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, 2022. 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. The Company seeks to conduct custom project work in other related areas The Company sells its haptics products primarily to consumers through online retail marketplaces. 10 Results of Operations for the Three Months Ended June 30, 2023 and 2022 Revenues Three months ended June 30, 2023 2022 Change Revenue $ — $ — $ — The Company recorded revenue of $0 and $0 for the three-month period ended June 30, 2023 and June 30, 2022. 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 June 30, 2023 2022 Change Operating Expenses $ 81,265 $ 36,858 $ 44,407 Operating expenses increased by $44,407 or 120% to $81,265 for the three months ended June 30, 2023, compared with $36,858 for the three months ended June 30, 2022. This increase was due primarily to increased professional fees related to the Company’s pursuit of a potential financing transaction. Other Expense Three months ended June 30, 2023 2022 Change Other Expense $ — $ — $ — The Company recorded other expense of $0 and $0 for the three-month period ended June 30, 2023 and June 30, 2022. Results of Operations for the Six Months Ended June 30, 2023 and 2022 Revenues Six months ended June 30, 2023 2022 Change Revenue $ — $ — $ — The Company recorded revenue of $0 and $0 for the three-month period ended June 30, 2023 and June 30, 2022. 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 Six months ended June 30, 2023 2022 Change Operating Expenses $ 131,644 $ 86,158 $ 45,486 Operating expenses increased by $45,486 or 53% to $131,644 for the six months ended June 30, 2023, compared with $86,158 for the six months ended June 30, 2022. This increase was due primarily to increased professional fees related to the Company’s pursuit of a potential financing transaction. 11 Other Expense Six months ended June 30, 2023 2022 Change Other Expense $ — $ (14 ) $ (14 ) Other expense decreased by $14 or 100% to $0 during the six months ended June 30, 2023 compared with $0 during the six months ended June 30, 2022. Other expense for the six months ended June 30, 2022 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 June 30, 2023 and December 31, 2022: As of As of June 30, December 31, Change 2023 2022 Increase (Decrease) Cash $ 27,216 $ 55,081 $ (27,865 ) Working capital deficit $ (855,500 ) $ (723,856 ) $ (131,644 ) The Company had a stockholders’ deficit of $41,935,024 and $41,803,380 at June 30, 2023 and December 31, 2022, respectively. Net loss for the six months ended June 30, 2023 and 2022 was $131,644 and $86,172, respectively. Net cash used in operating activities was $47,865 and $61,018 for the six months ended June 30, 2023 and 2022, respectively. Operations since inception have been funded primarily with the proceeds from equity and debt offerings. As of June 30, 2023, the Company had cash of $27,216. 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 June 30, 2023, had an accumulated deficit of $41,935,024; (iii) the Company sustained an operating loss of $131,644 for the six months ended June 30, 2023; 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 the Company’s independent registered public accounting firm relating to the Company’s financial statements for the year ended December 31, 2022 included an explanatory paragraph expressing substantial doubt about the Company’s 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: Six months ended June 30, 2023 2022 Change Net cash used in operating activities $ (47,865 ) $ (61,018 ) $ 13,153 Net cash provided by investing activities — — — Net cash provided by financing activities 20,000 — — Net cash used in operating activities for the six months ended June 30, 2023 was $47,865 compared with net cash used in operating activities of $61,018 for the six months ended June 30, 2022. The increase in net cash used in operating activities during the six months ended June 30, 2023 was due primarily to an increase in net loss of $45,472, and partially offset by an increase of $25,390 in the change in accounts payable and accrued expenses. 12 Net cash used in operating activities for the six months ended June 30, 2023 was $47,865, representing a net loss of $131,644, partially offset by an increase of $25,390 in accounts payable and accrued expenses, an increase in accrued royalties of $25,000 and a decrease in prepaid expenses of $3,389. Net cash from financing activities for the six months ended June 30, 2023 was $20,000 representing proceeds from a related party promissory note. The remaining portion of the related party promissory note payment was $30,000 of expenses paid for by a related party, which is an operating activity. There were no cash flows from financing activities for the six months ended June 30, 2022. Effects of Inflation Management does not believe that inflation has had a material impact on the Company’s business, sales, or operating results during the periods presented. Off-Balance Sheet Arrangements The Company currently does 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 six months ended June 30, 2023. For a further discussion of our critical accounting policies, see the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022 filed with the SEC on March 31, 2023. 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 recalls and 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; delays in obtaining regulatory approvals or the failure to maintain such approvals; 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, including our Registration Statement on Form 10. All subsequent forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. Additional factors that may have a direct bearing on our operating results are discussed in Item 1A “Risk Factors” in our Registration Statement on Form 10. 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. 13