Management's Discussion and Analysis should be read along with the financial statements included in this Quarterly Report on Form 10-Q (the "Financial Statements"). The Financial Statements have been prepared in accordance with generally accepted accounting policies in the United States ("GAAP"). Except as otherwise disclosed, all dollar figures included therein and in the following management discussion and analysis are quoted in United States dollars.
The Company operates as a marketer of branded safes and personal security products. Additionally, the Company designs and produces branded accessories and apparel including with concealment pockets.
We focus on primarily using U.S.-made steel as the primary component of our safes and personal security products. We believe our products are designed to safely store firearms, as well as store our customers' priceless keepsakes, family heirlooms and treasured memories, and aim to make our products accessible at various price points for home use. We believe our products are designed for safety, quality, reliability, features and performance.
In addition to branded safes, we offer an assortment of personal security products as well as apparel and accessories for men and women under the American Rebel brand. Our backpacks utilize what we believe is a distinctive sandwich-method concealment pocket, which we refer to as our Personal Protection Pocket, to hold firearms in place securely and safely. Concealment pockets on our Freedom 2.0 Concealed Carry Jackets incorporate a silent operation opening and closing with the use of a magnetic closure.
We believe that we have the potential to continue to create an American brand community presence, in part through our Chief Executive Officer, Mr. Charles A. "Andy" Ross, who has written, recorded and performs a number of songs about the American spirit of independence. We believe our customers identify with the values expressed by our Chief Executive Officer through the "American Rebel" brand.
Through our growing network of dealers, we promote and sell our products in select regional retailers and local specialty safe, sports, hunting and firearms stores, as well as via e-commerce marketplace. The brand shares a commitment to offering products of what we believe are enduring quality and comfort that allow customers to keep their valuable belongings safe on the go and express their patriotism and style, which is synonymous with the American Rebel brand.
We generate revenue from the following activities:
The costs of our revenue primarily consist of productions costs, product development, consulting, and marketing and brand development fees.
Our results of operations and financial condition may be impacted positively and negatively by certain general macroeconomic and industry wide conditions, such as the effects of the COVID-19 pandemic. The consequences of the pandemic and impact on the U.S. and global economies continue to evolve and the full extent of the impact is uncertain as of the date of this filing. The pandemic has had a significant effect on the safe and personal security industry and on the apparel industry. If the recovery from the COVID-19 pandemic is not robust, the impact could be prolonged and severe. While to date the Company has not been required to stop operating, management is evaluating its use of its office space, virtual meetings and the like. While our manufacturing capabilities have been suffering, and could continue to suffer from mandatory, forced production disruptions, which negatively impact our ability to satisfy the demand for our products, as the result of the pandemic, we expect that the impact of such attrition would be mitigated by the addition of new customers resulting from the increasing demand for home, office and personal safety and security. The extent to which the COVID-19 pandemic will impact our operations, ability to obtain financing or future financial results is uncertain at this time. Due to the effects of COVID-19, management worked to reduce unnecessary marketing expenditures and worked to improve staff and human capital expenditures, while maintaining overall workforce levels. The Company expects but cannot guarantee that demand for its safes and personal security products will continue to keep growing in 2022 and beyond, as customers continue to spend more time working remotely, and increasing regulation in many states mandating safe ammunition storage, accelerating the demand for our responsible solution safes and making them a necessary appliance for any household, providing protection for expensive firearms and other valuables. Overall, management is focused on effectively positioning the Company for meeting the increasing demand for our safes and faster production turnaround.
Our goal is to enhance our position as a designer, producer and marketer of premium safes and personal security products. We have established plans to grow our business by focusing on three key areas: (1) organic growth and expansion in existing markets; (2) targeted strategic acquisitions that increase our on-premise and online product offerings, distributor and retail footprint and/or have the ability to increase and improve our manufacturing capabilities and output, and (3) expanding the scope of our operation activities to the dispensaries U.S. community.
We have developed what we believe is a multi-pronged growth strategy, as described below, to help us capitalize on a sizable opportunity. Through methodical sales and marketing efforts, we believe we have implemented several key initiatives we can use to grow our business more effectively. We believe we made significant progress in 2021 in the largest growing segment of the safe industry, sales to first-time buyers. We also intend to opportunistically pursue the strategies described below to continue our upward trajectory and enhance stockholder value. Key elements of our strategy to achieve this goal are as follows:
Organic Growth and Expansion in Existing Markets - Build our Core Business
The cornerstone of our business has historically been safe product offerings. We are focused on continuing to develop our home, office and personal safes product lines. We are investing in adding what we believe are distinctive technology solutions to our safes.
