Totaligent, Inc 10-Q for FY2024 Q3
Totaligent, Inc. (TGNT)
About this 10-Q
Totaligent, Inc filed this 10-Q on December 9, 2024, covering the quarter ended September 30, 2024 (FY2024 Q3).
Headline figures
Quarter ended September 30, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $29.99K
- down 91.0% from $334.19K a year earlier
- Net loss
- $575.42K
- compared with a net loss of $170.85K a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
For the quarterly period ended
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) |
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(Address of principal executive offices) |
| (Zip code) |
Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
| Trading symbol |
| Name of exchange on which registered |
N/A |
| N/A |
| N/A |
Securities registered under Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☒ No ☐
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. Yes ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting 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 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously filed financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10 D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes
The aggregate market value of the registrant’s common stock held by non-affiliates as of September 30, 2024, the last day of the registrant’s most recently completed second fiscal quarter, based upon the closing price of the registrant’s common stock as reported by the OTCQB Marketplace on such date, was approximately $3.7 million. Shares of common stock held by each officer and director, and by each person who owns 10% or more of the outstanding common stock, have been excluded in that such persons may be deemed to be affiliates. This calculation does not reflect a determination that persons are affiliates for any other purposes.
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date. As of November 22, 2024, the registrant had
Documents Incorporated by Reference: None.
TOTALIGENT, INC.
FORM 10-Q
TABLE OF CONTENTS
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| Consolidated Balance Sheets as of September 30, 2024 (unaudited) and December 31, 2023 |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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| Table of Contents |
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This document contains certain statements of a forward-looking nature. Such forward-looking statements, including but not limited to statements regarding projected growth, trends and strategies, future operating and financial results, financial expectations and current business indicators are based upon current information and expectations and are subject to change based on factors beyond the control of the Company. Forward-looking statements typically are identified by the use of terms such as “look,” “may,” “should,” “might,” “believe,” “plan,” “expect,” “anticipate,” “estimate” and similar words, although some forward-looking statements are expressed differently. The accuracy of such statements may be impacted by a number of risks and uncertainties that could cause actual results to differ materially from those projected or anticipated, including but not limited to those set forth herein and in our Annual Report on Form 10-K.
Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Except as required by the federal securities laws, we undertake no obligation to update forward-looking information. Nonetheless, the Company reserves the right to make such updates from time to time by press release, periodic report or other method of public disclosure without the need for specific reference to this Report. No such update shall be deemed to indicate that other statements not addressed by such update remain correct or create an obligation to provide any other updates.
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| Table of Contents |
PART I – FINANCIAL INFORMATION
Item 1. Financial statements
TOTALIGENT, INC.
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024
INDEX TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
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| Table of Contents |
TOTALIGENT, INC.
(Formerly Alltemp, Inc.)
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
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| September 30, 2024 |
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| December 31, 2023 |
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ASSETS |
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Current assets |
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Cash |
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Prepaid expenses |
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Total current assets |
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Property and equipment, net |
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Capitalized software |
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Total assets |
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LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
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Current liabilities |
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Accrued compensation |
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Accrued interest |
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Convertible notes payable, net of unamortized discount of $ |
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Derivative liability |
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Total current liabilities |
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Total liabilities |
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Commitments and contingencies (Note 7) |
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Stockholders’ deficit |
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Preferred stock, $ |
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Common stock, $ |
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Shares to be issued |
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Additional paid-in capital |
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Accumulated deficit |
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Treasury stock, |
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Total stockholders’ deficit |
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Total liabilities and stockholders’ deficit |
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The accompanying notes are an integral part of these unaudited consolidated financial statements
| F-1 |
| Table of Contents |
TOTALIGENT, INC.
(Formerly Alltemp, Inc.)
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
UNAUDITED
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| For the Three Months Ended |
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Revenue |
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Cost of revenue |
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Gross (loss) profit |
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Operating expenses: |
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Consulting expenses |
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Personnel expenses |
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General and administrative |
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Total operating expenses |
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Net operating loss |
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Other income (expense) |
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Interest expense |
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Amortization of debt discount |
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Loss on change in fair value of derivative liability |
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Loss on sale of fixed assets |
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Total other expense |
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Loss before income taxes |
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Provision for income tax |
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Net loss |
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Loss per share - basic and diluted |
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Weighted average shares outstanding - basic and diluted |
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The accompanying notes are an integral part of these unaudited consolidated financial statements
| F-2 |
| Table of Contents |
TOTALIGENT, INC.
(Formerly Alltemp, Inc.)
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024
UNAUDITED
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| Preferred Stock |
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| Common Stock |
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| Shares to be issued |
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| Additional Paid-in |
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| Accumulated |
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| Treasury Stock |
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| Shares |
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| Capital |
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| Amount |
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Balance - December 31, 2023 |
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Series D Preferred Stock issued for services |
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Net loss |
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Balance - March 31, 2024 |
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Net loss |
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Balance - June 30, 2024 |
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Series D Preferred Stock issued for services |
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Net loss |
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Balance - September 30, 2024 |
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| $ | ( | ) |
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| 38,187,500 |
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| $ | ( | ) | |||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements
| F-3 |
| Table of Contents |
TOTALIGENT, INC.
(Formerly Alltemp, Inc.)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023
UNAUDITED
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| Preferred Stock |
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| Common Stock |
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| Shares to be issued |
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| Additional Paid-in |
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| Accumulated |
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| Treasury Stock |
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| Total Stockholders’ Equity |
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| Shares |
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| Amount |
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| Amount |
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| Amount |
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| Capital |
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| Deficit |
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| Shares |
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| Amount |
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Balance - December 31, 2022 |
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Net loss |
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Balance - March 31, 2023 |
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Sale of common stock |
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Conversion of Series A Preferred Stock into Common Stock |
|
| - |
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| ( | ) |
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| ( | ) |
|
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| - |
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Common stock issued related to December 3, 2021 merger |
|
| - |
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| ( | ) |
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| ( | ) |
|
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| - |
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| |||||||
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Net loss |
|
| - |
|
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|
|
| - |
|
|
|
|
|
| - |
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|
|
|
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| ( | ) |
|
| - |
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| ( | ) | |||||
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Balance - June 30, 2023 |
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| ( | ) |
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| ( | ) |
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| ( | ) | ||||||||
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Conversion of debt and accrued interest |
|
| - |
|
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|
|
| - |
|
|
|
|
|
| - |
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| ( | ) |
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Conversion of Series D Preferred Stock into Common Stock |
|
| ( | ) |
|
| ( | ) |
|
| - |
|
|
|
|
|
| - |
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| ( | ) |
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| ( | ) |
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Net loss |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
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| ( | ) |
|
| - |
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| ( | ) | |||||
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Balance - September 30, 2023 |
|
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| $ |
|
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|
| $ |
|
|
|
|
| $ |
|
| $ |
|
| $ | ( | ) |
|
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|
| $ | ( | ) |
| $ | ( | ) | ||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements
| F-4 |
| Table of Contents |
TOTALIGENT, INC.
