The following discussion should be read in conjunction with our audited consolidated financial statements and the related notes that appear elsewhere in this annual report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to such differences include but are not limited to those discussed below and elsewhere in this annual report, particularly in the section entitled "Risk Factors" beginning on page 6 of this annual report.

Our audited consolidated financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles.

Results of Operations - Years Ended December 31, 2021 vs. December 31, 2020

The following summary of our results of operations should be read in conjunction with our consolidated financial statements for the years ended December 31, 2021, and 2020, which are included herein.

Year Ended December 31, 2021 Compared to Year Ended December 31, 2020





                             December 31,
                         2021             2020           Change
Revenue              $  6,143,273     $  5,927,173     $   216,100

Cost of revenue 5,338,979 4,107,556 1,231,423 Operating Expenses 4,875,789 3,217,188 1,658,601 Net loss

$ (4,065,910 )   $ (1,498,926 )   $ 2,566,984

Revenues increased by $216,100 or 4% for the fiscal year ended December 31, 2021 compared with the fiscal year ended December 31, 2020. The change in revenue is due to the following increases: new customers of approximately $387,400, professional services of approximately $174,500 and additional services of approximately $25,000, these increases were partially offset by terminated customers revenue of approximately $370,800 of revenue.

Cost of revenue increased by $1,231,423 or 30% compared with the prior fiscal year. The gross margin declined to 13.1%, a decreased by approximately 57.3% compared to the prior year gross margin of 30.7%. The decrease in gross profit was from lower high margin professional services. In addition, there was additional labor added to cost of sales to increase services provided as standard managed services provided by the Company. Management increased these services to improve customer satisfaction and, in an effort, to improve the Company's ability to increase sales.

Operating expenses increased by $1,658,601 or 52% compared with the prior fiscal year. There was an increase in compensation, commission expenses, marketing expenses, amortization of beneficial conversion feature expenses, stock compensation and professional service expenses, which was partially offset by decreases in travel, depreciation and rent expense.






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The Company incurred a net loss of $4,065,910 and $1,498,926 for the fiscal years ended December 31, 2021 and 2020, respectively. Other income and expenses decreased by $106,940. The net gain of other income and expenses was related to the PPP loan forgiveness of $716,982 and offset by interest expense of $717,760, an increase of interest expense of $607,950. The increase in the net loss is primarily related to a decrease in the gross margin and an increase in selling, general and administrative expenses.

Liquidity and Capital Resources





Working Capital



                           At                 At
                      December 31,       December 31,
                          2021               2020
Current assets        $   1,256,120     $    2,459,189
Current liabilities       2,780,355          2,160,942
Working capital       $  (1,524,235 )   $      298,247




Cash Flows                                                 Year Ended
                                                          December 31,
                                                      2021             2020
Cash flows used in operating activities           $ (3,048,869 )   $ (1,445,924 )
Cash flows used in investing activities                (21,994 )        (64,719 )

Cash flows provided by financing activities 1,785,296 1,559,554 Net (decrease) increase in cash during the year $ (1,285,567 ) $ 48,911

At December 31, 2021, the Company had cash of $521,039. The decrease in cash of $1,285,567 from the December 31, 2020, cash balance of $1,806,606 was related to the significant losses sustained during the year and the decrease of deferred revenue.

Net cash used in investing activities for the fiscal year ended December 31, 2021, was $21,994 with $64,719 being used for the fiscal year ended December 31, 2020. During the years ended December 31, 2021, and 2020, the Company repaid debt related to the acquisition and purchased equipment and software licenses.

Net cash flows provided by financing activities for the fiscal year ended December 31, 2021, was $1,785,296 compared to $1,559,554 for the fiscal year ended December 31, 2020. During the year ended December 31, 2021, the Company received $1,190,000 proceeds from the issuance of convertible debt issuance of non-convertible debt of $515,500 and $213,606 of proceeds from a factoring agreement partially offset by repayments of finance lease obligations of $133,810. During the year ended December 31, 2020, the Company received proceeds of $1,050,000 from the issuance of convertible debt and proceeds received under the Payroll Protection Program of $710,500, offset by repayments of financed lease obligations of $200,946.

The ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and/or obtaining the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management intends to finance operating costs over the next twelve months from the date of the issuance of these consolidated financial statements with existing cash on hand, cash flow from operations, short-term debt from the factoring of receivables, additional debt financings and additional equity financings. The Company must raise capital through additional debt and equity financings to fund the operations of the business, there is, however, no assurance that the Company will be able to raise any additional capital through any type of offering on terms acceptable to the Company, as existing cash on hand will not be sufficient to finance operations over the next twelve months.






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Critical Accounting Policies

The discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate these estimates, including those related to bad debts, intangible assets, and litigation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of certain assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions.

