Liquidity, Capital Resources and Material Changes in Financial Condition
As of December 31, 2021, our total assets were $264,503 compared to $27,441 in
assets as of December 31, 2020. This increase in the total assets is primarily
attributed to an increase in prepaid expense and cash. Prepaid expense increased
due to the issuance of 1,250,000 shares of stock to consultants valued at
$537,500 per consulting agreements entered into by the Company. The amount is
being amortized over the one-year length of the contracts on a straight-line
basis.
As of December 31, 2021, our liabilities were $299,530 compared to $337,464 in
liabilities as of December 31, 2020. This change in the Company's financial
condition was due to decreases in accounts payable and accrued expenses of
$67,780, and long term note payable of $1,050 partially offset by an increase of
$10,000 in loans from stockholders, and an increase in accrued interest of
$20,896.
5
Net cash used in operating activities for the year ending December 31, 2021 was
$664,596 compared to net cash used in operating activities for the year ended
December 31, 2020 of $306,161. Cash provided by or used by operating activities
is driven by our net loss and adjusted by non-cash items as well as changes in
operating assets and liabilities. Non-cash adjustments for the year ended
December 31, 2021 include stock compensation of $460,708 and loss on settlement
of payables of $6,343.
Net cash used by investing activities for the years ended December 31, 2021 and
2020 was $0.
Net cash provided by financing activities was $692,150 for the year ended
December 31, 2021 as compared to $332,266 for the year ending December 31, 2020.
Specifically, proceeds from common stock issuance were $490,200 for the year
ended December 31, 2021as compared to $76,666 for the year ended December 31,
2020, and proceeds from common stock to be issued was $193,000 for the year
ended December 31, 2021 as compared to $60,000 for the year ended December 31,
2020. Conversely, proceeds from notes payable were $22,500 for the year ended
December 31, 2021compared to $232,100 for the year ended December 31, 2020.
The Company had operating revenue of $197 in 2021 and is currently reliant on
its ability to raise additional capital and/or debt to continue execution of its
business plan to move the Company forward towards profitability. The Company
does not anticipate any significant decrease in its operating expenses for 2022.
Unless the Company begins to generate operation revenue, it will be reliant on
its ability to raise additional debt and/or capital in order to continue its
operations.
Results of Operations for the Years Ended December 31, 2021 and 2020
The Company experienced a net loss of $1,087,712 for the year ended December 31,
2021 compared to net loss of $983,271 for the year ended December 31, 2020.
This increase in the Company's net loss was primarily due to a substantial
increase in professional fees as well as research and development fees,
partially offset by substantial decreases in software impairment expenses and
depreciation expenses.
Service revenue was $197 for 2021 in comparison to $19,944 for 2020. This
decrease in revenue was due to the Company recognizing $14,589 of revenue from a
customer's non-refundable two-year (beginning August 28, 2018) service contract
that ended in the third quarter of 2020.
Professional fees were $468,449 in 2021, compared to $56,483 in 2020. This
increase in professional fees was due to increased consulting services as a
result of increased software development costs associated with upgrading the
source code and infrastructure to accommodate increased capacity demands and
higher accounting fees during the period.
Research and development expenses were $180,063 in 2021, compared to $2,100 in
2020. This increase in research expenses was due to increased development costs
associated with the Company's re-factoring of the Cyberloq technology for
scalability.
Officers' compensation expense was $370,400 in 2021 as compared to $306,140 in
2020. This increase was due to an increase in stock price attributed to
Officers' share issuances.
In addition to the foregoing, rent expense was $9,031 for 2021, compared to
$3,585 for 2020. This increase was due to the Company signing a new lease
agreement in 2020.
The foregoing drivers of the increase in the Company's net loss for the year
ended December 31, 2021 were partially offset by decreases in the Company's
other operating expenses.
Software impairment expense was $0 in 2021, compared to $321,735 in 2020. This
decrease in software impairment expense is due to the one-time write-off of the
book value of the Cyberloq technology software fixed asset in 2020.
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Depreciation expense was $0 in 2021, compared to $122,675 in 2020. This decrease
in depreciation expense was due to a one-time software impairment expense in
2020. Since the write-off occurred in 2020, it could no longer be depreciated in
2021.
The Company had recognition of bad debt expense of $40,000 in 2020, as opposed
to no recognition of bad debt in 2021.
Computer and internet expenses were $10,859 in 2021 as compared to $7,759 in
2020. This increase was due to additional hosting costs associated with the
Company's private blockchain product.
Office supplies and expenses were $6,608 in 2021, compared to $4,369 in 2020.
Sales commissions were $0 in 2021, compared to $2,011 in 2020.
For 2021, there were no material changes in travel and entertainment and other
operating expenses as compared to 2020.
In summary, total revenue was $197 for 2021, and the Company is currently
reliant on its ability to raise additional debt and/or capital to continue
execution of its business plan to move forward towards profitability. Whether or
not there are any material changes in operational revenues or expenses in 2022
will be highly-dependent upon the Company's ability to enter into material
revenue contracts with customers.
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