BIOCORRX INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

This Management’s Discussion and Analysis of Financial Condition and Results of
Operations includes a number of forward-looking statements that reflect
Management’s current views with respect to future events and financial
performance. You can identify these statements by forward-looking words such as
“may” “will,” “expect,” “anticipate,” “believe,” “estimate” and “continue,” or
similar words. Those statements include statements regarding the intent, belief
or current expectations of us and members of its management team as well as the
assumptions on which such statements are based. Prospective investors are
cautioned that any such forward-looking statements are not guarantees of future
performance and involve risk and uncertainties, and that actual results may
differ materially from those contemplated by such forward-looking statements.

Readers are urged to carefully review and consider the various disclosures made
by us in this report and in our other reports filed with the Securities and
Exchange Commission
. Important factors currently known to us could cause actual
results to differ materially from those in forward-looking statements. We
undertake no obligation to update or revise forward-looking statements to
reflect changed assumptions, the occurrence of unanticipated events or changes
in the future operating results over time. We believe that its assumptions are
based upon reasonable data derived from and known about our business and
operations and the business and operations of the Company. No assurances are
made that actual results of operations or the results of our future activities
will not differ materially from its assumptions. Factors that could cause
differences include, but are not limited to, expected market demand for the
Company ‘s services, fluctuations in pricing for materials, and competition.


Business Overview


BioCorRx Inc., through its subsidiaries, develops and provides innovative
treatment programs for substance abuse and related disorders. The BioCorRx®
Recovery Program is a non-addictive, medication-assisted treatment (MAT) program
for substance abuse that includes peer recovery support. The UnCraveRx™ Weight
Loss Management Program is a medically assisted weight management program that
is combined with a virtual platform application. The program officially launched
on October 1, 2019. The Company is also engaged in the research and development
of sustained release naltrexone products for the treatment of addiction and
other possible disorders. Specifically, the company is developing its product
candidate (BICX101) a sustained release, injectable naltrexone for the treatment
of opioid abuse and alcoholism. The company is also developing an implantable
naltrexone treatment (BICX102) a long-acting naltrexone implant that can last
several months for the treatment of opioid dependence and alcohol use disorders
with the goal of future regulatory approval with the Food and Drug
Administration
.

The BioCorRx® Recovery Program is a comprehensive addiction program which
includes peer support and Cognitive Behavioral Therapy (CBT) modules (typically
completed in 16 sessions on average but not limited to), coupled with a
naltrexone implant. CBT is an evidence based method that can be used to change
thoughts, feelings, behaviors and improve overall life satisfaction. The implant
is specifically compounded with a prescription from a medical doctor for each
individual and is designed to release naltrexone into the body over multiple
months. The naltrexone implant means a single administration, long acting
naltrexone pellet(s) that consists of a naltrexone formulation in a
biodegradable form that is suitable for subcutaneous implantation in a
particular patient.

BioCorRx is not a licensed health care provider and does not provide health care
services to patients. BioCorRx does not operate substance abuse clinics.
BioCorRx makes the BioCorRx Recovery Program and UnCraveRx® Weight Loss
Management Program available to health care providers to utilize when the health
care provider determines it is medically appropriate and indicated for his or
her patients. Any physician or medical professional is solely responsible for
treatment options prescribed or recommended to his or her patients. At all
times, such providers retain complete and exclusive authority, responsibility,
supervision and control over their medical practice, their patients, the
treatment that their patients receive and any decision to prescribe the implant
to any of the provider’s patients.

BioCorRx does not condition its license to health care providers accessing the
implant on their making available the Counseling Program to the providers’
patients although BioCorRx certainly encourages that providers do so.

BioCorRx has issued several license and distribution agreements to several
unrelated third parties involving the establishment of alcoholism and opioid
addiction rehabilitation and treatment centers and creating certain addiction
rehabilitation programs. There are 12 licensed providers throughout the United
States
that offer the BioCorRx Recovery Program and 5 providers throughout the
United States
that offer the UnCraveRx® Weight Loss Management Program. The
company’s current focus will continue on wider distribution across the United
States
, branding of the BioCorRx Recovery Program and acquisition of healthcare
related products and services. The Company is committed to continuing to provide
excellent rehabilitation products and related services to healthcare providers
nationwide as it expands the distribution of the BioCorRx Recovery Program and
UnCraveRx® Weight Loss Management Program to a network of independent licensed
clinics and licensed healthcare professionals.

