Company Quick10K Filing
McorpCX
Price0.20 EPS-0
Shares20 P/E-9
MCap4 P/FCF-7
Net Debt-1 EBIT-0
TEV3 TEV/EBIT-8
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-06-30 Filed 2020-08-14
10-Q 2020-03-31 Filed 2020-05-15
10-K 2019-12-31 Filed 2020-03-27
10-Q 2019-09-30 Filed 2019-11-14
10-Q 2019-06-30 Filed 2019-08-14
10-Q 2019-03-31 Filed 2019-05-15
10-K 2018-12-31 Filed 2019-04-01
10-Q 2018-09-30 Filed 2018-11-14
10-Q 2018-06-30 Filed 2018-08-10
10-Q 2018-03-31 Filed 2018-05-09
10-K 2017-12-31 Filed 2018-03-29
10-Q 2017-09-30 Filed 2017-11-07
10-Q 2017-06-30 Filed 2017-08-10
10-Q 2017-03-31 Filed 2017-05-12
10-K 2016-12-31 Filed 2017-03-31
10-Q 2016-09-30 Filed 2016-11-14
10-Q 2016-06-30 Filed 2016-08-12
10-Q 2016-03-31 Filed 2016-05-13
10-K 2015-12-31 Filed 2016-03-30
10-Q 2015-09-30 Filed 2015-11-13
10-Q 2015-06-30 Filed 2015-08-14
10-Q 2015-03-31 Filed 2015-05-15
10-K 2014-12-31 Filed 2015-03-31
10-Q 2014-09-30 Filed 2014-11-06
10-Q 2014-06-30 Filed 2014-08-04
10-Q 2014-03-31 Filed 2014-05-15
10-K 2013-12-31 Filed 2014-03-31
10-Q 2013-09-30 Filed 2013-11-14
10-Q 2013-06-30 Filed 2013-08-08
10-Q 2013-03-31 Filed 2013-05-15
10-K 2012-12-31 Filed 2013-03-27
10-Q 2012-09-30 Filed 2012-12-26
8-K 2020-08-03 M&A, Other Events, Exhibits
8-K 2020-06-29 Shareholder Vote
8-K 2020-04-15
8-K 2020-02-03
8-K 2020-01-23
8-K 2019-09-29
8-K 2019-06-07
8-K 2019-02-08
8-K 2019-02-01
8-K 2018-12-27
8-K 2018-11-16
8-K 2018-11-06
8-K 2018-08-16
8-K 2018-08-16
8-K 2018-05-09
8-K 2018-04-03

MCCX 10Q Quarterly Report

Part I. Financial Information
Item 1. Financial Statements.
Note 1: Organization and Basis of Presentation
Note 2: Sale of Mcorpcx, Llc
Note 3: Recent Accounting Pronouncements
Note 4. Revenues
Note 5: Stock - Based Compensation
Note 6: Concentrations
Note 7: Leases
Note 8: Debt
Note 9: Going Concern
Note 10: Basic and Diluted Net Income / (Loss) per Share
Note 11: Subsequent Events
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Item 3. Quantitative and Qualitative Disclosure About Market Risk.
Item 4. Controls and Procedures.
Part II. Other Information
Item 1. Legal Proceedings.
Item 1A. Risk Factors.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information.
Item 6. Exhibits.
EX-3.6 ex_198764.htm
EX-3.7 ex_198765.htm
EX-31.1 ex_198165.htm
EX-31.2 ex_198170.htm
EX-32.1 ex_198171.htm
EX-32.2 ex_198172.htm

McorpCX Earnings 2020-06-30

Balance SheetIncome StatementCash Flow
3.32.62.01.30.70.02012201420172020
Assets, Equity
1.51.10.70.2-0.2-0.62012201420172020
Rev, G Profit, Net Income
2.82.11.40.70.0-0.72012201420172020
Ops, Inv, Fin

10-Q 1 mccx20200630_10q.htm FORM 10-Q mccx20200630_10q.htm
 

 



 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT UNDER TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED

June 30, 2020

 

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Commission File Number:   000-54918

 

MCX TECHNOLOGIES CORPORATION

(Exact name of registrant as specified in its charter)

 

California

(State or other jurisdiction of incorporation or organization)

 

26-0030631

(I.R.S. Employer Identification No.)

 

201 Spear Street, Suite 1100

San Francisco, CA   94105

(Address of principal executive offices, including zip code)

 

(415) 526-2655

(Registrant's telephone number, including area code)

 

 

MCORPCX, INC.

(Former name or former address, if changed since last report)

 

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 last 90 days.   YES      NO

 

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 such files).   YES      NO

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large Accelerated Filer

Accelerated Filer

Non-accelerated Filer

Smaller Reporting Company

 

 

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 is a shell company (as defined in Rule 12b-2 of the Exchange Act).  YES      NO

 

Securities registered pursuant to Section 12(b) of the Exchange Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

None

N/A

N/A

 

Indicated the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: 20,426,158 as of August 13, 2020  

 

 

 

MCX Technologies Corporation (formerly McorpCX, Inc.)

