What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-05-16 compared with 2021-11-15 · 52 added, 78 removed, 25 unchanged (84% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

following discussion should be read in conjunction with our condensed consolidated financial statements and notes to our financial statements

included elsewhere in this report.

following discussion should be read in conjunction with our condensed consolidated unaudited financial statements and notes to our unaudited

financial statements included elsewhere in this report.

This discussion contains forward-looking statements that involve risks and uncertainties.

Actual results

could differ materially from those anticipated in these forward-looking statements as a result of various factors discussed elsewhere

in this report.

Actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors discussed

elsewhere in this report.

on our diversified expertise in manufacturing, marketing, distribution, and technology services in a wide variety of consumer products,

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than 50 key, international markets.

2021, we continued under our 2019 five-year manufacturing and distribution agreement with an unrelated party to manufacture, distribute,

and sell condoms, electronic tobacco products, cigars, energy drinks, water beverages, and related merchandise, all using the HUSTLER®

In 2020, our efforts had been devoted to phase one of our development of all HUSTLER®-branded products, which led us

to generating revenue during 2020 for the first time in several years.

of Operations for the Three and Nine Months Ended September 30, 2021, Compared to the Three and Nine Months Ended September 30, 2020

2021 and into 2022, we continued under our 2019 five-year manufacturing and distribution agreement with an unrelated party to manufacture,

distribute, and sell condoms, electronic tobacco products, cigars, energy drinks, water beverages, and related merchandise, all using

the HUSTLER® brand name.

of Operations for the Three Months Ended March 31, 2022, Compared to the Three Months Ended March 31, 2021

and Cost of Sales

the three months ended September 30, 2021 and 2020, we had net sales of $961,474and $405,005, respectively, and cost of sales of $339,076

and $228,380, respectively, for gross profit of $622,398 and $176,625, respectively.

During the nine months ended September 30, 2021,

we had net sales of $2,281,529 and $935,319, respectively, and cost of sales of $803,135 and $425,699, respectively, for gross profit

of $1,478,394 and $509,620, respectively.

The net sales for the three months ended September 30, 2021, consisted of product sales, which

increased about 137.4% from the prior year.

For the nine months ended September 30, 2021, net sales included revenue received in the

first quarter of 2021 related to our agreement to develop and distribute certain HUSTLER® branded product, which was approximately

143.9% higher than net sales for the corresponding period in the previous year.

the three months ended September 30, 2021 and 2020, employee costs were $139,520 and $126,559, respectively, and selling, general, and

administrative expenses were $514,358 and $129,125, respectively, representing an increase in operating expenses of $385,233,

or 155.7%, in the current period.

During the nine months ended September 30, 2021 and 2020, employee costs were $408,485 and

$169,169, respectively, and selling, general, and administrative expenses were $1,165,870 and $248,059, respectively, representing an

increase in operating expenses of $1,157,127, or 277.3%, in the current period.

The increase in operating expenses period over period

is the result of substantially increased activities attributable to the development of products under the HUSTLER® brand name in

Income and Expense

income and expenses during the three months ended September 30, 2021 and 2020, consisted of $172,400 and $154,318 in interest expense

and a loss of $62,086 and a gain of $39,700 on derivative valuation, respectively.

Other income and expenses during the nine months ended September 30, 2021 and 2020, consisted of $507,614 and $466,953 in interest expense;

a loss on disposal of equipment of $0 and $9,771, a loss of $176,746 and $318,564 on derivative valuation;

other income of $0 and $42,000,

respectively;

and a gain on forgiveness of debt of $12,917 and $0, respectively.

The decrease in other expenses period over period is

the result of a decrease to our loss on derivative valuation.

the three months ended March 31, 2022 and 2021, we had net sales of $691,769 and $619,399, respectively, an increase of $72,369 or 11.7%.

We had cost of sales of $232,379 and $306,648, respectively, for gross profit of $459,389 and $312,751, respectively.

Revenues are derived

from the design, manufacture, and delivery of certain licensed products in accordance with our GloBrands-HUSTLER® distribution agreement.

the three months ended March 31, 2022 and 2021, employee costs were $132,506 and $133,888, respectively, a decrease of only $1,382 or

Selling, general, and administrative expenses were $376,177 and $174,298, respectively, an increase of $201,879 or 115.8%.

in operating expenses period over period is the result of substantially increased activities attributable to the development of products

under the HUSTLER® brand name.

expenses during the three months ended March 31, 2022 and 2021, consisted of $173,351 and $166,488 of interest expense and a loss of

$36,053 and $127,791 on derivative valuation, respectively.

The decrease in other expenses period over period is the result of a decrease

to our loss on derivative valuation.

and Capital Resources

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Our accumulated deficit was approximately

$78.8 million and $77.9 million at September 30, 2021, and December 31, 2020, respectively.

As of September 30, 2021, and December 31,

2020, we had current assets of $1,217,186 and $942,442, respectively, and current liabilities of approximately $39 million and $38.1

million, respectively, creating working capital deficits of approximately $37.8 million and $37.1 million, respectively, as of September

30, 2021, and December 31, 2020.

have only nominal cash or short-term assets, while our current liabilities aggregated approximately $39 million as of September 30, 2021.

