 due to our Company’s limited internal resources and lack of ability to have multiple levels of transaction review.

 

Management is in the process of determining how best to change our current system and implement a more effective system to insure that information required to be disclosed in the reports that we file or submit under the Exchange Act have been recorded, processed, summarized and reported accurately. Our management intends to develop procedures to address the current deficiencies to the extent possible given limitations in financial and personnel resources. While management is working on a plan, no assurance can be made at this point that the implementation of such controls and procedures will be completed in a timely manner or that they will be adequate once implemented.

 

Changes in internal control over financial reporting

 

There have been no changes in our internal control over financial reporting during the period ended MarchDecember 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

 

1921

 

PART II

OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

From time to time, we may be involved in routine legal proceedings, as well as demands, claims and threatened litigation that arise in the normal course of our business. The ultimate amount of liability, if any, for any claims of any type (either alone or in the aggregate) may materially and adversely affect our financial condition, results of operations and liquidity. In addition, the ultimate outcome of any litigation is uncertain. Any outcome (including any for the actions described above), whether favorable or unfavorable, may materially and adversely affect us due to legal costs and expenses, diversion of management attention and other factors. We expense legal costs in the period incurred. We cannot assure you that additional contingencies of a legal nature or contingencies having legal aspects will not be asserted against us in the future, and these matters could relate to prior, current or future transactions or events.

 

We are not currently a party to any other material legal proceedings. We are not aware of any pending or threatened litigation against us that in our view would have a material adverse effect on our business, financial condition, liquidity, or operating results. However, legal claims are inherently uncertain, and we cannot assure you that we will not be adversely affected in the future by legal proceedings.

 

ITEM 1A. RISK FACTORS

Investing in our common stock involves a high degree of risk. Before investing in our common stock, you should consider carefully the risks described below, together with the other information included or incorporated by reference in this Quarterly Report on Form 10-Q. The occurrence of any of the following risks could materially adversely affect our business, financial condition, results of operations and future growth prospects. In these circumstances, the market price of our common stock could decline, and you may lose all or part of your investment.

 

For a discussion identifying risk factors and other important factors that could cause actual results to differ materially from those anticipated, see the discussions under Part I, Item 1A, “Risk Factors” in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 20212022 and in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Notes to Consolidated Financial Statements” in this Quarterly Report on Form 10-Q. Except as set forth below, there haveThere has been noa material changeschange to the Risk Factors described in Part I “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 20212022 as filed with the SEC.

Risks RelatedThe following additional risk factor should be added to Our Business

Our holdings are controlled by one shareholder which owns approximately 70% of our issued and outstanding stock.

70% of our issued and outstanding common stock is controlled by Mr. Schadel, our sole officer and director. As a result, Mr. Schadel can direct the affairs ofdiscussions under Part I, Item 1A, “Risk Factors” in the Company asCompany’s Annual Report on Form 10-K for the majority shareholder and there is no assurance that any decisions made through a shareholder vote will be the same decisions that one or more minority shareholders would make.fiscal year ended June 30, 2022.

 

The Company has a limited operating history.

The Company has a limited history of operations and is in the early stage of development. As such, the Company will be subject to many risks common to such enterprises, including undercapitalization, cash shortages, limitations with respect to personnel, financial and other resources and lack of revenues. There is no assurance that the Company will be successful in achieving a return on shareholders’ investment and the likelihood of success must be considered in light of its early stage of operations. There can be no assurance that the Company will be able to develop any of its projects profitably or that any of its activities will generate positive cash flow.

20

The Company’s compliance and risk management programs may not be effective.

The Company’s ability to comply with applicable laws and rules will be largely dependent on the establishment and maintenance of compliance, review and reporting systems, as well as the ability to attract and retain qualified compliance and other risk management personnel. The Company cannot provide any assurance that its compliance policies and procedures will always be effective or that the Company will be successful in monitoring or evaluating its risks. In the case of alleged non-compliance with applicable laws or regulations, the Company could be subject to investigations and judicial or administrative proceedings that may result in substantial penalties or civil lawsuits, including by customers, for damages, restitution or other remedies, which could be significant. Any of these outcomes, individually or together, may among other things, materially and adversely affect the Company’s reputation, financial condition, investment and trading strategies, and asset value and the value of any investment in the Company’s common stock.

