Item
1. Financial Statements
Amesite,
Inc.
Condensed
Financial Statements
March
31, 2021
Amesite,
Inc.
Contents
Amesite,
Inc.
Condensed
Balance Sheets (unaudited)
|
|
March 31,
2021
|
|
|
June 30,
2020
|
|
Assets
|
Current Assets
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
12,121,692
|
|
|
$
|
4,093,874
|
|
Accounts receivable
|
|
|
6,900
|
|
|
|
61,120
|
|
Prepaid expenses and other current assets
|
|
|
625,686
|
|
|
|
227,274
|
|
Property and Equipment - Net
|
|
|
100,222
|
|
|
|
45,308
|
|
Capitalized Software - Net
|
|
|
1,359,573
|
|
|
|
1,277,097
|
|
Total assets
|
|
$
|
14,214,073
|
|
|
$
|
5,704,673
|
|
Liabilities and Stockholders’ Equity
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
215,850
|
|
|
$
|
112,053
|
|
Notes payable (Note 7)
|
|
|
-
|
|
|
|
2,025,600
|
|
Accrued and other current liabilities:
|
|
|
|
|
|
|
|
|
Accrued compensation
|
|
|
96,356
|
|
|
|
62,485
|
|
Deferred revenue
|
|
|
544,615
|
|
|
|
380,000
|
|
Other accrued liabilities
|
|
|
178,097
|
|
|
|
124,639
|
|
Total current liabilities
|
|
|
1,034,918
|
|
|
|
2,704,777
|
|
Stockholders’ Equity
|
|
|
|
|
|
|
|
|
Common stock, $.0001 par value; 50,000,000 shares authorized; 20,565,566 and 16,231,820 shares issued and outstanding at March 31, 2021 and June 30, 2020, respectively
|
|
|
2,017
|
|
|
|
1,583
|
|
Preferred stock, $.0001 par value; 5,000,000 shares authorized; no shares issued and outstanding at March 31, 2021 or June 30, 2020
|
|
|
-
|
|
|
|
-
|
|
Additional paid-in capital
|
|
|
31,504,527
|
|
|
|
11,629,114
|
|
Accumulated deficit
|
|
|
(18,327,389
|
)
|
|
|
(8,630,801
|
)
|
Total stockholders’ equity
|
|
|
13,179,155
|
|
|
|
2,999,896
|
|
Total liabilities and stockholders’ equity
|
|
$
|
14,214,073
|
|
|
$
|
5,704,673
|
|
See
notes to condensed financial statements.
Amesite,
Inc.
Condensed
Statements of Operations (unaudited)
|
|
Three Months
Ended
March 31,
2021
|
|
|
Three Months
Ended
March 31,
2020
|
|
|
Nine Months
Ended
March 31,
2021
|
|
|
Nine Months
Ended
March 31,
2020
|
|
Net Revenue
|
|
$
|
201,394
|
|
|
$
|
20,937
|
|
|
$
|
418,315
|
|
|
$
|
61,244
|
|
Operating Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative expenses
|
|
|
1,049,128
|
|
|
|
378,541
|
|
|
|
3,523,259
|
|
|
|
1,377,450
|
|
Technology and content development
|
|
|
615,157
|
|
|
|
344,401
|
|
|
|
1,593,934
|
|
|
|
924,072
|
|
Sales and marketing
|
|
|
860,562
|
|
|
|
182,814
|
|
|
|
1,385,202
|
|
|
|
565,198
|
|
Total operating expenses
|
|
|
2,524,847
|
|
|
|
905,756
|
|
|
|
6,502,395
|
|
|
|
2,866,720
|
|
Other Income (Expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Income
|
|
|
703
|
|
|
|
8,134
|
|
|
|
1,323
|
|
|
|
16,125
|
|
Interest Expense (Note 7)
|
|
|
-
|
|
|
|
-
|
|
|
|
(3,613,831
|
)
|
|
|
(77
|
)
|
Total other income (expense)
|
|
|
703
|
|
|
|
8,134
|
|
|
|
(3,612,508
|
)
|
|
|
16,048
|
|
Net Loss
|
|
$
|
(2,322,750
|
)
|
|
$
|
(876,685
|
)
|
|
$
|
(9,696,588
|
)
|
|
$
|
(2,789,428
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per Share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
$
|
(.11
|
)
|
|
$
|
(.06
|
)
|
|
$
|
(.51
|
)
|
|
$
|
(.19
|
)
|
Weighted average shares outstanding
|
|
|
20,538,461
|
|
|
|
15,831,820
|
|
|
|
19,150,778
|
|
|
|
14,699,015
|
|
See
notes to condensed financial statements.
Amesite,
Inc.
