You should read the following discussion and analysis of our financial condition
and results of operations together with our financial statements and the related
notes included elsewhere in this Form 10-Q and in our Annual Report on Form 10-K
for the year ended December 31, 2021. Some of the information contained in this
discussion and analysis, particularly with respect to our plans and strategy for
our business and related financing, includes forward-looking statements within
the meanings of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange
Act, including statements regarding expectations, beliefs, intentions or
strategies for the future. When used in this report, the terms "anticipate,"
"believe," "estimate," "expect," "can," "continue," "could," "intend," "may,"
"plan," "potential," "predict," "project," "should," "will," "would" and words
or phrases of similar import, as they relate to our company or our management,
are intended to identify forward-looking statements. We intend that all
forward-looking statements be subject to the safe-harbor provisions of the
Private Securities Litigation Reform Act of 1995. These forward-looking
statements are only predictions and reflect our views as of the date they are
made with respect to future events and financial performance, and we undertake
no obligation to update or revise, nor do we have a policy of updating or
revising, any forward-looking statement to reflect events or circumstances after
the date on which the statement is made or to reflect the occurrence of
unanticipated events, except as may be required under applicable law.
Forward-looking statements are subject to many risks and uncertainties that
could cause our actual results to differ materially from any future results
expressed or implied by the forward-looking statements as a result of several
factors including those set forth under "Risk Factors" in our Annual Report on
Form 10-K for the year ended December 31, 2021.
The Company notes that in addition to the description of historical facts
contained herein, this report contains certain forward-looking statements that
involve risks and uncertainties as detailed herein and from time to time in the
Company's other filings with the Securities and Exchange Commission and
elsewhere. Such statements are based on management's current expectations and
are subject to a number of factors and uncertainties, which could cause actual
results to differ materially from those, described in the forward-looking
statements. These factors include, among others: (a) the Company's fluctuations
in sales and operating results; (b) regulatory, competitive and contractual
risks; (c) development risks; (d) the ability to achieve strategic initiatives,
including but not limited to the ability to achieve sales growth across the
business segments through a combination of enhanced sales force, new products,
and customer service; and (e) pending litigation.
Overview and Outlook
OVERVIEW AND OUTLOOK
The Company was incorporated in September 2005 to act as a holding company for
its subsidiaries in the technology, telecom and banking industries.
The Company invests in financial technology and engages in use of certain
licensed technology to provide innovative telecommunications, mobility, and
remittance solutions to unserved, unbanked, and emerging markets. The Company
uses proprietary technology and certain licensed technology to provide
innovative telecommunications and telecommunications mobility and remittance
solutions in emerging markets. The Company also offers wholesale
telecommunications minutes and prepaid telecommunications minutes to consumers
through its Tel3 division.
The Company's subsidiary, Meimoun and Mammon, LLC (100% owned) ("M&M"), through.
Tel3, a business segment of Meimoun and Mammon, LLC provides prepaid calling
cards to consumers directly.
The Company also owns 50% of CUENTASMAX LLC which installs WiFi6 shared network
("WSN") systems in locations in the New York metropolitan tristate area using
access points and small cells to provide users with access to the WSN.
CUENTASMAX LLC generated a net loss of $20,000 during the third quarter of 2022
and approximately $77,000 since its inception.
Cuentas SDI, LLC (the "Cuentas-SDI") was incorporated in the State of Florida on
January 4, 2022 and was a wholly owned subsidiary of SDI Black 011, Inc. ("SDI
Black"). Cuentas-SDI is engaged in the business of electronic distribution and
sales of virtual products via its Black 011 portal located at Yonkers, NY. Its
electronic products range from prepaid wireless SIM activation, International
mobile recharge services and international long distance phone services. During
2020, Cuentas-SDI also started sales of general merchandise to its retail
reseller customers. Cuentas-SDI owns the assets of Black Wireless MVNO, Black
011 Long distance platform and operations and the SDI Black distribution
platform and network of over 31,000 bodegas and convenience stores.
