GAMING TECHNOLOGIES, INC. Management's Discussion and Analysis of Financial Condition and Results of Operations. (form 10-Q) - Marketscreener.com

The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the Company’s condensed unaudited consolidated financial statements and related notes appearing elsewhere in this Form 10-Q. In addition to historical information, this discussion and analysis here and throughout this Form 10-Q contains forward-looking statements that involve risks, uncertainties and assumptions. The Company’s actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including, but not limited to, those set forth under Item 1A (“Risk Factors”) in the Form 10-K and elsewhere in this Form 10-Q.
We are a software company specializing in online gaming. Our cloud-based Player Account Management (PAM) platform enables us to rapidly deploy branded online gambling presences for land-based casinos, consumer brands and media companies. Depending on each geographical region and the restrictions/requirements of its gambling-related legislation, we form “access deals” that offer a faster and easier route to market by enabling us to operate under a gambling license already held by a local partner.
We integrate best-in-class third-party games to provide the ultimate gaming platform, and we help our international partners in regulated markets leverage online gambling presences while putting players first. We also form business partnerships with established brands such as Playboy to launch new game content.
In addition, the Company operates an online gaming operation in Mexico through its web site vale.mx, in partnership with its local partner, Big Bola.
The Company’s activities are subject to significant risks and uncertainties, including the need for additional capital, as described below. The Company commenced revenue-generating operations in February 2021, does not have positive cash flows from operations, and is dependent on periodic infusions of equity capital to fund its operating requirements.
Background and Basis of Presentation
Gaming Technologies, Inc. was incorporated in the State of Delaware on July 23, 2019 under the name Dito, Inc. and on December 21, 2020 amended its name to Gaming Technologies, Inc. Effective as of March 18, 2020, Gaming Technologies, Inc. completed a Share Exchange Agreement (the “Exchange Agreement”) to acquire all of the outstanding ordinary shares of Gaming Technologies UK that provided for each outstanding ordinary share of Gaming Technologies UK to be effectively converted into 25 shares of common stock of Gaming Technologies, Inc., As a result, Gaming Technologies UK became our wholly-owned subsidiary in a recapitalization transaction, as described below. Gaming Technologies UK was originally formed on November 3, 2017, in the United Kingdom as Dito UK Limited for the purpose of software development.
For financial reporting purposes, the Exchange Agreement was accounted for as a combination of entities under common control (the “Combination”), as Gaming Technologies, Inc. was formed by Gaming Technologies UK, with the objective of Gaming Technologies UK becoming a wholly-owned subsidiary of Gaming Technologies, Inc., and the resultant parent company being domiciled in the United States. As a result of the Combination, the former stockholders of Gaming Technologies UK became the controlling shareholders of Dito, Inc., and the Gaming Technologies UK management and board members became the management and board members of Gaming Technologies, Inc.
Our Board of Directors and our shareholders have approved a potential reverse split of our common stock in a range between 1-for-2 and 1-for-8. The Board of Directors will make the final determination whether to effect the reverse split, and if so determined, of the actual ratio within that range. There is no assurance that any reverse stock split will occur. The share and per share information in this Report does not reflect any reverse stock split.
The Company’s condensed consolidated financial statements have been presented on the basis that the Company is a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. As reflected in the accompanying condensed consolidated financial statements, the Company has had limited operating revenues to date, and has experienced recurring net losses from operations and negative operating cash flows. During the three months ended March 31, 2022, the Company incurred a net loss of $1,439,133, utilized cash in operating activities of $393,811 and had an accumulated deficit of $22,301,431 as of March 31, 2022. The Company has financed its working capital requirements since inception through the sale of its equity securities and from borrowings.
At March 31, 2022, the Company had cash of $8,241. The Company estimates that it must raise additional capital in the form of debt or equity in order to continue operations. As reflected in Note 10 of the condensed consolidated financial statements the Company secured notes, with net proceeds of $65,000 and $250,000, in April 2022. The Company estimates that a significant amount of capital will be necessary over a sustained period of time to advance the development of the Company’s business to the point at which it can become commercially viable and self-sustaining. However, there can be no assurances that the Company will be successful in this regard.
