The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with "Financial Statements and
Supplementary Data" and our consolidated financial statements, related notes,
and other financial information appearing in this Annual Report. In addition to
historical consolidated financial information, the following discussion contains
forward-looking statements that reflect our plans, estimates, and beliefs that
involve significant risks and uncertainties. Our actual results could differ
materially from those discussed in the forward-looking statements. Factors that
could cause or contribute to these differences include those discussed below and
elsewhere in this Annual Report, particularly in "Risk Factors" and
"Forward-Looking Statements."
Overview
The Company, through its two operating subsidiaries, NuAxess and PR345 business,
is engaged in providing a full spectrum of benefit and insurance consulting
services, principally to smaller and mid-sized employer, offering innovative
means of providing their employees with multiple levels of employee benefits
including major medical health insurance, as well as providing financial and
business consulting services. The Company has entered into third-party
agreements with select strategic partners to provide comprehensive programs
administered through its vendor relationship agreements. The Company offers
programs that include innovative and affordable major medical health insurance
plans and other employee benefit products and services. The NuAxess Smart
Healthcare Plan is a proprietary health plan that is an ERISA-qualified,
self-insured plan, that includes wellness and prevention programs, among other
features. Our primary markets are small and mid-size group employers, sometimes
referred to as the 'gig' economy.
Material Developments During Fiscal 2019
Results of Operations
Comparison of the fiscal year ended September 30, 2019 to the fiscal year ended
September 30, 2019
Note: In April 2019, as disclosed in the Company's Form 8-K reports filed with
the SEC on March 27, 2019 and April 24, 2019, the Company ceased operating its
MMMM Mining Subsidiaries and commenced operations of its health insurance and
employee benefits subsidiaries, PR345, Inc., a newly organized Texas corporation
and NuAxess 2, Inc., a newly organized Delaware corporation. As a result, the
Results of Operations for the years ended September 30, 2019 and September 30,
2018 are not comparable.
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Revenue
The Company generated no revenues from its former mining operations during the
two fiscal years ended September 30, 2019 and 2019. In April 2019, the Company
experienced a change in control transaction, as reported in its Forms 8-K filed
in March and April 2019, referenced above, as a result of which it divested 75%
of the MMMM Mining Subsidiaries to an entity formed and controlled by the
Company's former CEO and Chairman, Sheldon Karasik. At the same time, the
Company commenced operations of its health insurance and employee benefits
subsidiaries. Reference is made to Item 1. Business and specifically to the
disclosure under the subcaptions "Company Information" and "New Business
Developments" above
Expenses
Marketing expenses for the fiscal year ended September 30, 2019 was $11,550
compared to $0 for the same period of the prior year, when the Company's mining
operations were not active and, in any event, did not require any marketing
expenses.
Operating expenses for the fiscal year ended September 30, 2019 were $1,591,331
compared to $ 455,682 for the same period of the prior year, representing an
increase of 249%, due principally to an increase in general and administrative
expense, legal expense, and travel expense. The main components of general and
administrative expenses in fiscal 2019 consisted of approximately $686,452 in
consulting fees, approximately $19,400 in shares issued for services, and
approximately $19,400 in investor relations fees. Included in the shares issued
for services was only a minimal amount for the Series B preferred shares issued
to the CEO for 51% of the voting control of the Company. The legal and
professional fees are primarily fees related to the Company's registration
statement on Form S-1 declared effective on March 8, 2019, which registration
statement was initially filed with the SEC on October 15, 2018, after the end of
the fiscal year ended September 30, 2018. In addition, the Company incurred
legal and professional fees of 418,917. During the prior year, the Company's
legal and professional fees were minimal 74,662.
Working Capital
The Company's net loss for the years ended September 30, 2019 and September 30,
2018 were $4,053,212 and $463,334, respectively. The $3,589,878 increase in net
loss for fiscal year 2019, as compared to fiscal year 2018, is due primarily to
an increase in non-cash gains and losses related to new convertible debt
financings and acquisition and disposal of subsidiaries and also to an increase
in general and administrative expenses, legal and professional fees, and travel
as a result of the change in business focus.