The Company may require additional funds to finance its operations.

Additional funds, raised through debt or equity offerings, may be needed to finance the Company’s future activities. There can be no assurance that the Company will be able to obtain adequate financing in the future or that the terms of such financing will be favorable. Failure to obtain such additional financing could cause the Company to reduce or terminate its operations.

If additional funds are raised through further issuances of equity or securities convertible into equity, existing shareholders could suffer significant dilution, and any new equity securities issued could have rights, preferences and privileges superior to those of holders of the Company’s common stock. Any debt financing secured in the future could involve restrictive covenants relating to capital raising activities and other financial and operational matters, which may make it more difficult for the Company to obtain additional capital and to pursue business opportunities.

Market adoption ofA particular digital assets has been limited to date and further adoption is uncertain.

Currently, there is relatively small use of digital assets in the retail and commercial marketplace in comparison to relatively large use by speculators, thus contributing to price volatility that could adversely affect an investment in the Company’s common stock. Digital assets have only recently become acceptedasset’s status as a means of payment for goods and services by certain major retail and commercial outlets and use of digital assets by consumers to pay such retail and commercial outlets remains limited. Conversely, a significant portion of digital asset demand“security” in any relevant jurisdiction is generated by speculators and investors seeking to profit from the short- or long-term holding of tokens. A lack of expansion by digital assets into the retail and commercial markets, or a contraction of such use, may result in increased volatility or a reduction in the market price of these assets. Further, if fees increase for recording transactions on these blockchains, demand for digital assets may be reduced and prevent the expansion of the networks to retail merchants and commercial businesses, resulting in a reduction in the price of these assets.

The value of digital assets may be subject to momentum pricing risk.

Momentum pricing typically is associated with growth stocks and other assets whose valuation, as determined by the investing public, accounts for anticipated future appreciation in value. Market prices of digital assets are determined primarily using data from various exchanges, over-the-counter markets, and derivative platforms. Momentum pricing may have resulted, and may continue to result, in speculation regarding future appreciation in the value of digital assets, inflating and making their market prices more volatile. As a result, they may be more likely to fluctuate in value due to changing investor confidence in future appreciation (or depreciation) in their market prices, which could adversely affect the value of the Company’s digital asset holdings and the value of the Company’s common stock.

A decline in the adoption and use of digital assets could materially and adversely affect the performance of the Company.

Because digital assets are a relatively new asset class and a technological innovation, they are subject to a high degree of uncertainty. Asuncertainty, and if we are unable to correctly characterize a related but separate issue from that of the regulatory environment, the adoption, growth and longevity of any digital asset, will require growth in its usage and in the blockchain for various applications. A lack of expansion in use of digital assets and blockchain technologies would adversely affect the financial performance of the Company. In addition, there is no assurance that any digital assets will maintain their value over the long term. Even if growth in the use of any digital assets occurs in the near or medium term, there is no assurance that such use will continue to grow over the long term. A lack of expansion of digital assets into the retail and commercial markets, may result in increased volatility or a reduction in the market price of these assets. Further, if fees increase for recording transactions on these blockchains, demand for digital assetswe may be reducedsubject to regulatory scrutiny, investigations, fines, sanctions, penalties and preventother adverse consequences, including potentially becoming subject to the expansionInvestment Company Act of the networks to retail merchants1940 which would impose significant regulatory burdens and commercial businesses, resulting in a reduction in the price of these assets. A contraction in use of any digital asset may result in increased volatility or a reduction in prices, which could materially and adversely affect the Company’s investment and trading strategies, the value of its assets and the value of any investment in the Company’s common stock.

We may invest or spend our cash in ways with which you may not agree or in ways which may not yield a significant return.compliance costs.

