Metavesco, Inc. 10-Q

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. “Forward-looking statements” 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 “Metavesco”, “we”, “our,” “us” and the “Company” in this Item 2 refer to Metavesco, Inc.. 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 nine months ended March 31, 2023 and 2022, 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. 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, 2022, filed with the SEC on October 7, 2022, as the same may be updated from time to time. Overview & Management Plans In March 2022, the Company commenced operations as a web3 enterprise. The Company currently generates revenue as a liquidity provider via decentralized exchanges such as Uniswap and from mining pool fees. Additionally, during the quarter ended March 31, 2023, the Company farmed tokens via staking on pancake swap, a decentralized exchange.. Yield farmers provide liquidity to various token pairs and earn rewards in cryptocurrencies. The Company also, during the quarter ended March 31, 2023, was invested 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 March 31, 2023, we are invested in 14 NFT tokens with a carrying value of $87,895. If sold, our NFTs may require the payment of a royalty to the creator. Our NFTs currently do not generate royalties or other income. EVM is a computation engine that facilitates the deployment and operation of smart contracts. The Company’s current operations include: ● 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. 15 ● 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 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 100 TH 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 was 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. Planned Future Operations Going forward, the Company plans to operate its business under five divisions, which we believe will allow Metavesco to leverage its existing expertise while exploring new markets. The Company does not expect to launch all of these divisions at once and instead will opt for a phased expansion strategy starting with the divisions that require less capital investment or have a shorter time-to-revenue. By generating revenue from these divisions, the Company believes it can gradually fund the growth of other divisions. The Company expects to implement its plan by issuing new loans, entering into strategic partnerships and leveraging its balance sheet. Currently, most of Metavesco’s debt is issued to Ryan Schadel, the Company’s Chief Executive Officer, Chief Financial Officer, sole director and majority stockholder. We have the option of borrowing against our digital assets, if required. Our planned divisions are: 1) Blockchain Division – continue and build on the Company’s current operations including bitcoin mining, liquidity provider and investor in blue chip NFT projects. 2) Real Estate Division – initially aiming to build a portfolio of single-family residences while exploring tokenization. 3) Staffing and Recurring Division – leverage the Company’s extensive network within the web3 and staffing industry to offer staffing and recruitment services. 4) Content and Media Division – provide high-quality content and digital media in the web3 space by developing and producing original content including articles, podcasts, videos and virtual events. 5) Energy Division – the division will seek to invest in and develop renewable energy projects, such as solar and wind forms, to power its operations and contribute to a more sustainable future. 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 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. 16 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: 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. 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. Tokens are subject to impairment losses if the fair value of a token 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 tokens. The Company currently obtains the quoted price of tokens from www.cryptocompare.com . Liquidity pool tokens and NFTs 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 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 digital assets. The Company currently reviews quoted prices of its liquidity pool tokens, NFTs 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 The 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 that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The following five steps are applied to achieve that core principle: ● 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 promised goods or services is transferred to the customer, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. The Company generates revenue through liquidity pools and 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 depend 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 liquidity over a price range. 17 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. Mining Pools The Company earns transaction fees with its crypto mining machines by validating requesting customers’ transactions to a distributing ledger. We joined a mining pool and receive a pro-rata share of a bitcoin award for completing a blockchain. The Company has entered into digital asset mining pools by executing 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 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. Providing computing power in digital asset transaction verification services is an output of the Company’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 the pools. The consideration is all variable. Because it is not probable that a significant reversal of cumulative revenue will not occur, the 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. Fair value of the cryptocurrency award received is determined using the quoted price of the related cryptocurrency at the time of receipt. 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 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. 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 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 broad levels. The three 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. 18 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. 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 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 years for federal purposes, and the prior four years for state purposes; however, as a result of the Company’s operating losses, all tax years remain subject to examination by tax authorities. Comparison of Three Months Ended March 31, 2023 and 2022 Revenue In March 2022, the Company commenced operations as a web3 enterprise and began purchasing digital assets. Revenue for the three months ended March 31, 2023 and 2022 was derived from liquidity pools fees of $6,208 and $22,772, respectively, and mining pool fees of $6,796 and $0, respectively. Our business plan includes earning income from liquidity fees and staking. 