The following management's discussion and analysis should be read in conjunction with our historical financial statements and the related notes. The management's discussion and analysis contains forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations and intentions. Any statements that are not statements of historical fact are forward-looking statements. When used, the words "believe," "plan," "intend," "anticipate," "target," "estimate," "expect" and the like, and/or future tense or conditional constructions ("will," "may," "could," "should," etc.), or similar expressions, identify certain of these forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements in this Report. The Company's actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of several factors. The Company does not undertake any obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this Report.
As the result of the transactions of which
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The discussion and analysis of our financial condition and results of operations
are based on our consolidated financial statements, which we have prepared in
accordance with
Results of Operations for the Years ended
The following table sets forth the summary income statement for the years ended
For the Year Ended December 31, December 31, 2018 2017 Revenues$ 57,973 $ 1,096 Operating Expenses$ (4,823,936 ) $ (1,981,944 ) Other Expense, net$ (4,745,439 ) $ (3,015,249 ) Net Loss$ (9,511,402 ) $ (4,996,097 )
Revenues: From inception, the Company has generated minimum revenues due to being in the development stage with regard to its technology and channel partner relationships.
Operating Expenses:Operating expenses consist primarily of compensation and related costs for personnel and facilities, and include costs related to our facilities, finance, human resources, information technology and fees for professional services. Professional services are principally comprised of outside legal, audit, information technology consulting, marketing, investor relations and outsourcing services.
Operating expenses increased by 143% during the year ended
· An increase in stock based compensation to directors of approximately$2.2 million . · An increase in stock based compensation to consultants of approximately 0.8 million. · An accumulation of minor decreases across other operating expenses categories of approximately 0.2 million.
Other expenses, net: Other expense, net consists primarily of interest expense
primarily related to the Company's convertible promissory notes and notes
payable and includes non-cash amortization of debt discounts of
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In addition, the Company incurred an aggregate of
During 2018, the Company reduced previously issued warrants exercisable at
In 2018, the Company issued convertible notes payable with variable conversion
features which included embedded derivatives. As such, the Company is required
to bifurcate the fair value of the derivative and mark-to-market each reporting
period. During the year ended
Overall, other expense, net - increased by
Liquidity and Capital Resources
The following table summarizes total current assets, liabilities and working
capital at
Year ended December 31, December 31, Increase/ 2018 2017 (Decrease) Current Assets$ 45,447 $ 33,156 $ 12,291
Current Liabilities
As of
We have incurred net operating losses and operating cash flow deficits since
inception. We have been funded primarily by debt, to execute on our business
plan and for working capital. Our principal source of liquidity is our cash. At
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We are obligated to file annual, quarterly and current reports with the
Management has determined that additional capital will be required in the form of equity or debt securities. In addition, if we cannot raise additional short term capital we will be forced to continue to further accrue liabilities due to our limited cash reserves. There are no assurances that management will be able to raise capital on terms acceptable to the Company. If we are unable to obtain sufficient amounts of additional capital, we may be required to reduce the scope of our planned development, which could harm our business, financial condition and operating results. If we obtain additional funds by selling any of our equity securities or by issuing common stock to pay current or future obligations, the percentage ownership of our stockholders will be reduced, stockholders may experience additional dilution, or the equity securities may have rights preferences or privileges senior to the common stock. If adequate funds are not available to us when needed on satisfactory terms, we may be required to cease operating or otherwise modify our business strategy.
Going Concern and Management's Liquidity Plans
As reflected in the consolidated financial statements, the Company had an
accumulated deficit at
The ability of the Company to continue its operations is dependent on management's plans, which include the raising of capital through debt and/or equity markets, with some additional funding from other traditional financing sources, including term notes, until such time that funds provided by operations are sufficient to fund working capital requirements. The Company may need to incur additional liabilities with certain related parties to sustain the Company's existence. There can be no assurance that the Company will be able to raise any additional capital.
