Item 7. Management’s Discussion and Analysis
Item
7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Forward-looking
statements
The
following discussion of the Company’s historical performance and financial condition should be read together with the consolidated
financial statements and related notes in “ Item 8. Financial Statements and Supplemental Data ” of this Report. This
discussion contains forward-looking statements based on the views and beliefs of our management, as well as assumptions and estimates
made by our management. These statements by their nature are subject to risks and uncertainties, and are influenced by various factors.
As a consequence, actual results may differ materially from those in the forward-looking statements. See “ Item 1A. Risk Factors ”
of this Report for the discussion of risk factors and see “ Cautionary Statement Regarding Forward-Looking Statements ”
for information on the forward-looking statements included below.
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The
following discussion is based upon our financial statements included elsewhere in this Report, which have been prepared in accordance
with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and judgments
that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingencies.
Introduction
Our
Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is provided in addition
to the accompanying financial statements and notes to assist readers in understanding our results of operations, financial condition,
and cash flows. MD&A is organized as follows:
●
Key
Performance Indicators. Indicators describing our performance for the periods presented.
●
Plan
of Operations. A description of our plan of operations for the next 12 months including required funding.
●
Results
of Operations. An analysis of our financial results comparing the years ended December 31, 2023 and 2022.
●
Liquidity
and Capital Resources. An analysis of changes in our balance sheets and cash flows and discussion of our financial condition.
●
Critical
Accounting Policies and Estimates. Accounting estimates that we believe are important to understanding the assumptions and judgments
incorporated in our reported financial results and forecasts.
See
also “ Glossary of Industry Terms ” above for information on certain of the terms used below.
Plan
of Operations
We
had working capital of $0.7 million as of December 31, 2023. With our current cash on hand, expected revenues, and based on our current
average monthly expenses, we currently anticipate the need for additional funding in order to continue our operations at their current
levels and to pay the costs associated with being a public company for the next 12 months. We may also require additional funding in
the future to expand or complete acquisitions.
Our
plan for the next 12 months is to continue using the same marketing and management strategies and continue providing a quality product
with excellent customer service while also seeking to expand our operations organically or through acquisitions as funding and opportunities
arise. As our business continues to grow, customer feedback will be integral in making small adjustments to improve products and our
overall customer experience.
We
are headquartered in Dallas, Texas and intend to grow our business both organically and through identifying acquisition targets over
the next 12 months in the technology, health and wellness space, funding permitting. Specifically, we plan to continue to make additional
and ongoing technology enhancements to our platform, further develop, market and advertise additional men’s health and wellness
related products on our telemedicine platform, and identify strategic acquisitions that complement our vision. As these opportunities
arise, we will determine the best method for financing such acquisitions and growth which may include the issuance of debt instruments,
common stock, preferred stock, or a combination thereof, all of which may result in significant dilution to existing shareholders.
We
may seek additional funding in the future through equity financings, debt financings or other capital sources, including collaborations
with other companies or other strategic transactions. We may not be able to obtain financing on acceptable terms or at all. The terms
of any financing may adversely affect the holdings or rights of our shareholders and/or create significant dilution. Although we continue
to pursue these plans, there is no assurance that we will be successful in obtaining sufficient funding on terms acceptable to us to
fund continued operations, if at all.
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Results
of Operations
Comparison
of the Year Ended December 31, 2023 and 2022
Revenues
We
began generating revenues in November 2022 and had revenues of $731,493 and $8,939 for the years ended December 31, 2023 and 2022, respectively.
Cost
of Revenues
We
had cost of revenues of $154,900 and $4,089 for the years ended December 31, 2023 and 2022, respectively, relating to amounts paid to
Epiq Scripts, a related party, 51% owned and controlled by Jacob D. Cohen, our Chairman and Chief Executive Officer, which entity provides
us pharmacy and compounding services, resulting in gross profit of $431,501 and $4,850 for the years ended December 31, 2023 and 2022,
respectively. The related party cost of revenues was associated with the Master Services Agreement entered into with Epiq Scripts and
a related statement of work and the remaining cost of revenues was attributed to the amounts paid to our unrelated party doctors network
and shipping expenses.
