THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE COMPANY'S UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS, THE NOTES THERETO AND THE OTHER FINANCIAL INFORMATION APPEARING IN THIS REPORT.





Introduction

The financial data discussed below are derived from the unaudited consolidated financial statements of the Company as of March 31, 2022, which were prepared and presented in accordance with United States generally accepted accounting principles for interim financial statements. These financial data are only a summary and should be read in conjunction with the unaudited financial statements and related notes contained herein, which more fully present the Company's financial condition and operations as at that date, and with its audited financial statements and notes thereto contained in its Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on April 18, 2021. Further, the Company urges caution regarding the forward-looking statements which are contained in this report because they involve risks, uncertainties and other factors affecting its operations, market growth, service, products and licenses that may cause the Company's actual results and achievements, whether expressed or implied, to differ materially from the expectations the Company describes in its forward-looking statements. The occurrence of any of the events described in Part II, Item 1A, Risk Factors, or other events, could have a material adverse effect on the Company's business, results of operations and financial position.





General Statement of Business

The Company was incorporated under the laws of the state of Florida on September 5, 1997, under the corporate name Synthetic Flowers of America, Inc. It changed its corporate name to Acology, Inc. on January 9, 2014; on August 28, 2018, to Medtainer, Inc.; and on October 3, 2020, to its present name.

The Company is in the businesses of (i) selling and distributing hydroponic containers called "GrowPods" and related products and (ii) designing, branding and selling proprietary plastic medical-grade containers that can store pharmaceuticals, herbs, teas and other solids or liquids and can grind solids and shred herbs, as well as selling other products such as humidity control inserts, smell-proof bags, lighters, and plastic lighter holders, and providing private labeling and branding for purchasers of the Company's containers and the other products.

The Company markets its products directly to businesses through its phone room and to the retail public through internet sales. The Company also markets directly to wholesalers and other businesses that resell them to other businesses and end users.

On October 9, 2020, the Company acquired all of the outstanding shares of Advanced Container Technologies, Inc., a California corporation ("Advanced"), from its shareholders pursuant to an Exchange Agreement, dated August 14, 2020, which was amended on September 9, 2020 (as so amended, the "Exchange Agreement"), in exchange for 50,000,000 shares of the Company's Common Stock. This exchange resulted in Advanced's becoming a wholly owned subsidiary of the Company.

The acquisition of ACT represented a material change in the business strategy of the Company and an expansion of its product base. Since the inception of the Company in 2014, its intended growth strategy was to concentrate on increasing sales of Medtainers, while introducing related products and services, such as humidity control inserts and printing. This approach resulted in relatively flat revenues, increasing expenses and a history of losses. Management believes that this acquisition offered the prospect of substantially increased revenues, without a comparable increase in expenses an opportunity to expand its profits significantly. The Company has announced that it is exploring with GP the acquisition of its assets and the assumption of some or all of its liabilities in exchange for shares of Common Stock (the "GP Acquisition"). Discussions are in their preliminary stages and none of the terms and conditions of the acquisition has been determined, including the number of shares of Common Stock to be issued to GP in exchange for its assets or the liabilities of GP that the Company would assume. The Company intends to structure any transaction such that its board of directors and executive officers would not be changed and that voting control of the Company would not be affected.

The Company's authorized capital is 100,000,000 shares of Common Stock and 10,000,000 shares of preferred stock, par value $0.00001 per share. On October 3, 2020, the Company combined the outstanding shares of its Common Stock on the basis of one share for every 59 shares then outstanding; the number of authorized shares of Common Stock and preferred stock was unaffected. The effect of this combination has been applied to all periods covered by this report. The Company has also designated 1,000,000 shares of its preferred stock as Series A Convertible Preferred Stock ("Series A Preferred") and, on July 31, 2020, issued them to its chief executive officer in exchange for 305,085 shares of his Common Stock; these shares, together with the shares of Common Stock owned by him, confer voting control of the Company on him. See Item 10, Employment Agreement.







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The Company's principal place of business is located at 1620 Commerce St., Corona, CA 92878. The Company's telephone number is (951) 381-2555. The Company has two corporate websites: www.advancedcontainertechnologies.com for GrowPods and related items and www.medtainer.com for Medtainers and related products and services. Common Stock is quoted on the OTC Pink tier of OTC Link, a quotation system operated by OTC Markets Group Inc. ("OTC Link"), under the trading symbol ACTX.





