Forward Looking Statements
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q, or Report.
The information in this discussion and elsewhere in this Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Such statements are based upon current expectations that involve risks and uncertainties. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. For example, the words "may," "will," "believe," "anticipate," "plan," "expect," "intend," "could," "estimate," "continue" and similar expressions or variations identify forward-looking statements.
Although we believe that we have a reasonable basis for each forward-looking statement contained in this Report, we caution you that these statements are based on a combination of facts and factors currently known by us and our projections of the future, about which we cannot be certain. We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and the development of the industry in which we operate may differ materially from the forward-looking statements contained in this Report. Factors that might cause such a discrepancy include, but are not limited to:· Our ability to obtain financing as and when needed on acceptable terms. · Our failure to develop or acquire and publish new Apps that achieve market acceptance or we do not continue to enhance our existing Apps. · Our inability to maintain a good relationship with the markets where our Apps are distributed. · Our inability to keep pace with technological changes and market conditions in the Apps industry. · Our inability to compete against a wide range of companies that market Apps, many of which have significantly greater resources than we do.
We caution readers not to place undue reliance on any forward-looking statements made by us, which speak only as of the date they are made. We disclaim any obligation, except as specifically required by law and the rules of the Securities and Exchange Commission, to publicly update or revise any such statements to reflect any change in our expectations or in events, conditions or circumstances on which any such statements may be based, or that may affect the likelihood that actual results will differ from those set forth in the forward-looking statements.
AppSoft Technologies, Inc., a Nevada corporation organized on March 24, 2015 ("we," "us," or the "Company"), develops, publishes and markets mobile software applications for smartphones and tablet devices ("Apps"). Our Apps titles include games designed to appeal to a broad cross section of consumers. We offer all of our game titles in both a free advertisement-supported version and a paid version that does not display ads. We believe that the ad supported versions allow for wider dissemination of our titles to consumers who might not otherwise spend money for an App without first playing the game.
We market, sell and distribute our games through direct-to-consumer digital storefronts, which currently comprises Apple's App Store and the Google Play Store. We currently or expect to advertise our Apps through the digital storefronts, our own website, social media, such as Facebook and LinkedIn, through mobile ad networks and search engine optimization, or SEO, tools. We derive our revenue primarily from sales, or downloads, of our Apps and from advertisements published on our ad supported game titles.
We are seeking to develop and acquire new Apps to expand our existing product offerings. We rely on third party designers, developers and programs to develop new Apps. We also solicit ideas for new titles from unrelated parties. We evaluate prospects based on a variety of factors. If we conclude that a particular prospect is worth pursuing, we may fund the development of the App through launch and beyond.12
During the second quarter of 2021, we launched an Esports/E-gaming platform which we refer to as Esportsreporter.com. Esportsreporter.com is a leading news channel for all things esports and gaming. Publishing the most relevant breaking news for esports and gaming, including coverage of industry trends and guides on the business of esports and gaming for investors and aspiring esports and gaming professionals. Esportsreporter.com provides daily coverage of important news in the esports world while also diving deeper with coverage of events with live reporters as well as conducting face to face and virtual interviews with professional players in the space. Esports is growing faster than ever with millions of gamers, millions of viewers, and millions of dollars in prizes. Accordingly, we believe now is an ideal time to bring all esports and gaming news into one platform to leverage the growth of this global audience and maximize user engagement through Esportreporter.com.
In addition to becoming a leading source of esports news, Esportsreporter.com has an editorial and digital content creation team that publishes fresh, original content covering the latest trends from the esports and gaming industry. We currently staff numerous qualified journalist and editorial gamers, as well as social media expert/ gamers, and video editors, graphic designers, and production engineers - all also gamers. Our platform is quickly becoming one of the most exciting eSports news sites, with a heavy and popular presence in the gaming and eSports communities via content both article and video, and social media, on its way toward becoming a major broadcaster of eSports tournaments and gaming events, with its own large in-house family of avid content creators.
We also provide fans with recording clips of tournaments for montages, similar to highlights of a major sports game. Recording clips of professional streamers for montages, a very popular genre of content that YouTube and now Netflix are offering as their own channels, which we hope to emulate in the near future. Videos recording our own staff explaining latest game patches, eSport team news/drama, new game trailers, new game features. Turning personal streams into montages for the site and channel.
