The following discussion and analysis should be read in conjunction with the
audited Financial Statements and accompanying notes thereto included in the
Company's Annual Report on Form 10-K as of and for the fiscal year ended
December 31, 2021. Unless otherwise noted, all the financial information in
this Report is financial information for the Company.
General
The Company is engaged in the business of the sale of 3D haptics products and
equipment. Haptics refers to one's sense of touch. The Company's focus is in
the consumer interactive computer gaming market, but the Company also does
project work in other areas. The Company sells its haptics products primarily to
consumers through online retail marketplaces.
Results of Operations for the Three Months Ended June 30, 2022 and 2021
Revenues
Three months ended June 30,
2022 2021 Change
Revenue $ - $ 460 $ (460 )The Company recorded revenue of $0 and $460 for the three-month period ended
June 30, 2022 and June 30, 2021. The Company incurred revenue in the three-month
period ended June 30, 2021 from the sale of Falcon 3D Touch Haptic Controllers.
The Company expects to continue to incur significant expenses and operating
losses for the foreseeable future. The Company's net losses may fluctuate
significantly from quarter to quarter and year to year.
Operating Expenses
Three months ended June 30,
2022 2021 Change
Operating Expenses $ 36,858 $ 37,766 $ (908 )Operating expenses decreased by $908 or 2% to $36,858 for the three months ended
June 30, 2022, compared with $37,766 for the three months ended June 30, 2021.
This decrease was due primarily to a decrease in General and Administrative
expenses that were incurred during the three months ended June 30, 2022.
Other Expense
Three months ended June 30,
2022 2021 Change
Other Expense $ - $ 52 $ (52 )Other expense decreased by $52 or 100% to $0 during the three months ended June
30, 2022 compared with $52 during the three months ended June 30, 2021. Other
expense for the three months ended June 30, 2021 consisted of interest expense
related to finance charges on credit cards.
Results of Operations for the Six Months Ended June 30, 2022 and 2021
Revenues
Six months ended June 30,
2022 2021 Change
Revenue $ - $ 1,655 $ (1,655 )The Company recorded revenue of $0 and $1,655 for the six-month period ended
June 30, 2022 and June 30, 2021. The Company incurred revenue in the six-month
period ended June 30, 2021 from the sales of Falcon 3D Touch Haptic Controller.
The Company expects to continue to incur significant expenses and operating
losses for the foreseeable future. The Company's net losses may fluctuate
significantly from quarter to quarter and year to year.
Operating Expenses
Six months ended June 30,
2022 2021 Change
Operating Expenses $ 86,158 $ 86,412 $ (254 )Operating expenses decreased by $254 or less than one percent to $86,158 for the
six months ended June 30, 2022, compared with $86,412 for the six months ended
June 30, 2021. This decrease was primarily due to a decrease in General and
Administrative expenses that were incurred during the six months ended June 30,
2022.
10
Other Expense
Six months ended June 30,
2022 2021 Change
Other Expense $ 14 $ 105 $ (91 )Other expense decreased by $91 or 87% to $14 during the six months ended June
30, 2022 compared with $105 during the six months ended June 30, 2021. Other
expense for the six months ended June 30, 2022 and June 30, 2021 consisted of
interest expense related to finance charges on credit cards.
Liquidity and Capital Resources
The following table summarizes select balance sheet and working capital amounts
as of June 30, 2022 and December 31, 2021:
As of As of
June 30, December 31, Change
2022 2021 Increase (Decrease)
Cash $ 124,917 $ 185,935 $ (61,018 )
Working capital deficit $ (631,278 ) $ (545,196 ) $ (86,172 )
At June 30, 2022, the Company had a stockholders' deficit of approximately
$41,710,802 and $41,624,630 at June 30, 2022 and December 31, 2021,
respectively. Net loss for the six months ended June 30, 2022 and 2021 was
$86,172 and $84,862, respectively. Net cash used in operating activities was
$61,018 and $70,741 for the six months ended June 30, 2022 and 2021,
respectively. Operations since inception have been funded primarily with the
proceeds from equity and debt offerings. As of June 30, 2022, the Company had
cash of $124,917.
The Company's management has evaluated whether there is substantial doubt about
the Company's ability to continue as a going concern and has determined that
substantial doubt existed as of the date of this filing. This determination was
based on the following factors: (i) the Company's available cash as of the date
of this filing will not be sufficient to fund its anticipated level of
operations for the next 12 months; (ii) the Company has incurred recurring
losses and at June 30, 2022, had an accumulated deficit of $41,710,802; (iii)
the Company sustained an operating loss of $86,172 for the period ended June 30,
2022; and (iv) if the Company fails to obtain the needed capital, it will be
forced to delay, scale back, or eliminate some or all of its programs or perhaps
cease operations. In the opinion of management, these factors, among others,
raise substantial doubt about the ability of the Company to continue as a going
concern.