Form 10-Q Quarterly Report

 

 

TABLE OF CONTENTS

 

 

 

Page

No.

 

 

 

 

Part I. - Financial Information

 3

 

 

  

Item 1.

Financial Statements.

3

 

 

  

 

Consolidated Balance Sheets as of June 30, 2020 (unaudited) and December 31, 2019.

3

 

 

  

 

Consolidated Statements of Operations for the Three and Six months ended June 30, 2020 and 2019 (unaudited).

4

 

 

  

 

Consolidated Statements of Changes in Shareholders’ Equity for the Three and Six months ended June 30, 2020 and 2019 (unaudited).

5

 

 

 

 

Consolidated Statements of Cash Flows for the Six months ended June 30, 2020 and 2019 (unaudited).

6

 

 

  

 

Notes to Consolidated Financial Statements (unaudited).

7

 

 

  

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations.

13

 

 

  

Item 3.

Quantitative and Qualitative Disclosure about Market Risk.

20

 

 

  

Item 4.

Controls and Procedures.

20

 

 

  

 

Part II. - Other Information

20

 

 

  

Item 1. 

Legal Proceedings.

20

 

  

  

Item 1A.

Risk Factors.

20

 

  

  

Item 2. 

Unregistered Sales of Equity Securities and Use of Proceeds.

22

 

  

  

Item 3. 

Defaults Upon Senior Securities.

23

  

  

  

Item 4. 

Mine Safety Disclosures.

23

  

  

  

Item 5. 

Other Information.

23

 

 

  

Item 6.

Exhibits.

24

 

 

  

Signatures

25

 

 

 

 
 

PART I. FINANCIAL INFORMATION

 

ITEM 1.     FINANCIAL STATEMENTS.

 

MCX Technologies Corporation (formerly McorpCX, Inc.)

Consolidated Balance Sheets

 

   

June 30,

   

December 31,

 
   

2020

   

2019

 
   

(unaudited)

         

Assets

               

Current assets:

               

Cash and cash equivalents

  $ 605,853     $ 588,848  

Accounts receivable

    668,730       486,317  

Total current assets

    1,274,583       1,075,165  

Long term assets:

               

Property and equipment, net

    86,262       87,551  

Other assets

    47,499       55,444  

Total assets

  $ 1,408,344     $ 1,218,160  
                 

Liabilities and Shareholders' Equity

               

Liabilities:

               

Accounts payable and accrued liabilities

  $ 270,164     $ 253,824  

Deferred revenue

    65,118       32,358  

Lease payable

    7,581       7,539  

Notes payable, current portion

    55,011       -  

Other current liabilities

    1,682       1,682  

Total current liabilities

    399,556       295,403  

Notes payable, net of current portion

    256,058       -  

Total liabilities

    655,614       295,403  

Shareholders' equity:

               

Common stock, no par value, 500,000,000 shares authorized, 20,426,158 shares issued and outstanding at June 30, 2020 and December 31, 2019

    -       -  

Additional paid-in capital

    6,549,345       6,517,885  

Accumulated deficit

    (5,796,615 )     (5,595,128 )

Total shareholders' equity

    752,730       922,757  

Total liabilities and shareholders' equity

  $ 1,408,344     $ 1,218,160  

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

3

 

 

MCX Technologies Corporation (formerly McorpCX, Inc.)

Consolidated Statements of Operations

(unaudited)

 

   

Three Months Ended

   

Six Months Ended

 
   

June 30,

   

June 30,

 
   

2020

   

2019

   

2020

   

2019

 
                                 

Revenue, net

                               

Consulting services

  $ 894,094     $ 1,129,852     $ 1,531,519     $ 2,095,765  

Products and other

    32,090       47,258       64,457       91,673  

Total revenue, net

    926,184       1,177,110       1,595,976       2,187,438  

Cost of goods sold

                               

Labor

    307,963       337,504       523,458       595,656  

Products and other

    24,556       100,662       68,404       230,910  

Total cost of goods sold

    332,519       438,166       591,862       826,566  

Gross profit

    593,665       738,944       1,004,114       1,360,872  

Expenses

                               

Salaries and wages

    270,079       294,220       548,991       587,930  

Contract services

    10,596       30,158       13,625       72,338  

Other general and administrative

    353,294       331,040       642,077       606,570  

Total expenses

    633,969       655,418       1,204,693       1,266,838  
                                 

Net operating (loss) income

    (40,304 )     83,526       (200,579 )     94,034  
                                 

Interest expense

    (199 )     (524 )     (199 )     (1,755 )
                                 

Other income (expense)

    4,867       2,182       (709 )     (2,318 )
                                 

Net (loss) income

  $ (35,636 )   $ 85,184     $ (201,487 )   $ 89,961  
                                 

Net (loss) income per share-basic and diluted

  $ (0.00 )   $ 0.00     $ (0.01 )   $ 0.00  
                                 

Weighted average common shares outstanding-basic and diluted

    20,426,158       20,426,158       20,426,158       20,426,158  

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

4

 

 

MCX Technologies Corporation (formerly McorpCX, Inc.)

