UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
| ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended:
| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ________ to ________
Commission file number:
(Exact name of registrant as specified in its charter) |
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(State or other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification No.) |
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(Address of registrant’s principal executive offices) |
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Registrant’s telephone number, including area code: (
Securities registered under Section 12(b) of the Exchange Act:
Title of Each Class | Trading Symbol(s) | Name of Each Exchange on Which Registered |
OTC Pink Marketplace |
Securities registered under Section 12(g) of the Exchange Act:
None
(Title of Class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☐ Yes ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. ☐ Yes ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ☒
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.:
Large accelerated filer | ☐ | Accelerated filer | ☐ |
☒ | Smaller reporting company | ||
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| Emerging growth company |
If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 17(a)(2)(B) of the Securities Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
The aggregate market value of voting and non-voting common equity held by non-affiliates as of June 30, 2021 was approximately $
At March 28, 2022, there were
DOCUMENTS INCORPORATED BY REFERENCE
None
TABLE OF CONTENTS
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CAUTIONARY NOTE ABOUT FORWARD-LOOKING STATEMENTS
This report on Form 10-K contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, which are intended to be covered by the safe harbors created by those laws. We have based our forward-looking statements on our current expectations and projections about future events. Our forward-looking statements include information about possible or assumed future results of operations. All statements, other than statements of historical facts, included or incorporated by reference in this report that address activities, events or developments that we expect or anticipate may occur in the future, including such things as the growth of our business and operations, our business strategy, competitive strengths, goals, plans, future capital expenditures and references to future successes may be considered forward-looking statements. Also, when we use words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “probably,” or similar expressions, we are making forward-looking statements.
Numerous risks and uncertainties may impact the matters addressed by our forward-looking statements, any of which could negatively and materially affect our future financial results and performance.
Although we believe that the assumptions underlying our forward-looking statements are reasonable, any of these assumptions, and, therefore, the forward-looking statements based on these assumptions, could themselves prove to be inaccurate. In light of the significant uncertainties inherent in the forward-looking statements that are included in this report, our inclusion of this information is not a representation by us or any other person that our objectives and plans will be achieved. In light of these risks, uncertainties and assumptions, any forward-looking event discussed in this report may not occur. Our forward-looking statements speak only as of the date made, and we undertake no obligation to update or review any forward-looking statement, whether as a result of new information, future events or other developments, unless the securities laws require us to do so.
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PART I
ITEM 1. BUSINESS
General
AppSoft Technologies, Inc. (“we,” “us,” or the “Company”) develops, publishes and markets mobile software applications for smartphones and tablet devices (“Apps”). We generate revenue from sales, or downloads, of our Apps and from advertisements published on our ad supported game titles. We currently own a portfolio comprising over 400 Apps titles including games designed to appeal to a broad cross section of consumers. Consumers download our Apps through the Apple App Store, a direct-to-consumer digital storefront.
Over the last several years, we discontinued updating our catalogue of legal-related Apps because they did not generate revenue sufficient to support continued investment and no longer offer those products.
We offer some of our game titles in both a free advertisement-supported version and a paid version that does not display ads. We believe that the ad supported versions allow for wider dissemination of our titles to consumers who might not otherwise spend money for an App without first playing the game.
We may purchase App titles directly from developers or enter into agreements with third-party developers to sell us titles under development or to create new Apps for us. Over the last several years, we have not developed, acquired or released any new App titles because of our lack of financial resources.
During 2021, we focused development efforts on our esports segments, which include e-gaming platforms and a digital publication titled “Esportsreporter,” a news channel covering esports and professional gaming.
During the first quarter of 2022, we launched a video game incubator, Gamerfy.com, through which we intend to identify develop and commercialize new games.
Over the last decade, mobile devices, including smartphone and tablets, have proliferated extensively around the world across a wide range of demographic groups. The mobile Apps industry has experienced corresponding growth in the number of downloads, the number and types of Apps published. We believe that there will continue to be an increase in the number of smartphones and tablets sold. In addition, technological advances to these devices, including more powerful smartphones and tablets with larger screens provide a platform for more diverse Apps and make games more fun and visually appealing. We believe that technological developments will continue to drive growth in our industry for the foreseeable future.
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History
We were organized in the State of Nevada in March 2015. In April 2015, we concluded a transaction in which we issued 2,000,000 shares of our Series A Preferred Stock in exchange for the sum of $50,000 and a portfolio comprising over 400 Apps titles.
On March 31, 2016, we closed our initial public offering of common stock, which we refer to throughout this report as our IPO. In our IPO, we registered 1,000,000 shares of common stock for sale at a price of $0.50 per share and sold 252,500 shares of common stock to the public for an aggregate offering price of $126,250.
On December 4, 2018, the holders of a majority of the outstanding shares of our common stock approved an amendment to our articles of incorporation to reduce the price at which shares of our Series A Cumulative, Convertible Preferred Stock convert into shares of Common Stock from $0.005 per share to $0.0002 per share. See the disclosure under Part II, Item 13 “Certain Relationships and Related Transactions, and Director Independence” for a discussion of the amendment. The amendment was filed with the state of Nevada on April 10, 2019.
Our App Portfolio
Our Apps portfolio includes approximately 200 products and comprises game titles that are designed to appeal to a variety of age groups ranging from younger teens to adults. Currently, we offer products only for Apple operating systems. We offer some of our games in both a free advertisement-supported version and a paid version that does not display ads. We believe that by offering free ad supported versions we can build a significantly larger customer base more quickly than we could if we charged users an up-front fee to download our games since they may be reluctant to purchasing a game without first playing it. If a consumer enjoys a title, they may purchase the game and play without interruption from pop-up ads.
The markets for our products are characterized by rapid technological change, particularly in the technical capabilities of mobile phones and tablets, and changing end-user preferences. Therefore, we will be required to continuously invest capital to innovate and publish new games, regularly update our games, and modify existing games for distribution on evolving platforms. We cannot assure that we will have the capital to develop new and update existing game, that we will be successful in selecting new games to bring to market or that our updates to successful games will allow us to retain market share.
App Development
We seek to develop and acquire new Apps to supplement our portfolio. We may engage developers to create games for us or acquire titles and concepts directly from independent developers. We are seeking to develop a pipeline of independent game designers, developers and programmers who provide us with new ideas and titles to publish.
In cases where we engage developers to create games for us, we may enter into services or consulting agreements with independent developers that may provide us with exclusive publishing and marketing rights and require us to make development payments, pay royalties based on product sales and to satisfy other conditions. Our agreements with third-party developers generally provide us with the right to monitor development efforts and to cease making development payments if specified development milestones are not satisfied.
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We develop and publish free-to-play games. Free-to-play games are games that a player can download and play for free, but which allow players to access a variety of additional content and features for a fee, through “in-app purchases” utilizing virtual currency they may be purchased through digital storefronts, and to engage with various advertisements and offers that generate revenues for us. Several large game publishers are successfully employing this business model. In order for us to achieve success using this model, we must develop and publish games that are widely accepted and commercially successful, which will provide us with the largest base from which to monetize our in-App sales. In addition to building strong core gameplay, successful monetization will require that we continually create new content within games and otherwise find ways to retain players and incentivize them to make in-app purchases. As these games gain wider acceptance and mature in the market, we may seek to improve monetization and increase awareness of our games by building social media communities around these titles and by delivering additional features, such as tournaments, live events and more frequent content updates.
During the first quarter of 2022, we launched a video game incubator, Gamerfy.com, which will seek to acquire and commercialize the next generation of game titles with particular focus on community play, the Metaverse, a virtual reality world where users can interact, game and experience things as they would in the real world; and non-fungible tokens, or NFT’s, each of which would allow us to sell into rapidly growing market segments.
Game developers will submit ideas and even partially developed games to us through the Gamerfy site. Our panel of experienced gamers will select from many possible titles presented to us through our Gamerfy site to select the most appealing and exciting games. We will explore the commercial viability of the concept and undertake an analysis of the cost to develop the App against its potential economic return. We conduct these analyses in-house and do not rely on independent third parties undertake these services. Subject to available capital, we plan to provide funding and access to studios, designers, coders and other resources to successfully launch and market a new game titles. We will seek to acquire an ownership interest in the projects that we fund and commercialize. We expect Gamerfy to be the principal source of new games for us for the foreseeable future.
In addition, we may seek to acquire franchises around which we develop games. Franchises may include movies, television programs, toys and other cultural phenomena that lend themselves to gamification. We will have to obtain a license from the owner of the franchise for each App we publish that is based on a third-party franchise and we likely will be required to pay ongoing royalties to the franchise owner.
The description of our development efforts throughout this report statements is subject in all events to acquiring the capital required to undertake such activities and we cannot provide investors with any assurance that will have capital available to us in the future.
Esports Platform
During the second quarter of 2021, we launched an Esports/E-gaming platform which we refer to as Esportsreporter.com. Esportsreporter.com is a news channel for a broad spectrum of esports and gaming. The site publishes the most relevant breaking news for esports and gaming, including coverage of industry trends and guides on the business of esports and gaming for investors and aspiring esports and gaming professionals. The site covers the most important news in esports on a daily basis while also diving deeper with coverage of events with live reporters as well as conducting face to face and virtual interviews with professional players.