There is no assurance that the Company will be successful in any capital-raising
efforts that it may undertake to fund operations during 2022. The Company
anticipates that it will continue to issue equity and/or debt securities as a
source of liquidity, until it begins to generate positive cash flow to support
its operations. Any future sales of securities to finance operations will dilute
existing stockholders' ownership. The Company cannot guarantee when or if it
will generate positive cash flow.
The audit report prepared by our independent registered public accounting firm
relating to the Company's consolidated financial statements for the year ended
December 31, 2021 included an explanatory paragraph expressing substantial doubt
about our ability to continue as a going concern.
Cash Flow Activities
The following table summarizes the Company's cash flows for the periods set
forth below:
Six months ended June 30,
2022 2021 Change
Net cash used in operating activities $ 61,018 $ 70,741 $ 9,723
Net cash used in operating activities for the six months ended June 30, 2022 was
$61,018 compared with net cash used in operating activities of $70,741 for the
six months ended June 30, 2021. The increase in net cash used in operating
activities during the six months ended June 30, 2022 was due primarily to an
increase in net loss of $1,310, partially offset by a decrease of $4,433 in
accounts payable and accrued expenses and a decrease in prepaid expenses of
$3,227.
Net cash used in operating activities for the six months ended June 30, 2021 was
$70,741, representing a net loss of $84,862, partially offset by an increase of
$8,566 in accounts payable and accrued expenses and an increase in prepaid
expenses of $6,040.
Effects of Inflation
We do not believe that inflation has had a material impact on our business,
sales, or operating results during the periods presented.
Off-Balance Sheet Arrangements
We currently do not have any off-balance sheet arrangements or financing
activities with special-purpose entities.
Critical Accounting Policies and Use of Estimates
Critical accounting policies are those policies which are both important to the
presentation of a company's financial condition and results and require
management's most difficult, subjective or complex judgments, often as a result
of the need to make estimates about the effect of matters that are inherently
uncertain. There have been no recent significant changes to our accounting
policies and use of estimates during the six months ended June 30, 2022. For a
further discussion of our critical accounting policies, see our Annual Report on
Form 10-K for the fiscal year ended December 31, 2021 filed with the SEC on
March 23, 2022.
11
Forward Looking Statements and Certain Factors That May Affect Future Results of
Operations
The Securities and Exchange Commission encourages companies to disclose
forward-looking information so that investors can better understand a company's
future prospects and make informed investment decisions. This Quarterly Report
on Form 10-Q contains such "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995.All statements in this
report, other than statements of historical fact, are forward-looking statements
for purposes of these provisions, including any projections of earnings,
revenues or other financial items, any statements of the plans and objectives of
management for future operations, any statements concerning proposed new
products or services, any statements regarding future economic conditions or
performance, and any statements of assumptions underlying any of the foregoing.
All forward-looking statements included in this report are made as of the date
hereof and are based on information available to us as of such date. We assume
no obligation to update any forward-looking statement. In some cases,
forward-looking statements can be identified by the use of terminology such as
"may," "will," "expects," "plans," "anticipates," "intends," "believes,"
"estimates," "potential," or "continue," or the negative thereof or other
comparable terminology. Although we believe that the expectations reflected in
the forward-looking statements contained herein are based upon reasonable
assumptions at the time made, there can be no assurance that any such
expectations or any forward-looking statement will prove to be correct. Our
actual results will vary, and may vary materially, from those projected or
assumed in the forward-looking statements. Future financial condition and
results of operations, as well as any forward-looking statements, are subject to
inherent risks and uncertainties, many of which we cannot predict with accuracy
and some of which we might not anticipate, including, without limitation,
product recalls and product liability claims; infringement of our technology or
assertion that our technology infringes the rights of other parties; termination
of supplier relationships, or failure of suppliers to perform; inability to
successfully manage growth; delays in obtaining regulatory approvals or the
failure to maintain such approvals; concentration of our revenue among a few
customers, products or procedures; development of new products and technology
that could render our products obsolete; market acceptance of new products;
introduction of products in a timely fashion; price and product competition,
availability of labor and materials, cost increases, and fluctuations in and
obsolescence of inventory; volatility of the market price of our common stock;
foreign currency fluctuations; changes in key personnel; work stoppage or
transportation risks; integration of business acquisitions; and other factors
referred to in our reports filed with the SEC, including our Registration
Statement on Form 10. All subsequent forward-looking statements attributable to
us or persons acting on our behalf are expressly qualified in their entirety by
these cautionary statements. Additional factors that may have a direct bearing
on our operating results are discussed in Item 1A "Risk Factors" in our
Registration Statement on Form 10. In light of these assumptions, risks and
uncertainties, the results and events discussed in the forward-looking
statements contained in this Quarterly Report or in any document incorporated by
reference might not occur. Stockholders are cautioned not to place undue
reliance on the forward-looking statements, which speak only as of the date of
this Quarterly Report. We are not under any obligation, and we expressly
disclaim any obligation, to update or alter any forward-looking statements,
whether as a result of new information, future events or otherwise. All
subsequent forward-looking statements attributable to us or to any person acting
on our behalf are expressly qualified in their entirety by the cautionary
statements contained or referred to in this section.
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