What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-08-19 compared with 2024-05-15 · 86 added, 25 removed, 78 unchanged (59% of the section changed)

27 unchanged sentences

Results of Operations

The following summary of our results of operations should be read in conjunction with our unaudited interim financial statements for the period ended March 31, 2024, which are included herein.

Our operating results for the three months ended March 31, 2024, and 2023 and the changes between those periods for the respective items are summarized as follows:

Results of Operations for the three months ended March 31, 2024, and the three months ended March 31, 2023

The following summary of our results of operations should be read in conjunction with our unaudited interim financial statements for the period ended June 30, 2024, which are included herein.

Our operating results for the three and six months ended June 30, 2024 and 2023 and the changes between those periods for the respective items are summarized as follows:

Results of Operations for the three months ended June 30, 2024 and the three months ended June 30, 2023

Three Months Ended

1 unchanged sentence

Other expense

$ (3,519,710)

$ (3,166,099)

The Company’s revenue is associated with revenue from MFB which acquired intellectual property to fire suppression in April 2022.

The cost of revenue was $89,872 and 13,854 for three months ended March 31, 2024 and 2023, respectively.

The Company’s revenue is associated with revenue from Mighty Fire Breaker, LLC, an Ohio limited liability company (“MFB Ohio’) which acquired intellectual property to fire suppression in April 2022.

During the three months ended June 30, 2024, the revenue increased $170,314 over the three months ended June 30, 2023, due to MFBs EPA approval and the filing of additional patents.

With the EPA approval, MFB started the marketing phase of the Company’s evolution.

MFB started selling directly to fire departments and launched its proactive wild-fire defense systems and is gaining momentum with commercial customers, along with attempting to influence the insurance industry to the benefit of consumers.

Operating Expenses

Three Months Ended

Stock-based management compensation

Stock -based compensation

Professional fees -related party

Cost of revenue

Amortization and depreciation

General and administration

Advertising and marketing

Professional fees

Marketing expenses

General and administrative expenses

The increase in operating expenses was primarily attributed to stock -base management compensation of $1,422,750, stock-based services companion of $975,250, marketing expenses of $98,603, depreciation of $63,571 and general and administrative expenses of $45,340.

Total operating expenses

The increase in operating expenses was primarily attributed to cost of revenue of $61,000, professional fees of $257,000, advertising and marketing of $219,000 and general and administrative expenses of $123,000.

Cost of revenue

Three Months Ended

Cost of inventory

Freight and shipping

Consulting and advisory - related party

Royalty and sales commission - related party

Total cost of revenue

During the three months ended June 30, 2024, the cost of revenue increased $61,000 over the three months ended June 30, 2023, primarily due to an increase in cost of inventory and royalty and sales commissions.

Cost of inventory consists of the sales of product, related supplies and direct testing our CitroTech™ product and various components required to for installation of Mighty Firebreaker proactive wildfire defense systems.

Cost of inventory increased during the three months ended June 30, 2024, primarily due to an increase in product sales and supplies and royalty and commission, from increased sales.

Royality and sales commissions increased in the three months ended June 30, 2024 from more revenue.

The Company recognizes an allocated portion of consulting and direct labor costs associated with our revenue.

Professional fees

The increase in professional fees during the three months ended June 30, 2024, of $257,000 over June 30, 2023, is primarily due to stock-based services compensation of $200,000 and professional fees of $57,000 for maintaining reporting status with the Securities and Exchange Commission (“SEC”).

Advertising and marketing

The increase in advertising and marketing during the three months ended June 30, 2024, of $219,000 over June 30, 2023, is primarily due to stock-based service compensation of $160,000 and increased expenses to support revenue growth.

Other Expenses

For the three months ended March 31, 2024, and 2023, the other expenses consisted of $885 and $175 interest related to convertible note payable and loss on settlement of debt of $882,279 and $0, respectively.

