The following discussion of our financial condition and results of operations
should be read in conjunction with our financial statements and the related
notes, and other financial information included in this prospectus.
Our Management's Discussion and Analysis contains not only statements that are
historical facts, but also statements that are forward-looking. Forward-looking
statements are, by their very nature, uncertain and risky. Forward-looking
statements are often identified by words like: "believe", "expect", "estimate",
"anticipate", "intend", "project" and similar expressions, or words that, by
their nature, refer to future events. You should not place undue certainty on
these forward-looking statements, which apply only as of the date of this
prospectus. These forward-looking statements are subject to certain risks and
uncertainties that could cause actual results to differ materially from
historical results or our predictions. These risks and uncertainties include
international, national, and local general economic and market conditions; our
ability to sustain, manage, or forecast growth; our ability to successfully make
and integrate acquisitions; new product development and introduction; existing
government regulations and changes in, or the failure to comply with, government
regulations; adverse publicity; competition; the loss of significant customers
or suppliers; fluctuations and difficulty in forecasting operating results;
change in business strategy or development plans; business disruptions; the
ability to attract and retain qualified personnel; the ability to protect
technology; the risk of foreign currency exchange rate; and other risks that
might be detailed from time to time in our filing with the Securities and
Exchange Commission. 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 prospectus, particularly in "Risk Factors".
Although the forward-looking statements in this Registration Statement reflect
the good faith judgment of our management, such statements can only be based on
facts and factors currently known by them. Consequently, and because
forward-looking statements are inherently subject to risks and uncertainties,
the actual results and outcomes may differ materially from the results and
outcomes discussed in the forward-looking statements. You are urged to carefully
review and consider the various disclosures made by us in herein and in our
other reports as we attempt to advise interested parties of the risks and
factors that may affect our business, financial condition, and results of
operations and prospects.
Our financial statements are stated in United States Dollars (USD or US$) and
are prepared in accordance with United States Generally Accepted Accounting
Principles. All references to "common stock" refer to the common shares in our
capital stock.
Overview
Stealth Technologies, Inc. (the "Company") was incorporated in the state of
Nevada on May 27, 2010 under the name "Pub Crawl Holdings, Inc". On March 11,
2014, the Company announced its name change from Pub Crawl Holdings to Excelsis
Investments, Inc. On May 26, 2016, the Company changed its name from Excelsis
Investments Inc. to Stealth Technologies, Inc. The Company is focused on the
sale of consumer electronics and other products through direct response
channels.
The Company is engaged in the sales and distribution of consumer electronics and
other safety products through Direct Response and live shopping channels.
Stealth represents leading consumer safety brands such as Help Now and its
associated product the 911 Help Now Emergency Pendent. Stealth continues to
leverage its industry knowledge to expand its sales growth through additional
product and direct shopping channels bringing on additional product suppliers
such as Edison Nation.
The Company's primary product currently is the 911 Help Now Emergency an
emergency alert system designed to accompany a consumer's lifestyle everywhere
they travel while providing 24/7 emergency response 2-way voice communication
activated by a "one touch" emergency button, packaged in a splash resistant,
compact encasement, and powered by the convenience of AAA batteries. The
emergency alert system can be used while performing any range of indoor or
outdoor activities and by capitalizing on proprietary technology we are able to
offer the 911 Help Now product for no recurring monthly charge. Following the
success of the 911 Help Now product we have launched several variations of the
911 product as well as other safety goods including decibel alarms, strobe
lights, emergency keychains and more.
The Company's only subsidiary, Stealth Technologies, Inc. was incorporated in
the State of Florida on November 6, 2012 under the name of Mobile Dynamic
Marketing, Inc. On May 18, 2016, the Company filed an Amendment to the Articles
of Incorporation to effectively change the name to Stealth Card, Inc. On March
10, 2018, the Company filed an Amendment to the Articles of Incorporation to
effectively change the name to Stealth Technologies, Inc. As of September 30,
2019, there has been minimal activity within the subsidiary.
Current Business
On February 6, 2019, the Company entered into a Forbearance Agreement (the
"Agreement") with BHP Capital NY Inc., whereby the Company agreed to increase
the principal balance of the Amended and Restated Convertible Promissory Note
dated August 13, 2018 to $301,706.