Consolidated Statements of Changes in Shareholders’ Equity

(unaudited)

 

   

Six Months Ended June 30, 2019

 
                           

Retained

         
                   

Additional

   

Earnings

         
   

Common Stock

   

Paid in

   

(Accumulated

         
   

Shares

   

Amount

   

Capital

   

Deficit)

   

Total

 

Balance at December 31. 2018

    20,426,158     $ -     $ 6,454,791     $ (4,834,173 )   $ 1,620,618  

Stock based compensation - stock options

    -       -       15,558       -       15,558  

Net income

    -       -       -       4,777       4,777  

Balance at March 31, 2019

    20,426,158     $ -     $ 6,470,349     $ (4,829,396 )   $ 1,640,953  

Stock based compensation - stock options

    -       -       15,730       -       15,730  

Net income

    -       -       -       85,184       85,184  

Balance at June 30, 2019

    20,426,158     $ -     $ 6,486,079     $ (4,744,212 )   $ 1,741,867  

 

   

Six Months Ended June 30, 2020

 
                           

Retained

         
                   

Additional

   

Earnings

         
   

Common Stock

   

Paid in

   

(Accumulated

         
   

Shares

   

Amount

   

Capital

   

Deficit)

   

Total

 

Balance at December 31. 2019

    20,426,158     $ -     $ 6,517,885     $ (5,595,128 )   $ 922,757  

Stock based compensation - stock options

    -       -       15,730       -       15,730  

Net loss

    -       -       -       (165,851 )     (165,851 )

Balance at March 31, 2020

    20,426,158     $ -     $ 6,533,615     $ (5,760,979 )   $ 772,636  

Stock based compensation - stock options

    -       -       15,730       -       15,730  

Net loss

    -       -       -       (35,636 )     (35,636 )

Balance at June 30, 2020

    20,426,158     $ -     $ 6,549,345     $ (5,796,615 )   $ 752,730  

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

5

 

 

MCX Technologies Corporation (formerly McorpCX, Inc.)

Consolidated Statements of Cash Flows

(unaudited)

 

   

Six Months Ended June 30,

 
   

2020

   

2019

 

CASH FLOWS FROM OPERATING ACTIVITIES:

               

Net (loss) income

  $ (201,487 )   $ 89,961  

Adjustments to reconcile net (loss) income to net cash used in operations:

               

Depreciation and amortization

    1,289       78,406  

Operating lease ROU asset amortization

    21,187       13,666  

Stock compensation expense

    31,460       31,288  

Changes in operating assets and liabilities:

               

Accounts receivable

    (182,413 )     (463,078 )

Other assets

    8,458       31,554  

Accounts payable and accrued liabilities

    16,340       (94,113 )

Lease liability

    (21,658 )     (13,891 )

Other current liabilities

    -       146  

Deferred revenue

    32,760       (107,393 )
                 

Net used in operating activities

    (294,064 )     (433,454 )
                 

FINANCING ACTIVITIES

               

Proceeds from notes payable

    311,069       -  
                 

Net cash provided by financing activities

    311,069       -  
                 

Increase (decrease) in cash and cash equivalents

    17,005       (433,454 )
                 

Cash and cash equivalents, beginning of period

    588,848       1,350,014  
                 

Cash and cash equivalents, end of period

  $ 605,853     $ 916,560  
                 

Supplemental disclosure of cash flow information:

               

Interest paid

  $ 199     $ 1,231  
Non-cash investing and financing activities:                

Initial recognition of ROU asset and lease liability

  $ 21,700     $ -  

ROU asset and operating lease obligation recognized upon adoption of ASU 2016-02

  $ -     $ 34,164  

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

  

6

 

 

MCX TECHNOLOGIES CORPORATION (formerly MCORPCX, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

(unaudited)

  

 

 

Note 1: Organization and Basis of Presentation

 

MCX Technologies Corporation (formerly McorpCX, Inc) (“we,” “us,” “our,” or the “Company”), was incorporated in the State of California on December 14, 2001. We are a customer experience (CX) management solutions company dedicated to helping organizations improve customer experiences, increase customer loyalty, reduce costs and increase revenue. The Company operated as The Innes Group, Inc., d/b/a MCorp Consulting until filing a Certificate of Amendment to the Articles of Incorporation renaming the Company Touchpoint Metrics, Inc., effective October 18, 2011. During Q1 2015, the Company filed a d/b/a (doing business as) with the State of California Secretary of State to begin doing business as McorpCX. On June 11, 2015, at our Annual General Meeting, shareholders passed a resolution to change the name of the Company to McorpCX, Inc. On June 29, 2020, at our Annual General Meeting, shareholders passed a resolution to change the name of the Company to MCX Technologies Corporation.