18
On May 27, 2022, the Company entered into a Membership Interest Purchase
Agreement (the "MIPA") with SDI Black 011, LLC ("SDI Black"), the holders of all
the membership interests of SDI Black and Cuentas SDI, LLC, a Florida limited
liability ("Cuentas SDI"), for the acquisition of 19.99% of the membership
interests of Cuentas SDI in exchange for $750,000. The Company also has the
right to close on the potential acquisition of the remaining 80.01% of the
membership interests of Cuentas SDI within 60 days (with a potential 30 day
extension, the "Potential Acquisition Period") in exchange for a purchase price
of an additional $2,459,000. SDI Black previously transferred all of its assets
including the platform, portals, domain names, and related software necessary to
conduct its business to Cuentas SDI. The MIPA further provides that during the
Potential Acquisition Period, the Company will invoice and Cuentas SDI will pay
invoices on a seven-net-ten day basis and during this same period, Cuentas SDI
will allow the Company to realize 40% of the Cuentas SDI gross revenues and
reflect 40% of the gross revenues on its books and records.The MIPA contains a
number of representations and warranties by each of the parties thereto which we
believe are customary for transactions similar to the transactions contemplated
by the MIPA. The 60-days option to acquire the remaining 80.01% of the
membership interests of Cuentas SDI expired on July 27, 2022.
On August 22, 2022, the Company entered into a Software Licensing and
transaction sharing Agreement with The OLB Group, Inc. ("OLB), a Delaware
corporation whereas OLB, through its wholly-owned subsidiaries will establish a
merchant services relationship whereby the parties will seek to sell or rent
OLB's point-of-sale (POS) devices to merchants in the network established by
Cuentas SDI, LLC for the merchants in the SDI network and the Company will use
reasonable best efforts to interconnect its reload agreement with the OLB POS
platform for use in qualified merchant locations. The Company will market the
OLB-branded products under the processing platform as a Cuentas white label
application for payment processing and debit cards. OLB will develop for
Cuentas' Mobile App and associated products, an Application Programming
Interface (API), databases and servers at no cost to the Company to allow for
the registration, approval and onboarding of consumers onto the Cuentas
GPR/Mobile App/Mobile Wallet platform with complete functions as currently
available through the Cuentas App and associated products and services. OLB
agreed to provide OLB's Services for Cuentas' benefit in exchange for revenue
sharing and OLB will utilize its developers to enhance the Cuentas
GPR-Mobile-App. Before the relaunch of the Cuentas GPR-Mobile-App, the OLB
developers in consultation with Cuentas shall as necessary test the
functionality, reliability and process of the Cuentas GPR-Mobile-App in a
controlled testing environment. Upon approval by the Company of the results of
the controlled testing environment to move the Cuentas GPR-Mobile-App into
production, the OLB developers, in consultation with the Company, shall perform
periodic test of the Cuentas GPR-Mobile-App to ensure continued functionality,
reliability and process of the Cuentas GPR-Mobile-App and to remove and repair
any bugs or malfunctions in the Cuentas GPR-Mobile-App as soon as practicable.
