The following is management's discussion and analysis of certain significant
factors that have affected our financial position and operating results during
the periods included in the accompanying condensed consolidated financial
statements, as well as information relating to the plans of our current
management. This report includes forward-looking statements. Generally, the
words "believes," "anticipates," "may," "will," "should," "expect," "intend,"
"estimate," "continue," and similar expressions or the negative thereof or
comparable terminology are intended to identify forward-looking statements. Such
statements are subject to certain risks and uncertainties, including the matters
set forth in this report or other reports or documents we file with the
Securities and Exchange Commission from time to time, which could cause actual
results or outcomes to differ materially from those projected. Undue reliance
should not be placed on these forward-looking statements which speak only as of
the date hereof. We undertake no obligation to update these forward-looking
statements.
Although the Company believes that the expectations reflected in the
forward-looking statements are reasonable, the Company cannot guarantee future
results, levels of activity, performance, or achievements. Except as required by
applicable law, including the securities laws of the United States, the Company
does not intend to update any of the forward-looking statements to conform these
statements to actual results.
Our financial statements are prepared in accordance with accounting principles
generally accepted in the United States ("GAAP"). These accounting principles
require us to make certain estimates, judgments, and assumptions. We believe
that the estimates, judgments, and assumptions upon which we rely are reasonable
based upon information available to us at the time that these estimates,
judgments, and assumptions are made. These estimates, judgments, and assumptions
can affect the reported amounts of assets and liabilities as of the date of the
financial statements as well as the reported amounts of revenues and expenses
during the periods presented. Our financial statements would be affected to the
extent there are material differences between these estimates.
The following discussion should be read in conjunction with our unaudited
financial statements and the related notes that appear elsewhere in this
Quarterly Report on Form 10-Q.
THE COMPANY
Cytta Corp., ("Cytta" or the "Company") was incorporated on May 30, 2006 under
the laws of the State of Nevada. It is located in Las Vegas, Nevada. Cytta is in
the business of imagineering, developing and securing disruptive technologies.
Results of Operations for the three and six months ended March 31, 2022 and
2021:
Revenue
Revenues of $936 and $1,873 for the three and six months ended March 31, 2022,
respectively, were from deferred revenue on subscription agreements being
recognized. Revenues of $70,520 for the six months ended March 31, 2021, consist
of hardware imbedded with our proprietary software, integration consulting
services, tech support and product maintenance billed to the customer.
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Cost of goods sold
Cost of goods sold was $25,277 for the six months ended March 31, 2021.
Operating expenses were $1,524,868 and $2,643,854 for the three and six months
ended March 31, 2022, respectively, compared to $553,803 and $1,071,966,
respectively, for the three and six months ended March 31, 2021.
Three months ended March 31, Six months ended March 31,
Description 2022 2021 2022 2021
Related party expenses
(excluding stock-based
expenses) $ 173,801 $ 114,501 $ 600,020 $ 224,835
Stock based expenses 872,419 225,156 1,289,341 391,249
Stock based
compensation, officers 39,063 39,063 78,126 78,126
Professional fees 94,623 54,060 205,919 120,679
Consulting expenses 47,250 24,150 65,700 47,817
Depreciation expense 11,904 9,920 23,808 17,910
Equipment and demo
expenses 150,963 30,840 159,944 54,412
General and
Administrative,
officers 14,918 22,190 18,588 54,373
Auto, travel and
entertainment 25,868 16,684 54,428 31,078
Rent expense 4,582 4,122 8,729 8,194
Investor relations 23,792 - 37,746 -
Other operating
expenses 65,685 13,117 101,505 43,293
Total $ 1,525,868 $ 553,803 $ 2,643,854 $ 1,071,966
Stock-based expenses increased in the current periods compared to the prior
periods substantially as a result of $784,919 and $1,171,842 related to the
amortization of stock-based compensation for the three and six months ended
March 31, 2022, as well as the expense of $87,500 and $117,500 for shares issued
and expensed for the three and six months ended March 31, 2022.