The Company’s subsidiary, BioCorRx Pharmaceuticals, is focused on acquiring and
the development of products for the treatment of addiction and other possible
disorders. Specifically, the company is developing injectable and implantable
naltrexone with the goal of future regulatory approval with the Food and Drug
Administration
. The Company’s pipeline includes BICX101 for the treatment of
opioid addiction and alcoholism as well as BICX102 for the same indications.

In August 2017, the Company announced that it had decided to seek U.S. Food and
Drug Administration
(the “FDA”) approval on BICX102 in advance of BICX101.
Product candidate BICX102 is a long-acting naltrexone implant that can last
several months being developed for opioid dependence and alcohol use disorders.
The pre-IND meeting date for BICX102 took place on January 24, 2018. On February
12, 2018
, the Company announced that the FDA deemed the 505(b)(2) pathway as an
acceptable route for approval for BICX102; the Company plans to apply for dual
indications, both opioid use disorder and alcohol use disorder, within the same
application. A grant application was submitted to the National Institutes of
Health
on May 14, 2018 for funding the development and study plans for BICX102.
On January 17, 2019, the Company received a Notice of Award from the United
States Department of Health and Human Services
for a grant from the National
Institutes of Health
(“NIH”) in support of BICX102 from the National Institute
on Drug Abuse
. The grant provides for (i) $2,842,430 in funding during the first
year and (ii) $2,831,838 during the second year subject to the terms and
conditions specified in the grant, including satisfactory progress of project
and the availability of funds. On January 30, 2020, the Company was notified by
NIH that the second year funding has been approved. In January 2020, the Company
was awarded a second year of funding from the National Institute on Drug Abuse
(“NIDA”) to support the development of a 3-month implantable depot pellet of
naltrexone for the treatment of Opioid Use Disorder, which the Company refers to
as BICX102. The grant provides for $2,831,838 during the second year subject to
the terms and conditions specified in the grant, including satisfactory progress
of project and availability of funds. On August 27, 2021, the Company received a
Notice of award from the United States Department of Health and Human Services
for a grant from National Institute on Drug Abuse. The grant provides for
$3,453,367 in funding during the third year subject to the terms and conditions
specified in the grant, including satisfactory progress of project and the
availability of funds. Grant receivables were $103,000 as of September 30, 2021,
and $224,879 as of December 31, 2020. Deferred revenues related to the grant
were $0 as of September 30, 2021, and $65,560 as of December 31, 2020. $531,134
was recorded as grant income for the nine months ended September 30, 2021.
$412,552 was recorded as grant income during the three months ended September
30, 2021
.



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The UnCraveRx® Weight Loss Management Program is a comprehensive 3-month
medically assisted weight management program that helps to reduce food cravings
combined with on-demand virtual lifestyle support, fitness and nutrition. The
program officially launched on October 1, 2019.

If determined medically appropriate by a patient’s treating physician and under
his/her medical supervision, an anti-craving medication may be prescribed to
help reduce food cravings. The benefits of using the anti-craving time released
mediation is that it may aid in compliance. BioCorRx® does not sell,
manufacture, or compound any drugs or pharmaceuticals for the program.

Training is required to assist the treating physician in making the best medical
decision regarding the use of the anti-craving medication and determine whether
the program is right for the patient.


Recent Developments


In December 2019, a novel strain of coronavirus (“COVID-19”) surfaced. The
spread of COVID-19 around the world in the first quarter of 2020 has caused
significant volatility in U.S. and international markets. There is significant
uncertainty around the breadth and duration of business disruptions related to
COVID-19, as well as its impact on the U.S. and international economies and, as
such, the Company is unable to determine if it will have a material impact to
its operations.

