Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
The following discussion should be read
in conjunction with our financial statements and notes thereto included herein. In connection with, and because we desire to take
advantage of, the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, we caution
readers regarding certain forward looking statements in the following discussion and elsewhere in this report and in any other
statement made by, or on our behalf, whether or not in future filings with the Securities and Exchange Commission. Forward looking
statements are statements not based on historical information and which relate to future operations, strategies, financial results
or other developments. Forward looking statements are necessarily based upon estimates and assumptions that are inherently subject
to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control and many
of which, with respect to future business decisions, are subject to change. These uncertainties and contingencies can affect actual
results and could cause actual results to differ materially from those expressed in any forward looking statements made by, or
on our behalf. We disclaim any obligation to update forward looking statements.
Overview and History
We were incorporated on December 26, 2005,
in the State of Colorado under the name "Yummieflies.com Inc." In March 2010, we filed an amendment to our
Articles of Incorporation changing our name to "Yummy Flies, Inc." In November 2016, we filed an amendment
to our Articles of Incorporation changing our name to "Pura Naturals, Inc." In September 2010, we engaged
in a forward split of our issued and outstanding Common Stock whereby nine (9) shares of Common Stock were issued in exchange for
every one (1) share then issued and outstanding. In addition, in November 2016, we engaged in a forward split of our
issued and outstanding Common Stock whereby 3.7 shares of Common Stock were issued in exchange for every one (1) share then issued
and outstanding. All references to our issued and outstanding Common Stock in this Report are presented on a post-forward
split basis unless otherwise indicated.
Effective July 18, 2016, the Company entered
into that certain Share Exchange Agreement by and among the Company, Pura Naturals, Inc., PURA and the PURA Shareholders.
Pursuant to the Share Exchange Agreement, the Company exchanged the outstanding common and preferred stock of PURA held by the
PURA Shareholders for shares of common stock of the Company. At closing, Robert Lee, the holder of 30,536,100 shares of common
stock, agreed to cancelation of such shares. Other than Robert Lee, shareholders of Company common stock held 7,625,700 shares.
Also at closing, the Company issued 23,187,876 shares of common stock to the PURA Shareholders. In addition, shares
issuable under outstanding options of PURA – DE will be exercisable into shares of common stock of the Company, pursuant
to the terms of such instruments.
As a result of the Share Exchange Agreement
and the other transactions contemplated thereunder, PURA is now a wholly owned subsidiary of the Company.
The exchange of shares with PURA was accounted
for as a reverse acquisition under the purchase method of accounting since PURA obtained control of the Company. Accordingly, the
merger of PURA into the Company was recorded as a recapitalization of PURA, PURA being treated as the continuing entity. The
historical financial statements presented are the financial statements of PURA.
PURA markets and sells a line of cleaning products
based on the BeBetterFoam® platform, a revolutionary and proprietary bio-based foam, for consumer kitchen and bathroom, with
additional products for outdoor hobbies (fishing and boating, spas and pools), pet care, infant care and industrial use currently
under development. BeBetterFoam® is a unique, proprietary polymer process technology that is protected by a trade secret,
completely owned by AIRTech and sold to PURA, and is incapable of being reverse engineered.
The Bath & Body line and household (including
kitchen) sponges are Oleophilic which means, among other things, that it absorbs oil, grease and grime, removes impurities from
skin (cleansing and applying/removing make- up), is latex-free. PURA - DE products are also non-toxic, contain Plant-Based/
renewable resources, have a carbon-negative footprint (removes more carbon than is created), contain no petroleum by-products,
use no adhesives or glues, and are infused with soap that is 100% Natural, bio-degradable, sustainable, Vegan, gluten-free, contains
botanicals and essential oils; SLS-, Sulfate, Paraben-, and BPA- Free. The BeBetterFoam® is hydrophobic, which
means it resists and does not support bacteria. PURA - DE believes that the BeBetterFoam® also is up to 40 times stronger
than the leading kitchen sponge brand.
Pura Marine, the Marine Division of Pura Naturals,
offers biologically-based oil-absorbent technologies to the commercial and consumer markets. Working alongside industrial partners,
Pura Marine has developed environmentally sustainable oil spill prevention products and solutions targeted towards the marine oil
transport, oil refining and trucking industries. Pura Marine also provides plant-based foam products to the recreational boating
and fishing industries.
