OPENLOCKER HOLDINGS, INC. The following discussion and analysis of the financial condition and results of
operations of
Overview
We seek to invest in companies with:
? defensible barriers to entry, ? proven value propositions, ? identifiable growth opportunities or operational improvements, and ? paths to sustainable competitive advantages.
We expect to provide strategic guidance through a network of experienced executives with operational and industry expertise, as well as financing support and other resources necessary to drive value.
Business of OpenLocker
Established on
OpenLocker connects the digital and the physical worlds by offering real world utility and a physical token of ownership to fans who purchase a digital collectible on its Web3 platform. The limited-edition Platinum Cards are wallet-sized, metal collectible cards that are hand-signed by the athlete and feature the digital art on one side and QR code on the back which directs to the digital viewer. The digital and physical collectibles will grant access to VIP experiences and enable fans to receive rewards from local, regional and national retailers.
The fan communities in development will feature unique branding and strategic
marketing campaigns to bolster fan awareness without the use of
university-licensed marks. For instance, the
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The OpenLocker mission is to empower athletes to monetize their fan engagement with innovative digital collectibles and to create meaningful experiences for fans by using OpenLocker's technology to build communities. Each digital token is authenticated on the blockchain with a unique serial number which is assigned to the buyer upon purchase. The selection and pricing of each collection is determined by such factors as the size of the target audience, the athlete's popularity, and associated utility and goals set forth by the community manager. To further engage super fans and boosters, as well as increase athlete's earning potential, a one-of-one NFT may also be offered for sale by auction and includes autographed gear/ memorabilia and personalized experiences (meet-and-greet or customized activity) with the athlete, arranged by OpenLocker with the athlete's input and approval.
A majority of the revenue from the BYHC project was generated on the first day
of sales of the NFTs. The first two hours were the busiest as fans were
incentivized by the free autographed "Platinum card" that was included with
purchase for the first 25 NFTs sold per athlete. This unique collectible is a
metal, wallet-sized card hand-signed by the athlete with the digital art printed
on the front and quick response (QR) code that directs to the NFT viewer on the
back. Another stream of revenue was generated in
OpenLocker's plan is to take the exclusive fan club model (
OpenLocker's current revenue model includes (i) profit sharing of primary sales on the OpenLocker platform with partners and athletes, (ii) collecting transaction fees from transactions on OpenLocker's trading portal, as well as (iii) service fees for additional creative design work, development and product fulfillment services.
OpenLocker has also negotiated deals with several professional lacrosse players
to release an NFT collection leading into the 2022
Moreover, OpenLocker has been in discussions with athletes outside of the
college sports arena, including related to golf and race car driving and
foresees opportunities in
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OpenLocker launched the OpenStable marketplace in
The launch strategy for the OpenStable marketplace involved reaching the largest
audience of racing fans (both casual and committed) by creating a collection of
NFTs featuring the leading contenders in the
The MOU has provided OpenLocker with access to the Horse Races Now's (horseracesnow.com) database of 600,000 users and placement in the app. OpenLocker also executed a weeklong digital promotion in the Daily Racing Form and conducted media interviews, as well as social media campaigns. While the racing season was at its height, OpenLocker benefited from significant traffic to its website and generated some sales of gear, including apparel, hats, pins, and other items featuring each racehorse's unique brand (also featuring the OpenStable logo). Additional NFT releases are expected to be made over the course of summer 2022, in connection with various racehorses.
Finally, the user-friendly interface that OpenLocker created for college sports fans and emphasis on fan community building is an important differentiator for OpenStable as it seeks to position itself as the next-generation marketing solution within the thoroughbred racing space. As the average fan is currently over 50 years old and likely unfamiliar with blockchain technology, simplifying NFTs is vital for piquing their interest. Offering ownership of digital tokens along with rewards and experiences, both in the virtual and physical realms, also makes OpenStable products attractive to a younger audience with a goal to develop a next generation younger fan engagement around the thoroughbred racing sport.
