ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
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:
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·
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Our failure to develop or acquire and publish new
Apps that achieve market acceptance or we do not continue to enhance our existing Apps.
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|
·
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Our inability to maintain a good relationship with
the markets where our Apps are distributed.
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|
·
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Our inability to keep pace with technological changes
and market conditions in the Apps industry.
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·
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Our inability to compete against a wide range of
companies that market Apps, many of which have significantly greater resources than we do.
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·
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Our ability to obtain financing as and when needed
on acceptable terms.
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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.
Overview
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 and legal-related Apps that provide (i) compilations of federal and state laws and
regulations across a variety of legal disciplines and (ii) digests of court decisions rendered by federal courts that are directed
to legal professionals. 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 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. We expect to release
several new Apps during 2018, assuming we are able to obtain adequate funding to complete the development of these Apps.
We
currently derive our revenue primarily from
sales, or downloads, of our Apps and from advertisements published on our ad
supported game titles. Over the course of 2018, we expect to generate revenue from
the
sale of software titles that we develop for own account, that are developed by third-parties which we acquired, or that have been
developed for our benefit. Operating margins are dependent in part upon our ability to release new, commercially successful products
and to manage effectively their development costs.
Over the last several years, mobile devices,
including smartphone and tablets, have proliferated extensively around the world across a wide range of demographic groups. The
Apps industry has experienced corresponding growth in the number of downloads, the number and types of Apps published. We believe
that there will continue to be an increase in the number of smartphones and tablets sold. In addition, technological advances to
these devices, including more powerful smartphones and tablets with larger screens provide a platform for more diverse Apps and
make games more fun and visually appealing. We believe that technological developments will continue to drive growth in our industry
for the foreseeable future.
Growth Strategies and Outlook
Our principal growth
strategy entails developing and acquiring new Apps to supplement our existing Apps portfolio. Our primary focus will be to release
new game titles. We are developing 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.
During 2016, we purchased an eSports tournament
platform and the related software, trademarks and trade names; and other intellectual property. When we took control of these assets,
they were fully developed and ready for live launch. Since the acquisition date, we have improved them by tailoring them towards
our unique competitive strategy.
eSports (also known as electronic sports,
competitive (video) gaming, professional (video) gaming, or pro gaming) are a form of competition that is facilitated by electronic
systems, particularly video games; the input of players and teams as well as the output of the eSports system are mediated by human-computer
interfaces. Most commonly, eSports take the form of organized, multiplayer video game competitions, particularly between professional
players. The most common video game genres associated with eSports are real-time strategy, fighting, first-person shooter (FPS),
and multiplayer online battle arena. Tournaments such as The International, the League of Legends World Championship, the Battle.net
World Championship Series, the Evolution Championship Series, and the Intel Extreme Masters provide live broadcasts of the competition,
and prize money and salaries to competitors.
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 Statista,
an online statistics gathering and dissemination portal, during 2015, there were 162 million frequent viewers and 161 occasional
viewers of eSports worldwide. During 2014, “Newzoo Esports” reported that eSports revenue, which comprises media rights,
merchandise, tickets, advertising, sponsorship and game publisher fees, was $194 million, which climbed to $325 million in 2015
and which Newzoo estimates could grow to and over $1.1 billion in 2019, which would represent a compound annual growth rate of
42.2% from 2014 through 2019.
Our App will provide eSports players with
an easy-to-use platform that provides fair, transparent, and prompt payouts for prize tournaments. We will differentiate our product
from competing platforms by focusing on casual games and mobile games. We also expect to focus on direct integrations with existing
game publishers enabling them to offer prize tournaments to their existing player base.
During 2016, we acquired a suite of concepts,
artwork, story lines and related computer software in connection with a computer game titled “CryptoGene,” for mobile
application. CryptoGene represents a potential franchise that we can develop and roll out over multiple platforms, including as
an App and video game version, graphic novels and other print and audio-visual media. This is a long-term project that will require
significant capital and personnel resources.