In addition to becoming a leading source of esports news, Esportsreporter.com has its own editorial and digital content creation team that will continue to publish original content covering the latest trends from the eSports and gaming industry. We currently staff numerous qualified journalist and editorial gamers, as well as social media expert/ gamers, and video editors, graphic designers, and production engineers – all also gamers. Our platform is quickly becoming one of the highest trafficking eSports news sites, with a heavy and popular presence in the gaming and eSports communities via content both article and video, and social media, on its way toward becoming a major broadcaster of eSports tournaments and gaming events, with its own large in-house family of avid content creators.
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The content we create includes: recording clips of tournaments for montages, similar to highlights of a major sports game. Recording clips of professional streamers for montages, a very popular genre of content that YouTube and Netflix are offering as their own channels, which we hope to emulate in the near future. We record videos of our own staff explaining latest game patches, eSport team news/drama, new game trailers, new game features and convert personal streams into montages for the site and channel.
We expect that our reporters will attend important events, including Play NYC, and interview top players from eSports teams that are sponsored Game Team Players. As capital permits, we will continue to grow and add more high caliber interviews as well as emerging game coverage and reviews, indie games still undiscovered, peripherals and gaming hardware systems, streaming video gameplay, competitive, walkthrough as well as industry technical topics.
According to Newzoo, a global source for games and esports analytics and market research, the Esports audience will grow to over 645 million globally by 2023 with “Esports enthusiasts” accounting for 45% of the total. The global Esports market is currently worth $1.08 billion and is expected to reach $1.62 billion by 2024. In 2018, over $2.5 billion was invested by venture capital into areas such as game development, event organizing, media platforms and consumer products. Esports is gaining popularity in regions where a high percentage of the population is young. Newzoo estimates that 57% of the total global esports viewership resides in the Asia-Pacific region. In addition, Latin America is the fastest-rising eSports market, with its revenue hitting $18 million in 2018 and possibly reaching $43 million by the end of 2023. According to Influencer Marketing Hup, eSports revenue streams arise from the following sources: sponsorship – 40%; advertising – 19%; media rights 18%; game publisher fees – 13%; merchandise and tickets – 11%.
The Esports ecosystem is made up of both software and hardware companies developing technologies that enable video games to be played on computers/consoles by professional gamers. Such technologies include: broadcasting and streaming services, marketing for competitive gaming, communication social tools, game developers and publishers and professional grade gaming hardware. Non-technical areas include events tournaments, organizations and teams.
We are currently building a following on digital media and expect to monetize the site and our audience utilizing an array of proven techniques, including generating revenue from sales, sponsorships, merchandise, and advertiser supported content.
Sales, Marketing and Distribution
We market, sell and distribute our games Apps exclusively through Apple’s App Store, a global direct-to-consumer digital storefront. From time to time, we may also sell development services to other business for products they will take to market. We expect to develop our new Apps for both Apple and Android devices and will seek to offer our products through Google Play.
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We generate revenue from downloads of our paid Apps and from advertisements published on our ad supported game titles. We have entered into an agreement with each of Apple that governs our relationship as a developer/distributor on its storefront. We are party to two agreements with Apple, one that relates to App sales and one that covers net revenues generated from in-App advertising, for which we pay Apple a fee equal to 30% of net advertising revenues, which are defined as gross advertising revenue recognized through the delivery of ads by Apple less: a) any allowances actually made or taken for returns, credits, cash discounts and promotional allowances; and, b) agency and agent fees, discounts, commissions and referral fees and (c) certain adjustments and allocations specified in the agreement. The agreement provides that we will continue to own all rights to our Apps, subject to a license we grant to each party to market and promote our products and further define permissible and prohibited activities of the parties.
We had marketed our legal titles through Google Play and may seek to re-engage with Google’s storefront in the future as we develop new games and Apps for Android devices.
We may partner with other App publishers to develop and market new titles. These types of arrangements will allow us to defray development and marketing costs among a wider range of titles and increase our chances of publishing a successful title.
We employ advanced analytics, a means of analyzing data we collect about users of our Apps, to develop and publish more appealing titles and features in our games.
Our ability to market our Apps successfully on direct-to-consumer digital storefronts depends on a number of factors, including our ability to build a relationships with storefront owners and educate them about our title roadmap so that they feature or otherwise prominently place them within the storefront. If we are able to achieve these ends, we believe that consumers are more likely to find our Apps, which may result in greater downloads and more revenue. We believe that a number of factors may influence the featuring or placement of an App, including:
| · | the perceived attractiveness of the title; |
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| · | the level of critical or commercial success of the App or of other Apps previously introduced by a publisher; |
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| · | incorporation of the storefront owner’s latest technology in the publisher’s title; |
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| · | how strong the consumer experience is on all of the devices that discover titles using any given digital storefront; |
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| · | the publisher’s relationship with the applicable storefront owner and future pipeline of quality titles for it; and |
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| · | the current market share of the publisher. |
We also expect to undertake a number of marketing initiatives designed to attract consumers to download our Apps, including:
| · | using social networking websites, such as Facebook and Twitter, focused directly at the target users of our Apps; |
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| · | paying third parties to advertise or incentivize consumers to download our Apps through offers or recommendations; |
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| · | using “push” notifications to alert existing and prospective users of updates to our Apps and new product offerings; |
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| · | cross-promoting our Apps through banner advertisements in our other Apps, as well as advertising our Apps in our competitors’ product offerings; and |
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| · | undertaking outreach efforts with video game websites and related media outlets, such as providing reviewers with access to our games prior to launch. |
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Competition
Developing, distributing and selling Apps is a highly competitive business, characterized by frequent product introductions and rapidly emerging new platforms, technologies and storefronts. With respect to competing for consumers of our game related Apps, we will compete primarily on the basis of game quality, brand and customer reviews. We will compete for promotional and digital storefront placement based on these factors, as well as our relationship with the storefront owner, historical performance, perception of sales potential and relationships with licensors of brands, properties and other content.
We believe that our small size will allow provide us a competitive edge for the time being and allow us to make quick decisions as to product development to take advantage of consumer preferences at a particular point in time.
With respect to our game Apps, we compete with a continually increasing number of public and well-funded private companies, including Supercell, Niantic Tencent, NetEase, Machine Zone and many others. We could also face increased competition if large companies with significant online presences such as Apple, Google, Amazon, Facebook or Yahoo, choose to enter or expand in the games space or develop competing games.
In addition, given the open nature of the development and distribution for smartphones and tablets, we also compete or will compete with a vast number of small companies and individuals in all of our segments who are able to create and launch Apps and other content for these devices using relatively limited resources and with relatively limited start-up time or expertise. As an example of the competition that we face, as of the fourth quarter of 2020, Statista estimated that 3.14 million mobile Apps were available to download from the Apple App Store for various iOS devices. The proliferation of titles in these open developer channels makes it difficult for us to differentiate ourselves from other developers and to compete for players and users who purchase content for their devices without substantially increasing marketing or development costs.
Most of our competitors and our potential competitors have one or more advantages over us, including:
| · | significantly greater financial and personnel resources; |
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| · | stronger brand and consumer recognition; |
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| · | the capacity to leverage their marketing expenditures across a broader portfolio of mobile and non-mobile products; |
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| · | more substantial intellectual property of their own; |
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| · | lower labor and development costs and better overall economies of scale; and |
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| · | broader distribution and presence. |
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Intellectual Property
Our intellectual property is an essential element of our business. We currently use a combination of trade secret and other intellectual property laws, confidentiality agreements and license agreements to protect our intellectual property. We may seek to file copyrights with respect to one or more of our titles in the future. Our employees and independent contractors are required to sign agreements acknowledging that all inventions, trade secrets, works of authorship, developments and other processes generated by them on our behalf are our property, and assigning to us any ownership that they may claim in those works. Despite our precautions, it may be possible for third parties to obtain and use without our consent intellectual property that we own or license. Unauthorized use of our intellectual property by third parties, including piracy, and the expenses incurred in protecting our intellectual property rights, may adversely affect our business.
From time to time, we may encounter disputes over rights and obligations concerning intellectual property. If we do not prevail in these disputes, we may lose some or all of our intellectual property protection, be enjoined from further sales of our Apps or other applications determined to infringe the rights of others, and/or be forced to pay substantial royalties to a third party, any of which would have a material adverse effect on our business, financial condition and results of operations.
Government Regulation
We are subject to various federal, state and international laws and regulations that affect our business, including those relating to the privacy and security of customer and employee personal information and those relating to the Internet, behavioral tracking, mobile applications, advertising and marketing activities, and sweepstakes and contests. Additional laws in all of these areas are likely to be passed in the future, which could result in significant limitations on or changes to the ways in which we can collect, use, host, store or transmit the personal information and data of our customers or employees, communicate with our customers, and deliver products and services, or may significantly increase our compliance costs. As our business expands to include new uses or collection of data that are subject to privacy or security regulations, our compliance requirements and costs will increase and we may be subject to increased regulatory scrutiny.