 

The Company formed a wholly owned subsidiary, McorpCX, LLC (“McorpCX LLC”) as a limited liability company in the state of Delaware on December 14, 2017. On August 16, 2018, the Company entered into a contribution agreement with its wholly owned subsidiary McorpCX LLC, pursuant to which the Company transferred to McorpCX LLC all of the Company’s assets and liabilities related to the Company’s customer experience consulting business, excluding the underlying technology and databases related thereto which remained with the Company.

 

We are a customer experience services company, currently focused on delivering consulting and technology solutions to customer-centric organizations. We previously engaged in the business of delivering consulting and professional services that are designed to help corporations improve their customer listening and customer experience management capabilities. To augment our consultative solutions, we have developed technology products that include on-demand “cloud based” customer experience management software. Our professional and related services include a range of customer experience management services such as research, training, strategy consulting and process optimization. 

 

The Company is subject to risks and uncertainties as a result of the COVID-19 pandemic. The extent of the impact of the COVID-19 pandemic on the Company's business is highly uncertain and difficult to predict, as the response to the pandemic and information continues to evolve. Although capital markets and economies worldwide improved during the second quarter from the initial negative impacts of the COVID-19 pandemic, there remains uncertainty around the strength and timing of global economic recoveries which could cause a local and/or global economic recession. Such economic disruption could have a material adverse effect on our business.

 

The severity of the impact of the COVID-19 pandemic on the Company's business will depend on a number of factors, including, but not limited to, the duration and severity of the pandemic and the extent and severity of the impact on the Company's customers, all of which are uncertain and cannot be predicted. The Company's future results of operations and liquidity could be adversely impacted by delays in payments of outstanding receivable amounts beyond normal payment terms and uncertain demand, and the impact of any initiatives or programs that the Company may undertake to address financial and operational challenges faced by its customers. As of the date of issuance of these Interim Consolidated Financial Statements, the extent to which the COVID-19 pandemic may materially impact the Company's financial condition, liquidity, or results of operations remain uncertain.

 

The consolidated financial statements and related disclosures as of and for the three and six months ended June 30, 2020 and 2019, are unaudited, pursuant to the rules and regulations of the United States Securities and Exchange Commission ("SEC"). The consolidated balance sheet as of December 31, 2019 was derived from the audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2019. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP") have been condensed or omitted pursuant to such rules and regulations. In our opinion, these consolidated financial statements include all adjustments (consisting only of normal recurring adjustments) necessary for the fair statement of the results for the interim periods. These consolidated financial statements should be read in conjunction with the consolidated financial statements included in our Annual Report for the year ended December 31, 2019, filed on Form 10-K with the SEC on March 27, 2020.  The results of operations for the three and six months ended June 30, 2020, are not necessarily indicative of the results to be expected for the full year.

 

7

 

 

Note 2: Sale of McorpCX, LLC

 

On April 15, 2020, the Company entered into a definitive purchase agreement (the “Purchase Agreement”) to sell all of the membership interests in McorpCX LLC to mfifty, LLC, a California limited liability company controlled by Michael Hinshaw, the current President of McorpCX LLC (the “Purchaser”). Since the Company’s professional and related consulting services business, which currently constitutes substantially all of the Company’s operations, is conducted through McorpCX LLC, the sale of McorpCX LLC represents a strategic shift that will have a major effect on the Company’s operations and financial results.

 

The Company received stockholder approval of the Purchase Agreement during a special meeting held on June 29, 2020, and the transaction closed on August 3, 2020.

 

As consideration for the sale of McorpCX LLC, the Company received a total of $352,000 in cash consisting of $100,000 received upon the signing of the Purchase Agreement and $252,000 received at the closing of the transaction along with a $756,000 promissory note. The promissory note has an initial annual interest rate of 0.99% (to be recalculated at the end of each twelve month period subsequent to the date of the note based on the annual Applicable Federal Rate for mid-term loans on the first business day following each such twelve month period) accruing daily on the outstanding balance of the note, and monthly principal payments are to be payable to the Company over a term of four or more years. Monthly principal payments to the Company are initially $7,292 per month for the first twelve months following the date of the note, and then during each subsequent twelve month period are to be based on a percentage of the annual revenues of McorpCX LLC.  The note is secured by mfifty's ownership interest in McorpCX LLC.

 

As of June 30, 2020, the sale of McorpCX LLC was subject to conditions that were less than probable to occur as of the end of the quarter and thus did not meet the held for sale criteria as of such date. These conditions included the approval of the TSX Venture Exchange, the sale of all of the Company’s shares of common stock currently owed by Mr. Hinshaw to third parties on terms reasonably satisfactory to the Company, and the satisfaction of customary closing conditions. See Note 11.

 

 

 

Note 3: Recent Accounting Pronouncements

 

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”), which contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. We are currently evaluating the impact of the guidance and our options related to the practical expedients. We don’t expect the adoption of this standard to have a material impact on the consolidated financial statements.

