The following discussion and analysis should be read in conjunction with the
audited Financial Statements and accompanying notes thereto included in the
Company's Annual Report on Form 10-K as of and for the fiscal year ended
December 31, 2019. Unless otherwise noted, all the financial information in this
Report is financial information for the Company.
General
The Company currently is engaged in the development and sale of 3D haptics
products and equipment. Haptics refers to one's sense of touch. The Company's
focus is in the consumer interactive computer gaming market, but the Company
also does project work in other areas. The Company's operations are based in New
Mexico with sales of its haptics products primarily to consumers through retail
outlets.
Results of Operations for the Three Months Ended September 30, 2020 and 2019
Revenues
Three months ended September 30,
2020 2019 Change
Revenue $ - $ - $ -
The Company recorded no revenue for the three-month period ended September 30,
2020 and no revenue during the three-month period ended September 30, 2019. The
Company expects to continue to incur significant expenses and operating losses
for the foreseeable future. The Company's net losses may fluctuate significantly
from quarter to quarter and year to year.
Operating Expenses
Three months ended September 30,
2020 2019 Change
Operating Expenses $ 51,498 $ 34,390 $ 17,108Operating expenses increased by $17,108 or 50% to $51,498 for the three months
ended in September 30, 2020, from $34,390 for three months ended September 30,
2019. This increase in professional fees was primarily due to additional costs
for being a current reporting company.
Other Expense
Three months ended September 30,
2020 2019 Change
Other Expense $ 58 $ 51 $ 7Other expense increased by $7 or 14% to $58 during the three months ended
September 30, 2020 compared with $51 during the three months ended September 30,
2019. Other expense for the three months ended September 30, 2020 consisted of
interest expense of related to finance charges on credit cards.
Results of Operations for the Nine Months Ended September 30, 2020 and 2019
Revenues
Nine months ended September 30,
2020 2019 Change
Revenue $ 1,000 $ - $ 1,000The Company recorded revenue of $1,000 for the nine-month period ended September
30, 2020 and no revenue during the nine-month period ended September 30, 2019.
The Company expects to continue to incur significant expenses and operating
losses for the foreseeable future. The Company's net losses may fluctuate
significantly from quarter to quarter and year to year.
Operating Expenses
Nine months ended September 30,
2020 2019 Change
Operating Expenses $ 134,296 $ 101,400 $ 32,896Operating expenses increased by $32,896 or 32% to $134,296 for the nine months
ended in September 30, 2020, from $101,400 for the nine months ended September
2019. This increase was due to an increase in professional fees which is due to
additional costs incurred for being a current reporting company.
Other Expense
Nine months ended September 30,
2020 2019 Change
Other Expense $ 224 $ 214 $ 10
10
Other expense increased by $10 or 5% to $224 during the nine months ended
September 30, 2020 compared with $214 during the nine months ended September 30,
2019. Other expense for the nine months ended September 30, 2020 consisted of
interest expense of related to finance charges on credit cards.
Liquidity and Capital Resources
The following table summarizes select balance sheet and working capital amounts
as of September 30, 2020 and December 31, 2019:
As of As of
September 30, December 31,
2020 2019 Change
Cash $ 336,922 $ 431,715 $ (94,793)
Working capital deficit $ (340,131) $ (206,611 ) $ (133,520)At September 30, 2020, the Company had working capital deficit of approximately
$340,131. Accumulated deficit amounted to $41,419,655 and $41,286,135 at
September 30, 2020 and December 31, 2019, respectively. Net loss for the nine
months ended September 30, 2020 and 2019 was $133,520 and $101,614,
respectively. Net cash used in operating activities was $94,793 and $62,034 for
the nine months ended September 30, 2020 and 2019, respectively. Operations
since inception have been funded primarily with the proceeds from equity and
debt offerings. As of September 30, 2020, the Company had cash of $336,922.
The Company's management has evaluated whether there is substantial doubt about
the Company's ability to continue as a going concern and has determined that
substantial doubt existed as of the date of this filing. This determination was
based on the following factors: (i) the Company's available cash as of the date
of this filing will not be sufficient to fund its anticipated level of
operations for the next 12 months; (ii) the Company has incurred recurring
losses and at September 30, 2020, had an accumulated deficit of $41,419,655;
(iii) the Company sustained an operating loss of $133,520 for the period ended
September 30, 2020; and (iv) if the Company fails to obtain the needed capital,
it will be forced to delay, scale back, or eliminate some or all of its programs
or perhaps cease operations. In the opinion of management, these factors, among
others, raise substantial doubt about the ability of the Company to continue as
a going concern.
There is no assurance that the Company will be successful in any capital-raising
efforts that it may undertake to fund operations during 2020. The Company
anticipates that it will continue to issue equity and/or debt securities as a
source of liquidity, until it begins to generate positive cash flow to support
its operations. Any future sales of securities to finance operations will dilute
existing stockholders' ownership. The Company cannot guarantee when or if it
will generate positive cash flow.
