The following is management's discussion and analysis of certain significant
factors that have affected our financial position and operating results during
the periods included in the accompanying condensed consolidated financial
statements, as well as information relating to the plans of our current
management. This report includes forward-looking statements. Generally, the
words "believes," "anticipates," "may," "will," "should," "expect," "intend,"
"estimate," "continue," and similar expressions or the negative thereof or
comparable terminology are intended to identify forward-looking statements. Such
statements are subject to certain risks and uncertainties, including the matters
set forth in this report or other reports or documents we file with the
Securities and Exchange Commission from time to time, which could cause actual
results or outcomes to differ materially from those projected. Undue reliance
should not be placed on these forward-looking statements which speak only as of
the date hereof. We undertake no obligation to update these forward-looking
statements.
Although the Company believes that the expectations reflected in the
forward-looking statements are reasonable, the Company cannot guarantee future
results, levels of activity, performance, or achievements. Except as required by
applicable law, including the securities laws of the United States, the Company
does not intend to update any of the forward-looking statements to conform these
statements to actual results.
Our financial statements are prepared in accordance with accounting principles
generally accepted in the United States ("GAAP"). These accounting principles
require us to make certain estimates, judgments, and assumptions. We believe
that the estimates, judgments, and assumptions upon which we rely are reasonable
based upon information available to us at the time that these estimates,
judgments, and assumptions are made. These estimates, judgments, and assumptions
can affect the reported amounts of assets and liabilities as of the date of the
financial statements as well as the reported amounts of revenues and expenses
during the periods presented. Our financial statements would be affected to the
extent there are material differences between these estimates.
The following discussion should be read in conjunction with our unaudited
financial statements and the related notes that appear elsewhere in this
Quarterly Report on Form 10-Q.
THE COMPANY
Cytta Corp., ("Cytta" or the "Company") was incorporated on May 30, 2006 under
the laws of the State of Nevada. It is located in Las Vegas, Nevada. Cytta is in
the business of imagineering, developing and securing disruptive technologies.
Results of Operations for the three and nine months ended June 30, 2022 and
2021:
Revenue
Revenues of $936 and $2,809 for the three and nine months ended June 30, 2022,
respectively, were from deferred revenue on subscription agreements being
recognized. Revenues of $70,520 for the nine months ended June 30, 2021, consist
of hardware imbedded with our proprietary software, integration consulting
services, tech support and product maintenance billed to the customer.
Cost of goods sold
Cost of goods sold was $25,277 for the nine months ended June 30, 2021.
Operating expenses
Operating expenses were $1,175,320 and $3,819,174 for the three and nine months
ended June 30, 2022, respectively, compared to $607,685 and $1,679,651,
respectively, for the three and nine months ended June 30, 2021.
Three months ended Nine months ended
June 30, June 30,
Description 2022 2021 2022 2021
Related party expenses (excluding
stock-based expenses) $ 216,932 $ 187,991 $ 895,078 $ 490,952
Stock based expenses 444,319 267,748 1,733,661 658,997
Professional fees 152,254 35,644 358,173 156,324
Consulting expenses 124,839 54,450 190,539 102,267
Depreciation expense 11,904 11,053 35,711 28,962
Equipment and demo expenses 44,894 7,216 204,839 61,627
General and Administrative,
officers 11,958 (2,817 ) 30,545 51,556
Auto, travel and entertainment 27,812 21,172 82,239 52,249
Rent expense 6,446 4,130 15,175 12,323
Investor relations 20,757 - 58,504 -
Other operating expenses 113,205 21,098 214,710 64,394
Total $ 1,175,320 $ 607,685 $ 3,819,174 $ 1,679,651
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For the three and nine months ended June 30, 2022, and 2021, the Company
recorded fee and stock compensation expenses to related parties in the following
amounts:
Three months ended Nine months ended
June 30, June 30,
Description 2022 2021 2022 2021
CEO-Management fees $ 60,000 $ 39,000 $ 263,000 $ 111,000
Chief Technology Officer (CTO) 60,000 61,584 263,000 133,584
Chief Administration Officer (CAO) 45,000 30,000 210,000 90,000
Stock-based compensation 39,063 38,992 117,189 117,118
Office rent and expenses 12,869 18,415 41,889 39,250
Total $ 216,932 $ 187,991 $ 895,078 $ 490,952
Stock-based expenses increased in the current periods compared to the prior
periods substantially as a result of $210,844 and $1,382,686 related to the
amortization of stock-based compensation for the three and nine months ended
June 30, 2022, as well as the expense of $233,475 and $350,975 for shares issued
and expensed for the three and nine months ended June 30, 2022.