Also during 2016, we acquired a product,
which we call “GoDex”, is a Pokémon Go companion app for iOS and Android. The App uses sophisticated image recognition
that will enable users to take screenshots of their Pokémon and have GoDex calculate its statistic, IV percentage, combat
power calculations, and other statistics that players deem relevant to the Pokémon experience. The App also will provide
users to send and receive in-App messages to and from team mates within a 10-kilometer radius. As GoDex develops, we expect that
it will become a “one-stop-shop” for all Pokémon Go related tools.
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.
Our revenues 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.
During fiscal 2017, 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. Capital will be utilized principally to retain the consultants who build our Apps, 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.
Results of Operations for the Three
Months Ended September 30, 2017 Compared to the Three Months Ended September 30, 2016 (unaudited)
The following table
presents our results of operations for the three months ended September 30, 2018 and 2017:
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|
Three Months Ended September 30,
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|
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2018
|
|
|
2017
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|
Revenue
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|
$
|
38
|
|
|
$
|
202
|
|
|
|
|
|
|
|
|
|
|
Expenses
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|
|
|
|
|
|
|
|
Selling, General and Administrative
|
|
|
8,532
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|
|
|
23,397
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|
Depreciation/Amortization Expense
|
|
|
5,604
|
|
|
|
5,604
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|
Interest Expense
|
|
|
582
|
|
|
|
190
|
|
Outside Services
|
|
|
3,000
|
|
|
|
3,240
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|
Outside Services – Stock for Services
|
|
|
-
|
|
|
|
71,000
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|
Professional Fees
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|
|
4,369
|
|
|
|
18,979
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|
Total Expenses
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|
|
22,049
|
|
|
|
122,410
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|
Net Loss
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|
$
|
(22,049
|
)
|
|
$
|
(122,410
|
)
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Revenues
We recorded revenue
during the quarter ended September 30, 2018 period of $38 comprising revenues generated from downloads of our Apps and in-App advertising
revenues, compared to revenue of $202 during the 2017 period. The decline in revenue is a result of our inability to advertise
our products for lack of cash.
Expenses
Selling, General and Administrative
,
or SGA, expenses consist of expenses relating to, among other things, web hosting and email hosting costs, rent for our virtual
office, and other general and administrative expenses. During the quarter ended September 30, 2018, our SGA expenses were $8,532,
as compared to SGA expenses of $23,397 during the 2017 period.
Depreciation and Amortization Expense.
For the three months ended September 30, 2018 and 2017, we recorded depreciation of $5,604 comprising $2,500 relating to amortization
of our Apps, $3,000 relating to our eSports platform and $104 relating to depreciation of relating to certain computer equipment
purchased in July 2016.
Interest Expense
is attributable
to interest accrued on promissory notes outstanding during the relevant periods. During the three months ended September 30, 2018,
interest expenses were $582, as compared to $190 for the 2017 period.
Outside Services
represents the
amount we paid to third party developers and software designers in connection with the Company’s Apps. During the quarter
ended September 30, 2018, we paid our third-party developers and software designers an aggregate of $3,000, as compared to payments
of $3,240 made during the 2017 period. We continue to require these services of these third-party service providers but did not
have sufficient cash to engage them at the levels necessary to develop our products. We expect that at such time as the cash is
available, we will expend additional resources on these service providers.
Outside Services - Stock for Services
represents shares of common stock issued to two consultants for services rendered by outside parties and to be rendered to
the Company in connection with the development and maintenance of our Apps. During the quarter ended September 30, 2018, we did
not issue any shares of common stock in exchange for services rendered as compared to the 2017 we issued $71,000 in value of common
stock in exchange for 142,000 shares of common stock.
Professional Fees
consist of amounts
paid to our third-party professionals for services rendered during the quarter. During the quarter ended September 30, 2018, we
recorded expenses for professional fees of $4,369 as compared to $18,979 during the 2017 period.