(Formerly Alltemp, Inc.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
|
| For the Nine Months Ended |
| |||||
|
| September 30, |
| |||||
|
| 2024 |
|
| 2023 |
| ||
|
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| ||
CASH FLOWS FROM OPERATING ACTIVITIES |
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| ||
Net loss |
| $ | ( | ) |
| $ | ( | ) |
Adjustment to reconcile net loss to net cash used in operating activities: |
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Depreciation expense |
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Stock issued for services |
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Amortization of debt discount |
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Loss on sale of fixed assets |
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Loss on change in fair value of derivative liabilities |
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| ||
Changes in Operating Assets and Liabilities: |
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Prepaid expense |
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| ( | ) |
|
| ( | ) |
Accrued compensation |
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| ||
Accrued interest |
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| ||
Accrued expenses |
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| ( | ) | |
Net change in operating activities |
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| ( | ) |
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| ( | ) |
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CASH FLOWS FROM INVESTING ACTIVITIES |
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Proceeds from sale of fixed assets |
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| ||
Expenditures for capitalized software |
|
| ( | ) |
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| |
Net change in investing activities |
|
| ( | ) |
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| |
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|
CASH FLOWS FROM FINANCING ACTIVITIES |
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Cash proceeds from sale of common stock |
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| ||
Proceeds from issuance of convertible notes payable |
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| ||
Repayments of notes payable |
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|
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|
| ( | ) | |
Net change in financing activities |
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| ||
|
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Net (Decrease) Increase in Cash |
|
| ( | ) |
|
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| |
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Cash - Beginning of the Period |
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| ||
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Cash - End of the Period |
| $ |
|
| $ |
| ||
|
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Supplemental Disclosures of Cash Flows |
|
|
|
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Cash paid for Interest |
| $ |
|
| $ |
| ||
Cash paid for income taxes |
| $ |
|
| $ |
| ||
|
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Supplemental Disclosures of Non-Cash Investing and Financing Activities: |
|
|
|
|
|
|
|
|
Conversion of notes payable |
| $ |
|
| $ |
| ||
The accompanying notes are an integral part of these unaudited consolidated financial statements
| F-5 |
| Table of Contents |
TOTALIGENT, INC.
(Formerly Alltemp, Inc.) AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2024
1. Nature of operations
On December 3, 2021, Totaligent, a Delaware corporation, Digi Messaging & Advertising Inc., a Wyoming corporation (“Digi” or the “Company”), and the Shareholders of the Company (the “Digi Shareholders”) executed an Agreement and Plan of Merger (the “Merger Agreement”) that provided for Digi to be merged into Totaligent (the “Merger”) through a share exchange agreement. As a result of the Share Exchange, Totaligent acquired
Immediately following the Merger, Totaligent’s subsidiary, CSES Group, Inc., which owns all rights, title and interest in Totaligent’s refrigerant technology, was spun out in exchange for the cancellation of an aggregate of
Upon completion of these actions, Edward C. DeFeudis was appointed to the role of CEO and Ben Hansel remained on the board of directors.
The Company’s common stock was traded under the symbol “LTMP” on the OTCQB through May 20, 2018, on the OTC Pink marketplace thereafter, and trades under the symbol “TGNT” as of August 1, 2022.
2. Summary of significant accounting policies
Basis of presentation
The results reported in these unaudited consolidated financial statements should not be regarded as necessarily indicative of results that may be expected for any future periods.
The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). In the opinion of management, all adjustments, consisting of normal and recurring accruals considered necessary for a fair presentation, have been included.
Going concern
The accompanying unaudited consolidated financial statements have been prepared on a going concern basis. For the nine months ended September 30, 2024, the Company had a net loss of $
| F-6 |
| Table of Contents |
As a result, management has concluded that there is substantial doubt about the Company’s ability to continue as a going concern within one year of the date that the accompanying unaudited consolidated financial statements are being issued. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to raise additional funds and implement its business plan, and to ultimately achieve sustainable operating revenues and profitability. The accompanying unaudited consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
As market conditions present uncertainty as to the Company’s ability to secure additional funds, there can be no assurances that the Company will be able to secure additional financing on acceptable terms, or at all, as and when necessary to continue to conduct operations. A debt financing may contain undue restrictions on the Company’s operations and/or liens on the Company’s tangible and intangible assets, and an equity financing may cause substantial dilution to the Company’s common stockholders. If cash resources are insufficient to satisfy the Company’s ongoing cash requirements, the Company would be required to scale back or discontinue its operations, obtain funds, if available, although there can be no certainty, through strategic alliances that may require the Company to relinquish rights to its technology, or to discontinue its operations entirely.
The development and expansion of the Company’s business in 2024 and thereafter will be dependent on the capital resources available to the Company. No assurances can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company or adequate to fund the development and expansion of the Company’s business to a level that is commercially viable and self-sustaining.
Principles of Consolidation
The unaudited consolidated financial statements include the accounts of Totaligent, Inc. and Digi Messaging & Advertising Inc. Digi is a wholly owned subsidiary of Totaligent. All significant intercompany balances and transactions have been eliminated.
Use of estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash and cash equivalents
The Company maintains cash balances in a non-interest-bearing account that currently does not exceed federally insured limits. For the purpose of the unaudited consolidated statements of cash flows, all highly liquid investments with an original maturity of three months or less are considered to be cash equivalents. As of September 30, 2024 and December 31, 2023, the Company’s cash balances totaled $
Sales Concentrations
Revenue to a single customer in any one year can exceed
| F-7 |
| Table of Contents |
Fair value measurements
Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurements and Disclosures (“ASC 820”), provides a comprehensive framework for measuring fair value and expands disclosures which are required about fair value measurements. Specifically, ASC 820 sets forth a definition of fair value and establishes a hierarchy prioritizing the inputs to valuation techniques, giving the highest priority to quoted prices in active markets for identical assets and liabilities and the lowest priority to unobservable value inputs. ASC 820 defines the hierarchy as follows:
Level 1 – Quoted prices are available in active markets for identical assets or liabilities as of the reported date. The types of assets and liabilities included in Level 1 are highly liquid and actively traded instruments with quoted prices, such as equities listed on the New York Stock Exchange.
Level 2 – Pricing inputs are other than quoted prices in active markets but are either directly or indirectly observable as of the reported date. The types of assets and liabilities in Level 2 are typically either comparable to actively traded securities or contracts or priced with models using highly observable inputs.
Level 3 – Significant inputs to pricing that are unobservable as of the reporting date. The types of assets and liabilities included in Level 3 are those with inputs requiring significant management judgment or estimation, such as complex and subjective models and forecasts used to determine the fair value of financial transmission rights.
The Company’s financial instruments consist of prepaid expenses, accrued compensation, accrued interest, convertible notes payable, and derivative liabilities. The carrying amounts of prepaid expenses, accrued compensation, accrued interest, and convertible notes payable approximates their fair values because of the short-term maturities of these instruments. The derivative liabilities are measured at fair value.
Treasury stock
Treasury stock is recognized at acquisition cost and are presented as a deduction from shareholder’s equity. Upon sale of treasury shares, the realized gain or loss is recognized through the unaudited consolidated statement of stockholders’ deficit in additional paid-in capital.
