The following is management's discussion and analysis of certain significant
factors that have affected our financial position and operating results during
the periods included in the accompanying consolidated financial statements, as
well as information relating to the plans of our current management. This report
includes forward-looking statements. Generally, the words "believes,"
"anticipates," "may," "will," "should," "expect," "intend," "estimate,"
"continue," and similar expressions or the negative thereof or comparable
terminology are intended to identify forward-looking statements. Such statements
are subject to certain risks and uncertainties, including the matters set forth
in this report or other reports or documents we file with the Securities and
Exchange Commission from time to time, which could cause actual results or
outcomes to differ materially from those projected. Undue reliance should not be
placed on these forward-looking statements which speak only as of the date
hereof. We undertake no obligation to update these forward-looking statements.
While our financial statements are presented on the basis that we are a going
concern, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business over a reasonable length of time,
our auditors have raised a substantial doubt about our ability to continue as a
going concern.
Results of Operations for the years ended September 30, 2021 and 2020:
The following tables set forth key components of our results of operations for
the periods indicated, both in dollars and as a percentage of sales revenue for
the periods indicated:
2021 % 2020 %
Revenue $ 94,626 100.0 $ 48,531 100.0
COGS $ 41,872 44.3 $ 24,037 49.6
Gross Profit $ 52,754 55.7 $ 24,476 50.4
Operating Expenses $ 2,625,302 2,774.4 $ 1,289,826 2,658.7
Operating Loss $ (2,572,548 ) -2,718.7 $ (1,265,350 ) -2,608.3
Net Loss $ (2,593,537 ) -2,740.8 $ (1,266,844 ) -2,611.3
Revenues consist of hardware imbedded with our proprietary software, integration
consulting services, tech support and product maintenance billed to the
customer. Revenues increased for the year ended September 30, 2021 by $46,113
from the year ended September 30, 2020, due to additional customer sales. Gross
profit increased due to the increase in sales for the year ending September 30,
2021. Operating expenses increased by $1,335,476 for the year ended September
30, 2021 over 2020 as shown in the table below:
September 30,
Description 2021 2020 Increase
Stock based expenses $ 1,365,667 $ 701,641 $ 664,026
Professional fees 196,317 24,825 171,492
Consulting expenses (excluding stock
expenses) 166,823 18,007 148,816
Related party expenses (excluding stock
expenses) 492,579 371,760 120,819
Depreciation expense 40,866 6,472 34,394
Equipment and demo expenses 69,035 8,779 60,256
General and Administrative officers 113,285 39,579 73,706
Auto, Travel and Meals and Entertainment 70,142 47,894 22,248
Rent expense 16,732 16,146 586
Bad debt expense 20,040 8,000 12,040
Other operating expenses 73,816 46,723 27,093
Total Operating expenses $ 2,625,302 $ 1,289,826 $ 1,335,476
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The following tables set forth key components of our balance sheet as of
September 30, 2021 and 2020.
2021 2020
Current Assets $ 1,102,449 $ 1,441,288
Property and Equipment $ 170,605 $ 143,058
Total Assets $ 1,273,054 $ 1,584,346
Current Liabilities $ 406,810 $ 584,440
Total Liabilities $ 406,810 $ 584,440
Stockholders' Equity $ 866,244 $ 999,906
Total Liabilities and Stockholders' Equity $ 1,273,054 $ 1,584,346
Liquidity and Capital Resources
As of September 30, 2021, we had limited operating capital. Our current capital
and our other existing resources will not be sufficient to provide the working
capital needed for our current business Additional capital will be required to
meet our obligations, and to further expand our business. We may be unable to
obtain the additional capital required. Our inability to generate capital or
raise additional funds when required will have a negative impact on our business
development and financial results. These conditions raise substantial doubt
about our ability to continue as a going concern as well as our recurring losses
from operations and the need to raise additional capital to fund operations.
This "going concern" could impair our ability to finance our operations through
the sale of debt or equity securities. Since September 30, 2021, the Company has
raised $2,963,750 from the sale of 59,270,000 shares of Series F Preferred
Stock.
For the year ended September 30, 2021, we primarily funded our business
operations with $682,500 of proceeds received pursuant to the sale of 13,650,000
shares of Series E Preferred Stock at $.05 per share and $25,000 from the sale
of 1,000,000 shares of common stock at $0.025 per share.
As of September 30, 2021, we had cash of $173,196 as compared to $847,646 at
September 30, 2020. As of September 30, 2021, we had current assets of
$1,102,449 and current liabilities of $406,810, which resulted in working
capital of $695,639. The current liabilities are comprised of accounts payable,
accrued expenses, dividends payable and stock to be issued.
In December 2019, a novel strain of coronavirus (COVID-19) emerged. Because
COVID-19 infections have been reported throughout the United States, certain
federal, state and local governmental authorities have issued stay-at-home
orders, proclamations and/or directives aimed at minimizing the spread of
COVID-19. The ultimate impact of the COVID-19 pandemic on the Company's
operations is unknown and will depend on future developments, which are highly
uncertain and cannot be predicted with confidence, including the duration of the
COVID-19 outbreak, new information which may emerge concerning the severity of
the COVID-19 pandemic, and any additional preventative and protective actions
that governments, or the Company, may direct, which may result in an extended
period of continued business disruption, and reduced operations. Any resulting
financial impact cannot be reasonably estimated at this time but it may have a
material adverse impact on our business, financial condition and results of
operations. Management expects that its business will be impacted to some
degree, but the significance of the impact of the COVID-19 outbreak on the
Company's business and the duration for which it may have an impact cannot be
determined at this time.
Operating Activities
For the year ended September 30, 2021, net cash used in operating activities was
$1,313,536 compared to $233,952 for the year ended September 30, 2020. For the
year ended September 30, 2021, our net cash used in operating activities was
primarily attributable to the net loss of $2,593,537, adjusted by stock-based
compensation of $1,365,667 and depreciation of $40,866. Net changes of $126,533
in operating assets and liabilities increased the cash used in operating
activities.
For the year ended September 30, 2020, net cash used in operating activities of
$233,952 was primarily attributable to the net loss of $1,266,844, adjusted for
non-cash expenses of stock- based expenses of $701,641 and depreciation of
$6,472, and net changes of $324,779 in operating assets and liabilities.
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Investing Activities
For the year ended September 30, 2021, the net cash used in investing activities
was $68,414, compared to $133,456 for the year ended September 30, 2020. The
expenditures were for the purchases of office furniture and equipment, including
the purchase of and customization of a vehicle.
Financing Activities
For the year ended September 30, 2021, net cash provided by financing activities
was $707,500, compared to $1,198,000 for the year ended September 30, 2020.
During the year ended September 30, 2021, we received $682,500 of proceeds
received pursuant to the sale of 13,650,000 shares of Series E Preferred Stock
at $0.05 per share and $25,000 from the sale of 1,000,000 shares of common stock
at $0.025 per share.
For the year ended September 30, 2020, net cash provided for financing
activities was $1,198,000 and was comprised of the $975,000 from the sale of
44,600,000 shares of common stock at $0.025 per share and the Company receiving
$223,000 for stock to be issued.
The Company anticipates that its cash needs for the next twelve months for
working capital and capital expenditures will be approximately $1,200,000. As of
September 30, 2021, the Company had $173,196. Since September 30, 2021, the
Company has raised $2,963,750 from the sale of 59,270,000 shares of Series F
Preferred Stock. Management believes the working capital is sufficient to meet
its' ongoing commitments for the next year and to begin executing on its'
business plan.
Critical Accounting Policies
Our significant accounting policies are summarized in Note 4 of our 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 an effect on our results of operations,
financial position or liquidity for the periods presented in this report.
Inventory
Inventories are valued at the lower of cost or net realizable value, with cost
determined on the first-in, first-out basis. Inventory costs include finished
goods and component parts. In evaluating the net realizable value of inventory,
management also considers, if applicable, other factors, including known trends,
market conditions, currency exchange rates and other such issues. Inventory as
September 30, 2021, and 2020, was $78,765 and $34,199, respectively.
Property and Equipment
Property and equipment are stated at cost, and depreciation is provided by use
of a straight-line method over the estimated useful lives of the assets.
The Company reviews property and equipment for potential impairment whenever
events or changes in circumstances indicate that the carrying amounts of assets
may not be recoverable. The estimated useful lives of property and equipment is
as follows:
Vehicles and equipment 5 years
Software 3 years
Revenue Recognition
Effective January 1, 2018, the Company adopted ASC 606 - Revenue from Contracts
with Customers. Under ASC 606, the Company recognizes revenue from the
commercial sales of products by: (1) identify the contract (if any) with a
customer; (2) identify the performance obligations in the contract (if any); (3)
determine the transaction price; (4) allocate the transaction price to each
performance obligation in the contract (if any); and (5) recognize revenue when
each performance obligation is satisfied. Under ASC 606, revenue is recognized
when the following criteria are met: (1) persuasive evidence of an arrangement
exists; (2) the performance of service has been rendered to a customer or
delivery has occurred; (3) the amount of fee to be paid by a customer is fixed
and determinable; and (4) the collectability of the fee is reasonably assured.
Other than The Company has no outstanding contracts with any of its' customers.
The Company recognizes revenue when title, ownership, and risk of loss pass to
the customer, all of which occurs upon shipment or delivery of the product and
is based on the applicable shipping terms.
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Stock-Based Compensation
The Company accounts for its stock based compensation under the recognition and
measurement principles of the fair value recognition provisions of Statement of
Financial Accounting Standards No. 123 (revised 2004) "Share-Based Payment"
("SFAS No. 123R")(ASC 718) using the modified prospective method for
transactions in which the Company obtains employee services in share-based
payment transactions and the Financial Accounting Standards Board Emerging
Issues Task Force Issue No. 96-18 "Accounting For Equity Instruments That Are
Issued To Other Than Employees For Acquiring, Or In Conjunction With Selling
Goods Or Services" ("EITF No. 96-18") for share-based payment transactions with
parties other than employees provided in SFAS No. 123(R) (ASC 718). All
transactions in which goods or services are the consideration received for the
issuance of equity instruments are accounted for based on the fair value of the
consideration received or the fair value of the equity instrument issued,
whichever is more reliably measurable. The measurement date used to determine
the fair value of the equity instrument issued is the earlier of the date on
which the third-party performance is complete or the date on which it is
probable that performance will occur.
Earnings (Loss) Per Share
The Company computes net loss per share in accordance with FASB ASC 260,
"Earnings per Share." ASC 260 requires presentation of both basic and diluted
earnings per share (EPS) on the face of the statement of operations. Basic EPS
is computed by dividing net income (loss) available to common shareholders by
the weighted average number of common shares outstanding during the period.
Diluted EPS gives effect to all dilutive potential common shares outstanding
during the period including stock options, using the treasury stock method, and
convertible notes and stock warrants, using the if-converted method. In
computing diluted EPS, the average stock price for the period is used in
determining the number of shares assumed to be purchased from the exercise of
stock options, warrants and conversion of convertible notes. Diluted EPS
excludes all dilutive potential common shares if their effect is anti-dilutive.
Off Balance Sheet Arrangements
We have no off-balance sheet arrangements including arrangements that would
affect our liquidity, capital resources, market risk support and credit risk
support or other benefits.
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