Dror Ortho-Design, Inc. 10-Q

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis should be read in conjunction with the audited Financial Statements and accompanying notes thereto included in the Company’s Annual Report on Form 10-K as of and for the fiscal year ended December 31, 2021. Unless otherwise noted, all the financial information in this Report is financial information for the Company . General The Company is engaged in the business of the sale of 3D haptics products and equipment. Haptics refers to one’s sense of touch. The Company’s focus is in the consumer interactive computer gaming market, but the Company also does project work in other areas. The Company sells its haptics products primarily to consumers through online retail marketplaces. Results of Operations for the Three Months Ended September 30, 2022 and 2021 Revenues Three months ended September 30, 2022 2021 Change Revenue $ — $ 913 $ (913 ) The Company recorded revenue of $0 and $913 for the three-month period ended September 30, 2022 and September 30, 2021. The Company incurred revenue in the three-month period ended September 30, 2021 from the sale of Falcon 3D Touch Haptic Controllers. The Company expects to continue to incur significant expenses and operating losses for the foreseeable future. The Company’s net losses may fluctuate significantly from quarter to quarter and year to year. Operating Expenses Three months ended September 30, 2022 2021 Change Operating Expenses $ 36,456 $ 28,074 $ 8,382 Operating expenses increased by $8,382 or 30% to $36,456 for the three months ended September 30, 2022, compared with $28,074 for the three months ended September 30, 2021. This increase was due primarily to an increase in Professional fees that were incurred during the three months ended September 30, 2022. Other Expense Three months ended September 30, 2022 2021 Change Other Expense $ — $ 50 $ (50 ) Other expense decreased by $50 or 100% to $0 during the three months ended September 30, 2022 compared with $50 during the three months ended September 30, 2021. Other expense for the three months ended September 30, 2021 consisted of interest expense related to finance charges on credit cards. Results of Operations for the Nine Months Ended September 30, 2022 and 2021 Revenues Nine months ended September 30, 2022 2021 Change Revenue $ 0 $ 2,568 $ (2,568 ) The Company recorded revenue of $0 and $2,568 for the nine-month period ended September 30, 2022 and September 30, 2021. The Company incurred revenue in the nine-month period ended September 30, 2021 from the sales of Falcon 3D Touch Haptic Controller. The Company expects to continue to incur significant expenses and operating losses for the foreseeable future. The Company’s net losses may fluctuate significantly from quarter to quarter and year to year. Operating Expenses Nine months ended September 30, 2022 2021 Change Operating Expenses $ 122,614 $ 114,486 $ 8,128 Operating expenses increased by $8,128 or 7% to $122,614 for the nine months ended September 30, 2022, compared with $114,486 for the nine months ended September 30, 2021. This increase was primarily due to an increase in Professional fees that were incurred during the nine months ended September 30, 2022. 10 Other Expense Nine months ended September 30, 2022 2021 Change Other Expense $ 14 $ 155 $ (141 ) Other expense decreased by $141 or 91% to $14 during the nine months ended September 30, 2022 compared with $155 during the nine months ended September 30, 2021. Other expense for the nine months ended September 30, 2022 and September 30, 2021 consisted of interest expense related to finance charges on credit cards. Liquidity and Capital Resources The following table summarizes select balance sheet and working capital amounts as of September 30, 2022 and December 31, 2021: As of As of September 30, December 31, Change 2022 2021 Increase (Decrease) Cash $ 97,708 $ 185,935 $ (88,227 ) Working capital deficit $ (667,734 ) $ (545,106 ) $ (122,628 ) The Company had a stockholders’ deficit of approximately $41,747,258 and $41,624,630 at September 30, 2022 and December 31, 2021, respectively. Net loss for the nine months ended September 30, 2022 and 2021 was $122,628 and $112,073, respectively. Net cash used in operating activities was $88,227 and $93,010 for the nine months ended September 30, 2022 and 2021, respectively. Operations since inception have been funded primarily with the proceeds from equity and debt offerings. As of September 30, 2022, the Company had cash of $97,708. The Company’s management has evaluated whether there is substantial doubt about the Company’s ability to continue as a going concern and has determined that substantial doubt existed as of the date of this filing. This determination was based on the following factors: (i) the Company’s available cash as of the date of this filing will not be sufficient to fund its anticipated level of operations for the next 12 months; (ii) the Company has incurred recurring losses and at September 30, 2022, had an accumulated deficit of $41,747,258; (iii) the Company sustained an operating loss of $122,614 for the period ended September 30, 2022; and (iv) if the Company fails to obtain the needed capital, it will be forced to delay, scale back, or eliminate some or all of its programs or perhaps cease operations. In the opinion of management, these factors, among others, raise substantial doubt about the ability of the Company to continue as a going concern. There is no assurance that the Company will be successful in any capital-raising efforts that it may undertake to fund operations during 2022. The Company anticipates that it will continue to issue equity and/or debt securities as a source of liquidity, until it begins to generate positive cash flow to