 

In June 2016, the FASB issued ASU No. 2016-13 (as amended through June 2020), “Financial Instruments—Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments”. ASU No. 2016-13 introduced a new forward-looking approach, based on expected losses, to estimate credit losses on certain types of financial instruments, including trade receivables, contract assets and held-to-maturity debt securities. For public business entities that are U.S. Securities and Exchange Commission (SEC) filers excluding smaller reporting companies, the amendments are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. For all other public business entities, the amendments are effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. On October 16, 2019 FASB voted to delay implementation of ASU No. 2016-13, "Financial Instruments-Credit Losses (Topic 326) -Measurement of Credit Losses on Financial Instruments.” For all other entities, the amendments are now effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. Early adoption is permitted for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company continues to evaluate the impact of these amendments to the Company’s financial position and results of operations and currently expect no material impact of the adoption of the amendments on the Company’s consolidated financial statements.

 

8

 

 

Note 4. Revenues

 

Consulting Service Revenues

 

The Company’s consulting services are project based and include the articulation of customer-centric strategies and implementation roadmaps in support of these strategies. The performance obligation in these projects is the delivery of specific findings reports as it pertains to the analysis of a client customer’s experience. These projects include milestone payments for completion of different phases of the project and are included in the transaction price. These milestone payments are deemed to be fixed because the milestones are within the control of the Company. The projects also include reimbursable expenses, which are part of the transaction price and deemed variable consideration. These reimbursable expenses are estimated at contract inception. Given the confidentiality provisions in the agreement and the nature of the services being performed, the Company has no alternative use for the specific findings report. Therefore, the Company recognizes the transaction price over time, based on percentage of completion of the milestones in the contract.

 

Product and other revenue

  

Product and other revenue during 2020 and 2019 has primarily been derived from reimbursable expenses charged to clients. The product related portion of this revenue originates from the utilization of the Company’s web-hosted Touchpoint Mapping On-Demand application (“Touchpoint Mapping”), which is designed to gather customer satisfaction data, track brand perceptions, and analyze results. Touchpoint Mapping is a SaaS (Software as a Service) subscription-based technology application, which derives revenue from the following sources: nonrefundable setup fees, subscription fees, professional service fees, and consulting fees related to implementation, customization, configuration, training, and other value-added services. Customer licenses for Touchpoint Mapping are not subject to the licensing guidance in Topic 606 because the customer can’t take possession of the software at any time and the customer would not be able to operate the software on its own or with another third party. Fees charged to customers of Touchpoint Mapping may include implementation, setup, training and license fees for the application. Revenue generated from Touchpoint Mapping (either directly through licensing fees or fees received through support functions) is recognized on a straight-line basis because the Company’s obligations under its contracts concerning Touchpoint Mapping are deemed to be stand-ready obligations due to the fact that the Company is contractually required to provide access to Touchpoint Mapping and customer support on a daily basis. Consequently, usage of Touchpoint Mapping by customers does not affect the ability of customers to access the application or our customer support functions. For these reasons, revenue is recognized on a straight-line basis over the contract period. If billings are front loaded, this will result in a deferral of revenue during the contract period. For recognition purposes, we do not unbundle such services into separate performance obligations as their pattern of transfer does not differ.

 

Deferred Revenues (Contract Liabilities)

 

The Company records deferred revenues when cash payments are received, including amounts which are refundable.

 

Payment terms vary by customer and the products or services offered. The term between invoicing and when payment is due is not significant. For certain products or services and customer types, full or a partial payment of the entire contract is required before the products or services are delivered to the customer.

 

The aggregate amount of the fees received from customers that are allocated to each customer’s respective performance obligation that is unsatisfied (or partially unsatisfied) is $65,118 as of June 30, 2020 and included in deferred revenue on the accompanying consolidated balance sheets. The Company expects to recognize revenue of $65,118 in 2020 related to these unsatisfied (or partially unsatisfied) performance obligations. Deferred revenue is not expected to be recognized beyond fiscal year 2021. 

 

During the three and six months ended June 30, 2020, we recognized revenue of $530 and $32,358, respectively, related to our contract liabilities included in deferred revenue at December 31, 2019. During the three and six months ended June 30, 2019, we recognized revenue of $47,133 and $122,238, respectively, related to our contract liabilities included in deferred revenue at December 31, 2018.

 

 

Practical Expedients and Exemptions

 

Contract costs consist primarily of sales commissions. The Company generally expenses sales commissions when incurred because the amortization period would have been one year or less and the commissions are only due and payable upon receipt of payment from the client. These costs are recorded within sales and marketing expenses.

 

The Company does not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed.

 

9

 

 

Note 5: Stock-Based Compensation

 

Our stock-based compensation plan was originally established in 2008. The shares of our common stock issuable pursuant to the terms of such plan (the “Plan Shares”) could not exceed 30% of any outstanding issue or 2,500,000 shares, whichever was the lower amount.

 

In December 2015, we adopted a revised share option plan in which Plan Shares cannot exceed 10% of the total issued and outstanding shares at any given time. All stock option grants have an exercise price equal to the fair market value of our common stock on the date of the grant and all option grants have a 10-year term. This share option plan was initially approved by the Company’s shareholders at the annual meeting of shareholders on August 10, 2016 and has subsequently been re-approved at each subsequent annual meeting of the Company’s stock holders since that date, as required under applicable TSX-V rules.