Condensed
Statements of Stockholders’ Equity (unaudited)
|
|
Common
Stock
|
|
|
Additional
Paid-In
Capital
|
|
|
Accumulated
Deficit
|
|
|
Total
|
|
Balance - July
1, 2019
|
|
$
|
1,309
|
|
|
$
|
6,304,118
|
|
|
$
|
(4,460,498
|
)
|
|
$
|
1,844,929
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
(953,097
|
)
|
|
|
(953,097
|
)
|
Stock compensation expense
|
|
|
-
|
|
|
|
179,870
|
|
|
|
-
|
|
|
|
179,870
|
|
Issuance
of restricted common stock
|
|
|
124
|
|
|
|
2,093,555
|
|
|
|
-
|
|
|
|
2,093,679
|
|
Balance
- September 30, 2019
|
|
|
1,433
|
|
|
|
8,577,543
|
|
|
|
(5,413,595
|
)
|
|
|
3,165,381
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
(959,646
|
)
|
|
|
(959,646
|
)
|
Stock compensation expense
|
|
|
-
|
|
|
|
100,375
|
|
|
|
-
|
|
|
|
100,375
|
|
Issuance
of common stock
|
|
|
150
|
|
|
|
2,676,393
|
|
|
|
-
|
|
|
|
2,676,543
|
|
Balance
- December 31, 2019
|
|
$
|
1,583
|
|
|
$
|
11,354,311
|
|
|
$
|
(6,373,241
|
)
|
|
$
|
4,982,653
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
(876,685
|
)
|
|
|
(876,685
|
)
|
Stock
compensation expense
|
|
|
-
|
|
|
|
100,375
|
|
|
|
-
|
|
|
|
100,375
|
|
Balance
- March 31, 2020
|
|
$
|
1,583
|
|
|
$
|
11,454,686
|
|
|
$
|
(7,249,926
|
)
|
|
$
|
4,206,343
|
|
|
|
Common Stock
|
|
|
Additional
Paid-In
Capital
|
|
|
Accumulated
Deficit
|
|
|
Total
|
|
Balance - July 1, 2020
|
|
$
|
1,583
|
|
|
$
|
11,629,114
|
|
|
$
|
(8,630,801
|
)
|
|
$
|
2,999,896
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
(5,086,264
|
)
|
|
|
(5,086,264
|
)
|
Issuance of common stock - net
|
|
|
300
|
|
|
|
12,795,930
|
|
|
|
-
|
|
|
|
12,796,230
|
|
Stock compensation expense
|
|
|
-
|
|
|
|
212,413
|
|
|
|
-
|
|
|
|
212,413
|
|
Conversion of notes payable
|
|
|
113
|
|
|
|
5,639,248
|
|
|
|
-
|
|
|
|
5,639,361
|
|
Balance - September 30, 2020
|
|
|
1,996
|
|
|
|
30,276,705
|
|
|
|
(13,717,065
|
)
|
|
|
16,561,636
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,287,574
|
)
|
|
|
(2,287,574
|
)
|
Issuance of common stock
|
|
|
18
|
|
|
|
789,582
|
|
|
|
|
|
|
|
789,600
|
|
Stock compensation expense
|
|
|
-
|
|
|
|
217,075
|
|
|
|
-
|
|
|
|
217,075
|
|
Balance - December 31, 2020
|
|
$
|
2,014
|
|
|
$
|
31,283,362
|
|
|
$
|
(16,004,639
|
)
|
|
$
|
15,280,737
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,322,750
|
)
|
|
|
(2,322,750
|
)
|
Cashless exercise of common stock warrants
|
|
|
3
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
-
|
|
Stock compensation expense
|
|
|
-
|
|
|
|
221,168
|
|
|
|
-
|
|
|
|
221,168
|
|
Balance – March 31, 2021
|
|
$
|
2,017
|
|
|
$
|
31,504,527
|
|
|
$
|
(18,327,389
|
)
|
|
$
|
13,179,155
|
|
See
notes to condensed financial statements.
Amesite,
Inc.
Condensed
Statements of Cash Flows (unaudited)
|
|
Nine
months ended
March 31,
2021
|
|
|
Nine
months ended
March 31,
2020
|
|
Cash
Flows from Operating Activities
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(9,696,588
|
)
|
|
$
|
(2,789,428
|
)
|
Adjustments
to reconcile net loss to net cash and cash equivalents from operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
537,112
|
|
|
|
365,349
|
|
Stock
compensation expense
|
|
|
650,656
|
|
|
|
380,620
|
|
Amortization
of debt costs
|
|
|
182,900
|
|
|
|
-
|
|
Interest
expense on notes payable converted to common stock
|
|
|
3,430,931
|
|
|
|
-
|
|
Value
of common stock issued in exchange for consulting services
|
|
|
789,600
|
|
|
|
-
|
|
Changes
in operating assets and liabilities which (used) provided cash:
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
54,220
|
|
|
|
(366,120
|
)
|
Prepaid
expenses and other assets
|
|
|
(398,412
|
)
|
|
|
(1,872
|
)
|
Accounts
payable
|
|
|
103,797
|
|
|
|
(107,779
|
)
|
Deferred
revenue
|
|
|
164,615
|
|
|
|
380,000
|
|
Accrued
compensation
|
|
|
33,871
|
|
|
|
(14,913
|
)
|
Accrued
and other liabilities
|
|
|
53,388
|
|
|
|
(10,640
|
)
|
Net
cash and cash equivalents used in operating activities
|
|
|
(4,093,910
|
)
|
|
|
(2,164,783
|
)
|
Cash
Flows from Investing Activities
|
|
|
|
|
|
|
|
|
Purchase
of property and equipment
|
|
|
(67,266
|
)
|
|
|
(7,810
|
)
|
Investment
in capitalized software
|
|
|
(607,236
|
)
|
|
|
(650,306
|
)
|
Net
cash and cash equivalents used in investing activities
|
|
|
(674,502
|
)
|
|
|
(658,116
|
)
|
Cash
Flows from Financing Activities – Issuance of common stock – net of issuance costs
|
|
|
12,796,230
|
|
|
|
4,770,222
|
|
Net
Increase in Cash and Cash Equivalents
|
|
|
8,027,818
|
|
|
|
1,947,323
|
|
Cash
and Cash Equivalents - Beginning of period
|
|
|
4,093,874
|
|
|
|
1,008,902
|
|
Cash
and Cash Equivalents - End of period
|
|
$
|
12,121,692
|
|
|
$
|
2,956,225
|
|
Significant
Noncash Transactions:
|
|
|
|
|
|
|
|
|
Acquisition
of capitalized software included in accounts payable and accrued liabilities
|
|
$
|
94,481
|
|
|
$
|
33,105
|
|
Conversion
of convertible notes payable, including accrued interest of $73,315, into 1,127,872 shares of common stock
|
|
$
|
2,255,745
|
|
|
$
|
-
|
|
Issuance
of common stock in exchange for consulting services
|
|
$
|
789,600
|
|
|
$
|
-
|
|
See
notes to condensed financial statements.
Note
1 - Nature of Business
Amesite
Inc. (the “Company”) was incorporated in November 2017. The Company is an artificial intelligence driven platform and course
designer, that provides customized, high performance and scalable online products for schools and businesses. The Company uses machine
learning to provide a novel, mass customized experience to learners. The Company’s customers are businesses, universities and colleges,
and K-12 schools. The Company’s activities are subject to significant risks and uncertainties. The Company’s operations are
considered to be in one segment.