On March 9, 2019, the Company entered into a Loan Extension Agreement with
Crossover Capital II Fund, LLC ("Crossover") extending the due date of the May
23, 2017 Note issued by the Company to Crossover to April 15, 2019. As part of
the extension, the Company was to pay Crossover $6,000. The Company made payment
on March 29, 2019.
On May 15, 2019, the Company entered into a Consulting Agreement (the
"Agreement") with Jimmy Wayne Anderson for services related to the Company's
filings with the Securities and Exchange Commission. Under the terms of the
Agreement, Mr. Anderson is to be paid $3,000 per month and receive 20,000,000
restricted shares of the Company's common stock.
-5-
On June 12, 2019, the Company entered into a Securities Purchase Agreement (the
"Agreement") with each of Armada Investment Fund, LLC, BHP Capital NY Inc. and
Fourth Man, LLC (collectively, the "Investors") wherein the Company issued each
of the Investors a Convertible Promissory Note (the "Notes") in the amount of
$22,000 for a total of $66,000. The Notes have a term of nine (9) months and are
due on March 12, 2020 and bear interest at 12% annually. As part and parcel of
the foregoing transactions, each of the Investors was issued a warrant granting
the holder the right to purchase up to 2,750,000 shares of the Company's common
stock at an exercise price of $0.008 for a term of 5-years. The transactions
closed on June 19, 2019. In addition, 36,000,000 shares of the Company's common
stock have been reserved at Action Stock Transfer Corporation, our transfer
agent, for possible issuance upon the conversion of the Notes into shares of our
common stock.
On June 13, 2019, Mace Security International, Inc. ("Plaintiff") filed a
complaint against the Company ("Defendant") with the United States District
Court of the Middle District of Florida, alleging that the Defendant failed to
pay the Plaintiff for products delivered that were ordered by the Defendant. The
Plaintiff states the amount due by Defendant is $322,034. The case is currently
in the discovery phase.
On July 5, 2019, Timothy Cabrera submitted his resignation from his position as
Chief Operating Officer with Stealth. Mr. Cabrera will continue to serve as a
member of the Board.
On July 17, 2019, the Company entered into a Settlement Agreement (the
"Settlement Agreement") by and between the Company, Life Alert Emergency
Response, Inc., a California corporation ("Life Alert"), HSNi, LLC, a Delaware
limited liability company ("HSNi"), HSN, Inc., a Delaware corporation ("HSN")
and International Marketing Group, Inc., a Missouri corporation ("IMG", and
together with the Company, HSNi and HSN the "Defendants") pursuant to which Life
Alert dismissed with prejudice all pending claims against the Defendants in
Delaware Court and Missouri Court (the "Dismissals"). In consideration for the
Dismissals, the Defendants jointly and severally agreed to pay Life Alert Five
Hundred Thousand dollars (USD $500,000) no later than July 22, 2019. Payment was
made by the Company on July 19, 2019. The Company also agreed to customary
releases as further contained in the Settlement Agreement.
On July 18, 2019 (the "Issuance Date"), the Company issued a convertible
promissory note (the "Note") in the principal amount of One Hundred Fifty Three
Thousand dollars (USD $153,000) (the "Principal Amount") to an entity
("Investor") controlled by Brian McFadden, the Company's President and Chief
Executive Officer and Tim Cabrera, a member of the Board of Directors of the
Company. The Investor advanced the Principal Amount to the Company in connection
with Settlement Agreement and Reconciliation Agreement. The Note accrues
interest at a rate of 5% per annum and may be prepaid without penalty. Upon six
(6) months from the Issuance Date, the Investor has the right to convert the
Note into shares of the Company's common stock at a price per share of $0.05.
On July 19, 2019, the Company entered into a Reconciliation and Settlement
Agreement (the "Reconciliation Agreement") by and between IMG and Stealth
Technologies Inc., a Florida corporation and wholly owned subsidiary of the
Company ("Stealth Tech"), Atlas Direct, LLC ("Atlas", and together with the
Company and Stealth Tech, "Stealth") and the Company whereby IMG is to pay
Stealth the Unliquidated Return Reserve Balance (as defined in the
Reconciliation Agreement) within twenty (20) days of the Reconciliation
Agreement. Stealth shall also pay One Hundred Fifty Thousand dollars (USD
$150,000) as contribution for the subsequent payment to be made in the
Settlement Agreement. The Company also agreed to customary releases as further
contained in the Settlement Agreement.
