SECURETECH INNOVATIONS, INC. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the financial statements and the related notes, and other information that are included elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements based on current expectations that involve risks and uncertainties, such as our plans, objectives, expectations, and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements due to a variety of factors, including without limitations those set forth under the cautionary note regarding "Forward-Looking Statements" contained elsewhere in this Annual Report. Additionally, you should read the "Risk Factors" section of this Annual Report for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
Limited Operating History; Need for
There is limited historical financial information about us upon which to evaluate our performance. We are an emerging business with limited operating history. We cannot guarantee that we will be successful in our business operations. Our business is subject to risks inherent in the establishment of a new business enterprise, including limited capital resources and possible cost overruns, such as increases in marketing costs, increases in administrative expenditures associated with daily operations, increases in accounting and audit fees, and increases in legal fees related to filings and regulatory compliance.
As of
To become profitable and competitive, we must successfully sell our current product, Top Kontrol, and continue innovating and developing new products, technologies, and services that the marketplace will accept. We anticipate relying on equity sales of our common stock to continue to fund our business operations until we can generate sufficient revenues to cover our operating expenses, which may never happen. Issuances of additional shares will result in dilution to our then existing stockholders. There is no assurance that we will be able to make any additional sales of our equity securities or arrange for debt or other financings to fund our planned business activities. We may also rely on loans from our management or other
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significant shareholders. However, there are no assurances that management or any of our significant shareholders will provide us with any additional funds in the future.
We are continually exploring new financing sources to meet our need for additional cash, including raising funds through sales of our equity securities and loans. We cannot provide any assurances that our efforts to secure additional financing will be successful. We have no guarantee that future funding will be available to us on acceptable terms. If financing is not available on satisfactory terms, we may be unable to continue, develop, or expand our operations. Further, future equity financing could result in additional and substantial dilution to existing shareholders.
Results of Operations
Comparison of the Fiscal Years Ended
The following table sets forth the results of our operations for the fiscal
years ended
Fiscal Years Ended December 31,
2022 2021
Sales $ 46,803 $ 31,713
Cost of goods sold (12,674) (8,915)
Gross profit 34,129 22,798
Operating expenses (516,930) (131,511)
Loss from operations (482,261) (108,713)
Other income 1,335 -
Net loss $ (480,926) $ (108,713)
Sales
Sales for the fiscal year ended
Cost of Goods Sold
Our cost of goods sold consists primarily of purchasing components and circuitry
from various vendors, and then utilizing third-party contract manufacturing
facilities to produce our products with final assembly conducted at our
Gross Profit
Gross profit for the fiscal year ended
Operating Expenses
Fiscal Years Ended December 31,
2022 2021Operating expenses:
General and administrative $ 504,316 $ 124,267 Research and development 12,074 7,245 Operating expenses $ 516,390 $ 131,511
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Our operating expenses for the fiscal year consisted of two components: general
and administrative expenses and research and development expenses. Total
operating expenses were
Loss From Operations
As a result of the foregoing, our loss from operations was (
Other Income
Our other income is comprised of bank interest received on cash deposits and
cashback rewards generated from a bank credit card. During the fiscal year that
ended
Net Loss
The result was that our net loss was (
Total Stockholders' Equity.
Our stockholders' equity was
Liquidity and Capital Resources
Our principal demands for liquidity are related to our efforts to generate sales, manufacture inventory, and expenditures related to sales, regulatory compliance, and general corporate purposes. We intend to meet our liquidity demands, including capital expenditures related to the manufacture of inventory and the expansion of our business, primarily through cash flow provided by operations and sales of our securities.
As of
We rely primarily on internally generated cash flow and available working capital to support operations and growth. Although we believe that our current cash and anticipated cash receipts from sales of Top Kontrol will be sufficient to meet our planned working capital requirements and capital expenditures over the next 12 months, we are constantly exploring additional sources of new capital. Without limiting our available options, future financings will most likely be through the sale of additional shares of our common stock. We may also include warrants, options, and/or rights in conjunction with any future issuances of our common stock. However, we can give no assurance that future financing will be available to us and, if available to us, in amounts or on terms acceptable to us.
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We had net working capital of
The following is a summary of cash provided by or used in each of the indicated
types of activities during the fiscal years ended
Fiscal Years Ended December 31,
2022 2021
Cash provided by (used in):
Operating activities ($301,891 ) ($109,159 )
Investing activities ($5,818 ) $-0 -
Financing activities $232,001 $65,894 Net cash used in operating activities during the fiscal year ended
Net cash used in investing activities was (
Net cash provided by financing activities was
Ongoing and Future Capital Funding Efforts
As of
Impact of the COVID-19 (Coronavirus) Pandemic
The ongoing COVID-19 pandemic has significantly impacted economic activity and markets worldwide. In response, governmental authorities have periodically imposed, and others in the future may reimpose, stay-at-home orders, shelter-in-place orders, quarantines, executive orders, and similar government orders and restrictions to control the spread of COVID-19. Such orders or restrictions have resulted in temporary business closures, limitation of business hours, limitations on the number of people in business locations, enhanced requirements on sanitation, social distancing practices, and travel restrictions, among others. Historically, we were restricted in our ability to sell and distribute our products while these restrictive mandates were in place. Should similar future government orders and restrictions go into effect again, it will adversely impact our financial condition and operating results.