On March 27, 2020, the Coronavirus Aid Relief, and Economic Security (“CARES”)
Act was signed into law to provide economic relief in the early wake of the
COVID-19 pandemic. The Company applied for both the Economic Injury Disaster
Loan (“EIDL”) and Paycheck Protection Program (“PPP”), which were created under
the CARES Act and administrated by the U.S. Small Business Administration
(“SBA”). On April 28, 2020, the Company received $5,000 from SBA as an advance
on the EIDL. On May 22, 2020, the Company received a PPP loan of $28,000 from
Citizens Business Bank and forgiveness of PPP loan has been granted effective
March 17, 2021. On July 17, 2020, the Company received an EIDL of $74,300.

On April 9, 2021, the Company received $131,440 from Citizens Business Bank as
the second tranche loan under the PPP loan. The Company believes that its
current cash on hand will not be sufficient to fund its projected operating
requirements for the next twelve months following the filing of this report.

On February 16, 2021, the Board appointed Mr. Joseph J. Galligan as a member of
the Board, effective February 17, 2021.

On February 16, 2021, the Company entered into a Subscription Agreement (the
“Lucido Subscription Agreement”) with Louis C Lucido and Carolyn M. Lucido, or
their Successors, as Trustee of the Lucido Family Trust, Dated May 23, 2017,
managed by Mr. Louis Lucido, a member of the Company’s Board of Directors.
Although the Lucido Subscription Agreement was dated February 16, 2021, it did
not become effective until it was fully executed on February 23, 2021. Pursuant
to the Lucido Subscription Agreement, Mr. Lucido purchased shares of the
Company’s common stock, par value $0.001 per share, in the aggregate amount of
$1,125,000 at a purchase price of $2.00 per share, for a total of 562,500 shares
of Common Stock. The aggregate Purchase Price owed pursuant to the Lucido
Subscription Agreement was paid in cash to the Company on February 26, 2021.

On February 16, 2021, the Company entered into a Subscription Agreement (the
“Galligan Subscription Agreement”) with The J and R Galligan Revocable Trust,
managed by Mr. Joseph Galligan, a member of the Company’s Board. Although the
Galligan Subscription Agreement was dated February 16, 2021, it did not become
effective until it was fully executed on February 23, 2021. The terms and
conditions of the Galligan Subscription Agreement (including the number of
shares of common stock purchased and the purchase price) are substantially the
same as the Lucido Subscription Agreement.

On September 9, 2021, the Company issued an unsecured promissory note payable to
one third party for $200,000 due June 8, 2022, with a stated interest rate of
25% per annum. The balance outstanding as of September 30, 2021 is $200,000. The
interest expense during the three months and nine months ended September 30,
2021
were $3,014 and $3,014, respectively. If the Company fails to make any
payment due under the terms of the promissory note, the Company shall issue a
warrant to the third party to which the number of common shares that the third
party has the right to purchase equals 48,309 common shares. The warrant shall
have a term of three years with an exercise price of $4.14 and shall be
equitably adjusted to offset the effect of any stock splits and similar events.

On September 9, 2021, the Company issued an unsecured promissory note payable to Kent Emry for $500,000 due June 8, 2022, with a stated interest rate of 25% per
annum. The balance outstanding as of September 30, 2021 is $500,000. If the
Company fails to make any payment due under the terms of the promissory note,
the Company shall issue a warrant to Kent Emry to which the number of common
shares that Kent Emry has the right to purchase equals 119,617 common shares.
The warrant shall have a term of three years with an exercise price of $4.14 and
shall be equitably adjusted to offset the effect of any stock splits and similar
events.



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Results of Operations



The following table summarizes changes in selected operating indicators of the
Company, illustrating the relationship of various income and expense items to
net sales for the respective periods presented (components may not add or
subtract to totals due to rounding):



Three Months ended September 30, 2021 Compared with Three Months ended September
30, 2020



                                              Three months ended
                                                 September 30,
                                             2021             2020
Revenues, net                            $      8,817$     29,809
Total operating expenses                   (1,643,466 )     (2,082,667 )
Interest expense, net                        (141,140 )       (129,946 )
Grant income                                  412,552        1,392,632
Other miscellaneous income                          -            5,000
Net loss                                   (1,363,237 )       (785,172 )
Non-controlling interest                          398           17,511

