Our discussion and analysis of the financial condition and results of operations
should be read in conjunction with the unaudited condensed consolidated
financial statements and the related disclosures included elsewhere herein and
in the Management's Discussion and Analysis of Financial Condition and Results
of Operations included as part of our Annual Report on Form 10-K for the year
ended December 31, 2020 and Quarterly Report on Form 10-Q for the nine months
ended September 30, 2021.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this Quarterly Report on Form 10-Q constitute
forward-looking statements within the meaning of the securities laws.
Forward-looking statements include all statements that do not relate solely to
the historical or current facts and can be identified by the use of
forward-looking words such as "may", "believe", "would", "could", "should",
"expect", "project", "anticipate", "estimates", "possible", "plan", "strategy",
"target", "prospect" or "continue" and other similar terms and phrases. These
forward-looking statements are based on the current plans and expectations of
our management and are subject to a number of uncertainties and risks that could
significantly affect our current plans and expectations, as well as future
results of operations and financial condition and may cause our actual results,
performance or achievements to be materially different from any future results,
performance or achievements expressed or implied by such forward-looking
statements. Important factors that could cause our actual results to differ
materially from our expectations are described in Item 1A (Risk Factors) of our
Annual Report on Form 10-K, for the year ended December 31, 2020. Although we
believe that the expectations reflected in such forward-looking statements are
reasonable, there can be no assurance that such expectations will prove to have
been correct. We do not assume any obligation to update these forward-looking
statements to reflect actual results, changes in assumptions, or changes in
other factors affecting such forward-looking statements.
Applied Energetics, Inc., (sometimes referred to as "Applied Energetics,"
"AERG," the "company," "its," "we," "us" or "our") is a corporation organized
and existing under the laws of the State of Delaware. Our executive office is
located at 9070 S. Rita Road, Suite 1500, Tucson, Arizona 85747, (520) 628-7415.
www.aergs.com
Applied Energetics, Inc., specializes in the development and manufacture of
advanced high-performance lasers, high voltage electronics, advanced optical
systems, and integrated guided energy systems for defense, aerospace,
industrial, and scientific customers worldwide.
Technology and Patents
Applied Energetics, Inc. is recognized as a global leader in developing the next
generation optical sources exhibiting ever-increasing output energy, peak power
and frequency agility while also providing decreased size, weight, and cost of
these systems for customers. The AERG scientific team is in the process of
expanding our patent portfolio to cover these technological breakthroughs to
further enhance our suite of solutions for threat disruption for the Department
of Defense, the intelligence community, and for commercial, medical, space and
national intelligence applications with optical sources operating from the deep
ultraviolet to the far infrared portions of the electromagnetic spectrum.
AERG has developed, successfully demonstrated and holds all crucial intellectual
property rights to a dynamic Directed Energy technology called Laser Guided
Energy ("LGE®") and Laser Induced Plasma Channel ("LIPC®"). LGE and LIPC are
technologies that can be used in a new generation of high-tech weapons. The
Department of Defense (DOD) previously recognized two key types of Directed
Energy Weapon ("DEW") technologies, High Energy Lasers ("HEL"), and High-Power
Microwave ("HPM"). Neither the HEL nor the HPM intellectual property portfolio
is owned by a single entity. The DOD then designated a third DEW technology,
LGE. Applied Energetics's LGE and LIPC technologies are wholly owned by Applied
Energetics and patent protected with 26 current patents and an additional 11
Government Sensitive Patent Applications ("GSPA"). These GSPA's are held under
secrecy orders of the US government and allow the company greatly extended
protection rights.
18
Applied Energetics technology is vastly different from conventional directed
energy weapons, i.e. HEL and HPM. LGE uses Ultra-Short Pulse (USP) laser
technology to combine the speed and precision of lasers with the overwhelming
impact on targeted threats with high-voltage electricity. This unique directed
energy solution allows extremely high peak power and energy, with target and
effects tenability, and is effective against a wide variety of potential
targets. A key element of LGE is its novel ability to offer selectable and
tunable properties that can help protect non-combatants and combat zone
infrastructure.
As Applied Energetics looks toward the future, our corporate strategic roadmap
builds upon the significant value of the company's USP capabilities and key
intellectual property, including LGE and LIPC, to offer our prospective
partners, co-developers and system integrators a variety of next-generation
Ultra Short-Pulse and frequency-agile optical sources from the ultraviolet to
the far infrared portion of the electromagnetic spectrum to address numerous
challenges within the military, medical device, and advanced manufacturing
market sectors.