We expect to have reporters attending the important upcoming events, including Play NYC, and have interviewed top Game Team Players. As capital permits, we will continue to grow and add more high caliber interviews as well as emerging game coverage and reviews, indie games still undiscovered, peripherals and gaming hardware systems, streaming video gameplay, competitive, walkthrough as well as industry technical topics.
We will seek to build a following on digital media from which we expect to generate revenue from sales, sponsorships, or merchandise from our fanbase and advertisers published on our ad supported content.
Growth Strategies and Outlook
Over the next several periods, we expect to focus our efforts on the development of our Esports/E-gaming platforms. eSports have become popular worldwide, not only with participants but also with fans who watch them online and in public spaces, including arenas. According to Newzoo, an online statistics gathering and dissemination portal, in 2019, there were 245 million casual viewers and 198 million enthusiasts, making the total audience 443 million. By 2023, Newzoo predicts that the annual growth rate will be approximately 10.4%.
We will continue to seek to develop and acquire new Apps to supplement our existing Apps portfolio. Our primary focus will be to release new game titles. We are seeking to develop a pipeline of independent game designers, developers and programmers who provide us with new ideas and titles to publish. We also are soliciting new games and concepts that we may acquire from third parties. We will seek to develop and publish free-to-play games. Free-to-play games are games that a player can download and play for free, but which allow players to access a variety of additional content and features for a fee, through "in-app purchases" utilizing virtual currency they may be purchased through digital storefronts, and to engage with various advertisements and offers that generate revenues for us. We may seek to acquire franchises around which we develop games, including movies, television programs, toys and other cultural phenomena that lend themselves to gamification.
Our ability to pursue and achieve our objectives is predicated on our receipt of meaningful revenue from sales of our existing Apps and those we may release in the future and from our ability to raise capital from outside sources.13
Our revenues from this segment will depend significantly on growth in the mobile games market and our ability to develop or acquire and publish Apps that are well received by consumers. In addition, because our products are purchased with disposable income, our success is dependent on the overall strength of the economy in the United States. We expect to invest resources in research and development, analytics and marketing to introduce new Apps and continue to update our existing Apps, and to the extent that Apps into which we have invested significant capital are not successful, our business and financial condition could be harmed. We operate in an environment that is extremely competitive for users against a continually increasing number of developers, many of which are significantly larger than us and have other competitive advantages. We expect to allocate a material portion of our operating revenue and capital that we receive to sales and marketing initiatives in connection with the launch and promotion of our games in an effort to drive sales.
Our revenues further depend on maintaining our continued good relationship with the digital storefront operators, primarily Apple and Google, each of which could unilaterally alter their terms of service in ways that could harm our business.
Our ability to achieve and sustain profitability will depend not only on our ability to grow our revenues, but also on our ability to manage our operating expenses. Currently, we have one full-time employee, who receives compensation when and as determined by the board of directors. For the foreseeable further, we expect to utilize the services of independent contractors and consultants, who we believe are readily available for our purposes, in order to manage our personnel costs. We also will continue to maintain a virtual office as long as our operations permit to contain our office space overhead.
Over the last several quarters, our growth has been constrained by our lack of capital. We require additional capital to fund the development of Apps in process that we have developed internally or acquired from third parties. We also require capital to fund marketing initiatives for our existing products and to launch and market Apps in development. We cannot be sure that the additional capital we require will be available on acceptable terms or at all. If adequate funds are not available on acceptable terms or at all, we may be unable to develop or enhance our services and products, take advantage of future opportunities, repay debt obligations as they become due, or respond to competitive pressures, any of which would have a material adverse effect on our business, prospects, financial condition, and results of operations.
During the year ended December 31, 2018, we recognized an impairment of our phone apps and esports gaming platform and wrote off all of their carrying, or book, value from our financial statements resulting in a loss in the aggregate amount of $45,500. We wrote off these assets because, as of December 31, 2018, we determined that their carrying value exceeded their fair value (the amount at which the assets could be sold in a negotiated transaction between two willing parties) and was not recoverable, meaning that we were uncertain that the future cash flow we might generate from these assets would be equal to the book value that we ascribed to these assets in our financial statements. Despite writing off these assets, upon the receipt of sufficient capital, of which there is no assurance, we intend to continue their development with the expectation that we will make them available for purchase by way of the consumer digital storefronts through which we offer our products.
