Year-over-year tone shift - average net-tone change across Risk Factors and MD&A vs the prior 10-K. This filing is 0.19pp more bullish than last year's.
Why YoY instead of absolute: the LM lexicon has ~6.6× more negative words than positive (legal/risk-disclosure language is heavy on hedging), so every 10-K reads bearish on raw tone. Year-over-year change strips that bias and surfaces the actual shift in management's framing.
Tone shift by section
The two components the gauge averages: how Risk Factors and MD&A each shifted in net tone versus last year's 10-K. The headline above is their average, so a green needle over a soft section just means the other section carried it.
Risk Factors
-0.12pp
Flat
Net-tone change vs last year's 10-K.
MD&A
+0.50pp
Lean +
Net-tone change vs last year's 10-K.
Per-snippet highlights
Sentence-level sentiment highlighting with category and subcategory filters is coming once the snippet-scoring pipeline lands. For now, dig into the actual section text on the Sections tab.
Language change vs prior 10-K
Risk Factors (Item 1A) - words with the biggest YoY frequency increase
Negative rising
challenges+1
problems+1
challenging+1
challenge+1
Positive rising
No words rose this year.
Risk Factors (Item 1A)
3,564 words
Item 1A. Risk Factors
The COVID-19 pandemic disrupted the global economy and the economic disruption continues to affect Nano Magic, its customers and suppliers and resulting in forecasts and supply chain make operations .
Language change vs prior 10-K
MD&A (Item 7) - words with the biggest YoY frequency increase
Negative rising
losses+1
Positive rising
effective+1
gain+1
improvement+1
MD&A (Item 7)
1,650 words
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation.
The following is management’s discussion and analysis of certain significant factors that have affected our financial position and operating results during the periods included in the accompanying financial statements.
The COVID-19 pandemic coupled with government orders and regulations designed to address the effects of the pandemic disrupted the U.S. and global economies. Inflation and changes in consumer buying patterns along with various challenges to the supply chain continue to challenge manufacturing and retail operations including Nano Magic and its customers. The duration of the disruption and the short and long-term effects of new and changing consumer and business behaviors are impossible to predict.
Labor shortages, inflation, and a variety of government regulations continue to affect Nano Magic customers – both consumer and retail stores – and the continuing impact on customers, the supply chain, raw materials supply and pricing, and the distribution of Nano Magic products, cannot be foreseen.
Supply chain disruption and sales growth can put additional strain on our need for working capital.
Disruption in the supply chain has caused some higher prices and longer lead times. To assure supply, Nano Magic must order materials further in advance, increasing the time between its payments to vendors and the time when Nano Magic can realize a sale. Increased order volume and increased sales will also require that Nano Magic buy larger quantities of raw material inventory and packaging materials. Sales growth will increase our working capital needs, as Nano Magic must pay for the materials before it can see the increased revenue from customers. Similarly, labor must be paid for before the revenue is realized. This can create a greater need for growth capital when funds are already curtailed by Nano Magic’s operating losses.
Nano Magic has limited resources which can hamper its ability to execute its business plan.
Nano Magic is a small company with limited human and financial resources. This limits the resources Nano Magic can devote to the sale and promotion of its products, and may limit its ability to tackle issues that arise in manufacturing and distribution. Nano Magic’s size curtails the resources Nano Magic can devote to promoting its existing products and developing brand recognition. Nano Magic’s limited resources can constrain its ability to take advantage of opportunities, may limit its growth and may give competitors time to challenge its products in the marketplace. These factors will make it harder for Nano Magic to be successful.
Nano Magic is dependent on key executives and the loss of its President and CEO or other key personnel could adversely affect its results of operations and financial condition.