Employees
As of the date of this report, we had one employee, who is our president and chief executive officers, who has other business interests and who is not obligated to devote any specific number of hours to our affairs. Our officer’s attention to his other business commitments may detract from his ability to devote time to our business and this may result in conflicts of interest that could harm our business.
We rely on independent game designers, developers, programmers and other IT specialists to develop new titles and update and maintain existing ones and from time to time we may have several contractors rendering services to us. As of the date of this report, we have engaged eight third party developers to assist with App development efforts.
Our employee is not represented by a collective bargaining agreement. We consider our relations with our employee to be very good.
Emerging Growth Company and Smaller Reporting Company Status
Emerging Growth Company
We are an “emerging growth company” as defined in Section 2(a)(19) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). As such, we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We intend to take advantage of all of these exemptions.
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In addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards, and delay compliance with new or revised accounting standards until those standards are applicable to private companies. We have elected to take advantage of the benefits of this extended transition period.
We could be an emerging growth company until the last day of the first fiscal year following the fifth anniversary of our first common equity offering, although circumstances could cause us to lose that status earlier if our annual revenues exceed $1.07 billion, if we issue more than $1.0 billion in non-convertible debt in any three-year period, if, at the end of any fiscal year in which the market value of our common stock held by non-affiliates exceeded $700 million as of the end of the second quarter of that fiscal year, or if we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act.
Smaller Reporting Company
We also qualify as a “smaller reporting company” under Rule 12b-2 of the Exchange Act, which is defined as a company with a public equity float of less than $75 million. To the extent that we remain a smaller reporting company at such time as we are no longer an emerging growth company, we will still have reduced disclosure requirements for our public filings, some of which are similar to those of an emerging growth company, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act and the reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements.
ITEM 1A. RISK FACTORS
As a smaller reporting company, as defined by Rule 12b-2 of the Exchange Act and Item 10(f)(1) of Regulation S-K, the Company has elected to comply with certain scaled disclosure reporting obligations, and therefore does not have to provide the information required by this item.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
We currently maintain a virtual office at 1225 Franklin Avenue, Suite 325, Garden City, New York at a cost of $149 per month. We believe that this space is adequate for our current and foreseeable requirements but that we could establish a permanent presence on acceptable terms, if necessary.
ITEM 3. LEGAL PROCEEDINGS
We are not presently a party to any material litigation, nor to the knowledge of management is any litigation threatened against us that may materially affect us.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASE OF EQUITY SECURITIES
Market Information
Our common stock currently is quoted on the OTC Pink Sheets Open Market. The market for our stock is highly illiquid and volatile.
On March 25, 2022, the closing bid price of our common stock was $0.551 per share.
Holders
As of March 18, 2022, we had 55 record holders and 4,145,103 shares of common stock outstanding.
Dividends
We have never declared or paid cash dividends on our capital stock. We currently intend to retain all available funds and any future earnings for use in the operation and expansion of our business and do not anticipate paying any cash dividends in the foreseeable future.
Recent Sales of Unregistered Securities
We did not issue any securities during fiscal 2021.
Securities Authorized for Issuance under Equity Compensation Plans
The Company does not have any equity compensation plans or any individual compensation arrangements with respect to its common stock or preferred stock. The issuance of any of our common or preferred stock is within the discretion of our Board of Directors, which has the power to issue any or all of our authorized but unissued shares without stockholder approval.
ITEM 6. SELECTED FINANCIAL DATA
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide the information required by this Item.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward Looking Statements
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and related notes appearing elsewhere in this Annual Report on Form 10-K, or Report.
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The information in this discussion and elsewhere in this Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Such statements are based upon current expectations that involve risks and uncertainties. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. For example, the words “may,” “will,” “believe,” “anticipate,” “plan,” “expect,” “intend,” “could,” “estimate,” “continue” and similar expressions or variations identify forward-looking statements.
Although we believe that we have a reasonable basis for each forward-looking statement contained in this Report, we caution you that these statements are based on a combination of facts and factors currently known by us and our projections of the future, about which we cannot be certain. We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and the development of the industry in which we operate may differ materially from the forward-looking statements contained in this Report. Factors that might cause such a discrepancy include, but are not limited to:
· | Our ability to obtain financing as and when needed on acceptable terms. |
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· | Our failure to develop or acquire and publish new Apps that achieve market acceptance or we do not continue to enhance our existing Apps. |
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· | Our inability to maintain a good relationship with the markets where our Apps are distributed. |
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· | Our inability to keep pace with technological changes and market conditions in the Apps industry. |
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· | Our inability to compete against a wide range of companies that market Apps, many of which have significantly greater resources than we do. |
We caution readers not to place undue reliance on any forward-looking statements made by us, which speak only as of the date they are made. We disclaim any obligation, except as specifically required by law and the rules of the Securities and Exchange Commission, to publicly update or revise any such statements to reflect any change in our expectations or in events, conditions or circumstances on which any such statements may be based, or that may affect the likelihood that actual results will differ from those set forth in the forward-looking statements.
Overview
We develop, publish and market Apps for smartphones and tablet devices. We derive revenue from sales, or downloads, of our Apps and from advertisements published on our ad-supported game titles. During 2021, we did not generate any revenue. Over the course of 2022, we expect to generate revenue from the sale of software titles that we are developing for own account, from titles that were developed by third-parties which we acquired and from titles that have been developed for our benefit. Operating margins are dependent in part upon our ability to release new, commercially successful software products and to manage effectively their development costs. We also expect to generate revenue from
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Our Apps titles include games designed to appeal to a broad cross section of consumers. We offer all of our game titles in both a free advertisement-supported version and a paid version that does not display ads. We believe that the ad supported versions allow for wider dissemination of our titles to consumers who might not otherwise spend money for an App without first playing the game.
We market, sell and distribute our games through as Apple’s App Store, a direct-to-consumer digital storefront. We currently expect to advertise our Apps through the digital storefronts, our own website, social media, such as Facebook and LinkedIn, through mobile ad networks and search engine optimization, or SEO, tools.
We will develop and acquire new Apps to expand our existing product offerings, as our resources permit. We rely on third party designers, developers and programs to develop new Apps. We also solicit ideas for new titles from unrelated parties. We evaluate prospects based on a variety of factors. If we conclude that a particular prospect is worth pursuing, we may fund the development of the App through launch and beyond.
We have been constrained in our development and acquisition activities by a lack of cash. Our ability to pursue and achieve our objectives is predicated on our receipt of meaningful revenue from sales of our existing Apps and those we may release in the future and from our ability to raise capital from outside sources.
Growth Strategies and Outlook
Our principal growth strategy entails developing and acquiring new Apps to supplement our existing Apps portfolio. Our primary focus will be to release new game titles. We seek to solicit new games and concepts that we may acquire from third parties. We also will seek to develop and publish free-to-play games. Free-to-play games are games that a player can download and play for free, but which allow players to access a variety of additional content and features for a fee, through “in-app purchases” utilizing virtual currency that may be purchased through digital storefronts, and to engage with various advertisements and offers that generate revenues for us. We may seek to acquire franchises around which we develop games, including movies, television programs, toys and other cultural phenomena that lend themselves to gamification.
During the first quarter of 2022, we launched a video game incubator, Gamerfy.com, which will seek to acquire and commercialize the next generation of game titles with particular focus on community play, the Metaverse and NFT’s, each of which would allow us to sell into rapidly growing market segments. We expect Gamerfy to be the principal source of new games for us for the foreseeable future.
During the second quarter of 2021, we launched Esportsreporter.com, a news channel for a broad spectrum of esports and gaming. We are currently building a following on digital media and expect to monetize the site and our audience utilizing an array of proven techniques, including generating revenue from sales, sponsorships, merchandise, and advertiser supported content. We expect to direct a significant percentage of our capital resources on Esportsreporter.com during 2022.
Our revenues will depend significantly on growth in the mobile games market and our ability to develop or acquire and publish Apps that are well-received by consumers. In addition, because our products are purchased with disposable income, our success is dependent on the overall strength of the economy in the United States. We expect to invest resources in research and development, analytics and marketing to introduce new Apps and continue to update our existing Apps, and to the extent that Apps into which we have invested significant capital are not successful, our business and financial condition could be harmed. We operate in an environment that is extremely competitive for users against a continually increasing number of developers, many of which are significantly larger than us and have other competitive advantages. We expect to allocate a material portion of our operating revenue and capital that we receive to sales and marketing initiatives in connection with the launch and promotion of our games in an effort to drive sales.
| 14 |
| Table of Contents |
Our ability to achieve and sustain profitability will depend not only on our ability to generate meaningful our revenues, but also on our ability to manage our operating expenses. Currently, we have one full-time employee, who receives compensation when and as determined by the board of directors. For the foreseeable further, we expect to utilize the services of independent contractors and consultants, who we believe are readily available for our purposes, in order to manage our personnel costs. We also will continue to maintain a virtual office as long as our operations permit us to do so to contain our office space overhead.