For the three and six months ended March 31, 2022, and 2021, the Company
recorded expenses to related parties in the following amounts:
Three months ended March 31, Six months ended March 31,
Description 2022 2021 2022 2021
CEO-Management fees $ 58,000 $ 36,000 $ 203,000 $ 72,000
Chief Technology
Officer (CTO) 58,000 36,000 203,000 72,000
Chief Administration
Officer (CAO) 45,000 30,000 165,000 60,000
Office rent and
expenses 12,801 12,501 29,020 20,835
Total $ 173,801 $ 114,501 $ 600,020 $ 224,835
During the three and six months ended March 31, 2022, equipment and demo
expenses increased as a result of the Company utilizing existing inventory to be
sent out for demo purposes.
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The following tables set forth key components of our balance sheet as of March
31, 2022 and September 30, 2021.
September
March 31, 2022 30, 2021
Current Assets $ 2,552,229 $ 1,102,449
Property and Equipment $ 146,798 $ 170,605
Total Assets $ 2,699,027 $ 1,273,054
Current Liabilities $ 278,223 $ 406,089
Total Liabilities $ 278,223 $ 406,089
Stockholders' Equity $ 2,420,804 $ 866,245
Total Liabilities and Stockholders' Equity $ 2,699,027 $ 1,273,054
Liquidity and Capital Resources
Our current capital and our other existing resources will be sufficient to
provide the working capital needed for our current business Additional capital
will be required to further expand our business. We may be unable to obtain the
additional capital required. Our inability to generate capital or raise
additional funds when required will have a negative impact on our business
development and financial results. These conditions raise substantial doubt
about our ability to continue as a going concern as well as our recurring losses
from operations and the need to raise addition. This "going concern" could
impair our ability to finance our operations through the sale of debt or equity
securities. During the six months ended March 31, 2022, the Company has raised
$2,963,500 from the sale of 59,270,000 shares of Series F Preferred Stock.
As of March 31, 2022, we had cash of $2,140,497 compared to $173,196 at
September 30, 2021. As of March 31, 2022, we had current assets of $2,552,229
and current liabilities of $278,223, which resulted in working capital of
$2,274,006. The current liabilities are comprised of accounts payable, accounts
payable-related parties, accrued expenses, dividends payable and stock to be
issued.
In December 2019, a novel strain of coronavirus (COVID-19) emerged. Because
COVID-19 infections have been reported throughout the United States, certain
federal, state and local governmental authorities have issued stay-at-home
orders, proclamations and/or directives aimed at minimizing the spread of
COVID-19. The ultimate impact of the COVID-19 pandemic on the Company's
operations is unknown and will depend on future developments, which are highly
uncertain and cannot be predicted with confidence, including the duration of the
COVID-19 outbreak, new information which may emerge concerning the severity of
the COVID-19 pandemic, and any additional preventative and protective actions
that governments, or the Company, may direct, which may result in an extended
period of continued business disruption, and reduced operations. Any resulting
financial impact cannot be reasonably estimated at this time but it may have a
material adverse impact on our business, financial condition and results of
operations. Management expects that its business will be impacted to some
degree, but the significance of the impact of the COVID-19 outbreak on the
Company's business and the duration for which it may have an impact cannot be
determined at this time.
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Operating Activities
For the six months ended March 31, 2022, net cash used in operating activities
was $996,199 compared to $681,469 for the six months ended March 31, 2021. For
the six months ended March 31, 2022, our net cash used in operating activities
was primarily attributable to the net loss of $2,690,116, adjusted by
stock-based compensation of $1,367,468 and depreciation of $23,808. Net changes
of $302,642 in operating assets and liabilities decreased the cash used in
operating activities.
For the six months ended March 31, 2021, net cash used in operating activities
of $681,469 was primarily attributable to the net loss of $1,026,464, adjusted
for non-cash expenses of stock- based expenses of $469,375 and depreciation of
$17.910, and net changes of $142,290 in operating assets and liabilities.
Investing Activities
For the six months ended March 31, 2022, there was no cash used in investing
activities and net cash used in investing activities was $34,249 for the six
months ended March 31, 2021. The expenditures were for the purchases of office
furniture and equipment.
Financing Activities
For the six months ended March 31, 2022, net cash provided by financing
activities was $2,963,500, compared to $385,000 for the six months ended March
31, 2021. During the six months ended March 31, 2022, we received $2,963,500 of
proceeds received pursuant to the sale of 59,270,000 shares of Series F
Preferred Stock at $0.05 per share. For the six months ended March 31, 2021, the
Company received $360,000 from the sale of preferred stock and $25,000 from the
sale of 1,000,000 shares of common stock at $0.025 per share.