During the fiscal year ended September 30, 2019, our principal sources of
liquidity included cash received from convertible notes payable and sales of our
common stock. During the fiscal year ended September 30, 2018 our principal
source of liquidity included proceeds from sales of our common stock. We intend
to use new capital in the form of new equity or debt to further advance
objectives. Net cash used by operating activities totaled $1,087,437 and
$283,411 for the years ending September 30, 2019 and 2018, respectively. The
$804,027 increase between 2019 and 2018 is primarily attributed to the increase
in non-cash costs associated with new convertible debt and acquisitions and
disposals and an increase in overall spending of the Company during 2019. Net
cash provided by financing activities totaled $1,100,237and $280,300 for the
years ending September 30, 2019 and 2018, respectively. The change between 2019
and 2018 is primarily attributed to an increase in convertible debt financing
and issuances of common stock for cash in 2019 as compared to 2018. The cash
increased to $14,700 at September 30, 2019 from $1,900 at September 30, 2018,
principally reflecting the net cash used by operations during the period, offset
by the sales of common stock.
As reflected in our accompanying financial statements, other than approximately
$950,000 received from the issuance of convertible notes during the fiscal year
ended September 30, 2019, we have limited cash, negative working capital, no
revenues and an accumulated deficit of $7,079,690 and $3,026,479 for the years
ending September 30, 2019 and September 30, 2018, respectively. Notwithstanding
our belief that we will be able to continue to raise capital through the
issuance of convertible notes at terms and condition acceptable to the Company,
of which there can be no assurance, these factors indicate that we may be unable
to continue in existence in the absence of receiving additional funding. In
addition to our operating expenses which average approximately $165,000 per
month, management's plans for the next twelve months include approximately $2.5
million of cash expenditures for development and expansion of our health
insurance and employee benefits business operations. While there can be no
assurance, the Company believes that it will be able to generate su
Dividend Policy
We have never declared or paid, and do not anticipate declaring or paying, any
cash dividends on any of our capital stock. We do not anticipate paying any
dividends in the foreseeable future, and we currently intend to retain all
available funds and any future earnings for use in the operation of our business
and to finance the growth and development of our business. Future determinations
as to the declaration and payment of dividends, if any, will be at the
discretion of our board of directors and will depend on then-existing
conditions, including our operating results, financial condition, contractual
restrictions, capital requirements, business prospects and other factors our
board of directors may deem relevant. Our loan agreements limit our ability to
pay dividends or make other distributions or payments on account of our common
stock, in each case subject to certain exceptions.
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Off-Balance Sheet Arrangements
The Company has not undertaken any off-balance sheet transactions or
arrangements.
Recent Accounting Pronouncements
Recent accounting pronouncements which may affect the Company are described in
Note 2 - Summary of Significant Accounting Policies, subsection "New Accounting
Requirements and Disclosures" in the annual financial statements below.
Limitations on Liability and Indemnification Matters
We intend to amend our bylaws to contain provisions that limit the liability of
our current and former directors for monetary damages to the fullest extent
permitted by Idaho law. Any limitation of liability pursuant to Idaho law does
not apply to liabilities arising under federal securities laws and does not
affect the availability of equitable remedies such as injunctive relief or
rescission.
Our amended bylaws will further authorize us to indemnify our directors,
officers, employees, and other agents to the fullest extent permitted by Idaho
law. We intend our amended bylaws also to provide that, on satisfaction of
certain conditions, we will advance expenses incurred by a director or officer
in advance of the final disposition of any action or proceeding, and permit us
to secure insurance on behalf of any officer, director, employee, or other agent
for any liability arising out of his or her actions in that capacity regardless
of whether we would otherwise be permitted to indemnify him or her under the
provisions of Idaho law. We expect to enter into agreements to indemnify our
directors, executive officers, and other employees as determined by the board of
directors. With certain exceptions, these agreements will provide for
indemnification for related expenses including attorneys' fees, judgments,
fines, and settlement amounts incurred by any of these individuals in any action
or proceeding. We believe that these amended bylaw provisions and
indemnification agreements are necessary to attract and retain qualified persons
as directors and officers.
The intended limitation of liability and indemnification provisions in our
amended bylaws may discourage stockholders from bringing a lawsuit against our
directors for breach of their fiduciary duty. They may also reduce the
likelihood of derivative litigation against our directors and officers, even
though an action, if successful, might benefit us and other stockholders.
Further, a stockholder's investment may be adversely affected to the extent that
we pay the costs of settlement and damage awards against directors and officers
as required by these indemnification provisions.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted for directors, executive officers, or persons controlling us, we
have been informed that, in the opinion of the SEC, such indemnification is
against public policy as expressed in the Securities Act and is therefore
unenforceable.
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