Results of Operations
Comparison of Results of Operations for
the Three Months Ended September 30, 2019 and 2018
|
|
|
|
Three Months Ended September 30,
|
|
|
|
Dollar
|
|
Percentage
|
|
|
|
|
2019
|
|
|
|
2018
|
|
|
|
Change
|
|
Change
|
Sales
|
|
|
$
|
|
|
|
133,349
|
|
|
|
$
|
|
|
|
156,486
|
|
|
|
$
|
|
|
|
(23,137
|
)
|
|
|
-14.8
|
%
|
Cost of goods sold
|
|
|
|
|
|
|
47,935
|
|
|
|
|
|
|
|
72,277
|
|
|
|
|
|
|
|
(24,342
|
)
|
|
|
-33.7
|
%
|
Gross profit
|
|
|
|
|
|
|
85,414
|
|
|
|
|
|
|
|
84,209
|
|
|
|
|
|
|
|
1,205
|
|
|
|
1.4
|
%
|
Selling expenses
|
|
|
|
|
|
|
70,489
|
|
|
|
|
|
|
|
154,472
|
|
|
|
|
|
|
|
(83,983
|
)
|
|
|
-54.4
|
%
|
General and administrative expenses
|
|
|
|
|
|
|
570,634
|
|
|
|
|
|
|
|
450,362
|
|
|
|
|
|
|
|
120,272
|
|
|
|
26.7
|
%
|
Interest expense
|
|
|
|
|
|
|
120,933
|
|
|
|
|
|
|
|
303,106
|
|
|
|
|
|
|
|
(182,173
|
)
|
|
|
-60.1
|
%
|
Change in value of derivative liability
|
|
|
|
|
|
|
(505,679
|
)
|
|
|
|
|
|
|
2,567,099
|
|
|
|
|
|
|
|
(3,072,778
|
)
|
|
|
-119.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
$
|
|
|
|
(170,963
|
)
|
|
|
$
|
|
|
|
(3,390,830
|
)
|
|
|
|
|
|
|
3,219,867
|
|
|
|
-95.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales for the three months ended September
30, 2019 were $133,349, a decrease of $23,137 or 14.8% compared to the same period in 2018. The decrease was due to periodic
sales cycles.
Cost of goods sold for the three months ended
September 30, 2019 were $47,935 a decrease of $24,342 or 33.7% compared to the same period in 2018. The decrease in cost
of goods was due to a decrease in sales. Cost of goods sold as a percentage of sales was 35.9% for the three months ended September
30, 2019 compared to 46.2% for the same period in 2018. Cost of goods sold as a percentage of sales decreased due to increases
in manufacturing efficiencies.
Selling expenses for the three months ended
September 30, 2019 were $70,489 a decrease of $83,983 or 54.4% compared to the same period in 2018. The decrease was due
to a decrease in retaining outside marketing consultants and media promotions.
General and administrative expenses for the
three months ended September 30, 2019 were $570,634 an increase of $120,272 or 26.7% compared to the same period in 2018. The change
is due to an increase in compensation expense and professional fees.
Interest expense for the three months ended
September 30, 2019 was $120,933 a decrease of $182,173 or 60.1% compared to the same period in 2018. The decrease was mainly
due to the decrease in amortization of debt discounts on the convertible notes for the three months ended September 30, 2019 compared
to the same period in 2018.
