Management Plans Capital Resources

3 Months Ended

Mar. 31, 2022

Basis of Presentation

Management Plans - Capital Resources

Note 2. Management Plans - Capital Resources

The Company reported net losses of $868,234 and $152,227 for the three months ended March 31, 2022 and 2021, respectively, and stockholders’ deficiencies of $4,816,866 and $4,097,889 at March 31, 2022 and December 31, 2021, respectively. The Company has a working capital deficit of approximately $3.85 million at March 31, 2022. Previously, this has raised substantial doubt about the entity’s ability to continue as a going concern within one year. The Company has plans to issue stock, restructure certain debt and anticipates significant growth of business. These plans, in management’s opinion, will allow the Company to meet its obligations and alleviate the substantial doubt.

The Company’s mission is to drive shareholder value by developing and bringing to market automated, cost effective, and innovative cybersecurity technologies. The Company’s strategy is to build its business by designing, developing, and marketing IT security-based products and solutions that fill technology gaps in cybersecurity.

The Company’s goal is to increase sales and generate cash flow from operations on a consistent basis. The Company’s business plans require improving the results of its operations in future periods. The Company has renegotiated the terms of certain obligations, using operational cash flow to pay down balances and extending terms, and provided financing with the issuance of new loans.

During February 2022, the Company entered into a financing arrangement with Mast Hill Fund, L.P. for $370,000. Under the terms of the Loan, amortization payments are due beginning June 15, 2022, and each month thereafter with the final payment due on February 15, 2023.

During the first quarter of 2022, the Company filed an S-1 for a public offering of $15 million of common stock and redeemable warrants, which is expected to be used for the acquisition discussed in Note 13 and working capital needs. The Company anticipates this offering to be completed during the second quarter of 2022. The completion of this offering is not a certainty. Should the offering not proceed or be delayed, or should it occur in a reduced format, the Company will scale down spending to reduce costs and to increase cash flow while continuing to grow the operations at a slower pace.

Subsequent to the quarter ended March 31, 2022, the Company entered into a financing arrangement with Talos Victory Fund, LLC. for $296,000. Under the terms of the Loan, amortization payments are due beginning August 12, 2022, and each month thereafter with the final payment due on April 12, 2023.

The Company believes the capital resources to be generated by the planned public offering noted above, the planned improvement to the Company’s results of future operations as well as cash available under its factoring line of credit and from additional related parties and third-party loans, if needed, provide sources to fund its ongoing operations and to support the internal growth of the Company.

In the event that the planned public offering is delayed, reduced in size, or does not occur, the Company’s plans may include the following:

· Negotiate, extend, convert debt to equity and/or restructure debt.

· Immediately execute a significant downsized operating plan with the goal of providing free cash flow.

· Create and execute an alternative equity transaction.

· Pay down debt or offset debt with receivables and deposits

· Reduce the planned expenses associated with the aggressive growth plan initiated in anticipation of the planned public offering.

· Discontinue new software development activities and all related expenses except those necessary to complete sales and make most development costs variable by using contractors.

The Company also plans to continue to evaluate alternatives which may include continuing to renegotiate the terms of other notes, seeking conversion of the notes to shares of common stock and seeking funds to repay the notes. The Company continues to evaluate repayment of our remaining notes payable based on its cash flow. These plans, in management’s opinion, will allow the Company to meet its obligations for a reasonable period of time from the date the financial statements are available to be issued.