On
September 18, 2020, we consummated a reorganizational merger (the “Reorganization”), pursuant to an Agreement and Plan of
Merger (the “Merger Agreement”), dated July 14, 2020, whereby we merged with and into Amesite Inc. (“Amesite Parent”)
our former parent corporation, with our Company resulting as the surviving entity. In connection with the same, we filed a Certificate
of Ownership and Merger with the Secretary of State of the State of Delaware, and changed our name from “Amesite Operating Company”
to “Amesite Inc.” The stockholders of Amesite Parent approved the Merger Agreement on August 4, 2020. The directors and officers
of Amesite Parent became our directors and officers.
Pursuant
to the Merger Agreement, on the Effective Date, each share of the Amesite parent’s common stock, $0.0001 par value per share, issued
and outstanding immediately before the Effective Date, was converted, on a one-for-one basis, into shares of our common stock.
Additionally,
each option or warrant to acquire shares of Amesite Parent outstanding immediately before the Effective Date was converted into and became
an equivalent option to acquire shares of our common stock, upon the same terms and conditions.
As
discussed in Note 6, the Company completed a stock offering through which it raised approximately $12.8 million in net proceeds. These
funds will be utilized to execute the Company’s strategic growth plans, including hiring additional sales staff as well as product
engineers. These funds provide sufficient operating capital for the Company. As such, we have concluded there are no current conditions
or events present that raise substantial doubt about the entity’s ability to continue as a going concern.
Note
2 - Significant Accounting Policies
Basis
of Presentation
The
condensed financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United
States of America (“GAAP”) and considering the requirements of the United States Securities and Exchange Commission (“SEC”).
The Company has a fiscal year with a June 30 year end.
In
the opinion of management, the financial statements of the Company as of March 31, 2021 and 2020 and for the three and nine months ended
March 31, 2021 and 2020 include all adjustments and accruals, consisting only of normal, recurring accrual adjustments, which are necessary
for fair presentation of the results for the interim periods. These interim results are not necessarily indicative of results for a full
year.
Certain
information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed in
or omitted from this report pursuant to the rules and regulations of the SEC. These financial statements should be read together with
the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2020.
Certain
operating expenses within the statement of operations from the prior year have been reclassified to conform with the current year presentation.
Use
of Estimates
The
preparation of condensed financial statements in conformity with generally accepted accounting principles requires management to make
estimates and assumptions that 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 revenue and expenses during the reporting period. Actual results
could differ from those estimates.
Fair
Value Measurements
Accounting
standards require certain assets and liabilities be reported at fair value in the financial statements and provide a framework for establishing
that fair value. The framework for determining fair value is based on a hierarchy that prioritizes the inputs and valuation techniques
used to measure fair value.
Fair
values determined by Level 1 inputs use quoted prices in active markets for identical assets or liabilities that the Company has the
ability to access.
Fair
values determined by Level 2 inputs use other inputs that are observable, either directly or indirectly. These Level 2 inputs include
quoted prices for similar assets and liabilities in active markets and other inputs such as interest rates and yield curves that are
observable at commonly quoted intervals.
Level
3 inputs are unobservable inputs, including inputs that are available in situations where there is little, if any, market activity for
the related asset. These Level 3 fair value measurements are based primarily on management’s own estimates using pricing models,
discounted cash flow methodologies, or similar techniques.
In
instances whereby inputs used to measure fair value fall into different levels in the above fair value hierarchy, fair value measurements
in their entirety are categorized based on the lowest level input that is significant to the valuation. The Company’s assessment
of the significance of particular inputs to these fair value measurements requires judgment and considers factors specific to each asset
or liability.
Cash
and Cash Equivalents
The
Company considers all investments with an original maturity of three months or less when purchased to be cash equivalents. The total
amount of bank deposits (checking, savings, and investment accounts) that was insured by the FDIC at March 31, 2021 was $500,000.
Property
and Equipment
Property
and equipment are recorded at cost. The straight-line method is used for computing depreciation and amortization. Assets are depreciated
over their estimated useful lives. The cost of leasehold improvements is depreciated (amortized) over the lesser of the length of the
related leases or the estimated useful lives of the assets. Costs of maintenance and repairs are charged to expense when incurred.
|
|
Depreciable
Life - Years
|
|
|
|
Leasehold
improvements
|
|
Shorter
of estimated lease term or 10 years
|
Furniture
and fixtures
|
|
7
years
|
Computer
equipment and software
|
|
5
years
|
Capitalized
Software Costs
The Company capitalizes significant costs
incurred in the development of software for internal use, including the costs of the software, materials, consultants, and payroll and
payroll related costs for employees incurred in developing internal use computer software. Planning costs incurred prior to the development
of software and costs not qualifying for capitalization are charged to expense. The Company amortizes capitalized software over a period
of three years, which is the expected useful life of the software. The Company recognized amortization expense of approximately $192,000
and $132,000 for the three month periods ended March 31, 2021 and 2020, respectively. The Company recognized amortization expense of
approximately $525,000 and $336,000 for the nine month periods ended March 31, 2021 and 2020, respectively. Accumulated amortization
at March 31, 2021 and 2020 was $1,129,186 and $457,659, respectively.
Revenue
Recognition
We generate substantially all of our revenue
from contractual arrangements with our businesses, colleges and universities and K-12 schools to provide a comprehensive platform of
integrated technology and technology enabled services related to product offerings. During the nine month period ending March 31, 2021,
we recognized revenue from contracts with customers of $418,315, of which $68,880 related to services transferred at a point in time,
and the remainder related to services provided over time.
Performance
Obligations and Timing of Recognition
A
performance obligation is a promise in a contract to transfer a distinct good or service to the customer. A contract’s transaction
price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied.
We
derive revenue from annual licensing arrangements, including maintenance fees, setup fees and other variable fees for course development
and miscellaneous items. Our contracts with partners generally have two to five-year terms and have a single performance obligation.