On August 1, 2019, the Company executed a new Board of Directors Services
Agreement with Brian McFadden. Under the terms of the Agreement, commencing
August 1, 2019 the Company is to compensate Mr. McFadden via the issuance of Two
Million (2,000,000) shares of its common stock for each year for which Mr.
McFadden serves on the Board of Directors.
On August 1, 2019, the Company executed a new Board of Directors Services
Agreement with Timothy Cabrera. Under the terms of the Agreement, commencing
August 1, 2019 the Company is to compensate Mr. Cabrera via the issuance of Two
Million (2,000,000) shares of its common stock for each year for which Mr.
Cabrera serves on the Board of Directors.
On September 6, 2019, the Company terminated the engagement of MaloneBailey LLP
as its independent auditing firm. On this same date, the Company engaged Michael
T. Studer CPA P.C. as its independent auditor.
On September 16, 2019, the Company's Board of Directors elected Alexander J.
Clair as a director of Stealth Technologies, Inc.
On September 16, 2019, Brian McFadden submitted his resignation from his
position as Chief Executive Officer with the Company, to the Company's Board,
effective at 11:59 pm September 16, 2019. Mr. McFadden will continue to serve as
a member of the Board and will work as a consultant with the Company to manage
the Company's DRTV operations. Effective upon the resignation of Mr. McFadden as
the Company's Chief Executive Officer, the Company's Board appointed Alexander
J. Clair to serve as the Chief Executive Officer of the Company. Mr. Clair will
assume the additional roles of Principal Financial Officer and Secretary.
On September 16, 2019, the Company entered into a Securities Purchase Agreement
(the "Agreement") with each of Armada Investment Fund, LLC and BHP Capital NY
Inc. (collectively, the "Investors") wherein the Company issued each of the
Investors a Convertible Promissory Note (the "Notes") in the amount of $18,000
for a total of $36,000. The Notes have a term of nine (9) months are due on June
16, 2020 and bear interest at 12% annually. As part and parcel of the foregoing
transactions, each of the Investors was issued a warrant granting the holder the
right to purchase up to 3,000,000 shares of the Company's common stock at an
exercise price of $0.005 for a term of 5-years. The transactions closed on
September 17, 2019. In addition, 30,000,000 shares of the Company's common stock
have been reserved at Action Stock Transfer Corporation, our transfer agent, for
possible issuance upon the conversion of the Notes into shares of our common
stock.
On September 24, 2019, the Board of Directors elected to amend the compensation
for each of Timothy Cabrera and Brian McFadden for serving on the Board of
Directors. Starting on October 1, 2019, each director shall receive 2,000,000
restricted shares of the Company's common stock and $10,000 for each year the
director serves on the Board of Directors.
On September 27, 2019, the Company executed a new Board of Directors Services
Agreement with Alexander J. Clair. Under the terms of the Agreement commencing
October 1, 2019, the Company is to compensate Mr. Clair via the issuance of
2,000,000 restricted shares of its common stock and $10,000 for each year for
which Mr. Clair serves on the Board of Directors.
-6-
Results of Operations
For the Nine Months Ended September 30, 2019 and 2018
Our results of operations for the nine months ended September 30, 2019 and 2018
are summarized below:
Nine Months Ended Nine Months Ended
September 30, 2019 September 30, 2018
Revenues $ 432,461 $ 2,144,820
Cost of Sales $ (79,181 ) $ (1,720,907 )
Total operating expenses $ 1,060,027 $ 915,767
Loss from operations $ (706,747 ) $ (491,854 )
Net income (loss) $ (5,426,582 ) $ (377,292 )
For the nine months ended September 30, 2019 revenues decreased by approximately
$1,712,359, or 79.84%, as compared to the nine months ended September 30, 2018
due to the ongoing lawsuit with Life Alert Emergency Response, Inc. Revenue
generated by the Company during the nine months ended September 30, 2019 (though
July 19, 2019) was held in a legal fund at International Marketing Group for
future legal and settlement payments to be made. Please seeITEM 1. LEGAL
PROCEEDINGS for further information.