As a result, management has concluded that there is substantial doubt about the Company’s ability to continue as a going concern within one year of the date that the accompanying condensed consolidated financial statements are issued. In addition, the Company’s independent registered public accounting firm, in their report on the Company’s condensed consolidated financial statements for the year ended December 31, 2021, has also expressed substantial doubt about the Company’s ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to raise additional funds and implement its business plan, and to ultimately achieve sustainable operating revenues and profitability. The accompanying condensed consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
The development and expansion of the Company’s business in 2022 and thereafter will be dependent on many factors, including the capital resources available to the Company. No assurances can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company or adequate to fund the development and expansion of the Company’s business to a level that is commercially viable and self-sustaining. There is also significant uncertainty as to the affect that the coronavirus pandemic may have on the availability, amount and type of financing in the future.
If cash resources are insufficient to satisfy the Company’s ongoing cash requirements, the Company would be required to scale back or discontinue its operations, obtain funds, if available, although there can be no certainty, through strategic alliances that may require the Company to relinquish rights to its technology, or to discontinue its operations entirely.
Critical Accounting Policies and Estimates
The following discussion and analysis of financial condition and results of operations is based upon the Company’s condensed consolidated financial statements for the three months ended March 31, 2022 and 2021 presented elsewhere in this Form 10-Q, which have been prepared in conformity with accounting principles generally accepted in the US (“GAAP”). Certain accounting policies and estimates are particularly important to the understanding of the Company’s financial position and results of operations and require the application of significant judgment by management or can be materially affected by changes from period to period in economic factors or conditions that are outside of the Company’s control. As a result, these issues are subject to an inherent degree of uncertainty. In applying these policies, management uses its judgment to determine the appropriate assumptions to be used in the determination of certain estimates. Those estimates are based on the Company’s historical operations, the future business plans and the projected financial results, the terms of existing contracts, trends in the industry, and information available from other outside sources. For a more complete description of the Company’s significant accounting policies, see Note 2 to the condensed consolidated financial statements.
The Company recognizes revenue in accordance with ASC Topic 606, Revenue From Contracts With Customers. ASC Topic 606 requires companies to recognize revenue in a manner that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, the standard requires disclosures of the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. Revenue is recognized based on the following five step model:
The Company operates an online betting platform allowing users to place wagers on casino and other games. Each wager placed by users create a single performance obligation for the Company to administer each event wagered. Net gaming revenue is the aggregate of gaming wins and losses based on results of each event that customers wager bets on. Gross gaming revenue is split with our partners, whose share of gross gaming revenue is recorded as a reduction to net gaming revenue.
The Company issues Common Stock and intends to issue stock options to officers, directors and consultants for services rendered. Options will vest and expire according to terms established at the issuance date of each grant. Stock grants, which are generally time vested, will be measured at the grant date fair value and charged to operations ratably over the vesting period.
The fair value of stock options granted as stock-based compensation will be determined utilizing the Black-Scholes option-pricing model, and can be affected by several variables, the most significant of which are the life of the equity award, the exercise price of the stock option as compared to the fair market value of the Common Stock on the grant date, and the estimated volatility of the Common Stock. Estimated volatility will be based on the historical volatility of the Company’s Common Stock over an appropriate calculation period, or, if not available, by reference to the volatility of a representative sample of comparable public companies. The risk-free interest rate will be based on the US Treasury yield curve in effect at the time of grant. The fair market value of the Common Stock will be determined by reference to the quoted market price of the Company’s Common Stock on the grant date, or, if not available, by reference to an appropriate alternative valuation methodology.
The Company will recognize the fair value of stock-based compensation awards in general and administrative costs or in software development costs, as appropriate, in the Company’s consolidated statements of operations. The Company will issue new shares of Common Stock to satisfy stock option exercises.
As of March 31, 2022, the Company did not have any outstanding stock options.
Recent Accounting Pronouncements
See Note 2 to the condensed consolidated financial statements for discussion of Recent Accounting Policies.
Development of Our Business
Our activities are subject to significant risks and uncertainties, including the need for additional capital, as described below. We do not have positive cash flows from operations, and we expect to continue to be dependent on periodic infusions of equity capital to fund our operating requirements. We have financed our working capital requirements since inception primarily through the sale of its equity securities in private placement transactions, as well as from borrowings. In private placements to “accredited investors” (as defined in Regulation D under the Securities Act of 1933, as amended (the “Securities Act”)) or to non-U.S. persons under Regulation S under the Securities Act, between February 2020 and February 2021 we sold an aggregate of 2,691,800 shares of our common stock at a price of $2.50 per share. In March 2021, we sold 10,000 shares of our common stock for gross proceeds of $25,000 in a private placement. In August 2021, we sold 538,694 shares of common for gross proceeds of $1,750,752 in a private placement. Our activities are subject to significant risks and uncertainties, including the need for additional capital, as described below.