The
Company analyzed the following factors when determining the amounts to be paid to Epiq Scripts under the Master Services Agreement and
related statement of work: a) the fairness of the terms for the Company (including fairness from a financial point of view); b) the materiality
of the transaction; c) bids / terms for a similar transaction from unrelated parties; d) the structure of the transaction; and e) the
interests of each related party in the transaction.
Operating
Expenses and Net Loss
We
had total general and administrative expenses of $9,608,409 and $1,996,432 and imputed interest expense of $0 and $6,473 (which
represented imputed interest on the related party loans which were repaid as discussed below under “ Liquidity and Capital
Resources ”) for the years ended December 31, 2023 and 2022, respectively, resulting in a net loss of $9,212,417 and
$1,998,055, respectively, for the years ended December 31, 2023 and 2022.
The
increase in general administration expenses for the years ended December 31, 2023 and 2022, compared to the prior period, was due
primarily to (a) stock-based compensation totaling $2,155,144 and $774,153 (including a total of $1,530,651 and $540,065 attributed
to stock issued for services and $624,463 and $234,088 attributed to stock-based compensation from issuances of options and
warrants), respectively, which increase was due to us having issued less stock for compensation during the 2022 period; (b)
advertising and marketing expenses in the amount of $2,097,505 and $352,860, for the years ended December 31, 2023 and 2022,
respectively, related to us increasing our advertising and marketing costs in the 2023 period as we ramped up our marketing efforts
in connection with the expansion of our operations; (c) legal fees of $327,055 and $231,799, for the years ended December 31, 2023
and 2022, respectively, mainly related to legal fees in connection with our initial public offering and related matters; (d)
placement agent fees of $496,000 and $160,000, for the years ended December 2023 and 2022, respectively, relating to fees paid to
our placement agent in connection with our private placement and initial public offering; (e) salaries and benefits of $914,115 and
$164,941 for the years ended December 31, 2023 and 2022, respectively, which increased due to the engagement of new employees as we
ramped up our operations in the current period; (f) accounting and auditing fees of $121,330 and $44,500, for the years ended
December 2023 and 2022, respectively, which was in connection with fees paid to our accountants and auditors in connection with the
preparation of the financial statements for our initial public offering , quarterly reviews, and annual filing; (g) general
consulting related expenses of $585,729 and $622,331, for the years ended December 31, 2023 and 2022, respectively, related to other
various consulting fees paid in connection with our operations in the current period; and (h) software development fees of $434,490
and $72,440 for the years ended December 2023 and 2022, respectively, related to the front and backend development of our website in
the current period. Software development expenses are integral to customers accessing our ordering system and successfully placing
an order for our products. We had not yet implemented our online ordering in the first nine months of
2022.
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Liquidity
and Capital Resources
As
of December 31, 2023, we had $739,006 of cash on-hand, compared to $682,860 of cash on-hand of December 31, 2022. We also had $60,953
of prepaid expenses, related party, relating to amounts funded to Epiq Scripts, which is 51% owned and controlled by Jacob D. Cohen,
our Chairman and Chief Executive Officer, $18,501 of inventory; $96,129 of property and equipment, net, consisting of computers, office
and custom product packaging equipment, $16,942 of security deposit, representing the security deposit on our leased office space and
$119,262 of right of use asset in connection with our office space lease. Cash increased mainly due to funds raised in the IPO and Follow
On Offering, offset by cash used for general operating expenses.
As of December 31, 2023, the Company
had total current liabilities of $276,039, consisting of $140,765 of accounts payable and accrued liabilities, $6,595 of payroll tax liabilities,
and $63,718 of right-of-use liability, operating lease, current portion. We also had $64,961 of right-of-use liability, long-term.