Comparison of Results of Operations for
the Nine Months Ended September 30, 2019 and 2018
|
|
Nine Months Ended September 30,
|
|
Dollar
|
|
Percentage
|
|
|
2019
|
|
2018
|
|
Change
|
|
Change
|
Sales
|
|
$
|
294,045
|
|
|
$
|
301,858
|
|
|
$
|
(7,813
|
)
|
|
|
(2.6
|
%)
|
Cost of goods sold
|
|
|
175,646
|
|
|
|
164,959
|
|
|
|
10,687
|
|
|
|
6.5
|
%
|
Gross profit
|
|
|
118,399
|
|
|
|
136,899
|
|
|
|
(18,500
|
)
|
|
|
(13.5
|
%)
|
Selling expenses
|
|
|
207,262
|
|
|
|
245,372
|
|
|
|
(38,110
|
)
|
|
|
(15.5
|
%)
|
General and administrative expenses
|
|
|
2,073,460
|
|
|
|
1,734,666
|
|
|
|
338,794
|
|
|
|
19.5
|
%
|
Interest expense
|
|
|
501,394
|
|
|
|
957,959
|
|
|
|
(456,565
|
)
|
|
|
(47.7
|
%)
|
Change in value of derivative liability
|
|
|
(615,893
|
)
|
|
|
3,028,388
|
|
|
|
(3,644,281
|
)
|
|
|
(120.3
|
%)
|
Net loss
|
|
$
|
(2,047,824
|
)
|
|
$
|
(5,829,486
|
)
|
|
$
|
3,781,662
|
|
|
|
(64.9
|
%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales for the nine months ended September 30,
2019 were $294,045, a decrease of $7,813 or 2.6% compared to the same period in 2018. The decrease was due to periodic sales
cycles.
Cost of goods sold for the nine months ended
September 30, 2019 were $175,646 an increase of $10,687 or 6.5% compared to the same period in 2018. The increase in cost
of goods was due to higher manufacturing costs offset by a decrease in sales. Cost of goods sold as a percentage of sales was 59.7%
for the nine months ended September 30, 2019 compared to 54.6% for the same period in 2018. Cost of goods sold increased
as a percentage of sales due to an increased cost to manufacture the product.
Selling expenses for the nine months ended
September 30, 2019 were $207,262 a decrease of $38,110 or 15.5% compared to the same period in 2018. The decrease was due
to a decrease in retaining outside marketing consultants and media promotions.
General and administrative expenses for the
nine months ended September 30, 2019 were $2,073,460 an increase of $338,794 or 19.5% compared to the same period in 2018. The
change is due to an increase in compensation expense offset by a decrease in professional fees. The decrease in professional fees
is due to a decrease in fees paid to a strategic consultant.
Interest expense for the nine months ended
September 30, 2019 was $501,394 a decrease of $456,565 or 47.7% compared to the same period in 2018. The decrease was mainly
due to the decrease in amortization of debt discounts on the convertible notes for the nine months ended September 30, 2019 compared
to the same period in 2018.
Liquidity and Capital Resources
As of September 30, 2019, we had $0 of cash
on hand..
At September 30, 2019, we had current assets
of $187,245 and current liabilities of $3,489,115 resulting in a working capital deficit of $3,301,870. We have experienced
losses since our inception. This raises substantial doubt about our ability to continue as a going concern. The
accompanying financial statements do not include any adjustments that might be necessary if we are unable to continue as a going
concern.
Net cash used in operating activities was $94,801
during the nine months ended September 30, 2019, compared to $500,646 in net cash used during the nine months ended September 30,
2018. The decrease in cash used in operating activities is due a decrease in net loss and changes to non-cash expense
items for the nine months ended September 30, 2019 compared to the same period in 2018.
Cash flows used by investing activities was
$0 during the nine months ended September 30, 2019 compared to cash used in investing activities of $1,950 during the nine months
ended September 30, 2018. The decrease in cash used by investing activities is due to trademark acquisition in 2018.
Cash flows provided by financing activities
were $65,024 during the nine months ended September 30, 2019 compared to $443,184 for the nine months ended September 30, 2018.
The decrease in cash provided by financing activities is principally due to the decrease in proceeds from the issuance of convertible
debt. For the future, we expect to raise money through equity financing via the sale of our common stock or equity-linked
securities such as convertible debt. If we cannot raise the money that we need in order to continue to operate our business, we
will be forced to delay, scale back or eliminate some or all of our proposed operations.
Convertible Note Financings
On February 8, 2018, the Company issued a 12%
Convertible Promissory Note #1 of $103,000, with debt issuance costs of $3,000 to an accredited investor. This convertible note
is due and payable on November 20, 2018. The holder has the right from time to time, and at any time during the period beginning
on the date which is 180 days following the date of the note and ending on the later of: (i) the maturity date and (ii) the date
of payment of the default amount, each in respect of the remaining outstanding principal amount of this note to convert all or
any amount of the outstanding and unpaid principal amount of the note into fully paid and non-assessable shares of common stock.