 

Mr. Schadel, our sole officerThe SEC and directorits staff have taken the position that certain digital assets fall within the definition of a “security” under the U.S. federal securities laws. The legal test for determining whether any given digital asset is a security is a highly complex, fact-driven analysis that evolves over time, and the outcome is difficult to predict. The SEC generally does not provide advance guidance or confirmation on the status of any particular digital asset as a significant stockholder, has considerable discretionsecurity. Furthermore, the SEC’s views in this area have evolved over time and it is difficult to predict the direction or timing of any continuing evolution. It is also possible that a change in the usegoverning administration or the appointment of new SEC commissioners could substantially impact the views of the SEC and its staff. Public statements by senior officials at the SEC indicate that the SEC does not intend to take the position that Bitcoin or Ethereum are securities (in their current form). Bitcoin and Ethereum are the only digital assets as to which senior officials at the SEC have publicly expressed such a view. Moreover, such statements are not official policy statements by the SEC and reflect only the speakers’ views, which are not binding on the SEC or any other agency or court and cannot be generalized to any other digital asset. With respect to all other digital assets, there is currently no certainty under the applicable legal test that such assets are not securities, notwithstanding the conclusions we may draw based on our cash. Our cash mayrisk-based assessment regarding the likelihood that a particular digital asset could be useddeemed a “security” under applicable laws. Similarly, though the SEC’s Strategic Hub for purposes that doInnovation and Financial Technology published a framework for analyzing whether any given digital asset is a security in April 2019, this framework is also not increase our operating resultsa rule, regulation or market value. Untilstatement of the cashSEC and is used, it may be placed in investments that do not produce significant income or that may lose value. The failure of our management to invest or spend our cash effectively could result in unfavorable returns and uncertainty about our prospects, each of which could causebinding on the price of our common stock to decline.SEC. 

 

Our digital assets may be subject to concentration risk.

Concentration risk is the risk of amplified losses that may occur from having a large portion of our holdings in digital assets. Digital assets returns may be highly corelated and may also be Illiquid. Investments within the same industry, geographic region or security type tend to be highly correlated, meaning that what happens to one investment is likely to happen to the others. Digital assets may also be difficult to sell off quickly. Should we need quick access to cash and are heavily invested in illiquid securities, we may not be able to tap this money in a timely or cost-efficient manner.

21

Risks Related to our Operations

Cyber-attacks, data breaches or malware may disrupt our operations and trigger significant liability for us, which could harm our operating results and financial condition, and damage our reputation or otherwise materially harm our business.

As a publicly traded company, we may experience cyber-attacks and other attempts to gain unauthorized access to our systems on a regular basis. There is a risk that some or all of our cryptocurrencies could be lost or stolen as a result of one or more of these incursions. As we increase in size, we may become a more appealing target of hackers, malware, cyber-attacks or other security threats, and, despite our implementation of strict security measures and it is impossible to eliminate all such vulnerability. For instance, we may not be able to ensure the adequacy of the security measures employed by third parties, such as our service providers. Efforts to limit the ability of malicious actors to disrupt the operations of the internet or undermine our own security efforts may be costly to implement and may not be successful. Such breaches, whether attributable to a vulnerability in our systems or otherwise, could result in claims of liability against us, damage our reputation and materially harm our business.

We have not to date experienced a material cyber-event; however, the occurrence of any such event in the future could subject us to liability give rise to legal and/or regulatory action, which could damage our reputation or otherwise materially harm our business, operating results, and financial condition.

Incorrect or fraudulent digital assets transactions may be irreversible and we could lose access to our digital assets.

