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

Overview

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

Results of operations for the six months ended June 30, 2022and 2021

                           For the Six Months ended
                                   June 30,
                             2022             2021          Change ($)       Change (%)

Revenue                  $     34,434     $     37,049           (2,615 )           (7.0 )%
Cost of revenue                12,514           16,952            4,438             26.2 %
Gross profit                   21,920           20,097            1,823              9.0 %

Operating expenses          1,137,796        3,939,512        2,801,716             71.1 %

Loss from operations       (1,115,876 )     (3,919,416 )      2,803,540             71.5 %

Other income (expense)     (2,687,955 )        628,223       (3,316,178 )         (527.8 )%

Net loss                 $ (3,803,831 )   $ (3,291,193 )   $   (512,638 )          (15.6 )%




Revenue

Revenues fell by $2,615 or 7% compared to the previous year $34,434 in the six months ended June 30, 2022compared to $37,049 during the previous period. The decrease is not considered significant, but the Company continues to recover from the negative impact of the COVID-19 outbreak in March 2020.

Cost of Revenue

The Company’s cost of revenue was $12,514 for the six months ended June 30, 2022a decrease of $4,438 i.e. approximately 26.2%, compared to $16,952 for the six months ended June 30, 2021. The decrease in revenue cost is due to improved productivity and reduced costs.

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Operating Expenses

Operating expenses were $1,137,796 for the six months ended June 30, 2022a decrease of $2,801,716 i.e. 71.1% compared to $3,939,512 for the six months ended
June 30, 2021. The decrease is mainly due to a decrease in stock-based compensation expense of approximately $2,794,000 resulting from the fair value of the common shares issued to our CEO and COO under their respective employment agreements and the issuance of common shares and Series A preferred shares under the asset purchase agreement with Life Tech Trust Matrix.

Other Expense

Other expenses for the six months ended June 30, 2022has been $2,687,955compared to other income $628,223 for the six months ended June 30, 2021.

Other expenses for the six months ended June 30, 2022consisted of $359,208 the expense resulting from the change in fair value of derivatives, $813,607 interest charges, and $1,515,140 the loss on the conversion of the Series A preferred shares into common shares.

Other income for the six months ended June 30, 2021consisted of $2,179,818 the result resulting from the change in fair value of derivative instruments, $416,050 interest charges, and $1,197,756 the loss on the conversion of the Series A preferred shares into common shares and $62,211 conversion gain.

Net Loss

Net loss for the six months ended June 30, 2022has been $3,803,831compared to a net loss of $3,291,193 for the six months ended June 30, 2021. The increase in our net loss results from the changes described above.

Results of operations for the three months ended June 30, 2022and 2021

                             For the Three Months
                                ended June 30,
                            2022             2021         Change ($)       Change (%)

Revenue                  $     8,983     $     16,813          (7,830 )          (46.6 )%
Cost of revenue                4,229            4,838             609             12.6 %
Gross profit                   4,754           11,976          (7,222 )          (60.3 )%

Operating expenses           531,263        3,566,864       3,035,601             85.1 %

Loss from operations        (526,509 )     (3,554,888 )     3,028,379             85.2 %

Other income (expense)     1,290,213         (340,251 )     1,630,464            479.2 %

Net Income (loss)        $   763,704     $ (3,895,139 )   $ 4,658,843            119.6 %




Revenue

Revenues fell by $7,830 i.e. 46.6% compared to the previous year $8,983 in the three months ended June 30, 2022compared to $16,813 during the previous period. This decrease is due to the persistent negative impact of the COVID-19 epidemic in March 2020.

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Cost of Revenue

The Company’s cost of revenue was $4,229 for the three months ended June 30, 2022a decrease of $609 i.e. approximately 12.6%, compared to $4,838 for the three months ended June 30, 2021. The decrease in cost of sales is not considered significant.

Operating Expenses

Operating expenses for the three months ended June 30, 2022and 2021, were
$531,263 and $3,566,864, respectively. The decrease is mainly due to a decrease in stock-based compensation expense of approximately $2,969,000
resulting from the fair value of ordinary shares issued under advisory contracts.

Other Income - Expense

Other income for the three months ended June 30, 2022has been $1,290,213compared to other expenses $340,251 for the three months ended June 30, 2021.

Other income for the three months ended June 30, 2022consisted of $2,120,071
the result resulting from the change in fair value of derivative instruments, $445,313 interest charges, and $384,545 the loss on the conversion of the Series A preferred shares into common shares.

Other expenses for the three months ended June 30, 2021consisted of $275,530 the result resulting from the change in fair value of derivative instruments, $190,169 interest charges, and $487,823 loss on conversion of Series A preferred shares into common shares and 62,211 gain on debt conversion.

Net Loss

Net gain for the three months ended June 30, 2022has been $763,704compared to a net loss of $3,895,139 for the three months ended June 30, 2021. The increase in our net loss results from the changes described above.

Cash and capital resources

Our working capital deficiency as of June 30, 2022, and December 31, 2021, was
as follows:



                            June 30,        December 31,
                              2022              2021
Current Assets            $      46,285     $     127,104
Current Liabilities       $  70,998,335     $  71,626,880
Working Capital Deficit   $ (70,952,050 )   $ (71,499,776 )

The overall working capital deficit went from $71,499,776 at December 31, 2021at $70,952,050 at June 30, 2022. Current liabilities mainly consist of loans payable, convertible notes payable, liabilities derived from the bifurcated conversion feature embedded in hybrid debt instruments, related party liabilities and Series A preferred shares classified as liabilities. The increase in the working capital deficit is mainly attributable to an increase in the fair value of the derivative liability and the conversion of the Series A preferred shares into common shares during the six months ended June 30, 2022.

Here is a selection of information from the cash flow statements for the six months ended June 30, 2022and 2021:

                                                 June 30,       June 30,
                                                   2022           2021
Cash used in Operating Activities               $ (253,151 )   $ (421,951 )
Cash used in Investing Activities               $  (14,914 )   $  (36,831 )
Cash provided by Financing Activities           $  245,394     $  473,864

(Decrease) Net increase in cash during the period ($22,671) $15,082

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Going Concern

Since January 1, 2022and through June 30, 2022the Company raised approximately $0.2 million in debt transactions. These funds were used to finance the day-to-day operations of the company. Our accompanying financial statements have been prepared on the assumption that the Company will continue as a going concern, which contemplates the realization of assets and the settlement of liabilities in the normal course of business for the twelve month period following the date of these financial statements. Our cash at June 30, 2022 was less than
$1,000. The Company has suffered significant losses since its inception. Its current liabilities exceed its current assets and there is insufficient cash available to fund planned future operations. The Company plans to raise additional capital through debt and equity in order to continue financing its activities, which could have the effect of diluting the holdings of existing shareholders. However, there can be no assurance that the Company will be able to raise sufficient funds or generate sufficient revenue to pay its obligations as they come due, which raises substantial doubt as to our ability to continue our operations.

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

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

Off-balance sheet arrangements

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

Seasonality

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

Critical Accounting Polices

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

Contingencies

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

Off-balance sheet arrangements

During the period ended June 30, 2022we have not entered into any off-balance sheet arrangements.

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Recent accounting pronouncements

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

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