During the three and nine months ended June 30, 2022, professional fee expenses
increased as a result of accounting and auditing fees increasing as a result of
being a fully reporting public company for the entire current year period and
only for a partial period in the prior year. Legal expenses also increased due
to expenses incurred in the defense of the Skoblow case.
During the three and nine months ended June 30, 2022, consulting expenses
increased primarily as a result of the engagement of a firm to provide a testbed
for market-product fit, user value and the general evolution of the product.
Additionally, the product will have enhanced video sharing features as well as
the development of both a desktop web app and a native mobile app. During the
three and nine months ended June 30, 2022, the Company incurred expenses of
$79,500 and $106,750 related to this project.
During the three and nine months ended June 30, 2022, equipment and demo
expenses increased as a result of the Company utilizing existing inventory to be
sent out for demo purposes.
The following tables set forth key components of our balance sheet as of June
30, 2022, and September 30, 2021.
June 30,
2022 September 30, 2021
Current Assets $ 1,715,762 $ 1,102,449
Property and Equipment $ 134,894 $ 170,605
Total Assets $ 1,850,656 $ 1,273,054
Current Liabilities $ 475,859 $ 406,809
Total Liabilities $ 475,859 $ 406,809
Stockholders' Equity $ 1,374,797 $ 866,245
Total Liabilities and Stockholders' Equity $ 1,850,656 $ 1,273,054
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Liquidity and Capital Resources
Our current capital and our other existing resources will be sufficient to
provide the working capital needed for our current business Additional capital
will be required to further expand our business. We may be unable to obtain the
additional capital required. Our inability to generate capital or raise
additional funds when required will have a negative impact on our business
development and financial results. These conditions raise substantial doubt
about our ability to continue as a going concern as well as our recurring losses
from operations and the need to raise addition. This "going concern" could
impair our ability to finance our operations through the sale of debt or equity
securities. During the nine months ended June 30, 2022, the Company has raised
$2,963,500 from the sale of 59,270,000 shares of Series F Preferred Stock.
As of June 30, 2022, we had cash of $1,569,367 compared to $173,196 at September
30, 2021. As of June 30, 2022, we had current assets of $1,715,762 and current
liabilities of $475,859, which resulted in working capital of $1,239,903. The
current liabilities are comprised of accounts payable, accounts payable-related
parties, accrued expenses, dividends payable and stock to be issued.
In December 2019, a novel strain of coronavirus (COVID-19) emerged. Because
COVID-19 infections have been reported throughout the United States, certain
federal, state and local governmental authorities have issued stay-at-home
orders, proclamations and/or directives aimed at minimizing the spread of
COVID-19. The ultimate impact of the COVID-19 pandemic on the Company's
operations is unknown and will depend on future developments, which are highly
uncertain and cannot be predicted with confidence, including the duration of the
COVID-19 outbreak, new information which may emerge concerning the severity of
the COVID-19 pandemic, and any additional preventative and protective actions
that governments, or the Company, may direct, which may result in an extended
period of continued business disruption, and reduced operations. Any resulting
financial impact cannot be reasonably estimated at this time but it may have a
material adverse impact on our business, financial condition and results of
operations. Management expects that its business will be impacted to some
degree, but the significance of the impact of the COVID-19 outbreak on the
Company's business and the duration for which it may have an impact cannot be
determined at this time.
The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. As of June 30, 2022, the Company
had an accumulated deficit of $26,639,427 and has also generated losses since
inception. These factors, among others, raise substantial doubt about the
ability of the Company to continue as a going concern.
Operating Activities
For the nine months ended June 30, 2022, net cash used in operating activities
was $1,567,329 compared to $976,002 for the nine months ended June 30, 2021. For
the nine months ended June 30, 2022, our net cash used in operating activities
was primarily attributable to the net loss of $3,864,522, adjusted by
stock-based compensation of $1,850,850 and depreciation of $35,711. Net changes
of $410,632 in operating assets and liabilities decreased the cash used in
operating activities.
For the nine months ended June 30, 2021, net cash used in operating activities
of $976,002 was primarily attributable to the net loss of $1,634,238, adjusted
for non-cash expenses of stock- based expenses of $776,115 and depreciation of
$28,962, and net changes of $146,841 in operating assets and liabilities.
