12 RETECH CORPORATION The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this quarterly report. References in the following discussion and throughout this annual report to "we", "our", "us", "12ReTech Corporation ", "12 ReTech", "RETC", "the Company", and similar terms refer to,12 ReTech Corporation . Unless otherwise expressly stated or the context otherwise requires. This discussion contains forward-looking statements that involve risks and uncertainties.12 ReTech Corporation actual results could differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled "Risk Factors" included elsewhere in this filing. Company
Our software, both deployed and in development, is designed to allow the smaller
merchants to compete effectively with the retail behemoths like Walmart and
Amazon, and to attract, retain, and delight consumers both online and in
physical stores, without being dependent on
Our AI Social Shopping platform App, which is currently in development, will allow merchants to connect with consumers directly, and will give merchants tools to protect their brand and lower their marketing costs, which will be focused on results not just "looky-loos".
For consumers, the App allows them to support their favorite local businesses and find new merchants that may be of interest to them, while earning money through their social communications and posts.
The Company has also acquired retail and wholesale operating companies that will allow us to test our tech on real consumers and demonstrate their success for other merchants while earning revenues for the Company. As an innovative retail technology company that has been built through acquisitions and ideas, we intend to continue to search for additional synergistic acquisitions that bring incremental revenues and profitability, and access to products that will incentivize both merchants and consumers to quickly adopt our social shopping App. 20
Principal subsidiaries as
The details of the principal subsidiaries of the Company as of
Name of Place of Date of Acquisition Attributable Equity
Company Incorporation Incorporation Date Interest %
Business
Includes the
operations of
Bluwire Group,
LLC (acquired
October 1,
12 Retail 2019), and its
Corporation Formed by subsidiaries and
("12 Sept. 18, 12 ReTech as its own
Retail") Arizona, USA 2017 Corporation 100 % operations
Includes the
operations and
Intellectual
Properties of 12
Japan Limited
(acquired July
31, 2017), 12
Hong Kong
Limited)
acquired July
31, 2017), and
12 Europe AG
(acquired
October 26,
2017, now
defunct), and
12 Tech Formed by its own
Inc. Arizona, USA Dec 26,2019 12 Retech 100 % operations.
Includes the
operations of
Red Wire Group,
LLC (acquired
February 19,
2019, now
defunct), Rune
NYC, LLC
(acquired March
14, 2019), and
Social Decay,
LLC dba Social
Sunday (acquired
November 01,
12 Fashion June 26, Formed by 2019) and other
Group Inc. Arizona, USA 2020 12 Retech 100 % brands
12
12
OnFebruary 19, 2019 we acquiredRed Wire Group, LLC . ("RWG") aUtah Limited Liability company pursuant to a Share Exchange Agreement whereby the Company exchanged and the members of RWG (the "Members") Pursuant to the terms of the Exchange Agreement, the Company will acquire (i) 75% of the membership interests of RWG in exchange for 54,000 shares of the Corporation's Series D-6 Preferred Stock and with a stated value of$5.00 (ii) the remaining 25% of the membership interests of RWG in exchange for 37,500 shares of the Corporation's Series D-5 Preferred Stock with a stated value of$4.00 per share, RWG operates its own "cut & sew" operation for independent third parties contract to produce cloths operating out of its factory inSalt Lake City, Utah . As of the end ofNovember 30, 2019 , we closed the factory inUtah , while 12Fashion Group retained the customers by completing the orders in process. We were able to produce the products through 3rd party factories inNew York City andLos Angeles for less than it cost us to produce the products in our own factory inSalt Lake City, Utah . OnMarch 6, 2020 , the company filed a Chapter 11 Bankruptcy filing inPhoenix Arizona . This filing allowed us to sell the equipment we no longer needed, pay off the secured creditors, and shed all of Red Wire's debt from our balance sheet. The bankruptcy was discharged on or aboutSeptember 2020 , and all debts were extinguished. During 2021, there has been no change in the bankruptcy proceedings. 12Fashion Group continues to service those customers acquired as well as obtaining new accounts by marketing under the d/b/a Red Wire Designs.