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 $56,949 and $34,833 for the three months ended March 31, 2023 and 2022, respectively. These expenses were primarily costs related to accounting, audit, legal and investor relations. Interest Expense Interest expense totaled $24,418 and $1,294 for the three months ended March 31, 2023 and 2022, respectively. The increase in interest expense was due to amortization of debt discount and accrued interest on new promissory notes issued since October 2021. Impairment of Digital Assets Held Impairment of digital assets held totaled $9,937 and $51,983 for the three months ended March 31, 2023 and 2022, respectively. Digital assets are accounted for as intangible assets and 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. Other Income (Expense) Other digital rewards totaled $7,741 and $17,439 for the three months ended March 31, 2023 and 2022, respectively. We received $GOO tokens as a result of holding two Art Gobblers NFTs and we received tokens from Blur as a result of using the Blur NFT trading platform. Other digital rewards or “airdrops” were issued by the platforms to simultaneously reward users and bootstrap growth and liquidity of a new marketplace. Airdrops are unpredictable and the Company does not seek out these rewards. Other realized gain on sale/exchange of digital totaled $76,251 and $32,519 for the three months ended March 31, 2023 and 2022, respectively. We generally do not seek to earn income from actively trading digital assets 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. Metavesco realized gains near the end of the quarter ended March 31, 2023, due to liquidating part of its portfolio crypto assets and holding additional cash at March 31, 2023. The rebalancing of the portfolio was due to the uncertainty in the crypto market in March 2023 highlighted by the insolvency of Silvergate Bank and Silicon Valley Bank. 19 Net Income (Loss) We reported net income (loss) of $5,692 and $(15,380) for the three months ended March 31, 2023 and 2022, respectively. Our revenue and realized gain on sales/exchange on digital assets held were offset by an increase in administrative, interest expenses. There has been a steep drop in market price of crypto assets, high volatility of prices and a broad deterioration of the cryptocurrency market. During the quarter ended March 31, 2023, the sustained period of lower market prices which started in 2022 continued. The broad deterioration of the cryptocurrency 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 cryptocurrency 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 Nine Months Ended March 31, 2023 and 2022 Revenue In March 2022, the Company commenced operations as a web3 enterprise and began purchasing digital assets. Revenue for the nine months ended March 31, 2023 and 2022 was derived from liquidity pools fees of $90,102 and $22,772, respectively, and mining pool fees of $6,796 and $0, respectively. Our business plan includes earning income from liquidity fees and staking. 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 $234,459 and $88,840 for the nine months ended March 31, 2023 and 2022, respectively. These expenses were primarily costs related to accounting, audit, legal and investor relations. Interest Expense Interest expense totaled $72,951 and $1,294 for the nine months ended March 31, 2023 and 2022, respectively. The increase in interest expense was due to amortization of debt discount and accrued interest on new promissory notes issued since October 2021. Impairment of Digital Assets Held Impairment of digital assets held totaled $291,254 and $51,983 for the nine months ended March 31, 2023 and 2022, respectively. Digital assets are accounted for as intangible assets and 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. Other Income (Expense) Other digital rewards totaled $12,899 and $17,439 for the three months ended March 31, 2023 and 2022, respectively. We received $GOO tokens as a result of holding two Art Gobblers NFTs and we received tokens from Blur as a result of using the Blur NFT trading platform. Other digital rewards or “airdrops” were issued by the platforms to simultaneously reward users and bootstrap growth and liquidity of a new marketplace. Airdrops are unpredictable and the Company does not seek out these rewards. Other realized gain on sale/exchange of digital totaled $329,233 and $32,519 for the three months ended March 31, 2023 and 2022, respectively. We generally do not seek to earn income from actively trading digital assets 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. Metavesco realized gains near the end of the quarter ended March 31, 2023, due to liquidating part of its portfolio crypto assets and holding additional cash at March 31, 2023. The rebalancing of the portfolio was due to the uncertainty in the crypto market in March 2023 highlighted by the insolvency of Silvergate Bank and Silicon Valley Bank. Net Loss We reported a net loss of $159,634 and $69,387 for the nine months ended March 31, 2023 and 2022, respectively. Any increase in revenue and realized gain on sales/exchange on digital assets held was offset by an increase in administrative, interest and impairment expenses. Our net loss was primarily due to a steep drop in market price of crypto assets, high volatility of cryptocurrency prices and a broad deterioration of the cryptocurrency market. During the quarter ended March 31, 2023, the sustained period of lower market prices which started in 2022 continued. The broad deterioration of the cryptocurrency 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 cryptocurrency 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. 20 Liquidity and Capital Resources We have incurred recurring operating losses and negative operating cash flows through March 31, 2023, and we expect to continue to incur losses and negative operating cash flows at least through the near future. During the nine months ended March 31, 2023, we obtained $75,000 of funding by issuing a demand promissory note and a promissory note – related party to meet our most critical cash requirements. At March 31, 2023, $6,152 of cash was held at a financial institution and $98,648 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 100 TH 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 2022 financial statements, expressed substantial doubt about our ability to continue as a going concern. Our financial statements as of and for the year ended 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 5 and Note 6 to our 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. 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. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. Not applicable.