On November 13, 2020, we entered into an Agreement for the Provision of Online Gaming Management and Consulting Services (as subsequently amended) with Comercial de Juegos de la Frontera, S.A. de C.V., a Mexican company doing business as Big Bola, pursuant to which we provide to Big Bola consulting and management services related to their interactive online betting and gaming business in Mexico via the web site www.vale.mx, a regulated online casino and sports betting site. vale.mx operates under Big Bola’s existing license issued by the General Directorate of Games and Raffles of the Ministry of Interior (SEGOB). Big Bola is one of only 14 operators legally authorized to offer legal betting and online casino services in Mexico. vale.mx has more than 500 online premium casino games available, which can be enjoyed both on mobile or via desktop. Players can receive promotions and play live roulette and blackjack, or high-definition slots from leading software providers such as NetEnt, Microgaming, Pragmatic Play, Evolution and Matrix Studios. We are responsible for player acquisition, promotion and retention for vale.mx. We manage players’ accounts and are required to ensure that the balance in players’ accounts at all times satisfies the requirements under applicable law, and we pay out winnings to players from Big Bola’s account. While Big Bola bears liability to the players as provided by the permit, as between us and Big Bola we bear the costs of this obligation. Each party indemnifies the other against certain liabilities and claims. Under the terms of the agreement, we share 75% of gross gaming revenue generated from the platform, subject to certain minimum guaranteed monthly amounts of Big Bola’s participation in the remaining gross gaming revenues. In February 2021, vale.mx began operations.
On May 19, 2021, we entered into a non-exclusive license agreement with Playboy Enterprises International, Inc. (“Playboy”) to use certain trademarks (including the rabbit head logo) and other intellectual property of Playboy on and in connection with the design, creation, promotion, marketing, advertisement, sales, operation, maintenance and distribution in India of real-money game mobile apps, such as rummy, poker, fantasy sports and other games of skill approved by Playboy. We will pay Playboy as a royalty a percentage of net gaming revenue. The term of the agreement is through the end of 2025, subject to early termination upon certain events of default, which include our failure to launch a Playboy-branded game in India by November 1, 2021, or to meet certain annual minimum net gaming revenue targets. The Playboy-branded game, https://www.playboyrummy.com/, was launched on November 1, 2021.
On August 18, 2021, we entered into a software partnership with Ortiz Gaming to supply us with online Bingo gaming content. The deal initially cover Mexico and we plan to expand to other parts of Latin and South America.
A registered player is a customer who has registered on our app or website and met our Know Your Customer identification requirements. During the three months ended March 31, 2022 we registered 7,373 players on vale.mx. On October 4, 2021, we announced we had reached 100,000 total registrations on vale.mx.
Monthly Unique Payers (“MUPs”). MUPs is the average number of unique paid users (“unique payers”) that use our online platform on a monthly basis.
MUPs is a key indicator of the scale of our user base and awareness of our brand and/or the third-party brands we partner with. We believe that year-over-year MUPs will also generally be indicative of the long-term revenue growth potential of the online gaming brands we hold directly and/or those we establish around our B2B brand partners, although MUPs in individual periods may be less indicative of our longer-term expectations. We expect the number of MUPs to grow as we attract, retain and re-engage users in new and existing jurisdictions and expand the online gambling brands we operate to appeal to a wider audience.
We define MUPs as the average number of unique payers per month who had a paid engagement (e.g., participated in a casino game) across one or more of our product offerings via our platform technology. For reported periods longer than one month, we average the MUPs for the months in the reported period.
A “unique paid user” or “unique payer” is any person who had one or more paid engagements via our B2C technology during the period (i.e., a user that participates in a paid engagement with one of our B2C product offerings counts as a single unique paid user or unique payer for the period). We exclude users who have made a deposit but have not yet had a paid engagement. Unique payers or unique paid users include users who have participated in a paid engagement with promotional incentives, which are fungible with other funds deposited in their wallets on our technology. The number of these users included in MUPs has not been material to date and a substantial majority of such users are repeat users who have had paid engagements both prior to and after receiving incentives.