Investing Activities
For the nine months ended June 30, 2022, there was no cash used in investing
activities and net cash used in investing activities was $61,914 for the nine
months ended June 30, 2021. The expenditures were for the purchases of office
furniture and equipment.
Financing Activities
For the nine months ended June 30, 2022, net cash provided by financing
activities was $2,963,500, compared to $707,500 for the nine months ended June
30, 2021. During the nine months ended June 30, 2022, we received $2,963,500 of
proceeds received pursuant to the sale of 59,270,000 shares of Series F
Preferred Stock at $0.05 per share. For the nine months ended June 30, 2021, the
Company received $682,500 from the sale of preferred stock and $25,000 from the
sale of 1,000,000 shares of common stock at $0.025 per share.
As of June 30, 2022, the Company had $1,569,367 in cash on hand. Management
believes the working capital is sufficient to meet its' ongoing commitments for
the next year and to begin executing on its' business plan.
Critical Accounting Policies
Our significant accounting policies are summarized in Note 3 of our financial
statements. While all these significant accounting policies impact our financial
condition and results of operations, we view certain of these policies as
critical. Policies determined to be critical are those policies that have the
most significant impact on our financial statements and require management to
use a greater degree of judgment and estimates. Actual results may differ from
those estimates. Our management believes that given current facts and
circumstances, it is unlikely that applying any other reasonable judgments or
estimate methodologies would cause an effect on our results of operations,
financial position or liquidity for the periods presented in this report.
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Property and Equipment
Property and equipment are stated at cost, and depreciation is provided by use
of a straight-line method over the estimated useful lives of the assets.
The Company reviews property and equipment for potential impairment whenever
events or changes in circumstances indicate that the carrying amounts of assets
may not be recoverable. The estimated useful lives of property and equipment is
as follows:
Vehicles and equipment 5 years
Software 3 years
Revenue Recognition
Effective January 1, 2018, the Company adopted ASC 606 - Revenue from Contracts
with Customers. Under ASC 606, the Company recognizes revenue from the
commercial sales of products by: (1) identify the contract (if any) with a
customer; (2) identify the performance obligations in the contract (if any); (3)
determine the transaction price; (4) allocate the transaction price to each
performance obligation in the contract (if any); and (5) recognize revenue when
each performance obligation is satisfied. The Company has no outstanding
contracts with any of its' customers. The Company recognizes revenue when title,
ownership, and risk of loss pass to the customer, all of which occurs upon
shipment or delivery of the product and is based on the applicable shipping
terms.
Stock-Based Compensation
The Company accounts for its stock based compensation under the recognition and
measurement principles of the fair value recognition provisions of Statement of
Financial Accounting Standards No. 123 (revised 2004) "Share-Based Payment"
("SFAS No. 123R")(ASC 718) using the modified prospective method for
transactions in which the Company obtains employee services in share-based
payment transactions and the Financial Accounting Standards Board Emerging
Issues Task Force Issue No. 96-18 "Accounting For Equity Instruments That Are
Issued To Other Than Employees For Acquiring, Or In Conjunction With Selling
Goods Or Services" ("EITF No. 96-18") for share-based payment transactions with
parties other than employees provided in SFAS No. 123(R) (ASC 718). All
transactions in which goods or services are the consideration received for the
issuance of equity instruments are accounted for based on the fair value of the
consideration received or the fair value of the equity instrument issued,
whichever is more reliably measurable. The measurement date used to determine
the fair value of the equity instrument issued is the earlier of the date on
which the third-party performance is complete or the date on which it is
probable that performance will occur.
Earnings (Loss) Per Share
The Company computes net loss per share in accordance with FASB ASC 260,
"Earnings per Share." ASC 260 requires presentation of both basic and diluted
earnings per share (EPS) on the face of the statement of operations. Basic EPS
is computed by dividing net income (loss) available to common shareholders by
the weighted average number of common shares outstanding during the period.
Diluted EPS gives effect to all dilutive potential common shares outstanding
during the period including stock options, using the treasury stock method, and
convertible notes and stock warrants, using the if-converted method. In
computing diluted EPS, the average stock price for the period is used in
determining the number of shares assumed to be purchased from the exercise of
stock options, warrants and conversion of convertible notes. Diluted EPS
excludes all dilutive potential common shares if their effect is anti-dilutive.
Off Balance Sheet Arrangements
We have no off-balance sheet arrangements including arrangements that would
affect our liquidity, capital resources, market risk support and credit risk
support or other benefits.
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