Digital asset transactions are not, from an administrative perspective, reversible without the consent and active participation of the recipient of the digital assets from the transaction. Because of the decentralized nature of the blockchain, once a transaction has been verified and recorded in a block that is added to the blockchain, an incorrect transfer of a digital or a theft thereof generally will not be reversible, and we may not have sufficient recourse to recover our losses from any such transfer or theft. It is possible that, through computer or human error, or through theft or criminal action, our rewards or fees could be transferred in incorrect amounts or to unauthorized third parties, or to uncontrolled accounts. Though recent high profile enforcement actions against individuals laundering stolen digital assets have demonstrated some means of bringing malicious actors to justice for their theft, the stolen digital assets is likely to remain unrecoverable. Furthermore, we must possess both the unique public and private keys to our digital wallets to gain access to our digital assets and the loss of a private key required may be irreversible. Therefore, if we lose, or if a malicious actor successfully denies us access to our private keys, we may be permanently denied access to the digital assets held in the wallet corresponding to the lost, stolen or blocked keys. Though we have taken and continue to take reasonable steps to secure our private keys. if we were to lose access to our private keys or otherwise experience data loss relating to our digital wallets, we could effectively lose access to and the ability to use our digital assets. Moreover, we may be unable to secure insurance policies for our digital assets at rates or on terms acceptable to us, if at all. To the extent that we are unable to recover our losses from such action, error or theft, such events could have a material adverse effect on our business, results of operations and financial condition.

Our business could be harmed by prolonged power and internet outages, shortages, or capacity constraints.

Our operations require access to high-speed internet to be successful. If we lose internet access for a prolonged period, we may be required to reduce our operations or cease them altogether. If this occurs, our business and results of operations may be materially and adversely affected.

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 in some jurisdictions, such as in the U.S., subject the mining, ownership and exchange of digital assets to extensive, and in some cases overlapping, unclear and evolving regulatory requirements. Ongoing and future regulatory actions could have a material adverse effect on our business, prospects or operations.

Our interactions with a blockchain may expose us to SDN or blocked persons and new legislation or regulation could adversely impact our business or the market for cryptocurrencies.

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 specially designated nationals (“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, but we may not be adequately capable of determining the ultimate identity of the individual with whom we transact with respect to selling cryptocurrency assets. Moreover, the use of cryptocurrencies, including Bitcoin, as a potential means of avoiding federally-imposed sanctions, such as those imposed in connection with the Russian invasion of Ukraine. For example, on March 2, 2022, a group of United States Senators sent the Secretary of the United States Treasury Department a letter asking Secretary Yellen to investigate its ability to enforce such sanctions vis-à-vis Bitcoin, and on March 8, 2022, President Biden announced an executive order on cryptocurrencies which seeks to establish a unified federal regulatory regime for cryptocurrencies. We are unable to predict the nature or extent of new and proposed legislation and regulation affecting the cryptocurrency industry, or the potential impact of the use of cryptocurrencies 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.

Digital assets may be made illegal in certain jurisdictions which could adversely affect our business prospects and operations.

Although we do not anticipate any material adverse regulations on digital assets in our jurisdictions of operation, it is possible that state or federal regulators may seek to impose harsh restrictions or total bans on digital assets which may make it impossible for us to do business. Further, although digital assets in general are largely unregulated in most countries (including the United States), regulators in certain jurisdictions may undertake new or intensify existing regulatory actions in the future that could severely restrict the right to mine, acquire, own, hold, sell, or use digital assets or to exchange it for traditional fiat currency such as the United States Dollar. Such restrictions may adversely affect us as the large-scale use of digital assets as a means of exchange is presently confined to certain regions globally. Such circumstances could have a material adverse effect on us, which could have a material adverse effect on our business, prospects or operations and potentially the value of digital assets we acquire and thus harm investors.

22
 

The Company will haveclassification of a digital asset as a security under applicable law has wide-ranging implications for the regulatory obligations that flow from the offer, sale, trading, and clearing of such assets. For example, a digital asset that is a security in the U.S. may generally only be offered or sold in the U.S. pursuant to adapt to respond to evolving security risks.

As technological change occurs,a registration statement filed with the security threats to the Company’sSEC or in an offering that qualifies for an exemption from registration. Persons that effect transactions in digital assets will likely adapt, and previously unknown threats may emerge. The ability ofthat are securities in the Company and Coinbase to adopt technology in response to changing security needs or trends may pose a challenge to the safekeeping of their assets. To the extent that the Company or Coinbase is unable to identify and mitigate or stop new security threats, The Company’s assetsU.S. may be subject to theft, loss, destructionregistration with the SEC as a “broker” or other attack.“dealer.” Platforms that bring together purchasers and sellers to trade digital assets that are securities in the U.S. are generally subject to registration as national securities exchanges, or must qualify for an exemption, such as by being operated by a registered broker-dealer as an alternative trading system, or ATS, in compliance with rules for ATSs. Persons facilitating clearing and settlement of securities may be subject to registration with the SEC as a clearing agency. Foreign jurisdictions may have similar licensing, registration, and qualification requirements.