During the three months ended March 31, 2022, our MUPs were 340.
Average Revenue per MUP (“ARPMUP”). ARPMUP is the average online casino revenue per MUP, and this key metric represents our ability to drive usage and monetization of our online casino offering.
During the three months ended March 31, 2022, our ARPMUP was $129.46.
We define and calculate ARPMUP as the average monthly online casino revenue for a reporting period, divided by MUPs (i.e., the average number of unique payers) for the same period.
Handle is a casino or sports betting term referring to the total amount of money bet. We will report the handle or cash wagering which is the total amount of money bet excluding all bonuses.
During the three months ended March 31, 2022, our handle was $1,238,594.
Hold is essentially the amount of cash that our platform instances keep after paying out winning bets. The industry also refers to hold as win or revenue. During the three months ended March 31, 2022, our hold was $55,159.
Online games are characterized by an element of chance. Our revenue is impacted by variations in the hold percentage (the ratio of net win to total amount wagered) on bets placed on, or the actual outcome of, games or events on which users bet. Although our product offerings generally perform within a defined statistical range of outcomes, actual outcomes may vary for any given period, and a single large bet can have a sizeable impact on our short-term financial performance. Our hold is also affected by factors that are beyond our control, such as a user’s skill, experience and behavior, the mix of games played, the financial resources of users and the volume of bets placed. As a result of variability in these factors, actual hold rates on our products may differ from the theoretical win rates we have estimated and could result in the winnings of our gaming users exceeding those anticipated. We seek to mitigate these risks through data science and analytics and rules built into our technology, as well as active management of our amounts at risk at a point in time, but may not always be able to do so successfully, particularly over short periods, which can result in financial losses as well as revenue volatility.
During the three months ended March 31, 2022, our hold percentage was 4.45%.
Our next phase of growth is focused on scaling our customer and player base and geographies, and utilizing the existing technical capacity and investment in infrastructure which has taken place since 2017. The company intends to invest in further software development, specifically the recruitment of a further 10 developers to add sportsbook functionality to the existing PAM platform. As our platform is hosted in AWS, we do not anticipate investing further in any equipment.
In line with the Company’s strategy of creating lean and flexible operations, we are outsourcing a number of departments including Customer Service to TelePerformance in Mexico City, and Marketing to WPP Group / Grey. Furthermore, as we are now integrating the best-in-class games from games studios worldwide, we anticipate a reduced headcount in games development.
In February 2021, our online casino, vale.mx, began operations. However, as of March 31, 2022 and 2021, the Company did not have any positive cash flows from operations and was dependent on its ability to raise equity capital to fund its operating requirements.
The Company began generating revenue in February 2021. Revenues consist of the net gaming revenues from the Company’s vale.mx online casino based in Mexico. Total revenues were $44,016 and $2,089 for the three months ended March 31, 2022 and 2021. The increase of $41,927 is due to fact that the initiation of revenue producing activities in February 2021 resulted in a few number of days in the quarter ended March 31, 2021 and the fact that we have been able to increase the number of players in our system over the ensuing twelve months, resulting in an increase in revenue from the prior period.
The Company began generating costs of revenues in February 2021. Cost of revenues consist of the direct costs of operating vale.mx, our online casino based in Mexico. Total costs of revenues were $49,990 and $182,263 for the three months ended March 31, 2022 and 2021. The decrease of $132,273 was higher costs of operations during the initial phase of operations during the three months ended March 31, 2021 that were not incurred during the three months ended March 31, 2022.
The Company generally recognizes operating costs and expenses as they are incurred in two general categories, software development costs and expenses and general and administrative costs and expenses. The Company’s operating costs and expenses also include non-cash components related to depreciation and amortization of property and equipment, and intellectual property, which are allocated, as appropriate, to software development costs and expenses and general and administrative costs and expenses.
Software development costs and expenses consist primarily of fees paid to consultants and amortization of intellectual property. Management expects software costs and expenses to increase in the future as the Company increases its efforts to develop technology for potential future products based on its technology and research.