- One
pursuant to a Share Exchange Agreement whereby the Company exchanged with the
members of Rune (the "Members"), representing 92.5% of the membership
interests, and the members agreed to tender their interests to the
Corporation, and the Corporation closed out the tender offer period and the
Exchange Agreement became effective. Accordingly, pursuant to the terms of the
Exchange Agreement, at closing the Company acquired 92.5% of the membership
interests of Rune in exchange for 82,588 shares of the Corporation's Series
D-5 Preferred Stock with a stated value of
continued uninterrupted in
key employees as the leading part of 12
- On
share exchange agreement whereby the Company exchanged the Company's 30,000
D-6 Shares for 100% of the total outstanding equity of Social and the member
of Social (the "Member"). That Member was retained by the Company, but
subsequent to the year end on
consequence, forfeited the additional 12,000 D-6 Shares held in escrow as a
performance incentive. The D-6 shares have a face value of
and are convertible into the Company's common shares. Subsequent to year end
in
Pandemic. Social's products are marketing and manufactured by the staff of 12
Fashion Group . 21
-
11 airport terminal locations and one casino location under an equity exchange
agreement. Under the terms of the Agreement, the Company issued to the Sellers
500,000 Series A Preferred Shares in exchange for 51% of the equity in Bluwire
Bluwire and 19% is reserved for 12 months for potential equity investors into
Bluwire. Any of that equity not used to raise capital for Bluwire over that
period would be divided equally between the Company and the Sellers. No
capital was raised for Bluwire, and this 19% was issued to 12 ReTech
Corporation .
- 12 Tech, Inc. An Arizona corporation, is a subsidiary of 12 ReTech
Corporation, and has a number of subsidiaries ("12Tech"). On
2019, the Company formed 12Tech to spearhead the Company's software technology
development and to focus more effort on the largest retail market in the
world:
under 12Tech all its other software technology companies and maintains the
following three subsidiaries:
- 12
acquired 12
is the Company that managed all the Company's proprietary and licensed
technology that is utilized and sold by the other subsidiaries. With the
formation of 12Tech, that role is now being managed by 12Tech. Today, 12 HK
operates as a subsidiary of 12Tech and serves as the marketing and sales hub
for
- 12
the initial acquisition of 12
2018, the Company made several acquisitions including 12
Subsequent to this acquisition, the Company took steps to consolidate the
assets and streamline operations that effectively by the end the 3rd quarter
2019, this Company no longer functions as independent subsidiary. In the third
quarter of 2019 the Company closed the offices of 12 Japan, and its flagship
customer ITOYA and the revenue generated will be serviced and managed by 12
- 12
the third quarter 2019, it was determined by management that the costs of
continuing to support the expenses of an independent 12
unsupportable. Therefore, the Company reaffirmed its previous master
representation agreement between 12
software customers in
operations in
discharged all of its debts associated with 12
completion of the 12
benefit payments still owed approximately
subsidiary is no longer in existence.
Business and Operations
12 ReTech Corporation is a Technology company that is creating software that
management believes will create new platforms and tools for smaller retailers to
compete with major companies like Amazon and Walmart and delight consumers. To
better understand the entire retail environment, the Company has acquired
operating companies that sell direct to consumers online and in physical stores
as well as to other retailers. Management believes, in addition to providing
current revenue to the Company, these acquisitions will provide entry to other
retailers for the sale and or licensing of our technology solutions.
From an operating perspective, 12 ReTech Corporation is a holding company with
three main operating companies that themselves may now and/or in the future own
other subsidiaries. They are: 12 Retail Corporation which now operates our
casino stores and subsidiaries Bluwire Group, LLC ; 12 Fashion Group, Inc , that
operates our fashion brands and wholesale manufacturing brands; and 12 Tech Inc
that designs and develops our retail software.