For the nine months ended September 30, 2019, cost of sales decreased by
approximately $1,641,726 or 95.40%, as compared to the nine months ended
September 30, 2018. Cost of sales decreased due to lower product shipment.
For the nine months ended September 30, 2019, gross profit amounted to $353,280
as compared to $423,913 in the nine months ended September 30, 2018, amounting
to a decrease of $70,633, or 16,66%. For the nine months ended September 30,
2019 and 2018, gross profit margins were at 81.69% and 19.76%, respectively.
Gross Margins were increased due to lower cost of goods sold.
For the nine months ended September 30, 2019 and 2018, we incurred operating
expenses of $1,060,027 and $915,767, respectively, and a net loss of $5,426,582
and $377,292, respectively. The operating expenses are costs related to
amortization, general and administrative, payroll and professional fees.
Operating expenses increased by approximately $144,260 or 15.75%.
Liquidity and Capital Resources
For the Nine Months Ended September 30, 2019 and 2018
The following table provides detailed information about our net cash flows:
For the For the
Nine Months Ended Nine Months Ended
September 30, 2019 September 30, 2018
Cash Flows
Net cash used in operating activities $ (330,819 ) $ (336,666 )
Net cash used in investing activities $ - $ (9,500 )
Net cash provided by financing activities $ 361,000 $ 484,000
Net change in cash $ 30,181 $ 137,834
Operating Activities
For the Nine Months Ended September 30, 2019 and 2018
Cash provided by operating activities for the nine months ended September 30,
2019 consisted of a net loss as well as the effect of changes in operating
assets and liabilities as well as adjustments to reconcile net to loss to net
cash used in operating activities. Cash used in operating activities of $330,819
consisted of a net loss of $(5,426,582). The net loss was offset by accretion of
discount on convertible notes of $174,824, amortization of equipment of $3,180,
share based compensation of $17,086 and change in fair value of derivative
liabilities of $4,477,785.
Cash used in operating activities for the nine months ended September 30, 2018
consisted of a net loss as well as the effect of changes in operating assets and
liabilities as well as adjustments to reconcile net income to net cash used in
operating activities. Cash used in operating activities of $336,666 consisted of
a net loss of $377,292. The net loss was offset by accretion of discount on
convertible notes of $337,627, amortization of intangible assets of $951, change
in fair value of make whole expense with related party of $(455,741), gain on
settlement of liability of $(23,776), loss on change of fair value of derivative
liabilities of $5,087, and share based compensation of $143,466.
Investing Activities
For the Nine Months Ended September 30, 2019 and 2018
For the nine months ended September 30, 2019 and 2018, we used cash flow from
investing activities of $- and $(9,500), respectively.
-7-
Financing Activities
For the Nine Months Ended September 30, 2019 and 2018
For the nine months ended September 30, 2019 and 2018 net cash provided by
financing activities was $361,000 and $484,000, respectively. Most cash provided
was through convertible debentures and was overset by repayments and financing
fees.
We currently have no external sources of liquidity, such as arrangements with
credit institutions or off-balance sheet arrangements that will have or are
reasonably likely to have a current or future effect on our financial condition
or immediate access to capital.
We are dependent on our product sales to fund our operations and may require the
sale of additional common stock to maintain operations. Our officers and
directors have made no written commitments with respect to providing a source of
liquidity in the form of cash advances, loans, and/or financial guarantees.
If we are unable to raise the funds required to fund our operations, we will
seek alternative financing through other means, such as borrowings from
institutions or private individuals. There can be no assurance that we will be
able to raise the capital we need for our operations from the sale of our
securities. We have not located any sources for these funds and may not be able
to do so in the future. We expect that we will seek additional financing in the
future. However, we may not be able to obtain additional capital or generate
sufficient revenues to fund our operations. If we are unsuccessful at raising
sufficient funds, for whatever reason, to fund our operations, we may be forced
to cease operations. If we fail to raise funds, we expect that we will be
required to seek protection from creditors under applicable bankruptcy laws.
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