We have identified below the accounting policies, related to what we believe are most critical to our business operations and are discussed throughout Management's Discussion and Analysis of Financial Condition or Plan of Operation where such policies affect our reported and expected financial results.





Revenue Recognition

For revenue recognition arrangements that we determine are within the scope of Topic ASC 606, the Company performs the following five steps: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company applies the five-step model to arrangements that meet the definition of a contract under Topic 606, including when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of Topic 606, the Company evaluates the goods or services promised within each contract related performance obligation and assesses whether each promised good or service is distinct. The Company recognizes as revenue, the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

The Company recognizes revenue upon completion of our performance obligations or expiration of the contractual time to use services such as professional service hours purchased in bulk for a given time period. Any early termination fees are recognized in the period the contract is terminated and the termination invoice is paid.

The Company has elected the following practical expedients in applying ASC 606:

Unsatisfied Performance Obligations - all performance obligations relate to contracts with a duration of less than one year, the Company has elected to apply the optional exemption provided in ASC 606 and therefore, is not required to disclose the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied or partially unsatisfied at the end of the reporting period.

Contract Costs - all incremental customer contract acquisition costs are expensed as they are incurred as the amortization period of the asset that the Company otherwise would have recognized is one year or less in duration.

Sales Tax Exclusion from the Transaction Price - the Company excludes from the measurement of the transaction price all taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction and collected by the Company from the customer.





Accounts Receivable

Accounts receivable are stated at the amount management expects to collect. An allowance for doubtful accounts is recorded, as a charge to bad debt expense, where collection is considered to be doubtful due to credit issues. These allowances together reflect the Company's estimate of potential losses inherent in accounts receivable balances, based on historical loss and known factors impacting its customers. Management has determined that there should be a $40,000 and $26,000 allowance required for the years ended December 31, 2021 and 2020. The Company does not accrue interest on past due receivables.






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Impairment of Long-lived Assets

The Company records an impairment of long-lived assets used in operations, other than goodwill, when events or circumstances indicate that the asset might be impaired and the estimated undiscounted cash flows to be generated by those assets over their remaining lives are less than the carrying amount of those items. The net carrying value of assets not recoverable is reduced to fair value, which is typically calculated using the discounted cash flow method. During the year ended December 31, 2021, the Company recorded a $302,115 impairment related to the contracts purchased in February 2018 based on the expected negative cash flow from the business unit over the next 18-month period. The Company did not record any impairment during the year ended December 31, 2020.

Convertible Debt and Securities

The Company follows beneficial conversion feature guidance in ASC 470-20, which applies to convertible stock as well as convertible debt. A beneficial conversion feature is defined as a nondetachable conversion feature that is in the money at the commitment date. The beneficial conversion feature guidance requires recognition of the conversion option's in-the-money portion, the intrinsic value of the option, in equity, with an offsetting reduction to the carrying amount of the instrument. The resulting discount is amortized as interest over the life of the instrument, if a stated maturity date exists, or to the earliest conversion date, if there is no stated maturity date. If the earliest conversion date is immediately upon issuance, the expense must be recognized at inception. When there is a subsequent change to the conversion ratio based on a future occurrence, the new conversion price may trigger the recognition of an additional beneficial conversion feature on occurrence.

Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In January 2017, the FASB issued ASU 2017-04, "Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment". The update simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit's goodwill with the carrying amount. The new rules were effective for the Company in the first quarter of 2021. The Company determined that the adoption of this ASU had no impact on its consolidated financial statements.

New Accounting Pronouncements Not Yet Adopted

In June 2016, the FASB issued ASU 2016-13, "Financial Instruments-Credit Losses (Topic 326)", authoritative guidance amending how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The guidance requires the application of a current expected credit loss model, which is a new impairment model based on expected losses. The new guidance is effective for interim and annual reporting periods beginning after December 15, 2022. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements and related disclosures.

In August 2020, the FASB issued ASU 2020-06, "Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity", which simplifies the guidance for certain convertible debt instruments by removing the separation models for convertible debt with a cash conversion feature or convertible instruments with a beneficial conversion feature. As a result, convertible debt instruments will be reported as a single liability instrument with no separate accounting for embedded conversion features. Additionally, ASU 2020-06 requires the application of the if-converted method for calculating diluted earnings per share and the treasury stock method will be no longer available. The provisions of ASU 2020-06 are applicable for fiscal years beginning after December 15, 2021, with early adoption permitted no earlier than fiscal years beginning after December 15, 2020. The Company expects the primary impacts of this new standard will be to increase the carrying value of its convertible debt and reduce its reported interest expense. In addition, the Company will be required to use the if-converted method for calculating diluted earnings per share. The Company is currently evaluating the impact the adoption of this standard will have on its consolidated financial statements.

No other recent accounting pronouncements were issued by FASB and the SEC that are believed by management to have a material impact on the Company's present or future consolidated financial statements.

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