The conversion price is 58% of the average of the lowest two trading prices for the common stock during the ten trading day period
ending on the latest complete trading day prior to the conversion date.
On March 5, 2018, the Company issued
a 12% Convertible Promissory Note #2 of $103,000, with debt issuance costs of $3,000 to an accredited investor. This convertible
promissory note #2 is due and payable on December 15, 2018. The holder has the right from time to time, and at any time during
the period beginning on the date which is 180 days following the date of the note and ending on the later of: (i) the maturity
date and (ii) the date of payment of the default amount, each in respect of the remaining outstanding principal amount of this
note to convert all or any amount of the outstanding and unpaid principal amount of the note into fully paid and non-assessable
shares of common stock. The conversion price is 61% of the average of the lowest two trading prices for the common stock during
the ten trading day period ending on the latest complete trading day prior to the conversion date.
On March 6, 2018, the Company issued an 8%
Convertible Redeemable Note of $126,000, with debt issuance costs of $6,000 to an accredited investor. This convertible note is
due and payable on March 6, 2019. The holder is entitled, at its option, at any time after six months, to convert all or any amount
of the principal face amount of this note then outstanding into shares of common stock. The conversion price is 60% of the lowest
trading prices for the common stock during the 20 trading day period ending on the latest complete trading day prior to the conversion
date.
On October 8, 2018, the Company issued two
8% Promissory Note of $50,000 each, with debt issuance costs of $1,000 each, to two accredited investor. This convertible promissory
notes are due and payable on April 8, 2019. The holders has the right at any time on or after the maturity date to convert any
portion of the outstanding principal and accrued interest into fully paid and non-assessable shares of common stock. The conversion
price shall equal the lesser of (i) 80% of the lowest trading price for the common stock during the five trading period ending
on the last completed trading day prior to the conversion date or (ii) $0.0065.
On November 15, 2018, the Company issued a
0% Promissory Note of $150,000, with original issue discount of $20,000 to an accredited investor. Beginning on February 15, 2019
and continuing on the 15th of every consecutive calendar month for seven months, the Company shall make a cash payment in the amount
of $21,429. This convertible promissory note is due and payable on August 15, 2019. The holder has the right at any time on or
after the issuance date to convert any portion of the outstanding principal and accrued interest into fully paid and non-assessable
shares of common stock. The conversion price is the closing price of the closing price of the Company's common stock on the date
the note is funded.
On October 8, 2018, the Company issued a 0%
Promissory Note of $200,000 for advertising, social media, marketing, consulting, advisory and related services. This convertible
promissory note is due and payable on April 8, 2019. The holder has the right at any time on or after the maturity date to convert
any portion of the outstanding principal and accrued interest into fully paid and non-assessable shares of common stock. The conversion
price shall equal the lesser of (i) 90% of the lowest trading price for the common stock during the five trading period ending
on the last completed trading day prior to the conversion date.
On January 22, 2019, the Company issued a 12%
convertible note payable for $63,000. This convertible note is due and payable on November 15, 2019. The holder has the right to
convert any portion of the outstanding principal and accrued interest into fully paid and non-assessable shares of common stock.
The conversion price shall equal to 61% of the average of the two lowest trading prices 10 days prior to conversion.
On March 4, 2019, the Company issued
a 12% convertible note payable for $53,000. This convertible note is due and payable on December 31, 2019. The holder has the right
to convert any portion of the outstanding principal and accrued interest into fully paid and non-assessable shares of common stock.
The conversion price shall equal to 61% of the average of the two lowest trading prices 10 days prior to conversion.
Sale of Common Stock
On January 18, 2018, the Company sold $5,000
of common stock to an accredited investor. The total amount of common stock sold was 83,333 shares at $0.06 per share.
Note Payable
The Company entered into a merchant agreement
on May 21, 2018. Total payments for the note payable is $40,470, which included $28,500 principal payment and $11,970 interest
payment. The note payable requires daily payments of $165, is due on May 21, 2019. The loan is secured by the assets of the Company
as defined by Article 9 of the Uniformed Commercial Code and a personal guaranty. The interest rate is 42% per annum.