We are also working to increase floor space dedicated to our safes and strengthen our online presence in order to expand our reach to new enthusiasts and build our devoted American Rebel community. We intend to continue to endeavor to create and provide retailers and customers with what we believe are responsible, safe, reliable and stylish products, and we expect to concentrate on tailoring our supply and distribution logistics in response to the specific demands of our customers.
We launched our Freedom line of safes during the second quarter of 2022. The Freedom line of safes are made from 12 gauge American-made steel and carry a 60 minute at 1200 degrees fire rating. The Freedom safe is available in three sizes: the Freedom 20, the Freedom 30, and the Freedom 50. The exterior is a stylish dark grey textured finish with a plush velour interior containing high-capacity gun racks and a custom door organizer.
An additional new product we expect to launch during the fourth quarter of this year is our 2A Locker. The 2A Locker is a response to demand from our customers for a lightweight, steel cabinet with a secure lock. Our 2A Locker is expected to be available in three models: 2A Ammo, 2A Locker-10, and the 2A Locker-14. Each 2A product will utilize our proprietary 5-point locking mechanism.
While we currently rely on third-party manufacturers for the production of our current line of safes, apparel and accessories, the Champion acquisition adds safe manufacturing to the Company's activities.
Additionally, our Concealed Carry Product line and Safe line serve a large and growing market segment. We believe that interest in safes increase, as well as in our complimentary concealed carry backpacks and apparel as a by-product, when interest of the general population in firearms increase. To this extent, the FBI's National Instant Criminal Background Check System (NICS), which we believe serves as a proxy for gun sales since a background check is generally needed to purchase a firearm, reported a record number of background checks in 2020, 39,695,315. The prior annual record for background checks was 2019's 28,369,750. In 2021, there were 38,876,673 background checks conducted, similar to that of 2020's annual record which was 40% higher than the previous annual record in 2019. While we do not expect this increase in background checks to necessarily translate to an equivalent number of additional safes purchased, we do believe it might be an indicator of the increased demand in the safe market. In addition, certain states (such as Massachusetts, California, New York and Connecticut) are starting to legislate new storage requirements in respect of firearms, which is expected to have a positive impact on the sale of safes.
We continue to strive to strengthen our relationships and our brand awareness with our current distributors, dealers, manufacturers, specialty retailers and consumers and to attract other distributors, dealers, and retailers. We believe that the success of our efforts depends on the distinctive features, quality, and performance of our products; continued manufacturing capabilities and meeting demand for our safes; the effectiveness of our marketing and merchandising programs; and the dedicated customer support.
In addition, we seek to improve customer satisfaction and loyalty by offering distinctive, high-quality products on a timely and cost-attractive basis and by offering efficient customer service. We regard the features, quality, and performance of our products as the most important components of our customer satisfaction and loyalty efforts, but we also rely on customer service and support for growing our business.
Furthermore, we intend to continue improving our business operations, including research and development, component sourcing, production processes, marketing programs, and customer support. Thus, we are continuing our efforts to enhance our production by increasing daily production quantities through equipment acquisitions, expanded shifts and process improvements, increased operational availability of our equipment, reduced equipment down times, and increased overall efficiency.
We believe that by enhancing our brand recognition, our market share might grow correspondingly. Industry sources estimate that 70 million to 80 million people in the United States own an aggregate of more than 400 million firearms, creating a large potential market for our safes and personal security products. We are focusing on the premium segment of the market through the quality, distinctiveness, and performance of our products; the effectiveness of our marketing and merchandising efforts; and the attractiveness of our competitive pricing strategies.
Targeted Strategic Acquisitions for Long-term Growth
We are consistently evaluating and considering acquisitions opportunities that fit our overall growth strategy as part of our corporate mission to accelerate long-term value for our stockholders and create integrated value chains.
On June 29, 2022, the Company entered into a stock and membership interest purchase agreement with Champion Safe Co., Inc., Superior Safe, LLC, Safe Guard Security Products, LLC, Champion Safe De Mexico, S.A. de C.V. (the "Champion Entities" or "Champion") and Mr. Ray Crosby ("Seller") (the "Champion Purchase Agreement"), pursuant to which the Company agreed to acquire all of the issued and outstanding capital stock and membership interests of the Champion Entities from the Seller.