General and administrative costs and expenses consist of fees for directors and officers, and their affiliates, as well as legal and other professional fees, depreciation and amortization of property and equipment, lease and rent expense, and other general corporate expenses. Management expects general and administrative costs and expenses to increase in future periods as the Company adds personnel and incurs additional costs related to its operation as a public company, including higher legal, accounting, insurance, compliance, compensation and other costs.
Three Months Ended March 31, 2022 and 2021
The Company’s condensed consolidated statements of operations for the three months ended March 31, 2022 and 2021, as discussed herein, are presented below.
Net loss per common share – basic and diluted $ (0.05 ) $ (0.08 ) Weighted average common shares outstanding – basic and diluted
Revenue. The Company began generating revenue in February 2021. Revenues consist of the net gaming revenues from the Company’s vale.mx online casino based in Mexico. Total revenues were $44,016 and $2,089 for the three months ended March 31, 2022 and 2021. The increase of $41,927 is due to fact that the initiation of revenue producing activities in February 2021 resulted in a few number of days in the quarter ended March 31, 2021 and the fact that we have been able to increase the number of players in our system over the ensuing twelve months, resulting in an increase in revenue from the prior period.
Cost of Revenues: The Company began generating costs of revenues in February 2021. Cost of revenues consist of the direct costs of operating and marketing vale.mx, our online casino based in Mexico. Total costs of revenues were $49,990 and $182,263 for the three months ended March 31, 2022 and 2021. The decrease of $132,273 was higher costs of operations during the initial phase of operations during the three months ended March 31, 2021 that were not incurred during the three months ended March 31, 2022.
Software Development Costs and Expenses. For three months ended March 31, 2022, software development costs and expenses were $14,473, which consisted of amortization of intellectual property of $3,614 and development costs of $10,859.
For the three months ended March 31, 2021, software development costs and expenses were $18,403, which consisted amortization of intellectual property of $18,403.
Software development costs and expenses decreased by $3,930 or 21% in 2022 as compared to 2021, primarily as a result of reduced costs in 2022 as mobile app development was completed.
General and Administrative Costs and Expenses. For the three months ended March 31, 2022, general and administrative costs and expenses were $975,447, which consisted of director, consulting, and professional fees to officers, directors, affiliates, and other related parties of $164,763, investor relations costs of $366,401, stock compensation expense of $62,500, legal and accounting fees to non-related parties of $81,265, consulting fees of $221,290, depreciation and amortization of property and equipment of $2,744, lease and rent expense of $44,687, and other operating costs of $31,797.
For the three months ended March 31, 2021, general and administrative costs and expenses were $2,182,246, which consisted of director, consulting, and professional fees to officers, directors, affiliates, and other related parties of $291,855, stock compensation expense of $1,446,502, marketing and advertising of $269,967, legal and accounting fees to non-related parties of $82,580, consulting fees of $29,924, depreciation and amortization of property and equipment of $2,663, lease and rent expense of $13,804, transfer agent fees of $9,951, investor relations costs of $20,045, travel expenses of $13,964, and other operating costs of $991.
General and administrative costs decreased by $1,206,799 or 55% in 2022 as compared to 2021, primarily as a result of a decrease in stock compensation expense of $1,384,002, an increase in investor relations of $346,356, and a decrease in marketing and advertising of $269,967.
Interest Expense. For the three months ended March 31, 2022, the Company had interest expense of $442,596, as compared to interest expense of $0 for the three months ended March 31, 2021, primarily as a result of accretion of premium, discount amortization and interest on notes payable.
Foreign Currency Gain (Loss). For the three months ended March 31, 2022, the Company had a foreign currency loss of $643, as compared to a foreign currency loss of $0 for the three months ended March 31, 2021, as a result of a decrease in the value of the GB Pound compared to the US Dollar.
Net Loss. For the three months ended March 31, 2022, the Company incurred a net loss of $1,439,133, as compared to a net loss of $2,380,823 for the three months ended March 31, 2021.
Foreign Currency Translation Adjustment. For the three months ended March 31, 2022, the Company had a foreign currency translation adjustment of $6,418, as compared to a foreign currency translation adjustment of $(13,173) for the three months ended March 31, 2021. The foreign currency translation adjustment is a result of fluctuations between the GBP, the functional currency of the Company’s UK subsidiary, and the USD, the reporting currency of the Company.