We require significant additional capital to fund the development of Apps in process that we have developed internally or acquired from third parties during the last year. We also require capital to fund marketing initiatives for our existing products and the launch and marketing of Apps in development. We cannot be sure that the additional capital we require will be available on acceptable terms or at all. If adequate funds are not available on acceptable terms or at all, we may be unable to develop or enhance our services and products, take advantage of future opportunities, repay debt obligations as they become due, or respond to competitive pressures, any of which would have a material adverse effect on our business, prospects, financial condition, and results of operations.
Results of Operations for the Year Ended December 31, 2021 Compared to the Year Ended December 31, 2020
The following table presents our results of operations for the year ended December 31, 2021 and 2020:
|
| For the years ended December 31, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
|
|
|
|
|
|
| ||
Revenue |
| $ | — |
|
| $ | — |
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
|
Selling, General and Administrative |
|
| 20,421 |
|
|
| 6,350 |
|
Depreciation and Amortization Expense |
|
| 207 |
|
|
| 416 |
|
Interest Expense |
|
| 5,352 |
|
|
| 4,405 |
|
Outside Services |
|
| 22,659 |
|
|
| — |
|
Professional Fees |
|
| 2,215 |
|
|
| 35,636 |
|
Total Expense |
|
| 50,854 |
|
|
| 46,807 |
|
Loss from Operations |
| $ | (50,854 | ) |
| $ | (46,807 | ) |
Liquidity and Capital Resources
Liquidity is the ability of a company to generate cash to support its current and future operations, satisfy its obligations, and otherwise operate on an ongoing basis. Significant factors in the management of liquidity include funds generated by operations, the availability of credit facilities, levels of accounts receivable and accounts payable and capital expenditures.
As of December 31, 2021, we had total assets of $325 and total liabilities of $338,818, of which $303,941 is attributable to the principal and interest due under a promissory note we issued in 2018 which replaced promissory notes issued during the prior three years. Comparably, as of December 31, 2020, we had total assets of $213 and total liabilities of $287,852, of which $241,220 is attributable to the principal and interest due under promissory notes issued during the three prior years. As of December 31, 2021, we had a working capital deficit of $34,562 and a working capital deficit of $46,626 as of December 31, 2020.
Our primary requirements for liquidity and capital are to fund the development and acquisition of new Apps and for sales and marketing initiatives in connection with the launch and promotion of our games, as well as for working capital to fund our general corporate needs, including filing reports under the federal securities laws. We work with independent game designers, developers and programmers who provide us with new ideas and titles to publish. We also are soliciting new games and concepts that we may acquire from third parties. When we receive an idea for a new App, we research the commercial viability of the concept, undertaking an analysis of the cost to develop the App against its potential economic return. If we determine that the App is commercially viable, we may fund the cost of development, publication and marketing. Upon completion of development we will own the App title. Developing and publishing free-to-play games will require considerable capital to develop, maintain and update, particularly games we may seek to develop around popular movie, television, toy other cultural phenomena that lend themselves to gamification.
Since our customers pay for their purchases by credit or debit card at the time of sale, neither inventories nor receivables are relevant to our business.
| 15 |
| Table of Contents |
Our cash on hand and cash flow from operations are not sufficient to fund our existing operations or support our desired development and acquisition strategy or required in connection with launching, marketing and promoting our games. Over the last several years, we have relied on loans from entities related to a shareholder for operating capital. These loans are represented by promissory notes in the aggregate principal amount of $160,314, which matured on December 31, 2021 which were extended by the lenders to mature on December 31, 2025, and a promissory note that allows us to drawdown up to $150,000, of which $63,087 remained available for advances December 31, 2021, which matures on December 31, 2022. The capital we received from these borrowings was not sufficient to allow us to undertake development or marketing activities but provided the capital required to support the Company’s minimal operations while we formulated our strategies for the next few years, which include launching Esportsreporter.com and the Gamerfy site. We are seeking to identify sources of capital to fund the entire range of our operations and development activities; however, such capital may not be available to us on acceptable terms or at all. Financing transactions may include the issuance of equity or debt securities, obtaining credit facilities or through other financing mechanisms. Even if we are able to raise the funds required, it is possible that we could incur unexpected costs and expenses or experience unexpected cash requirements that would force us to seek alternative financing. Furthermore, if we issue additional equity or debt securities, stockholders may experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of our common stock. The inability to obtain additional capital will continue to constrain our operations, including App development and marketing, and restrict our ability to grow. If we are unable to obtain additional financing, we may possibly have to cease our operations.
Cash Flows:
The following table presents summary cash flow information for the periods indicated.
|
| For the years ended December 31, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
Net cash used in operating activities |
|
| (62,402 | ) |
|
| (38,800 | ) |
Net cash provided by (used in) investing activities |
|
| - |
|
|
| - |
|
Net cash provided by financing activities |
|
| 62,721 |
|
|
| 38,800 |
|
Net increase (decrease) in cash and cash equivalents |
|
| 319 |
|
|
| - |
|
Operating Activities
Cash used in operations was $62,402 and $38,800 for the years ended December 31, 2021 and 2020, respectively. In 2021 and 2020, cash was mainly used to pay selling, general and administrative expenses and the cost of our outside professionals.
Investing Activities
We did not use any cash in investing activities during the years ended December 31, 2021 and 2020.
Financing Activities
Cash flow from financing activities was $62,721 and $38,800 for the years ended December 31, 2021 and 2020, respectively. These amounts were attributable to loans received periodically over the course of the year.
Off-Balance Sheet and Other Arrangements
As of the date of this report, the Company does not have any off-balance sheet or similar arrangements.
| 16 |
| Table of Contents |
Going Concern
The report of our independent auditor and Note B to the financial statements filed with this annual report on Form 10-K indicate that the Company’s minimal operations to date and lack of fully established sources of revenue raise substantial doubt about the Company’s ability to continue as a going concern. For these reasons, our financial statements have been prepared assuming the Company will continue as a going concern, which assumes we will realize our assets and discharge our liabilities in the normal course of business. If we are unable to achieve these ends, we cannot assure you that we will be able to generate revenue to support our operations and continue operations.
The presence of the going concern explanatory paragraph suggests that we may not have sufficient liquidity, or minimum cash levels, to operate our business. Since our inception, we have incurred losses and anticipate that we will continue to incur losses until such time as our Apps generate sufficient revenue to offset our research and development, general and administrative and sales and marketing expenses. We will need to raise additional capital to fund our near-term operational plans described elsewhere in this report. We cannot assure you that we will be successful in our operational plans. We cannot be sure that the additional capital we require will be available on acceptable terms or at all. If adequate funds are not available on acceptable terms or at all, we may be unable to develop or enhance our services and products, take advantage of future opportunities, repay debt obligations as they become due, or respond to competitive pressures, any of which would have a material adverse effect on our business, prospects, financial condition, and results of operations.
Inflation
We do not believe that inflation has had a material effect on our business, financial condition or results of operations. If our costs were to become subject to significant inflationary pressures, we might not be able to fully offset these higher costs through price increases. Our inability or failure to do so could harm our business, operating results and financial condition.
Critical Accounting Policies and Use of Estimates
The preparation of our financial statements in accordance with United States Generally Accepted Accounting Principles, of GAAP, requires us to make estimates and judgments that affect our reported amounts of assets, liabilities, revenue, and expenses, and related disclosure of contingent assets and liabilities. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under current circumstances in making judgments about the carrying value of assets and liabilities that are not readily available from other sources. We evaluate our estimates on an on-going basis. Actual results may differ from these estimates under different assumptions or conditions.
Accounting policies are an integral part of our financial statements. A thorough understanding of these accounting policies is essential when reviewing our reported results of operations and our financial position. Management believes that the critical accounting policies and estimates discussed below involve the most difficult management judgments, due to the sensitivity of the methods and assumptions used. Our significant accounting policies are described in Note 1 to our financial statements included elsewhere in this report.
We believe the following accounting policies and estimates are the most critical. Some of them involve significant judgments and uncertainties and could potentially result in materially different results under different assumptions and conditions.
| 17 |
| Table of Contents |
Revenue Recognition - The Company applies paragraph 605-10-S99-1 of the FASB Accounting Standards Codification for revenue recognition. The Company recognizes revenue when it is realized or realizable and earned less estimated future doubtful accounts. The Company considers revenue realized or realizable and earned when all of the following criteria are met:
| (i) | persuasive evidence of an arrangement exists, |
| (ii) | the services have been rendered and all required milestones achieved, |
| (iii) | the sales price is fixed or determinable, and |
| (iv) | collectability is reasonably assured. |
Recent Accounting Pronouncements
Emerging Growth Company Critical Accounting Policy Disclosure: We qualify as an “emerging growth company” under the 2012 JOBS Act. Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. As an emerging growth company, we can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of the benefits of this extended transition period.
