Forward Looking Statements
The following discussion should be read in conjunction with our unaudited
financial statements and related notes included in Item 1, "Financial
Statements," of this Quarterly Report on Form 10-Q, as well as our Annual Report
on Form 10-K for the fiscal year ended March 31, 2021. Certain information
contained in this MD&A includes "forward-looking statements." Statements which
are not historical reflect our current expectations and projections about our
future results, performance, liquidity, financial condition and results of
operations, prospects and opportunities and are based upon information currently
available to us and our management and their interpretation of what is believed
to be significant factors affecting our existing and proposed business,
including many assumptions regarding future events. Actual results, performance,
liquidity, financial condition and results of operations, prospects and
opportunities could differ materially and perhaps substantially from those
expressed in, or implied by, these forward-looking statements as a result of
various risks, uncertainties and other factors, including those risks described
in detail in the section entitled "Risk Factors" of our Annual Report on Form
10-K for the fiscal year ended March 31, 2021.
Forward-looking statements, which involve assumptions and describe our future
plans, strategies, and expectations, are generally identifiable by use of the
words "may," "should," "would," "will," "could," "scheduled," "expect,"
"anticipate," "estimate," "believe," "intend," "seek," or "project" or the
negative of these words or other variations on these words or comparable
terminology.
In light of these risks and uncertainties, and especially given the nature of
our existing and proposed business, there can be no assurance that the
forward-looking statements contained in this section and elsewhere in this
Quarterly Report on Form 10-Q will in fact occur. Potential investors should not
place undue reliance on any forward-looking statements. Except as expressly
required by the federal securities laws, there is no undertaking to publicly
update or revise any forward-looking statements, whether as a result of new
information, future events, changed circumstances or any other reason.
Business
We develop and market products for wellness and physical therapy markets, using
patented dry-hydro therapy equipment that we plan to offer and sell in fitness
and medical markets.
Our mission is to redefine the massage industry by introducing affordable, "on
demand" massage memberships through a network of retail locations, which we
refer to as Relaxation Centers, which feature a patented, touchless SOLAJET™
massage, a technology equivalent to hands-on massage. We seek to become the
leading provider of therapeutic massage and the most recognized brand in the
massage category through the rapid and focused expansion of Relaxation Centers
in key markets throughout the U.S. and Europe. The goal is not only to capture a
significant share of the existing market but also to expand the massage market
as a whole by attracting a large segment of potential customers who are averse
to human touch.
We plan to introduce a disruptive business model into the traditional massage
industry by delivering the important benefits of massage in a more affordable
and convenient way. We have created a unique and expandable business model that
we believe breaks through the main barriers of massage which include cost,
scheduling, and quality/consistency.
Central to our business plan is the creation of Relaxation Centers, which are
premium, spa-like locations that can be located, and an appointment booked, by
customers or "members" using a smartphone app or the web (massage on demand). We
expect that each Relaxation Center will have an average of ten patented
dry-hydrotherapy SOLAJET™ massage systems where customers will receive a
private, deeply relaxing, consistent and therapeutic massage. We believe that
the experience is equal to a traditional hands-on massage provided by an
experienced, licensed masseuse. The SOLAJET™ massage systems are designed to
permit customers to control virtually every aspect of the massage session by the
touch of a button.
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Our retail membership model is currently based upon a price from $5 to $10 per
fifteen minute session. We believe that the combined experience of deep tissue
massage, therapeutic heat and proprietary wave therapy is so significant, the
effects of a one hour hands-on massage can be felt in as little as one fifteen
minute session. Due to this technology advantage, we expect to operate the
Relaxation Centers with a minimal amount of staffing, as well as potentially
franchise Relaxation Centers to third parties to enhance the rate of growth.
Based on projected usage rates determined by us after multiple years of product
development and market testing, we estimate that a single SOLAJET™ massage
system may generate approximately $60,000 in annual revenue with a target gross
margin of approximately 60%.