During the nine months ended September 30, 2021, operations generated $152,353 of net cash, comprised of a loss from continuing operations

of $767,404, noncash items totaling $15,093 consisting primarily of losses recognized from the changes in fair values of derivative liabilities

and debt discount amortization, repayment expenses paid by related parties on our behalf of $268,924, and changes in working capital

totaling $934,850.

During the nine months ended September 30, 2020, operations generated $135,415of net cash, comprised of a net loss

from continuing operations of $660,896, noncash items totaling $418,085consisting of losses recognized from the changes in fair values

of derivative liabilities and expense paid by related parties on our behalf, and changes in working capital totaling $378,226.

the nine months ended September 30, 2021, financing activities used $214,421 of cash, compared to using$126,061 of cash during the nine

months ended September 30, 2020.

Cash used in financing activities during the nine months ended September 30, 2021, consisted of repayments

of related-party loans.

Cash used in financing activities during the nine months ended September 30, 2020, consisted of advances from

convertible debentures totaling $15,000, repayments of bank overdrafts of $1,611, repayments on related-party payables of $270,150, advances

from related parties of $10,700, advances from loans payable of $156,000 and repayments on loans payable $36,000.

$78.1 million at March 31, 2022.

As of March 31, 2022, we had current assets of $1,429,633 and current liabilities of approximately $40

million, resulting in a working capital deficit of approximately $38.5 million at March 31, 2022.

the three months ended March 31, 2022, operations generated $66,057 of net cash, comprised of a loss from continuing operations of $258,698,

noncash items totaling $66,442 consisting primarily of losses recognized from the changes in fair values of derivative liabilities and

debt discount amortization, and changes in working capital totaling $239,406.

During the three months ended March 31, 2021, operations

used $61,745 of net cash, comprised of a net loss from continuing operations of $289,714, noncash items totaling $70,103 consisting of

losses recognized from the changes in fair values of derivative liabilities and expense paid by related parties on our behalf, and changes

in working capital totaling $157,866.

the three months ended March 31, 2022, financing activities used $35,000 of cash, compared to using $15,000 of cash during the three

months ended March 31, 2021.

Cash used in financing consisted of repayments of related-party loans.

Capital Resources and Anticipated Requirements

monthly operating costs total approximately $143,000 per month, excluding approximately $50,000 of accruing interest expense and capital

monthly operating costs are approximately $35,000 per month, excluding approximately $50,000 of accruing interest expense and capital

expenditures.

We are generating sales revenue under our Exclusive Manufacturing and Distribution Agreement with GloBrands, LLC.

we do not have enough cash on hand to sustain our business operations, and we expect to access external capital resources in the future.

conjunction with our efforts to commercialize new products, we are actively seeking infusions of capital from investors.

In our current

financial condition, it is unlikely that we will be able to obtain additional debt financing.

Even if we did acquire additional debt,

we would be required to devote additional cash flow to servicing the debt and securing the debt with assets.

we are looking to obtain equity financing to meet our anticipated capital needs.

We cannot assure that we will be successful in obtaining

such capital.

If we were to issue additional shares for debt and/or equity, this would dilute the value of our common stock and existing

stockholders’ positions.

We also have no authorized but unissued capital available.

We continue to focus on generating revenue and reducing our monthly business expenses through cost reductions and operational

streamlining.

We have only recently begun to generate enough cash to sustain our day-to-day operations, and we expect to access external

capital resources in the future to fund any new projects we may undertake.

We cannot assure that we will be successful in obtaining such

we seek infusions of capital from investors, it is unlikely that we will be able to obtain additional debt financing.

If we did incur

additional debt, we would be required to devote additional cash flow to servicing the debt and securing the debt with assets.

issuance of additional shares for equity or for conversion of debt could dilute the value of our common stock and existing stockholders’

Debentures and Note Payable

currently have an outstanding amended, restated, and consolidated secured convertible debenture with Tekfine, LLC, an unrelated entity,

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The amended debenture had a total outstanding principal

balance of $2.4 million, with accrued interest of $1.5 million as of September 30, 2021.

balance of $2.4 million, with accrued interest of $1.6 million as of March 31, 2022.

We also have four additional convertible debentures

with Tekfine with maturity dates ranging from December 8, 2021, through May 30, 2022, totaling $275,000, unless earlier converted.

convertible debentures and accrued interest are convertible into shares of our common stock at the lower of $100 or $0.10 (depending

on the instrument) or the lowest bid price for the 20 trading days prior to conversion.

with Tekfine with maturity dates ranging from December 8, 2022, until December 30, 2022, totaling $275,000, unless earlier

The convertible debentures and accrued interest are convertible into shares of our common stock at the lower of $100 or $0.10

(depending on the instrument) or the lowest bid price for the 20 trading days prior to conversion.

the three months ended March 31, 2022, we made repayments to related parties of $35,000 and had other noncash reductions of $96,145.

There were $21,882 and $21,882 of short-term advances due to related parties as of March 31, 2022, and December 31, 2021, respectively.

The advances are due on demand and included in current liabilities.

No demand for payment has been made.

interim unaudited financial statements have been prepared on the going concern basis, which assumes that adequate sources of financing

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of assets and liabilities that might be necessary should we not be unable to continue as a going concern.

Sheet Arrangements

have no off-balance sheet arrangements.

Accounting Policies

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis