EXECUTIVE OVERVIEW
Finalizing long-term, constant revenue generating production contracts with our existing and other customers remains our greatest challenge because our on-going business is dependent on the types of revenues and cash flows generated by such contracts. Cash flow and cash requirement risks are closely tied to and are dependent upon our ability to attract significant long-term production contracts. We must continue to obtain funding to operate and expand our operations so that we can deliver our unique Bend Sensor® and Bend Sensor® related technologies and products to the market. Management believes that even though we are making positive strides forward with our business plan we will need to raise additional operating capital.
Worldwide automakers are faced with the challenge of providing a safer, more energy efficient, longer lasting product that consumers can afford. This has required automakers to search new and innovative ways to lower the overall weight of the vehicle and to improve its fuel efficiencies, while lowering the cost. We continue to experience an increased interest regarding automotive and other potential applications for our sensor technology because they meet this criterion. With its versatility, light weight, single layer construction and the fact that it is currently being used in various safety devices the Bend Sensor® is positioned well to meet the challenges that the automobile industry is facing.
LIQUIDITY AND CAPITAL RESOURCES
The challenges posed by the Pandemic in
The Pandemic negatively impacted our revenue during the first six months of 2022. At this time, it is impossible to accurately predict when this will end. Many of our clients, to protect their employees, have sharply curtailed operations and have most employees working from home. The long-term impact of the Pandemic is difficult to assess at this point, as it will be dependent on how rapidly our clients can resume their business operations and place orders with us for the needed sensors incorporated into their products.
Currently our revenue is primarily from product licensing, development, manufacturing and recurring sales with additional contributions to income from design contract, testing and limited production services for prototypes and samples, and is currently at a level to support our operations. Depending upon the world returning to some form of normalcy following the end of the Pandemic, we believe, based upon current orders and projected orders over the
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next twelve months, that we could be producing sensors under long-term contracts in the future that will help support our existing operations and potential future growth. Management recognizes such contracts usually go through a long negotiation process and there can be no guarantee that we will be successful in our negotiations or that such contracts will be sufficient to support our current operations in the near future.
In 2022, we relied on the proceeds of convertible loans from existing
shareholders, which funds are accounted for as demand notes. The balances of the
non-related party convertible notes have a combined total of
Management believes that our current cash burn rate is approximately
As we enter into new agreements, we must ensure that those agreements provide adequate funding for any pre-production research and development and manufacturing costs. If we are successful in establishing agreements with adequate initial funding, management believes that our operations for the long term will be funded by revenues, licensing fees and/or royalties related to these agreements. However, we have formalized only a few agreements during the past four years and there can be no assurance that the agreements will generate sufficient revenues or be profitable in the future or that a desired technological application will be successful enough to produce the volumes and profits necessary to fund our operations.
FINANCIAL OBLIGATIONS AND CONTINGENT LIABILITIES
Our principal commitments at
In
The Company has received
The Company has a few major customers who represent a significant portion of
revenue and accounts receivable. During the six months ended
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OFF-BALANCE SHEET ARRANGEMENTS
We have not entered into 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 and would be considered material to investors.
CRITICAL ACCOUNTING ESTIMATES
ASC 350-20 "Intangibles -
ASC 820 Fair Value Measurement: We test long-lived assets for impairment annually or when a triggering event occurs. Impairment is indicated if undiscounted cash flows are less than the carrying value of the assets. The amount of impairment is measured using a discounted-cash-flows model considering future revenues, operating costs and risk-adjusted discount rate and other factors. The analysis compares the present value of projected net cash flows for the remaining current year and next two years against the carrying value of the long-lived assets. If the carrying values of the long-lived assets exceed the present value of the discounted projected revenues an impairment expense would be recognized in the period and the carrying value of the assets would be adjusted accordingly. Impairment tests are conducted on an annual basis and, should they indicate a carrying value in excess of fair value, a charge may be required.
ASC 718 "Compensation - Stock Compensation: Financial accounting standards
require that recognition of the cost of employee services received in exchange
for stock options and awards of equity instruments be based on the grant-date
fair value of such options and awards and is recognized as an expense in
operations over the period they vest. The fair value of the options we have
granted is estimated at the date of grant using the Black-Scholes American
option-pricing model. Option pricing models require the input of highly
sensitive assumptions, including expected stock volatility. In addition, our
stock options have characteristics significantly different from those of traded
options, and changes in the subjective input assumptions can materially affect
the fair value estimate. Management believes the best input assumptions
available were used to value the options and that the resulting option values
are reasonable. For the six-month periods ended
RESULTS OF OPERATIONS
The Company continues to concentrate its marketing resources on a limited number of customers that have the greatest potential to generate the most short-term revenue while still building relationships with our larger customers. Management believes this approach has the highest potential to bring long-term commercially viable products to market and will provide sustainable cash flow to fund the Company's operations in the future. Currently, overall revenues are not sufficient to sustain our operations. The Pandemic has had a dramatic effect on our business as well as the business of our customers. The wide-ranging effects on the world-wide business market has led to a general reluctance for businesses to move forward with entering into major commitments until their future markets have been clarified. Because of this, we have experienced a significant slowdown in the size and number of
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orders received and, while we cannot predict when the influence of the Pandemic will end, we expect that orders will return to their former levels and increase throughout the remainder of 2022 following a return to normal business operations. Following a return to normal business operations in the world, management anticipates that revenues will increase as we continue to execute our long-term business plan and cultivate larger customer bases with our existing product offering. However, until the Pandemic ends and a long-term production contract is in place there is no guarantee that our current customer base will order in sufficient volumes to sustain our operations. Therefore, management continues to work with larger companies and industries and is hopeful that in the near future we will sign a long-term licensing or manufacturing contract.
We recognized revenue from repeat orders from our existing customers, design contract, and development engineering. Revenue is recognized using the ASC 606 five step detailed in Note 1 to the financial statements. Revenue from the sale of a product is recorded at the time of shipment to the customer. Revenue from the license agreements was recognized in the period the agreement was concluded, as it is a right of use license and the Company has no further obligations to perform under the terms of the agreement. Revenue from research and development engineering contracts is recognized as the services are provided and accepted by the customer. Revenue from contracts to license technology to others is deferred until all conditions under the contract are met and then the sale is recognized as licensing royalty revenue over the remaining term of the contract.
The following discussions are based on the consolidated operations of
THREE MONTH PERIODS ENDED
SUMMARY OF OPERATING RESULTS Three-month period ended June 30, 2022 June 30, 2021 Manufacturing, design, licensing and contract revenue$ 36,015 $ 79,554 Total operating costs and expenses 213,520 213,485 Net other income (expense) (16,622) 37,613 Net loss (194,127) (96,318)
Basic and diluted loss per common share
For the three months ending
Of the
Other expense for the three-month period ended
A net loss of
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SIX MONTH PERIODS ENDED
SUMMARY OF OPERATING RESULTS Six-month period ended June 30, 2022 June 30, 2021 Manufacturing, design, licensing and contract revenue$ 96,939 $ 99,844 Total operating costs and expenses 463,665 421,349 Net other income (expense) (83,190) 13,720 Net loss (449,905) (307,785) Basic and diluted loss per common share$ (0.00) $ (0.00)
For the six months ending
Of the
Other expense for the six-month period ended
A net loss of
The chart below represents a summary of our condensed consolidated balance
sheets at
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