Going Concern

As indicated in Note 3 of the Notes to Consolidated Financial Statements, there is substantial doubt as to the ability of the Company to continue as a going concern. The Company has generated material operating losses since inception and its ability to continue as a going concern depends on the successful execution of its operating plan, which includes increasing sales of existing products - and in particular GrowPods and related products - while introducing additional products and services, controlling cost of goods sold and operation expenses, negotiating extensions of existing loans, and raising either debt or equity financing.





Need for Capital

The Company needs a substantial amount of additional capital to fund its business, including expansion of its operations, and for repayment of its debts. No assurance can be given that any additional capital can be obtained or, if obtained, will be adequate to meet its needs. If adequate capital cannot be obtained on a timely basis and on satisfactory terms, the Company's operations could be materially negatively impacted it may need to take certain measures to remain a going concern, or it could be forced to terminate operating.

Impact of the Covid-19 Pandemic

The Covid-19 pandemic, its disruption of the Company's business and its effect on the economy generally have not adversely impacted the Company, due principally to its cost-saving measures. See Item 1A, Risk Factors - The Company's business, financial condition, results of operations and liquidity may be substantially and adversely affected by this pandemic for a detailed discussion of matters relating to this pandemic.

Also, in connection with the pandemic:

· The Company's chief executive officer has waived current payment of his salary


   since June 1, 2020; however, the Company is accruing it and is obligated to pay
   the deferred amount, which was $325,000 as of March 31, 2022, at some future
   time.

· The Company has purchased from Polymation fewer Medtainers than required under


   the Production Contract; while doing so has enabled the Company to preserve
   cash by reducing expenses, it also subjects it to claims for breach of that
   agreement.

· On May 4, 2020, the Company made a note in favor of Customers Bank in the


   principal amount of $137,690 pursuant to the terms of the CARES Act and
   pursuant to all regulations and guidance promulgated or provided by the Small
   Business Administration and other Federal agencies that are now or may become
   applicable to the loan. The loan bore interest at the rate of 1% per annum and,
   as provided in the CARES Act, no interest was accrued during the first 6 months
   after the loan amount was disbursed. On August 5, 2021, this note was fully
   forgiven.

The Company believes that, owing to the effect of the pandemic on its customers, receivables have been and may continue to be collected more slowly than prescribed by their payment terms and some may prove to be uncollectible.

The Company tested intellectual property and goodwill for impairment in preparing its financial statements for the year ended December 31, 2021, and determined that no adjustment was required.







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Results of Operations

Comparison of the Three Months Ended March 31, 2022, and March 31, 2021

The following table sets forth information from the consolidated statements of operations for the three months ended March 31, 2022, and March 31, 2021.





                           Three Months Ended March 31,
                              2022                2021
Revenues                 $      926,148       $  1,872,958
Cost of goods sold              607,965          1,550,041
Gross profit                    318,183            322,917

Operating expenses              486,668            614,886
Loss from operations           (168,485 )         (291,969 )

Non-operating expense:
Interest expense                 (4,632 )           (5,004 )
Net loss                 $     (173,117 )     $   (296,973 )

Revenues and Cost of Goods Sold

Revenue for the three months ended March 31, 2022, was $926,148, from which the Company earned a gross profit of $318,183, or 34% of sales. Revenues for the three months ended Mach 31, 2021, were $1,872,958, from which the Company earned a gross profit of $322,917, or 17% of sales. The decrease was primarily due to a $1,127,850 decrease in sales from GrowPods, a $70,720 decrease in revenues from sales of humidity pack inserts and a $2,589 decrease in sales of Medtainers. The decrease was partially offset by a $187,802 increase in sales of lighters, an increase of $27,075 increase in sales of mylar bags, a $23,607 increase in printing and a $10,872 increase in sales of plastic lighter holders. Cost of goods sold for the three months ended March 31,2022, and March 31, 2021, were $607,965 and $1,550,041, respectively. This decrease was primarily due to a $1,045,880 decrease in the cost of GrowPods, a $49,722 decrease in the cost of humidity pack inserts and a $10,853 in the cost of other products. This decrease in cost of goods sold was partially offset by a $124,101 increase in the cost of lighters and a $15,374 increase in the cost of Mylar bags. Overall, gross profit increased from 17% for the three months ended March 31, 2021, to 34% in 2022, because, in the later period, gross profit for GrowPods and related products were 21%, based upon revenues of $197,150, while gross profit for Medtainers and related products and services was 79%, based upon revenues of $728,998.





