What changed in this filing

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Item 7. Management’s Discussion and Analysis

2023-10-06 compared with 2022-10-04 · 33 added, 32 removed, 200 unchanged (25% of the section changed)

11 unchanged sentences

Since February 12, 2018 Mark Lucky has served as Chairman and CEO.

He currently also serves as CFO.

He also currently serves as CFO.

The Company’s headquarters is located at 4094 Majestic Lane, Suite 360, Fairfax, VA 22124.

9 unchanged sentences

Development Expense

For the year ended June 30, 2022, development expense totaled $361,298 as compared to $258,168 for the year ended June 30, 2021, an increase of $103,130 or approximately 72%.

For the year ended June 30, 2023, development expense totaled $214,965 as compared to $361,298 for the year ended June 30, 2022, a decrease of $146,333 or approximately 40.5%.

Selling, General, and Administrative Expenses

For the year ended June 30, 2022, selling, general and administrative expenses were $3,879,158 as compared to $3,879,158 for the year ended June 30, 2021, an increase of $2,961,165 or approximately 322.6%.

For the year ended June 30, 2023, selling, general and administrative expenses were $2,198,639 as compared to $4,316,191 for the year ended June 30, 2022, a decrease of $2,117,552 or approximately 49%.

For the years ended June 30, 2023 and 2022 selling, general and administrative expenses consisted of the following:

10 unchanged sentences

Stock based compensation

The increase in selling, general and administrative expenses during fiscal 2022, when compared with the prior year, is primarily due to an increase in salaries of $627,435, legal and professional fees of $344,815, and stock based consulting expense of $899,175, offset by decreases in stock based compensation of $1,668,200.

$ (2,117,552 )

The decrease in selling, general and administrative expenses during fiscal 2023, when compared with the prior year, is primarily due to a decrease in stock-based consulting expense of $311,103, stock based compensation of $1,154,358, a decrease in marketing expense of $201,062 and a decrease in legal and professional fees of $447,845, offset by an increase in consulting fees of $90,445, and an increase in accounting expense of $26,238.

Change in Fair Value of Derivative Liability

8 unchanged sentences

Interest expense represents the stated interest of notes and convertible notes payable as well as the amortization of debt discount.

The increase in interest expense during fiscal 2021 is primarily due to higher amortization of debt discount of $265,582.

The decrease in interest expense during fiscal 2023 is primarily due to higher discount amortization expense of $468,344 in fiscal 2022.

Loss on extinguishment of debt

In September 2022 we issued 138,667 warrants with a five year life, and a fixed exercise price of $1.35 per share, as part of a modification to three outstanding convertible notes payable.

The Company evaluated these amendments under ASC 470-50, “ Debt - Modification and Extinguishment” , and concluded that the issuance of these warrants in exchange for deferring the interim interest payments that were due resulted in significant and consequential changes to the economic substance of the debt and thus resulted in accounting for these modifications as an extinguishment of the debt.

Under ASC 470-50, the issuance of these warrants resulted in a loss on the extinguishment of debt, as follows:

Value of warrants issued

Write-off of unamortized debt discount

Loss on extinguishment of debt

During the year ended June 30, 2023 we recorded a loss on the conversion of convertible note totaling $12,062, which is recorded in the Consolidated Statement of Operations as loss on extinguishment of debt.

A recap of the Loss on extinguishment of debt follows:

Loss on extinguishment of debt related to warrants

Loss on extinguishment of debt related to note conversions

Gain on Debt Write-Off

Gain (loss) on debt write off/conversions

In June 2021, the Company obtained a legal opinion to extinguish aged debt totaling $787,272 as detailed in the following table.

Each of the individual debt instruments were determined to be beyond the statute of limitations and it was determined that the Company has a complete defense to liability related to this debt under the applicable statute of limitations.

Accrued interest payable

Convertible notes payable

Gain on debt write off/conversions

Liquidity and Capital Resources

5 unchanged sentences

$ (1,684,199 )

At June 30, 2021 our total assets consisted of cash and prepaid license fees.

At June 30, 2023 our total assets consisted of cash.

At June 30, 2022 100% our total assets consisted of cash.

We do not have any material commitments for capital expenditures.

10 unchanged sentences

Going Concern

The accompanying financial statements have been prepared on a going concern basis.

Ther accompanying financial statements have been prepared on a going concern basis.

The Company has used net cash in its operating activities of $523,886 and $2,224,576 during the years ended June 30 2023 and 2022, respectively, and has a working capital deficit of approximately $4.3 million and $2.8 million at June 30, 2023 and 2022, respectively.