 

The majority of the Company’sWhile we do not currently, nor do we plan to, offer, sell, trade, and clear digital assets are held in Self Custody (Non-Custodial) wallets. The Company holds the majorityor take custody of itsothers digital assets as part of any potential Staking-as-a-Service operations we may undertake, however, digital assets we stake and validate transactions for could be deemed to be a “security” under applicable laws. Our blockchain infrastructure operations which entails securing blockchains by processing and validating blockchain transactions (most analogous to Bitcoin mining or operating a Bitcoin mining pool) could be construed as facilitating transactions in Self Custody (Non-Custodial) wallets. These wallets are useddigital assets; as such we could be subject to interactlegal or regulatory action in the event the SEC, a foreign regulatory authority, or a court were to determine that a blockchain we secure is a “security” under applicable laws. Because our platform is not registered or licensed with Decentralized Exchangesthe SEC or foreign authorities as a broker-dealer, national securities exchange, or ATS (or foreign equivalents), and other DeFi focused protocols. Mr. Schadel, our sole officer and director and our majority stockholder, is currently the holder of the private keys that provide accesswe do not seek to these wallets.register or rely on an exemption from such registration or license to secure blockchains.

 

Additionally, the Company from time to time holds assets at Coinbase, a SOC 1/ SOC 2 certifiedFurther, if any digital asset custodian. If Coinbase wereis deemed to be a security under any U.S. federal, state, or foreign jurisdiction, or in a proceeding in a court of law or otherwise, it may have adverse consequences for such digital asset. For instance, the networks on which such digital assets are utilized may be required to be regulated as securities intermediaries, and subject to applicable rules, which could effectively render the network impracticable for its existing purposes. Further, it could draw negative publicity and a malicious attack or otherwise cease its operations, the Company will be at risk of losing the majority of its digital assets. There is no assurance that Coinbase will not be subject to any such attack and there is no guarantee that Coinbase won’t cease its operations.

Banks may not provide banking services, or may cut off banking services, to businesses that provide digital asset-related services.

A number of companies that provide digital asset-related services have been unable to find banks that are willing to provide them with bank accounts and banking services. Similarly, a number of such companies have had their existing bank accounts closed by their banks. Banks may refuse to provide bank accounts and other banking services to digital asset-related companies, or companies that accept digital assets, for a number of reasons, such as perceived compliance risks or costs. The difficulty that many businesses that provide digital asset-related services have and may continue to have in finding banks willing to provide them with bank accounts and other banking services may decrease the usefulness of digital assets as a payment system and harm public perception of digital assets. Similarly, the usefulness of digital assets as a payment system and the public perception of digital assets could be damaged if banks were to close the accounts of many or of a few key businesses providing digital asset-related services. This could decrease the market prices of digital assets, and adversely affect the value of the Company’s digital asset holdings and the Company’s common stock.

The Company’s business is exposed to the potential misuse of digital assets and malicious actors.

Since the existence of digital assets, there have been attempts to use them for speculation or malicious purposes. Although lawmakers increasingly regulate the use and applications of digital assets, and software is being developed to curtail speculative and malicious activities, there can be no assurances that those measures will sufficiently deter those and other illicit activitiesdecline in the future. Advances in technology, such as quantum computing, could lead to a malicious actor or botnet (a voluntary or hacked collection of computers controlled by networked software coordinating the actions of the computers) being able to alter the blockchain on which digital asset transactions rely. In such circumstances, the malicious actor or botnet could control, exclude or modify the ordering of transactions, or generate new digital assets or transactions using such control. The malicious actor or botnet could double spend its own digital assets and prevent the confirmation of other users’ transactions for so long as it maintains control. Such changes could adversely affect an investment in the Company’s common stock.