The promises to set up and provide a hosted platform of tightly integrated technology and services partners need to attract, enroll,
educate and support students are not distinct within the context of the contracts. This performance obligation is satisfied as the partners
receive and consume benefits, which occurs ratably over the contract term.
Occasionally,
we provide professional services, such as custom development, non-complex implementation activities, training, and other various professional
services. We evaluate these services to determine if they are distinct and separately identifiable in the context of the contract. In
our contracts with customers that contain multiple performance obligations as a result of this assessment, we allocate the transaction
price to each separate performance obligation on a relative standalone selling price basis. Standalone selling prices of our solutions
and services are typically estimated based on observable transactions when the solutions or services are sold on a standalone basis.
When standalone selling prices are not observable, we utilize a cost plus margin approach to allocate the transaction price.
We
do not disclose the value of unsatisfied performance obligations because the variable consideration is allocated entirely to a wholly
unsatisfied promise to transfer a service that forms part of a single performance obligation (i.e., consideration received is based on
the level of product offerings, which is unknown in advance).
We
also receive fees that are fixed in nature, such as annual license and maintenance charges, in place of or in conjunction with variable
consideration. The fees are independent of the number of students that are enrolled in courses with our customers and are allocated to
and recognized ratably over the service period of the contract that the Company’s platform is made available to the customer (i.e.
the customer simultaneously receives and consumes the benefit of the software over the contract service period).
The
following factors affect the nature, amount, timing, and uncertainty of our revenue and cash flows:
|
●
|
The
majority of our customers are private and public learning institutions across various domestic
regions
|
|
●
|
The
majority of our customers have annual payment terms
|
The
following table shows revenue from contracts with customers by customer type for the nine months ended March 31:
Customer
Type
|
|
2021
|
|
|
2020
|
|
Enterprise
|
|
$
|
349,745
|
|
|
$
|
-
|
|
K12
|
|
|
45,166
|
|
|
|
-
|
|
University
|
|
|
23,404
|
|
|
|
61,244
|
|
Total
|
|
$
|
418,315
|
|
|
$
|
61,244
|
|
Contract
Fulfilment Costs
We
incur certain fulfilment costs related to software design of specific course offerings for our customers, primarily comprised of software
development, configuration costs, and implementation costs. These costs are capitalized and recorded on a contract-by-contract basis
and amortized using the straight-line method over the length of the contract (i.e. on a systematic basis that is consistent with the
transfer to the customer of the goods or services to which the asset relates). There were no costs to fulfill capitalized or amortized
as of March 31, 2021 or 2020.
Accounts
Receivable, Contract Assets and Liabilities
Balance
sheet items related to contracts consist of accounts receivable (net) and contract liabilities on our condensed balance sheets. Accounts
receivable (net) is stated at net realizable value, and we utilize the allowance method to provide for doubtful accounts based on management’s
evaluation of the collectability of the amounts due. Our estimates are reviewed and revised periodically based on historical collection
experience and a review of the current status of accounts receivable. Historically, actual write-offs for uncollectible accounts have
not significantly differed from prior estimates. There was no allowance for doubtful accounts on accounts receivable balances as of March
31, 2021 and 2020.
We
may recognize revenue prior to billing a customer when we have satisfied or partially satisfied our performance obligations as billings
to our customers may not be made until after the service period has commenced. As of March 31, 2021 and 2020, we do not have any contract
assets.
Contract
liabilities as of each balance sheet date represent the excess of amounts billed or received as compared to amounts recognized in revenue
on our condensed statements of operations as of the end of the reporting period, and such amounts are reflected as a current liability
on our condensed balance sheets as deferred revenue. We generally receive payments prior to completion of the service period and our
performance obligations. These payments are recorded as deferred revenue until the services are delivered or until our obligations are
otherwise met, at which time revenue is recognized.
Some
contracts also involve annual license fees, for which upfront amounts are received from customers. In these contracts, the license fees
received in advance of the platform’s launch are recorded as contract liabilities.
The
following table provides information on the changes in the balance of contract liabilities for the nine months ended March 31:
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
Opening
balance
|
|
$
|
380,000
|
|
|
$
|
-
|
|
Billings
|
|
|
582,930
|
|
|
|
-
|
|
Less
revenue recognized from continuing operations (net of cancellations):
|
|
|
(418,315
|
)
|
|
|
-
|
|
Closing
balance
|
|
$
|
544,615
|
|
|
$
|
-
|
|
Technology
and Content Development
Technology
and content development expenditures consist primarily of personnel and personnel-related expense and contracted services associated
with the maintenance of our platform as well as hosting and licensing costs and are charged to expense as incurred. It also includes
amortization of capitalized software costs and research and development costs related to improving our platform and creating content
that are charged to expense as incurred.
Stock-Based
Payments
Financial
Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718 “Compensation-Stock
Compensation” requires companies to measure the cost of employee and nonemployee services received in exchange for the award of
equity instruments based on the estimated fair value of the award at the date of grant. The expense is to be recognized over the period
during which an employee is required to provide services in exchange for the award. The Company accounts for shares of common stock,
stock options and warrants issued to employees and nonemployees based on the fair value of the stock, stock option or warrant.
Income
Taxes
In
calculating the provision for interim income taxes, in accordance with Accounting Standards Codification (ASC) 740, Income Taxes, we
apply an estimated annual effective tax rate to year-to-date ordinary income. At the end of each interim period, we estimate the effective
tax rate expected to be applicable for the full fiscal year.
Deferred
tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not
be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years
in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in the condensed statement of operations in the period that includes the enactment date.
Net
Loss per Share
Basic net loss per share is computed by
dividing net loss available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted
loss per share includes potentially dilutive securities such as outstanding options and warrants, using various methods such as the treasury
stock or modified treasury stock method in the determination of dilutive shares outstanding during each reporting period. For the three
and nine months ended March 31, 2021, the Company had 2,910,125 and 2,032,533 potentially dilutive shares of common stock related to
common stock options and warrants, respectively, as determined using the if-converted method. For the three and nine months ended March
31, 2020, the Company had 1,597,833 and 2,045,315 potentially dilutive shares of common stock related to common stock options and warrants,
respectively, as determined using the if-converted method. For all periods presented, the dilutive effect of common stock options and
common stock warrants has not been included in the average shares outstanding for the calculation of net loss per share as the effect
would be anti-dilutive as a result of our net losses in these periods.