The long-term impact of the ongoing COVID-19 pandemic on our financial condition or results of operations remains uncertain, in particular, due to external factors related to the pandemic and as COVID-19 cases (including the spread of variants or mutant strains) continue to surge in certain parts of the world. In particular, COVID-19 could have a significant disruption to our supply chain for the products we sell, which could have a material impact on our sales and future earnings. Accordingly, COVID-19 may negatively impact our business in the future, and any future adverse impacts on our business may be worse than we anticipate. The ultimate impact will depend on the severity and duration of the current ongoing COVID-19 pandemic and future resurgences and actions taken by governmental authorities and other third parties in response, each of which is uncertain, rapidly changing, and difficult to predict. Our growth rates during the ongoing COVID-19 pandemic may not be sustainable and may not be indicative of future growth.
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Going Concern Consideration
Our independent registered public accounting firm has issued a going concern
opinion in their audit report dated
Off-Balance Sheet Operations
As of
Critical Accounting Policies Use of Estimates
The accompanying financial statements of
Cash and Cash Equivalents
For purposes of the statement of cash flows,
Fair Value of Financial Instruments
ASC 820, "Fair Value Measurements" and ASC 825, Financial Instruments, requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. It establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument's categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. It prioritizes the inputs into three levels that may be used to measure fair value:
Level Description
Level 1 Applies to assets or liabilities for which there are quoted prices in
active markets for identical assets or liabilities.
Level 2 Applies to assets or liabilities for which there are inputs other than
quoted prices that are observable for the asset or liability such as
quoted prices for similar assets or liabilities in active markets;
quoted prices for identical assets or liabilities in markets with
insufficient volume or infrequent transactions (less active markets); or
model-derived valuations in which significant inputs are observable or
can be derived principally from, or corroborated by, observable market
data.
Level 3 Applies to assets or liabilities for which there are unobservable inputs
to the valuation methodology that are significant to the measurement of
the fair value of the assets or liabilities.
Inventory and Cost of Sales
Inventories are stated at the lower of cost or realizable value, using the weighted average cost method. When an impairment indicator suggests that the carrying amounts of inventories might not be recoverable, Management reviews such carrying amounts and estimates the net realizable value based on the most reliable evidence available at that time. An impairment loss is recorded if the net realizable value is less than the carrying value. Impairment indicators considered for these purposes are, among others, obsolescence, decrease in market prices, damage, and a firm commitment to sell.
Net Loss per Share Calculation
Basic net loss per common share is computed by dividing the net loss attributable to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted earnings per share is calculated similarly to basic loss per share except that the denominator is increased to include the number of additional common shares that would have been
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outstanding if the potential common shares had been issued and if the additional
common shares were dilutive.
Revenue Recognition
Effective
Top Kontrol requires installation by a Certified Top Kontrol Technician. To
become a Certified Top Kontrol Technician, an automotive technician must
complete a one-day hands-on course hosted by
Because of this professional installation requirement,
Revenue is recognized when performance obligations under the terms of a contract with our customers are satisfied. Revenue is recorded net of marketing allowances, volume discounts, and other forms of variable consideration.
Generally, this occurs with the transfer of control of our product to the
customer and payment has been received.
Revenue Recognition; ASC 606 Five-Step Model
Under ASC 606,
Revenue Recognition;
Customers are allowed to return goods that are defective (warranty returns). In some instances, customers may be allowed to return a limited number of units for periodic stock adjustment returns. Such stock adjustment returns would be limited to no more than 5% of their total units sold.
As is standard in the industry, we only will accept returns from active customers. If a customer ceases doing business with us, we have no further obligation to accept additional product returns from that customer.
Income Taxes
SecureTech accounts for income taxes pursuant to FASB ASC 740, Income Taxes.
Under FASB ASC 740-10-25, deferred tax assets and liabilities are determined based on temporary differences between the bases of certain assets and liabilities for income tax and financial reporting purposes. The deferred tax assets and liabilities are classified according to the financial statement classification of the assets and liabilities generating the differences.
Changes in circumstances, such as
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Recent Accounting Pronouncements
There are various updates recently issued, most of which represented technical
corrections to the accounting literature or application to specific industries
and are not expected to have a material impact on
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