BOON INDUSTRIES, INC. Management report and analysis of the financial situation and operating results. (Form 10-Q)

Overview

We are an innovative bio-scientific company that has developed an effective germ fighter, DiOx+, a disinfectant sterilizer that kills 99.99% of harmful pathogens without harmful toxic exposure to the user or the environment. Our DiOx+ is a broad-spectrum, activated chlorine dioxide (Cl02) sanitizer that kills dangerous pathogens with no residual toxicity. It protects the environment and human health from harmful viruses, bacteria and by-products left behind by other cleaning disinfectants, without unpleasant odor or skin irritation. Our proprietary chemical formulas and processes make DiOx+ ideal for sterilizing mission-critical and high-value medical equipment and for disinfecting air and surfaces in laboratory and hospital environments. DiOx+ helps protect agricultural crops against diseases and other pathogens such as molds and fungi. It is used in water treatment plants and helps reduce operating costs in warehouses, distribution centers and e-commerce support facilities.

Results of operations for the three months ended March 31, 2022and 2021


                            For the Three Months
                               ended March 31,
                             2022            2021         Change ($)       Change (%)

Revenue                  $     25,451     $   20,236            5,215             25.8 %
Cost of revenue                 8,285         12,115           (3,830 )          (31.6 )%
Gross profit                   17,166          8,121            9,045            111.4 %

Operating expenses            606,533        372,649          233,884             62.8 %

Loss from operations         (589,367 )     (364,528 )       (224,839 )          (61.6 )%

Other income (expense)     (3,978,168 )      968,474       (4,946,642 )         (510.8 )%

Net loss                 $ (4,567,535 )   $  603,946     $ (5,171,481 )           (856 )%


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Revenue


Revenue increased by $5,215 i.e. 25.8% compared to the previous year $25,451 in the three months ended March 31, 2022compared to $20,236 during the previous period. This increase is due to the recovery from the negative impact of the COVID-19 outbreak in March 2020.


Cost of Revenue


The Company’s cost of sales was $8,285 for the three months ended March 31, 2022a decrease of $3,830 i.e. approximately 31.6%, against $12,115 for the three months ended March 31, 2021. The decrease in revenue cost is due to improved productivity and reduced costs.


Operating Expenses


Operating expenses for the three months ended March 31, 2022and 2021, were
$606,533 and $372,649, respectively. The increase is mainly due to an increase in stock-based compensation expense of approximately $175,000
resulting from the fair value of common shares issued under advisory agreements and general and administrative expenses of approximately
$28,000 associated with the preparation of reports relating to being a public company and accounting fees.


Other Expense


Other expenses for the three months ended March 31, 2022been $3,978,168compared to other income $968,474 for the three months ended March 31, 2022.

Other expenses for the three months ended March 31, 2022consisted of $2,479,279
the expense resulting from the change in fair value of derivatives, $368,294 interest charges, and $1,130,595 the loss on the conversion of the Series A preferred shares into common shares.

Other income for the three months ended March 31, 2021consisted of $1,904,288
the result resulting from the change in fair value of derivative instruments, $225,881 interest charges, and $709,933 the loss on the conversion of the Series A preferred shares into common shares.


Net Loss


Net loss for the three months ended March 31, 2022been $4,567,535compared to a net result of $603,946 for the three months ended March 31, 2021. The increase in our net loss results from the changes described above.

Cash and capital resources



Our working capital deficiency as of March 31, 2022, and December 31, 2021, was
as follows:



                            March 31,       December 31,
                              2022              2021
Current Assets            $      73,921     $     127,104
Current Liabilities       $  73,080,066     $  71,626,880
Working Capital Deficit   $ (73,006,145 )   $ (71,499,776 )


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The overall working capital deficit went from $71,499,776 to December 31, 2021for $73,006,145 to March 31, 2022. Current liabilities consist mainly of loans payable, convertible notes payable, liabilities derived from the bifurcated conversion feature embedded in hybrid debt instruments, related party liabilities and Series A preferred shares classified as liabilities. The increase in the working capital deficit is mainly due to an increase in the fair value of the derivative liability and the conversion of the Series A preferred shares into common shares during the three months ended March 31, 2022.

Here is a selection of information from the cash flow statements for the three months ended March 31, 2022and 2021:



                                                March 31,      March 31,
                                                   2022           2021
Cash used in Operating Activities               $ (151,165 )   $ (214,820 )
Cash used in Investing Activities               $  (14,914 )   $        -
Cash provided by Financing Activities           $  145,394     $  239,378

(Decrease) Net increase in cash during the period ($20,685) $24,558



Going Concern


Since January 1, 2022and through March 31, 2022the Company raised approximately $0.1 million in debt transactions. These funds were used to finance the day-to-day operations of the business. Our accompanying financial statements have been prepared on the assumption that the Company will continue as a going concern, which contemplates the realization of assets and the settlement of liabilities in the normal course of business for the twelve month period following the date of these financial statements. Our cash at March 31, 2022 was approximately
$2,700. The Company has suffered significant losses since its inception. Its current liabilities exceed its current assets and there is insufficient cash available to fund planned future operations. The Company plans to raise additional capital through debt and equity in order to continue financing its activities, which could have the effect of diluting the holdings of existing shareholders. However, there can be no assurance that the Company will be able to raise sufficient funds or generate sufficient revenue to pay its obligations as they come due, which raises substantial doubt as to our ability to continue our operations.

The Company’s ability to continue as a going concern depends on its ability to raise additional capital and implement its business plan.

The Company requires additional capital to fully execute its commercialization program and fund its current operations and development. Currently, we rely on additional fundraising to fill operational gaps. There can be no assurance that continued financing will be available on satisfactory terms. We intend to raise additional capital through the sale of shares, loans or other short-term financing options.

Off-balance sheet arrangements

We do not have any material off-balance sheet arrangements that have or are reasonably likely to have a present or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or our capital resources which are important to our shareholders.


Seasonality


Management does not believe that our current industry is seasonal to any significant degree.



Critical Accounting Polices



There have been no material changes in our critical accounting policies, from the critical accounting policies and material judgments and estimates disclosed in our Annual Report on Form 10-K for the year ended
December 31, 2021filed with the SECOND on April 14, 2022.

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Contingencies


For an analysis of contingencies, see note 10, Commitments and contingencies, of the notes to the consolidated financial statements in “Part I, point 1. Consolidated financial statements (unaudited)” of the quarterly report.

Off-balance sheet arrangements

During the period ended March 31, 2022we have not entered into any off-balance sheet arrangements.

Recent accounting pronouncements

For a list of our new and recently adopted accounting standards, see Note 2, Summary of Significant Accounting Policies, in the Note to the Consolidated Financial Statements in “Part I, Item 1. Consolidated Financial Statements (Unaudited)” of this report. quarterly.

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