As a result of the foregoing, we incurred a net loss of $3,519,710, for the three months ended March 31, 2024, compared to a net loss of $353,611 for the corresponding three months ended March 31, 2023.

For the three months ended June 30, 2023, the other expense consisted of interest related to convertible note payable.

The net loss for the three months ended June 30, 2024, increased by $490,000 as compared to the three months ended June 30,2023 primarily due to the increase in operating expenses, primarily from stock-based compensation and professional fees for maintaining reporting status with the Securities and Exchange Commission (“SEC”).

Results of Operations for the six months ended June 30, 2024 and the six months ended June 30, 2023

Six Months Ended

Operating expenses

Other expenses

$ (4,427,114 )

During the six months ended June 30, 2024, the revenue increased $548,000 over the six months ended June 30, 2023, due to MFB Ohio’s EPA approval and the filing of additional patents.

With the EPA approval, MFB Ohio started the marketing phase of the company’s evolution.

MFB Ohio started selling directly to fire departments and launched its proactive wild-fire defense systems and is gaining momentum with commercial customers, along with attempting to influence the insurance industry to the benefit of consumers.

Operating Expenses

Six Months Ended

Cost of revenue

Amortization and depreciation

General and administration

Advertising and marketing

Professional fees

Total operating expenses

The increase in operating expenses was primarily attributed to increases in cost of revenue of $148,000, professional fees of $2.6 million, advertising and marketing of $318,000 and general and administrative expenses of $188,000.

Cost of revenue

Six Months Ended

Cost of inventory

Freight and shipping

Consulting and advisory-related party

Royalty and sales commission-related party

Total cost of revenue

During the six months ended June 30, 2024, the cost of revenue increased $148,000 over the six months ended June 30, 2023, primarily due to an increase in cost of inventory and royalty and sales commissions.

Cost of inventory increased during the six months ended June 30, 2024, primarily due to an increase in product sales and supplies and royalty and commission, from increased sales.

Royality and sales commissions increased in the six months ended June 30, 2024 from more revenue.

The Company recognizes an allocated portion of consulting and direct labor costs associated with our revenue.

Professional fees

The increase in professional fees during the six months ended June 30, 2024, of $2.6 million over June 30, 2023, is primarily due to stock-base management compensation of $1.4 million and stock-based services compensation of $1.2 million.

Advertising and marketing

The increase in advertising and marketing during the six months ended June 30, 2024, of $318,000 over June 30, 2023, is primarily due to stock-based compensation for services of $160,000 and increased expenses to support revenue growth.

Other Expenses

For the six months ended June 30, 2024 and 2023, the other expenses consisted of $885 and $759 interest related to convertible note payable and loss on settlement of debt of $882,279 and $0, respectively.

The net loss for the six months ended June 30, 2024, increased by $3.6 million as compared to the six months ended June 30, 2023 primarily due to the increase in operating expenses, primarily from stock-based compensation and professional fees for maintaining reporting status with the Securities and Exchange Commission (“SEC”).

Liquidity and Capital Resources

2 unchanged sentences

Working Capital (Deficiency)

The increase in working capital in 2024 was primarily the result of an increase in accounts receivable of $253,532, prepaid expenses of $792 and a decrease in cash of $178,660 and inventory of 41,406 offset by an increase in accounts payable and accrued liabilities of $15,685, operating lease liability -current portion of $1,915, a decrease in promissory note of $120,000 and convertible note of $54,000.

As of March 31, 2024, and December 31, 2023, the current assets consisted primarily of cash of $371,095 and $549,755, inventory of $188,791 and $230,197, accounts receivable of $680,965 and $427,433, and prepaid expenses of $11,463 and 10,671, respectively.

As of March 31, 2024, and December 31, 2023, the current liabilities consisted of accounts payable and accrued liabilities of $70,257 and $54,572, due to related party of $1,309,077 and $1,309,077, convertible note of $0 and $54,000, promissory note of $0 and $120,000 and current portion of operating lease liability of $82,051 and $80,136, respectively.

