CYTTA CORP. Management's Discussion and Analysis of Financial Condition and Results of Operations. (form 10-Q)

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 condensed 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.

Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future results, levels of activity, performance, or achievements. Except as required by applicable law, including the securities laws of the United States, the Company does not intend to update any of the forward-looking statements to conform these statements to actual results.

Our financial statements are prepared in accordance with accounting principles generally accepted in the United States ("GAAP"). These accounting principles require us to make certain estimates, judgments, and assumptions. We believe that the estimates, judgments, and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments, and assumptions are made. These estimates, judgments, and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the reported amounts of revenues and expenses during the periods presented. Our financial statements would be affected to the extent there are material differences between these estimates.

The following discussion should be read in conjunction with our unaudited financial statements and the related notes that appear elsewhere in this Quarterly Report on Form 10-Q.

THE COMPANY

Cytta Corp., ("Cytta" or the "Company") was incorporated on May 30, 2006 under the laws of the State of Nevada. It is located in Las Vegas, Nevada. Cytta is in the business of imagineering, developing and securing disruptive technologies.

Results of Operations for the three and nine months ended June 30, 2022 and 2021:

Revenue

Revenues of $936 and $2,809 for the three and nine months ended June 30, 2022, respectively, were from deferred revenue on subscription agreements being recognized. Revenues of $70,520 for the nine months ended June 30, 2021, consist of hardware imbedded with our proprietary software, integration consulting services, tech support and product maintenance billed to the customer.

Cost of goods sold

Cost of goods sold was $25,277 for the nine months ended June 30, 2021.

Operating expenses

Operating expenses were $1,175,320 and $3,819,174 for the three and nine months ended June 30, 2022, respectively, compared to $607,685 and $1,679,651, respectively, for the three and nine months ended June 30, 2021.

                                        Three months ended              Nine months ended
                                             June 30,                       June 30,
Description                             2022           2021           2022            2021
Related party expenses (excluding
stock-based expenses)                $   216,932     $ 187,991     $   895,078     $   490,952
Stock based expenses                     444,319       267,748       1,733,661         658,997
Professional fees                        152,254        35,644         358,173         156,324
Consulting expenses                      124,839        54,450         190,539         102,267
Depreciation expense                      11,904        11,053          35,711          28,962
Equipment and demo expenses               44,894         7,216         204,839          61,627
General and Administrative,
officers                                  11,958        (2,817 )        30,545          51,556
Auto, travel and entertainment            27,812        21,172          82,239          52,249
Rent expense                               6,446         4,130          15,175          12,323
Investor relations                        20,757             -          58,504               -
Other operating expenses                 113,205        21,098         214,710          64,394
Total                                $ 1,175,320     $ 607,685     $ 3,819,174     $ 1,679,651





         15

  Table of Contents




For the three and nine months ended June 30, 2022, and 2021, the Company
recorded fee and stock compensation expenses to related parties in the following
amounts:



                                       Three months ended           Nine months ended
                                            June 30,                    June 30,
Description                            2022          2021          2022          2021
CEO-Management fees                  $  60,000     $  39,000     $ 263,000     $ 111,000
Chief Technology Officer (CTO)          60,000        61,584       263,000       133,584
Chief Administration Officer (CAO)      45,000        30,000       210,000        90,000
Stock-based compensation                39,063        38,992       117,189       117,118
Office rent and expenses                12,869        18,415        41,889        39,250
Total                                $ 216,932     $ 187,991     $ 895,078     $ 490,952

Stock-based expenses increased in the current periods compared to the prior periods substantially as a result of $210,844 and $1,382,686 related to the amortization of stock-based compensation for the three and nine months ended June 30, 2022, as well as the expense of $233,475 and $350,975 for shares issued and expensed for the three and nine months ended June 30, 2022.

During the three and nine months ended June 30, 2022, professional fee expenses increased as a result of accounting and auditing fees increasing as a result of being a fully reporting public company for the entire current year period and only for a partial period in the prior year. Legal expenses also increased due to expenses incurred in the defense of the Skoblow case.

During the three and nine months ended June 30, 2022, consulting expenses increased primarily as a result of the engagement of a firm to provide a testbed for market-product fit, user value and the general evolution of the product. Additionally, the product will have enhanced video sharing features as well as the development of both a desktop web app and a native mobile app. During the three and nine months ended June 30, 2022, the Company incurred expenses of $79,500 and $106,750 related to this project.

During the three and nine months ended June 30, 2022, equipment and demo expenses increased as a result of the Company utilizing existing inventory to be sent out for demo purposes.

The following tables set forth key components of our balance sheet as of June 30, 2022, and September 30, 2021.

                                              June 30,
                                                2022          September 30, 2021

Current Assets                               $ 1,715,762     $          1,102,449

Property and Equipment                       $   134,894     $            170,605

Total Assets                                 $ 1,850,656     $          1,273,054

Current Liabilities                          $   475,859     $            406,809

Total Liabilities                            $   475,859     $            406,809

Stockholders' Equity                         $ 1,374,797     $            866,245

Total Liabilities and Stockholders' Equity $ 1,850,656 $ 1,273,054

         16

  Table of Contents

Liquidity and Capital Resources

Our current capital and our other existing resources will be sufficient to provide the working capital needed for our current business Additional capital will be required 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 addition. This "going concern" could impair our ability to finance our operations through the sale of debt or equity securities. During the nine months ended June 30, 2022, the Company has raised $2,963,500 from the sale of 59,270,000 shares of Series F Preferred Stock.

As of June 30, 2022, we had cash of $1,569,367 compared to $173,196 at September 30, 2021. As of June 30, 2022, we had current assets of $1,715,762 and current liabilities of $475,859, which resulted in working capital of $1,239,903. The current liabilities are comprised of accounts payable, accounts payable-related parties, 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.

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 June 30, 2022, the Company had an accumulated deficit of $26,639,427 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.

Operating Activities

For the nine months ended June 30, 2022, net cash used in operating activities was $1,567,329 compared to $976,002 for the nine months ended June 30, 2021. For the nine months ended June 30, 2022, our net cash used in operating activities was primarily attributable to the net loss of $3,864,522, adjusted by stock-based compensation of $1,850,850 and depreciation of $35,711. Net changes of $410,632 in operating assets and liabilities decreased the cash used in operating activities.

For the nine months ended June 30, 2021, net cash used in operating activities of $976,002 was primarily attributable to the net loss of $1,634,238, adjusted for non-cash expenses of stock- based expenses of $776,115 and depreciation of $28,962, and net changes of $146,841 in operating assets and liabilities.

Investing Activities

For the nine months ended June 30, 2022, there was no cash used in investing activities and net cash used in investing activities was $61,914 for the nine months ended June 30, 2021. The expenditures were for the purchases of office furniture and equipment.

Financing Activities

For the nine months ended June 30, 2022, net cash provided by financing activities was $2,963,500, compared to $707,500 for the nine months ended June 30, 2021. During the nine months ended June 30, 2022, we received $2,963,500 of proceeds received pursuant to the sale of 59,270,000 shares of Series F Preferred Stock at $0.05 per share. For the nine months ended June 30, 2021, the Company received $682,500 from the sale of preferred stock and $25,000 from the sale of 1,000,000 shares of common stock at $0.025 per share.

As of June 30, 2022, the Company had $1,569,367 in cash on hand. 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 3 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.

         17

  Table of Contents




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. 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.

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.

© Edgar Online, source Glimpses