Net Loss
During the quarter
ended September 30, 2018, we had a net loss of $19,299, which represents the difference between our total expenses of $19,337 partially
offset by our revenue of $38, as compared to a net loss of $122,208 for the comparable 2017 period, in which our total expenses
were $122,410 which were offset by our revenues of $202.
Results of Operations for the Nine Months
Ended September 30, 2017 Compared to the Nine Months Ended September 30, 2016
The following table
presents our results of operations for the nine months ended September 30, 2018 compared to the nine months ended September 30,
2017:
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|
Nine Months Ended
September 30,
|
|
|
|
2018
|
|
|
2017
|
|
Revenue
|
|
$
|
244
|
|
|
$
|
755
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
Selling, General and Administrative
|
|
|
16,000
|
|
|
|
57,975
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|
Amortization/Depreciation Expense
|
|
|
16,812
|
|
|
|
16,812
|
|
Interest Expense
|
|
|
1,686
|
|
|
|
648
|
|
Outside Services
|
|
|
6,400
|
|
|
|
18,540
|
|
Outside Services – Stock for Services
|
|
|
-
|
|
|
|
123,500
|
|
Professional Fees
|
|
|
29,314
|
|
|
|
22,587
|
|
Total Expenses
|
|
|
70,212
|
|
|
|
240,062
|
|
Net Loss
|
|
$
|
(69,968
|
)
|
|
$
|
(240,062
|
)
|
Revenues
During the nine months
ended September 30, 2018, we recorded revenue of $244 comprising revenues generated from downloads of our Apps and in-App advertising
revenues, compared to revenue of $755 during the 2017 period.
Expenses
Selling, General and Administrative
,
or SGA, expenses consist of expenses relating to, among other things, web hosting and email hosting costs, rent for our virtual
office, and other general and administrative expenses. During the nine months ended September 30, 2018, our SGA expenses were $16,000,
as compared to SGA expenses of $57,975 during the 2017 period.
Depreciation and Amortization Expense.
For the nine months ended September 30, 2018 and 2017, we recorded total depreciation of $16,812 comprising $7,500 relating
to amortization of our Apps, $9,000 relating to our eSports platform and $312 relating to depreciation of computer equipment.
Interest Expense
is attributable
to interest accrued on promissory notes outstanding during the relevant periods. During the nine months ended September 30, 2018,
interest expenses were $1,686, as compared to $648 for the 2017 period.
Outside Services
represents the
amount we paid to third party developers and software designers in connection with the Company’s Apps. During the nine months
ended September 30, 2018, we paid $6,400 to our third-party developers and software designers, as compared to $18,540 during the
2017 period. We continue to require these services of these third-party service providers but did not have sufficient cash to engage
them at the levels necessary to develop our products. We expect that at such time as the cash is available, we will expend additional
resources on these service providers.
Outside Services - Stock for Services
represents shares of common stock issued to two consultants for services rendered and to be rendered to the Company in connection
with the development and maintenance of our Apps. During the nine months ended September 30, 2018, we did not issue and common
stock for services rendered by outside parties as compared to $123,500 in value of common stock in exchange for 247,000 shares
of common stock 2017 period.
Professional Fees
consist of amounts
paid to our third-party professionals for services. During the nine months ended September 30, 2018, we recorded expenses for professional
fees of $29,314, as compared to professional fees of $22,587 paid during the 2017 period.
Net Loss
During the nine months
ended September 30, 2018, we had a net loss of ($69,968), which represents the difference between our total expenses of ($67,462)
partially offset by our revenue of $244, as compared to a net loss of ($239,307), which represents the difference between our total
expenses of ($240,062) partially offset by our revenue of $755 for the comparable 2017 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, 2018, we had a working capital deficit of ($34,202), compared to a working capital deficit of ($78,069) at December
31, 2017.
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.
