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 September 30, 2022 and 2021
Revenues
Three months ended
September 30,
2022 2021 Change
Revenue $ - $ 913 $ (913 )The Company recorded revenue of $0 and $913 for the three-month period ended
September 30, 2022 and September 30, 2021. The Company incurred revenue in the
three-month period ended September 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
September 30,
2022 2021 Change
Operating Expenses $ 36,456 $ 28,074 $ 8,382Operating expenses increased by $8,382 or 30% to $36,456 for the three months
ended September 30, 2022, compared with $28,074 for the three months ended
September 30, 2021. This increase was due primarily to an increase in
Professional fees that were incurred during the three months ended September 30,
2022.
Other Expense
Three months ended
September 30,
2022 2021 Change
Other Expense $ - $ 50 $ (50 )Other expense decreased by $50 or 100% to $0 during the three months ended
September 30, 2022 compared with $50 during the three months ended September 30,
2021. Other expense for the three months ended September 30, 2021 consisted of
interest expense related to finance charges on credit cards.
Results of Operations for the Nine Months Ended September 30, 2022 and 2021
Revenues
Nine months ended
September 30,
2022 2021 Change
Revenue $ 0 $ 2,568 $ (2,568 )The Company recorded revenue of $0 and $2,568 for the nine-month period ended
September 30, 2022 and September 30, 2021. The Company incurred revenue in the
nine-month period ended September 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
Nine months ended
September 30,
2022 2021 Change
Operating Expenses $ 122,614 $ 114,486 $ 8,128Operating expenses increased by $8,128 or 7% to $122,614 for the nine months
ended September 30, 2022, compared with $114,486 for the nine months ended
September 30, 2021. This increase was primarily due to an increase in
Professional fees that were incurred during the nine months ended September 30,
2022.
10
Other Expense
Nine months ended
September 30,
2022 2021 Change
Other Expense $ 14 $ 155 $ (141 )Other expense decreased by $141 or 91% to $14 during the nine months ended
September 30, 2022 compared with $155 during the nine months ended September 30,
2021. Other expense for the nine months ended September 30, 2022 and September
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 September 30, 2022 and December 31, 2021:
As of As of
September 30, December 31, Change
2022 2021 Increase (Decrease)
Cash $ 97,708 $ 185,935 $ (88,227 )
Working capital deficit $ (667,734 ) $ (545,106 ) $ (122,628 )
The Company had a stockholders' deficit of approximately $41,747,258 and
$41,624,630 at September 30, 2022 and December 31, 2021, respectively. Net loss
for the nine months ended September 30, 2022 and 2021 was $122,628 and $112,073,
respectively. Net cash used in operating activities was $88,227 and $93,010 for
the nine months ended September 30, 2022 and 2021, respectively. Operations
since inception have been funded primarily with the proceeds from equity and
debt offerings. As of September 30, 2022, the Company had cash of $97,708.
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 September 30, 2022, had an accumulated deficit of $41,747,258;
(iii) the Company sustained an operating loss of $122,614 for the period ended
September 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:
Nine months ended
September 30,
2022 2021 Change
Net cash used in operating activities $ 88,227 $ 93,010 $ (4,783 )
Net cash used in operating activities for the nine months ended September 30,
2022 was $88,227, compared with net cash used in operating activities of $93,010
for the nine months ended September 30, 2021. The decrease in net cash used in
operating activities during the nine months ended September 30, 2022 was due
primarily to an increase in net loss to $122,628, partially offset by an
increase of $37,500 in accrued royalties.
Net cash used in operating activities for the nine months ended September 30,
2021 was $93,010, primarily due to a net loss of $112,073, partially offset by
an increase of $37,500 in accrued royalties and a decrease of $1,072 in prepaid
expenses and other current assets.
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 nine months ended September 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 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; 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. All subsequent forward-looking statements
attributable to us or persons acting on our behalf are expressly qualified in
their entirety by these cautionary statements. 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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