support its operations. Any future sales of securities to finance operations will dilute existing stockholders’ ownership. The Company cannot guarantee when or if it will generate positive cash flow. The audit report prepared by our independent registered public accounting firm relating to the Company’s consolidated financial statements for the year ended December 31, 2021 included an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern. Cash Flow Activities The following table summarizes the Company’s cash flows for the periods set forth below: Nine months ended September 30, 2022 2021 Change Net cash used in operating activities $ 88,227 $ 93,010 $ (4,783 ) Net cash used in operating activities for the nine months ended September 30, 2022 was $88,227, compared with net cash used in operating activities of $93,010 for the nine months ended September 30, 2021. The decrease in net cash used in operating activities during the nine months ended September 30, 2022 was due primarily to an increase in net loss to $122,628, partially offset by an increase of $37,500 in accrued royalties. Net cash used in operating activities for the nine months ended September 30, 2021 was $93,010, primarily due to a net loss of $112,073, partially offset by an increase of $37,500 in accrued royalties and a decrease of $1,072 in prepaid expenses and other current assets. Effects of Inflation We do not believe that inflation has had a material impact on our business, sales, or operating results during the periods presented. Off-Balance Sheet Arrangements We currently do not have any off-balance sheet arrangements or financing activities with special-purpose entities. Critical Accounting Policies and Use of Estimates Critical accounting policies are those policies which are both important to the presentation of a company’s financial condition and results and require management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. There have been no recent significant changes to our accounting policies and use of estimates during the nine months ended September 30, 2022. For a further discussion of our critical accounting policies, see our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 filed with the SEC on March 23, 2022. 11 Forward Looking Statements and Certain Factors That May Affect Future Results of Operations The Securities and Exchange Commission encourages companies to disclose forward-looking information so that investors can better understand a company’s future prospects and make informed investment decisions. This Quarterly Report on Form 10-Q contains such “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.All statements in this report, other than statements of historical fact, are forward-looking statements for purposes of these provisions, including any projections of earnings, revenues or other financial items, any statements of the plans and objectives of management for future operations, any statements concerning proposed new products or services, any statements regarding future economic conditions or performance, and any statements of assumptions underlying any of the foregoing. All forward-looking statements included in this report are made as of the date hereof and are based on information available to us as of such date. We assume no obligation to update any forward-looking statement. In some cases, forward-looking statements can be identified by the use of terminology such as “may,” “will,” “expects,” “plans,” “anticipates,” “intends,” “believes,” “estimates,” “potential,” or “continue,” or the negative thereof or other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements contained herein are based upon reasonable assumptions at the time made, there can be no assurance that any such expectations or any forward-looking statement will prove to be correct. Our actual results will vary, and may vary materially, from those projected or assumed in the forward-looking statements. Future financial condition and results of operations, as well as any forward-looking statements, are subject to inherent risks and uncertainties, many of which we cannot predict with accuracy and some of which we might not anticipate, including, without limitation, product liability claims; infringement of our technology or assertion that our technology infringes the rights of other parties; termination of supplier relationships, or failure of suppliers to perform; inability to successfully manage growth; concentration of our revenue among a few customers, products or procedures; development of new products and technology that could render our products obsolete; market acceptance of new products; introduction of products in a timely fashion; price and product competition, availability of labor and materials, cost increases, and fluctuations in and obsolescence of inventory; volatility of the market price of our common stock; foreign currency fluctuations; changes in key personnel; work stoppage or transportation risks; integration of business acquisitions; and other factors referred to in our reports filed with the SEC. All subsequent forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. In light of these assumptions, risks and uncertainties, the results and events discussed in the forward-looking statements contained in this Quarterly Report or in any document incorporated by reference might not occur. Stockholders are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date of this Quarterly Report. We are not under any obligation, and we expressly disclaim any obligation, to update or alter any forward-looking statements, whether as a result of new information, future events or otherwise. All subsequent forward-looking statements attributable to us or to any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section.