During
the nine months ended September 30, 2018, we borrowed an aggregate of $55,926 from Empire State Financial, Inc. and its related
parties (“ESFI”), which borrowings are evidenced by promissory notes that mature on December 1, 2018 and bear interest
at the rate of 2% per year. In addition, through September 30, 2018, we have sold 5,714 shares of common stock in a private offering
for an aggregate price of $6,000, or $1.05 per share.
Over
the last two years, we have been borrowing funds from ESFI and its related parties to fund our operations in part. As of September
30, 2018, we owed ESFI and its related parties an aggregate of $146,135 principal amount, which loans are evidenced by promissory
notes that mature on December 1, 2018. We do not have the cash on hand or other borrowing facilities available to repay the notes
to ESFI when they mature. If we are unable to satisfy our debt to ESFI and its related parties on the maturity date, they could
bring an action against us demanding payment of the total amount of principal and interest due under the notes and for the cost
of collecting the notes, including their reasonable legal fees and the other costs they incur. If these parties were to obtain
a judgment against us in the amount of the debt evidenced by the notes and its other costs, a court could enforce the judgment
by requiring us to sell our assets. We currently are negotiating with ESFI to extend the maturity date of these loans.
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.
We do not have any
cash on hand and do not generated cash flow from operations sufficient to support our operations. During 2018, we have been selling
securities to third parties and borrowing cash to fund our minimal operations during the period. As noted above, we require significant
cash to effectuate all of our desired development and acquisition strategies and in connection with launching, marketing and promoting
our games. We will continue to seek to fund acquisitions and to engage third party developers partially through the issuance of
securities. However, our future operations are dependent on our ability to secure additional financing. Financing transactions
may include the issuance of equity or debt securities, obtaining credit facilities or through other financing mechanisms. However,
we cannot assure investors that we will be able to securities such financing on terms favorable to us, if at all. Even if we are
able to raise the funds required, it is possible that we could incur unexpected costs and expenses, fail to collect significant
amounts owed to us, 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 may restrict our ability to grow and may reduce our ability to continue to conduct business operations. If we are unable
to obtain additional financing, we may have to curtail our marketing and development plans and possibly cease our operations.
Cash Flows:
The following table
presents summary cash flow information.
|
|
For the nine months
ended
September 30, 2018
|
|
|
For the nine months
ended
September 30, 2017
|
|
|
|
|
|
|
|
|
Net cash used in operating activities
|
|
$
|
(62,026
|
)
|
|
$
|
(80,622
|
)
|
Net cash used in investing activities
|
|
|
-
|
|
|
|
-
|
|
Net cash provided by financing activities
|
|
|
62,026
|
|
|
|
81,280
|
|
Net increase in cash
|
|
$
|
-
|
|
|
$
|
658
|
|
Operating Activities
We used net cash used
in operating activities for the nine months ended September 30, 2018 of ($62,026) compared to ($80,622) for the 2017 period, in
each case consisting principally of payments to outside consultants, developers and programmers and payments to web hosting and
email hosting providers. The decrease in cash used in operating activities was the result of our limited cash resources to deploy
to our operations.
Investing Activities
We did not utilize
and cash in investing activities for the nine months ended September 30, 2018 or 2017.
Financing Activities
During the nine months
ended September 30, 2018, net cash provided by financing activities was $62,026 compared to $81,280 during the 2017 period. During
the 2018 period, we sold and issued securities in private placement from which we received proceeds of approximately $6,000 and
received loans equal to $55,925. We utilized all of the proceeds that we received from the sale of securities and from the borrowings
for working capital.
Contractual Commitments as of September
30, 2018
As
of September 30, 2018, 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.
Going Concern
The
notes to our financial statements for the quarter ended September 30, 2017 and the report of our independent registered public
accounting firm on our financial statements for the year ended December 31, 2018 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 $665,444 at September 30, 2018. 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, 2017. We do not believe that there has been any significant
change in the Company’s critical accounting policies since December 31, 2017.
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.