As of March 31, 2022, the Company had $2,140,497 in cash on hand. Management
believes the working capital is sufficient to meet its' ongoing commitments for
the next year and to begin executing on its' business plan.
Critical Accounting Policies
Our significant accounting policies are summarized in Note 3 of our financial
statements. While all these significant accounting policies impact our financial
condition and results of operations, we view certain of these policies as
critical. Policies determined to be critical are those policies that have the
most significant impact on our financial statements and require management to
use a greater degree of judgment and estimates. Actual results may differ from
those estimates. Our management believes that given current facts and
circumstances, it is unlikely that applying any other reasonable judgments or
estimate methodologies would cause an effect on our results of operations,
financial position or liquidity for the periods presented in this report.
Inventory
Inventories are valued at the lower of cost or net realizable value, with cost
determined on the first-in, first-out basis. Inventory costs include finished
goods and component parts. In evaluating the net realizable value of inventory,
management also considers, if applicable, other factors, including known trends,
market conditions, currency exchange rates and other such issues.
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Property and Equipment
Property and equipment are stated at cost, and depreciation is provided by use
of a straight-line method over the estimated useful lives of the assets.
The Company reviews property and equipment for potential impairment whenever
events or changes in circumstances indicate that the carrying amounts of assets
may not be recoverable. The estimated useful lives of property and equipment is
as follows:
Vehicles and equipment 5 years
Software 3 years
Revenue Recognition
Effective January 1, 2018, the Company adopted ASC 606 - Revenue from Contracts
with Customers. Under ASC 606, the Company recognizes revenue from the
commercial sales of products by: (1) identify the contract (if any) with a
customer; (2) identify the performance obligations in the contract (if any); (3)
determine the transaction price; (4) allocate the transaction price to each
performance obligation in the contract (if any); and (5) recognize revenue when
each performance obligation is satisfied. Under ASC 606, revenue is recognized
when the following criteria are met: (1) persuasive evidence of an arrangement
exists; (2) the performance of service has been rendered to a customer or
delivery has occurred; (3) the amount of fee to be paid by a customer is fixed
and determinable; and (4) the collectability of the fee is reasonably assured.
Other than The Company has no outstanding contracts with any of its' customers.
The Company recognizes revenue when title, ownership, and risk of loss pass to
the customer, all of which occurs upon shipment or delivery of the product and
is based on the applicable shipping terms.
Stock-Based Compensation
The Company accounts for its stock based compensation under the recognition and
measurement principles of the fair value recognition provisions of Statement of
Financial Accounting Standards No. 123 (revised 2004) "Share-Based Payment"
("SFAS No. 123R")(ASC 718) using the modified prospective method for
transactions in which the Company obtains employee services in share-based
payment transactions and the Financial Accounting Standards Board Emerging
Issues Task Force Issue No. 96-18 "Accounting For Equity Instruments That Are
Issued To Other Than Employees For Acquiring, Or In Conjunction With Selling
Goods Or Services" ("EITF No. 96-18") for share-based payment transactions with
parties other than employees provided in SFAS No. 123(R) (ASC 718). All
transactions in which goods or services are the consideration received for the
issuance of equity instruments are accounted for based on the fair value of the
consideration received or the fair value of the equity instrument issued,
whichever is more reliably measurable. The measurement date used to determine
the fair value of the equity instrument issued is the earlier of the date on
which the third-party performance is complete or the date on which it is
probable that performance will occur.
Earnings (Loss) Per Share
The Company computes net loss per share in accordance with FASB ASC 260,
"Earnings per Share." ASC 260 requires presentation of both basic and diluted
earnings per share (EPS) on the face of the statement of operations. Basic EPS
is computed by dividing net income (loss) available to common shareholders by
the weighted average number of common shares outstanding during the period.
Diluted EPS gives effect to all dilutive potential common shares outstanding
during the period including stock options, using the treasury stock method, and
convertible notes and stock warrants, using the if-converted method. In
computing diluted EPS, the average stock price for the period is used in
determining the number of shares assumed to be purchased from the exercise of
stock options, warrants and conversion of convertible notes. Diluted EPS
excludes all dilutive potential common shares if their effect is anti-dilutive.
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Off Balance Sheet Arrangements
We have no off-balance sheet arrangements including arrangements that would
affect our liquidity, capital resources, market risk support and credit risk
support or other benefits.
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