History
On April 17, 2020, we entered into the Exchange Agreement with Omnia Corp. and
the beneficial stockholders of Omnia Corp. to acquire 100% of the issued and
outstanding shares of capital stock of Omnia Corp. The transactions contemplated
by the Exchange Agreement were consummated on January 5, 2021 and, pursuant to
the terms of the Exchange Agreement, among other things, all outstanding Omnia
Corp. Shares were exchanged for shares of our common stock, par value $0.001 per
share, based on the exchange ratio of one share of our common stock for every
one Omnia Corp. Share. Accordingly, we acquired 100% of Omnia Corp. in exchange
for the issuance of 10,000,000 shares of our common stock and Omnia Corp. became
our wholly-owned subsidiary. As of the Closing, Mr. Amer Samad, formerly our
sole director and executive officer, agreed to cancel 52,656,888 (pre-stock
split) shares of our common stock owned beneficially and of record by him as
part of the conditions to Closing, which were cancelled immediately after the
Closing. We also issued an aggregate of 1,269,665 shares of common stock on
January 5, 2021 as a result of the conversion in accordance with their terms of
outstanding convertible promissory notes in the aggregate principal amount of
approximately $539,000.
As of immediately prior to the closing of the Acquisition, we entered into an
Assignment and Assumption Agreement with RZI Consulting LLC (the "Assignment
Agreement"), pursuant to which RZI Consulting LLC assumed substantially all of
our remaining assets and liabilities through the closing of the Acquisition.
Accordingly, as of the closing of the Acquisition, we had no assets or
liabilities (other than relating to general and administrative expenses).
Significant Accounting Policies and Estimates
The discussion and analysis of the financial condition and results of operations
are based upon the financial statements, which have been prepared in accordance
with accounting principles generally accepted in the United States. The
preparation of consolidated financial statements in conformity with accounting
principles generally accepted in the United States requires us to make estimates
and assumptions that affect the reported amounts of assets and liabilities,
disclosure of any contingent liabilities at the financial statement date and
reported amounts of revenue and expenses during the reporting period. On an
on-going basis we review our estimates and assumptions. The estimates were based
on historical experience and other assumptions that we believe to be reasonable
under the circumstances. Actual results are likely to differ from those
estimates under different assumptions or conditions, but we do not believe such
differences will materially affect our financial position or results of
operations.
Results of Operations
We have incurred recurring losses to date. 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.
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Fiscal Quarter Ended September 30, 2021 Compared to Fiscal Quarter Ended
September 30, 2020
Revenues
Total revenue was $57,809 for the fiscal quarter ended September 30, 2021,
compared to $ 75,000 for the fiscal quarter ended September 30, 2020. The
decreased revenue during the 2021 period is due to a shift of selling equipment
to a shared revenue program with our customers implemented in the first fiscal
quarter of 2021. The Company also obtained PPP loan forgiveness of approximately
$147,000 for the fiscal quarter ended September 30, 2021.
Cost of Goods Sold
Total cost of goods sold was $8,477 for the fiscal quarter ended September 30,
2021, compared to $70,826 for the fiscal quarter ended September 30, 2020. The
decrease in cost of goods sold during the 2021 period was due to the Company
moving its business model to primarily usage memberships or revenue share with
partners, where the Company retains ownership of the equipment and does not
enter into a sales arrangement. Therefore, cost of goods sold is not accounted
for as in a traditional sales model.
Operating Expenses
Total operating expenses was $426,270 for the fiscal quarter ended September 30,
2021, compared to $476,677 for the fiscal quarter ended September 30, 2020.
There was a decrease due to selling and marketing, general and administrative
expenses and payroll expense during the 2021 period as the Company continued to
build its business, offset by higher depreciation and amortization expenses,
related party, legal and professional fees and consulting fees, as compared to
2020.
Interest Expenses
Interest expense was $918,807 for the fiscal quarter ended September 30, 2021,
compared to $378,419 for the fiscal quarter ended September 30, 2020. The
increase in interest expense from 2020 is due to the Company issuing convertible
notes during the period in the amount of $1,090,000, that convert into shares at
a lower cost than the cost that was offered to the current market (the
Beneficial Conversion Feature). The convertible notes convert within 12 months
at $.22/ share and were issued when the market for the shares ranged from $.17
to $.36/share. The Company is recognizing the cost for the price difference in
those shares, which represents the share's intrinsic value and is considered an
additional cost of financing and is recorded as an interest expense for the
period of $771,576.
Net Income (Loss)
The net loss for the fiscal quarter ended September 30, 2021 was $(1,546,286),
compared to a net loss for the fiscal quarter ended September 30, 2020 of
$(850,922). The net loss of $(1,546,286) as of the fiscal quarter ended
September 30, 2021 resulted in a loss per share of (.006) compared to a net loss
of $(850,922) as of September 30, 2020, resulting in a loss per share of (.004).