Net loss attributable to BioCorRx Inc.$ (1,362,839 )$ (767,661 )



Revenues


Total net revenues for the three months ended September 30, 2021 were $8,817
compared with $29,809 for the three months ended September 30, 2020, reflecting
a decrease of 70.4%. Sales/access fees for three months ended September 30, 2021
and 2020 were $0 and $1,500, respectively. The primary reason for the decrease
in 2021 is directly related a sales discount of $3,000 was given to the
customer. Distribution rights income for three months ended September 30, 2021
and 2020 were $8,817 and $28,959, respectively. The primary reason for the
decrease in distribution rights income was due to the deferred revenues from
certain licenses were fully amortized. Membership program fees for the three
months ended September 30, 2021 and 2020 were $0 and $(650), respectively. A
sales discount of $4,495 was given to the customer during the three months ended
September 30, 2021.



Total Operating Expenses



Total operating expenses for the three months ended September 30, 2021 and 2020
were $1,643,466 and $2,082,667, respectively, reflecting a decrease of $439,201.
The reason for the decrease in 2021 is primary due to a decrease of $699,381 in
research and development expense due to conducting more extensive studies in
2020 with regard to BICX102, from $1,289,366 for the three months ended
September 30, 2020 to $589,985 for the three months ended September 30, 2021,
partially offset by an increase of $141,480 in impairment of intellectual
property due to the Company’s assessment that the it is more likely than not
that the fair value of intellectual property is less than its carrying value,
from $0 for the three months ended September 30, 2020 to $141,480 for the three
months ended September 30, 2021, an increase of $78,427 in accounting and legal
fees due to additional legal services used in 2021 in connection with the
drafting and filing of the Company’s SEC filings, from $65,788 for the three
months ended September 30, 2020 to $144,215 for the three months ended September
30, 2021
, an increase of $40,777 in consulting fees due to increased consulting
services, from $155,853 for the three months ended September 30, 2020 to
$196,630 for the three months ended September 30, 2021, and an increase of
$31,629 in payroll expense due to the increased number of employees to support
the Company’s growth of business and a replacement of the payment of consulting
fees with the payment of annual base salary in accordance with the Company’s
normal payroll schedule, from $218,183 for the three months ended September 30,
2020
to $249,811 for the three months ended September 30, 2021.


Interest Expense


Interest expense for the three months ended September 30, 2021 and 2020 were
$141,140 and $129,946, respectively. The increase is mainly due to the issuance
of note payables with a stated interest rate of 25% per annum.


Grant Income


During the three months ended September 30, 2021, the Company recognized grant
income of $412,552 as compared to $1,392,632 for the comparable period last
year. The grant income increase in 2020 was due to: (i) the advancement of
preclinical studies with the development of a 3-month implantable depot pellet
of naltrexone for the treatment of Opioid Use Disorder, which the Company refers
to as BICX102 and (ii) the award of second year funding from the National
Institute on Drug Abuse
(“NIDA”) providing for $2,831,838. On August 27, 2021,
the Company received a Notice of award from the United States Department of
Health and Human Services
for a grant from National Institute on Drug Abuse. The
grant provides for $3,453,367 in funding during the third year subject to the
terms and conditions specified in the grant, including satisfactory progress of
project and the availability of funds. The funds are available to reimburse the
Company for certain incurred direct costs and 17% of indirect costs. Indirect
costs are costs that are not directly related to the project itself but are
required to conduct the research and are critical to the success of the project
and organization as a whole.


Net Loss


For the three months ended September 30, 2021, the Company experienced a net
loss of $1,363,237 compared with a net loss of $785,172 for the three months
ended September 30, 2020. The increase in net loss is primarily due to the lower
grant income incurred in 2021.



