METAVESCO, INC. The following discussion and analysis of the results of operations and financial
condition for the fiscal years ended
All references to "Metavesco", "Waterside", "we", "our," "us" and the "Company"
in this Item 7 refer to
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. Several risks and uncertainties we face are discussed in more detail under "Risk Factors" in Part I, Item 1A of this Annual Report, or in the discussion and analysis below. You should, however, 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 should be read in conjunction with the financial statements, and the notes to those statements included elsewhere in this Annual Report on Form 10-K.
10 Overview & Management Plans
On
In
The Company has three 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. We expect
that this revenue will fuel our other initiatives as we build the Company.
? Staking - Like LPs, staking can provide potential passive 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 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 holds NFTs for capital appreciation and for potential income
from IP licensing.
On
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 financial statements which we have been prepared
in accordance with the
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 financial statements included in this Annual Report, we believe the following accounting policies to be critical to the judgments and estimates used in the preparation of our 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.
11
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 a tokens 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 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
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 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
There is currently no definitive guidance under GAAP or alternative accounting framework for the accounting for digital assets recognized as revenue 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 required to change its policies, which could have an effect on the Company's financial position and results from operations.
Revenue is recognized 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 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 token and to increase liquidity in the early stages of a token project.
Liquidity Pools
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.
Staking Rewards
The Company earns rewards for agreeing to lock up tokens for a fixed period of time to participate in running the blockchain and maintaining security. Rewards are typically calculated in percentage yields.
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).
12
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.
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 Years Ended
Revenue
In
Our business plan includes earning income from liquidity fees and staking. Airdrop revenue represents APE coin awards received as a result of holding the Mutant 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
Administrative expenses totaled
Interest Expense
Interest expense totaled
13
Impairment of Digital Assets Held
Impairment of digital assets held totaled
Realized Gain (Loss) on Sales/ Exchange 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
Our losses were primarily due to a broad deterioration of the crypto-currency market.
Liquidity and Capital Resources
We have incurred recurring operating losses and negative operating cash flows
through
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
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.
© Edgar Online, source