Six Months Ended September 30, 2021 Compared to Six Months Ended September 30,
2020
Revenues
Total revenue was $94,931 for the six months ended September 30, 2021, compared
to $63,764 for the six months ended September 30, 2020. The increase in revenue
during the 2021 period is due to a shift of selling equipment to a shared
revenue program with our customers implemented in the first fiscal quarter of
2021. The Company also had $443,873 of Income in 2021 from the forgiveness of
its PPP loan under the CARES Act.
Cost of Goods Sold
Total cost of goods sold was $15,010 for the six months ended September 30,
2021, compared to $89,995 for the six months ended September 30, 2020. The
decrease in cost of goods sold during the 2021 period was mainly due to the
Company reviewing the value of obsolete items in inventory in 2020 and writing
this down by charging to cost of goods sold. Additionally, the Company is moving
its business model to primarily usage memberships or revenue share with
partners, where the Company retains ownership of the equipment and does not
enter into a sales arrangement. Therefore, cost of goods sold is not accounted
for as in a traditional sales model.
Operating Expenses
Total operating expenses was $682,476 for the six months ended September 30,
2021, compared to $842,002 for the six months ended September 30, 2020. There
was a decrease due to selling and marketing, general and administrative expenses
and payroll expense during the 2021 period as the Company continued to build its
business, offset by higher depreciation and amortization expenses, related
party, legal and professional fees and consulting fees, as compared to 2020.
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Interest Expenses
Interest expense was $1,045,638 for the six months ended September 30, 2021,
compared to $364,915 for the six months ended September 30, 2020. The increase
in interest expense from 2020 is due to the Company issuing convertible notes
during the period in the amount of $1,090,000, that convert into shares at a
lower cost than the cost that was offered to the current market (the Beneficial
Conversion Feature). The convertible notes convert within 12 months at $.22/
share and were issued when the market for the shares ranged from $.17 to $.36/
share. The Company is recognizing the cost for the price difference in those
shares, which represents the share's intrinsic value and is considered an
additional cost of financing and is recorded as an interest expense for the
period of $771,576.
Net Income (Loss)
The net loss for the six months ended September 30, 2021 was $(1,936,318),
compared to net loss for the six months ended September 30, 2020 of
$(1,233,148). The net loss of $(1,936,318) as of the six months ended September
30, 2021 resulted in a loss per share of (.008), compared to a net loss of
$(1,233,148) as of September 30, 2020, resulting in a loss per share of (.005).
Liquidity and Capital Resources
We have historically funded operations through the issuance of loans, evidenced
by convertible and non-convertible promissory notes. Since inception, we have
raised an aggregate of $8,891,158 through the sale of such promissory notes, of
which approximately $5,392,984 principal amount remains outstanding and either
is currently due and continuing to accrue default interest, or will be due in
2021. Additionally, in 2021 we received funding of $294,825, for a total of $
588,891, pursuant to the federal Paycheck Protection Program under the
Coronavirus Aid, Relief and Economic Security (CARES) Act, of which
approximately $444,000 was forgiven in May and August 2021, and approximately
$148,000 was forgiven in October 2021.
Based on our current burn rate, we need to raise additional capital in the short
term to fund operations, including the opening of Relaxation Centers, and meet
expected future liquidity requirements, as well as to repay our remaining
existing total indebtedness of approximately $6,403,103, if not converted to
equity, or we will be required to curtail or terminate some or all of our
installations or our operations. We are continuously in discussions to raise
additional capital, which may include or be a combination of convertible or term
loans and equity which, if successful, will enable us to continue operations
based on our current burn rate, for the next 12 months; however, we cannot give
any assurance at this time that we will successfully raise all or some of such
capital or any other capital. In addition, the recent COVID-19 pandemic has
presented unprecedented challenges to businesses and the investing landscape
around the world, including our business. Therefore, there can be no assurance
that management's plans will be successful. We may not be able to negotiate any
such financing arrangements on acceptable terms, if at all. If we are unable to
obtain additional funding on a timely basis, we may be required to curtail or
terminate some or all of our product lines or our operations. Furthermore, at
this time, we do not have an established source of funds sufficient to cover
operating costs after January, 2022. Funds raised, if any, are anticipated to
fund not just repayment of existing obligations, but our ongoing operations
including validating the business model for Relaxation Centers, hiring
additional personnel, and expanding the revenue share model with additional
facilities.