There are no recent accounting pronouncements published after December 31, 2019 that have a material effect on the financial statements presented herein.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide the information required by this Item.
| 18 |
| Table of Contents |
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Financial Statements
| 19 |
| Table of Contents |
Report of Independent Registered Public Accounting Firm
To the shareholders and the board of directors of AppSoft Technologies, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of AppSoft Technologies, Inc. as of December 31, 2021 and 2020, the related statements of operations, stockholders' equity (deficit), and cash flows for the years then ended, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States.
Substantial Doubt about the Company’s Ability to Continue as a Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note B to the financial statements, the Company has suffered recurring losses from operations and has a significant accumulated deficit. In addition, the Company continues to experience negative cash flows from operations. These factors raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note B. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
/S/ BF Borgers CPA PC
We have served as the Company's auditor since 2019
March 29, 2022
| F-1 |
| Table of Contents |
AppSoft Technologies, Inc.
Balance Sheets
|
| As of |
|
| As of |
| ||
|
| December 31, 2021 |
|
| December 31, 2020 |
| ||
CURRENT ASSETS |
|
|
|
|
|
| ||
Cash |
| $ |
|
| $ |
| ||
TOTAL CURRENT ASSETS |
|
|
|
|
|
| ||
FIXED ASSETS |
|
|
|
|
|
|
|
|
Computer Equipment, net |
|
|
|
|
|
| ||
TOTAL FIXED ASSETS |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
TOTAL ASSETS |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
|
|
|
|
CURRENT LIABILITIES |
|
|
|
|
|
|
|
|
Accounts Payable and Accruals |
|
|
|
|
|
| ||
Accrued Interest |
|
|
|
|
|
| ||
TOTAL CURRENT LIABILITIES |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Note Payable |
|
|
|
|
|
| ||
TOTAL LIABILITIES |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
COMMITMENTS AND CONTINGENCIES |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
STOCKHOLDER'S EQUITY |
|
|
|
|
|
|
|
|
Series A Cumulative, Convertible Preferred stock ($ |
| $ |
|
| $ |
| ||
Common stock ($ |
|
|
|
|
|
| ||
Additional Paid in Capital |
|
|
|
|
|
| ||
Additional Paid in Capital - Stock Warrants |
|
|
|
|
|
| ||
Accumulated Deficit |
|
| ( | ) |
|
| ( | ) |
TOTAL STOCKHOLDER'S EQUITY (DEFICIT) |
|
| ( | ) |
|
| ( | ) |
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY/(DEFICIT) |
| $ |
|
| $ |
| ||
The accompanying notes are an integral part of these financial statements.
| F-2 |
| Table of Contents |
AppSoft Technologies, Inc.
Statements of Operations
|
| For the years ended December 31, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
|
|
|
|
|
|
| ||
Sales |
| $ |
|
| $ |
| ||
Total Revenue |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
EXPENSES: |
|
|
|
|
|
|
|
|
Selling, General and Administrative |
|
|
|
|
|
| ||
Amortization/Depreciation Expense |
|
|
|
|
|
| ||
Interest Expense |
|
|
|
|
|
| ||
Outside Services |
|
|
|
|
|
| ||
Professional Fees |
|
|
|
|
|
| ||
Total Expense |
|
|
|
|
|
| ||
Loss from operations |
| $ | ( | ) |
| $ | ( | ) |
Provision for Income Taxes |
| $ |
|
| $ |
| ||
NET LOSS |
|
| ( | ) |
|
| ( | ) |
Weighted average common shares outstanding, basic and fully diluted |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Basic and fully diluted net loss per common share: |
| $ | ( | ) |
| $ | ( | ) |
The accompanying notes are an integral part of these financial statements.
| F-3 |
| Table of Contents |
AppSoft Technologies, Inc.
Statements of Cash Flows
|
| For the years ended December 31, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
| ||
Net loss |
| $ | ( | ) |
| $ | ( | ) |
|
|
|
|
|
|
|
|
|
Amortization and Depreciation |
|
|
|
|
|
| ||
Adjustments to reconcile net (loss) |
|
|
|
|
|
|
|
|
to net cash provided by (used in) operations: |
|
|
|
|
|
|
|
|
Changes in Assets and Liabilities: |
|
|
|
|
|
|
|
|
Increase (decrease) in Accounts Payable and Other Accruals |
|
| ( | ) |
|
|
| |
Increase (decrease) in Accrued Interest Expense |
|
|
|
|
|
| ||
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES |
|
| ( | ) |
|
| ( | ) |
CASH FLOWS TO/(FROM) FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
Note Payable - borrowings |
|
|
|
|
|
| ||
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
NET INCREASE(DECREASE) IN CASH AND CASH EQUIVALENTS |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS, |
|
|
|
|
|
|
|
|
BEGINNING OF THE PERIOD |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
END OF THE PERIOD |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: |
|
|
|
|
|
|
|
|
CASH PAID DURING THE PERIOD FOR: |
|
|
|
|
|
|
|
|
Interest |
| $ |
|
| $ |
| ||
Taxes |
| $ |
|
| $ |
| ||
The accompanying notes are an integral part of these financial statements.
| F-4 |
| Table of Contents |
AppSoft Technologies, Inc.
Statement of Stockholders' Equity
For the year ended | ||||||||||||||||||||||||||||||||
December 31, 2021 | ||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| Additional |
|
| Additional Paid-in Capital |
|
|
|
|
| ||||||||||||||
|
| Common Stock |
|
| Preferred Stock |
|
| Paid-in |
|
| Stock |
|
| Accumulated |
|
| Total |
| ||||||||||||||
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Capital |
|
| Warrants |
|
| Deficit |
|
| Equity |
| ||||||||
| Balances, January 1, 2021 |
|
|
|
| $ |
|
|
|
|
| $ |
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ | ( | ) | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Preferred Shares Converted to Common Shares |
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net Loss |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
| $ | ( | ) | ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balances, December 31, 2021 |
|
|
|
| $ |
|
|
|
|
| $ |
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ | ( | ) | ||||||
The accompanying notes are an integral part of these financial statements.
| F-5 |
| Table of Contents |
AppSoft Technologies, Inc.
Statement of Stockholders' Equity
For the years ended | ||||||||||||||||||||||||||||||||
December 31, 2020 | ||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| Additional |
|
| Additional Paid-in Capital |
|
|
|
|
|
|
| ||||||||
|
| Common Stock |
|
| Preferred Stock |
|
| Paid-in |
|
| Stock |
|
| Accumulated |
|
| Total |
| ||||||||||||||
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Capital |
|
| Warrants |
|
| Deficit |
|
| Equity |
| ||||||||
Balances, January 1, 2020 |
|
|
|
| $ |
|
|
|
|
| $ |
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ | ( | ) | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
| $ | ( | ) | ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, December 31, 2020 |
|
|
|
| $ |
|
|
|
|
| $ |
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ | ( | ) | ||||||
The accompanying notes are an integral part of these financial statements.
| F-6 |
| Table of Contents |
APPSOFT TECHNOLOGIES
NOTES TO THE (UNAUDITED) FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2021
NOTE A—BUSINESS ACTIVITY
AppSoft Technologies (the “Company”) was organized under the laws of the State of Nevada March 24, 2015. The Company’s fiscal year end is December 31st. AppSoft is a developer of innovative games/mobile apps as well as Esports/E-gaming platforms, including Esportsreporter, a leading news channel for all things esports and professional gaming. Coverage includes events with live reporters as well as conducting face to face and virtual interviews with professional players in the space. We are currently building a following on digital media to generate revenue from sales, sponsorships, or merchandise from our fanbase and advertisers published on our ad supported content.
NOTE B—GOING CONCERN
The accompanying financial statements have been prepared on a going concern basis, which assumes the Company will realize its assets and discharge its liabilities in the normal course of business. As reflected in the accompanying financial statements, the Company has a deficit accumulated of $
The Company’s ability to continue as a going concern is dependent upon its ability to generate future profitable operations and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. These circumstances raise substantial doubt about the Company’s ability to continue as a going concern for the 12 months from the date when these financial statements were issued. The accompanying financial statements do not include any adjustments that might arise because of this uncertainty.
To address these aforementioned, management has undertaken the following initiatives: 1) enter into discussions to secure additional equity funding from current or new shareholders; 2) undertake a program to continue to monitor the Company’s ongoing working capital requirements and minimum expenditure commitments; 3) continue their focus on maintaining an appropriate level of corporate overhead in line with the Company’s available cash resources.
NOTE C—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation- The financial statements included herein were prepared under Generally Accepted Accounting Principles (GAAP).
All adjustments have been made which in the opinion of management are necessary, normal, and recurring in nature for presentation.
Interim filings should be read in conjunction with the Company’s annual report as of December 31, 2020.
Cash and Cash Equivalents- For purposes of the Statement of Cash Flows, the Company considers liquid investments with an original maturity of three months or less to be cash equivalents.
Management’s Use of Estimates- The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. The financial statements above reflect all of the costs of doing business.