Nano Magic’s President and CEO, Tom Berman, is under contract through the end of 2024. His vision and leadership are very important to the execution of the Nano Magic business plan, and loss of his services would adversely affect Nano Magic’s results of operations and the value of its stock. Other executives and employees are at-will employees, so they may terminate their employment relationship at any time. Loss of experienced personnel and their knowledge of Nano Magic’s business and industry would be extremely difficult to replace. Moreover, because of Nano Magic’s small size, it would be very difficult for remaining personnel to perform the duties fulfilled by the loss of personnel.
Increased sales under the Nano Magic brand name and building a strong brand with consumer brand loyalty will take time.
Nano Magic has placed a number of Nano Magic branded products in regional and national retailers. Developing customer loyalty and brand awareness takes time. The time frame could be shortened if Nano Magic had greater resources for marketing and advertising.
Consumer confidence and spending habits have been affected by the COVID-19 pandemic and its after effects, but what that means and how this will affect sales of Nano Magic products remains unknown.
Nano Magic is a small company and the marketplace for consumer cleaning products is competitive.
Nano Magic has a limited line of products; retail chains and big-box stores may only want suppliers that offer a more extensive product line. Nano Magic has fewer resources than many of its competitors to devote to extending product lines, and to new products and packaging. Its inability to devote the required resources to adapt to the demands of consumers or to meet competitive product offerings may limit Nano Magic’s ability to execute on its business plan and hurt its revenue.
If we or our third-party service providers experience a security breach, data loss or other compromise, including if unauthorized access to our data, our business operations may be interrupted, our reputation and business relationships may be harmed, and we may incur other costs.
We use cloud-based computer systems for our communications (e-mail, voice, data exchange, etc.), for other aspects of our operations and for our business and financial records. Any security breach, data loss, or other compromise, including those resulting from a cybersecurity attack, phishing attack, or any unauthorized access, unauthorized usage, virus or similar breach or disruption could result in the loss or destruction of or unauthorized access to, or use, alteration, disclosure, or acquisition of, data, business disruptions and delays as well as damage to our reputation, litigation, regulatory investigations, or other liabilities. Our website and technology infrastructure also may experience performance issues due to a variety of factors, including infrastructure changes, human or software errors, hosting disruptions, capacity constraints, technical failures, natural disasters, or fraud.
We also rely on cloud technologies from third parties in order to operate critical functions of our business, including financial management services, relationship management services, and aspects of our manufacturing and sales functions. If our service agreements are terminated, or there is a lapse of service, elimination of services or features that we utilize, interruption of internet service provider connectivity or damage to our providers’ facilities, we could experience business interruptions as well as significant delays and additional expense in arranging or creating new facilities and services and/or re-architecting our cloud-based offerings for deployment on a different cloud infrastructure service provider, which could adversely affect our business, financial condition and results of operations. Our vendors and service providers may also be the targets of cyberattacks, malicious software, phishing schemes, and fraud. Any of the foregoing could have a material adverse effect on our business, including our financial condition, results of operations and reputation.
Our facilities, as well as the facilities of third-parties that provide or maintain, or have access to our data or network infrastructure, are vulnerable to damage or interruption from earthquakes, hurricanes, floods, fires, cyber security attacks, terrorist attacks, power losses, telecommunications failures and similar events. In the event that our or any third-party provider’s systems or service abilities are hindered by any of the events discussed above, our ability to operate may be impaired. A third party’s decision to close facilities or terminate services without adequate notice, or other unanticipatedproblems, could adversely impact our operations. If business continuity and disaster recovery plans of ours or of a third-party provider prove to be inadequate in preventing the loss of data or service interruptions, this could cause further disruptions to our operations or damages to important systems or facilities or damage to our computer hardware or systems or those of our employees, or customers. Our systems have been the target of cyber-attacks. Although we have taken and continue to take steps to enhance our cybersecurity posture, we cannot assure that future cyber incidents will not occur or that our systems will not be targeted or breached in the future.
Drug stores and big-box retail chains that Nano Magic has targeted as a distribution channel to increase its sales volume have their own challenges in the marketplace and demand a high level of support from vendors which will be challenging for Nano Magic, due to its size and limited resources.
The after effects of the pandemic continue to pose challenges for retail stores and this can make them cautious about ordering product or trying new products. In addition, to supply a large number of stores and maintain brand quality, drug stores and big-box retail chains often require, among other things, that their vendors comply with scheduling and packaging requirements, maintain back-up inventory in reserves and impose other standards and restrictions on their vendors. Retail customers may delay or defer orders that can slow sales for Nano Magic. And, if Nano Magic, because of its limited resources, cannot meet customer requirements, then it will not be able to service these distribution channels, and Nano Magic’s potential for revenue growth will be harmed. Moreover, losing a customer may leave Nano Magic with significant obsolete inventory.
Sales of specialized coatings to industrial customers that incorporate Nano Magic products into their own product offerings make us dependent on Nano Magic’s industrial customers’ commitment to the product and dependent on the success of Nano Magic’s customers.
Some of Nano Magic’s existing products are sold to industrial customers that incorporate Nano Magic’s product into their own product or service offering to their customers. This means the success of Nano Magic’s product is dependent on the level of support, marketing and customer assistance provided by the industrial customers. Also, Nano Magic cannot control timing, marketing or introduction of its products or improved products, the timing or methods used to address customer concerns, and Nano Magic cannot affect directly marketing or distribution of the products or services that incorporate its products. If Nano Magic’s industrial customer has other priorities or is unsuccessful in its marketing or provides poor customer service, then the sales of Nano Magic’s products and Nano Magic’s results of operations will be adversely affected. To the extent that Nano Magic’s customers feel the effects of an economic downturn from the COVID-19 pandemic, that may lessen their interest in introducing products or services incorporating Nano Magic products.
Risks Relating to Nano Magic’s Technology and Commercialization
Third-parties may claim that Nano Magic’s products may infringe their intellectual property rights, which may subject it to claims, or prevent or delay its product development efforts and stop it from selling or increase the costs of its products.
Nano Magic’s commercial success depends in part on its ability to operate without infringing the patents and other intellectual property rights of third parties. If claims are made that Nano Magic is using third party technology without authorization or that any third-party patents cover Nano Magic’s products or their use, then the holders of any of these patents or other intellectual property may be able to block the sale of Nano Magic’s products unless Nano Magic obtains a license or changes the products so as not to use the third-party’s intellectual property. Nano Magic could incur significant costs defendingagainst any claim; and, if Nano Magic is liable, then Nano Magic may not be able to enter licensing arrangements or to redesign the products at a reasonable cost or on reasonable terms.
Nano Magic may be unable to adequately prevent disclosure of trade secrets and other proprietary information.
Nano Magic relies on trade secrets to protect its proprietary know-how and technology, especially where Nano Magic does not believe patent protection is appropriate or obtainable. Others independently may develop the same or similar technology, or otherwise obtain access to Nano Magic’s proprietary technology. Nano Magic relies in part on confidentiality agreements with its employees and consultants to protect its trade secrets and other proprietary information. These agreements may not effectively prevent disclosure of confidential information and may not provide an adequate remedy in the event of unauthorized disclosure. Costly and time-consuming litigation could be necessary to enforce and determine the scope of Nano Magic’s proprietary rights. Failure to obtain or maintain trade secret protection could enable competitors to use Nano Magic’s proprietary information and to develop products that better compete with its products.
Any lawsuits relating to infringement of intellectual property rights necessary to defend Nano Magic or enforce its rights will be costly and time consuming.
Nano Magic’s ability to defend its intellectual property may require litigation to enforce its rights or to defendlitigation brought by a third-party. Any of these lawsuits, regardless of their success, could be time consuming and expensive to defend and resolve and may require delay or suspension of commercial sales while they are pending. The cost could cause Nano Magic to foregolitigation or to settle on terms that are disadvantageous. If litigation is undertaken or defended, that attendant cost or delay could have a material, adverse impact on Nano Magic’s results of operations.
Some health effects of nanotechnology are unknown.
There has been scientific debate on the health effects of nanomaterials. The science of nanotechnology is engineering at the molecular level to modify or build materials. Many nano-materials are found in nature; others are not naturally occurring. Some scientists believe that certain nanomaterials may be hazardous to human health or the environment. The health effect of new materials is unknown, and can be affected by how they are incorporated and bonded to other materials. Nano Magic focuses on materials larger than 100 nanometers so that they are not regulated as nanoparticles, and Nano Magic carefully evaluates potential health effects of its products on its customers and the effects of handling materials on Nano Magic’s employees. Changing regulations, including those regulating polyfluoroalkyl substances (PFASs) can affect us and our customers. Nano Magic is very mindful of the risks of materials Nano Magic uses and focuses on health and safety. However, debate about the health effects of PFASs, nanoparticles and nanotechnology may adversely affect market acceptance of Nano Magic’s products and adversely affect its financial performance.
Risks Related to Ownership of Nano Magic’s Common Stock
Nano Magic’s common stock is thinly traded, and the number of free trading shares is small, thereby contributing to price volatility.
There is little trading of Nano Magic common stock. As a result, an investor may not be able to sell Nano Magic common stock at the time that the investor would like to sell. Furthermore, if a stock is thinly traded, then any sale may depress the market price.
The limited number of Nano Magic’s free trading shares may limit its ability to raise capital through private placements forcing Nano Magic to offer its stock using more costly qualification or registration procedures.
To remain eligible for the OTCQB, Nano Magic must have a minimum float of 10% of the outstanding stock. Shares sold in a private placement are restricted, and issuing too many restricted shares will take Nano Magic below the float required to remain on the OTCQB. This may force Nano Magic to use available qualification and registration procedures for any capital raise. This in turn would require additional time and resources before Nano Magic would have additional funds for operations or other purposes.
The market price of Nano Magic’s common stock is subject to potential significant price fluctuation because the common stock is thinly traded, and that could result in substantial losses for investors and subject Nano Magic to securities class action litigation.
Among the factors that may cause the market price of Nano Magic’s common stock to fluctuate are the risks described in this “Risk Factors” section and other factors, including:
The trading volume of Nano Magic’s common stock;
Changes in Nano Magic’s capital structure, such as future issuances of securities or the incurrence of debt;
Actual or expected sales of Nano Magic’s common stock by its stockholders;
Failure of Nano Magic’s products to achieve or maintain market acceptance or commercial success;
Changes in the estimation of the future size and growth rate of Nano Magic’s markets;
Fluctuation in Nano Magic’s quarterly operating results;
Recruitment or departure of key personnel;
The commencement or outcome of litigation involving Nano Magic, its industry segments, or some combination; and
Changes in legislation or regulatory policies, practices, or actions.
In addition, the stock market in general, the OTCQB and the market for nanotechnology companies in particular, may experience a loss of investor confidence. Such loss of investor confidence may result in extreme price and volume fluctuations in Nano Magic common stock that are unrelated or disproportionate to the operating performance of Nano Magic’s business, financial condition or results of operations. These broad market and industry factors may materially harm the market price of Nano Magic’s common stock and expose Nano Magic to securities class action litigation. Such litigation, even if unsuccessful, could be costly to defend and divert management’s attention and resources, which could further materially harm Nano Magic’s financial condition and results of operations.
Concentration of stock ownership with affiliates could make a management change or an acquisition of Nano Magic more difficult.