The audit report prepared by our independent registered public accounting firm
relating to the Company's consolidated financial statements for the year ended
December 31, 2019 included an explanatory paragraph expressing substantial doubt
about our ability to continue as a going concern.
Cash Flow Activities
The following table summarizes the Company's cash flows for the periods set
forth below:
Nine months ended September 30,
2020 2019 Change
Net cash used in operating activities $ 94,793 $ 62,034 $ 32,759
Net cash used in operating activities for the nine months ended September 30,
2020 was $94,793 compared with net cash used in operating activities of $62,034
for the nine months ended September 30, 2019. The net cash used in operating
activities during the nine months ended September 30, 2020, was primarily due to
a net loss of $133,520 partial offset by increase of $42,744 in accounts payable
and accrued expenses.
Net cash used in operating activities for the nine months ended September 30,
2019 was $62,034. The net cash used in operating activities during the nine
months ended September 30, 2019, was primarily due to a net loss of $101,614
partial offset by increase of $37,276 in accounts payable and accrued expenses.
Effects of Inflation
We do not believe that inflation has had a material impact on our business,
sales, or operating results during the periods presented.
Off-Balance Sheet Arrangements
We currently do not have any off-balance sheet arrangements or financing
activities with special-purpose entities.
Critical Accounting Policies and Use of Estimates
Critical accounting policies are those policies which are both important to the
presentation of a company's financial condition and results and require
management's most difficult, subjective or complex judgments, often as a result
of the need to make estimates about the effect of matters that are inherently
uncertain. There have been no recent significant changes to our accounting
policies and use of estimates during the nine months ended September 30, 2020.
For a further discussion of our critical accounting policies, see our Annual
Report on Form 10-K for the fiscal year ended December 31, 2019
11
Certain Factors That May Affect Future Results of Operations
The Securities and Exchange Commission encourages companies to disclose
forward-looking information so that investors can better understand a company's
future prospects and make informed investment decisions. This Quarterly Report
on Form 10-Q contains such "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995.All statements in this
report, other than statements of historical fact, are forward-looking statements
for purposes of these provisions, including any projections of earnings,
revenues or other financial items, any statements of the plans and objectives of
management for future operations, any statements concerning proposed new
products or services, any statements regarding future economic conditions or
performance, and any statements of assumptions underlying any of the foregoing.
All forward-looking statements included in this report are made as of the date
hereof and are based on information available to us as of such date. We assume
no obligation to update any forward-looking statement. In some cases,
forward-looking statements can be identified by the use of terminology such as
"may," "will," "expects," "plans," "anticipates," "intends," "believes,"
"estimates," "potential," or "continue," or the negative thereof or other
comparable terminology. Although we believe that the expectations reflected in
the forward-looking statements contained herein are based upon reasonable
assumptions at the time made, there can be no assurance that any such
expectations or any forward-looking statement will prove to be correct. Our
actual results will vary, and may vary materially, from those projected or
assumed in the forward-looking statements. Future financial condition and
results of operations, as well as any forward-looking statements, are subject to
inherent risks and uncertainties, many of which we cannot predict with accuracy
and some of which we might not anticipate, including, without limitation,
product recalls and product liability claims; infringement of our technology or
assertion that our technology infringes the rights of other parties; termination
of supplier relationships, or failure of suppliers to perform; inability to
successfully manage growth; delays in obtaining regulatory approvals or the
failure to maintain such approvals; concentration of our revenue among a few
customers, products or procedures; development of new products and technology
that could render our products obsolete; market acceptance of new products;
introduction of products in a timely fashion; price and product competition,
availability of labor and materials, cost increases, and fluctuations in and
obsolescence of inventory; volatility of the market price of our common stock;
foreign currency fluctuations; changes in key personnel; work stoppage or
transportation risks; integration of business acquisitions; and other factors
referred to in our reports filed with the SEC, including our Registration
Statement on Form 10. All subsequent forward-looking statements attributable to
us or persons acting on our behalf are expressly qualified in their entirety by
these cautionary statements. Additional factors that may have a direct bearing
on our operating results are discussed in Item 1A "Risk Factors" in our
Registration Statement on Form 10. In light of these assumptions, risks and
uncertainties, the results and events discussed in the forward-looking
statements contained in this Quarterly Report or in any document incorporated by
reference might not occur. Stockholders are cautioned not to place undue
reliance on the forward-looking statements, which speak only as of the date of
this Quarterly Report. We are not under any obligation, and we expressly
disclaim any obligation, to update or alter any forward-looking statements,
whether as a result of new information, future events or otherwise. All
subsequent forward-looking statements attributable to us or to any person acting
on our behalf are expressly qualified in their entirety by the cautionary
statements contained or referred to in this section.
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