Risks
and Uncertainties
The
Company operates in an industry subject to rapid change. The Company’s operations will be subject to significant risk and uncertainties
including financial, operational, technological, and other risks associated with an early stage company, including the potential risk
of business failure.
On
March 11, 2020, the World Health Organization declared the outbreak of a respiratory disease caused by a novel coronavirus as a “pandemic.”
First identified in late 2019 and known now as COVID-19, the outbreak has impacted thousands of individuals worldwide. In response, many
countries, including the United States, have implemented measures to combat the outbreak which have impacted global business operations.
While management believes the Company’s operations have not been significantly impacted, the Company continues to monitor the situation.
In addition, while the Company’s results of operations, cash flows and financial condition could be negatively impacted, the extent
of the impact cannot be reasonably estimated at this time.
Note
3 - Prepaid Expenses
Prepaid
expenses and other assets is comprised of the following:
|
|
March
31,
2021
|
|
|
June
30,
2020
|
|
|
|
|
|
|
|
|
Prepaid insurance
|
|
$
|
364,259
|
|
|
$
|
36,102
|
|
Prepaid consulting services
|
|
|
24,110
|
|
|
|
-
|
|
Prepaid offering costs
|
|
|
-
|
|
|
|
142,730
|
|
Other
prepaid services
|
|
|
237,317
|
|
|
|
48,442
|
|
Total
|
|
$
|
625,686
|
|
|
$
|
227,274
|
|
Note
4 - Stock-Based Compensation
The
Company’s Equity Incentive Plan (the “Plan”) permits the grant of stock options, stock appreciation rights, restricted
stock, or restricted stock units to officers, employees, directors, consultants, agents, and independent contractors of the Company.
The Company believes that such awards better align the interests of its employees, directors, and consultants with those of its stockholders.
Option awards are generally granted with an exercise price equal to the market price of the Company’s stock at the date of grant;
those option awards generally vest over two years from the grant date and generally have ten-year contractual terms. Certain option awards
provide for accelerated vesting (as defined in the Plan).
The
Company has reserved 4,600,000 shares of common stock to be available for granting under the Plan.
The
Company estimates the fair value of each option award using a Black-Scholes Model (“BSM”) that uses the weighted-average
assumptions included in the table below. Expected volatilities are based on historical volatility of comparable companies. The Company
uses historical data to estimate option exercise within the valuation model or estimates the expected option exercise when historical
data is unavailable. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve
in effect at the time of grant. The Company has not paid any dividends on common stock since its inception and does not anticipate paying
dividends on its common stock in the foreseeable future. When calculating the amount of annual compensation expense, the Company has
elected not to estimate forfeitures and instead accounts for forfeitures as they occur.
The
following table summarizes the assumptions used for estimating the fair value of the stock options granted for the nine-month periods
presented:
|
|
March
31,
2021
|
|
|
March
31,
2020
|
|
|
|
|
|
|
|
|
Expected term
(years)
|
|
|
6.00
|
|
|
|
6.00
|
|
Risk-free interest rate
|
|
|
0.12
|
%
|
|
|
1.50
|
%
|
Expected volatility
|
|
|
46.30
|
%
|
|
|
45.00
|
%
|
Dividend yield
|
|
|
0
|
%
|
|
|
0
|
%
|
A
summary of option activity for the nine months ended March 31, 2021 is presented below:
Options
|
|
Number
of Shares
|
|
|
Weighted
Average
Exercise Price
|
|
|
Weighted
Average Remaining
Contractual Term
(in years)
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at July 1, 2020
|
|
|
2,962,833
|
|
|
$
|
1.82
|
|
|
|
9.06
|
|
Granted
|
|
|
234,000
|
|
|
|
3.97
|
|
|
|
9.59
|
|
Terminated
|
|
|
(286,708
|
)
|
|
|
2.29
|
|
|
|
-
|
|
Outstanding at March 31, 2021
|
|
|
2,910,125
|
|
|
|
1.95
|
|
|
|
8.42
|
|
The weighted-average grant-date fair value
of options granted during the nine month period ended March 31, 2021 was $1.75. The options contained time-based vesting conditions satisfied
over periods ranging from two to five years from the grant date.
The
Company recognized $221,168 and $100,375 in expense related to the Plan for the three month periods ended March 31, 2021 and 2020, respectively.
The Company recognized $650,656 and $380,620 in expense related to the Plan for the nine month periods ended March 31, 2021 and 2020,
respectively. As of March 31, 2021, there was approximately $976,000 of total unrecognized compensation cost for employees and non-employees
related to nonvested options. That cost is expected to be recognized through June 2025.
Note
5 - Income Taxes
For
the three and nine months ended March 31, 2021 and prior periods since inception, the Company’s activities have not generated any
taxable income or tax liabilities. Accordingly, the Company has not recognized an income tax benefit for the three and nine month periods
ended March 31, 2021 and 2020.
The
Company has approximately $16,311,000 of net operating loss carryforwards available to reduce future income taxes, of which approximately
$17,000 of net operating loss carryforwards expire in 2037. Due to uncertainty as to the realization of the net operating loss carryforwards
and other deferred tax assets as a result of the Company’s limited operating history and operating losses since inception, a full
valuation allowance has been recorded against the Company’s deferred tax assets.
Note
6 - Common Stock
On September 25, 2020, the Company completed
an initial public offering (“Offering”) of 3,000,000 shares of its common stock, $0.0001 par value per share, at an offering
price of $5.00 per share (total net proceeds of approximately $12.8 million after underwriting discounts, commissions, and other offering
costs). In connection with the Offering, the Company has agreed to issue five (5) year warrants to the underwriter to purchase five percent
(5%) of the number of common shares sold in the Offering for an exercise price equal to $6.00. Total warrants of 150,000 were issued
to the underwriter on September 29, 2020.