All net revenue generated by OLB from the following: (i) net revenues from the
sale or rental of OLB POS devices to Cuentas SDI Merchants, (ii) all other net
revenues generated by OLB arising from or related to the OLB POS devices elected
to be utilized by the Cuentas SDI Merchants, (iii) all net revenues generated by
OLB from the Cuentas White Label Products/Services, and (iv) to the extent that
the Reload Provider agrees to provide its reload capability through the OLB POS
devices, the net revenues generated by OLB from the reloads shall be split
between OLB and Cuentas. All net revenue generated by Cuentas from the
following: (i) net revenues from each reload purchased though the OLB POS device
through a Cuentas SDI Merchant, (ii) all retail digital products as set forth on
Schedule A sold through a OLB POS device through a Cuentas SDI Merchant or the
Cuentas White Label Products/Services, (iii) mobile top-ups net revenues sold
through a OLB POS device through a Cuentas SDI Merchant: all net revenues to be
split between OLB and Cuentas. Net revenue will be shared between the Parties
and profits will be calculated and settled on a 30 net 30 basis (after each
30-day period closes, the Parties have 30 days to calculate and settle net
revenue). On August 22, 2022, the Company entered into an Independent Sales
Organization Processing Agreement with eVance, Inc., a wholly owned subsidiary
of The OLB Group, Inc.,. whereby eVance is in the business of providing credit
and debit card processing services to merchants. The Company desires to solicit
and refer merchants to eVance for those Services under the terms of this
Agreement. eVance will provide Merchants with access to Third-Party
Authorization Networks, Settlement and other services to authorize, capture and
transmit data relating to transactions on major credit and debit card networks.
As of the date of this report, the Company has not generated any revenue from
this transaction.
On August 31, 2022 the Company entered into a one year Marketing Agreement with
LSI Group, which is extendable to 3 years total with completion of certain
milestones. LSI will market the US based Cuentas Prepaid Debit Card, Mobile App
and Cuentas Mobile's USA phone service in countries including El Salvador,
Guatemala and Honduras with plans to expand to South America, starting with
Colombia, with the goal to sign 200,000 US-based Cuentas customers in 1 year for
international cross-border remittances. As of the date of this report, the
Company has not generated any revenue from this transaction.
19
OUTLOOK
Business Environment
We are a technology payment platform company that enables digital and mobile
payments on behalf of under-bank and unbanked individuals. We believe in
providing simple, affordable, secure and reliable financial services and digital
payments to help our customers to achieve their financial goals. We strive to
increase our relevance for consumers, and family to access and move their money
anywhere in the world, anytime, on any platform and through any device (e.g.,
mobile, tablets, personal computers or wearables). We provide safer and simpler
ways for businesses of all sizes to accept payments from merchant websites,
mobile devices and applications, and at offline retail locations through a wide
range of payment solutions. We also facilitate person to person payments through
Cuentas GPR Card.
We operate globally and in a rapidly evolving regulatory environment
characterized by a heightened regulatory focus on all aspects of the payments
industry. That focus continues to become even more heightened as regulators on a
global basis focus on such important issues as countering terrorist financing,
anti-money laundering, privacy and consumer protection. Some of the laws and
regulations to which we are subject were enacted recently and the laws and
regulations applicable to us, including those enacted prior to the advent of
digital and mobile payments, are continuing to evolve through legislative and
regulatory action and judicial interpretation. Non-compliance with laws and
regulations, increased penalties and enforcement actions related to
non-compliance, changes in laws and regulations or their interpretation, and the
enactment of new laws and regulations applicable to us could have a material
adverse impact on our business, results of operations and financial condition.
Therefore, we monitor these areas closely to ensure compliant solutions for our
customers who depend on us.
Industry Trends
Our industry is dynamic and highly competitive, with frequent changes in both
technologies and business models. The Fintech industry has had to adapt to the
COVID pandemic with resulting challenges due to changes in the labor market,
supply chains, inflation, increasing interest rates and the stock market
uncertainty. Each industry shift is an opportunity to conceive new products, new
technologies, or new ideas that can further transform the industry and our
business. At Cuentas, we push the boundaries of what is possible through a broad
range of research and development activities that seek to anticipate the
changing demands of customers, industry trends and competitive forces. Society
has seen a major shift towards cashless transactions and acceptance of digital
currency for normal day to day transactions and services. Cuentas is currently
offering digital reloads for several mass transit agencies in the USA and
expects to increase that segment significantly as people continue to return to
normal work commutes. Discounted digital offerings are also expected to increase
in popularity as the public leans towards digital, touchless transactions and
Cuentas is strategically aligned and interconnected with one of the largest
digital gift card providers in the USA. Sports arenas are once again full and
Cuentas has aligned itself with MASL, a new indoor soccer league starting in
November 2022, which we believe has tremendous potential as the upcoming World
Cup competition will stimulate interest in professional soccer leagues.
