This quarterly report on Form 10-Q and other reports filed by
Although the Company believes that the expectations reflected in the
forward-looking statements are reasonable, the Company cannot guarantee future
results, levels of activity, performance, or achievements. Except as required by
applicable law, including the securities laws of
Our financial statements are prepared in accordance with accounting principles
generally accepted in
The following discussion should be read in conjunction with the attached
unaudited consolidated financial statements and notes thereto, and our audited
consolidated financial statements and related notes for our fiscal year ended
Business Overview
Digital twin technology is a critical component of Industry 4.0, the ongoing
automation of traditional manufacturing and industrial practices, using modern
smart technology. In simple terms, digital twin is the virtual replica of
real-world objects, including physical objects, processes, relationships, and
behaviors. These models of real-world objects, through the use of
Critical Accounting Policies
Our financial statements are prepared in accordance with accounting principles
generally accepted in
· Use of Estimates · Derivative liability · Stock-based Compensation · Income Taxes 17 Table of Contents
While our estimates and assumptions are based on our knowledge of current events and actions we may undertake in the future, actual results may ultimately differ from these estimates and assumptions. For a discussion of the Company's significant accounting policies, refer to Note 2 of Notes to the Financial Statements.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reported periods. Amounts could materially change in the future.
Derivative Liability
The Company does not use derivative instruments to hedge exposures to cash flow, market or foreign currency risks. We evaluate all of our financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. For stock-based derivative financial instruments, the Company used a Black Scholes valuation model to value the derivative instruments at inception and on subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within 12 months of the balance sheet date.
Stock-based Compensation
The Company issues stock, options and warrants as share-based compensation to employees and non-employees.
The Company accounts for its share-based compensation to employees and non-employees in accordance ASC 718. Stock-based compensation cost is measured at the grant date, based on the estimated fair value of the award, and is recognized as expense over the requisite service period.
Income Taxes
Deferred tax assets and liabilities are recognized for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The deferred tax assets of the Company relate primarily to operating loss carryforwards for federal income tax purposes. A full valuation allowance for deferred tax assets has been provided because the Company believes it is not more likely than not that the deferred tax asset will be realized. Realization of deferred tax assets is dependent on the Company generating sufficient taxable income in future periods.
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.
Results of Operations
The following are the results of our continuing operations for the three months
ended
Three Months Ended September 30, 2022 2021 Change % Revenue $ - $ - $ - - Operating expense 160,017 262,476 (102,459 ) (39 %)
Other income (expense) (179,159 ) (427,784 ) 248,625 (58 %)
Net income (loss)
18 Table of Contents Revenue During the three months endedSeptember 30, 2022 and 2021, the Company did not generate any revenue. Operating Expenses Three Months Ended September 30, 2022 2021 Change % General and administrative$ 38,247 $ 154,118 $ (115,871 ) (75 %) Professional fee 37,441 11,433 26,008 227 %
Compensation and payroll taxes 84,329 96,925 (12,596 ) (13 %)
Total operating expenses
Compensation and payroll taxes decreased by
Other Income (Expense) Three Months Ended September 30, 2022 2021 Change % Interest expense$ (34,556) $ (166,427) $ 131,871 (79 %) Gain on settlement of debt 400 907 (507 ) (56 %) Change in fair value of %) derivative liability (145,003) (262,264) 117,261 (45 Total other income (expense)$ (179,159) $ (427,784) $ 248,625 (58 %)
The decrease in other income was due to a decrease in gain on change in fair value of derivative liability, from an accounting estimate primarily from the conversion feature of one convertible promissory note, and less amortization of discounts on convertible notes as interest expense.
The following are the results of our continuing operations for the nine months
ended
Nine Months Ended September 30, 2022 2021 Change % Revenue $ - $ - $ - - Operating expense 498,509 940,638 (442,129 ) (47 %)
Other income (expense) 3,346,622 90,676,512 (87,329,890 ) (96 %)
Net income (loss)
Revenue During the nine months endedSeptember 30, 2022 and 2021, the Company did not generate any revenue. 19 Table of Contents Operating Expenses Nine Months Ended September 30, 2022 2021 Change % General and administrative$ 112,130 $ 293,696 $ (181,566 ) (62 %) Professional fee 143,240 70,339 72,901 104 %
Compensation and payroll taxes 243,139 576,603 (333,464 ) (58 %)
Total operating expenses
Compensation and payroll taxes decreased by
Other Income (Expense) Nine Months Ended September 30, 2022 2021 Change % Interest expense$ (187,403 ) $ (410,253 ) $ 222,850 (54 %) Gain on settlement of debt 87,062 907 86,155 9499 % Change in fair value of (96 %) derivative liability 3,446,963 91,085,858 (87,638,895 ) Total other income (expense)$ 3,346,622 $ 90,676,512 $ (87,329,890 ) (96 %)
The decrease in other income was primarily due to the change in fair value of derivative liability, from an accounting estimate primarily from the conversion feature of one convertible promissory note.
Liquidity and Capital Resources
September 30, December 31, 2022 2021 Change % Cash$ 475,451 $ 966,682 $ (491,231 ) (51 %) Current assets$ 670,327 $ 1,159,724 $ (489,397 ) (42 %) Current liabilities$ 2,985,080 $ 6,541,729 $ (3,556,649 ) (54 %)
Working capital deficiency
Liquidity is the ability of a company to generate funds to support asset growth, satisfy disbursement needs, maintain reserve requirements, and otherwise operate on an ongoing basis. The Company has insufficient operating revenues so is currently dependent on debt financing and sale of equity to fund operations.
As shown in the accompanying financial statements, the Company has net income of
As of
20 Table of Contents
Management believes that it will need additional equity or debt financing to be able to implement its business plan. Given the lack of revenue, capital deficiency and negative working capital, there is substantial doubt about the Company's ability to continue as a going concern.
We believe that the successful growth and operation of our business is dependent upon our ability to do the following:
· obtain adequate sources of debt or equity financing to pay unfunded operating expenses and fund long-term business operations; and · manage or control working capital requirements by controlling operating expenses. Management is attempting to raise additional capital via equity and debt offerings to sustain operations until it can market its services and achieves profitability. The successful outcome of future activities cannot be determined at this time and there are no assurances that, if achieved, the Company will have sufficient funds to execute its intended business plan or generate positive operating results. Cash Flows Nine Months Ended September 30, 2022 2021 Change % Cash used in operating (32 activities$ (494,803 ) $ (724,024 ) $ 229,221 %) Cash used in investing activities$ (54,428 ) $ (7,500 ) $ (46,928 ) 626 % Cash provided by financing (96 activities$ 58,000 $ 1,329,594 $ (1,271,594 ) %) Cash and cash equivalents on (28 hand$ 475,451 $ 659,642 $ (184,191 ) %) Operating activities
Net cash used in operating activities for the nine months ended
Investing activities
During the nine months ended
During the nine months ended
Financing activities
During the nine months ended
Net cash provided by financing activities for the nine months ended
21 Table of Contents
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