The Company has earned money from four different revenue streams (in declining
order): Retail Sales, Wholesale and Online sales of Fashion products, Royalty
Payments for 3rd party licensing of the Bluwire name, and technology sales.22
Effects on us of the Covid-19 Pandemic
The time span starting in 2020 and continuing into 2021 was a unusual period in that at nearly at the same time, the entire world was in the grip of the Covid-19 pandemic, with unprecedented closings of businesses, a virtual cessation of most business and personal travel, and lockdown and stay at home orders. As a Company centered around retail, and which derives the most significant portion of its revenue from retail stores in airports and casinos, we were hit particularly hard. In retail, the 1st quarter of every year is the slowest revenue quarter of any year, and even before that first quarter ended, all of our retail stores were closed due to the pandemic. Only the casino store was able to be re-opened inmid-December 2020 to lackluster sales. Supply chains were interrupted, and it became difficult to re-stock our retail store for the holiday season which also delayed its re-opening to mid-December, after an aborted restart in September. The supply chain problems also delayed the receipt of fabric and other products needed by ourFashion Group as they began to re-emerge from under the pandemic closures. Our fashion group, being based-in NYC, was closed for many months and only reopened in July to produce masks. All of the stores our fashion group sold to were also closed. Our technology division, 12Tech Inc , was also hard hit. Not only were retailers closed and conserving cash like we were, but it became apparent that consumers would no longer interact with public touchscreens, which was the cornerstone of our technology. In other words, our technology was made obsolete in the blink of an eye. The Company managed survival during the pandemic by squirreling cash and obtaining PPP and or EIDL loans from the SBA. We attempted to retain all of our key employees utilizing these funds, but byJune 2021 most have found other jobs once the PPP money ran out. This presents challenges for our airport stores' re-openings, as it is a long process to get employees certified ("badged") to work in airports. This will further slow our re-openings during 2022. We also renegotiated various leases and commitments to make us more streamlined and efficient as we re-open and expand. InJapan , we renegotiated out licensing arrangement with ITOYA whereby they managed more of the day-to-day software for a smaller fee, and we eliminated virtually all of our costs there. We also learned that the App we had developed there was strongly used by Japanese consumers of ITOYA. and we could re-develop it for the U.S. market. This process is well on the way, and management believes will create the next great shopping platform.
For more information about our existing technology please visit our website at www.12retech.com.
Financing and Convertible Debt
During the periodJune 2017 untilJuly 2021 , the Company financed most of its operations, acquisitions, and technology through convertible debt. The issue with convertible debt is the dilution that our shareholders experienced as these debt holders converted their debt to common stock and then sold that common stock into the market. During 2020 and 2021, the Company raised$956,600 in new convertible debt and the existing debt holders converted their older debt in the amount of$ 943,896 into 9,122,400,274 shares of common stock. AtDecember 31, 2021 the Company owed$1,353,447 in convertible debt, held a default reserve of$1,364,204 and maintained a derivative liability reserve of$6,758,937 . During 2020, the Company received$294,882 in PPP funds from the SBA under the CARES Act ("ACT") DuringJune 2021 , the Company was able to have the SBA forgive$70,200 in accordance with the ACT requirements. During the third quarter of 2021, the Company was able to have the SBA forgive the remaining$224,682 , thereby all of the first round PPP funds have been forgiven. During 2021, the company also received$302,602 in PPP funds. The company also asked for these funds to be forgiven in accordance with CARES ACT, and during the fourth quarter,$302,602 of these loans were forgiven by the SBA.
Also, during 2020 the Company received
23
YEAR ENDED
Amounts reflected in our financial statements are accounted for under common control accounting (see footnotes).
Revenues
During the year endedDecember 31, 2021 our revenues decreased to$ 660,206 from$721,312 in the prior comparable year. This represents a decrease of$61,106 or 8%, which is primarily the result of the continued global pandemic due to COVID 19 on our Bluwire subsidiary and 12Fashion Group subsidiary during 2021. The government forced the closure of all our store locations onMarch 16, 2020 , and in 2021, we have not yet been able to re-open the remaining Bluwire subsidiary locations following this closure. When allowed, the company was able to re-open only one of our store locations inDecember 2020 . We hope to open additional store locations in the near future. Cost of revenues During the twelve months endedDecember 31, 2021 we incurred Cost of Revenues associated with the delivery of our products in the amount of$394,394 , as compared to$385,236 for the comparable period in 2020. These expenses are related to costs of delivering goods. In 2021, our Cost of Revenues as a percentage of Revenues was 60% as compared to 53% in the prior comparable period. The slightly higher cost of revenues as a percentage of Revenues in 2021 is mainly the result of increased costs associated with purchases of inventory and production materials due to COVID 19. General and Administrative Our general and administrative expenses for the year endedDecember 31, 2021 were$1,447,357 , a significant decrease of$315,499 or 18% when compared to$1,762,856 for the year endedDecember 31, 2020 . The decrease is a result of impact due to COVID 19 and forced closure of operations during many months.