As of December 31, 2023, we had
$1,050,793 in total assets, $276,039 in total liabilities, working capital of $0.6 million and a total accumulated deficit of $11,.
We
have mainly relied on related party loans, as well as funds raised through the sale of securities, mainly through the private placement
offering, our IPO and our Follow On Offering, each discussed below, and revenues generated from sales of our Mango ED and Mango GROW
products, to support our operations since inception. We have primarily used our available cash to pay operating expenses. We do not have
any material commitments for capital expenditures.
We
have experienced recurring net losses since inception. We believe that we will continue to incur substantial operating expenses in the
foreseeable future as we continue to invest to bring our Mango ED and Mango GROW products to market and to attract customers, expand
the product offerings and enhance technology and infrastructure. These efforts may prove more expensive than we anticipate, and we may
not succeed in generating commercial revenues or net income to offset these expenses. Accordingly, we may not be able to achieve profitability,
and we may incur significant losses for the foreseeable future. Our independent registered public accounting firm included an explanatory
paragraph in its report on our financial statements as of December 31, 2023. As of December 31, 2023, our current capital resources,
combined with the net proceeds from the offering, are not expected to be sufficient for us to fund operations for the next 12 months.
We need to raise funding in addition to the funding raised in our IPO and Follow On Offering, to support our operations in the future.
We may also seek to acquire additional businesses or assets in the future, which may require us to raise funding. We currently anticipate
such funding being raised through the offering of debt or equity. Such additional financing, if required, may not be available on favorable
terms, if at all. If debt financing is available and obtained, our interest expense may increase and we may be subject to the risk of
default, depending on the terms of such financing. If equity financing is available and obtained it may result in our shareholders experiencing
significant dilution. If such financing is unavailable, we may be forced to curtail our business plan, which may cause the value of our
securities to decline in value .
To
support our existing operations or any future expansion of business, including the ability to execute our growth strategy, we must have
sufficient capital to continue to make investments and fund operations. We have plans to pursue an aggressive growth strategy for the
expansion of operations through marketing to attract new customers for our Mango ED and Mango GROW products.
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Cash
Flows
Year
ended
December
31,
2023
Year
ended
December
31,
2022
Cash
provided by (used in):
Operating
activities
$ (6,997,375 )
$ (1,346,518 )
Investing
activities
(3,519 )
(43,102 )
Financing
activities
7,057,040
2,047,930
Net
increase in cash
$ 56,146
$ 660,310
Net
cash used in operating activities was $6,997,375 for the year ended December 31, 2023, which was mainly due to $9,212,417 of net loss,
offset by $1,530,651 of common stock issued for services, $624,463 for options vested for stock-based compensation.
Net
cash used in operating activities was $1,346,518 for the year ended December 31, 2022, which was mainly due to $1,998,055 of net loss
offset by $540,065 of common stock issued for services and $234,088 for options vested for stock-based compensation.
Net
cash used in investing activities was $3,519 for the year ended December 31, 2023, compared to $43,102 for the year ended December 31,
2022, which were due to the purchase of equipment.
Net
cash provided by financing activities was $7,057,040 for the year ended December 31, 2023, which was mainly due to $6,200,000 of funds
raised in the IPO and Follow On Funding and $1,024,500 in proceeds from the exercise of warrants, offset by repayments of notes payable
of $78,260 and repayments of related party notes payable of $89,200.
Net
cash provided by financing activities was $2,049,930 for the year ended December 31, 2022, which was mainly due to $2,000,000 of proceeds
from the sale of common stock in our private offering, discussed below.
Related
Party Loans and Advances
On
December 10, 2021, the Company received an advance of $70 from ZipDoctor, Inc., a wholly-owned subsidiary of its then sole shareholder,
American International, which was used to open and establish the Company’s bank account. The advance bears no interest and is due
on demand upon the Company’s ability to repay the advance from either future revenues or investment proceeds. The amount owed to
ZipDoctor was $70 as of December 31, 2021. Imputed interest equal to 8% per annum, or $0, was recorded against the related party advance
as of December 31, 2021. The amount was paid in full on May 24, 2022 and the amount owed to ZipDoctor was $0 as of December 31, 2022.