Comprehensive Loss. For the three months ended March 31, 2022, the Company incurred a comprehensive loss of $1,432,715, as compared to a comprehensive loss of $2,393,996 for the three months ended March 31, 2021.
Liquidity and Capital Resources – March 31, 2022 and December 31, 2021
The Company’s condensed consolidated financial statements have been presented on the basis that the Company is a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company has had no significant operating revenues to date, and has experienced recurring net losses from operations and negative operating cash flows. The Company has financed its working capital requirements since inception through the sale of its equity securities and from borrowings.
As a result, management has concluded that there is substantial doubt about the Company’s ability to continue as a going concern within one year of the date that the condensed consolidated financial statements are being issued. In addition, the Company’s independent registered public accounting firm, in their report on the Company’s condensed consolidated financial statements for the year ended December 31, 2021, has also expressed substantial doubt about the Company’s ability to continue as a going concern (see “-Going Concern”).
The ability of the Company to continue as a going concern is dependent upon the Company’s ability to raise additional funds and implement its business plan, and to ultimately achieve sustainable operating revenues and profitability. The accompanying condensed consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
As of March 31, 2022, the Company had a working capital of $(3,492,128), as compared to working capital of $(2,113,765) as of December 31, 2021, reflecting a decrease in working capital of $1,378,363 for the three months ended March 31, 2022. The decrease in working capital during the three months ended March 31, 2022, was primarily due to the operating costs incurred during the period.
As of March 31, 2022, the Company had cash of $8,241. As discussed in Note 10 of the condensed consolidated financial statements, in April 2022, Company obtained two loans with net proceeds of $60,000 and $250,000. As of December 31, 2021, the Company had cash of $406,526, reflecting the remaining cash on hand from the proceeds of $1,500,000 from the private placement of a secured convertible note payable in November 2021.
In February 2021, the Company began earning revenues, however they are not a level sufficient to support the Company’s operations.
The Company estimates that its working capital requirements for the next twelve months to be approximately $200,000 per month for a total of $2,400,000.
The working capital budget will enable the Company to support the existing monthly operating costs of the Company of approximately $200,000 per month, consisting of monthly (and quarterly) accounting and US securities filing costs estimated at $20,000 per month and a sales and marketing budget of $180,000 per month to engage in a sales and marketing campaign to sell licenses of the Company’s software platform to third parties and attach customers to its online casino based in Mexico.
During the year ended December 31, 2021, the Company completed a series of private placements of its Common Stock, with proceeds totaling $5,300,648 and the placement of a secured convertible note payable with net proceeds of $1,500,000. See Item 1 (“Business-The Private Placements and Share Exchange”) in the Form 10-K. In April the Company entered into two note agreements with existing investors, the first of which resulted in a note with net proceeds of $250,000 and the second of which resulted in net proceeds of $60,000. The second investor agreed to lend up to $250,000. The Company believes that resulting working capital will be sufficient to fund the Company’s operations for the next twenty-four months.
Since acquiring the software platform, the Company has successfully carried out development to port the software platform from its former physical server dependencies and reliance on third parties for hardware management and deployment to a cloud-based platform where deployment is automated through the use of infrastructure as code. To make the Company’s software platform work for business-to-business (B2B) licensees, the Company has modified the software to enable remote management by system administrators of prospective licensees. Previously, the platform was business to consumer (B2C) focused, with outsourced management and deployment. As a result of this software development, the Company expects to be able to monetize its software platform by selling licenses to third parties.
The Company’s ability to raise additional funds through equity or debt financings or other sources may depend on the stage of development of the software platform, the commercial success of the software, and financial, economic and market conditions and other factors, some of which are beyond the Company’s control. No assurance can be given that the Company will be successful in raising the required capital at reasonable cost and at the required times, or at all. Further equity financings may have a dilutive effect on shareholders and any debt financing, if available, may require restrictions to be placed on the Company’s future financing and operating activities. If the Company requires additional capital and is unsuccessful in raising that capital, the Company may not be able to continue the development of its software platform and continue to advance its growth initiatives, or ultimately to be able to continue its business operations, which could adversely impact the Company’s business, financial condition and results of operations.
For the three months ended March 31, 2022, operating activities utilized cash of $393,811, as compared to utilized cash of $906,577 for the three months ended March 31, 2021, to fund the Company’s ongoing operating expenses.