The security procedures and operational infrastructure of the Company and Coinbase may be breached due to the actions of outside parties, error or malfeasance of an employee of the Company or Coinbase, or otherwise, and, as a result, an unauthorized party may obtain access to the Company’s digital asset accounts, private keys, data or tokens. Additionally, outside parties may attempt to fraudulently induce employees of the Company or Coinbase to disclose sensitive information in order to gain access to the infrastructure of the Company or Coinbase. As the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently, or may be designed to remain dormant until a predetermined event, and often are not recognized until launched against a target, The Company may be unable to anticipate these techniques or implement adequate preventative measures. If an actual or perceived breach of the Company’s digital assets account occurs, the market perception of the effectiveness of its security protocols could be harmed and the value of the Company’s common stock could be materially adversely affected.

The Company’s use of proprietary and non-proprietary software, data and intellectual property may be subject to substantial risk.

The Company’s token selection strategy may rely heavily on the use of proprietary and non-proprietary software, data and intellectual property of third parties in the digital asset sector. The reliance on this technology and data is subject to a number of important risks. For example, the operation of any elementgeneral acceptance of the digital assets network, or any other electronic platform, may be severely and adversely affected by the malfunction of technology. For example, an unforeseen software or hardware malfunction could occur asasset. Also, such a result of a virus or other outside force, or as result of a design flaw in the design and operation of the network or platform. In addition, the underlying technology of the tokens themselves, may be inactive for periods of time, known as “downtime” and could have serious adverse effects on our business.

Risks Related to Ownership of Our Common Stock

Nevada law contains provisions that could discourage, delay or prevent a change in control of our company, prevent attempts to replace or remove current management and reduce the market price of our stock.

Certain provisions of Nevada law described belowdevelopment may make us a less attractive candidateit difficult for acquisition, which may adversely impact the value of the shares of our capital stock held by our stockholders. We havesuch supported digital asset to be traded, cleared, and custodied as compared to other digital asset that are not opted out of these provisions in our Bylaws, as permitted under the Nevada Revised Statutes.considered to be securities.

Nevada Revised Statutes Sections 78.411 through 78.444 (the “Nevada Combinations Statute”) generally prohibit “combinations” including mergers, consolidations, sales and leases of assets, issuances of securities and similar transactions by a Nevada corporation having a requisite number of stockholders of record (of which we are one) with any person who beneficially owns (or any affiliate or associate of the corporation who within the previous two years owned), directly or indirectly, 10% or more of the voting power of the outstanding voting shares of the corporation (an “interested stockholder”), within two years after such person first became an interested stockholder unless (i) the board of directors of the corporation approved the combination or transaction by which the person first became an interested stockholder before the person first became an interested stockholder or (ii) the board of directors of the corporation has approved the combination in question and, at or after that time, such combination is approved at an annual or special meeting of the stockholders of the target corporation, and not by written consent, by the affirmative vote of holders of stock representing at least 60% of the outstanding voting power of the target corporation not beneficially owned by the interested stockholder or the affiliates or associates of the interested stockholder.

23

Two years after the date the person first became an interested stockholder, the Nevada Combinations Statute prohibits any combination with that interested stockholder unless (i) the board of directors of the corporation approved the combination or transaction by which the person first became an interested stockholder before the person first became an interested stockholder or (ii) such combination is approved by a majority of the outstanding voting power of the corporation not beneficially owned by the interested stockholder or any affiliate or associate of the interested stockholder. The Nevada Combinations Statute does not apply to combinations with an interested stockholder after the expiration of four years from when the person first became an interested stockholder.

Because there has been limited precedent set for financial accounting of digital assets, the determination that we have made for how to account for digital assets transactions may be subject to change.