The
Company measures the warrants using the Black-Scholes Model (“BSM”) to estimate their fair value. The fair value of the warrants
issued in connection with the Offering was approximately $249,000 based on the following inputs and assumptions using the BSM: (i) expected
stock price volatility of 45.00%; (ii) risk-free interest rate of .14%; and (iii) expected life of the warrants of 5 years. The warrants
are included in offering costs in the Statement of Stockholders’ Equity.
In
connection with the Offering, the Company converted its outstanding convertible notes payable into 1,127,872 shares of its common stock
(Note 7).
Additionally,
in connection with the Offering, the Company cancelled 126,532 warrants previously issued to nonemployees in exchange for professional
services to meet certain offering listing requirements, of which 6,665 were replaced and deemed vested in full. As a result, the Company
recorded approximately $15,000 of additional warrant expense, which was recorded as additional paid-in-capital.
On November 3, 2020 and December 14, 2020,
the Company issued 69,709 shares of its common stock totaling approximately $290,000 in value and 106,383 shares of its common stock totaling
approximately $500,000 in value, respectively, to various consulting firms in exchange for strategic investor relations services. These
shares vested immediately upon issuance.
On March 23, 2021, warrant holders exercised
36,250 warrants on a cashless basis and received 29,782 shares of common stock.
Note
7 - Convertible Notes Payable
In
April and May 2020, the Company issued unsecured, convertible notes payable (the “Notes”) to certain accredited investors,
with an aggregate principal amount of $2,182,500, in an offering intended to be exempt from registration under the Securities Act of
1933 pursuant to Section 4(a)(2) thereof and Regulation D thereunder.
The
Notes were unsecured, bore interest at 8% per annum, and matured one year from their dates of issuance. The Notes were subject to automatic
conversion into the Company’s common stock upon a qualified equity financing or change of control, based on a specified formula
for the conversion price; using the lesser of $2.00 or 75% of the price paid per share in either of the conversion events.
The
Company incurred issuance costs of $261,900. The issuance costs were amortized over six months, which was the estimated length of time
that the Company believed the Notes would be outstanding until a conversion event occurred.
In connection with the Offering (Note 6),
the Notes (totaling $2,255,815, including accrued interest) were converted into 1,127,872 shares of common stock at a price of $2.00
per share. As the Offering price was $5.00 per share, the Company recognized an expense totaling $3,383,546 which represents the discount
provided to the Note holders. This expense is recorded within interest expense in the condensed statement of operations. Additionally,
upon completion of the Offering, the remaining unamortized debt issuance costs of $182,900 were fully amortized and included within interest
expense.
Item
2. Management’s Discussion And Analysis Of Financial Condition And Results Of Operations.
The
following discussion and analysis of our financial condition and results of operations should be read together with our unaudited financial
statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our audited financial statements and related
notes for the year ended June 30, 2020 included in our final prospectus filed with the Securities and Exchange Commission, or SEC, pursuant
to Rule 424(b) of the Securities Act, dated September 24, 2020, which we refer to as the Prospectus. In addition to historical information,
this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results
may differ materially from those anticipated in these forward-looking statements as a result of certain factors. We discuss factors that
we believe could cause or contribute to these differences below and elsewhere in this Quarterly Report on Form 10-Q, including those
factors set forth in the section entitled “Cautionary Note Regarding Forward-Looking Statements and Industry Data” and in
the section entitled “Risk Factors” in Part II, Item 1A.
Overview
We
were incorporated in the State of Delaware on November 14, 2017. We are an artificial intelligence driven platform and course designer
that rapidly provides customized, high performance and scalable online products for schools and businesses. We use machine learning to
provide a novel, mass customized experience to learners. Our customers are businesses, universities and colleges and K-12 schools. We
are passionate about improving the learner experience and learner outcomes in online learning products, and improving our customers’
ability to create and deliver both. We are focused on creating the best possible technology solutions and have been awarded an innovation
award for our product. We are committed to our team, and have twice been recognized with workplace excellence awards.
Our
activities are subject to significant risks and uncertainties, including failure to secure additional funding to execute the current
business plan.
The
following discussion highlights our results of operations and the principal factors that have affected our financial condition as well
as our liquidity and capital resources for the three months ended March 31, 2021 and provides information that management believes is
relevant for an assessment and understanding of the statements of financial condition and results of operations presented herein. The
following discussion and analysis are based on our unaudited condensed financial statements contained in this Quarterly Report on Form
10-Q, which we have prepared in accordance with United States generally accepted accounting principles, or GAAP. You should read the
discussion and analysis together with such financial statements and the related notes thereto.
We are not currently profitable, and we cannot provide
any assurance that we will ever be profitable. We incurred a net loss of $2,322,750 and $9,696,588 for the three months and nine months
ended March 31,2021, respectively. We incurred a net loss of $16,004,639 for the period from November 14, 2017 (date of incorporation)
to January 1, 2021.
Basis
of Presentation
The
financial statements contained herein have been prepared in accordance with GAAP and the requirements of the Securities and Exchange
Commission (“SEC”).
Critical
Accounting Policies and Significant Judgments and Estimates
This
management’s discussion and analysis of financial condition and results of operations is based on our financial statements, which
have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and assumptions
that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenue and expenses during the reported period. In accordance with U.S. GAAP, we base our estimates
on historical experience and on various other assumptions we believe to be reasonable under the circumstances. Actual results may differ
from these estimates if conditions differ from our assumptions. While our significant accounting policies are more fully described in
Note 2 in the “Notes to Condensed Financial Statements,” we believe the following accounting policies are critical to the
process of making significant judgments and estimates in preparation of our financial statements.
Internally-Developed
Capitalized Software
We
capitalize certain costs related to internal-use software, primarily consisting of direct labor and third-party vendor costs associated
with creating the software. Software development projects generally include three stages: the preliminary project stage (all costs are
expensed as incurred), the application development stage (certain costs are capitalized and certain costs are expensed as incurred) and
the post-implementation/operation stage (all costs are expensed as incurred). Costs capitalized in the application development stage
include costs related to the design and implementation of the selected software components, software build and configuration infrastructure,
and software interfaces. Capitalization of costs requires judgment in determining when a project has reached the application development
stage, the proportion of time spent in the application development stage, and the period over which we expect to benefit from the use
of that software. Once the software is placed in service, these costs are amortized on the straight-line method over the estimated useful
life of the software, which is generally three years.