Nine months ended September 30, 2021 Compared with Nine Months ended September
30, 2020



                                               Nine months ended
                                                 September 30,
                                             2021             2020
Revenues, net                            $     34,659$    100,399
Total operating expenses                   (4,211,930 )     (5,825,140 )
Interest expense, net                        (391,297 )       (380,981 )
Grant income                                  531,134        3,498,084
Other miscellaneous income                     28,229            5,799
Net loss                                   (4,009,205 )     (2,601,839 )
Non-controlling interest                        1,866           32,179

Net loss attributable to BioCorRx Inc.$ (4,007,339 )$ (2,569,660 )




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Revenues


Total net revenues for the nine months ended September 30, 2021 were $34,659
compared with $100,399 for the nine months ended September 30, 2020, reflecting
a decrease of 65.5%. Sales/access fees for nine months ended September 30, 2021
and 2020 were $0 and $13,500, respectively, reflecting a decrease of $13,500.
The primary reason for the decrease in 2021 is directly related to the reduced
number of patients treated at licensed clinics and BioCorRx Recovery Program
distribution and a sales discount of $3,000 was given to the customer.
Distribution rights income for nine months ended September 30, 2021 and 2020
were $26,664 and $86,249, respectively, reflecting a decrease of $59,585. The
primary reason for the decrease in distribution rights income was due to the
deferred revenues from certain licenses were fully amortized. Membership/program
fees for the nine months ended September 30, 2021 and 2020 were $7,995 and $650,
respectively. The primary reason for the increase in 2021 was due to the
increased customers of the Company’s UnCraveRx™ Weight Loss Management Program
launched in October 2019. A sales discount of $4,495 was given to the customer
during the nine months ended September 30, 2021.


Total Operating Expenses


Total operating expenses for the nine months ended September 30, 2021 and 2020
were $4,211,930 and $5,825,140, respectively, reflecting a decrease of
$1,613,210. The reasons for the decrease in 2021 are primarily due to a decrease
of $1,973,486 in research and development expense and conclusion of the
preclinical studies of BICX102, from $3,344,970 for the nine months ended
September 30, 2020 to $1,371,484 for the nine months ended September 30, 2021,
and a decrease of $90,898 in stock-based compensation related to both directors
and service providers due to certain stock options that were fully amortized in
2021, from $257,238 for the nine months ended September 30, 2020 to $166,340 for
the nine months ended September 30, 2021, offset by an increase of $215,404 in
accounting and legal fees due to additional legal services used in 2021 in
connection with the drafting and filing of the Company’s SEC filings, from
$249,514 for the nine months ended September 30, 2020 to $464,918 for the nine
months ended September 30, 2021, an increase of $141,480 in impairment of
intellectual property due to the Company’s assessment that the it is more likely
than not that the fair value of intellectual property is less than its carrying
value, from $0 for the nine months ended September 30, 2020 to $141,480 for the
nine months ended September 30, 2021, and an increase of $101,066 in consulting
fees due to increased consulting services, from $437,846 for the nine months
ended September 30, 2020 to $538,913 for the nine months ended September 30,
2021
.



Interest Expense



Interest expense for the nine months ended September 30, 2021 and 2020 were
$391,297 and $380,981, respectively. The increase is mainly due to the issuance
of note payables with a stated interest rate of 25% per annum.


Grant Income


During the nine months ended September 30, 2021, the Company recognized grant
income of $531,134 as compared to $3,498,084 for the comparable period last
year. The larger grant income in 2020 was due to: (i) the advancement of
preclinical studies with the development of a 3-month implantable depot pellet
of naltrexone for the treatment of Opioid Use Disorder, which the Company refers
to as BICX102 and (ii) the award of second year funding from the National
Institute on Drug Abuse
(“NIDA”) providing for $2,831,838. On August 27, 2021,
the Company received a Notice of award from the United States Department of
Health and Human Services
for a grant from National Institute on Drug Abuse. The
grant provides for $3,453,367 in funding during the third year subject to the
terms and conditions specified in the grant, including satisfactory progress of
project and the availability of funds. The funds are available to reimburse the
Company for certain incurred direct costs and 17% of indirect costs. Indirect
costs are costs that are not directly related to the project itself but are
required to conduct the research and are critical to the success of the project
and organization as a whole.


Net Loss


For the nine months ended September 30, 2021, the Company experienced a net loss
of $4,009,205 compared with a net loss of $2,601,839 for the nine months ended
September 30, 2020. The increase in net loss is primarily due to the lower grant
income incurred in 2021.