Because there has been limited precedent set for the financial accounting of cryptocurrencies and related revenue recognition and no official guidance has yet been provided by the FASB or the SEC, it is unclear how companies may in the future be required to account for cryptocurrency transactions and assets and related revenue recognition. A change in regulatory or financial accounting standards could result in the necessity to change our accounting methods and restate our financial statements. Such a restatement could adversely affect the accounting for our newly mined cryptocurrency rewards and more generally negatively impact our business, prospects, financial condition and results of operations. Such circumstances would have a material adverse effect on our ability to continue as a going concern or to pursue our new strategy at all, which would have a material adverse effect on our business, prospects or operations as well as and potentially the value of any cryptocurrencies we hold or expects to acquire for our own account and harm investors.

We have identified material weaknesses in our internal control over financial reporting and may identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls, which may result in material misstatements of our financial statements or cause us to fail to meet our periodic reporting obligations.

We are required to comply with certain provisions of Section 404 of the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley Act”). Section 404 requires that we document and test our internal control over financial reporting and issue management’s assessment of our internal control over financial reporting. Management assessed the effectiveness of our internal control over financial reporting as of June 30, 2021. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated Framework. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. Based on our assessment, as of June 30, 2021, we concluded that our internal control over financial reporting contained material weaknesses. To remediate these material weaknesses, our management has been implementing and continues to implement measures designed to ensure that control deficiencies contributing to the material weakness are remediated, such that these controls are designed, implemented, and operating effectively.

We believe that these actions will remediate the material weakness. However, the remediation cannot be deemed successful until the applicable controls operate for a sufficient period of time and our management has concluded, through testing, that these controls are operating effectively. If we fail to comply with the requirements of Section 404 of the Sarbanes-Oxley Act, the accuracy and timeliness of the filing of our annual and quarterly reports may be materially adversely affected and could cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our common stock. In addition, a material weakness in the effectiveness of our internal control over financial reporting could result in an increased chance of fraud and the loss of customers, reduce our ability to obtain financing and require additional expenditures to comply with these requirements, each of which could have a material adverse effect on our business, results of operations and financial condition.

Substantial sales of our common stock may impact the market price of our common stock.

Future sales of substantial amounts of our common stock, including shares that we may issue upon exercise of options and warrants could adversely affect the market price of our common stock. Furthermore, if we raise additional funds through the issuance of common stock or securities convertible into our common stock, the percentage ownership of our shareholders will be reduced, and the price of our common stock may fall.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

 

ITEM 5. OTHER INFORMATION

 

None.

 

2423
 

 

ITEM 6. EXHIBITS

 

