Item 7. Management’s Discussion and Analysis
Item
7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Results
of Operations for the Years Ended December 31, 2024 and 2023
Revenues .
We reported $1,349,905 (unaudited) and $16,468 (unaudited) in sales for the nine months ended September 30, 2024 (“Interim 2024”)
and 2023 (“Interim 2023”), respectively. All of our revenues for Interim 2024 were attributable to the business operations
of EMGE for the period from the acquisition date, March 14, 2024. All revenues reported for Interim 2023 were attributable to the Subsidiary.
Gross
Profit . For Interim 2024, our cost of revenue was $477,079 (unaudited), compared to cost of revenue of $13,257 (unaudited) for
Interim 2023, resulting in a gross profit of $872,826 (unaudited) for Interim 2024 and a gross profit of $3,211 (unaudited) for Interim
2023.
All
cost of revenue and gross profit for Interim 2024 were attributable to the business operations of EMGE for the period from the acquisition
date, March 14, 2024. All cost of revenue and gross profit reported for Interim 2023 were attributable to the Subsidiary.
6
Operating
Expenses . Our operating expenses were $2,219,787 (unaudited) and $195,627 (unaudited) for Interim 2024 and Interim 2023, respectively.
Our operating expenses for the remainder of 2024 can be expected to increase as the effects of the acquisition of EMGE impact on our
operating results. No prediction as to the level of operating expenses for all of 2024 can be made in this regard, however.
Other
Income/Expense . We had other expense of $208,805 (unaudited) for Interim 2024, compared to $819,016 (unaudited) in other expense
for Interim 2023.
Net
Income/Loss . For Interim 2024, we had a net loss of $1,555,767 (unaudited), compared to a net loss of $1,011,432 (unaudited)
for Interim 2023.
Liquidity
and Capital Resources
In
connection with the EMGE transaction, we obtained a loan from a third party and, subsequent to the closing of the EMGE transaction, we
have obtained an additional loan from another third party. We remain, nevertheless, dependent on additional investment capital to
continue our survival. Historically, we have raised money through convertible debt, almost always on unfavorable terms. There is no guarantee
that any capital, including through convertible loan transactions, will be available to us in the future or, if available, on terms acceptable
to us . The terms of the recently obtained loans are discussed below.
AJB
Capital Investments, LLC . In March 2024, the Company obtained a loan from AJB Capital Investments, LLC (AJB) which netted the
Company $252,000 in proceeds. In consideration of such loan, the Company issued a $280,000 face amount promissory note (the AJB Note),
with OID of $28,000, bearing interest at 12% per annum, with principal and interest payable on September 4, 2024. The Company has the
right to repay the AJB Note at any time. Should the Company be in default, which shall not have been cured, the AJB Note is convertible
into shares of the Company’s common stock at a conversion price that shall equal the volume weighted average trading price (a)
during the previous 20 trading-day period ending on the date of issuance of the AJB Note or (b) during the previous 20 trading-day period
ending on the relevant conversion date, whichever is lower.
The
AJB Note is secured by all assets of our company.
In
addition, we issued to AJB a pre-funded common stock purchase warrant (the AJB Warrant) to purchase 3,428,571 shares of our common stock,
with a nominal exercise price of $.00001 per share. The AJB Warrant may be exercised on a cashless basis,
Ray
Vollintine . In March 2024, the Company obtained a loan from Ray Vollintine (Vollintine) which netted the Company $250,000 in
proceeds. In consideration of such loan, the Company issued a $280,000 face amount promissory note (the Vollintine Note), with OID of
$30,000, bearing interest at 12% per annum, with principal and interest payable on September 29, 2024. The Company has the right to repay
the Vollintine Note at any time. The Vollintine Note is convertible at any time and from time to time into shares of the Company’s
common stock at a conversion price that shall equal to $.035; provided, however, that, upon an event of default, the conversion price
shall be the lower of (a) $.035 or (b) the volume weighted average trading price during the previous 20 trading-day period ending on
the date of issuance of the Vollintine Note or during the previous 20 trading-day period ending on the relevant conversion date, whichever
is lower.
The
Vollintine Note is unsecured.
In
addition, we issued to Vollintine a pre-funded common stock purchase warrant (the Vollintine Warrant) to purchase 7,200,000 shares of
our common stock, with a nominal exercise price of $.00001 per share. The Vollintine Warrant may be exercised on a cashless basis, As
further consideration for Vollintine’s purchasing the Vollintine Note, we entered into a make-whole agreement that assures that
Vollintine shall derive not less than $250,000 in net proceeds from Vollintine’s sales of the common stock underlying the Vollintine
Warrant.
As
of December 31, 2024, we had total current assets of $1,044,236 (unaudited), consisting of $68,236 (unaudited) in cash, $6,000 loan receivable
and $970,000 (unaudited) in advances to former acquisition partner-company. Our total current liabilities as of December 31, 2024, were
$4,557,634 (unaudited). Our working capital deficit was $3,513,398 (unaudited) as of December 31, 2024, compared to our working capital
deficit of $2,150,975 (unaudited) as of December 31, 2023.
7
Going
Concern
As
of December 31, 2024, we have an accumulated deficit of $28,292,170 (unaudited). Our ability to continue as a going concern is contingent
upon the successful completion of additional financing arrangements and our ability to achieve and maintain profitable operations. While
we are expanding our best efforts to achieve the above plans, there is no assurance that any such activity will generate funds that will
be available for operations. These conditions raise substantial doubt about our ability to continue as a going concern. These financial
statements do not include any adjustments that might arise from this uncertainty.
Off
Balance Sheet Arrangements
As
of December 31, 2024, there were no off-balance sheet arrangements.
Critical
Accounting Policies
In
December 2001, the SEC requested that all registrants list their most “critical accounting polices” in the Management Discussion
and Analysis. The SEC indicated that a “critical accounting policy” is one which is both important to the portrayal of a
company’s financial condition and results, and requires 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 material changes
to our critical accounting policies as described in the footnotes to our financial statements included in our annual report on Form 10-K
for the year ended December 31, 2022; however, we consider our critical accounting policies to be those related to determining the amount
of revenue to be billed, the timing of revenue recognition, stock-based compensation, capitalization and related amortization of intangible
assets, impairment of assets, and the fair value of liabilities.
Recent
Accounting Pronouncements
No
new accounting pronouncements issued or effective during the fiscal year has had or is expected to have a material impact on the financial
statements.
Item
8. Financial Statements and Supplementary Data
Please
see our Financial Statements beginning on page F-1 of this Annual Report.
8
Item
9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure
None
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