Approximately 72% of the common stock on a fully-diluted basis is owned or controlled by Nano Magic’s present officers and directors. Certain provisions of Nano Magic’s organizational documents could discourage potential acquisition proposals, delay or prevent a change in control of us or limit the price that investors may be willing to pay in the future for shares of Nano Magic’s common stock. For example, the amended and restated certificate of incorporation and amended and restated by-laws will:
authorize the issuance of preferred stock that can be created and issued by Nano Magic’s board of directors without prior stockholder approval, commonly referred to as “blank check” preferred stock, with rights senior to those of its common stock;
limit the persons who can call special stockholder meetings;
permit written action by voting stockholders, permitting affiliates acting alone to accomplish most stockholder actions;
establish advance notice requirements to nominate persons for election to Nano Magic’s board of directors or to propose matters that can be acted on by stockholders at stockholder meetings;
not provide for cumulative voting in the election of directors; and
provide for the filling of vacancies on Nano Magic’s Board of Directors by action of a majority of the directors and not by the stockholders.
These provisions could also limit the price that investors would be willing to pay in the future for shares of Nano Magic common stock.
Nano Magic does not intend to pay dividends for the foreseeable future.
Nano Magic intends to retain earnings for the foreseeable future to finance the operation and expansion of its business, and Nano Magic does not anticipate paying cash dividends. Stockholders can expect to receive a return on common stock only if the market price of the stock increases.
Nano Magic’s common stock is a “penny stock” under SEC rules, and it may be more difficult to resell securities classified as “penny stock.”
Nano Magic’s common stock is a “penny stock” under applicable SEC rules (generally defined as non-exchange traded stock with a per-share price below $5.00). Unless Nano Magic maintains a per-share price above $5.00, these rules impose additional sales practice and disclosure requirements on broker-dealers that recommend the purchase or sale of penny stocks to persons other than those who qualify as “established customers” or “accredited investors.” The additional burdens imposed upon broker-dealers by such requirements may discourage broker-dealers from effecting transactions in Nano Magic’s securities, which could severely limit the market price and liquidity of Nano Magic’s securities. These requirements may also affect your ability to resell Nano Magic’s common stock.
Nano Magic has reported material weaknesses in its internal controls over financial reporting.
In order to remedy the identified deficiencies in its internal controls over financial reporting, Nano Magic may be required to add additional staff. Nano Magic may not be able to remediate any future material weaknesses, or to complete its evaluation, testing and any required remediation in a timely fashion. During the annual evaluation process, if Nano Magic identifies one or more material weaknesses in its internal controls over financial reporting, then Nano Magic may be unable to assert that its internal controls are effective. If Nano Magic is unable to assert that its internal controls over financial reporting are effective, investors then could lose confidence in the accuracy and completeness of its financial reports, which could harm Nano Magic’s stock price.
Nano Magic’s obligations associated with being a public company require significant resources and management attention, and carry significant cost.
As a public company, Nano Magic has legal, accounting, administrative and other costs and expenses that burden its profit. As a reporting company under the Exchange Act, Nano Magic is required to file annual, quarterly and current reports with respect to its business and financial condition, and proxy and other information statements, and is subject to the rules and regulations implemented by the Commission, the Sarbanes-Oxley Act, and the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, and accounting pronouncements and standards of the Public Company Accounting Oversight Board, each of which imposes additional reporting and other obligations on public companies.
Moreover, Nano Magic must monitor changes and comply with any changes to these rules and regulations, and with any future changes in laws, regulations and standards relating to corporate governance and public disclosure. Nano Magic’s need to comply with existing and evolving regulatory requirements imposes administrative expense and also diverts management’s time and attention from revenue-generating activities to compliance activities, which could have a material adverse effect on its business, financial condition and results of operations.
Item 1. Business
Available Information
General information about the Company can be found on our website, www.nanomagic.com.
Item 1A. Risk Factors
OVERVIEW
Nano Magic develops, commercializes and markets nanotechnology powered consumer and industrial cleaners and coatings to clean, protect, and enhance products for peak performance. Consumer products include lens and screen cleaners and coatings, anti-fog solutions, and household and automobile cleaners and protective coatings sold direct-to-consumer and in big box retail. Nano Magic also sells branded and private label cleaners and coatings into the optical, safety, and industrial channels. Our focus is to expand our direct-to-consumer sales through e-commerce and to grow sales to big box retailers. We continue to sell our consumer products directly to opticians and ophthalmologists and small optical retailers.