The closing of the acquisition occurred on July 29, 2022. Under the terms of the Champion Purchase Agreement, the Company paid the Seller (i) cash consideration in the amount of $9,150,000.00, along with (ii) cash deposits in the amount of $350,000.00, and (iii) reimbursed Seller for $397,420.32 of agreed upon acquisitions and equipment purchases completed by the Seller and the Champion Entities since June 30, 2021.
Based in Provo, Utah and founded in 1999, Champion Safe is what we believe to be one of the premier designers, manufacturers and marketers of home and gun safes in North America. Champion Safe Co. has three safe lines, which we believe feature some of the most secure and highest quality gun safes.
Following the acquisition, we plan to continue to operate Champion Safe in substantially the same manner as it currently operates pre-acquisition as Champion Safe, Superior Safe and Safe Guard Security Products are valuable and very identifiable brands in the safe industry. We plan to expand our manufacturing throughput to fill our significant backlog of orders and aggressively open new dealer accounts with the support of proceeds from this offering. As a division of the combined company, Champion Safe Company will shift its emphasis to growing revenue and increasing profitability for the combined company.
The combined company will benefit from Champion founder Mr. Ray Crosby's vast experience and expertise. Mr. Crosby is a foundational figure in the safe business with over 40 years of experience in the industry. Mr. Crosby and his brother Jay founded Fort Knox Safe in 1982 and Liberty Safe, in 1988, which recently sold to a middle market private investment firm for approximately $147.5 million. In 1999, Mr. Crosby founded Champion Safe, later expanding to include Superior Safe and Safe Guard Security Products. Champion Safe employs over 100 employees in their Utah factory and over 300 employees in their Nogales, Mexico facility just south of the U.S. border. Most midline and value priced safes are manufactured in China, but Mr. Crosby had the foresight to build his own facility in Mexico and utilize American-made steel only. Steep tariffs were imposed on China manufactured safes by the Trump administration and have continued under the Biden administration. The prices of components for the made-in-China safes have dramatically increased as well as the transportation costs to import these Chinese-made safes. Mr. Crosby's decision to build his own facility in Mexico as opposed to importing Chinese-made safes has proven to be insightful and beneficial for Champion Safe.
Mr. Crosby is eager to expand his manufacturing operation and seize upon the growth opportunities in the safe business. Working closing with the American Rebel team, Mr. Crosby has expanded his paint-line capacity and hinge assembly workstations. Mr. Crosby has experience in many prior economic cycles and has found the safe business to be sound in good and bad economic times. Furthermore, the current emphasis on safe storage and the capital infusion from American Rebel positions the Champion operation to grow its footprint.
In addition to the access to capital for Champion to grow its business, American Rebel will benefit from Champion's 350 dealers, nationwide distribution network and seniority with buying groups and trade shows. American Rebel will also benefit from the increased Champion manufacturing throughput as capacity restrictions have limited American Rebel's inventory and potential growth. The collaboration between Champion and American Rebel management teams will focus on increased manufacturing efficiencies and volume expansion.
Expanding Scope of Operations Activities by Offering Servicing Dispensaries and Brand Licensing
We continually seek to target new consumer segments for our safes. As we believe that safes are becoming a must-have household appliance, we strive to establish authenticity by selling our products to additional groups, and to expand our direct-to-consumer presence through our website and our showroom in Lenexa, Kansas.
Further, we expect the cannabis dispensary industry to be a material growth segment for our business. Several cannabis dispensary operators have expressed interest in the opportunity to help them with their inventory locking needs. Cannabis dispensaries have various insurance requirements and local ordinances requiring them to secure their inventory when the dispensary is closed. Dispensary operators have been purchasing gun safes and independently taking out the inside themselves to allow them to store cannabis inventory. Recognizing what seems to be a growing need for cannabis dispensary operators, we have designed a safe tailor-made for the cannabis industry. With the legal cannabis hyper-growth market expected to exceed $43 billion by 2025, and an increasing number of states where the growth and cultivation of cannabis is legal (California, Colorado, Hawaii, Maine, Maryland, Michigan, Montana, New Mexico, Oregon, Rhode Island, Vermont and Washington), we believe we are well positioned to address the need of dispensaries. American Rebel has a long list of dispensary operators, growers, and processors interested in the Company's inventory control solutions. We believe that dispensary operators, growers, and processors are another fertile growth market for our Vault Doors products, as many in the cannabis space have chosen to install entire vault rooms instead of individual inventory control safes-the American Rebel Vault Door has been the choice for that purpose.