 

To calculate the fair value of stock options at the date of grant, we use the Black-Scholes option pricing model. The volatility used is based on a blended historical volatility of our own stock and similar sized companies due to the limited historical data available for our own stock price. The expected term was determined based on the simplified method outlined in Staff Accounting Bulletin No. 110. The risk-free interest rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant.

 

The following table summarizes our stock option activity for the six months ended June 30, 2020:

 

                   

Weighted

         
           

Weighted

   

Average

         
           

Average

   

Remaining

   

Aggregate

 
   

Number of

   

Exercise

   

Contractual

   

Intrinsic

 
   

Shares

   

Price

   

Term (in years)

   

Value

 

Outstanding at December 31, 2019

    1,140,000     $ 0.35       6.25       -  

Granted

    -       -       -       -  

Exercised

    -       -       -       -  

Cancelled

    -       -       -       -  

Forfeited or expired

    -       -       -       -  

Outstanding at June 30, 2020

    1,140,000     $ 0.35       5.75       -  
                                 

Exercisable at June 30, 2020

    680,000     $ 0.43       4.14     $ -  

 

 

At June 30, 2020, 680,000 stock options were exercisable and $31,460 of total compensation cost related to share-based compensation grants had been recognized for the six months ended June 30, 2020. Unrecognized compensation expense from stock options was $71,046 at June 30, 2020, which is expected to be recognized over a weighted-average vesting period of 1.13 years beginning July 1, 2020.

 

There were no options granted during the six months ended June 30, 2020.

 

A summary of the status of the Company’s nonvested options as of June 30, 2020, is presented below:

 

Nonvested options

       
   

Number of

 
   

Shares

 

Nonvested options at December 31, 2019

    460,000  

Granted

    -  

Exercised

    -  

Cancelled

    -  

Forfeited or expired

    -  

Vested

    -  

Nonvested options at June 30, 2020

    460,000  

 

10

 

 

Note 6: Concentrations 

 

We sell products and services under various terms to a broad range of companies across multiple industries ranging from start-ups to Fortune 500 companies, with sales historically concentrated among a few large clients. We continue to make efforts to mitigate risk from loss of a single client and shift sales concentration to a more even distribution among our clients. For the six months ended June 30, 2020 and 2019, the percentage of sales and the concentrations are:

 

   

2020

   

2019

 

Largest client

    42 %     27 %

Second largest client

    25 %     21 %

Third largest client

    12 %     16 %

Next three largest clients

    17 %     27 %

All other clients

    4 %     9 %
      100 %     100 %

 

Sales are made without collateral and the credit-related losses have been insignificant or non-existent. Accordingly, there is no provision made to include an allowance for doubtful accounts.

   

 

Note 7: Leases

 

In 2019, the Company adopted the provisions of Accounting Standards Update 2016-02, Leases, effective January 1, 2019. We determined if an arrangement is a lease at inception. Operating lease right-of-use (“ROU”) assets are recorded in other assets and operating lease liabilities are recorded in current liabilities in the accompanying consolidated balance sheets. Finance leases, none of which existed as of the adoption of Accounting Standards Codification (“ASC”) 842 or as of December 31, 2019, would be reflected in property and equipment and other liabilities in our consolidated balance sheets.

 

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. We use the implicit rate when readily determinable. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

 

Under the available practical expedient, we account for the lease and non-lease components as a single lease component for all classes of underlying assets. Further, we elected a short-term lease exception policy on all classes of underlying assets, permitting us to not apply the recognition requirements of this standard to short-term leases (i.e. leases with terms of 12 months or less). 

 

Effective January 1, 2020, the Company’s leased office space in San Anselmo, California which was originally scheduled to expire on March 31, 2020 was renegotiated and treated as a modified lease for a 6-month term and monthly rent of $2,539 and will expire September 30, 2020. As of January 1, 2020, the impact of the modified lease with a discount rate of 6% resulted in the recognition of a right of use asset of $21,700, included in other assets, and lease payable obligation on the Company’s consolidated balance sheets of $22,405. Lease expense was $21,187 and $13,666 for the six months ended June 30, 2020 and 2019, respectively, which is included in the general and administrative expense in the accompanying consolidated statements of operations.

 

 

Note 8: Debt

 

On May 12, 2020, the Company received an unsecured non-recourse promissory note in the amount of $161,069 under the Paycheck Protection Program. In March 2020, the Coronavirus Aid, Relief, and Economic Security Act was passed in the United States, which included amongst other programs, loans to businesses under a Paycheck Protection Program. The Paycheck Protection Program Note incurs interest at a fixed rate of 1.00% and is scheduled to mature on May 3, 2022. The Company is required to make monthly payments on the note of $6,785 commencing on November 1, 2020.