13 unchanged sentences

Amortization of prepaid expenses

Warrant conversion expense

Changes in assets and liabilities:

2 unchanged sentences

Accounts payable and accrued expenses

Prepaid license fees

Discount on note payable

Net cash used in operations

7 unchanged sentences

Net cash provided by financing activities

Net increase in cash

Net increase (decrease) in cash

Year ended June 30, 2023

Net cash used in operations in fiscal year 2022 increased by $1,525,536 or 192% from fiscal year 2021.

This cash was obtained through the sale of common stock that netted the Company $1,500,000, and three convertible notes that netted the Company $1,170,000.

Net cash used in operations in fiscal year 2023 decreased by $1,691,435 or 76% from fiscal year 2022.

Cash from financing activities was obtained through the sale of common stock that netted the Company $40,250, the sale of convertible notes that netted the Company $140,000, and the sale of promissory notes that netted the Company $190,000.

Year ended June 30, 2022

Net cash used in operations in fiscal year 2022 increased by $1,525,536 or 192% from fiscal year 2021.

This cash was obtained through the sale of three convertible notes that netted the Company $838,595, and from the sale of three short term notes payable that netted the Company $225,000.

This cash was obtained through the sale of common stock that netted the Company $1,500,000, and three convertible notes that netted the Company $1,170,000.

Capital Raising Transactions

1 unchanged sentence

We generated net proceeds of $140,000 and $1,170,000 during fiscal 2023 and 2022, respectively, from the issuance of convertible notes payable.

We generated net proceeds of $225,000 during fiscal 2021 from the issuance of short term notes payable.

Convertible Notes Payable

5 unchanged sentences

The Convertible Notes Payable are generally convertible at rates ranging between $0.20 and $22,500,000 per share, at the holders’ option.

At June 30, 2022, all convertible promissory notes have matured.

June 30, 2023

3 unchanged sentences

Notes payable, net of discount

Convertible notes payable to ASC Recap LLC

On July 22 2013, and May 6, 2014, the Company issued to ASC Recap LLC (“ASC”) two convertible promissory notes with principal amounts of $25,000 and $125,000, respectively.

These two notes were issued as a fee for services under a 3(a)10 transaction.

In May 2022 the Company entered into a litigation settlement agreement to satisfy the balance owed on these notes.

Pursuant to the agreement the Company issued 44,444 shares of its $0.0001 par value common stock, valued at $108,000, or $2.43 per share, the market value at the time, resulting in a gain on extinguishment of debt of $187,930.

Notes Payable

5 unchanged sentences

$205,000 of these notes have matured as of June 30, 2023.

We generated net proceeds of $190,000 during fiscal 2023 from the issuance of short-term notes payable.

Common Stock Warrants

1 unchanged sentence

An additional 9,239,130 warrant shares were issued due to repricing certain warrants with a $0.02 exercise price to a $0.0115 exercise price.

In January 2019 we issued 500 warrants with a three-year life and a conversion price of $0.15 per share.

These warrants had price protection provisions that allow for the reduction in the current exercise price upon the occurrence of certain events, including the Company’s issuance of common stock or securities convertible into or exercisable for common stock, such as options and warrants, at a price per share less than the exercise price then in effect.

For instance, if the Company issues shares of its common stock or options exercisable for or securities convertible into common stock at an effective price per share of common stock less than the exercise price then in effect, the exercise price will be reduced to the effective price of the new issuance.

Simultaneously with any reduction to the exercise price, the number of shares of common stock that may be purchased upon exercise of each of these warrants shall be increased proportionately, so that after such adjustment the aggregate exercise price payable for the adjusted number of warrants shall be the same as the aggregate exercise price in effect immediately prior to such adjustment.

The holders of the warrants issued in 2019 exercised all of their warrants on a cashless basis, during the three months ended December 31, 2020.

Due to the price protection features of these warrants, the Company issued 277,407 warrant shares to these warrant holders.

In September 2022, we issued 138,667 warrants with a five year life, and a fixed exercise price of $1.35 per share, as part of a modification to three outstanding convertible notes payable.

Under ASC 470-50, the issuance of these warrants resulted in a loss on the extinguishment of debt, as follows:

Value of warrants issued

Write-off of unamortized debt discount

Loss on extinguishment of debt

A summary of the status of the Company’s outstanding common stock warrants as of June 30, 2023 and changes during the fiscal year ending on that date is as follows:

3 unchanged sentences

Balance at beginning of year

Granted due to repricing

Balance at end of period

71 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-K

Item 7. Management’s Discussion and Analysis