Three months ended

The increase in working capital deficiency in 2024 was primarily the result of an increase in accounts receivable of $223,000, prepaid expenses of $791, deferred offering cost of $35,000 and a decrease in cash of $3,200, inventory of 38,000 offset by an increase in accounts payable and accrued liabilities of $46,000, operating lease liability-current portion of $3,900, advances payable of $695,000 and a decrease in promissory note of $120,000, convertible note of $54,000 and due to related party of $58,000.

As of June 30, 2024, and December 31, 2023, the current assets consisted of cash of $547,000 and $550,000, inventory of $192,000 and $230,000, accounts receivable of $651,000 and $427,000, prepaid expenses of $11,000 and $11,000, and deferred offering costs of $35,000 and $0 respectively.

As of June 30, 2024, and December 31, 2023, the current liabilities consisted of accounts payable and accrued liabilities of $101,000 and $55,000, due to related parties of $1.3 million and $1.3 million, convertible note of $0 and $54,000, promissory note of $0 and $120,000, advances of $695,000 and $0, and operating lease liability-current portion of $84,000 and $80,000, respectively.

Six Months Ended

Cash used in operating activities

Cash provided by investing activities

Cash used in investing activities

Cash provided by financing activities

2 unchanged sentences

We have not generated positive cash flows from operating activities.

For the three months ended March 31, 2023, net cash flows used in operating activities was $343,660, consisting of a net loss of $3,519,710, reduced by stock-based compensation of $2,398,000, non-cash lease expenses of $19,602, depreciation of $63,835, loss on settlement of debt of $882,279 and increased by changes in operating assets and liabilities of $187,666.

For the three months ended March 31, 2023, net cash flows used in operating activities was $176,905, consisting of a net loss of $353,611, reduced by stock-based compensation of $86,850, depreciation of $264, non-cash lease expenses of $15,000 and reduced by changes in operating assets and liabilities of $75,592.

For the six months ended June 30, 2024, net cash flows used in operating activities consisted of a net loss of $4.4 million, reduced by stock-based compensation of $2.8 million , non-cash lease expenses of $40,000, amortization and depreciation of $127,000, loss on settlement of debt of $882,000 and increased by net changes in operating assets and liabilities of $148,000.

For the six months ended June 30, 2023, net cash flows used in operating activities consisted of a net loss of $833,000, reduced by stock-based compensation of $147,000, amortization and depreciation of $124,000, non-cash lease expenses of $30,000 and reduced by net changes in operating assets and liabilities of $108,000.

Cash Flows from Investing Activities

The Company did not use any funds for investing activities during the three months ended March 31, 2024, and 2023.

The Company did not use any funds for investing activities during the six months ended June 30, 2024 and 2023.

Cash Flows from Financing Activities

For the three months ended March 31, 2024, net cash provided by financing activities consisted of $165,000 proceed from issuance Series C Preferred Stock.

For the three months ended March 31, 2023, net cash provided by financing activities consisted of $185,000 received from a related party.

For the six months ended June 30, 2024, net cash provided by financing activities consisted of $165,000 proceed from issuance Series C Preferred Stock, $695,000 advances received from eleven (11) lenders in cash for issuance of convertible promissory notes and warrants, $35,000 deferred offering cost payment and $65,000 repayment of loan -related party.

For the six months ended June 30, 2023, net cash provided by financing activities consisted of $275,000 received from a related party and $179,600 received from Series C Preferred Stock subscription.

Contractual Obligations

Lease Agreements

The Company has one lease classified as an operating lease for an office and warehouse purpose.

The following table outlines maturities of our lease liabilities as of June 30, 2024:

Year ending December 31,

2024 (excluding the six months ended June 30, 2024)

Imputed interest

Operating lease liabilities

Going Concern

31 unchanged sentences

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