On
December 10, 2021 and March 18, 2022, the Company received advances of $39,200 and $50,000, respectively, for a total of $89,200 from
its previous majority shareholder, American International, in order to cover various general and administrative expenses. The amount
owed to American International was $39,200 as of December 31, 2021. Imputed interest equal to 8% per annum, or $181, was recorded against
the related party advance as of December 31, 2021. Other than the imputed interest discussed above, the advances bear no interest and
are due on demand upon the Company’s ability to repay the advances from either future revenues or investment proceeds. Pursuant
to the terms of the June 16, 2022, SPA discussed below, on June 16, 2022, Cohen Enterprises also acquired the right to be repaid the
$89,200 advanced from American International to the Company.
On
June 16, 2022, American International entered into and closed the transactions contemplated by a Stock Purchase Agreement (the
“SPA”), with Cohen Enterprises, Inc. (“Cohen Enterprises”), which entity is owned by Jacob D. Cohen, the
Chairman and Chief Executive Officer of the Company, who is also the majority shareholder of the Company. Pursuant to the SPA,
American International sold 8,000,000 shares of the outstanding common stock of the Company which represented 80% of the then
outstanding shares of common stock of the Company, to Cohen Enterprises in consideration for $90,000, which was approximately the
same amount that had been advanced to the Company from American International through the date of the SPA ($89,200). Cohen
Enterprises also acquired the right to be repaid the $89,200 advanced from American International to the Company, from the Company,
pursuant to the terms of the SPA. As a result of the closing of the SPA, Cohen Enterprises increased its ownership of the Company to
90% (with the remaining 10% of the Company then being owned by Mr. Arango (or former President and Director), as discussed above),
and American International completely divested its interest in the Company.
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On
June 29, 2022, the Company received an advance of $25,000 from Cohen Enterprises, which is owned by Mr. Cohen, the Chairman and
Chief Executive Officer of the Company, who is also the majority shareholder of the Company, in order to cover various general and
administrative expenses. The Company repaid Cohen Enterprises $25,000 on August 18, 2022 and the remaining $89,200 on April 4, 2023,
bringing the total amount owed to Cohen Enterprises to $0 as of December 31, 2023. The Company further recorded a credit of $6,473
towards imputed interest, as other income (previously calculated at a rate of 8% per annum) against the related party advances for
the year ended December 31, 2023.
On
November 18, 2022, the Company entered into a Secured Installment Promissory Note with a vendor for the purchase of equipment in the
amount of $78,260 (the “Note Payable”). The note bears no interest unless an event of default occurs, and then it bears interest
at the rate of 10% per annum until paid in full. The Note Payable was payable in installments, requiring payments of $5,000 on each of
January 1, 2023, February 1, 2023, and March 1, 2023, with a $31,630 payment due on April 1, 2023 and a final payment due on May 1, 2023.
The January 1 and March 1, 2023 payments were timely made and on March 23, 2023, the Company elected to pay off the remaining balance
of $63,260. The outstanding balance on December 31, 2022 was $78,260 and as of December 31, 2023, was $0.
2022
Private Placement
In
August 2022, the Company initiated a private placement of up to $2 million of units to accredited investors, with each unit consisting
of one share of common stock and a warrant to purchase one share of common stock, at a price of $1.00 per unit. The warrants have a five-year
term (from each closing date that units were sold) and an exercise price of $1.00 per share. If at any time after the six-month anniversary
of the issuance date, there is no effective registration statement registering, or no current prospectus available for the resale of
the shares of common stock issuable upon exercise the warrants, the holder of the warrants may elect a cashless exercise of the warrants.