20
RESULTS OF OPERATIONS
Comparison of the nine months ended September 30, 2022 to the nine months ended
September 30, 2021
Revenue
The Company generates revenues through the sale and distribution of prepaid
telecom minutes, digital products and other related telecom services. The
Company also generated sales from its Fintech products and services commencing
in the third quarter of 2020. Revenues during the nine months ended September
30, 2022 totaled $ 2,207,000 compared to $489,000 for the nine months ended
September 30, 2021. The increase in our sales of digital products and
General-Purpose Reloadable Cards is mainly due to increase in the sales of our
digital telecom products due to online and other marketing initiatives.
Revenue by product for the nine months ended September 30, 2022, and the nine
months ended September 30, 2022 are as follows:
September 30, September 30,
2022 2021
(dollars in thousands)
Telecommunications $ 484 $ 440
Digital products and General Purpose Reloadable Cards 1,723 49
Total revenue $ 2,207 $ 489
Costs of Revenue and Gross profit
Cost of revenues during the nine months ended September 30, 2022 totaled
$1,902,000 compared to $361,000 for the nine months ended September 30, 2021.
Cost of revenue consists of the purchase of wholesale minutes for resale,
related telecom platform costs and purchase of digital products in the amount of
$187,000 during the nine months ended September 30, 2022 and $257,000 during the
nine months ended September 30, 2021.
Cost of revenue also consists of costs related to the sale of the Company's
Digital products and GPR Cards in the amount of $1,715,000 during the nine
months ended September 30, 2022 and $104,000 during the nine months ended
September 30, 2021.
Gross profit (loss) by product lines for nine months ended September 30, 2022,
and 2021 are as follows:
September 30, September 30,
2022 2021
(dollars in thousands)
Telecommunications $ 297 $ 183
Digital products and General Purpose Reloadable Cards 8 (55 )
Total gross profit $ 305 $ 128
Gross margin for the nine months ended September 30, 2022 was 14% consisting of
62% margin for the telecommunications and less than 1% margin for the digital
product and general purpose reloadable cards. The gross loss for the sale of
digital product and general-purpose reloadable cards in 2021stemmed from the
lower margins of the digital products since the sales derived from the sale of
digital products has minimal gross margins.
21
Operating Expenses
Operating expenses consist of selling, general and administrative Expenses and
amortization of Intangible assets as discussed below and totaled $9,320,000
during the nine months ended September 30, 2022, compared to $6,144,000 during
the nine months ended September 30, 2021 representing a net increase of
$3,176,000.
Selling, General and Administrative Expenses
Selling, general and administrative expenses totaled $7,962,000 during the nine
months ended September 30, 2022 compared to $4,787,000 during the nine months
ended September 30, 2021, representing a net increase of $3,175,000. Included in
in the Selling, general and administrative expenses, Stock-based compensation
amounted to $1,438,000 and shares issued for services expenses amounted to
$110,000 during the nine months ended September 30, 2022 compared to $541,000
during the nine months ended September 30, 2021. This increase was mainly due to
issuance of 1,550,000 stock options to directors and officers of the Company in
the 2021 and 400,000 stock options to officer and directors of the Company in
the 2022. Such options can be exercised until 2032. The increase in the other
operating expenses is mainly due to an increase in the agreed maintenance and
support services in accordance with the software maintenance agreement with CIMA
and settlement agreement in the amount to $942,000 during the nine months ended
September 30, 2022 due to the settlement agreement with CIMA, increase in the
agreed payments in accordance with the processing service agreement with Incomm
in the amount of $185,000 to $625,000 during the nine months ended September 30,
2022, increase in our compensation and director fees in the approximate amount
of $270,000 to $1,334,000 and increase of approximately of $1,090,000 in our
selling and marketing expenses during the nine months ended September 30, 2022.
Amortization of Intangible assets
Amortization of Intangible assets totaled $1,358,000 during the nine months
ended September 30, 2022 and $1,357,000 during the nine months ended Septemeber
2021. The amortization expense mainly stems from the one-time licensing fee in
the amount of $9,000,000 that was paid in shares to Cima, on December 31,
2019. The acquired intangible assets that consisted of a perpetual software
license had an estimated fair value of $9,000,000. The Company amortizes the
intangible assets on a straight-line basis over their expected useful life of 60
months which is approximately $453,000 per quarter.
22
Other Income (expenses)
The Company recognized other expense of $34,000during the nine months ended
September 30, 2022 compared to other expense of $66,000 during the nine months
ended September 30, 2021. The other expenses during the nine months ended
September 30, 2022, included an expense of $32,000 for the settlement of the
Telco - Cuba matter.
Net Income (Loss)
We incurred a net loss of $9,085,000 for the nine months ended September 30,2022
as compared to a net loss of 6,082,000 for the nine months ended September 30,
2021 due to the increase in selling and general administrative expenses as
described above.
Comparison of the three months ended September 30, 2022 to the three months
ended September 30, 2021
Revenue
The Company generates revenues through the sale and distribution of prepaid
telecom minutes, digital products and other related telecom services. The
Company also generated sales from its Fintech products and services commencing
in the third quarter of 2020. Revenues during the three months ended September
30, 2022 totaled $1,143,000 compared to $109,000 for the three months ended
September 30, 2021. The increase in our sales of digital products and
General-Purpose Reloadable Cards is mainly due to increase in the sales of our
digital telecom product due to online and other marketing initiatives.
Revenue by product for the three months ended September 30, 2022, and the three
months ended September 30, 2021 are as follows:
September 30, September 30,
2022 2021
(dollars in thousands)
Telecommunications $ 166 $ 87
Digital products and General Purpose Reloadable Cards 977 22
Total revenue $ 1,143 $ 109
Costs of Revenue and Gross profit
Cost of revenues during the three months ended September 30, 2022 totaled
$1,027,000 compared to $91,000 for the three months ended September 30, 2021.
Cost of revenue consists of the purchase of wholesale minutes for resale,
related telecom platform costs and purchase of digital products in the amount of
$ 69,000 during the three months ended September 30, 2022 and $53,000 during the
three months ended September 30, 2021.
Cost of revenue also consists of costs related to the sale of the Company's GPR
Card in the amount of $958,000 during the three months ended September 30, 2022
and $38,000 during the three months ended September 30, 2021.
23
Gross profit (loss) by product lines for three months ended September 30, 2022
and 2021 are as follows:
September 30, September 30,
2022 2021
(dollars in thousands)
Telecommunications $ 97 $ 34
Digital products and General Purpose Reloadable Cards 19 (16 )
Total revenue $ 116 $ 18
Gross margin for the three months ended September 30, 2022, was 10% consisting
of 58% margin for the telecommunications and 2% margin for the digital product
and general-purpose reloadable cards. The gross loss for the sale of digital
product and general-purpose reloadable cards in 2021stemmed from the lower
margins of the digital products since the sales derived from the sale of digital
products has minimal gross margins. The gross loss for the sale of digital
product and general-purpose reloadable cards in 2021stemmed from the lower
margins of the digital products since the sales derived from the sale of digital
products has minimal gross margins.
Operating Expenses
Operating expenses consist of selling, general and administrative Expenses and
amortization of Intangible assets as discussed below and totaled $2,382,000
during the three months ended September 30 2022, compared to $2,428,000 during
the three months ended September 30, 2021 representing a net decrease of
$46,000.
Selling, General and Administrative Expenses
Selling, general and administrative expenses totaled $1,929,000 during the three
months ended September 30, 2022 compared to $1,976,000 during the three months
ended September 30, 2021, representing a net decrease of $47,000. Included in in
the Selling, general and administrative expenses, Stock-based compensation and
shares issued for services expenses amounted to $234,000 during the three months
ended September 30, 2022 and $255,000 during the three months ended September
30, 2021. This was mainly due to issuance of 1,550,000 stock options to
directors and officers of the Company in the 2021 and 400,000 stock options to
officer and directors of the Company in the 2022. Such options can be exercised
until, 2032.
The increase in the other operating expenses is mainly due to an increase in the
agreed maintenance and support services in accordance with the software
maintenance agreement with CIMA in the amount of $383,000 during the three
months ended September 30, 2022 in accordance with the software maintenance
agreement and the Settlement Agreement and General Release dated August 2, 2022,
increase in the agreed payments in accordance with the processing service
agreement with Incomm in the amount of $70,000 to $250,000 during the three
months ended September 30, 2022, and decrease in our compensation and director
fees in the approximate amount of $3,000 to $403,000 during the three months
ended September 30, 2022 and increase of approximately of $147,000 in our
selling and marketing expenses during the three months ended September 30, 2022.
Amortization of Intangible assets
Amortization of Intangible assets totaled $453,000 during the three months ended
September 30, 2022 and 2021. The amortization expense mainly stems from the
one-time licensing fee in the amount of $9,000,000 that was paid in shares to
Cima, on December 31, 2019. The acquired intangible assets that consisted of a
perpetual software license had an estimated fair value of $9,000,000. The
Company amortizes the intangible assets on a straight-line basis over their
expected useful life of 60 months which is approximately $453,000 per quarter.
24
Other Income
The Company recognized other income of $1,000 during the three months ended
September 30, 2022 compared to other expenses of $4,000 during the three months
ended September 30, 2021.
Net Income (Loss)
We incurred a net loss of $2,275,000 for the three-month period ended September
30, 2022, as compared to a net loss of 2,406,000 for the three-month period
ended September 30, 2021due to the increase in selling and general
administrative expenses as described above.
Liquidity and Capital Resources
Liquidity is the ability of a company to generate funds to support its current
and future operations, satisfy its obligations, and otherwise operate on an
ongoing basis. Significant factors in the management of liquidity are funds
generated by operations, levels of accounts receivable and accounts payable and
capital expenditures.
As of September 30, 2022, the Company had total current assets of $2,429,000,
including $2,108,000 of cash, accounts receivables of $264,000, and other
current assets of $ 57,000 and total current liabilities of $2,720,000 creating
a working capital deficit of $291,000.
As of December 31, 2021, the Company had total current assets of $6,780,000,
including $6,607,000 of cash, accounts receivables of $11,000, and other current
assets of $162,000 and total current liabilities of $2,719,000 creating a
working capital of $4,061,000.
The decrease in our working capital deficit was mainly attributable to the
decrease in our Cash and Cash equivalents in the amount of $4,499,000 due to our
losses.
To date, we have principally financed our operations through the sale of our
Common Stock. Nevertheless, management anticipates that our current cash and
cash equivalents position and generating revenue from the sales of our digital
products and General-Purpose Reloadable Cards will provide us limited financial
resources for the near future to continue implementing our business strategy of
further developing our digital products and General Purpose Reloadable Card,
enhance our digital products offering and increase our sales and marketing.
Management has taken important steps to reduce the financial burn rate and has
curtailed some ineffective marketing programs, concentrating on those programs
that have been proven to produce good results. Reduction of some top-level
personnel has brought savings to the company as current executives took over the
vacant positions at no additional cost to the Company. Management plans to
secure additional financing sources, including but not limited to the sale of
our Common Stock in future financings. There can be no assurance, however, that
the company will be successful in raising additional capital or that the company
will have net income from operations to fund the business plan of the company
for the near future or long term.