Effective May 31, 2022, we sold a 70% interest in our subsidiary, Applied Nanotech, Inc. (“ANI”). The contract research services performed by ANI for governmental and private customers was previously reported as our Contract research segment. As a result of this sale, the Company has deconsolidated ANI from its financial reporting, and we will report as only one segment. We retain a 30% interest in ANI that is now recorded as an equity investment.
RESULTS OF OPERATIONS
The following comparative analysis on results of operations was based primarily on the comparative financial statements, footnotes and related information for the periods identified below and should be read in conjunction with the financial statements and the notes to those statements that are included elsewhere in this report. The results discussed below are for the years ended December 31, 2023 and 2022.
Comparison of Results of Operations for the Year Ended December 31, 2023 and 2022
Revenues
For the years ended December 31, 2023 and 2022, revenues were $2,782,390 and $2,577,332, respectively. For the year ended December 31, 2023, sales increased by $205,058, or 8%, as compared to the year ended December 31, 2022. This increase is primarily driven by increases in optical sales, e-commerce, and sales to retail customers. Sales of private label and co-branded products to optical and industrial customers remain significant. We continue to focus to increase sales of our Nano Magic branded solutions by direct sales to consumers using e-commerce, and are expanding by placing products with pharmacies, big box stores and other retailer outlets. Revenue opportunities from those solutions has been delayed by the logistics and other supply chain issues those customers have been facing in their business.
Cost of sales
Cost of sales includes inventory costs, materials and supplies costs, internal labor and related benefits, subcontractor costs, depreciation, overhead and shipping and handling costs.
For the year ended December 31, 2023, cost of sales was $2,418,521 as compared to $2,481,110 for 2022, a decrease of $62,589 or 3%. Costs containment efforts and reduced headcount resulted in improvementdespite fixed costs, increased energy costs and inflation.
Gross profit and gross margin
For the year ended December 31, 2023, gross profit amounted to $363,869 as compared to $96,222 for the year ended December 31, 2022, an increase of $267,647, or 278%. The increase was due primarily to cost containment and reduced headcount. For the years ended December 31, 2023 and 2022, gross margins were 13.1% and 3.7%, respectively.
Other operating income
For the year ended December 31, 2023, other operating income totaled $11,420 as compared to $95,701 for the year ended December 31, 2022, a decrease of $84,281, or 88%. The decrease was due primarily due to settlement income received in 2022.
Operating expenses
For the year ended December 31, 2023, operating expenses decreased by $329,399, or 9% as compared to the year ended December 31, 2022. For the years ended December 31, 2023 and 2022, respectively, operating expenses consisted of the following:
Year Ended December 31,
Selling and marketing expenses
Salaries, wages and related benefits
Stock compensation expense
Research and development
Professional fees
General and administrative expenses
Total
For the year ended December 31, 2023, selling and marketing expenses decreased by $70,021, or 18%, as compared to the year ended December 31, 2022. The decrease was primarily attributable to reduced direct to consumer brand marketing and more cost-effective trade show exhibits.
For the year ended December 31, 2023, salaries, wages and related benefits decreased by $449,657 or 34%, as compared to the year ended December 31, 2022. This was due to reduced headcount and use of options in lieu of cash for some employees.
For the year ended December 31, 2023, stock compensation expense increased by $198,132, or 96%, as compared to the year ended December 31, 2022 due primarily to options granted to employees and consultants.
For the year ended December 31, 2023, research and development costs increased by $30,663, or 183%, as compared to the year ended December 31, 2022, due primarily to consultant expense and product development expenses.
For the year ended December 31, 2023, professional fees decreased by $186,060, or 24%, as compared to the year ended December 31, 2022, primarily driven by reduced legal fees.