Revenue Recognition- On May 28, 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers, Topic 606 (“ASC 606”), requiring an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The new revenue standard replaces most existing revenue recognition guidance in GAAP and permits the use of either the full retrospective or modified retrospective transition method. The Company adopted this standard using the modified basis effective January 1, 2019, and given the Company’s limited revenue, the modified retrospective basis has no material impact on prior years given the limited revenue.
Comprehensive Income (Loss) - The Company reports Comprehensive income and its components following guidance set forth by section 220-10 of the FASB Accounting Standards Codification which establishes standards for the reporting and display of comprehensive income and its components in the financial statements. There were no items of comprehensive income (loss) applicable to the Company during the period covered in the financial statements.
| F-7 |
| Table of Contents |
APPSOFT TECHNOLOGIES
NOTES TO THE (UNAUDITED) FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2021
NOTE C—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES—CONT’D
Net Income per Common Share- Net loss per common share is computed pursuant to section 260-10-45 of the FASB Accounting Standards Codification. Basic net loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. Diluted net loss per share is computed by dividing net loss by the weighted average number of shares of common stock and potentially outstanding shares of common stock during each period. There was a total of
Deferred Taxes- The Company accounts for income taxes under Section 740-10-30 of the FASB Accounting Standards Codification. Deferred income tax assets and liabilities are determined based upon differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the statements of operations in the period that includes the enactment date.
Fair Value of Financial Instruments- The carrying amounts reported in the balance sheet for cash, accounts receivable and payable approximate fair value based on the short-term maturity of these instruments.
Accounts Receivable- Accounts deemed uncollectible are written off in the year they become uncollectible. As of December 31, 2021 and 2020 the balance in Accounts Receivable was $
Impairment of Long-Lived Assets- The Company evaluates the recoverability of its fixed assets and other assets in accordance with section 360-10-15 of the FASB Accounting Standards Codification for disclosures about Impairment or Disposal of Long-Lived Assets. Disclosure requires recognition of impairment of long-lived assets in the event the net book value of such assets exceeds its expected cash flows. If so, it is impaired and is written down to fair value, which is determined based on either discounted future cash flows or appraised values. The Company adopted the statement on inception. No impairments of these types of assets were recognized during the periods ended December 31, 2021 and 2020.
Stock-Based Compensation- The Company accounts for stock-based compensation using the fair value method following the guidance set forth in section 718-10 of the FASB Accounting Standards Codification for disclosure about Stock-Based Compensation. This section requires a public entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). That cost will be recognized over the period during which an employee is required to provide service in exchange for the award- the requisite service period (usually the vesting period). No compensation cost is recognized for equity instruments for which employees do not render the requisite service.
Fair Value for Financial Assets and Financial Liabilities- The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America (U.S. GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:
| Level 1 | Quoted market prices available in active markets for identical assets or liabilities as of the reporting date. |
| Level 2 | Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. |
| Level 3 | Pricing inputs that are generally unobservable inputs and not corroborated by market data. |
| F-8 |
| Table of Contents |
APPSOFT TECHNOLOGIESNOTES
TO THE (UNAUDITED) FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2021
NOTE C—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES—CONT’D
The carrying amounts of the Company’s financial assets and liabilities, such as cash and accrued expenses, approximate their fair values because of the short maturity of these instruments. The Company’s note payable approximates the fair value of such instrument based upon management’s best estimate of interest rates that would be available to the Company for similar financial arrangement at the periods ended December 31, 2021 and 2020.
The Company does not have any assets or liabilities measured at fair value on a recurring or a non-recurring basis, consequently, the Company did not have any fair value adjustments for assets and liabilities measured at fair value at December 31, 2021, nor gains or losses are reported in the statement of operations that are attributable to the change in unrealized gains or losses relating to those assets and liabilities still held at the reporting date for the periods ended December 31, 2021 and 2020.
Recently Issued Accounting Pronouncements
In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06, Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”) to simplify accounting for certain financial instruments. ASU 2020-06 eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity. The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity’s own equity. ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if-converted method for all convertible instruments. ASU 2020-06 is effective January 1, 2022 and should be applied on a full or modified retrospective basis, with early adoption permitted beginning on January 1, 2021. The Company is currently assessing the impact, if any, that ASU 2020-06 would have on its financial position, results of operations or cash flows.
Other pronouncements issued by the FASB or other authoritative accounting standards groups with future effective dates are either not applicable or are not expected to be significant to the Company’s financial position, results of operations or cash flows.
NOTE D-SEGMENT REPORTING
The Company follows the guidance set forth by section 280-10 of the FASB Accounting Standards Codification for reporting and disclosure on operating segments of the Company. It also requires segment disclosures about products and services, geographic areas, and major customers. The Company determined that it did not have any separately reportable operating segments as of December 31, 2021 and 2020.
NOTE E-CAPITAL STOCK
The Company is authorized to issue
Total issued and outstanding shares of common stock is
Total issued and outstanding shares of preferred stock is
The Company is authorized to issue
| F-9 |
| Table of Contents |
APPSOFT TECHNOLOGIES
NOTES TO THE (UNAUDITED) FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2021
NOTE E-CAPITAL STOCK—CONT’D
The Company is authorized to issue 10,000,000 Series A Cumulative, Convertible Preferred Shares (Preferred Stock) at $.0001 par value per share. During the period from inception (March 24, 2015) through December 31, 2016, the Company issued 2,000,000 shares of preferred stock at $.05 per share to Ventureo, LLC in exchange for $50,000 in cash and Phone Apps with a fair market value of $50,000 for a total of $100,000. The shares of “Preferred Stock” are convertible, at the option of the holder, into shares of common stock at a conversion price of $0.005 per share. The holder of the “Preferred Stock” may not convert any portion of the “Preferred Stock” if, after giving effect to such conversion, the holder would beneficially own in excess of 4.99%, except that the holder may, by written notice to the Company, increase or decrease this percentage up to a maximum of 9.99%, provided that any such increase will not be effective until the 61st day after such notice is delivered to the Company. Upon a liquidation event, the Company shall first pay to the holders of the “Preferred Stock” an amount per share equal to the Original Issue Price (i.e., $0.05 per share of Series A Preferred Stock), plus all accrued and unpaid dividends on each share of Series A Preferred Stock (the “Series A Preference Amount”). After full payment of the liquidation preference amount to the holders of the “Preferred Stock”, the Company will then distribute the remaining assets to holders of common stock, other junior preferred shares (if any) and the “Preferred Stock” on an as-if-converted-basis. The Series A Preferred Stock ranks senior to the Company’s common stock and senior to any other shares of preferred stock the Company may issue in the future.
The Company agreed to reduce the price at which each share of Series A Preferred Stock, of which Ventureo is the sole holder, converts into Common Stock from $
During the 2nd Quarter 2021, the Company converted
Capital Contributions
Brian Kupchik, President and CEO made no capital contributions during the twelve months ended December 31, 2021 and 2020.
NOTE F – INCOME TAX
The Company provides for income taxes under (now included under Accounting Standards Codification (ASC), 740), Accounting for Income Taxes. ASC 740 requires the use of an asset and liability approach in accounting for income taxes. Deferred tax assets and liabilities are recorded based on the differences between the financial statement and tax bases of assets and liabilities and the tax rates in effect when these differences are expected to reverse.
ASC 740 requires the reduction of deferred tax assets by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some or all the deferred tax assets will not be realized. For Federal income tax purposes,
No tax benefit has been reported in the financial statements because after evaluating our own potential tax uncertainties,
The Company is not obligated to pay State Income Taxes because it is a Nevada corporation. The Company does not currently have any tax returns open for examination.
NOTE G--NOTES PAYABLE AND NOTE EXCHANGE AGREEMENT
On November 30, 2018, the Company entered into an Exchange Agreement with its Creditors under which each Creditor agreed to cancel the Original Notes issued and accept a new promissory note in the amount of $
| F-10 |
| Table of Contents |
APPSOFT TECHNOLOGIES
NOTES TO THE (UNAUDITED) FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2021
NOTE G--NOTES PAYABLE AND NOTE EXCHANGE AGREEMENT—CONT’D
In consideration for the exchange of the Original Notes for the New Notes, the Company agreed to reduce the price at which each share of Series A Preferred Stock, of which Ventureo is the sole holder, converts into Common Stock from $
Although new borrowings are not yet formalized into a note agreement, the Company and the lender agree that the new loans have the same terms and conditions for the formalized notes.