Related party transactions
A related party is generally defined as (i) any person that holds 10% or more of our membership interests including such person’s immediate families, (ii) the Company’s management, (iii) someone that directly or indirectly controls, is controlled by or is under common control with the Company, or (iv) anyone who can significantly influence the Company’s financial and operating decisions. A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties.
Convertible Debentures
The Company adheres to the guidance in Accounting Standards Updated (“ASU”) 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. ASU 2020-06 simplifies an issuer’s accounting for convertible instruments and its application of the derivatives scope exception for contracts in its own equity. Additionally, ASU 2020-06 removes the requirements for accounting for beneficial conversion features.
| F-8 |
| Table of Contents |
Derivative Liability
The Company evaluates convertible instruments, options, warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for under ASC Topic 815, “Derivatives and Hedging”. The result of this accounting treatment is that the fair value of the derivative is marked-to-market each balance sheet date and recorded as a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the unaudited consolidated statements of operations as other income (expense). Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity. Equity instruments that are initially classified as equity that become subject to reclassification under ASC Topic 815 are reclassified to liabilities at the fair value of the instrument on the reclassification date.
Property and Equipment
Property and equipment is recorded at cost. Major improvements are capitalized, while maintenance and repairs that do not improve or extend the useful life of the respective assets are charged to expense as incurred. Gains and losses from disposition of property and equipment are included in income and expense when realized. Depreciation of property and equipment is provided using the straight-line method over the following estimated useful lives:
Computer equipment | |
Computer server | |
Mining equipment |
The Company recognizes depreciation costs in general and administrative expenses in the Company’s unaudited consolidated statements of operations.
Finite-lived Intangible Assets
The Company’s internal software development costs primarily relate to internal-use software. Such costs are capitalized in the application development stage in accordance with ASC 350-40, Internal-use Software (“ASC 350-40”). The Company also capitalizes software development costs upon the establishment of technological feasibility for a product in accordance with ASC 985-20, Software to be Sold, Leased, or Marketed (“ASC 985-20”). Software development costs are amortized on a straight-line basis over five years.
Long-Lived Assets
The Company reviews long-lived assets, consisting primarily of capitalized software, for impairment at each fiscal year end or when events or changes in circumstances indicate the carrying value of these assets may exceed their current fair values. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds the fair value of the assets. Assets to be disposed of are separately presented in the consolidated balance sheets and reported at the lower of the carrying amount or fair value less costs to sell and are no longer depreciated. The Company has not historically recorded any impairment to its long-lived assets. In the future, if events or market conditions affect the estimated fair value to the extent that a long-lived asset is impaired, the Company will adjust the carrying value of these long-lived assets in the period in which the impairment occurs. As of September 30, 2024 and December 31, 2023, the Company had not deemed any long-lived assets as impaired, and was not aware of the existence of any indicators of impairment at such dates.
Income taxes
The provision for income taxes is computed using the asset and liability method, under which deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating losses and tax credit carry-forwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates that apply to taxable income in effect for the years in which those tax assets are expected to be realized or settled. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.
| F-9 |
| Table of Contents |
Uncertain tax positions
The Company evaluates tax positions in a two-step process. The Company first determines whether it is more likely than not that a tax position will be sustained upon examination, based on the technical merits of the position. If a tax position meets the more-likely-than-not recognition threshold, it is then measured to determine the amount of benefit to recognize in the unaudited consolidated financial statements. The tax position is measured as the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. The Company classifies gross interest and penalties and unrecognized tax benefits that are not expected to result in payment or receipt of cash within one year as long-term liabilities in the unaudited consolidated financial statements.
Revenue recognition
The Company’s revenues are generated from managing branding and awareness campaigns to publicly traded companies and political candidates. These campaigns typically consist of writing landing pages, editorials, creating ads, setting up and managing email, SMS, Push, SEO, PPC and programmatic campaigns, as well as social media marketing. The Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers (ASC 606). In accordance with ASC 606, revenue is recognized when promised services are transferred to a customer. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for these services. To achieve this core principle, the Company applies the following five steps:
Identify the contract with a customer.
A contract with a customer exists when (i) the Company enters into an enforceable contract with a customer that defines each party’s rights regarding the services to be transferred and identifies the payment terms related to these services, (ii) the contract has commercial substance and, (iii) the Company determines that collection of substantially all consideration for services that are transferred is probable based on the customer’s intent and ability to pay the promised consideration. The Company applies judgment in determining the customer’s ability and intention to pay, which is based on a variety of factors including the customer’s historical payment experience or, in the case of a new customer, published credit and financial information pertaining to the customer.
Determine the transaction price.
The transaction price is determined based on the consideration to which the Company will be entitled in exchange for transferring services to the customer. To the extent the transaction price includes variable consideration, the Company estimates the amount of variable consideration that should be included in the transaction price utilizing either the expected value method or the most likely amount method depending on the nature of the variable consideration. Variable consideration is included in the transaction price if, in the Company’s judgment, it is probable that a significant future reversal of cumulative revenue under the contract will not occur. None of the Company’s contracts at September 30, 2024 and 2023, contained a significant financing component or variable consideration terms.
Allocate the transaction price to performance obligations in the contract.
If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. However, if a series of distinct services that are substantially the same qualifies as a single performance obligation in a contract with variable consideration, the Company must determine if the variable consideration is attributable to the entire contract or to a specific part of the contract. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on a relative standalone selling price basis unless the transaction price is variable and meets the criteria to be allocated entirely to a performance obligation or to a distinct service that forms part of a single performance obligation.
Recognize revenue when or as the Company satisfies a performance obligation.
The Company satisfies performance obligations at a point in time. Revenue is recognized at the time the related performance obligation is satisfied by transferring the promised service to a customer. Under both managed services arrangements and self-service arrangements, the Company’s promised services under the contracts include identification, bidding and purchasing of advertisement opportunities. The Company also generally has discretion in establishing the pricing of the ads. Since the Company is controlling the promise to deliver the contracted services, the Company is considered the principal in all arrangements for revenue recognition purposes. The performance obligations are satisfied, and revenue recognition, primarily upon performing the set up on content creation and monthly for the management fees.
| F-10 |
| Table of Contents |
Stock-based compensation
The cost of equity instruments issued to employees and non-employees in return for goods and services is measured by the grant date fair value of the equity instruments issued in accordance with ASC 718, Compensation – Stock Compensation. The related expense is recognized as services are rendered or vesting periods elapse.
Net loss per share calculation
Basic earnings (loss) per common share (“EPS”) is computed by dividing net income (loss) available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted earnings (loss) per share is computed by dividing net income (loss) by the weighted average shares outstanding, assuming all dilutive potential common shares were issued. Dilutive loss per share excludes all potential common shares if their effect is anti-dilutive.
The following potential common shares were excluded from the calculation of diluted net income (loss) per share available to common stockholders because their effect would have been antidilutive:
|
| Three and Nine months ended September 30, |
| |||||
|
| 2024 |
|
| 2023 |
| ||
Convertible notes payable |
|
|
|
|
|
| ||
Preferred stock |
|
|
|
|
|
| ||
Total |
|
|
|
|
|
| ||
Recently accounting pronouncements
The Company has reviewed all the recently issued, but not yet effective, accounting pronouncements and do not believe any of these pronouncements will have a material impact on its unaudited consolidated financial statements.
3. Property and equipment
Property and equipment as of September 30, 2024 and December 31, 2023, are summarized as follows:
|
| September 30, |
|
| December 31, |
| ||
|
| 2024 |
|
| 2023 |
| ||
Computer equipment |
| $ |
|
| $ |
| ||
Computer server |
|
|
|
|
|
| ||
Mining equipment |
|
|
|
|
|
| ||
|
|
|
|
|
|
| ||
Less: Accumulated depreciation |
|
| ( | ) |
|
| ( | ) |
Property and equipment - net |
| $ |
|
| $ |
| ||
For the nine months ended September 30, 2024 and 2023, the Company recorded $
| F-11 |
| Table of Contents |
4. Intangible assets
Intangible assets consisted of the following at September 30, 2024 and December 31, 2023:
|
| September 30, |
|
| December 31, |
| ||
|
| 2024 |
|
| 2023 |
| ||
Software development costs |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
| ||
Less: Accumulated amortization |
|
|
|
|
|
| ||
Intangible assets - net |
| $ |
|
| $ |
| ||
The Company has incurred costs for software development. The software reached technological feasibility on May 23, 2023. As such the Company has capitalized $
5. Convertible notes payable
The following table details the Company’s convertible notes payable as of September 30, 2024 and December 31, 2023, respectively:
Ref No. | Date of Note Issuance | Original Principal Balance | Maturity Date | Principal Balance as of | |||||||||||||
Interest | September 30, | December 31, | |||||||||||||||
Rate % | 2024 | 2023 | |||||||||||||||
1 | * | 6/16/2021 | $ | $ | $ | ||||||||||||
| 2 | * | 6/17/2021 |
|
|
|
|
|
|
|
|
| |||||
3 | * | 6/18/2021 | |||||||||||||||
| 4 | * | 7/2/2021 |
|
|
|
|
|
|
|
|
| |||||
5 | * | 8/4/2021 | |||||||||||||||
| 6 | * | 8/16/2021 |
|
|
|
|
|
|
|
|
| |||||
7 | * | 9/10/2021 | |||||||||||||||
| 8 | * | 10/18/2021 |
|
|
|
|
|
|
|
|
| |||||
9 | * | 6/30/2023 | |||||||||||||||
| 10 | ** | 9/28/2023 |
|
|
|
|
|
|
|
|
| |||||
11 | ** | 9/29/2023 | |||||||||||||||
| 12 | ** | 10/1/2023 |
|
|
|
|
|
|
|
|
| |||||
13 | * | 10/13/2023 | |||||||||||||||
| 12 | ** | 10/1/2023 |
|
|
|
|
|
|
|
|
| |||||
13 | ** | 10/13/2023 | |||||||||||||||
|
|
| Total |
|
|
|
|
|
|
|
|
| $ |
| $ | ||
Total Current | $ | $ | |||||||||||||||
|
|
| Total Long Term |
|
|
|
|
|
| $ |
| $ | |||||
Less unamortized discount | $ | $ | |||||||||||||||
|
|
| Carrying value |
|
|
|
|
|
|
| $ |
| $ | ||||
*
**The conversion price is fixed at $
*** Notes 1-13 are considered in default as of September 30, 2024.
| F-12 |
| Table of Contents |
Accounting considerations for notes with variable conversion prices
The Company evaluated the notes under ASC 815 Derivatives and Hedging (“ASC 815”). ASC 815 generally requires the analysis of embedded terms and features that have characteristics of derivatives to be evaluated for bifurcation and separate accounting in instances where their economic risks and characteristics are not clearly and closely related to the risks of the host contract. The material embedded derivative features consisted of the embedded conversion option. The conversion option bears risk of equity which were not clearly and closely related to the host debt agreement and required bifurcation. Current accounting principles that are also provided in ASC 815 do not permit an issuer to account separately for individual derivative terms and features that require bifurcation and liability classification. Rather, such terms and features must be and were bundled together and fair valued as a single, compound embedded derivative.
Accounting considerations for notes with fixed conversion prices
The Company evaluated the notes under ASC 815. ASC 815 generally requires the analysis of embedded terms and features that have characteristics of derivatives to be evaluated for bifurcation and separate accounting in instances where their economic risks and characteristics are not clearly and closely related to the risks of the host contract. There were no embedded instruments which required bifurcation.
6. Derivative liabilities
Embedded derivatives
The Company’s convertible promissory notes gave rise to derivative financial instruments. The notes embodied certain terms and conditions that were not clearly and closely related to the host debt agreement in terms of economic risks and characteristics. These terms and features consist of the embedded conversion option.
The following tables summarize the components of the Company’s derivative liabilities and linked common shares as of September 30, 2024 and December 31, 2023 and the amounts that were reflected in income related to derivatives for the period ended:
|
| September 30, 2024 |
| |||||
The financings giving rise to derivative financial instruments |
| Indexed Shares |
|
| Fair Values |
| ||
Embedded derivatives |
|
|
|
| $ |
| ||
Total |
|
|
|
| $ |
| ||
|
| December 31, 2023 |
| |||||
The financings giving rise to derivative financial instruments |
| Indexed Shares |
|
| Fair Values |
| ||
Embedded derivatives |
|
|
|
| $ |
| ||
Total |
|
|
|
| $ |
| ||
The following table summarizes the effects on the Company’s gain (loss) associated with changes in the fair values of the derivative financial instruments by type of financing for the nine months ended September 30, 2024 and 2023:
|
| For the Nine Months Ended |
| |||||
|
| September 30, 2024 |
|
| September 30, 2023 |
| ||
Embedded derivatives |
| $ | ( | ) |
| $ | ( | ) |
Loss on issuance of derivative |
|
|
|
|
|
| ||
Total gain (loss) |
| $ | ( | ) |
| $ | ( | ) |
| F-13 |
| Table of Contents |
The following table summarizes the effects on the Company’s gain (loss) associated with changes in the fair values of the derivative financial instruments by type of financing for the three months ended September 30, 2024 and 2023:
|
| For the Three Months Ended |
| |||||
|
| September 30, 2024 |
|
| September 30, 2023 |
| ||
Embedded derivatives |
| $ | ( | ) |
| $ | ( | ) |
Loss on issuance of derivative |
|
|
|
|
|
| ||
Total gain (loss) |
| $ | ( | ) |
| $ | ( | ) |
Current accounting principles that are provided in ASC 815 - Derivatives and Hedging require derivative financial instruments to be classified in liabilities and carried at fair value with changes recorded in income. The Company has selected the Monte Carlo Simulation Model, which approximates the Monte Carlo Simulations, valuation technique to fair value the embedded derivative because it believes that this technique is reflective of all significant assumption types, and ranges of assumption inputs, that market participants would likely consider in transactions involving embedded derivatives. Such assumptions include, among other inputs, interest risk assumptions, credit risk assumptions and redemption behaviors in addition to traditional inputs for option models such as market trading volatility and risk-free rates. The Binomial Lattice Model technique is a level three valuation technique because it requires the development of significant internal assumptions in addition to observable market indicators. For instruments in which the time to expiration has expired, the Company has utilized the intrinsic value as the fair value. The intrinsic value is the difference between the quoted market price on the valuation date and the applicable conversion price.