The Company entered into a 90 day Secured Convertible
Note with Bridgepoint Capital, LLC on August 10, 2018 in the principal amount of $50,000, with no interest accruing. At any time,
the principal amount of the note may be converted into any funding or other agreement contemplated at a near future date between
the note holder and the Company. The Convertible Note contained an original issue discount of $2,500. For the twelve months ended,
$2,500 was amortized.
On July 10, 2018, the Company entered into
a one year Unsecured Promissory Note in the principal amount of $50,000, with an interest rate of 30% per annum. Five monthly progress
payments of $5,000 was due beginning on August 10, 2018. The Company made a payment of $5,000 on November 19, 2018 and December
3, 2018. The Company did not make the progress payments due on October, November and December 10, 2018. As such, this Promissory
Note is in default. However, the Holder of the Promissory Note has not declared a default.
On March 26, 2019, the Company entered into
an unsecured promissory note for net proceeds of $22,515 The note accrues interest at 149% per annum; requires daily repayments
of $170 for 248 days and is guaranteed by an officer of the Company.
To date, our operations have not generated
any profits. We have funded our operating to date through the sales of common stock and issuance of notes payable and convertible
notes payable. Our ability to continue as a going concern is dependent upon use raising sufficient debt or equity capital
to sustain operations until such time as we can generate a profit from our operations. We are currently working
with investors to provide us with the necessary funding, but there can be no assurances we will obtain such funding in the future. Failure
to obtain this additional financing will have a material negative impact on our ability to generate profits in the future. We
anticipate sales will increase during 2019. As such, our anticipated cash needs to fund operations and pay our notes for
the next 12 months is approximately $500,000.
Inflation
Although our operations are influenced by general
economic conditions, we do not believe that inflation had a material effect on our results of operations during the nine months
ended September 30, 2019.
Critical Accounting Estimates
The discussion and analysis of our financial
condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting
principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates
and judgments that affect the amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets
and liabilities. On an on-going basis, we evaluate our estimates based 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 assets and liabilities that are not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions. The following represents a summary of our critical accounting policies, defined
as those policies that we believe are the most important to the portrayal of our financial condition and results of operations
and that require management's most difficult, subjective or complex judgments, often as a result of the need to make estimates
about the effects of matters that are inherently uncertain.
Use of Estimates
The preparation of financial statements in
conformity with generally accepted accounting principles requires management to make estimates and assumptions. These estimates
and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates. It is possible that accounting estimates and assumptions may be material to the Company due
to the levels of subjectivity and judgment involved.
Accounts Receivable
The Company grants credit to customers under
credit terms that it believes are customary in the industry and does not require collateral to support customer receivables. The
Company currently does not provide an allowance for doubtful collections, which is based upon a review of outstanding receivables,
historical collection information, and existing economic conditions. Normal receivable terms vary from 30-90 days after the issuance
of the invoice and typically would be considered past due when the term expires. Delinquent receivables are written off based on
individual credit evaluation and specific circumstances of the customer.
Inventory
Inventory is valued at the lower of the inventory's
cost (first in, first out basis) or the current market price of the inventory. Management compares the cost of inventory with its
market value and an allowance is made to write down inventory to market value, if lower.
Long-Lived Assets
The Company applies the provisions of ASC Topic
360, Property, Plant, and Equipment , which addresses financial accounting and reporting for the impairment or disposal
of long-lived assets. ASC 360 requires impairment losses to be recorded on long-lived assets used in operations when indicators
of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying
amounts. In that event, a loss is recognized based on the amount by which the carrying amount exceeds the fair value of the long-lived
assets. Loss on long-lived assets to be disposed of is determined in a similar manner, except that fair values are reduced for
the cost of disposal.
Revenue Recognition
ASU No. 2014-09, Revenue from Contracts with
Customers ("Topic 606"), became effective for us on January 1, 2018. We applied the "modified retrospective"
transition method for open contracts for the implementation of Topic 606. As sales are and have been primarily through distributors,
and we have no significant post-delivery obligations, this did not result in a material recognition of revenue on our accompanying
consolidated financial statements for the cumulative impact of applying this new standard. We made no adjustments to our previously-reported
total revenues, as those periods continue to be presented in accordance with our historical accounting practices under Topic 605,
Revenue Recognition.
Deferred Income
In some instances, the Company receives payments
prior to delivery of its products, whereupon such revenues are deferred until the revenue recognition criteria are met.