Stock-Based
Compensation
We
have issued three types of stock-based awards under our stock plans: stock options, restricted stock units and stock warrants. All stock-based
awards granted to employees, directors and independent contractors are measured at fair value at each grant date. We rely on the Black-Scholes
option pricing model for estimating the fair value of stock-based awards granted, and expected volatility is based on the historical
volatilities of peer company’s common stock. Stock options generally vest over two years from the grant date and generally have
ten-year contractual terms. Restricted stock units generally have a term of 20 months from the closing date of the agreement. Stock warrants
issued have a term of five years from the closing date of the respective private placements. Information about the assumptions used in
the calculation of stock-based compensation expense is set forth in Notes 4 and 6 in the “Notes to Condensed Financial Statements”.
Revenue
Recognition
We generate substantially all of our revenue from
contractual arrangements with our businesses, colleges and universities and K-12 schools to provide a comprehensive platform of integrated
technology and technology enabled services related to product offerings.
Performance
Obligations and Timing of Recognition
A
performance obligation is a promise in a contract to transfer a distinct good or service to the customer. A contract’s transaction
price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied.
We derive revenue from annual licensing arrangements,
including maintenance fees, setup fees and other variable fees for course development and miscellaneous items. Our contracts with partners
generally have two to five-year terms and have a single performance obligation. The promises to set up and provide a hosted platform
of integrated technology and services that our partners need to attract, enroll, educate and support students are not distinct within
the context of the contracts. This performance obligation is satisfied as the partners receive and consume benefits, which occurs ratably
over the contract term.
Occasionally,
we provide professional services, such as custom development, non-complex implementation activities, training, and other various professional
services. We evaluate these services to determine if they are distinct and separately identifiable in the context of the contract. In
our contracts with customers that contain multiple performance obligations as a result of this assessment, we allocate the transaction
price to each separate performance obligation on a relative standalone selling price basis. Standalone selling prices of our solutions
and services are typically estimated based on observable transactions when the solutions or services are sold on a standalone basis.
When standalone selling prices are not observable, we utilize a cost plus margin approach to allocate the transaction price.
We
do not disclose the value of unsatisfied performance obligations because the variable consideration is allocated entirely to a wholly
unsatisfied promise to transfer a service that forms part of a single performance obligation (i.e., consideration received is based on
the level of product offerings, which is unknown in advance).
We
also receive fees that are fixed in nature, such as annual license and maintenance charges, in place of or in conjunction with variable
consideration. The fees are independent of the number of students that are enrolled in courses with our customers and are allocated to
and recognized ratably over the service period of the contract that the Company’s platform is made available to the customer (i.e.
the customer simultaneously receives and consumes the benefit of the software over the contract service period).
The
following factors affect the nature, amount, timing, and uncertainty of our revenue and cash flows:
|
●
|
The majority of our customers
are private and public learning institutions across various domestic regions, however the majority of our revenue is derived from
enterprise customers
|
|
●
|
The
majority of our customers have annual payment terms
|
Contract
Fulfilment Costs
We
incur certain fulfilment costs related to software design of specific course offerings for our customers, primarily comprised of software
development, configuration costs, and implementation costs. These costs are capitalized and recorded on a contract-by-contract basis
and amortized using the straight-line method over the length of the contract (i.e. on a systematic basis that is consistent with the
transfer to the customer of the goods or services to which the asset relates). There were no costs to fulfill capitalized or amortized
as of March 31, 2021 or June 30, 2020.
Accounts
Receivable, Contract Assets and Liabilities
Balance
sheet items related to contracts consist of accounts receivable (net) and contract liabilities on our condensed balance sheets. Accounts
receivable (net) is stated at net realizable value, and we utilize the allowance method to provide for doubtful accounts based on management’s
evaluation of the collectability of the amounts due. Our estimates are reviewed and revised periodically based on historical collection
experience and a review of the current status of accounts receivable. Historically, actual write-offs for uncollectible accounts have
not significantly differed from prior estimates. There was no allowance for doubtful accounts on accounts receivable balances as of March
31, 2021 and June 30, 2020.
We
may recognize revenue prior to billing a customer when we have satisfied or partially satisfied our performance obligations as billings
to our customers may not be made until after the service period has commenced. As of March 31, 2021 and June 30, 2020, we do not have
any contract assets.
Contract
liabilities as of each balance sheet date represent the excess of amounts billed or received as compared to amounts recognized in revenue
on our condensed statements of operations as of the end of the reporting period, and such amounts are reflected as a current liability
on our condensed balance sheets as deferred revenue. We generally receive payments prior to completion of the service period and our
performance obligations. These payments are recorded as deferred revenue until the services are delivered or until our obligations are
otherwise met, at which time revenue is recognized.
Some
contracts also involve annual license fees, for which upfront amounts are received from customers. In these contracts, the license fees
received in advance of the platform’s launch are recorded as contract liabilities.
Results
of Operations
Revenue
We generated revenues of $201,394 for the three months
ended March 31, 2021 as compared to $20,937 for the three months ended March 31, 2020, an increase of nearly ten times over the same period
for the prior year. As compared to revenues generated of $106,812 for the three months ended December 31, 2020, this represents an increase
of nearly 2 times over the same period for the prior quarter. We generated revenues of $418,315 for the nine months ended March 31, 2021
as compared to $61,244 for the nine months ended March 31, 2020. Revenue growth compared to prior year for both the three months and the
nine months ended March 31, 2021 was primarily driven by growth in the sale of annual license fees and associated implementation and customization
services. In addition, increases in variable revenue related to customer user fees also contributed to the year-over-year increase.
Operating
Expenses
General
and Administrative
General
and administrative expenses consist primarily of personnel and personnel-related expenses, including executive management, legal, finance,
human resources and other departments that do not provide direct operational services. General and administrative expense also includes
professional fees and other corporate expense.