Boustead Securities, LLC, the representative of the underwriters in our IPO, served as the placement agent in connection with the private
placement. In total, we sold an aggregate of 2,000,000 units for $2,000,000 to 23 accredited investors between August 16, 2022 and December
22, 2022, the end date of the offering.
Initial
Public Offering
On
March 23, 2023, we consummated our IPO of 1,250,000 shares of common stock at a price to the public of $4.00 per share, pursuant to that
certain Underwriting Agreement, dated March 20, 2023, between the Company and Boustead Securities, LLC, as representative of several
underwriters named in the Underwriting Agreement. The Company received gross proceeds of approximately $5 million, before deducting underwriting
discounts and commissions and estimated offering expenses payable by the Company upon the sale of the shares. In connection with the
IPO, the Company also granted Boustead a 45-day option to purchase up to an additional 187,500 shares of its common stock, which expired
unexercised.
At
the same time, and as part of the same registration statement, but pursuant to a separate prospectus the Company registered the sale
of 4,765,000 shares of common stock, including 2,000,000 shares of common stock issuable upon the exercise of outstanding warrants to
purchase shares of common stock with an exercise price of $1.00 per share, of which warrants to purchase 975,500 shares of common stock
remain outstanding, and unexercised, as of the date of this Report.
As
additional consideration in connection with the IPO, we granted Boustead, the representative of the underwriters named in the Underwriting
Agreement for the IPO, warrants to purchase 87,500 shares of common stock with an exercise price of $5.00 per share, which are exercisable
beginning six months after the effective date of the registration statement filed in connection with the IPO (March 20, 2023) and expire
five years after such effectiveness date.
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At
the same time, and as part of the same registration statement, but pursuant to a separate prospectus (the “ Resale Prospectus ”)
the Company registered the sale of 4,765,000 shares of common stock, including 2,000,000 shares of common stock issuable upon the exercise
of outstanding warrants to purchase shares of common stock with an exercise price of $1.00 per share, of which warrants to purchase 975,500
shares of common stock remain outstanding and unexercised.
As
additional consideration in connection with the IPO, upon the closing of the IPO, we granted Boustead, the representative of the underwriters
named in the Underwriting Agreement for the IPO, warrants to purchase 87,500 shares of common stock with an exercise price of $5.00 per
share, which are exercisable beginning six months after the effective date of the registration statement filed in connection with the
IPO (March 20, 2023) and expire five years after such effectiveness date.
Follow
On Offering
On
December 15, 2023, we entered into another underwriting agreement (the “Underwriting Agreement”) with Boustead, as representative
of the underwriters named on Schedule 1 thereto (the “Underwriters”), relating to a public offering of 4,000,000 shares of
the Company’s common stock to the Underwriters at a purchase price to the public of $0.30 per share and also granted to the Underwriters
a 45-day option to purchase up to 600,000 additional shares of its common stock, solely to cover over-allotments, if any, at the public
offering price less the underwriting discounts.
The
Follow On Offering closed on December 19, 2023. As a result, the Company sold 4,000,000 shares of its common stock for total gross proceeds
of $1.2 million.
The
net proceeds to the Company from the Offering, after deducting the underwriting discounts and commissions and offering expenses, were
approximately $1.0 million. The Company used the net proceeds from the Offering to finance the marketing and operational expenses associated
with the planned marketing of its Mango ED and GROW hair growth products, to develop and maintain software, and for working capital and
other general corporate purposes.
We
and our directors, executive officers, and shareholders holding 5% or more of our outstanding common stock previously agreed, in connection
with our IPO, subject to certain exceptions and without the approval of Boustead, not to offer, issue, sell, contract to sell, encumber,
grant any option for the sale of or otherwise dispose of any of our securities until March 20, 2024, and any directors or officers who
did not enter into a lock-up agreement in connection with our IPO entered into a lock-up agreement in connection with the Follow On Offering,
agreeing to not to offer, issue, sell, contract to sell, encumber, grant any option for the sale of or otherwise dispose of any of our
securities for a period of 90 days after December 14, 2023.