The total amount of the Notes Payable is $
Detail of the Notes Payable is as follows:
| · | 2018 Principal and Interest consolidated into new promissory note in the amount of $ |
| · | During the 1st Quarter 2019, the Company incurred an additional $ |
| · | During the 2nd Quarter 2019, the Company incurred an additional $ |
| · | During the 3rd Quarter 2019, the Company incurred an additional $ |
| · | During the 4th Quarter 2019, the Company incurred an additional $ |
As of June 30, 2020, the Company executed a Drawdown Promissory Note in favor of Bryan Glass Securities, Inc. (“BSG”) under which the Company is entitled to borrow up to an aggregate of $
During the year 2020, $
During the 1st quarter 2021, $
During the 2nd quarter 2021, $
During the 3rd quarter 2021, $
During the 4th quarter 2021, $
As of December 31, 2021, the Company has borrowed an aggregate of $
NOTE H—FIXED ASSETS
In July 2016, the Company purchased computer equipment for $
NOTE I—MATERIAL EVENTS/SUBSEQUENT EVENTS
Since the close of the period covered by the financial statements of which these notes form a part, the following material transactions have occurred:
On April 2, 2021, an amendment to the original Drawdown Promissory note was issued. Under the original Drawdown Note, the Company was extended up to $50,000 in credit at a rate of
Subsequent Events
The Company evaluated for subsequent events through the issuance date of the Company’s financial statements and has determined no subsequent events have occurred.
| F-11 |
| Table of Contents |
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management conducted an evaluation, with the participation of our Chief Executive Officer, who is our principal executive officer and our principal financial and accounting officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this annual report on Form 10-K. Based upon that evaluation, our Chief Executive Officer concluded that as a result of the material weakness in our internal control over financial reporting described below, our disclosure controls and procedures were not effective as of December 31, 2021.
Management’s Annual Report on Internal Control over Financial Reporting
Management is responsible for the preparation of our financial statements and related information. Management uses its best judgment to ensure that the financial statements present fairly, in material respects, our financial position and results of operations in conformity with generally accepted accounting principles.
Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in the Exchange Act. These internal controls are designed to provide reasonable assurance that the reported financial information is presented fairly, that disclosures are adequate and that the judgments inherent in the preparation of financial statements are reasonable. There are inherent limitations in the effectiveness of any system of internal controls including the possibility of human error and overriding of controls. Consequently, an ineffective internal control system can only provide reasonable, not absolute, assurance with respect to reporting financial information.
Our internal control over financial reporting includes policies and procedures that: (i) pertain to maintaining records that, in reasonable detail, accurately and fairly reflect our transactions; (ii) provide reasonable assurance that transactions are recorded as necessary for preparation of our financial statements in accordance with generally accepted accounting principles and that the receipts and expenditures of company assets are made in accordance with our management and directors authorization; and (iii) provide reasonable assurance regarding the prevention of or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on our financial statements.
Under the supervision of our Chief Executive Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework Internal Control—Integrated Framework (2013) as outlined by the Committee of Sponsoring Organizations of the Treadway Commission and guidance prepared by the Commission specifically for smaller public companies. Based on that evaluation, our management concluded that our internal control over financial reporting was not effective as of December 31, 2021. We have identified the following material weakness as of December 31, 2021:
| · | Segregation of duties in the handling of cash, cash receipts and cash disbursements was not formalized, and |
|
|
|
| · | Lack of an independent board to oversee management decisions and use of funds. |
The foregoing weaknesses in our internal controls continue to exist as of the date of this report.
| 20 |
| Table of Contents |
Remediation of Material Weakness in Internal Control
Presently, it will be difficult to mitigate or eliminate the material weaknesses in our internal controls. We do not currently possess sufficient financial resources to engage the additional personnel required to alleviate the weaknesses that stem from the lack of segregation of duties in the handling of cash, cash receipts and cash disbursements was not formalized. Moreover, it is difficult for small public companies such as ours to attract qualified independent directors given the obligations and risks attendant to such serving in such capacity; hence we will continue to operate with a single board member thereby failing mitigate the weaknesses stemming from the lack of an independent board:
In the interim, management has internally formalized the procedures for segregation of duties and monitoring handling of cash, cash receipts and cash disbursements. We also are establishing a formal documented system of internal controls surrounding cash and plan to implement such systems.
Our management does not expect that our disclosure controls and procedures or our internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our Company have been detected.
This annual report on Form 10-K does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to rules of the SEC that permit us to provide only management’s report in this annual report on Form 10-K.
Changes in Internal Controls over Financial Reporting
There have been no changes in our internal control over financial reporting during the quarter ended December 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
None.
| 21 |
| Table of Contents |
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Members of our Board of Directors (“Board”) are elected by the stockholders to a term of one year and serve until their successors are elected and qualified. Our officers are appointed by our Board to a term of one year and serve until their successors are duly appointed and qualified, or until the officer is removed from office. Our Board has no nominating, audit or compensation committees.
Brian Kupchik currently is our only officer and director. Set forth below is certain information regarding Mr. Kupchik.
Name |
| Age |
| Position |
|
|
|
|
|
Brian Kupchik |
| 47 |
| President, Chief Executive Officer and Director |
Background Information about our Officers and Directors
Brian Kupchik has been our President, Secretary and a member of our board of directors since the Company’s inception. In January 2015, he co-founded Primo Media Inc. with Mr. Ingram, our former Treasurer and a director, a business development concern based in Yorktown Heights, New York, for which he served as the chief operating officer. Primo is a Latin-focused multi-channel network that connects brands with millions of Hispanic Millennials through integrated digital and mobile advertising opportunities across its network. Since January 2012, Mr. Kupchik has been a partner in 47 Media, an outsourced business development and consulting firm, where he is responsible for acquiring new business, negotiating contracts, establishing project plans and consulting regarding strategy, business development, management and other outsourced digital media services. From October 2011 to May 2012, he was a portfolio manager at Black Ocean, digital platform that has created a new generation business model that combines entrepreneurship, incubation, venture capital and investment banking practices. From October 2009 to August 2011, Mr. Kupchik was vice president of business development at MediaBrix/Smartclip, a social media focus company offering a foundation of social products including, Pulse for Facebook, Guaranteed Video View, Social Apps / Games, and Mobile, where he participated in sales, strategy, product development with a heavy focus on mobile. Mr. Kupchik is a member of OMMA, a digital media marketing organization, and the Interactive Advertising Bureau. Mr. Kupchik is involved with several children’s charitable organizations. Mr. Kupchik has been selected as a director of our Company because of his experience and background in business development in Internet based businesses.
Involvement in Certain Legal Proceedings
Our sole director, executive officer and control person has not been involved in any legal proceeding listed in Item 401(f) of Regulation S-K in the past 10 years.
Corporate Governance
Our Board has not established any committees, including an audit committee, a compensation committee or a nominating committee, or any committee performing similar functions. The functions of those committees are being undertaken by our Board. Because we do not have any independent directors, our Board believes that the establishment of committees of our Board would not provide any benefits to our Company and could be considered more form than substance.
We do not have a policy regarding the consideration of any director candidates that may be recommended by our stockholders, including the minimum qualifications for director candidates, nor have our officers and directors established a process for identifying and evaluating director nominees. We have not adopted a policy regarding the handling of any potential recommendation of director candidates by our stockholders, including the procedures to be followed. Our officers and directors have not considered or adopted any of these policies as we have never received a recommendation from any stockholder for any candidate to serve on our Board of Directors.
Given our relative size and lack of directors’ and officers’ insurance coverage, we do not anticipate that any of our stockholders will make such a recommendation in the near future. While there have been no nominations of additional directors proposed, in the event such a proposal is made, all current members of our Board will participate in the consideration of director nominees.
As with most small, early stage companies until such time as our Company further develops our business, achieves a stronger revenue base and has sufficient working capital to purchase directors’ and officers’ insurance, we do not have any immediate prospects to attract independent directors. When we are able to expand our Board to include one or more independent directors, we intend to establish an audit committee of our Board of Directors. It is our intention that one or more of these independent directors will also qualify as an audit committee financial expert. Our securities are not quoted on an exchange that has requirements that a majority of our Board members be independent and we are not currently otherwise subject to any law, rule or regulation requiring that all or any portion of our Board of Directors include “independent” directors, nor are we required to establish or maintain an audit committee or other committees of our Board.
| 22 |
| Table of Contents |
Code of Ethics
We have adopted a code of business conduct and ethics that applies to all of our employees, officers and directors, including those officers responsible for financial reporting. The code of business conduct and ethics is available on our website at www.appsofttechnologies.com. We intend to post any amendments to the code, or any waivers of its requirements, on our website. The contents of our website are not incorporated by reference into this annual report on Form 10-K.
Committees of our Board of Directors
Our securities are not quoted on an exchange that has requirements that a majority of our Board members be independent and we are not currently otherwise subject to any law, rule or regulation requiring that all or any portion of our Board of Directors include “independent” directors, nor are we required to establish or maintain an Audit Committee or other committees of our Board of Directors.
Our Board does not have standing audit, compensation or nominating committees. Our Board does not believe these committees are necessary based on the size of our company, the current levels of compensation to corporate officers and voting control lies with our current board of directors. Our Board will consider establishing audit, compensation and nominating committees at the appropriate time.
The entire Board of Directors participates in the consideration of compensation issues and of director nominees. Candidates for director nominees will be reviewed in the context of the current composition of the Board and our operating requirements and the long-term interests of our stockholders. In conducting this assessment, the Board of Directors will consider professional and business skills, experience, expertise, diversity, judgment and such other factors as it deems appropriate given the current needs of the Board and our company, to maintain a balance of knowledge, experience and capability.