Significant inputs and results arising from the Monte Carlo Simulation process are as follows for the embedded derivatives that have been bifurcated from the convertible notes and classified in liabilities:
|
| Inception Date |
|
| December 31, 2023 |
|
| September 30, 2024 |
| |||
Quoted market price on valuation date |
| $ |
|
| $ |
|
| $ |
| |||
Effective contractual conversion rates |
| $ |
|
| $ |
|
| $ |
| |||
Contractual term to maturity |
|
|
|
|
|
| ||||||
Market volatility: |
|
|
|
|
|
|
|
|
|
|
|
|
Volatility |
| % |
| % |
| % | ||||||
Risk-adjusted interest rate |
|
| % |
|
| % |
|
| % | |||
The following table reflects the issuances of embedded derivatives and changes in fair value inputs and assumptions related to the embedded derivatives as of September 30, 2024 and December 31, 2023.
|
| Nine months ended |
|
| Year ended |
| ||
|
| September 30, 2024 |
|
| December 31, 2023 |
| ||
Balances at beginning of period |
| $ |
|
| $ |
| ||
Issuances: |
|
|
|
|
|
|
|
|
Embedded derivatives |
|
|
|
|
|
| ||
Conversions/extinguishments |
|
|
|
|
|
| ||
Changes in fair value inputs and assumptions reflected in income |
|
|
|
|
| ( | ) | |
Balances at end of period |
| $ |
|
| $ |
| ||
| F-14 |
| Table of Contents |
7. Commitments and contingencies
Legal contingencies
The Company may be subject to legal proceedings from time to time as part of its business activities. As of September 30, 2024, the Company was not subject to any threatened or pending legal actions or claims.
8. Equity
Preferred Stock
The Company has authorized a total of
Common Stock
As of September 30, 2024 and 2023, respectively, the Company had authorized
Shares to be Issued
As of September 30, 2024 and December 31, 2023, the Company had
Treasury Stock
As of September 30, 2024 and December 31, 2023, the Company had
9. Income taxes
The Company provides for income taxes by 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. This also 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 of the deferred tax assets will not be realized.
The valuation allowance at September 30, 2024 was $
As of September 30, 2024, the Company has federal net operating loss carry forwards of approximately $
| F-15 |
| Table of Contents |
As of September 30, 2024 and 2023, the difference between the tax provision at the statutory federal income tax rate and the tax provision attributable to loss before income taxes is as follows (in percentages):
Statutory federal income tax rate |
|
| ( | )% |
State taxes – net of federal benefits |
|
| ( | )% |
Valuation allowance |
|
| % | |
Income tax rate – net |
|
| % |
FASB Interpretation No. 48 (Fin 48) - Accounting for Uncertain Tax Positions
The Company files income tax returns in the U.S. federal jurisdiction and various state, and local jurisdictions. The Company is no longer subject to U.S. federal income tax examination by tax authorities, with limited exception, for the quarters prior to December 31, 2014. With respect to state and local jurisdictions, with limited exception, the Company is no longer subject to income tax audits prior to December 31, 2014. In the normal course of business, the Company is subject to examination by various taxing authorities. Although the outcome of tax audits is always uncertain, the Company believes that adequate amounts of tax, interest and penalties have been provided for any adjustments that may result from these open tax years.
Based on management’s review of the Company’s tax position, the Company had no significant unrecognized corporate tax liabilities as of September 30, 2024 and June 30, 2024 payable to the Internal Revenue Service due to the net operating loss carry-forward, however, the Company had yet to file its 2005 through 2009 and 2012 through 2021 Federal, New Jersey nor New York Corporate Income Tax Returns.
10. Subsequent events
None
| F-16 |
| Table of Contents |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion of our financial condition and results of operations should be read in conjunction with the audited and unaudited consolidated financial statements and the notes to those statements included elsewhere in this Report. This discussion contains forward-looking statements that involve risks and uncertainties. You should specifically consider the various risk factors identified in this Report that could cause actual results to differ materially from those anticipated in these forward-looking statements.
Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements, including without limitation, statements related to our plans, strategies, objectives, expectations, intentions and adequacy of resources. Investors are cautioned that such forward-looking statements involve risks and uncertainties including without limitation the following: (i) our plans, strategies, objectives, expectations and intentions are subject to change at any time at our discretion; (ii) our plans and results of operations will be affected by our ability to manage growth; and (iii) other risks and uncertainties indicated from time to time in our filings with the Securities and Exchange Commission.
In some cases, you can identify forward-looking statements by terminology such as ‘‘may,’’ ‘‘will,’’ ‘‘should,’’ ‘‘could,’’ ‘‘expects,’’ ‘‘plans,’’ ‘‘intends,’’ ‘‘anticipates,’’ ‘‘believes,’’ ‘‘estimates,’’ ‘‘predicts,’’ ‘‘potential,’’ or ‘‘continue’’ or the negative of such terms or other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of such statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. We are under no duty to update any of the forward-looking statements after the date of this Report.
This section of the report should be read together with Footnotes of the Company’s audited financials for the year ended December 31, 2023. The unaudited consolidated statements of operations for the Nine months ended September 30, 2024 and 2023 are compared in the sections below.
Financial Results
The following discussion of the results of operations constitutes management’s review of the factors that affected the financial and operating performance for the Nine months ended September 30, 2024. This discussion should be read in conjunction with the consolidated financial statements and notes thereto contained elsewhere in this report. The Company has a December 31 fiscal year end.
Executive Summary
Totaligent, Inc. (“Totaligent” or the “Company”) is a person-based digital marketing platform that allows companies and individuals to use and unlock owned and acquired data to efficiently market their products, services, and brands. The Company is building an Nvidia supercluster with 2.4 Terabytes of GPU ram and 18 Terabytes of system ram, which will allow Totaligent’s Artificial Intelligence to deliver nearly instantaneous data processing and modeling. The Company’s consumer-facing integrated digital marketing platform, which allows individuals and enterprises to leverage its big data to micro-target customers with disruptive increases in efficiency, is set to launch in Q4 of 2024. Totaligent is a Delaware corporation currently trading on the OTCPink market under the stock symbol TGNT, and has executive offices located at 2255 Glades Road, Suite 324A Boca Raton, FL 33431 and a technology hub in Houston, TX.
Business Description:
Today, Totaligent offers managed campaigns to publicly traded companies and political candidates, and is launching a consumer-facing person-based digital marketing platform in Q4 of 2024. Totaligent’s managed campaign business will continue to be the main driver of revenue until the public launch of the consumer platform.