Operating Expenses

Operating expenses for the three months ended March 31, 2022, and March 31, 2021, consisted of the following:





                                   Three Months Ended March 31,
                                     2022                 2021
Advertising and marketing       $       48,469       $       14,827
Depreciation and amortization           69,023               70,440
Professional fees                       94,795               77,073
Share-based compensation                     -              270,000
Payroll                                183,552              114,818
General and administrative              90,829               67,728
Total operating expenses        $      486,668       $      614,886






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Operating expenses for the three months ended March 31, 2022, and March 31, 2021, were $486,668 and $614,886, respectively. The decrease was attributable to a $270,000 decrease in share-based compensation, which was partially offset by a $68,734 increase in payroll expense, a $33,642 increase in advertising and marketing and a $23,101 increase in general and administrative expense.





Loss from Operations

The Company's operating loss for the three months ended March 31, 2022, was $168,485 ($69,023 of which was non-cash expense for depreciation and amortization). Compared with $291,969 for the three months ended March 31, 2021 ($270,000 of which was non-cash expense for share-based compensation and $70,440 of which was non-cash expense for depreciation and amortization). The Company believes that, owing to the effect of the pandemic on its customers, receivables have been and may continue to be collected more slowly than prescribed by their payment terms and some may prove to be uncollectible.





Interest Expense

For the three months ended March 31,2022, and March 31, 2021, interest expense was $4,632 and $5,004, respectively.





Net Loss

The net loss for the three months ended March 31, 2022, was $173,117 ($69,023 of which was non-cash expense for depreciation and amortization) versus a net loss of $296,973 for the three months ended March 31, 2021 ($270,000 of which was non-cash expense for share-based compensation and $70,440 of which was non-cash expense for depreciation and amortization). As described above, the principal reason for this difference was the $270,000 decrease in share-based compensation.

Liquidity and Capital Resources

As of March 31, 2022, the Company had $117,478 in cash and accounts receivable of $210,462. As of March 31, 2022, and December 31, 2021, the Company had negative working capital of $967,003 and $1,073,722, respectively. As of March 31, 2022, the Company had no commitments for capital expenditures. As of March 31, 2022, the Company had inventory of approximately 102,000 Medtainer units, approximately 87,771 units of other products and one GrowPod.

In addition to the Cares Loan, the Company received $10,000 from sales of shares of Common Stock to individuals during the year ended December 31, 2020, and received $615,000 from sales of Common Stock to individuals during 2021; it has received $210,000 from such sales in 2022. The Company believes that it will require approximately $765,000 in additional funding for the next 12 months, including approximately $600,000 to repay loans and interest that are past due, assuming that the Company's operating loss remains at the same level and that it does not acquire the assets of GP, as it announced it may on February 28, 2022; if it does consummate this acquisition, the Company believes that it would require approximately $2,300,000 in additional funding for the next 12 months, owing to increased expenses associated with operating and integrating the acquired business. The Company is seeking extensions of its overdue loans, and if it is successful in doing so, the amount of such funding will be reduced, but no assurance can be given as to the extent to which it will be successful. The Company plans to fund its activities principally through the sale of debt or equity securities to private investors. There is no assurance that such funding will be available on acceptable terms or available at all. If the Company is unable to raise sufficient funds when required or on acceptable terms, it may have to reduce its operations significantly or discontinue them. To the extent that funds are raised by issuing equity securities or securities that are convertible into the Company's equity securities, its stockholders may experience significant dilution.

The Company had no material commitments for capital expenditures as of March 31, 2022, or as of the date of this report.

The Company intends to devote its manpower and capital resources to increasing revenues while working to reduce the cost of goods sold and operating expenses. Doing so depends on the successful execution of its operating plan, which includes increasing sales of existing products, introducing additional products and services, controlling cost of goods sold and operating expenses, negotiating extensions of existing loans, raising either debt or equity financing and, if the GP Acquisition were consummated, integrating the related business into the Company. The Company intends to devote its manpower and capital resources to increasing revenues, while working to reduce the cost of goods sold and operating expenses. Doing so depends on the successful execution of its operating plan, which includes increasing sales of existing products, introducing additional products and services, controlling cost of goods sold and operation expenses, negotiating extensions of existing loans and raising either debt or equity financing.







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Off-Balance-Sheet Arrangements

The Company has no off-balance-sheet arrangements.

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