 

On June 11, 2020, the Company received a secured non-recourse promissory note in the amount of $150,000 under the Economic Injury Disaster Loan. The Economic Injury Disaster Loan incurs interest at a fixed rate of 3.75% and is scheduled to mature 30 years from the date of the promissory note on June 10, 2050. The Company is required to make monthly payments on the note of $731 which includes principal and interest beginning twelve months from the date of the note beginning June 11, 2021. Collateral for the loan includes all tangible and intangible personal property.

 

 

Note 9: Going Concern

 

The accompanying consolidated financial statements and notes have been prepared assuming that the Company will continue as a going concern.

 

We have had material operating losses and have not yet created positive cash flows for a full fiscal year. These factors raise substantial doubt as to our ability to continue as a going concern.  On August 3, 2020, the Company completed the sale of all of the membership interests in McorpCX, LLC, of which the proceeds of $1,108,000, consisting of $352,000 in cash and a $756,000 promissory note, are expected to be applied to transaction costs as well as investment toward becoming a technology services business. See Note 2 for details. These measures combined with our positive working capital position should enable us to meet our liquidity needs over the next 12 months. Notwithstanding the foregoing, our longer-term ability to continue as a going concern is entirely dependent upon our ability to achieve a level of profitability, and/or to raise additional capital through debt financing and/or through sales of common stock. We cannot provide any assurance that profits from operations, if any, will generate sufficient cash flow to meet our working capital needs and service our existing obligations, nor that sufficient capital can be raised through debt or equity financing. The consolidated financial statements do not include adjustments related to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should we be unable to continue as a going concern.

 

11

 

 

Note 10: Basic and Diluted Net Income / (Loss) per Share

 

Net income (loss) per share was computed by dividing the net income (loss) by the weighted average number of common shares outstanding during the period. The weighted average number of shares was calculated by taking the number of shares outstanding and weighting them by the amount of time that they were outstanding. For the six months ended June 30, 2020 and 2019, the assumed exercise of share options is anti-dilutive and are excluded from the determination of net income (loss) per share – basic and diluted. The share options were anti-dilutive due to the Company’s net loss or the Company’s common stock average market price was less than the share options exercise price. Accordingly, net (loss) / income per share basic and diluted are equal in all periods presented. Securities that were not included in the diluted per share calculations because they would be anti-dilutive were options to purchase common stock of 680,000 and 1,350,000 for the six months ended June 30, 2020 and 2019, respectively.

 

   

Six Months Ended

 
   

June 30,

 
   

2020

   

2019

 

Net (loss) income

  $ (201,487 )   $ 89,961  

Basic and diluted weighted average common shares outstanding

    20,426,158       20,426,158  

Net (loss) income per share, basic and diluted

  $ (0.01 )   $ 0.00  

 

 

 

Note 11: Subsequent Events

 

On August 3, 2020 the Company completed the sale of McorpCX, LLC. Management determined that the disposal will meet the criteria for presentation as discontinued operations as of August 3, 2020 and will be disclosed as such for the three months ended September 30, 2020. The disposal of McorpCX, LLC represents a strategic shift that will have a major effect on the Company’s operations and financial results. Accordingly, the results of the McorpCX, LLC will be presented as discontinued operations in the Company’s Consolidated Statements of Operations beginning in the third quarter of 2020, and thus be excluded from continuing operations for all periods presented. In addition, the related assets and liabilities of McorpCX, LLC will be classified as discontinued operations on the Company’s Consolidated Balance Sheets for all periods presented.

 

Subsequent to the sale of McorpCX, LLC, the Company intends to focus on growing the Company’s software development and technology services business.

 

12

 

ITEM 2.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

 

Cautionary Statement

 

This Management’s Discussion and Analysis includes a number of forward-looking statements that reflect our current views with respect to future events and financial performance. Forward-looking statements are often identified by words like: “believe,” “expect,” “plan”, “estimate,” “anticipate,” “intend,” “project,” “will,” “predicts,” “seeks,” “may,” “would,” “could,” “potential,” “continue,” “ongoing,” “should” and similar expressions, or words which, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements, which apply only as of the date of this Form 10-Q. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or from our predictions. We undertake no obligation to update or revise publicly any forward-looking statements, whether because of new information, future events, or otherwise.

 

Unless the context otherwise requires, all references to “we,” “us,” “our” or the “Company” are to MCX Technologies Corporation and our subsidiaries.

 

Critical Accounting Policies and Estimates

 

Our financial statements are prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosures. We evaluate our estimates and assumptions on an ongoing basis. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Our actual results could differ from these estimates. We believe that the assumptions and estimates associated with revenue recognition, income taxes, stock-based compensation, research and development costs and impairment of long-lived assets have the greatest potential impact on our financial statements. Therefore, we consider these to be our critical accounting policies and estimates.

 

A description of the Company’s critical accounting policies and related judgments and estimates that affect the preparation of the Company’s financial statements is set forth in under the heading “Critical Accounting Policies and Estimates” in Item 7, Management’s Discussion and Analysis of the Company’s Annual Report on Form 10-K for the year ended December 31, 2019. With the exception of the policy adoptions discussed in Note 3 of the Notes to the Consolidated Financial Statements included with this report, such policies were unchanged during the six months ended June 30, 2020.