Totaligent’s white-label programmatic ad platform is directly connected to its own custom Database Management Platform (“DMP”), which allows micro-targeting using data matching, which can be site specific, area specific and/or zip code specific. This platform leverages highly efficient display advertising, as opposed to general search engine keyword advertising. The platform is connected to more than 40 network publishers, giving users a deep network of web portals in all verticals.
| 5 |
| Table of Contents |
The Totaligent team is continuously updating the platform to follow the ever-changing advertising rules implemented by Google, Facebook, Twitter and others, regarding advertising crypto, drugs, tobacco, firearms, sex, and political advertising. Our customer outreach tools include email, SMS, and push notification.
| · | Email marketing on the Totaligent platform connects to most of the known email marketing Electronic Services Portals (“ESP”). |
| · | Short Message Service (“SMS”) connects to multiple telecom partners allowing users to choose deliverability and the best price for their messaging needs. We offer long code, short code, and 1-800s. |
| · | Push notification marketing utilizes the Totaligent smart code (cookie), which allows customers to receive push notifications for upcoming news, offers, events, and more, all managed internally on Totaligent’s Push servers. |
Individual Totaligent services are currently operational and used for our managed campaign program. Upon the launch of the consumer-facing platform, the full spectrum of Totaligent’s digital communication tools will operate within the same User Interface XML (“UIX”), negating the need for multiple service providers or Customer Relationship Management (“CRM”) tools to perform various individual tasks. Users will be able to harmonize every facet of a digital campaign from a single panel, allowing multichannel marketing and analytics to maximize communication and ROI from the user’s customer and visitor databases.
Background
To be successful in today’s digital world, companies’ websites need pop up widgets, tracking pixels, push notification services, email services (Constant Contact, Mail Chimp, etc.), text and/or SMS services (Twilio), and other services for Pay per Click (“PPC”) (Google, Oath, Twitter, Facebook, etc.). From platform set up to campaign management, each of these services requires additional layers of effort and focus.
Companies are required to purchase or license software and often need a technical team to set up and integrate APIs and manage each digital platform. Today, most users of these services are typically small to medium sized business owners and don’t have the technical expertise, time or capital to effectively manage digital marketing campaigns successfully. These deficiencies make them susceptible to click and bot fraud, which runs rampant on ad networks.
There is no way to audit clicks and impressions on these ad networks; companies are led to believe that every view and click is a real person when in reality, they’re not. Fake clicks and impressions are a massive revenue generator for the ad networks, so there is no incentive for them to make digital advertising more efficient. Companies are simply told to accept unsustainable conversion rates.
In addition, ad networks hoard an enormous amount of customer data (email, device ID, mobile number, etc.) for their benefit, even though they are being paid by companies to acquire customers on their behalf. Companies are only provided with the alleged number of clicks and the average time spent on their site. This lack of crucial data is a major disadvantage for the companies’ campaign managers when trying to determine how to better engage with their target market. Because they cannot retarget prospects via email, text, or otherwise, they are forced to spend additional money on the ad networks to blindly reengage.
How Totaligent is Different
The Totaligent platform makes every visitor and impression a usable data point. When users run digital campaigns on Totaligent, every prospect that clicks on users’ sites, is immediately matched to the requisite data from the DMP, providing the users with crucial data points. The Totaligent platform stores the users’ data in a closed-circuit environment for use in future digital campaigns. This is the key to the Totaligent marketing platform. Totaligent can match all visitor data immediately upon landing on the users’ websites, like: device IDs, IP address, mobile number, email address, and social network profiles. This type of data allows Totaligent’s users to engage in micro-targeted person-based marketing, as opposed to blindly running ad campaigns and requesting the site visitors’ details. With Totaligent, users will now be able to access one interface to manage their Text, Email, PPC, and Push Notification campaigns to maximize their person-based marketing efforts.
| 6 |
| Table of Contents |
Totaligent Programmatic
The use of programmatic marketing is extremely cost effective, when Totaligent users create “like audiences.” Users of the platform can input specific demographics to create “like audiences” for micro-targeting purposes, so they can be most efficient with their ad spend. Totaligent estimates that person-based targeted ads yield a 40% cost savings, while increasing conversion rates from remarketing campaigns. Benefits:
| · | Eliminates bot and fraudulent traffic, as well as wasteful display impressions; now every impression becomes useful data with Totaligent’s ability to match and append based upon IP address and device ID. |
|
|
|
| · | Eliminates the need to target the general population, with the hope that an interested party will click an ad with the intention of converting. |
|
|
|
| · | Eliminates competitors and marketers clicking ads, to get advertising ideas, pushing lower conversion ratios, or simply to waste a user’s money. |
Totaligent currently has vast U.S. audiences of businesses, non-profits, political parties, venture capital, financial markets/investor verticals, and donors.
Totaligent Tools
To get great results, you need the right tools. Unfortunately, the right tools are not available in a single platform, which makes effective digital marketing a cumbersome and costly endeavor. After years of managing millions of dollars in digital campaigns, the Totaligent team built specific tools to overcome systemic marketing problems that continue to force people to needlessly employ “marketing experts” and/or rely on unverifiable platform data. Totaligent’s tools put website owners back in control of their marketing, by connecting the website to specific person-based audiences in our database. This means anyone who knows who their ideal customer is, can create an audience of those people, and micro-target campaigns across all forms of digital communication.
Totaligent Widget acts as a functional central command to connect to our DMP. The Totaligent Widget includes basic digital marketing functionality including a limited number of pop ups, emails, analytics, and push notifications.
Totaligent Link tracks and matches every click delivered via email, SMS, and other campaign mechanisms, to Totaligent’s DMP.
These tools were designed and created over years of analysis and tens of millions of dollars spent on advertising campaigns, custom communication, and marketing platforms.
Currently, for person-based programmatic and micro-targeted advertising, companies must spend thousands of dollars per month to use LiveRamp, a Totaligent competitor, in order to create and market to tailored audiences. This expense can significantly increase the cost per 1,000 impressions (CPI) and cost-per-click (CPC), typically by 400% and even much higher for some verticals.
As the Totaligent network grows, so too will the number of first party cookies. Totaligent’s first-party cookies can be set on browsers, allowing for marketing, data collection and verification in our DMP. Every user that visits any Totaligent enabled web portal, link or ad is placed into the DMP and instantly matched across all channels and data points, continually updating and verifying their information.
Totaligent Database Management Platform (DMP)
The Internet is full of information; a quick Google, Facebook, or Twitter query, can typically locate just about everyone. Most people keep the same alter egos online for years and, with the smart phone being connected to web browsers and emails, it’s very easy to collect, store and manage data on everyone in the United States.
| 7 |
| Table of Contents |
Totaligent’s database is constantly being appended, cleaned, and verified from pixel fires, link clicks, PPC, email, and SMS. Our base data sets include voters, donors, investors, consumers, and other publicly sourced information, to verify and update the information as needed. We track and maintain over 400 data points on each record and allow for cross platform marketing. Our DMP utilizes schema mark ups, indexing, public filings, search engines, corporate records, WhoIs, IP addresses, as well as consumer, voter, and business data to match, update, and verify existing records. First and third- party pixels are also employed, in agreement with certain vendors and clients, who gather more millions of monthly impressions.
Totaligent DMP partners with websites to provide functionality for major clients for free in exchange for adding our pixel to their portals, which generate additional impressions to help grow and verify user data running through the system.
Totaligent Audiences are created and used internally and are MD5 hash encrypted, so they cannot be exported and downloaded by users.