We currently have available funds to repay currently due liabilities of
approximately $67,326 but we do not have available funds to repay note
indebtedness that is expected to become due in 2021, and are exploring
refinancing, extending the maturity date and/or converting some or all of such
indebtedness into equity.
There can be no assurance that necessary debt or equity financing will be
available, or will be available on terms acceptable to us, in which case we may
be unable to meet our obligations or fully implement our business plan, if at
all. These conditions raise substantial doubt about the Company's ability to
continue as a going concern. The accompanying condensed consolidated financial
statements do not include any adjustments to reflect the possible future effects
on recoverability and reclassification of assets or the amounts and
classification of liabilities that may result from the outcome of this
uncertainty.
Additionally, we will need additional funds to respond to business opportunities
including potential acquisitions of complementary technologies, protect our
intellectual property, develop new lines of business, and enhance our operating
infrastructure. While we may need to seek additional funding for any such
purposes, we may not be able to obtain financing on acceptable terms, or at all.
In addition, the terms of our financings may be dilutive to, or otherwise
adversely affect, holders of our common stock.
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As a result of the COVID-19 pandemic and actions taken to slow its spread, the
global credit and financial markets have experienced extreme volatility,
including diminished liquidity and credit availability, declines in consumer
confidence, declines in economic growth, increases in unemployment rates and
uncertainty about economic stability. There can be no assurance that further
deterioration in credit and financial markets and confidence in economic
conditions will not occur. If equity and credit markets deteriorate, it may make
any necessary debt or equity financing more difficult to obtain, more costly
and/or more dilutive. Any of these actions could materially harm our business,
results of operations and future prospects.
Cash Flows
The following table provides a summary of the net cash flow activity for each of
the periods set forth below:
Six Months ended September 30,
2021 2020
Cash used in operating activities $ (1,536,678 ) $ (539,740 )
Cash provided by investing activities
(146,750 ) (2,279,979 )
Cash provided by financing activities 1,721,993 2,703,216
Change in cash
$ 38,565 $ (116,503 )Cash used in operating activities for the six months ended September 30, 2021
was $(1,536,678). Cash used in operating activities for the six months ended
September 30, 2020 was $(539,740). The additional expenses reflect interest on
beneficial conversion feature and costs in leasehold improvements incurred in
preparing our first company store location on Long Island, NY.
Cash provided by investing activities for the six months ended September 30,
2021 was $(146,750), compared to $(2,279,979) for the six months ended September
30, 2020, which consisted of acquiring fixed assets, research and development
and licensing technology.
Cash provided by financing activities for the six months ended September 30,
2021 was $1,721,993, compared to $2,703,216 for the six months ended September
30, 2020, which consisted of decrease of loans payable, advances to related
party for production, and proceeds from issuance of notes.
Going Concern
The independent auditors' report accompanying our March 31, 2021, financial
statements contain an explanatory paragraph expressing substantial doubt about
our ability to continue as a going concern. The financial statements have been
prepared "assuming that we will continue as a going concern," which contemplates
that we will realize our assets and satisfy our liabilities and commitments in
the ordinary course of business.
Our financial statements are prepared using accounting principles generally
accepted in the United States of America applicable to a going concern, which
contemplate the realization of assets and liquidation of liabilities in the
normal course of business. We have incurred continuous losses from operations,
have an accumulated deficit of $(6,251,138) and had a working capital deficit of
$(5,930,448) at September 30, 2021, and have reported negative cash flows from
operations since inception. In addition, we do not currently have the cash
resources to meet our operating commitments for the next twelve months. Our
ability to continue as a going concern must be considered in light of the
problems, expenses, and complications frequently encountered by entrance into
established markets and the competitive nature in which we operate.
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Our ability to continue as a going concern is dependent on our ability to
generate sufficient cash from operations to meet our cash needs and/or to raise
funds to finance ongoing operations and repay debt. There can be no assurance,
however, that we will be successful in our efforts to raise additional debt or
equity capital and/or that our cash generated by any of our future operations
will be adequate to meet our needs. These factors, among others, indicate that
we may be unable to continue as a going concern for a reasonable period of time.
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.
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