For the year ended December 31, 2023, general and administrative expenses increased by $147,544, or 18%, as compared to the year ended December 31, 2022 primarily due to increased reserve for credit losses based on aging of receivables.
Loss from operations
As a result of the factors described above, for the year ended December 31, 2023, loss from operations amounted to $2,840,932 as compared to a loss from operations of $3,353,697 for the year ended December 31, 2022, a decrease of $512,765 or 15%.
Other expense (income)
For the year ended December 31, 2023, total other expense amounted to $14,787 as compared to other income of $102,583 for the year ended December 31, 2022, a decrease of $117,370 or 114%. The change is primarily due to a government grant for employee-retention tax credits recognized in 2022 as well as reduced income from investment in subsidiary.
Loss from continuing operations
For the year ended December 31, 2023, loss from continuing operations amounted to $2,855,719 as compared to a loss from continuing operations of $3,251,114 for the year ended December 31, 2022, a decrease of $395,395 or 12%.
Income (loss) from discontinued operations
For the year ended December 31, 2023, income from discontinued operations was $0, as compared to a gain from discontinued operations of $1,149,525 for the year ended December 31, 2022, comprised of $1,300 income plus a gain on sale of discontinued operations of $1,148,225.
Net loss
As a result of the foregoing, for the year ended December 31, 2023 our net loss amounted to $2,855,719 as compared to a net loss of $2,101,589 for the year ended December 31, 2022, an increase in losses of $754,130 or 36%.
For the years ended December 31, 2023 and 2022, net losses from continuing operations amounted to $0.25 and $0.32 per common share (basic and diluted), respectively. For the years ended December 31, 2023 and 2022, net income from discontinued operations amounted to $0 and $0.11 per common share (basic and diluted), respectively.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity is the ability of an enterprise to generate adequate amounts of cash to meet its needs for cash requirements. We had a working capital balance of $454,969 and unrestricted cash of $527,462 as of December 31, 2023.
The following table sets forth a summary of changes in our working capital from continuing operations for the period from December 31, 2023 to December 31, 2022:
December 31, 2023
December 31, 2022
Dollar Change
Percentage Change
Working capital:
Total current assets
Total current liabilities
Working capital:
The decrease in current assets reflects decreases in accounts receivable, prepaids, and inventory balances, offset by an increase in cash. The increase in current liabilities is primarily due to increases in accounts payable and accrued expenses.
Net cash used by operating activities was $1,537,468 for the year ended December 31, 2023 as compared to net cash used by operating activities of $1,708,365 for the year ended December 31, 2022, a decrease of $170,897, or 10%. Net cash used by operating activities reflects a net loss of $2,855,719, partially offset by the add-back of non-cash items totaling $1,286,581 and changes in operating assets and liabilities of $31,670. Net cash used by continuing operations for the years ended December 31, 2023 and 2022 totaled $1,537,468 and $1,636,120, respectively. Net cash used by discontinued operations for the years ended December 31, 2023 and 2022 totaled $0 and $72,245, respectively.
We have worked over the last several quarters to reduce our costs and conserve cash. Our common stock suffered an extended period with no market makers and the caveat emptor designation on the OTC market, that made it difficult to raise additional capital. Since early March 2023, we have had market makers for our stock, and later that year the OTC removed the caveat emptor warning on our shares. In September 2023, we resumed quotation on the OTCQB.
Net cash provided by investing activities was $35,648 for the year ended December 31, 2023 as compared to net cash used in investing activities of $20,090 for the year ended December 31, 2022.
Net cash provided by financing activities was $1,770,059 for the year ended December 31, 2023 as compared to $1,705,024 for the year ended December 31, 2022.
CRITICAL ACCOUNTING POLICIES
Our critical accounting policies are included in Note 2 - Significant Accounting Policies of our financial statements included within this Report.
RECENT ACCOUNTING PRONOUNCEMENTS
Recently issued accounting standards are included in Note 2 - Significant Accounting Policies of our financial statements included within this Report.