The Board’s process for identifying and evaluating nominees for director, including nominees recommended by stockholders, will involve compiling names of potentially eligible candidates, conducting background and reference checks, conducting interviews with the candidate and others (as schedules permit), meeting to consider and approve the final candidates and, as appropriate, preparing an analysis with regard to particular recommended candidates.
Director Compensation
Our director does not receive any compensation for his service as a director and there is no director compensation being considered at this time.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Exchange Act requires directors, executive officers and holders of more than 10% of an equity security registered pursuant to Section 12 of the Exchange Act to file various reports with the SEC. Our equity securities are not registered pursuant to Section 12 of the Exchange Act, so our directors, executive officers and 10% holders are not subject to Section 16(a).
Procedures for Nominating Directors
There have been no material changes to the procedures by which security holders may recommend nominees to the Board during the quarter ended December 31, 2021.
| 23 |
| Table of Contents |
ITEM 11. EXECUTIVE COMPENSATION
The following table summarizes compensation recorded by us for the years ended December 31, 2021 and 2020 for our principal executive officer who also serves as our principal financial officer.
Summary Compensation Table
Name and principal position |
| Year |
| Salary ($) |
|
| Bonus ($) |
|
| Stock Awards ($) |
|
| Option Awards ($) |
|
| Non-Equity Incentive Plan Compensation ($) |
|
| Nonqualified Deferred Compensation Earnings ($) |
|
| All Other Compensation ($) |
|
| Total ($) |
| ||||||||
Brian Kupchik, President and |
| 2021 |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
Chief Executive Officer |
| 2020 |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
___________
Narrative Disclosure to Summary Compensation Table
The Company has not established a base salary for the President and Chief Executive Officer. However, from time to time, the President, Chief Executive Officer and sole director approves, in his sole discretion, payments to be made to himself by the Company in the form of a management fee. The management fee is intended to compensate Mr. Kupchik for services rendered to the Company in his capacity as an executive officer. There is no written agreement regarding the management fee and no terms in place regarding the amount and timing of management fees. In addition, from time to time, the President, Chief Executive Officer and sole director approves, in his sole discretion, the payment by the Company of certain of the President and Chief Executive Officer’s personal expenses and/or financial obligations.
There are no compensatory plans or arrangements, including payments to be received from the Company with respect to any executive officer, that would result in payments to such person because of his or her resignation, retirement or other termination of employment with the Company, or our subsidiaries, any change in control, or a change in the person’s responsibilities following a change in control of the Company.
Employment Agreements
There are no current employment agreements between the Company and our executive officer or understandings regarding future compensation.
Outstanding Equity Awards at Fiscal Year-End
No executive officer received any equity awards, or holds exercisable or unexercisable options, as of December 31, 2021.
Long-Term Incentive Plans
There are no arrangements or plans in which the Company would provide pension, retirement or similar benefits for directors or executive officers.
Compensation Committee
We do not currently have a compensation committee of our Board of Directors. The Board as a whole determines executive compensation.
Compensation of Directors
Our current director does not receive separate compensation for his service on our Board of Directors. Our Board has the authority to fix the compensation of directors. We do not intend to pay employee directors a separate fee for their Board services.
No compensation was paid to our director for his service as a director during the year ended December 31, 2021.
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| Table of Contents |
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
The following table sets forth certain information regarding beneficial ownership of our capital stock as of the date of this report, by (i) each person known by us to be the beneficial owner of more than 5% of each class of our outstanding capital stock, (ii) each director and each of our executive officers and (iii) all executive officers and directors as a group. As of the date of this report, there were 4,145,103 shares of our common stock outstanding and 1,937,400 shares of Series A Preferred Stock outstanding.
The number of shares of capital stock beneficially owned by each person is determined under the rules of the Commission and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rules, beneficial ownership includes any shares as to which such person has sole or shared voting power or investment power and also any shares which the individual has the right to acquire within 60 days after the date hereof, through the exercise of any stock option, warrant or other right. Unless otherwise indicated, each person has sole investment and voting power (or shares such power with his or her spouse) with respect to the shares set forth in the following table. The inclusion herein of any shares deemed beneficially owned does not constitute an admission of beneficial ownership of those shares.
Name of Beneficial Owner |
| Amount and Nature of Beneficial Ownership |
|
| Percent of Class |
| ||
|
|
|
|
|
|
| ||
Directors and Officers |
|
|
|
|
|
| ||
|
|
|
|
|
|
| ||
Brian Kupchik, President, Chief Financial Officer and Director |
|
| 2,000,000 |
|
|
| 49.59 | % |
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All officers and directors as a group (1 person) |
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| 2,000,000 |
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| 49.59 | % |
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Series A Preferred Stock 1: |
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Ventureo, LLC 20 West Park Avenue Suite 207 Long Beach NY 11561 |
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| 1,937,400 |
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| 100 | % |
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1. | The shares of Series A Preferred Stock are convertible, at the option of the holder, into shares of common stock at a conversion price of $0.0002 per share. The holder of Series A Preferred Stock may not convert any portion of the Series A Preferred Stock if, after giving effect to such conversion, the holder would beneficially own in excess of 4.99%, except that the holder may, by written notice to the Company, increase or decrease this percentage up to a maximum of 9.99%, provided that any such increase will not be effective until the 61st day after such notice is delivered to us. See “DESCRIPTION OF SECURITIES.” |
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Related Party Transactions
During the years ended December 31, 2020 and 2021, the Company paid no management fees to Brian Kupchik, President and CEO.
Director Independence
Our Board of Directors currently consists of one member, who does not qualify as an independent director in accordance with the listing requirements of the NASDAQ Global Market. The NASDAQ independence definition includes a series of objective tests, including whether the director is not, and has not been for at least three years, one of our employees and that neither the director, nor any of his family members has engaged in various types of business dealings with us. In addition, our Board has not made a subjective determination as to each director that no relationships exist which, in the opinion of our Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director, though such subjective determination is required by the NASDAQ rules. Had our Board of Directors made these determinations, our Board would have reviewed and discussed information provided by our sole director with regard to his business and personal activities and relationships as they may relate to us and our management.
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| Table of Contents |
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The following table shows the fees that were billed for the audit and other services for the fiscal years ended December 31, 2021 and 2020 provided by BF Borgers CPA PC.
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| 2021 |
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| 2020 |
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Audit Fees |
| $ | 6,000 |
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| $ | 6,000 |
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Audit-Related Fees |
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| 9,000 |
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| 9,000 |
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Tax Fees |
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All Other Fees |
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Total |
| $ | 15,000 |
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| $ | 15,000 |
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Audit Fees — This category includes the audit of our annual financial statements, review of financial statements included in our Quarterly Reports on Form 10-Q and services that are normally provided by the independent registered public accounting firm in connection with engagements for those fiscal years. This category also includes advice on audit and accounting matters that arose during, or as a result of, the audit or the review of interim financial statements.
Audit-Related Fees — This category consists of assurance and related services by the independent registered public accounting firm that are reasonably related to the performance of the audit or review of our financial statements and are not reported above under “Audit Fees.” The services for the fees disclosed under this category include consultation regarding our correspondence with the SEC, other accounting consulting and other audit services.
Tax Fees — This category consists of professional services rendered by our independent registered public accounting firm for tax compliance and tax advice. The services for the fees disclosed under this category include tax return preparation and technical tax advice.
All Other Fees — This category consists of fees for other miscellaneous items.
Our Board of Directors has adopted a procedure for pre-approval of all fees charged by our independent registered public accounting firm. Under the procedure, the Board approves the engagement letter with respect to audit, tax and review services. Other fees are subject to pre-approval by the Board, or, in the period between meetings, by a designated member of Board. Any such approval by the designated member is disclosed to the entire Board at the next meeting.
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PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
The following documents are being filed as part of this report:
| (1) | The following financial statements of the Company and the report of BF Borgers CPA PC are included in Part II, Item 8: |
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| (2) | All financial statement supporting schedules are omitted because the information is inapplicable or presented in the Notes to Financial Statements. |
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| (3) | Exhibits. |
Exhibit |
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101.INS |
| Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document). |
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101.SCH |
| Inline XBRL Taxonomy Extension Schema Document. |
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101.CAL |
| Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
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101.DEF |
| Inline XBRL Taxonomy Extension Definition Linkbase Document. |
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101.LAB |
| Inline XBRL Taxonomy Extension Labels Linkbase Document. |
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101.PRE |
| Inline XBRL Taxonomy Extension Presentation Linkbase Document. |
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104 |
| Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101). |
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* | Filed herewith. |
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** | Furnished herewith. This certification is not deemed filed for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and is not deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act. |
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| APPSOFT TECHNOLOGIES, INC. | ||
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March 29, 2022 | By: | /s/ Brian Kupchik | |
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| Brian Kupchik |
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| President and Chief Executive Officer |
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Pursuant to the requirements of the Securities and Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature | Title | Date | ||
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Brian Kupchik | President, Chief Executive Officer, principal executive officer and |
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/s/ Brian Kupchik | principal financial and accounting officer | March 29, 2022 |
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