Stock-Based Compensation
The Company records stock-based compensation
in accordance with FASB ASC Topic 718, Compensation – Stock Compensation . FASB ASC Topic 718 requires companies to
measure compensation cost for stock-based employee compensation at fair value at the grant date and recognize the expense over
the employee's requisite service period. The Company recognizes in the statement of operations the grant-date fair value of stock
options and other equity-based compensation issued to employees and non-employees.
Off-Balance Sheet Arrangements
We do not maintain any off-balance sheet arrangements,
transactions, obligations or other relationships with unconsolidated entities that would be expected to have a material current
or future effect upon our financial condition or results of operations.
Going Concern
The consolidated financial statements have been prepared assuming
we will continue as a going concern, which contemplates, the realization of assets and satisfaction of liabilities in the normal
course of business. We incurred losses from operations of $2,162,323 for the nine months ended September 30, 2019 and $3,394,068
for the year ended December 31, 2018, and had an accumulated deficit of $15,959,955 at September 30, 2019. In addition, we
used cash from operating activities of $94,801 for the nine months ended September 30, 2019. These factors raise substantial
doubt about our ability to continue as a going concern.
The Company will require additional funding
to execute its future strategic business plan. Successful business operations and its transition to attaining profitability are
dependent upon obtaining additional financing and achieving a level of revenue adequate to support its cost structure. These conditions
raise substantial doubt about the Company's ability to continue as a going concern.
While the Company is attempting to establish
an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern, the Company’s
cash position may not be adequate to support the Company’s daily operations. Management intends to raise additional funds
by seeking equity and/or debt financing; however there can be no assurances that it will be successful in those efforts. The ability
of the Company to continue as a going concern is dependent upon the Company’s ability to obtain financing, further implement
its business plan, and generate revenues.
There are significant risks and uncertainties which could
negatively affect the Company’s operations. These are principally related to the existence of events of default under the
Company’s outstanding debt obligations, which could trigger penalties. Furthermore, if our current indebtedness is not restructured,
paid or converted into equity, which is at the debt holder’s discretion, our current operations do not generate sufficient
cash to pay interest and principal on these obligations when they become due. Accordingly, there can be no assurance that we will
be able to pay these or other obligations which we may incur in the future. In the event we are unable to restructure, pay or convert
into equity the balance of our outstanding indebtedness, the holders may obtain judgments against us and seek to enforce such judgments
against our assets, in which event we will be required to cease our business activities and the equity of our stockholders will
be effectively wiped out.
Our only sources of additional funds
to meet continuing operating expenses, fund additional research and development and fund additional working capital are through
the sale of securities, and/or debt instruments. We are actively seeking additional debt or equity financing, but no assurances
can be given that such financing will be obtained or what the terms thereof will be. We may need to discontinue a portion or all
of our operations if we are unsuccessful in generating positive cash flow or financing for our operations through the issuance
of securities.
The consolidated financial statements do not include any adjustments
related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that
might be necessary should the Company be unable to continue as a going concern.
Recent Accounting Pronouncements
In June 2018, the FASB issued Accounting Standards
Update (“ASU”) ASU 2018-07, Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting,
which simplifies the accounting for share-based payments granted to nonemployees for goods and services and aligns most of the
guidance on such payments to nonemployees with the requirements for share-based payments granted to employees. ASU 2018-07 is effective
on January 1, 2019. Early adoption is permitted. The adoption of this ASU did not have a material impact on the Company’s
consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02,
Leases (Topic 842). ASU 2016-02 requires lessees to recognize lease assets and lease liabilities on the balance sheet
and requires expanded disclosures about leasing arrangements. ASU 2016-02 is effective for fiscal years beginning after December
15, 2018 and interim periods in fiscal years beginning after December 15, 2018, with early adoption permitted. The adoption
of this ASU did not have a material impact on the Company’s consolidated financial statements as the Company did not have
any leases covered by this new ASU.
Management does not believe that any recently
issued, but not yet effective, accounting standards could have a material effect on the accompanying financial statements. As new
accounting pronouncements are issued, we will adopt those that are applicable under the circumstances.
Other recent accounting pronouncements issued
by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities
and Exchange Commission did not or are not believed by management to have a material impact on the Company's present or future
financial statements.