Key Relationships and Business Development
Gregory Quarles joined Applied Energetics, to serve as its Chief Executive
Officer and a member of the Board of Directors, effective May 6, 2019. He was
elected President of the company in January 2021. He leads the company in its
development of next generation advanced defense technologies based on compact
ultra-short pulse optical systems and laser guided energy. Dr. Quarles is an
experienced CEO, board member and renowned physicist with over 30 years of
experience driving cutting-edge laser, optics, and photonics technology
development and operations within advanced industrial companies. Additionally,
Dr. Quarles is a globally recognized leader for his strategic partnerships with
the Department of Defense and his innovative work in the progression of global
materials research, specifically developing new laser and integrated photonic
devices for a variety of military, medical, and industrial applications.
Pursuant to a Consulting Agreement, dated as of May 24, 2019, with SWM
Consulting, LLC, an entity owned by Stephen W. McCahon, Dr. McCahon serves as
our Chief Scientist. This relationship gives us the technical and industry
knowhow to utilize the company's intellectual property in the development of a
next generation of Ultra-Short Pulse Lasers. The Consulting Agreement provides
for a combination of cash and equity compensation, as we have previously
disclosed, for which Dr. McCahon leads Applied Energetics' scientific efforts
including: leading the scientific team, developing new intellectual property,
assisting with business development, transferring legacy knowledge to new team
members, recruiting and training talent, working with executives on corporate
strategy, assisting in budget development for R&D, meeting with clients on
technical concepts, attending conferences, and producing thought leadership for
the company. Dr. McCahon works closely with Dr. Quarles on the company's
research and development activities and in the proposal and fulfilment of
research and development contracts for branches of the Department of Defense,
agencies of the federal government, other defense contractors, and in other
internal research and development activities relating to lasers and advanced
optical sources.
Pursuant to our July 16, 2018, Master Services Agreement, Westpark Advisors, LLC
assists the company in its comprehensive sales and marketing strategy for the
greater Washington DC area and broader Department of Defense markets. Westpark
Advisors focuses on the company's next generation USP laser technologies, along
with LGE and the company's other novel laser technologies and provides business
development, program management and strategy consulting services, including
sales and marketing of the company's product line. Westpark Advisors' Managing
Director, Patrick Williams provides full-time support to the company under this
agreement. This agreement was amended to grant Westpark Advisors options to
purchase an additional 1,000,000 shares of AERG common stock, par value $0.001
per share, at an exercise price of $0.40 per share, in exchange for Westpark
Advisors's continued service to the company. The option vests over a period of
three years from the date of the amendment. Otherwise, the other provisions of
the agreement remain in force and unchanged.
Under our February 15, 2019, Consulting and Advisory Services Agreement,
WCCventures, LLC provides advice and guidance to management including business
strategy, marketing and capital needs.
AERG also retains corporate communications firm Cameron Associates ("CA"), to
provide investor relations services on behalf of the company including
counselling, management on appropriate investor communications, preparing and
distributing press releases and other public documents, orchestrating conference
calls and responding to investor inquiries.
19
Effective April 29, 2019, AERG. established its Board of Advisors and appointed
Christopher Donaghey as its first member. Chris Donaghey currently serves as the
senior vice president and head of corporate development for Science Applications
International Corporation ("SAIC"), a $7 billion revenue defense and government
agency technology integrator. As an executive of SAIC, Donaghey works closely
with SAIC's senior management to support the development and implementation of
SAIC's strategic plan with an emphasis on M&A to complement organic growth
strategies and value creation. In his role on Applied Energetics' Board of
Advisors, Mr. Donaghey has significant input into the strategic direction of the
company and provides assistance in building lasting relationships in our defense
markets. This agreement has been renewed for an additional two years for 70,000
shares of common stock per year and options to purchase 200,000.
Recent Developments
Effective March 15, 2021, AERG entered into a Lease Agreement with Campus
Research Corporation, for approximately 13,000 rentable square feet of office,
laboratory and production space located at the UA Tech Park, a research and
technology park owned and operated by the University of Arizona. The company
consolidated its offices and expanded its R&D capacity by leasing this space
which is outfitted with a Class 1000 (ISO Class 6) "clean room" and other
turnkey laboratory and conference features.