For the three months ended March 31, 2022, the Company’s investing activities consisted of the acquisition of property and equipment for $6,203.
For the three months ended March 31, 2021, the Company’s investing activities consisted of the acquisition of intellectual property for $166,680.
For the three months ended March 31, 2022, the Company’s financing activities consisted of repayment of note payable – bank in the amount of $3,188. We failed to make interest payments on our 10% Original Issue Discount Senior Secured Convertible Note in the principal amount of $1,666,666.67 that were due in February and March 2022, in the amount of $13,889 each. The holder agreed to extend the due dates of the payments that were due in February and March 2022 to April 18, 2022, and to waive any resulting default until such date. On April 14, 2022, we paid the February and March 2022 interest payments, and on April 18, 2022 we made the April 2022 interest payment. However, there can be no assurance that we will be able to raise additional capital to enable us to make future payments that come due.
For the three months ended March 31, 2021, the Company’s financing activities consisted of gross proceeds from the private placement of 1,616,600 shares of Common Stock of $3,681,500. We failed to make interest payments on our 10% Original Issue Discount Senior Secured Convertible Note in the principal amount of $1,666,666.67 that were due in February and March 2022, in the amount of $13,889 each. The holder agreed to extend the due dates of the payments that were due in February and March 2022 to April 18, 2022, and to waive any resulting default until such date. On April 14, 2022, we paid the February and March 2022 interest payments, and on April 18, 2022 we made the April 2022 interest payment. However, there can be no assurance that we will be able to raise additional capital to enable us to make future payments that come due.
Off-Balance Sheet Arrangements
As of March 31, 2022, the Company did not have any transactions, obligations or relationships that could be considered off-balance sheet arrangements.
Trends, Events and Uncertainties
Development of new software is, by its nature, unpredictable. Although the Company will undertake development efforts with commercially reasonable diligence, there can be no assurance that the Company’s efforts to raise funds in the future will be sufficient to enable the Company to develop its technology to the extent needed to create future revenues to sustain operations as contemplated herein.
There can be no assurances that the Company’s technology will be adopted or that the Company will ever achieve sustainable revenues sufficient to support its operations. Even if the Company is able to generate revenues, there can be no assurances that the Company will be able to achieve profitability or positive operating cash flows. There can be no assurances that the Company will be able to secure additional financing on acceptable terms or at all. If cash resources are insufficient to satisfy the Company’s ongoing cash requirements, the Company would be required to scale back or discontinue its software development programs, or obtain funds, if available (although there can be no certainty), through strategic alliances that may require the Company to relinquish rights to certain of its potential products, or to curtail or discontinue its operations entirely.
Other than as discussed above and elsewhere in this Form 10-Q, the Company is not currently aware of any trends, events or uncertainties that are likely to have a material effect on the Company’s financial condition in the near term, although it is possible that new trends or events may develop in the future that could have a material effect on the Company’s financial condition.
Impact of COVID-19 on the Company
The global outbreak of COVID-19 has led to severe disruptions in general economic activities, as businesses and governments have taken broad actions to mitigate this public health crisis. Although the Company has not experienced any significant disruption to its business to date, these conditions could significantly negatively impact the Company’s business in the future.
The extent to which the COVID-19 outbreak ultimately impacts the Company’s business, future revenues, results of operations and financial condition will depend on future developments, which are highly uncertain and cannot be predicted, including, but not limited to, the duration and spread of the outbreak, its severity and longevity, the actions to curtail the virus and treat its impact (including an effective vaccine), and how quickly and to what extent normal economic and operating conditions can resume. Even after the COVID-19 outbreak has subsided, the Company may be at risk of experiencing a significant impact to its business as a result of the global economic impact, including any economic downturn or recession that has occurred or may occur in the future.
Currently, capital markets have been disrupted by the crisis, as a result of which the availability, amount and type of financing available to the Company in the near future is uncertain and cannot be assured and is largely dependent upon evolving market conditions and other factors.
The Company intends to continue to monitor the situation and may adjust its current business plans as more information and guidance become available.
Other than as discussed above and elsewhere in this Form 10-Q, the Company is not currently aware of any trends, events or uncertainties that are likely to have a material effect on the Company’s financial condition in the near term, although it is possible that new trends or events may develop in the future that could have a material effect on the Company’s financial condition.
© Edgar Online, source Glimpses

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