Totaligent ESP is our customizable email system that can connect to any outside API provider or can be used on the Totaligent email network, which runs on the TOTALIGENT PMTA, SMTP (any), Amazon SES API, Mailgun API, SparkPost API, SendGrid API, Mandrill API, Elastic Email API, MailJet API, SendinBlue API) backbone for delivering email. Emails can be obtained from click traffic, created by the uploaded audience in the customer portal, and internally loaded to send permission passes to potential consumers. Site visitors have their emails populated into the user’s list for retargeting purposes, which can then be permission passed into the customer lists for future promotions.
Web forms used to collect subscribers’ emails and permission passes can be sent after the consumer clicks the subscribe button, understanding that there is no need to provide further information or fill out any forms. This should breed much higher conversion rates than forcing target customers to fill out conventional subscription forms.
In addition, the email platform can quickly create unique Totaligent Links to tag each contact in the users’ email lists, which monitoring opens, and then collects data to create additional communication points for the audience. This allows the clients’ sites to monetize impressions from AdSense or other traffic advertising sources.
Totaligent SMS is a robust text platform that connects through API to multiple vendors which can send SMS campaigns for pre-approved users. Users can seamlessly log in and set up their campaign, also tagging each target with a unique Totaligent Link ID. The system can send pre-recorded outgoing messages, SMS, SES, and any other function used over the telephone system, which is especially useful for political and non-profit organizations that need to raise donations in a cost-effective way.
The audiences’ mobile numbers are stored in the DMP and can be used once loaded into the customer portal. They cannot be exported unless the person is a verified subscriber but can be used for internal cross channel marketing programs. When properly used, this system will track SMS users, to ensure proper identification has been obtained, which protects the sender against frivolous or dubious lawsuits from bad actors.
Totaligent Append and Data Sales
Because the DMP is so large and constantly updated, Totaligent is able to provide data on a low cost per record basis to a wide array of users by offering specific list types based on Totaligent’s internal data points. Users can search the criteria needed and the DMP will provide the data size and price.
Totaligent Email Clean
Our campaigns are constantly using our data, which helps ensure that the data is of the highest quality. In other words, the constant feedback from campaigns allows us to actively identify bad data to be removed from our system.
Totaligent’s cleaning system for marketers is more than just uploading their data for positive or negative system matches. Because our data is scored, the advertiser will have insight as to whether their data is good. We maintain one of the largest blacklists on the market, with scam, or bad data that is constantly passed around, so old, and dead data can be removed. Our cleaning service can be added to any websites’ forms, to keep anyone from entering or using an email on the bad or blacklist to the user’s site for an additional fee. Our service also connects through API to multiple other cleaning services and can be cleaned and compared with any of them for an additional cost to ensure the best deliverability.
Political operatives have been known to add dirty or unfriendly email addresses to subscriber lists, causing complaints and shutdowns of valuable marketing accounts. Our service can help identify these fake addresses to protect against this dubious activity.
| 8 |
| Table of Contents |
Results of Operations
The following discussion should be read in conjunction with the information contained in the accompanying unaudited consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q. Our historical results of operations summarized and analyzed below may not necessarily reflect what will occur in the future.
Three Months Ended September 30, 2024 compared to the Three Months Ended September 30, 2023
For the three months ended September 30, 2024 and 2023, the Company had total revenues of $29,990 and $334,185, respectively, and gross profit (loss) of ($41,182) and $274,229, respectively. The Company’s volume of sales increased in the three months ended September 30, 2024 when compared to the three months ended September 30, 2023 primarily due to an increase in managed campaign activity.
Cost of goods sold for the three months ended September 30, 2024 and 2023 were $71,172 and $59,956, respectively. Cost of goods sold consists primarily of costs associated with outsourcing certain campaign activities. The increase in cost of goods sold for the three months ended September 30, 2024 when compared to the three months ended September 30, 2023 was primarily due to the corresponding increase in revenues.
The Company’s operating expenses increased from $356,053 for the three months ended September 30, 2023 to $412,322 for the three months ended September 30, 2024 due primarily to an increase in consulting fees. Other income (expenses) increased from ($89,026) for the three months ended September 30, 2023 to ($116,919) for the three months ended September 30, 2024. The primary reason for the difference is the Company had an increase loss on change in fair value of derivative liability in the current period of ($24,732).
As a result of increased cost of sales, operating expenses and loss on change in fair value of derivative liability, we had a net loss of $570,423 for the three months ended September 30, 2024 compared to a net loss of $170,850 for the three months ended September 30, 2023.
Nine months Ended September 30, 2024 compared to the Nine months Ended September 30, 2023
For the nine months ended September 30, 2024 and 2023, the Company had total revenues of $444,529 and $400,295, respectively, and gross profits of $28,606 and $318,754, respectively. The Company’s volume of sales increased in the Nine months ended September 30, 2024 when compared to the nine months ended September 30, 2023 primarily due to an increase in managed campaign activity.
Cost of goods sold for the nine months ended September 30, 2024 and 2023 were $415,923 and $81,541, respectively. Cost of goods sold consists primary of costs associated with outsourcing certain campaign activities. The increase in cost of goods sold for the nine months ended September 30, 2024 when compared to the nine months ended September 30, 2023 was primarily due to the corresponding increase in revenues.
The Company’s operating expenses increased from $593,379 for the nine months ended September 30, 2023 to $755,418 for the nine months ended September 30, 2024 due primarily to an increase in consulting fees and professional fees due to compliance reporting and audit fees. Other income (expenses) increased from ($91,415) for the nine months ended September 30, 2023 to ($107,903) for the nine months ended September 30, 2024. The primary reason for the difference is the Company had increased interest expense and an increase in the change in the fair value of derivative liability in the current period.
As a result of increased cost of sales and operating expenses, we had a net loss of $834,715 for the Nine months ended September 30, 2024 compared to a net loss of $366,040 for the nine months ended September 30, 2023.
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| Table of Contents |
Liquidity and Capital Resources
Going Concern
We have had negative working capital and have sustained operating losses since inception. These factors, and the need for additional financing in order for the Company to meet its business plan raises substantial doubt about the Company’s ability to continue as a going concern.
We anticipate that operating losses will continue in the near term. We intend to meet near-term obligations with private placement offerings. We currently have limited revenue, which is not sufficient to cover operational expenses.
Failure to raise adequate capital and generate adequate revenues could result in the Company having to curtail or cease operations. The Company’s ability to raise additional capital through the future issuances of the common stock is unknown. Additionally, even if the Company does raise sufficient capital to support its operating expenses and generate adequate revenues, there can be no assurances that the revenue will be sufficient to enable it to develop to a level where it will generate profits and cash flows from operations. These matters raise substantial doubt about the Company’s ability to continue as a going concern; however, the accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. These consolidated financial statements do not include any adjustments relating to the recovery of the recorded assets or the classifications of the liabilities that might be necessary should the Company be unable to continue as a going concern.
Capital Resources
To date, our operations have been funded primarily through private investors. Some of these investors have verbally committed additional funding for the Company, as needed. The Company has also had discussions with broker-dealers and lenders regarding funding required to execute the Company’s business plan.