Liquidity and Capital Resources

As of September 30, 2021, the Company had cash of approximately $745,457. The
following table provides a summary of the Company’s net cash flows from
operating, investing, and financing activities.


                                                  Nine months ended
                                                    September 30,
                                                2021             2020

Net cash used in operating activities $ (2,890,034 )$ (1,810,543 )
Net cash used in investing activities

            (38,002 )         (6,400 )

Net cash provided by financing activities 3,081,440 107,300
Net increase (decrease) in cash

                  153,404       (1,709,643 )
Cash, beginning of period                        592,053        2,645,852
Cash, end of period                         $    745,457$    936,209





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In March 2019, the Company entered into two Subscription and Royalty Agreements
(the “Subscription and Royalty Agreements”), one of which was with Louis and
Carolyn Lucido CRT LLC
, managed by Mr. Lucido. Pursuant to the Subscription and
Royalty Agreements: (i) Each party would purchase shares of the Company’s common
stock, par value $0.001 per share (the “Common Stock”), in the aggregate amount
of $3,000,000 at a purchase price of $15.00 per share (the “Purchase Price”),
for a total of 200,000 shares of Common Stock; and (ii) the Company shall pay
each (a) a total of $37.50 from the gross revenue derived from each of its
weight loss treatments sold in the United States starting on the first (1st) day
that the first unit of the treatment is sold (the “Initial Sales Date”) and
ending on the third (3rd) anniversary of the Initial Sales Date; and (b) a total
of $25.00 from the gross revenue derived from each of its weight loss treatments
sold in the United States starting on the day following the third (3rd)
anniversary of the Initial Sales Date and ending on the fifteenth (15th)
anniversary of the Initial Sales Date (the “Royalty”).

Under the Lucido agreement, the Company will use no less than 65% of the
proceeds of the aggregate Purchase Price of the Lucido Subscription and Royalty
Agreement exclusively to develop, launch and expand the Company’s weight loss
program (the “Business”) including sales and marketing activities directly
related to the Business, and shall be free to use up to 35% of the aggregate
Purchase Price of the Lucido Subscription and Royalty Agreement for general
working capital and administration, and for further product development. With
the prior written consent of Mr. Lucido, the Company may use more than 35% of
the aggregate Purchase Price for general working capital and administration, and
for further product development. Under the second agreement, the Company will
have complete discretion as to the exact amount of the aggregate purchase price
to be allocated to the development and expansion of the Business.

In connection with the Conversion Agreement, the Company and BICX entered into a
Lock-Up Agreement (the “Lock-Up Agreement”) pursuant to which BICX Holding
Company LLC
will not sell, or otherwise dispose of the Conversion Shares, during
the period commencing on October 1, 2019 and ending six (6) months following the
initial closing of the Company’s intended public offering of its securities to
raise gross proceeds to the Company of at least $10,000,000 (subject to
adjustment in the Company’s sole discretion) (the “Public Offering”). As the
Public Offering was abandoned on December 9, 2019, the Lock-Up Agreement expired
on April 1, 2020.

In accordance with the Conversion Agreement, the Company cannot enter into any
agreement to issue or announce the issuance or proposed issuance of any shares
of common stock or common stock equivalents at an issuance price below $2.00 per
share.

Pursuant to the Conversion Agreement, BICX Holding Company LLC has agreed that
the Total Interest Payment (as defined in the Conversion Agreement) that would
have been due under the Note, in the amount of $1,138,157, will be reflected on
the Company’s financial statements as an amount due and owing to the Investor to
be repaid within twelve (12) months of the closing of the Public Offering, or if
the Public Offering is terminated or abandoned prior to closing, then on or
before such date that is no later than twelve (12) months from the date of such
termination or abandonment.

The Company has historically sought and continue to seek financing from private
sources to move its business plan forward. In order to satisfy the financial
commitments, the Company had relied upon private party financing that has
inherent risks in terms of availability and adequacy of funding. During the
three months ended the Company received $2,250,000 proceeds from common stock
subscription agreement.