The lease term began May 1, 2021 and ends on April 30, 2026. The base rent is
$6.7626 per rentable square foot for year one, and escalates to $9.2009 in year
two, $11.4806 in year three, $13.1740 in year four and $14.9306 in year five,
plus certain operating expenses and taxes.
The space was previously occupied by a global provider of lasers and laser-based
technology which opted to vacate prior to the end of its lease term. As a
result, we are benefiting from millions of dollars of capital investment made by
the vacating tenant, and the vacating tenant will continue to pay a portion of
the full market rent, with the company paying the balance in the amounts set
forth above.
We believe that this new strategic location will support the company's
anticipated future growth and provide greater capacity for research, product
development and production activities. The new facility, which the AERG team
began to occupy on May 1, 2021, provides the company with an ITAR and laser
safety compliant facility totaling approximately 13,000 square feet, of which
approximately 4,800 square feet is dedicated to the cleanroom. The consolidation
of the two previous Applied Energetics facilities in Tucson into the UA Tech
Park facility was completed on May 30, 2021.
We submitted multiple proposals to various government agencies in 2020 and
between Q1 and through Q3 of 2021. Due to the closures of multiple agencies and
work-from-home orders across various regions of the United States, we anticipate
that reviews and funding decisions on these proposals might be delayed longer
than anticipated as resources are focused on other matters within the
government. AERG has received multiple notices from government agencies stating
that "the vast number of proposals received, and the challenges posed by the
COVID-19 pandemic have impacted the Government's evaluation timelines." Several
of the government agencies that have received and are reviewing our proposals
started to open their facilities to limited off-site briefings starting on June
1, 2021. Since that date, AERG's team has been invited to, and completed,
multiple briefings focused on our capabilities and our submissions. This
positive action by the agencies could be impacted by the new Delta variant
(B.1.617.2) of the SARS-CoV-2 strain. The Federal government is currently
evaluating the possibility of reducing staff sizes in the offices and closing
off all external visitors unless the meetings are deemed critical by the agency.
Effective August 2, 2021, the DOD re-enforced a maximum telework position for
their employees and contractors and reduced the on-site occupancy to less than
50% of the normal occupancy. As the Delta variant increased, the DOD maintained
the maximum telework policy and on September 9, 201 reduced the maximum on-site
occupancy to less than 40% of normal work occupancy. These recent changes have
again further hampered the ability of the AERG team to schedule on-site
briefings for our proposals undergoing review. In addition to these review-based
delays, the US federal budget for 2022 was not approved by Congress by the
October 1, 2021 start of the U.S. federal government fiscal year. On September
21, 2021, the U.S. House of Representatives passed H.R. 5305, and on September
30, 2021, the U.S. Senate passed the same bill, a continuing resolution (CR) to
extend federal government funding through December 3, 2021 and the President
signed it into law (Public Law 117-43) on September 30, 2021 to avoid a
government shutdown at the end of the fiscal year 2021. There is some
uncertainty as to whether the federal budget will be approved before December 3,
2021, and if not, there will either be a second CR or there could be a
sequestration and closure of the federal government. Either of these delays also
could drastically impact review of proposals and awards of near-term contracts.
20
On April 28, 2020, AERG was awarded a loan for $132,760 through the Small
Business Administration (SBA) Paycheck Protection Program (PPP). The terms of
this loan were twenty-four months with a 1% annual interest rate. These funds
were issued to cover payroll costs over eight weeks covering May and June 2020.
Through the utilization of this PPP loan, AERG was able to keep all employees
fully engaged during these two months of the pandemic. We followed the
guidelines set forth by the SBA on the PPP program which allowed AERG to apply
for a waiver of all or a portion of the loan, because of full employment
retention. On July 2, 2021 we received a letter from our bank, via the SBA,
approving that $80,593.55 of the loan be converted to a grant. The balance of
the loan will be paid back by AE over the next 24 months at the 1% annual
interest rate.
Upon the successful examination, and with no opposition, The United States
Patent and Trademark Office officially entered the marks LGE® (Reg. No.
6,289,892) and LIPC® (Reg. No. 6,316,069) on March 9, 2021, and April 6, 2021,
respectively, in the principal register.
Commencing with the Quarterly Report on Form 10-Q for the three months ended
March 31, 2021, we engaged the CFO Squad to assist us in the maintenance of the
company's books and records, including the preparation of our financial
statements. Management believes that the engagement of the CFO Squad is an
important step toward continuously improving the company's internal controls
over financial reporting and its disclosure controls and procedures which are
discussed in Item 4. Controls and Procedures. We also believe that the addition
of the accountants of the CFO Squad, with their broad range of accounting
expertise, will strengthen the company's accounting team and its financial
reporting.