Further, we believe that American Rebel has significant potential for its branded products as a lifestyle brand. As the American Rebel Brand continues to grow in popularity, we anticipate generating additional revenues from licensing fees earned from third parties who wish to engage the American Rebel community. While the Company does not generate material revenues from licensing fees, our management believes the American Rebel brand name may in the future have significant licensing value to third parties that seek the American Rebel name to brand their products to market to the American Rebel target demographic. For example, a tool manufacturer that wants to pursue an alternative marketing plan for a different look and feel could license the American Rebel brand name for their line of tools and market their tools under our distinct brand. This licensee would benefit from the strong American Rebel brand with their second line of American Rebel branded tools as they would continue to sell both of the lines of tools. Conversely, American Rebel could potentially also benefit as a licensee of products. If American Rebel determines a third party has designed, engineered, and manufactured a product that would be a strong addition to the American Rebel catalog of products, American Rebel could license that product from the third-party and sell the licensed product under the American Rebel brand.
Coronavirus ("COVID-19") and Related Market Impact.
The COVID-19 outbreak has presented evolving risks and developments domestically and internationally, as well as new opportunities for our business. Although the pandemic has not materially impacted our results and operations adversely, our ability to satisfy demand for our products could be negatively impacted by mandatory forced production disruptions of our safes' sole third-party manufacturer and strategic partners. Any significant disruption to communications and travel, including travel restrictions and other potential protective quarantine measures against COVID-19 by governmental agencies, could make it difficult for us to deliver goods and services to our customers. Further, travel restrictions and protective measures against COVID-19 could cause the Company to incur additional unexpected labor costs and expenses or could restrain the Company's ability to retain the highly skilled personnel the Company needs for its operations. The extent to which COVID-19 impacts the Company's business, sales and results of operations will depend on future developments, which are uncertain and cannot be currently predicted.
Additionally, as a result of COVID-19, at any time we may be subject to increased operating costs, supply interruptions, and difficulties in obtaining raw materials and components. To address these challenges, we continue to monitor our supply chain.
We expect that the demand for home, office and personal safety and security products would remain stable, in part due to customers spending more time working remotely, increasing regulation mandating safe storage, and substantial uncertainty related to the supply chain and delivery of international goods, which in turn translate into, we believe, growth in demand for our home and personal safes as a U.S. company. We, however, cannot guarantee, that demand for our safes and personal security products will keep growing through the end of the 2022 calendar year and beyond.
Due to the substantial uncertainty related to the effects of the pandemic, its duration and the related market impacts, including the economic stimulus activity, we are unable to predict the specific impact the pandemic and related restrictions (including the lifting or re-imposing of restrictions due to the Omicron variant or otherwise) will have on our results of operations, liquidity or long-term financial results.
From inception through June 30, 2022, we have generated an operating deficit of $31,199,986. We expect to incur additional losses during the fiscal year ending December 31, 2022, and beyond, principally as a result of our increased investment in inventory, marketing expenses, and the limited sales of our new products as we seek to establish them in the marketplace.
Six Months Ended June 30, 2022 Compared To Six Months Ended June 30, 2021
Revenue ('Sales') and cost of goods sold ('Cost of Sales')
For the six months ended June 30, 2022, we reported Sales of $492,786, compared to Sales of $552,867 for the six months ended June 30, 2021. The decrease in Sales for the period compared to the six months ended June 30, 2021 is attributable to lack of available inventory for sale during the first three months of the year. The recent completion of our registered public offering in February 2022 has provided the necessary funds to allow the Company to replenish its inventory. For the six months ended June 30, 2022, we reported Cost of Sales of $337,797, compared to Cost of Sales of $436,731 for the six months ended June 30, 2021. The decrease in Cost of Sales for the current quarter is again due to fewer sales during the period compared to the six months ending June 30, 2021. For the six months ended June 30, 2022, we reported gross margin ('Gross Profit') of $154,989, compared to Gross Profit of $116,136 for the six months ended June 30, 2021. The increase in Gross Profit for the six months ending June 30, 2022 compared to the six months ending June 30, 2021 is due to the decrease in sale discounts.
Total operating expenses for the six months ended June 30, 2022 were $2,698,156 compared to $1,823,155 for the six months ended June 30, 2021 as further described below.
For the six months ended June 30, 2022, we incurred consulting and business development expense of $709,396, compared to consulting and business development expense of $1,117,219 for the six months ended June 30, 2021. The decrease in consulting and business development expenses was due to the overall decrease in expenses that did not relate directly to the Company's registered public offering that was completed in February 2022.
For the six months ended June 30, 2022, we incurred product development expenses of $146,463, compared to product development expenses of $233,060 for the six months ended June 30, 2021. The decrease in product development expenses relates primarily to a decrease in product development activities.
For the six months ended June 30, 2022, we incurred marketing and brand development expenses of $230,219, compared to marketing and brand development expenses of $104,114 for the six months ended June 30, 2021. The increase in marketing and brand development expenses relates primarily to an increase of activities including major trade shows and the availability of working capital provided by our recently completed registered public offering.
For the six months ended June 30, 2022, we incurred general and administrative expenses of $1,610,723, compared to general and administrative expenses of $366,964 for the six months ended June 30, 2021. The majority of the increase in general and administrative expenses relates primarily to the Company's registered offering completed in February 2022 along with significant legal and other professional fees that we incurred in preparation for the acquisition of Champion and our registered public offerings.
For the six months ended June 30, 2022, we incurred depreciation expense of $1,355, compared to depreciation expense of $1,798 for the six months ended June 30, 2021. The decrease in depreciation expense relates primarily to the maturity of historical depreciable assets offset by a small amount ($455) attributable to newly acquired depreciable assets.
For the six months ended June 30, 2022, we incurred interest expense of $310,406, compared to interest expense of $1,118,143 for the six months ended June 30, 2021. The decrease in interest expense is due to several notes being paid in full during the six months ending June 30, 2022 primarily due to the use of proceeds from our registered public offering. During the six months ended June 30, 2022, we incurred a loss on extinguishment of debt ('additional interest expense') of $1,376,756, compared to $638,148 during the six months ended June 30, 2021 in loss on extinguishment of debt through the amortization of debt discount recorded for the various issuance of shares of common stock in connection with working capital loans and their payoff.
Net loss for the six months ended June 30, 2022 amounted to $4,230,329, resulting in a loss per share of $1.07, compared to $3,463,310 for the six months ended June 30, 2021, resulting in a loss per share of $3.28. The increase in the net loss from the six months ended June 30, 2021 to the six months ended June 30, 2022 is primarily due to the increase in corporate and financing costs including the loss on extinguishment of debt of $1,376,756 incurred during the six months ended June 30, 2022 created by the issuance of common stock, eliminating short term debt and accrued interest expense on this short term debt.
Three Months Ended June 30, 2022 Compared To Three Months Ended June 30, 2021
Revenue ('Sales') and cost of goods sold ('Cost of Sales')
For the three months ended June 30, 2022, we reported Sales of $338,706 compared to Sales of $203,577 for the three months ended June 30, 2021. The increase in Sales for the current quarter compared to the three months ended June 30, 2021 is attributable to available inventory for sale. The completion of our registered public offering in February 2022 has provided funds to allow the Company to replenish its inventory to satisfactory levels. For the three months ended June 30, 2022, we reported Cost of Sales of $241,078, compared to Cost of Sales of $168,586 for the three months ended June 30, 2021. The increase in Cost of Sales for the current quarter is due to a greater number of Sales during the quarter compared to the three months ending June 30, 2021. For the three months ended June 30, 2022, we reported Gross Profit of $97,628, compared to Gross Profit of $34,991 for the three months ended June 30, 2021. The increase in Gross Profit for the three months ending June 30, 2022 compared to the three months ending June 30, 2021 is due to the increase in Sales for 2022.
Total operating expenses for the three months ended June 30, 2022 were $1,681,719 compared to $1,362,647 for the three months ended June 30, 2021 as further described below.
For the three months ended June 30, 2022, we incurred consulting and business development expense of $246,407 compared to consulting and business development expense of $971,213 for the three months ended June 30, 2021. The decrease in consulting and business development expense was due to the overall decrease in expenses that did not relate directly to the Company's registered public offering that was completed in February 2022.
For the three months ended June 30, 2022, we incurred product development expenses of $113,190, compared to product development expenses of $146,327 for the three months ended June 30, 2021. The decrease in product development expenses relates primarily to a decrease in product development activities.
For the three months ended June 30, 2022, we incurred marketing and brand development expenses of $149,249, compared to marketing and brand development expenses of $57,774 for the three months ended June 30, 2021. The increase in marketing and brand development expenses relates primarily to an increase of activities including major trade shows and the availability of working capital.