On September 9, 2021, the Company issued an unsecured promissory note payable to
one third party for $200,000 due June 8, 2022, with a stated interest rate of
25% per annum. The balance outstanding as of September 30, 2021 is $200,000. The
interest expense during the three months and nine months ended September 30,
2021
were $3,014 and $3,014, respectively. If the Company fails to make any
payment due under the terms of the promissory note, the Company shall issue a
warrant to the third party to which the number of common shares that the third
party has the right to purchase equals 48,309 common shares. The warrant shall
have a term of three years with an exercise price of $4.14 and shall be
equitably adjusted to offset the effect of any stock splits and similar events.

On September 9, 2021, the Company issued an unsecured promissory note payable to Kent Emry for $500,000 due June 8, 2022, with a stated interest rate of 25% per
annum. The balance outstanding as of September 30, 2021 is $500,000. If the
Company fails to make any payment due under the terms of the promissory note,
the Company shall issue a warrant to Kent Emry to which the number of common
shares that Kent Emry has the right to purchase equals 119,617 common shares.
The warrant shall have a term of three years with an exercise price of $4.14 and
shall be equitably adjusted to offset the effect of any stock splits and similar
events.

For the next twelve months, the Company anticipates that it will need to
supplement its revenues with additional capital investment or debt to ensure
that the Company will have adequate cash to provide the minimum operating cash
requirements to continue as a going concern. There can be no guarantee or
assurance that the Company can raise adequate capital from outside sources. If
the Company is unable to raise funds when required or on acceptable terms, it
has to significantly scale back, or discontinue its operations.

Net Cash Flow from Operating Activities

Net cash used in operating activities was $2,890,034 for the nine months ended
September 30, 2021 compared to $1,810,543 used in operating activities the nine
months ended September 30, 2020. The increase was primarily due to the increased
net loss in 2021.

Net Cash Flow from Investing Activities

Net cash used in investing activities for the nine months ended September 30,
2021
was $38,002 compared to $6,400 used in investing activities the nine months
ended September 30, 2020. The increase was primarily due to purchase on
equipment and costs on software development during the nine months ended
September 30, 2021.



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Net Cash Flow from Financing Activities

Net cash provided by financing activities increased by $2,974,140, from $107,300
provided by financing activities for the nine months ended September 30, 2020 to
$3,081,440 cash provided by financing activities for the nine months ended
September 30, 2021. The Company issued 1,125,000 shares of common stock for
proceeds during the nine months ended September 30, 2021. The Company also
received $131,440 from Citizens Business Bank as the second tranche loan under
the PPP loan. On September 9, 2021, the Company issued an unsecured promissory
note payable to Kent Emry (member of the Company’s Board of Directors) for
$500,000 due June 8, 2022, with a stated interest rate of 25% per annum. On
September 9, 2021, the Company issued an unsecured promissory note payable to
one third party for $200,000 due June 8, 2022, with a stated interest rate of
25% per annum.



Going Concern



The Company’s financial statements are prepared in accordance with generally
accepted accounting principles applicable to a going concern. This contemplates
the realization of assets and the liquidation of liabilities in the normal
course of business. As of September 30, 2021, the Company had a working capital
deficit of $(3,096,888), and an accumulated deficit of $68,695,650. The Company
has not yet generated any significant revenues, and has incurred net losses
since inception. These conditions raise substantial doubt about the Company’s
ability to continue as a going concern for the next twelve-month period since
the date of the financial statements were issued.

The Company believes that its current cash on hand will not be sufficient to
fund its projected operating requirements for the next twelve months since the
date of the issuance of the financial statements.

The Company will be dependent upon the raising of additional capital through
placement of its common stock in order to implement the Company’s business plan
or by using outside financing. There can be no assurance that the Company will
be successful in these situations in order to continue as a going concern. The
Company is funding its operations by additional borrowings and some shareholder
advances.

Off Balance Sheet Arrangements

The Company does not have any off balance sheet arrangements that have or are
reasonably likely to have a current or future effect on its financial condition,
changes in financial condition, sales or expenses, results of operations,
liquidity or capital expenditures, or capital resources that are material to an
investment in its securities.



Critical Accounting Policies



See the Company’s discussion under Note 2-Signifciant Accounting Policies in its
financial statements.

© Edgar Online, source Glimpses

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