Material Cash Requirements
Our material short-term cash requirements include recurring payroll and benefits obligations for our employees, capital, operating expenditures, software development payments and other working capital needs. We believe that material cash requirements for operating expenditures may range from $100,000 per month to $200,000 per month during the twelve months.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition.
| 10 |
| Table of Contents |
Cash Flow
The following table provides detailed information about our net cash flow for the nine months ended September 30, 2024 and 2023:
|
| Nine months Ended September 30, |
| |||||
|
| 2024 |
|
| 2023 |
| ||
Net change in operating activities |
| $ | (157,653 | ) |
| $ | (5,077 | ) |
Net cash (used in) provided by investing activities |
|
| (61,634 | ) |
|
| 16,071 |
|
Net cash provided by financing activities |
|
| 60,000 |
|
|
| 191,841 |
|
Net change in cash and cash equivalents |
|
| (159,287 | ) |
|
| 202,835 |
|
Cash and cash equivalents at beginning of period |
|
| 167,735 |
|
|
| 14,001 |
|
Cash and cash equivalent at end of period |
| $ | 8,448 |
|
| $ | 216,836 |
|
Net cash used in operating activities for the nine months ended September 30, 2024 was $157,653 compared to $5,077 for the nine months ended September 30, 2023. This difference primarily related to stock issued for services in the current period of $1,200,000. During the nine months ended September 30, 2024, net cashed used in investing activities was ($61,634) compared to $16,071 of net cash provided by investing activities during the nine months ended September 30, 2023. This difference related to expenditures for capitalized software in the current period of $61,634 versus sale of fixed assets in the prior period in the amount of $16,071. During the nine months ended September 30, 2024, our financing activities provided cash of $60,000 compared to $191,841 during the nine months ended September 30, 2023. The cash provided in the current period related to proceeds from the issuance of convertible notes payable. The cash provided in the prior period related to proceeds from the sale of common stock, proceeds from the issuance of convertible notes payable and repayments on notes payable.
Item 3. Qualitative and Quantitative Discussions about Market Risk
Not applicable.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management is responsible for maintaining disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that the Registrant files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. In addition, the disclosure controls and procedures must ensure that such information is accumulated and communicated to the Registrant’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required financial and other required disclosures.
At September 30, 2024, an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rules 13(a)-15(e) and 15(d)-15(e) of the Exchange Act) was carried out under the supervision and with the participation of Edward C. DeFeudis our Chief Executive Officer and Ben Hansel our Director. Based on our evaluation of our disclosure controls and procedures, we concluded that, at September 30, 2024, our disclosure controls and procedures are effective.
Management’s Quarterly Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over our financial reporting. Internal control over financial reporting is a process designed to provide reasonable assurance to our management and board of directors regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP.
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Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of 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; (iii) provide reasonable assurance that receipts and expenditures of company assets are made in accordance with management authorization; and (iv) provide reasonable assurance that unauthorized acquisition, use or disposition of Company assets that could have a material effect on our financial statements would be prevented or detected on a timely basis.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because changes in conditions may occur or the degree of compliance with the policies or procedures may deteriorate.
Our management has conducted an evaluation, under the supervision and with the participation of Edward C. DeFeudis, our Chief Executive Officer, and Ben Hansel, our Director, of the effectiveness of our internal control over financial reporting as of September 30, 2024. This evaluation was based on criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO, Internal Control-Integrated Framework. Based upon such assessment, Edward C. DeFeudis concluded that our internal controls over financial reporting are effective based upon the Company’s size and staff size, and that there are no apparent material weaknesses in our internal controls over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.
This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. The rules of the Securities and Exchange Commission do not require an attestation of the Management’s report by our registered public accounting firm in this annual report.
Changes in Internal Controls
There have been no changes in our internal control over financial reporting that occurred during the Nine months ended September 30, 2024, that have materially affected, or are reasonable likely to materially affect, our internal control over financial reporting.
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Part II – Other Information
Item 1. Legal Proceedings
None
Item 1A. Risk Factors
Not applicable.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Default Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not Applicable.
Item 5. Other Information
During the Company’s quarter ended September 30, 2024, no director or officer adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement.
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Item 6. Exhibits
The following exhibits are filed herewith
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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 |
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101.CAL |
| Inline XBRL Taxonomy Extension Calculation |
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101.DEF |
| Inline XBRL Taxonomy Extension Definition |
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101.LAB |
| Inline XBRL Taxonomy Extension Label |
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101.PRE |
| Inline XBRL Taxonomy Extension Presentation |
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104 |
| Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) |
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SIGNATURES
In accordance with the requirements of the Exchange Act, the Company caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| TOTALIGENT, INC. | ||
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Date: December 5, 2024 | By: | /s/ Edward C. DeFeudis | |
| Edward C. DeFeudis Chief Executive Officer (Principal Executive) and Chief Financial Officer & Principall Financial and Accounting Officer | ||
By: | /s/ Edward C. DeFeudis |
| By: | /s/ Ben Hansel |
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| Edward C. DeFeudis |
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| Ben Hansel |
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| President, Chief Executive Officer, |
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| Director |
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| Chief Financial Officer, Director |
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EXHIBIT 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND
PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO RULE 13a-14(a) UNDER THE EXCHANGE ACT
I, Edward C. DeFeudis, certify that:
| 1. | I have reviewed this annual report on Form 10-K of Totaligent, Inc.; |
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| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
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| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
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| 4. | I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
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| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared; |
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| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting. |
| 5. | I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions): |
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| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
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| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: December 5, 2024 | By: | /s/ Edward C. DeFeudis | |
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| Edward C. DeFeudis |
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| Chief Executive Officer (Principal Executive Officer) |
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EXHIBIT 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER AND
PRINCIPAL FINANCIAL OFFICER
PURSUANT TO RULE 13a-14(a) UNDER THE EXCHANGE ACT
I, Edward C. DeFeudis, certify that:
| 1. | I have reviewed this annual report on Form 10-K of Totaligent, Inc.; |
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| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
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| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
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| 4. | I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
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| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared; |
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| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting. |
| 5. | I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions): |
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| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
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| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: December 5, 2024 | By: | /s/ Edward C. DeFeudis | |
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| Edward C. DeFeudis |
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| Chief Financial Officer (Principal Financial Officer) |
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EXHIBIT 32.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
(18 U.S.C. SECTION 1350)
In connection with the Annual Report of Totaligent, Inc., a Delaware corporation (the “Company”), on Form 10-K for the year ended December 31, 2023, as filed with the Securities and Exchange Commission (the “Report”), Edward C. DeFeudis, Chief Executive Officer of the Company, does hereby certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. ss. 1350), that:
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| (1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
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| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. |
| Date: December 5, 2024 | By: | /s/ Edward C. DeFeudis | |
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| Edward C. DeFeudis |
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| Chief Executive Officer (Principal Executive Officer) |
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EXHIBIT 32.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
(18 U.S.C. SECTION 1350)
In connection with the Annual Report of Totaligent, Inc., a Delaware corporation (the “Company”), on Form 10-K for the year ended December 31, 2023, as filed with the Securities and Exchange Commission (the “Report”), Edward C. DeFeudis Chief Financial Officer of the Company, does hereby certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. ss. 1350), that:
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| (1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
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| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. |
| Date: December 5, 2024 | By: | /s/ Edward C. DeFeudis | |
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| Edward C. DeFeudis |
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| Chief Financial Officer (Principal Financial Officer) |
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