Professional fees Our professional fee expenses for the year endedDecember 31, 2021 were$744,112 an increase of$60,861 or 9% when, compared to$683,251 for the year endedDecember 31, 2020 . Our professional fees include expenses related to our external auditors, legal costs, and consultants. In order to preserve our subsidiaries operations, the company conserved on spending from the period of closure onMarch 16, 2020 untilDecember 31, 2021 .
Depreciation and amortization
Our depreciation expenses for the year ended
Other Expense Our Other Expenses decreased by$16,099,158 or 83% to$3,292,641 for the year endedDecember 31, 2021 compared to$19,391,799 for the year endedDecember 31, 2020 . There are four main components of the increase of the 2021 Other Expense category:
1. A significant decrease in the loss of change in derivative liability to
twelve months ended
which is the result of the calculation of derivative liability using
Black-Scholes.
2. An increase in other income to
compared to
was primarily the result of the PPP loans being forgiven during 2021.
3. An increase in general default reserve expense of for the year ended December
31, 2021 to
4. A significant increase in interest expense of
24
See these components described in further detail below.
Other Income An increase in other income to$598,809 for the year endedDecember 31, 2021 compared to$431,937 for twelve months endedDecember 31, 2020 . During 2020 the Company received$294,882 in PPP funds from the SBA under the CARES Act ("ACT"). BySeptember 30, 2021 , the Company was able to have the SBA forgive$294,882 of first round PPP loans from 2021. During 2021, the company also received$302,602 in PPP funds. During the third and fourth quarter of 2021, the$302,602 of the second round PPP loans which were also forgiven by the SBA. This represents the majority of the other income recognized by the company in 2021. Interest Expense
There was an increase in interest expense of$2,056,847 to$2,528,426 as ofDecember 31, 2021 compared to$471,579 for the period endedDecember 31, 2020 . The increase in interest expenses is primarily related to increase in convertible notes' convertible preferred stock during the same period, as well as a significant increase in interest expense associated with the additional derivative liability and for the general default reserve.
Change in Derivative Liability
There was a gain as a result of the change of derivative liability of$1,792,072 as ofDecember 31, 2021 compared to gain of$18,860,260 for the period endedDecember 31, 2020 . The reason for the change was because of a change in the calculation method from Lattice model to Black-Scholes model. General Reserve Expense
The company recognized a general default reserve gain of for the year endedDecember 31, 2021 of$429,048 compared to a general default expense of$491,897 as ofDecember 31, 2020 . OnJuly 25, 2019 the Company was served with a lawsuit fromAuctus Fund, LLC ("Auctus"). Since 2019 and thereafter, management calculated a default reserve which represents the additional amount management would have to pay out to all note holders in the event of the default. Management quantified what this amount would be which includes additional premiums, additional accrued interest and default accrued interest in 2019 and 2020 and updated these calculations in 2021. The total reserve quantified by management amounted to$1,364,204 and$2,278,648 as ofDecember 31, 2021 and 2020. Net Income During the year endedDecember 31, 2021 , we incurred a net loss of$5,260,898 compared to a net loss of$21,941,099 for the year endedDecember 31, 2020 . The decreased loss is primarily the result of the increase in the change in derivative liability. The Company is expending working capital to further their business plan. This includes the further development, refinement and improvement of their software and its adaptation to various languages and geography. The Company is also expending working capital on the development of new technology which is designed to further enhance the attractiveness of their offerings to their target customer base.