Exhibit Number Description
   
3.131.1 Certificate of Designations for the Series A Preferred Stock, filed with the Nevada Secretary of State on March 11, 2022 (incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed with the SEC on March 15, 2022).
10.1Convertible Promissory Note, dated March 4, 2022, issued by the registrant in favor of Ryan Schadel (incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed with the SEC on March 7, 2022).
10.2Convertible Promissory Note, dated March 10, 2022, issued by the registrant in favor of Ryan Schadel (incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed with the SEC on March 11, 2022).
10.3Securities Purchase Agreement by and among Waterside Capital Corporation and Buyer #1 dated as of March 16, 2022 (incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed with the SEC on March 22, 2022).
10.4Common Stock Purchase Warrant #1 issued to Buyer #1 on March 16, 2022 for 1,000,000 shares of Common Stock of Waterside Capital Corporation, at an exercise price of $1.30 per share (incorporated by reference to Exhibit 10.2 to the registrant’s Current Report on Form 8-K filed with the SEC on March 22, 2022).
10.5Common Stock Purchase Warrant #2 issued to Buyer #1 on March 16, 2022 for 1,000,000 shares of Common Stock of Waterside Capital Corporation, at an exercise price of $1.50 per share (incorporated by reference to Exhibit 10.3 to the registrant’s Current Report on Form 8-K filed with the SEC on March 22, 2022).
10.6Common Stock Purchase Warrant #3 issued to Buyer #1 on March 16, 2022 for 1,000,000 shares of Common Stock of Waterside Capital Corporation, at an exercise price of $1.75 per share (incorporated by reference to Exhibit 10.4 to the registrant’s Current Report on Form 8-K filed with the SEC on March 22, 2022).
10.7Securities Purchase Agreement by and among Waterside Capital Corporation and Buyer #2 dated as of March 16, 2022 (incorporated by reference to Exhibit 10.5 to the registrant’s Current Report on Form 8-K filed with the SEC on March 22, 2022).
10.8Common Stock Purchase Warrant #1 issued to Buyer #2 on March 16, 2022 for 1,000,000 shares of Common Stock of Waterside Capital Corporation, at an exercise price of $1.30 per share (incorporated by reference to Exhibit 10.6 to the registrant’s Current Report on Form 8-K filed with the SEC on March 22, 2022).
10.9Common Stock Purchase Warrant #2 issued to Buyer #2 on March 16, 2022 for 1,000,000 shares of Common Stock of Waterside Capital Corporation, at an exercise price of $1.50 per share (incorporated by reference to Exhibit 10.7 to the registrant’s Current Report on Form 8-K filed with the SEC on March 22, 2022).
10.10Common Stock Purchase Warrant #3 issued to Buyer #2 on March 16, 2022 for 1,000,000 shares of Common Stock of Waterside Capital Corporation (incorporated by reference to Exhibit 10.8 to the registrant’s Current Report on Form 8-K filed with the SEC on March 22, 2022).
10.11Securities Purchase Agreement by and among Waterside Capital Corporation and Buyer #3 dated as of March 16, 2022 (incorporated by reference to Exhibit 10.9 to the registrant’s Current Report on Form 8-K filed with the SEC on March 22, 2022).
10.12Common Stock Purchase Warrant #1 issued to Buyer #3 on March 16, 2022 for 200,000 shares of Common Stock of Waterside Capital Corporation, at an exercise price of $1.30 per share (incorporated by reference to Exhibit 10.10 to the registrant’s Current Report on Form 8-K filed with the SEC on March 22, 2022).
10.13Common Stock Purchase Warrant #2 issued to Buyer #3 on March 16, 2022 for 200,000 shares of Common Stock of Waterside Capital Corporation, at an exercise price of $1.50 per share (incorporated by reference to Exhibit 10.11 to the registrant’s Current Report on Form 8-K filed with the SEC on March 22, 2022).
10.14Common Stock Purchase Warrant #3 issued to Buyer #3 on March 16, 2022 for 200,000 shares of Common Stock of Waterside Capital Corporation, at an exercise price of $1.75 per share (incorporated by reference to Exhibit 10.12 to the registrant’s Current Report on Form 8-K filed with the SEC on March 22, 2022).
10.15Convertible Promissory Note, dated May 6, 2022, issued by the registrant in favor of Ryan Schadel (incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed with the SEC on May 10, 2022).
10.16Convertible Promissory Note, dated May 9, 2022, issued by the registrant in favor of Ryan Schadel (incorporated by reference to Exhibit 10.2 to the registrant’s Current Report on Form 8-K filed with the SEC on May 10, 2022).
10.17Note Purchase Agreement, dated May 10, 2022, by and between the registrant and Timothy Hackbart (incorporated by reference to Exhibit 10.3 to the registrant’s Current Report on Form 8-K filed with the SEC on May 10, 2022).
10.18Convertible Promissory Note, dated May 10, 2022, issued by the registrant in favor of Timothy Hackbart (incorporated by reference to Exhibit 10.4 to the registrant’s Current Report on Form 8-K filed with the SEC on May 10, 2022).

31.1Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002(*).
   
31.2. Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002(*).
   
32.1 Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes Oxley Act of 2002(**).
   
101.SCH Inline XBRL Schema Document(*)
101.INS Inline XBRL Instance Document(*)
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document(*)
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document(*)
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document(*)
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document(*)
104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
   
(*) Filed herewith.
(**) Furnished herewith.

 

2624
 

 

SIGNATURES

 

In accordance with Section 13 or 15(d) of the Exchange Act, our Company caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Date: May 16, 2022February 14, 2023WATERSIDE CAPITAL CORPORATIONMETAVESCO, INC.
   
 By:/s/ Ryan Schadel
 Name:RYAN SCHADEL
  Chief Executive Officer, Chief Financial Officer (Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer)

 

2725