General
and administrative expenses for the three months ended March 31, 2021 were $1,049,128 as compared to $378,541 for the three months ended
March 31, 2020. General and administrative expenses for the nine months ended March 31, 2021 were $3,523,259 as compared to $1,377,450
for the nine months ended March 31, 2020. The increases are due primarily to the hiring of new team members.
Technology
and Content Development
Technology
and content development expenses consist primarily of personnel and personnel-related expense and contracted services associated with
the ongoing improvement and maintenance of our platform as well as hosting and licensing costs. Technology and content expense also include
the amortization of capitalized software costs.
As we worked in third quarter to position Amesite
to close repeatable sales, we continued to create features and capabilities that supported customer needs at larger scale. On March 1,
2021, we announced the successful implementation of our whole enterprise solution for The Henry Ford Museum of American Innovation. We
were able to provide their organization with the ability to migrate their entire training system into our AI-backed ecosystem, enabling
them to more efficiently achieve their goals of teaching and inspiring the next generation of innovators and inventors. Since launching
the Amesite platform, The Henry Ford has seen greater than 95% learner retention, which is in line with the overall Amesite average.
We believe that our continuous investment in our platform
technology is a key factor in our product differentiation. We delivered our third generation (Gen 3) platform in January 2020, and have
continued work on the next generation of the Amesite platform (Gen 4); and we are targeting availability by the end of Q1 2022.
We believe that our strong reviews and high learner
retention are proof points on our product and will help drive sales. We are targeting maintaining these reviews with larger programs in
Q4 2021 and Q1 2022.
We believe the specific, unique features that we have
delivered have enabled our partners to launch programs easily and with low overhead. Automated grading and release, tracking of user participation
and automation of notifications reduce administrative burdens for our customers, and improve the user experiences. In Q4 2021, we aim
to deliver global dashboards, to enable multinational organizations to better plan, launch and track learning. We also aim to deliver
expanded user analytics and demonstrate integration with other enterprise solutions in Q4 2021.
Our goal is to improve the way the world learns, specifically
by improving the user experience in learning and providing more engaging, customized experiences.
Technology and content development expenses for the
three months ended March 31, 2021 were $615,157 as compared to $344,401 for the three months ended March 31, 2020. Technology and content
development expenses for the nine months ended March 31, 2021 were $1,593,934 as compared to $924,072 for the nine months ended March
31, 2020. The increases are due primarily to technical contract services that support the development of our technology.
Sales and Marketing
Sales and marketing expense consist primarily of activities
to attract customers to our offerings. This includes personnel and personnel-related expenses, various search engine and social media
costs as well as the cost of advertising.
We significantly increased expenditures on sales and marketing in Q3 2021
as we increased focus on our digital presence to drive lead generation and pipeline growth in support of our sales team. We also continued
our focus on creation of value-added content and social posts including the release of The Henry Ford Museum of American Innovation case
study. Our recruitment efforts within our sales and marketing teams continued. We hired an additional Director of Enterprise Sales as
we believe the opportunity in the Enterprise market is significant and growing.
We have the ability to deliver solutions for whole
enterprises, including enterprises that offer paid learning opportunities for other enterprises or individuals. We strive to be agile
and aggressive in pursuing contracts at larger scales, even as we continue to provide services to companies and universities for specific
programs and applications. We believe that the ease of use of our platform enables adoption in these cases, and in Q4 2021, we aim to
demonstrate more results of programs.
We plan to pursue selected business opportunities,
including joint collaboration and acquisitions that have the potential to build sales more rapidly. We aim to develop and pursue such
opportunities on an annual basis to grow the Company.
Sales
and marketing expenses for the three months ended March 31, 2021 were $860,562 as compared to $182,814 for the three months ended March
31, 2020. Sales and marketing expenses for the nine months ended March 31, 2021 were $1,385,202 as compared to $565,198 for the nine
months ended March 31, 2020. The increases are due primarily to increased digital marketing efforts, personnel and personnel-related
costs.
Interest
Income
For
the three months ended March 31, 2021, interest income totaled $703 as compared to interest income of $8,134 for the three months ended
March 31, 2020. For the nine months ended March 31, 2021, interest income totaled $1,323 as compared to interest income of $16,125 for
the nine months ended March 31, 2020.
Net
Loss
Our
net loss for the three months ended March 31, 2021 was $2,322,750 as compared to a net loss for the three months ended March 31, 2020
of $876,685. Our net loss for the nine months ended March 31, 2021 was $9,696,588 as compared to a net loss for the nine months ended
March 31, 2020 of $2,789,428. The loss was substantially higher during the nine months ended March 31, 2021 compared to 2020 as a result
of both increased operating expenses noted above, as well incremental interest expense incurred in connection with our Offering.
Financial
Position, Liquidity, and Capital Resources
Overview
We
are not currently profitable, and we cannot provide any assurance that we will ever be profitable, as indicated by our losses noted above.
As of March 31, 2021, our cash and cash equivalents
balance totaled $12,121,692.
At present, we believe that our cash balances should
be sufficient to satisfy our anticipated operating and investing needs beyond the next 12 months. However, it is possible that we will
choose to accelerate our plan of operations in order to attract and sign more customers or to support current customers, and that we
will require more funds than we currently have available to meet those needs. The source, timing and need for any future financing will
depend principally upon market conditions, and, more specifically, on the decision to accelerate our plan of operations or alter our
strategic growth plans. Funding may not be available when needed, at all, or on terms acceptable to us, and, even if it is available,
future equity issuances may result in dilution to its existing stockholders and future debt securities may contain covenants that limit
the Company’s operations or ability to enter into certain transactions. Lack of necessary funds may require us to, among other
things, delay, scale back or eliminate any decision to accelerate our plan of operations or alter our strategic growth plans.
Off-Balance
Sheet Arrangements
We
did not have during the periods presented, nor do we currently have, any off-balance sheet arrangements as defined under applicable SEC
rules.
Changes
in and Disagreements with Accountants on Accounting and Financial Disclosure
None.