For the three months ended June 30, 2022, we incurred general and administrative expenses of $1,172,418, compared to general and administrative expenses of $187,148 for the three months ended June 30, 2021. The majority of the increase in general and administrative expenses relates primarily to the significant legal and other professional fees that we incurred in preparation for the acquisition of Champion and our registered public offerings, especially as we approached the end of this quarter.
For the three months ended June 30, 2022, we incurred depreciation expense of $455, compared to depreciation expense of $185 for the three months ended June 30, 2021. The increase in depreciation expense relates primarily to the acquisition of additional depreciable assets.
For the three months ended June 30, 2022, we incurred interest expense of $18,001, compared to interest expense of $569,891 for the three months ended June 30, 2021. The decrease in interest expense is due to several notes being paid in full during the previous quarter. During the three months ended June 30, 2022, we incurred a loss on extinguishment of debt of none, compared to $638,148 during the three months ended June 30, 2021 in loss on extinguishment of debt through the amortization of the debt discount recorded for the issuance of shares of common stock in connection with working capital loans.
Net loss for the three months ended June 30, 2022 amounted to $1,602,092, resulting in a loss per share of $0.34, compared to $2,535,695 for the three months ended June 30, 2021, resulting in a loss per share of $2.15. The decrease in the net loss from the three months ended June 30, 2021 to the three months ended June 30, 2022 is primarily due to eliminating short term debt and accrued interest expense on this short term debt.
We are a development stage company and our revenue from our planned operations does not cover our operating expenses. We had a working capital deficit of $3,171,277 at December 31, 2021 and working capital asset of $3,155,898 at June 30, 2022 due to the successful closing of our recently completed registered public offering in February 2022 and have incurred a deficit of $31,199,986 from inception to June 30, 2022. We have funded our operations primarily through the issuance of capital stock, convertible debt, and other securities.
During the six months ended June 30, 2022, we raised net cash of $9,038,456 through the issuance of common and preferred shares, as compared to $645,005 for the six months ended June 30, 2021. During the six months ended June 30, 2022, we raised net cash of $60,000 through the issuance of notes payable secured by inventory, as compared to $1,280,000 for the six months ended June 30, 2021.
As we continue with the launch of our safes and concealed carry product line we have devoted and expect to continue to devote significant resources in the areas of capital expenditures and marketing, sales, and operational expenditures.
We expect to require additional funds to further develop our business and acquisition plan, including the launch of additional products in addition to aggressively marketing our safes and concealed carry product line. Since it is impossible to predict with certainty the timing and amount of funds required to establish profitability, we anticipate that we will raise additional funds through equity or debt offerings or otherwise in order to meet our expected future liquidity requirements. Any such financing that we undertake will likely be dilutive to existing stockholders.
In addition, we expect to also need additional funds to respond to business opportunities and challenges, including our ongoing operating expenses, protecting our intellectual property, developing or acquiring new lines of business and enhancing our operating infrastructure. While we may need to seek additional funding for such purposes, we may not be able to obtain financing on acceptable terms, or at all. In addition, the terms of our financings may be dilutive to, or otherwise adversely affect, holders of our common stock. We may also seek additional funds through arrangements with collaborators or other third parties. We may not be able to negotiate any such arrangements on acceptable terms, if at all. If we are unable to obtain additional funding on a timely basis, we may be required to curtail or terminate some or all of our product lines.
The Company has recently engaged in a financial restructuring (the "Debt Restructuring"), that included extending, renewing, and structuring terms of loans with investors and third-party creditors. The completion of the registered offering provided funds in the use of proceeds to pay off multiple loans with investors and third-party creditors.
As part of the Debt Restructuring (as defined above), the Company also entered into replacement notes to extend the maturity on certain prior notes.
On July 1, 2022, the Company entered into a $600,000 unsecured Promissory Note with an accredited investor. The unsecured Promissory Note bears 12% interest per annum. The principal of the unsecured Promissory Note is due on March 31, 2023. The unsecured Promissory Note contains customary warranties, covenants and representations of the Company.
The preparation of financial statements and related footnotes requires us to make judgments, estimates, and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities.
An accounting policy is considered to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact the financial statements.
Financial Reporting Release No. 60 requires all companies to include a discussion of critical accounting policies or methods used in the preparation of financial statements. There are no critical policies or decisions that rely on judgments that are based on assumptions about matters that are highly uncertain at the time the estimate is made. Note 1 to the financial statements, included elsewhere in this report, includes a summary of the significant accounting policies and methods used in the preparation of our financial statements.
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