On
December 19, 2023, pursuant to the Underwriting Agreement, the Company issued a common stock purchase warrant to Boustead for the purchase
of 280,000 shares of common stock at an exercise price of $0.38, subject to adjustments. The warrant is exercisable at any time and from
time to time, in whole or in part, until December 14, 2029, and may be exercised on a cashless basis.
On
January 18, 2024, the Underwriters notified the Company that they were exercising their over-allotment option in full to purchase an
additional 600,000 shares of common stock, which sale closed on January 22, 2024. The net proceeds to the Company from the sale of the
600,000 shares of common stock, after deducting underwriting discounts and expenses, was approximately $160,000. Inclusive of the full
exercise of the over-allotment option, a total of 4,600,000 shares of common stock were issued and sold in the Offering.
On
January 22, 2024, pursuant to the Underwriting Agreement, the Company also issued a common stock purchase warrant to Boustead for the
purchase of 42,000 shares of common stock at an exercise price of $0.375, subject to adjustments. The warrant is exercisable at any time
and from time to time, in whole or in part, until December 14, 2028, and may be exercised on a cashless basis.
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Need
for Future Funding
As
discussed above, our current capital resources, combined with the net proceeds from the offering, are not expected to be sufficient for
us to fund operations for the next 12 months. We believe we will need funding in addition to the funding raised in our IPO and Follow
On Offering, to support our operations in the future. We may also seek to acquire additional businesses or assets in the future, which
may require us to raise funding. We currently anticipate such funding, if required, being raised through the offering of debt or equity.
Such additional financing, if required, may not be available on favorable terms, if at all. If debt financing is available and obtained,
our interest expense may increase and we may be subject to the risk of default, depending on the terms of such financing. If equity financing
is available and obtained it may result in our shareholders experiencing significant dilution. If such financing is unavailable, we may
be forced to curtail our business plan, which may cause the value of our securities to decline in value.
Critical
Accounting Policies and Estimates
The
preparation of the Company’s financial statements in accordance with accounting principles generally accepted in the United States
of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities
and expenses. “Note 2 – Summary of Significant Accounting Policies” to the audited financial statements included under
“Index to Financial Statements,” below describes the significant accounting policies used in the preparation of the financial
statements. Certain of these significant accounting policies and estimates have a higher degree of inherent uncertainty and require significant
judgments. Accordingly, actual results could differ from those estimates. To the extent that there are differences between our estimates
and actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected.
A
critical accounting policy is defined as one that is both material to the presentation of our financial statements and requires management
to make difficult, subjective or complex judgments that could have a material effect on our financial condition and results of operations.
Specifically, critical accounting estimates have the following attributes: (1) we are required to make assumptions about matters that
are highly uncertain at the time of the estimate; and (2) different estimates we could reasonably have used, or changes in the estimate
that are reasonably likely to occur, would have a material effect on our financial condition or results of operations.
Estimates
and assumptions about future events and their effects cannot be determined with certainty. We base our estimates on historical experience
and on various other assumptions believed to be applicable and reasonable under the circumstances. These estimates may change as new
events occur, as additional information is obtained and as our operating environment changes. These changes have historically been minor
and have been included in the financial statements as soon as they became known. Based on a critical assessment of our accounting policies
and the underlying judgments and uncertainties affecting the application of those policies, management believes that our financial statements
are fairly stated in accordance with GAAP and present a meaningful presentation of our financial condition and results of operations.
We believe the following critical accounting policies reflect our more significant estimates and assumptions used in the preparation
of our consolidated financial statements:
Share-Based
Compensation – Stock-based compensation is accounted for based on the requirements of the Share-Based Payment Topic of
Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 718, which requires recognition
in the consolidated financial statements of the cost of employee and director services received in exchange for an award of equity instruments
over the shorter of period the employee or director is required to perform the services in exchange for the award or the vesting period.