Results of Operations for the Three Months Ended September 30, 2022 Compared to the Three Months Ended September 30, 2021 (unaudited)
The following table presents our results of operations for the three months ended September 30, 2022 and 2021:Three Months Ended September 30, 2022 2021 Revenue $ - $ - Expenses
Selling, General and Administrative 1,047 5,370 Depreciation/Amortization Expense- - Interest Expense 1,606 1,362 Outside Services - 10,891 Professional Fees 3,860 605 Total Expenses 6,513 18,228 Net Loss $ (6,513 ) $ (18,228 ) 14 Business Activity
During the quarter ended September 30, 2022, our efforts focused on identifying sources of meaningful capital and we experienced only inconsequential business activity.Net Loss
During the three months ended September 30, 2022, we had a net loss from operations of $6,513, as compared to a net loss of $18,228 for the comparable 2021 period.
The following table presents our results of operations for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021:Nine Months Ended September 30, 2022 2021 Revenue $ - $ - Expenses
Selling, General and Administrative 8,933 18,670 Amortization/Depreciation Expense- 207 Interest Expense 4,712 3,892 Outside Services 1,629 17,814 Professional Fees 8,550 1,440 Total Expenses 23,824 42,023 Net Loss $ (23,824 ) $ (42,023 ) Revenues
During the nine months ended September 30, 2022 and 2021, we did not record any revenue.Net Loss
During the nine months ended September 30, 2022, we had a net loss from operations of $23,824, as compared to a net loss of $42,023 for the comparable 2021 period.
Liquidity and Capital Resources
Liquidity is the ability of a company to generate adequate amounts of cash to support its current and future operations, satisfy its obligations, and otherwise operate on an ongoing basis. Significant factors in the management of liquidity are funds generated by operations, the availability of credit facilities, levels of accounts receivable and accounts payable and capital expenditures.
As of September 30, 2022, we had a working capital deficit of $39,576, compared to a working capital deficit of $34,552 at December 31, 2021.
Since our inception, we have financed our operations through the sale of equity securities, from third party loans and from internally generated revenue from operations.
Over the last several years, we have been borrowing cash from Bryan Glass Securities, Inc. ("BGS") and its affiliates to fund our operations. From 2016 to 2018, we borrowed an aggregate of $160,314 from Empire State Financial Inc. ("ESF"), an affiliate of BGS, which debt was evidenced by promissory notes that matured in 2018. In the fourth quarter of 2018, ESF agreed to extend the maturity date of the notes to December 31, 2021 in consideration of our lowering the conversion price of the shares of Series A Convertible Preferred Stock owned by Ventureo, LLC, an affiliate of BSG and ESF, from $0.005 per share to $0.0002 per share. During 2019, we borrowed an aggregate of approximately $42,000 from BGS. In June 2020, we entered into a drawdown note with BGS which provided for total credit of up to $50,000. The credit line under the drawdown note was increased to $150,000 in 2021 which bears interest at the rate of 2% per year and matures on December 31, 2024.15
During the three and nine months ended September 30, 2022, we borrowed an aggregate of $4,910 and $18,800, respectively, under the drawdown note. As of September 30, 2022, we had borrowed an aggregate of $120,320 under the drawdown note and there remained $29,680 available for borrowing.
Our primary requirements for liquidity and capital are to fund the development and acquisition of new Apps and for sales and marketing initiatives in connection with the launch and promotion of our games, as well as for working capital to fund our general corporate needs, including filing reports under the federal securities laws. We work with independent game designers, developers and programmers who provide us with new ideas and titles to publish. We also are soliciting new games and concepts that we may acquire from third parties. When we receive an idea for a new App, we research the commercial viability of the concept, undertaking an analysis of the cost to develop the App against its potential economic return. If we determine that the App is commercially viable, we may fund the cost of development, publication and marketing. Upon completion of development, we will own the App title. Developing and publishing free-to-play games will require considerable capital to develop, maintain and update, particularly games we may seek to develop around popular movie, television, toy other cultural phenomena that lend themselves to gamification.
Since our customers pay for their purchases by credit or debit card at the time of sale, neither inventories nor receivables are relevant to our business.
