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.
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Results of Operations for the years ended September 30, 2022 and 2021:
The following tables set forth key components of our results of operations for
the periods indicated:
2022 2021
Revenue $ 6,089 $ 94,626
COGS $ - $ 41,872
Gross Profit $ 6,089 $ 52,754
Operating Expenses $ 5,058,255 $ 2,625,302
Operating Loss $ (5,052,166 ) $ (2,572,548 )
Net Loss $ (5,100,102 ) $ (2,593,537 )
Revenues of $6,089 for the year ended September 30, 2022, were from deferred
revenue on subscription agreements being recognized. Revenues of $94,626 for the
year ended September 30, 2021, consist of hardware imbedded with our proprietary
software, integration consulting services, tech support and product maintenance
billed to the customer.
For the year ended September 30, 2021 cost of revenues of $41,872 include the
cost of hardware that were part of revenues for the year ended September 30,
2021.
Operating expenses were $5,058,255 and $2,625,302 for the years ended September
30, 2022, and 2021, respectively, as shown in the table below:
September 30,
Increase
Description 2022 2021 (decrease)
Stock based expenses $ 2,178,973 $ 1,365,667 $ 813,306
Professional fees 414,633 196,317 218,316
Consulting expenses (excluding stock
expenses) 627,657 173,735 453,922
Related party expenses (excluding stock
expenses) 1,005,757 492,579 513,178
Depreciation expense 47,616 40,866 6,750
Equipment and demo expenses 305,762 69,035 236,727
General and Administrative officers 59,955 112,385 (52,430 )
Auto, Travel and Meals and Entertainment 229,343 71,904 157,439
Rent expense
21,496 16,732 4,764
Transfer agent and filing fees 48,445 5,968 42,477
Bad debt expense - 20,040 (20,040 )
Other operating expenses 118,618 60,074 58,544
Total Operating expenses $ 5,058,255 $ 2,625,302 $ 2,432,953
The following tables set forth key components of our balance sheet as of
September 30, 2022 and 2021.
2022 2021
Current Assets $ 788,019 $ 1,102,449
Property and Equipment $ 122,990 $ 170,605
Total Assets $ 911,009 $ 1,273,054
Current Liabilities $ 449,217 $ 406,810
Total Liabilities $ 449,217 $ 406,810
Stockholders' Equity $ 461,792 $ 866,244
Total Liabilities and Stockholders' Equity $ 911,009 $ 1,273,054
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Liquidity and Capital Resources
As of September 30, 2022, 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.
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. As of September 30, 2022, the
Company had an accumulated deficit of $27,875,007 and has also generated losses
since inception. These factors, among others, raise substantial doubt about the
ability of the Company to continue as a going concern.
For the year ended September 30, 2022, we primarily funded our business
operations with $2,963,500 of proceeds received pursuant to the sale of
59,270,000 shares of Series F Preferred Stock at $.05 per share.
As of September 30, 2022, we had cash of $755,122 as compared to $173,196 at
September 30, 2021. As of September 30, 2022, we had current assets of $788,019
and current liabilities of $449,217, which resulted in working capital of
$338,802. 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, 2022, net cash used in operating activities was
$2,381,574 compared to $1,313,536 for the year ended September 30, 2021. For
the year ended September 30, 2022, our net cash used in operating activities was
primarily attributable to the net loss of $5,100,102, adjusted by stock-based
compensation of $2,178,973 and depreciation of $47,615. Net changes of $491,940
in operating assets and liabilities decreased the cash used in operating
activities.
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 $126,532 in operating assets and liabilities increased the cash used in
operating activities.
Investing Activities
There was no investment activity for the year ended September 30, 2022. For the
year ended September 30, 2021, the net cash used in investing activities was
$68,414. The expenditures were for the purchases of office furniture and
equipment, including the purchase of and customization of a vehicle.
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Financing Activities
For the year ended September 30, 2022, net cash provided by financing activities
was $2,963,500, compared to $707,500 for the year ended September 30, 2021.
during the year ended September 30, 2022, we received $2,963,500 pursuant to the
sale of 59,270,000 shares of Series F Preferred Stock at $.05 per share. 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.
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.
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.
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.
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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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