The team at Applied Energetics continued to expand during the third and fourth
quarters of 2021, with the addition of two new full-time employees (one, a laser
technician and the other a junior scientist) and retention of world-class
contractors to strengthen our human resources, public relations, IT, and
technical staff supporting the research and development in the laboratory.
Path Forward
Our goal with the AERG Strategic Plan is to increase the energy, peak power and
frequency agility of USP optical sources while decreasing the size, weight, and
cost of these systems. We are in the process of developing this breadth of very
high peak power USP lasers and additional optical sources that have a very broad
range of applicability for threat disruption for the Department of Defense, the
intelligence community, and for commercial, biomedical, space and national
intelligence applications. Although the historical market for AERG's USP
technology is the U.S. Government, derivatives of these USP technologies could
provide future platforms for commercial additive and subtractive manufacturing
and medical device and imaging markets, creating larger dual-use market for our
products to address once testing, evaluation and integration have been completed
in partnerships with the user community. During 2020, the AERG team was able to
develop partnership and teaming arrangements with the three leading laser and
optics institutes in the United States, namely, the University of Arizona, the
University of Central Florida, and the University of Rochester Laboratory for
Laser Energetics. Our desire is to work on programs jointly where the strengths
of each organization can assist in escalating knowledge and delivery of systems
to the government sponsors, and to train the next generation of scientists and
engineers to work in the Directed Energy fields.
The ongoing Coronavirus Disease 2019 (COVID-19) pandemic does present unique
risks and uncertainties that may alter or otherwise affect our path forward,
including the recent challenges experienced with rising infections from the
emerging CoVID-Delta variant. Our management continues to monitor the possible
effects of the COVID-19 on the execution of our plan of operations, our
prospective contracts, and the availability of financing to fund our strategic
and operational plans going forward. Despite these challenges, we have continued
to execute our business development plans and to deliver on our government
contracts as per the timeline commitments. During this fiscal year, we submitted
multiple proposals and have been engaged in meetings on a daily and weekly basis
with various agencies and departments both remotely and in person in Washington,
DC and at various other domestically-located government facilities. Dr. Quarles,
our President and CEO, has traveled to Washington, DC and to multiple other
government facilities around the United States on multiple occasions during the
pandemic in 2020 and during Q1, Q2, and Q3 of 2021 and remains very committed to
pursuing this business even in these challenging times. The interest in our
technology, IP portfolio, and applications remains high, and we continue to
submit proposals for all appropriate opportunities and share our vision with
government agency leadership, Congressional offices, and industrial partners
regarding the disruptive capabilities of USP optical sources for both near- and
far-term threats and dual-use commercial applications.
21
Through our analysis of the market, and in discussions with potential customers,
we would also conclude that customers are becoming more receptive and interested
in directed energy technologies. According to the Department of Defense fiscal
2019 budget, its directed energy spending grew from approximately $500 million
in 2017 to over $1 billion in 2019, an increase of 100%. The 2020 budget
reflected directed energy spending of $1.2 billion, an additional increase of
20% over 2019, and from 2017 through 2020, the directed energy budget grew from
approximately $500 million to approximately $1.2 billion, averaging
approximately 40% per year. The government has allocated $1.4 billion for
various directed energy programs in 2021, and it is anticipated to exceed $2.1 B
by 2024. As a result, we continue to be even more optimistic about our future
and the growing opportunities in directed energy applications. The AERG team
anticipates a continuation of strong funding for the Directed Energy community.
With our existing patent portfolio, and through further advancements of our
technologies, we believe we have the substantial building blocks needed to
become a significant and successful developer in our USP and LGE marketplaces.
We continue to be very optimistic about the opportunity for our Directed Energy
portfolio. We are actively building our patent portfolio with multiple
submissions and applications, and we continue to brief and meet with
congressional and government agencies about ultrashort optical sources and
counter-threat applications, we are actively hiring and recruiting scientists,
engineers and technical staff as we strengthened our balance sheet with a
private placement of common stock in the amount of $3,041,000, which closed on
July 9 and 22, 2021, to help build for our future.