Our cash on hand and cash flow from operations are not sufficient to fund our existing operations or support our desired development and acquisition strategy or required in connection with launching, marketing and promoting our games. Over the last twelve months, we have been using the proceeds from loans to fund our operations. We are seeking to identify meaningful sources of capital to fund the entire range of our operations and development activities, though we cannot provide any assurance that we will identify any such sources of capital. Financing transactions may include the issuance of equity or debt securities, obtaining credit facilities or through other financing mechanisms. Even if we are able to raise the funds required, it is possible that we could incur unexpected costs and expenses or experience unexpected cash requirements that would force us to seek alternative financing. Furthermore, if we issue additional equity or debt securities, stockholders may experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of our common stock. The inability to obtain additional capital will continue to constrain our operations, including App development and marketing, and restrict our ability to grow. If we are unable to obtain additional financing, we may possibly have to cease our operations.Cash Flows:
The following table presents summary cash flow information.For the nine For the nine months ended months ended September September 30, 2022 30, 2021 Net cash used in operating activities $ (19,112 ) $ (40,423 ) Net cash used in investing activities Net cash provided by financing activities 19,112 40,438 Net increase / (decrease) in cash $ (312 ) $ 15
Contractual Commitments as of September 30, 2022
As of September 30, 2022, the Company had no contractual obligations, as such term is defined in Item 303 of Regulation S-K promulgated under the Securities Act of 1933, as amended.16 Going Concern
The notes to our financial statements for the quarter ended September 30, 2022 and the report of our independent registered public accounting firm on our financial statements for the year ended December 31, 2021 include an explanatory paragraph with respect to our ability to continue as a going concern. As reflected in the accompanying financial statements, the Company has a deficit accumulated of $896,817 at September 30, 2022. The Company's ability to continue as a going concern is dependent upon its ability to generate future profitable operations and/or to obtain the necessary financing to meet its obligations and pay its liabilities arising from normal business operations when they come due. The accompanying financial statements do not include any adjustments that might arise because of this uncertainty
The presence of the going concern explanatory paragraph suggests that we may not have sufficient liquidity, or minimum cash levels, to operate our business. Since our inception, we have incurred losses and anticipate that we will continue to incur losses until such time as our Apps generate sufficient revenue to offset our research and development, general and administrative and sales and marketing expenses. We will need to raise additional capital to fund our near-term operational plans described elsewhere in this report. We cannot assure you that we will be successful in our operational plans. We cannot be sure that the additional capital we require will be available on acceptable terms or at all. If adequate funds are not available on acceptable terms or at all, we may be unable to develop or enhance our services and products, take advantage of future opportunities, repay debt obligations as they become due, or respond to competitive pressures, any of which would have a material adverse effect on our business, prospects, financial condition, and results of operations.
Off-Balance Sheet and Other Arrangements
We do not engage in any activities involving variable interest entities or off-balance sheet arrangements.Inflation
We do not believe that inflation has had a material effect on our business, financial condition or results of operations. If our costs were to become subject to significant inflationary pressures, we might not be able to fully offset these higher costs through price increases. Our inability or failure to do so could harm our business, operating results and financial condition.
Critical Accounting Policies and Use of Estimates
The discussion and analysis of financial condition and results of operations are based upon the Company's financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of these condensed consolidated financial statements requires estimates and assumptions that affect the reported amounts of assets, liabilities, sales and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, our management evaluates its estimates based upon historical experience and various other assumptions that it believes to be reasonable in the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
The Company believes that its significant accounting policies affect its more significant estimates and judgments used in the preparation of its consolidated financial statements. Our significant accounting policies are described in Note C to our audited financial statements included in our annual report on Form 10-K for the period ended December 31, 2021. We do not believe that there has been any significant change in the Company's critical accounting policies since December 31, 2021.17
Recent Accounting Pronouncements
Emerging Growth Company Critical Accounting Policy Disclosure: We qualify as an "emerging growth company" under the 2012 JOBS Act. Section 107 of 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. As an emerging growth company, we 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 benefits of this extended transition period.
See Note C to the financial statements furnished with this report for a discussion of recent accounting pronouncements that had a material effect on the financial statements presented herein.
© Edgar Online, source Glimpses