The following discussion should be read in conjunction with our consolidated audited financial statements and the related notes that appear elsewhere in this annual report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward looking statements. Factors that could cause or contribute to such differences include, but are not limited to those discussed below and elsewhere in this annual report.
Our consolidated audited financial statements are stated in
Our Current Business
Plan of Operations and Cash Requirements
Our financial statements have been prepared assuming that we will continue as a going concern and, accordingly, do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should we be unable to continue in operation. We expect we will require additional capital to meet our long term operating requirements. We expect to raise additional capital through, among other things, the sale of equity or debt securities.
The following summary of our results of operations should be read in conjunction
with our financial statements for the year ended
December 31, December 31, 2020 2019 Change %
Cash and cash equivalents
-$ 96,214 $ 74,903 (100.00 )% Inventories$ 60,815 $ 60,815 $ - - Operating lease right-of-use assets $ -$ 46,971 $ (46,971 ) (100.00 )% Property and equipment$ 163,093 $ 213,037 $ (49,944 ) (23.44 )% Intangible assets$ 129,462 $ 69,284 $ 60,178 86.86 % Total Assets$ 361,918 $ 491,115 $ (129,197 ) (26.31 )% Total Liabilities$ 3,139,998 $ 3,360,421 $ (220,423 ) (6.56 )% Stockholders' Deficit$ (2,778,080 ) $ (2,869,306 ) $ 91,226 (3.18 )% 9 Table of Contents The following summary of our results of operations, for the year endedDecember 31, 2020 , should be read in conjunction with our financial statements, as included in this Form 10-K. Year ended December 31, 2020 2019 Change % Revenue$ 3,994 $ 3,758 $ 236 6.28 % Cost of Revenue (26,858 ) - (26,858 ) (100.00 )% Operating Expenses General and administrative expenses (227,726 ) (423,246 ) 195,520 (46.20 )% Depreciation and amortization (114,910 ) (39,818 ) (75,092 ) 188.59 % Consulting fees share expense - (133,200 ) 133,200 (100.00 )% Officer salaries and compensation - - - - Stock based compensation (700 ) (83,574 ) (83,574 ) (99.16 )% Gain from extinguishment of debt - 12,041 (12,041 ) (100.00 )% Other expense (779,668 ) (998,084 ) (228,416 ) (22.89 )% Net loss$ (1,135,868 ) $ (1,662,123 ) $ (526,255 ) (31.66 )%
For the year ended
For the year ended
10 Table of Contents
For the year ended
The decrease in net loss during the year ended
Liquidity and Capital Resources
The following table provides selected financial data about our company as of
Working Capital December 31, December 31, 2020 2019 Change % Current Assets$ 69,363 $ 161,823 $ (92,460 ) (57.14 )% Current Liabilities$ 3,139,998 $ 3,360,421 $ (220,423 ) (6.56 )% Working Capital (deficit)$ (3,070,635 ) $ (3,198,598 ) $ 127,963 (4.00 )% Cash Flows Year ended December 31, 2019 2019 Change
Cash Flows used in Operating Activities
$ 3,754 $ (24,516 ) $ 28,270
Our working capital deficit decreased as of
11 Table of Contents
Cash Flow from Operating Activities
During the year ended
The net cash used in operating activities for the year ended
The net cash used in operating activities for the year ended
Cash Flow from Investing Activities
During the year ended
During the year ended
Cash Flow from Financing Activities
During the year ended
Net cash from financing activities was
Net cash from financing activities was
12 Table of Contents Contractual Obligations
As a "smaller reporting company", we are not required to provide tabular disclosure obligations.
Going Concern
The accompanying financial statements have been prepared in accordance with
The Company's ability to continue as a going concern is dependent upon its ability to repay or settle its current indebtedness, generate positive cash flow from an operating company, and/or raise capital through equity and debt financing or other means on desirable terms. If the Company is unable to obtain additional funds when they are required or if the funds cannot be obtained on favorable terms, management may be required to restructure the Company or cease operations. The financial statements do not include any adjustments that might result from the outcome of these uncertainties.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.
Critical Accounting Policies
We prepare our consolidated financial statements in conformity with GAAP, which requires management to make certain estimates and assumptions and apply judgments. We base our estimates and judgments on historical experience, current trends and other factors that management believes to be important at the time the financial statements are prepared, and actual results could differ from our estimates and such differences could be material. Due to the need to make estimates about the effect of matters that are inherently uncertain, materially different amounts could be reported under different conditions or using different assumptions. On a regular basis, we review our critical accounting policies and how they are applied in the preparation our financial statements. Please refer to "Management's Discussion and Analysis of Financial Condition and Results of Operations," as included in this Annual Report, for disclosures regarding the Company's critical accounting policies and estimates.
13 Table of Contents Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in
Revenue Recognition
The Company recognizes revenue from its contracts with customers in accordance with ASC 606 - Revenue from Contracts with Customers. The Company recognizes revenues when satisfying the performance obligation of the associated contract that reflects the consideration expected to be received based on the terms of the contract.
Revenue related to contracts with customers is evaluated utilizing the following steps: (i) Identify the contract, or contracts, with a customer; (ii) Identify the performance obligations in the contract; (iii) Determine the transaction price; (iv) Allocate the transaction price to the performance obligations in the contract; (v) Recognize revenue when the Company satisfies a performance obligation.
Leases
Effective
Stock-based Compensation
We account for stock-based awards at fair value on the date of grant and
recognize compensation over the service-period that they are expected to vest.
We estimate the fair value of stock options and stock purchase warrants using
the Black-Scholes option pricing model. The estimated value of the portion of a
stock-based award that is ultimately expected to vest, taking into consideration
estimated forfeitures, is recognized as expense over the requisite service
periods. The model includes subjective input assumptions that can materially
affect the fair value estimates. The expected volatility is estimated based on
the most recent historical period of time, of other comparative securities,
equal to the weighted average life of the options. The estimate of stock awards
that will ultimately vest requires judgment, and to the extent that actual
forfeitures differ from estimated forfeitures, such differences are accounted
for as a cumulative adjustment to compensation expenses and recorded in the
period that estimates are revised. For the year ended
14 Table of Contents Fair Value
FASB ASC 820, Fair Value Measurements and Disclosures ("ASC 820") establishes a framework for all fair value measurements and expands disclosures related to fair value measurement and developments. ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
ASC 820 requires that assets and liabilities measured at fair value are classified and disclosed in one of the following three categories:
Level 1-Quoted market prices for identical assets or liabilities in active markets or observable inputs;
Level 2-Significant other observable inputs that can be corroborated by observable market data; and
Level 3-Significant unobservable inputs that cannot be corroborated by observable market data.
The Company analyzed the conversion option for derivative accounting consideration under ASC 815, "Derivatives and Hedging," and determined that the convertible notes should be classified as a liability since the conversion option becomes effective at issuance resulting in there being no explicit limit to the number of shares to be delivered upon settlement of the above conversion options. The Company accounts for convertible notes and warrants as a derivative liabilities due to there being no explicit limit to the number of shares to be delivered upon settlement of all conversion options.
Recent Accounting Pronouncements
In
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