Results of Operations
Comparison of Operations for the Three Months Ended September 30, 2021 and 2020:
2021 2020
Revenue $ - $ 165,920
Cost of revenue - (153,630 )
General and administrative (1,304,875 ) (1,133,536 )
Selling and marketing (83,173 ) (72,335 )
Research and development (61,968 ) (84,465 )
Interest (expense) (1,794 ) (225,210 )
Net loss $ (1,451,810 ) $ (1,503,255 )
Revenue
Revenue for the three months ended September 30, 2021, and 2020, was $0 and
$166,000, respectively. The decrease was due to the completion of the STTR phase
I project in 2020.
Cost of Revenue
Cost of revenue decreased approximately $154,000 to $0 for the three months
ended September 30, 2021 compared to $154,000 for the three months ended
September 30, 2020. The decrease in the cost of revenue was due to the
completion of the STTR phase I project in 2020.
General and Administrative
General and administrative expenses increased approximately $171,000 to
approximately $1,305,000 for the three months ended September 30, 2021 compared
to approximately $1,134,000 for the three months ended September 30, 2020
primarily due to the $154,000 in applied project costs in 2020, increases of
$100,000 of salaries and employee benefits, $64,000 building costs, $8,000 of
travel and $4,000 supplies insurance and miscellaneous, partially offset by a
decrease in professional expenses of $158,000.
Selling and Marketing
Selling and marketing expenses increased $11,000 to approximately $83,000 for
the three months ended September 30, 2021 compared to approximately $72,000 for
the three months ended September 30, 2020 primarily due to an increase of $4,000
in travel related expenses, $3,000 in marketing supplies and $3,000 in
professional services.
22
Research and Development
Research and development expenses decreased approximately $22,000 to
approximately $62,000 for the three months ended September 30, 2021 compared to
approximately $84,000 for the three months ended September 30, 2020 primarily
due to the decreases in contract labor of $17,000 and R&D materials of $6,000.
Interest Expense
Interest expense decreased approximately $223,000 to $2,000 for the three months
ended September 30, 2021 compared to approximately $225,000 for the three months
ended September 30, 2020 primarily due the decrease in interest bearing notes
payable.
Net Loss
Our operations for the three months ended September 30, 2021 resulted in a net
loss of approximately $1,452,000, a decrease of approximately $51,000 compared
to the approximately $1,503,000 net loss for the three months ended September
30, 2020 primarily due to a decrease in interest expense and research and
development partially offset by general and administrative, sales and marketing
and a gross profit decrease.
Comparison of Operations for the Nine Months Ended September 30, 2021 and 2020:
2021 2020
Revenue $ - $ 175,920
Cost of revenue - 153,630
General and administrative (3,412,603 ) (3,352,280 )
Selling and marketing (235,897 ) (225,861 )
Research and development (192,783 ) (207,261 )
Other income 81,218 15,833
Interest (expense) (3,542 ) (395,776 )
Net loss $ (3,763,607 ) $ (4,143,055 )
Revenue
Revenue decreased $176,000 from $176,000 for the nine months ended September 30,
2020 compared to $0, for the nine months ended September 30, 2021. Revenue for
the nine months ended September 30, 2021, and 2020, was $0 and $176,000,
respectively. The decrease was due to the completion of the STTR phase I project
in 2020.
Cost of Revenue
Cost of revenue decreased approximately $154,000 to $0 for the nine months ended
September 30, 2021 compared to $154,000 for the nine months ended September 30,
2020. Cost of revenue in the 2020 period was due to the completion of the STTR
phase I project in 2020.
General and Administrative
General and administrative expenses increased approximately $60,000 to
approximately $3,413,000 for the nine months ended September 30, 2021 compared
to approximately $3,352,000 for the nine months ended September 30, 2020
primarily due to the $154,000 in applied project costs in 2020, the increases in
building costs of $133,000, salaries and employee benefits of $133,000, supplies
and insurance of $14,000, depreciation of $2,000, partially offset by a decrease
in professional expenses of $376,000.
23
Selling and Marketing
Selling and marketing expenses increased approximately $10,000 to approximately
$236,000 for the nine months ended September 30, 2021 compared to approximately
$226,000 for the nine months ended September 30, 2020. This is primarily due to
increases in supplies of $12,000 and partially offset by a decrease in travel
related of $4,000.
Research and Development
Research and development expenses decreased approximately $14,000 to
approximately $193,000 for the nine months ended September 30, 2021 compared to
approximately $207,000 for the nine months ended September 30, 2020 primarily
due to the decrease in R&D contract labor.