As of September 30, 2022, the Company had approximately $2,108 thousand in cash
and cash equivalents, approximately $291 thousand in negative working capital
and an accumulated deficit of approximately $47,304 thousand . These conditions
raise substantial doubt about the Company's ability to continue as a going
concern. On August 4, 2022, the Company, sold an aggregate of 1,655,000 shares
of the Company's common stock, $0.001 par value, pre-funded warrants to purchase
up to 2,569,044 shares of Common and warrants to purchase up to 4,224,044 shares
of Common Stock in consideration of $3.0 million. The net proceeds to the
Company, after deducting placement agent fees and other offering expenses, were
approximately $2.7 million. Company's ability to continue as a going concern is
dependent upon raising capital from financing transactions and revenue from
operations. Management anticipates their business will require substantial
additional investments that have not yet been secured. Management is continuing
in the process of fund raising in the private equity and capital markets as the
Company will need to finance future activities.
25
Cash Flows - Operating Activities
The Company's operating activities for the nine months ended September 30, 2022,
resulted in net cash used of $6,523,000. Net cash used in operating activities
consisted of a net loss of $9,085,000 partially offset by non-cash expenses
consisting of share-based compensation of $1,548,000 and amortization of
intangible assets of $1,358,000. Changes in operating assets and liabilities
used cash of $387,000, resulting mainly from an increase in accounts payables of
$406,000 which was mitigated in an increase of in accounts receivables of
$486,000.
The Company's operating activities for the nine months ended September 30, 2021,
resulted in net cash used of $7,227,000. Net cash used in operating activities
consisted of a net loss of $6,082,000, which were offset partially by non-cash
expenses consisting of share-based compensation of $541,000 and amortization of
intangible assets of $1,357,000. Changes in operating assets and liabilities
utilized cash of $3,078,000, resulting mainly from an increase in accounts
receivable of $12,000, decrease in accrued expenses and other current
liabilities of $262,000, and a decrease in accounts payables of $1,567,000.
Cash Flows - Investing Activities
The Company's investment activities for the nine months ended September 30,
resulted in net cash used of $664,000 and net cash used of $47,000 for the same
period in 2021. The increase was mainly due to the investment in Cuentas SDI
LLC.
Cash Flows - Financing Activities
The Company's financing activities for the nine months ended September 30, 2022,
resulted in net cash in the amount of $2,688,000 from the sale of our common
stock. . The Company's financing activities for the nine months ended September
30, 2021, resulted in net cash received of $15,797,000, consisting of
$10,614,000 received from the sale of our common stock and $6,264,000 from the
issuance of shares due to exercise of warrants, partially offset by repayments
of loans of $730,000 and repayments of $355,000 of loans from a related party.
Inflation and Seasonality
In management's opinion, our results of operations have not been materially
affected by inflation or seasonality, and management does not expect that
inflation risk or seasonality would cause material impact on our operations in
the future.
26
Off-Balance Sheet Arrangements
As of September 30, 2022, we had no off-balance sheet arrangements of any
nature.
Critical Accounting Policies
The preparation of financial statements in conformity with GAAP in the United
States requires our management to make assumptions, estimates and judgments that
affect the amounts reported in the financial statements, including the notes
thereto, and related disclosures of commitments and contingencies, if any. Note
3 to our consolidated audited financial statements filed with the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 2021,
describes the significant accounting policies and methods used in the
preparation of our financial statements.
Recently Issued Accounting Standards
New pronouncements issued but not effective as of September 30, 2022, are not
expected to have a material impact on the Company's consolidated financial
statements.
Other accounting standards that have been issued or proposed by the FASB or
other standards-setting bodies that do not require adoption until a future date
are not expected to have a material impact on our financial statements upon
adoption.
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