OpenLocker believes that it has found a unique and attractive market for the
application of NFTs by focusing on the college athlete market. For example,
pursuant to a Statista survey published on
Plan of Operations
Over the next 12 months, we expect to require approximately
We are planning to obtain the funds necessary to execute our plan of operations
from various capital raises, including potentially through private placements or
our common stock or the issuance and sales of convertible notes, as well as
potentially through a registration statement or an offering statement filed with
the
There can be no assurance that we will be able to obtain the necessary funds for our foregoing operations on terms that are acceptable to us or at all, and there can be no assurance that our plan of operations can be executed as planned, or at all.
RESULTS OF OPERATIONS Revenues
During the year ended
34 Operating Expenses
Operating expenses for the year ended
Loss from Operations
Loss from operations for the year ended
Net Loss
Net loss for the year ended
There is significant uncertainty projecting future profitability due to our history of losses and lack of revenues. In our current state, we have no recurring or guaranteed source of revenues and cannot predict when, if ever, we will become profitable. There is significant uncertainty projecting future profitability due to our minimal operating history and lack of guaranteed ongoing revenue streams.
Liquidity and Capital Resources
As of
The following table sets forth a summary of our cash flows for the year ended
Seven Month
Year Period
Ended Ended
July 31, 2022 July 31, 2021
Net cash used in operating activities
13,326 18,664
Net cash provided by financing activities 827,158 50,000
Net increase in cash 553,957 52,730
Cash, beginning 53,178 448
Cash, ending $ 607,135 $ 53,178 Since inception, we have financed our cash flow requirements through issuance of common stock and debt financing. As we expand our activities, we may, and most likely will, continue to experience net negative cash flows from operations. We anticipate obtaining additional financing to fund operations through additional common stock offerings, to the extent available, or to obtain additional financing to the extent necessary to augment our working capital.
We anticipate that we will incur operating losses in the next twelve months. Our lack of operating history makes predictions of future operating results difficult to ascertain. Our prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies in their early stage of development, particularly companies in new and rapidly evolving markets. Such risks for us include, but are not limited to, an evolving and unpredictable business model and the management of growth. To address these risks, we must, among other things, obtain a customer base, implement and successfully execute our business and marketing strategy, continually develop and upgrade our website, provide national and regional industry participants with an effective, efficient and accessible website on which to promote their products and services through the Internet, respond to competitive developments, and attract, retain and motivate qualified personnel. There can be no assurance that we will be successful in addressing such risks, and the failure to do so can have a material adverse e
Effects of Coronavirus on the Company
If the current outbreak of the coronavirus continues, the effects of such a widespread infectious disease and epidemic may inhibit our ability to conduct our business and operations and could materially harm our Company. The coronavirus may cause us to have to reduce operations as a result of various lock-down procedures enacted by the local, state or federal governments. The continued coronavirus outbreak may also restrict our ability to raise funding when needed, and may cause an overall decline in the economy as a whole. The specific and actual effects of the spread of coronavirus are difficult to assess at this time as the actual effects will depend on many factors beyond the control and knowledge of the Company. However, the spread of the coronavirus, if it continues, may cause an overall decline in the economy as a whole and also may materially harm our Company.
Critical Accounting Policies and Estimates
Our management's discussion and analysis of our financial condition and results
of operations is based on our financial statements, which have been prepared in
accordance with
Going Concern and Management's Plans
These consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business.
As reflected in the accompanying consolidated financial statements, for the year
ended
? Net loss of$2,556,714 ; and ? Net cash used in operations of$286,527
Additionally, at
? Accumulated deficit of$2,708,155 ? Stockholders' equity of$5,719,109 ; and ? Working capital of$506,260
We manage liquidity risk by reviewing, on an ongoing basis, our sources of
liquidity and capital requirements. The Company has cash on hand of
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The Company has incurred significant losses since its inception and has not
demonstrated an ability to generate sufficient revenues to achieve profitable
operations. There can be no assurance that profitable operations will ever be
achieved, or if achieved, could be sustained on a continuing basis. In making
this assessment we performed a comprehensive analysis of our current
circumstances including: our financial position, our cash flows and cash usage
forecasts for the twelve months ended
The Company has satisfied its obligations from the issuance of common stock; however, there is no assurance that such successful efforts will continue during the twelve months subsequent to the date these consolidated financial statements are issued.