Other Income
Other income increased approximately $65,000 to $81,000 for the nine months
ended September 30, 2021 compared to approximately $16,000 for the nine months
ended September 30, 2020 primarily due to the partial forgiveness of the
company's PPP loan.
Interest Expense
Interest expense decreased approximately $392,000 to approximately $4,000 for
the nine months ended September 30, 2021 compared to approximately $396,000 for
the nine months ended September 30, 2020 primarily due to sharply decreased
levels of debt and elimination of the beneficial conversion feature of notes
payable. The 2020 amount also included a $50,000 penalty interest on the note
payable for the AOS acquisition.
Net Loss
Our operations for the nine months ended September 30, 2021 resulted in a net
loss of approximately $3,764,000, a decrease of $379,000 compared to the
$4,143,000 net loss for the nine months ended September 30, 2020 primarily due
to a decrease in total other and research and development partially offset by
gross profit and increases in general and administrative and selling and
marketing.
Trend Discussion
There are obvious costs associated with restarting the corporation and acquiring
the skilled leadership and manpower to execute on new product development, as is
visible in the higher year-over-year expenses recognized in this Result of
Operations. It appears with early 2020 and 2021 contract booking and the
combination of the government slow-down due to COVID-19 impacts that it is too
early to determine if efforts to obtain new business under our Teaming and
Consulting Agreements could be successful for the next fiscal year. The AERG
team expanded teaming arrangements in 2020, with agreements signed with the
three most prominent optics and laser universities in the United States. This
should provide greater visibility to government agencies looking for submissions
with university/industry partnerships and research alignment.
Liquidity and Capital Resources
The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and satisfaction of
liabilities in the normal course of business. For the nine months ended
September 30, 2021, the company incurred a net loss of $3,763,607, had negative
cash flows from operations of $2,279,649 and may incur additional future losses
due to the possible reduction in government contract activity and the expenses
discussed under Results of Operations. In their report accompanying our
financial statements for the year ended December 31, 2020, our independent
auditors stated that our financial statements were prepared assuming that we
would continue as a going concern and that they have substantial doubt as to our
ability to do so based on our recurring losses from operations and need to raise
additional capital. The financial statements do not include any adjustments
relating to the recoverability of assets and the amount or classification of
liabilities that might be necessary should the company be unable to continue as
a going concern.
24
At September 30, 2021, the company had total current assets of $5,207,448 and
total current liabilities of a $1,358,280 resulting in working capital of
approximately $3,849,168. At September 30, 2021, we had $5,142,332 of cash and
cash equivalents, an increase of $1,819,042 from $3,323,290 at December 31,
2020.
During the first nine months of 2021, the net cash outflow from operating
activities was $2,279,649. This amount was comprised primarily of our net loss
of $3,763,607, offset by noncash stock-based compensation expense of $848,277
and amortization of future compensation payable of $625,000. However, compared
with the nine months ended September 30, 2020, we experienced a decrease in
noncash stock based compensation expense of $289,967 and in accounts payable of
$122,555. Amortization of future compensation payable of $625,000 was consistent
over both periods. Accrued interest also decreased from $231,152 in the nine
months ended September 30, 2020 to $696 for the nine months ended September 30,
2021.
Investing activities reflected $206,198 for the acquisition of equipment.
Financing activities reflected $5,299,000 in proceeds from the sale of common
stock and proceeds from the exercise of warrants and options of $108,000,
partially offset by the repayment of notes payable of $1,102,113 resulting in
net cash inflow of $4,304,887. On February 2, 2021 and February 8, 2021, the
company completed the issuance of 7,056,250 total shares of its common stock at
a price of $0.32 per share, or $2,258,000 in the aggregate.
As a result of these financings, as of November 15, 2021, the company had cash
and cash equivalents of approximately $5,500,000. Based on the company's current
business plan, it believes its cash balance as of the date of this report will
be sufficient to meet its anticipated cash requirements for the next twelve
months. However, the company cannot be certain that it will achieve its current
business plan.
The company's existence is dependent upon management's ability to develop
profitable operations. Management is devoting substantially all of its efforts
to developing its business and raising capital, as needed, and cannot be certain
that these efforts will be successful. Management's business development efforts
may not result in profitable operations. To fund its research and development
and marketing efforts, the company's management continues to explore possible
financing opportunities through discussions with investment bankers and private
investors. The company may not be successful in its effort to secure additional
financing on terms it considers favorable. The accompanying consolidated
financial statements do not include any adjustments that might result should the
company be unable to continue as a going concern.
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