Liquidity and Capital Resources
The Company has met its current capital requirements primarily through the issuance of debt-equity and preferred stock. Management views the working capital that is raised through debt-equity or preferred equity offerings as being equivalent to raising working capital via common equity subscriptions, but with the added bonus of allowing the common equity value to rise through the passage of time and simultaneous achievement of the Company's business goals. Any conversion of debt into equity could occur at a higher equity valuation than the Company currently has. The Company has reserved the right to repurchase these debt-equity interests and preferred stock at a predetermined premium should management determine that this is in the best interests of shareholders at an appropriate future point in time. Operating expenses for the Company have been paid from revenue as well as from the issuance of debt-equity and preferred stock subscriptions. AtDecember 31, 2021 the Company had a deficit in working capital (current liabilities in excess of current assets) of$14,794,099 . A portion of this working capital deficit has been financed loans from stockholders. As ofDecember 31, 2021 , amounts owed to stockholders totalled$386,773 . AtDecember 31, 2020 , the Company had a deficit in working capital (current liabilities in excess of current assets) of$31,490,395 . A portion of this working capital deficit has been financed loans from stockholders. As ofDecember 31, 2020 , amounts owed to stockholders totalled$383,753 . The decrease in working capital deficit when compared toDecember 31, 2020 was principally due to a decrease derivative liabilities and offset to a lesser extent, increase in accounts payable. 25
The Company has financed our cash flow requirements through the issuance of debt-equity and preferred stock. As the Company expands, we may continue to experience net negative cash flows from operations, pending generation of significant revenues. Additionally, we anticipate obtaining additional financing to fund operations through debt-equity and preferred stock offerings to the extent available or to obtain additional financing to the extent necessary to augment our working capital balances. Management believes that our acquisition strategy will successfully provide significant revenues, potential profits as well as access to traditional bank and asset-based credit lines. In addition, Management believes that existing shareholders, lenders and prospective new investors will provide the additional cash needed to meet our obligations as they become due. The Company filed a Certificate of Designation onJanuary 9, 2019 to create 1,000,000 Series D-5 Convertible Preferred Stock with par value$0.00001 and stated value of$4.00 per share. Also onJanuary 9, 2019 , the Company filed a Certificate of Designation to create One Million (1,000,000) Series D-6 Convertible Preferred Stock with par value$0.00001 and stated value of$5.00 per share. The Company filed an amendment onJanuary 11, 2019 to Series C Preferred shares where each issued and outstanding shares of Series C Preferred Stock shall be entitled to 8,000,000,000 votes at each meeting of shareholders of the Company with respect to any and all matters presented to the shareholders of the Company for their action or consideration (by vote or written consent). Holders of shares of Series C Preferred Stock shall vote together with the holders of Common Shares as a single class. The Company also filed with theState of Nevada an Amendment to its Articles of Incorporation onMarch 8, 2018 , that increased it authorized common shares from one billion to eight billion common shares authorized. OnMarch 14, 2019 , the Company entered into a PIPE Equity Purchase Agreement whereby an institutional investor agreed to purchase up to$500,000 worth of the Company's D-2 Preferred Shares with a$2.00 face value at to be determined discount to face value. Concurrent with the execution of this Agreement, the Company sold 103,500 preferred D-2 Preferred Shares and received net proceeds after expenses of$100,000 (Tranche #1). The D-2 Preferred Shares are convertible to common shares after a 6 month or more holding period at market price. (See Form 8-K filed
onMarch 20, 2019 ). Concurrent with the execution of the PIPE Funding Agreement the Company executed an Exchange Agreement with the same institution investor whereby that investor exchange all of its Series D-1 preferred shares for newly issued Series D-2 Preferred Shares. (See Form 8-K filed onMarch 20, 2019 ). In connection with the with PIPE Funding Agreement and the Exchange Agreement listed above the Company filed with theState of Nevada a new Certificate of Designation which took 2.5 million of the blank check preferred shares the Company has and designated them as Series D-2 Preferred Shares. (See Form 8-K filed onMarch 20, 2019 ). OnSeptember 25 . 2019, the Company's Rune subsidiary entered into two separate future receivables purchase agreements with Vox Funding and received gross proceeds for$49,000 which were used in part to retire a previous and smaller obligation to Vox Funding. The Agreements provided for payment over 6 months and carries a fee of$1,470 . This obligation is not convertible under any terms
into Company Stock.