The Company may also require additional funding to finance the growth of our anticipated future operations as well as to achieve its strategic objectives. There can be no assurance that financing will be available in amounts or terms acceptable to the Company, if at all. In that event, the Company would be required to change its growth strategy and seek funding on that basis, if at all.
The Company's plan regarding these matters is to raise additional debt and/or equity financing to allow the Company the ability to cover its current cash flow requirements and meet its obligations as they become due. There can be no assurances that financing will be available or if available, that such financing will be available under favorable terms. In the event that the Company is unable to generate adequate revenues to cover expenses and cannot obtain additional financing in the near future, the Company may seek protection under bankruptcy laws. The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. These financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.
The spread of a novel strain of coronavirus (COVID-19) around the world in the
first half of 2020 has caused significant volatility in
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During the year ended
Each of the Notes is convertible at an initial price equal to
Summary Cash flows for the years ended
Year EndedDecember 31 ,December 31, 2018 2017
Net cash used in operating activities
-$ (37,500 )
Net cash provided by financing activities
Cash Used in Operating Activities
Our primary uses of cash from operating activities include payments to consultants for research and development, compensation and related costs, legal and professional fees, computer and internet expenses and other general corporate expenditures.
Cash used in operating activities in 2018 consisted of net loss adjusted for
certain non-cash items such as equity-based compensation expense of
Cash Used in Investing Activities
No cash used in investing activities for the year ended
Cash Provided by Financing Activities
Cash provided by financing activities consists primarily of net proceeds from
issuance or repayments of notes payable, convertible promissory notes and
warrant exercises for the year ended
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Cash provided by financing activities increased from the year ended
Recent Accounting Pronouncements
See Note 3 to the consolidated financial statements included elsewhere in this Filing.
Critical Accounting Policies
Our financial statements and related public financial information are based on
the application of accounting principles generally accepted in
Our significant accounting policies are summarized in Note 3 of our consolidated financial statements. While all these significant accounting policies impact our financial condition and results of operations, we view certain of these policies as critical. Policies determined to be critical are those policies that have the most significant impact on our financial statements and require management to use a greater degree of judgment and estimates. Actual results may differ from those estimates. Our management believes that given current facts and circumstances, it is unlikely that applying any other reasonable judgments or estimate methodologies would cause effect on our consolidated results of operations, financial position or liquidity for the periods presented in this report.
We believe the following critical accounting policies and procedures, among others, affect our more significant judgments and estimates used in the preparation of our consolidated financial statements:
Use of Estimates
The preparation of consolidated financial statements in conformity with
Accounting for Warrants
The Company accounts for the issuance of common stock purchase warrants issued in connection with debt and equity offerings in accordance with the provisions of ASC 815, Derivative Instruments and Hedging Activities ("ASC 815"). The Company classifies as equity any contracts that (i) require physical settlement or net-share settlement or (ii) gives the Company a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement). The Company classifies as assets or liabilities any contracts that (i) require net-cash settlement (including a requirement to net-cash settle the contract if an event occurs and if that event is outside the control of the Company) or (ii) gives the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement).
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The Company assessed the classification of its common stock purchase warrants as of the date of each equity offering and determined that such instruments met the criteria for equity classification, as the settlement terms indicate that the instruments are indexed to the entity's underlying stock.
Derivative Instrument Liability
The Company accounts for derivative instruments in accordance with ASC 815,
which establishes accounting and reporting standards for derivative instruments
and hedging activities, including certain derivative instruments embedded in
other financial instruments or contracts and requires recognition of all
derivatives on the balance sheet at fair value, regardless of hedging
relationship designation. Accounting for changes in fair value of the derivative
instruments depends on whether the derivatives qualify as hedge relationships
and the types of relationships designated are based on the exposures hedged. At
Off Balance Sheet Arrangements:
We do not have any off-balance sheet arrangements, financings, or other relationships with unconsolidated entities or other persons, also known as "special purpose entities" (SPEs).
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