If the Company does not obtain additional capital, the Company will be required to reduce the scope of its business development activities or cease operations. The Company continues to explore obtaining additional capital financing and the Company is closely monitoring its cash balances, cash needs, and expense levels.
These factors create substantial doubt about the Company's ability to continue as a going concern within the twelve-month period subsequent to the date that these consolidated financial statements are issued. The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. Accordingly, the consolidated financial statements have been prepared on a basis that assumes the Company will continue as a going concern and which contemplates the realization of assets and satisfaction of liabilities and commitments in the ordinary course of business.
Management's strategic plans include the following:
? Pursuing additional capital raising opportunities, ? Continuing to explore and execute prospective partnering or distribution
opportunities?
? Identifying strategic acquisitions; and ? Identifying unique market opportunities that represent potential positive short-term cash flow. Principles of Consolidation
These consolidated financial statements have been prepared in accordance with
Use of Estimates
Preparing financial statements in conformity with
Goodwill and Impairment
In financial reporting, goodwill is not amortized, but is tested for impairment annually or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Events that result in an impairment review include significant changes in the business climate, declines in our operating results, or an expectation that the carrying amount may not be recoverable. We assess potential impairment by considering present economic conditions as well as future expectations. All assessments of goodwill impairment are conducted at the individual reporting unit level.
The Company uses qualitative factors according to ASC 350-20-35-3 to determine
whether it is more likely than not that the fair value of goodwill is less than
its carrying amount. During the year ended
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Intangible Assets and Impairment
Definite-lived intangible assets are amortized on a straight-line basis over their estimated useful lives. Indefinite-lived intangible assets are reviewed for impairment annually. The Company reviews definite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
There were no impairment losses for the year ended
Revenue Recognition
OpenLocker generates revenue from two main sources, primary sales of NFTs on its online store and commissions collected from sales on the secondary marketplace.
Revenue is recognized in accordance with FASB Topic ASC No. 606, "Revenue from Contracts with Customers". The Company recognizes revenue when its performance obligations are complete, which occurs at a point in time related to the transfer of an NFT to its customer. Currently, all sales contain a single performance obligation.
All payments are received from third-party payment processing providers. The Company receives payments from sales on its primary marketplace (Shopify site) as well as two other sources. Each of these sources of payment relate to the completion of a single performance obligation completed at a point in time, which occurs upon the transfer of an NFT and where no further performance obligations are required:
? Shopify payouts from credit/debit cards transactions typically occur 2-3 days
after date of sale, ? PayPal payments are received same day; and ? Cryptocurrency payments are deposited immediately into OpenLocker's Coin Payments account.
The Company also recognizes revenues generated from the 5% commission fee
collected on secondary marketplace sales transacted on the OpenLocker Trading
Portal site, operated by Mint Blockchain Solutions, which is deposited into a
blocto wallet. The platform uses FUSD (1:
Shipping fees collected from customers for physical collectibles are included with revenues received from Shopify payouts. The majority of those collectibles have not yet been shipped due to a delay in receiving the goods from our vendor. Prior to the product shipping, any amounts received in advance are accounted for as contract liabilities (deferred revenue).
Software Development Costs
Internal-use software development costs are accounted for in accordance with ASC
350- 40, "
Once an application has reached the development stage, internal and external costs incurred to develop internal-use software are capitalized and amortized on a straight-line basis over the estimated useful life of the software (typically three to five years).
Maintenance and enhancement costs, including those costs in the post-implementation stages, are typically expensed as incurred, unless such costs relate to substantial upgrades and enhancements to the software that result in added functionality, in which case the costs are capitalized and amortized on a straight-line basis over the estimated useful life of the software.
The Company reviews the carrying value for impairment whenever facts and circumstances exist that would suggest that assets might be impaired or that the useful lives should be modified. Amortization expense related to capitalized internal-use software development costs will be included in cost of goods sold in the statements of operations.
For the year ended
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Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
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