On
26 In connection with the acquisition ofBluwire Group, LLC , onOctober 3, 2019 , one of the Sellers of Bluwire provided$300,000 capital contribution to Bluwire. This obligation is not convertible into Company stock under any terms. This capital contribution to Bluwire has not been adequately documented. In Addition, onOctober 15, 2019 , the Company's Bluwire subsidiary entered into a future receivable purchase agreement with Libertas Funding and received$343,000 . This agreement provides for payment over 8 months and caries a fee of$7,000 . This obligation is not convertible under any terms into Company stock. Lastly, onNovember 5, 2019 , the Company's Rune subsidiary entered into a future receivables purchase agreement with Vox funding and received gross proceeds for$145,500 which were used in part to retire a previous and smaller obligation to Vox Funding. The Agreement provided for payment over 6 months and carries a fee of$4,500 . This obligation is not convertible under any terms into Company Stock. After theMarch 16, 2020 Covid shut down, all payment ceased by verbal mutual agreement. InMay 2021 , the Company entered into a verbal agreement with Vox to repay$250 per week and all collection efforts are put on hold and forbearance on other receivable holders. OnMarch 18, 2020 , the Company entered into a back-end promissory note agreement withAdar Alef, LLC ("Adar") for loans totalling$33,600 . The consideration to the Company was$30,000 with$3,600 of legal fees. As a subsequent event, onMarch 25, 2020 , the Company entered into a back end promissory note agreement withLG Capital, LLC ("LG") for loans totalling$33,600 . The consideration to the Company was$30,000 with$3,600 of legal fees. The note is convertible after 181 days at a (i)$0.0075 ceiling or (ii) 60% of the lowest trading price over the past twenty trading days prior to the conversion date. OnMarch 5, 2020 , the Company's Bluwire subsidiary entered into a second future receivable purchase agreement with Reliant Funding and received$83,000 . This agreement provides for payment over 6 months and carries a fee of$3,000 . This obligation is not convertible under any terms into Company stock. This agreement has been in forbearance sinceApril 2021 , and the Company pays$10 per week until the Bluwire store atNewark international airport is re-opened. In the future, we will need to generate sufficient revenues from operations in order to eliminate or reduce the need to sell additional stock or obtain additional loans. However, there can be no assurance we will be successful in raising the necessary funds to execute our high growth business plan.
As of
During the year endedDecember 31, 2021 , the current liabilities decreased by$16,759,204 when compared toDecember 31, 2020 . The primary reason for the decrease was the decrease in derivative liabilities of$17,039,303 to$6,758,937 offset by increase in accounts payable of$980,012 to$4,167,604 as ofDecember 31, 2021 compared to$23,798,240 in derivative liabilities and$3,187,592 in accounts payable as ofDecember 31, 2020 . Due to Covid 19 pandemic, the company tried to preserve operations and obtained extended terms from most of its creditors.
As discussed earlier, it is likely that the Company will need to obtain additional working capital through debt-equity and preferred stock capital raises until the Company can generate sufficiently profitable revenues to sustain the cash burn rate that the Company's business plan calls for.
Although, our business plan calls for high growth, we anticipate that we may continue to incur operating losses during the next twelve months. Our prospects must be considered in light of the risks, expenses, and difficulties frequently encountered by companies at our stage, particularly companies in new and rapidly evolving markets. Our roll up acquisition strategy seeks to mitigate some of those risks, but until more acquisitions can be completed, consolidated, and we reap the benefits of consolidation, we cannot accurately include their results in our projection of cash needs. Risks include, but are not limited to, an evolving and unpredictable business model and the management of growth and the consummation and assimilation of multiple acquisitions. These factors raise substantial doubt about our ability to continue as a going concern. To address these risks, we must, among other things, increase our customer base, implement and successfully execute our business and marketing strategy, respond to competitive developments, and attract, retain and motivate qualified personnel. There can be no assurance that we will be successful in addressing such risks, and the failure to do so can have a material adverse effect on our business prospects, financial condition, and results of operations. 27 Impact of COVID-19 Like most other business inthe United States , our businesses have been severely impacted by the COVID-19 Pandemic.In 2020, our main operating subsidiaries were severely impacted by theUS Government's business shutdowns and stay at home orders related to COVID-19. We derive most of our revenue from our 12Retail Corporation , which is itself composed of two Operating units: 12Fashion Group andBluwire Group, LLC .