ASC 718 also requires measurement of the cost of employee and director services received in exchange for an award based on the grant-date
fair value of the award. Pursuant to ASC 505-50, for share-based payments to non-employees, compensation expense is determined at the
“measurement date.” The expense is recognized over the service period of the award. Until the measurement date is reached,
the total amount of compensation expense remains uncertain. The Company initially records compensation expense based on the fair value
of the award at the reporting date. Additionally, we used this same methodology when determining the fair value of our restricted common
stock issuances to managers and other related parties.
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Estimating
the Fair Value of Common Stock – We are required to estimate the fair value of the common stock underlying our stock-based
awards and warrants when performing the fair value calculations using the Black-Scholes option pricing model
Our
determination of the fair value of stock options with time-based vesting on the date of grant utilizes the Black-Scholes option pricing
model, and is impacted by our common stock price as well as other variables including, but not limited to, expected term that options
will remain outstanding, expected common stock price volatility over the term of the option awards, risk-free interest rates and expected
dividends. Estimating the fair value of equity-settled awards as of the grant date using valuation models, such as the Black-Scholes
option pricing model, is affected by assumptions regarding a number of complex variables. Changes in the assumptions can materially affect
the fair value and ultimately how much stock-based compensation expense is recognized. These inputs are subjective and generally require
significant analysis and judgment to develop.
Warrants
– In accordance with ASC 480, the Company classifies as equity any contracts that (i) require physical settlement or net-share
settlement or (ii) gives the Company a choice of net-cash settlement in its own shares. The Company classifies as liabilities any contracts
that (i) require net-cash settlement (including a requirement to net-cash settle the contract if an event occurs and if that event is
outside the control of the Company) or (ii) give the counterparty a choice of net-cash settlement or settlement in shares.
The
Company accounts for its currently issued warrants in conjunction with the Company’s ordinary shares in permanent equity. These
warrants are indexed to the Company’s stock and meet the requirements of equity classification as prescribed under ASC 815-40.
Warrants classified as equity are initially measured at fair value, and subsequent changes in fair value are not recognized so long as
the warrants continue to be classified as equity. The value of the warrant is based on accepted valuation procedures and practices that
rely substantially on the third-party professional’s use of numerous assumptions and its consideration of various factors that
are relevant to the operation of the Company.
JOBS
Act and Recent Accounting Pronouncements
The
JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period provided in Section
7(a)(2)(B) of the Securities Act, for complying with new or revised accounting standards. In other words, an “emerging growth company”
can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected
to take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act, for complying with new or revised
accounting standards that have different effective dates for public and private companies until the earlier of the date we (i) are no
longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in Section
7(a)(2)(B) of the Securities Act.
We
have implemented all new accounting pronouncements that are in effect and may impact our financial statements and we do not believe that
there are any other new accounting pronouncements that have been issued that might have a material impact on our financial position or
results of operations.
Recently
Issued Accounting Pronouncements
From
time to time, new accounting pronouncements are issued by the Financial
Accounting Standards Board (“ FASB”) that are adopted by the Company as of the specified
effective date. If not discussed, management believes that the impact of recently issued standards, which are not yet effective, will
not have a material impact on the Company’s financial statements upon adoption.
In
August 2020, the FASB issued Accounting Standards Update (“ ASU”) 2020-06, “Debt – Debt with Conversion and Other
Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815 –
40)” (“ASU 2020-06”). ASU 2020-06 simplifies the accounting for certain financial instruments with
characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. The ASU
is part of the FASB’s simplification initiative, which aims to reduce unnecessary complexity in U.S. GAAP. The ASU’s
amendments are effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. The
Company is currently evaluating the impact of ASU 2020-06 on its financial statements.
Item
7A. Quantitative and Qualitative Disclosures About Market Risk.
We
are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required
under this item.
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