In response to the President's "stay at home" orders, onMarch 16, 2020 , we promptly laid off almost all of our 12Fashion Group employees and contractors. 12Fashion Group retained three employee/contractors and focused on producing and selling of washable reusable masks, both wholesale and direct to consumer online. With the continued impact of COVID 19, 12Fashion Group has not hired any additional employees and is maintaining it revenue channels despite the significant impact on the environment. Our Bluwire retail stores inNewark airport ,Dallas airport , and JFK international airport were temporarily closed on or aboutMarch 17, 2020 . Our Casino location was temporarily closed on or aboutMarch 17, 2020 when theMohegan Sun Casino itself was closed. We laid off all of our Bluwire employee/contractors except two members of the headquarters staff who continued to source innovative products for our stores when they re-open, some of which will be uniquely desired by consumers due to changing buying habits due to COVID-19. During 2021, the Company has not yet been able to reopen these locations.
The financial effects of these closures are reflected in the Management Discussion and Analysis.
The Cares Act and the Payroll Protection Program SBA Loans (PPP Loans).
The Company has applied for PPP Loans for all of itsU.S. operating Companies, and is in the process of analyzing if it would qualify for similar governmental assistance for its reduced operating unit inJapan (12Japan Ltd ). The Company has qualified and received for an aggregate of$294,882 in 2020 and$302,602 in 2021 in PPP loans for its operating companies. OnJune 4, 2021 ,$70,200 of the first round of PPP loans was forgiven by the SBA. During the third quarter of 2021, an additional$224,682 of the first and second round PPP loans were also forgiven by the SBA. During the fourth quarter, an additional$302,602 in the PPP loans were also forgiven by the SBA. These funds were used to re-hire previously laid off personnel where appropriate and hire new personal that management believes better fits the post COVID-19 shut-down environment. The Company hired personnel that helps the operating units generate revenues in a more contactless environment and to create changes to our cutting-edge retail software to help our stores and well as other retailers attract consumers in this new environment. Going Concern The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted inthe United States of America , which contemplates continuation of the Company as a going concern. Since we have not yet generated significant revenue, we have negative cash flows from operations, and negative working capital we have included a reference to the substantial doubt about our ability to continue as a going concern in connection with our consolidated financial statements for the year endedDecember 31, 2021 . Our total accumulated deficit atDecember 31, 2021 was$49,709,916 compared to $$44,475,900 as ofDecember 31, 2020 . These consolidated financial statements have been prepared on the going concern basis, which assumes that adequate sources of financing will be obtained as required and that our assets will be realized, and liabilities settled in the ordinary course of business. If we are unable to obtain additional financing, we may cease operations and not be able to execute on operating plans. Accordingly, these consolidated financial statements do not include any adjustments related to the recoverability of assets and classification of assets and liabilities that might be necessary should we be unable to continue as a going concern.
28
Critical Accounting Policies and Estimates
The preparation of our consolidated financial statements in conformity with accounting principles generally accepted inthe United States requires us to make estimates and judgments that affect our reported assets, liabilities, and expenses and the disclosure of contingent assets and liabilities. We use assumptions that we believe to be reasonable under the circumstances. Future events, however, may differ markedly from our current expectations and assumptions. We believe there have been no significant changes in accounting policies during the year endedDecember 31, 2021 . See Note 3 to the consolidated statements in this Annual Report for a complete discussion of our significant accounting policies and estimates.
Recently Issued Accounting Standards
The Company has reviewed all recently issued, but not yet adopted, accounting standards in order to determine their effects, if any, on its consolidated results of operation, financial position, or cash flows. Based on that review, the Company believes that none of these pronouncements will have a significant effect on its consolidated financial statements. See Note 3 to the consolidated statements in this Annual Report for a complete discussion of our significant accounting policies and estimates.
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