 

Overview

 

We are a customer experience (CX) management solutions company dedicated to helping organizations improve customer experiences, increase customer loyalty, reduce costs and increase revenue.

 

The Company formed a wholly owned subsidiary, McorpCX, LLC (“McorpCX LLC”) as a limited liability company in the state of Delaware on December 14, 2017. On August 16, 2018, the Company entered into a contribution agreement with its wholly owned subsidiary McorpCX LLC, pursuant to which the Company transferred to McorpCX LLC all of the Company’s assets and liabilities related to the Company’s customer experience consulting business, excluding the underlying technology and databases related thereto which remained with the Company.

 

On April 15, 2020, the Company entered into a definitive purchase agreement (the “Purchase Agreement”) to sell all of the membership interests in McorpCX, LLC to mfifty, LLC, a California limited liability company controlled by Michael Hinshaw, the current President of McorpCX LLC (the “Purchaser”). Since the Company’s professional and related consulting services business, which currently constitutes substantially all of the Company’s operations, is conducted through McorpCX LLC, the sale of McorpCX LLC represents a strategic shift that we believe will have a major effect on the Company’s operations and financial results.

 

The Company received stockholder approval of the Purchase Agreement during a special meeting held on June 29, 2020, and the transaction closed on August 3, 2020.

 

As consideration for the sale of McorpCX LLC, the Company received a total of $352,000 in cash consisting of $100,000 received upon the signing of the Purchase Agreement and $252,000 received at the closing of the transaction along with a $756,000 promissory note. The promissory note has an initial annual interest rate of 0.99% (to be recalculated at the end of each twelve month period subsequent to the date of the note based on the annual Applicable Federal Rate for mid-term loans on the first business day following each such twelve month period) accruing daily on the outstanding balance of the note, and monthly principal payments are to be payable to the Company over a term of four or more years. Monthly principal payments to the Company are initially $7,292 per month for the first twelve months following the date of the note, and then during each subsequent twelve month period are to be based on the annual revenues of McorpCX, LLC.  The note is secured by mfifty's ownership interest in McorpCX LLC.

 

In connection with the completion of the sale of McorpCX LLC, the Company intends to focus on growing the Company’s software development and technology services business.

 

13

 

Prior to the sale of McorpCX LLC our primary source of revenue was derived from our consulting services which were intended to help primarily large and medium sized organizations plan, design and deliver better customer experiences in order to maximize their return on investment, improve efficiency, and increase the adoption of our products and services. Our services offered included a range of customer experience management consulting services in the areas of research, strategy development, planning, education, training and best practices, as well as providing customer-centric strategies and implementation roadmaps in support of these strategies.

 

We also have developed on-demand “cloud based” customer experience management software such as Touchpoint Mapping® On-Demand (also marketed as McorpCX | Insights), referred to as “Touchpoint Mapping”, and McorpCX | Persona.

 

Touchpoint Mapping is a research-based online Software-as-a-Service (“SaaS”) solution designed to provide insights to organizations that can help them improve customer and employee experience, brand, and loyalty. It is designed to be a solution for customer-centric organizations to measure and gather customer data across all their touchpoints, channels and interactions with their customers.

 

McorpCX | Persona, another online SaaS solution, is designed for developing and managing customer persona, as well as automating the currently manual process of developing, managing and sharing persona across corporations. It is designed to help customer-centric businesses and the agencies and consultancies that serve them to better understand, connect with and serve their customers.

 

Though we released the first version of Touchpoint Mapping in 2013, and we released the first version of McorpCX | Persona in 2016, neither product has generated significant sales revenue to date, and we have yet to engage the necessary development, client support, and sales staff required to identify, develop, and close material product sales opportunities that we believe are required to achieve our product sales and revenue growth objectives. We also believe that our current software capabilities are more limited in scope than our desired final software platform and as such, significant further software development expenditures will be required. Revenues from our consulting services provided to our clients represented a majority of our revenue in 2019 and for the six months ended June 30, 2020.

 

Upon the completion of the sale of the Company’s consulting services business, the Company’s management is now in the process of determining the optimal path forward for our software products based on current market dynamics, the competitive environment and customer feedback. We continue to evaluate various potential strategies with the goal of improving our ability to achieve additional revenue and profit growth for software products. These possible strategies, which are generally focused on ways to create a more complete slate of customer experience solutions for potential clients, include further software or technology development expenditures, pursuit of merger, acquisitions or joint ventures with companies that provide complimentary products and services, software licensing arrangements, and investment in additional infrastructure within our Company. Each of these possible strategies will be thoroughly vetted by our board of directors to assess the expected level of enterprise value creation for each strategy compared to the various risks associated with each possible scenario. In addition, we may require financing to pursue these strategies that is beyond our current financial resources. Accordingly, there is no assurance that we will be able to pursue any strategies that are identified by our board of directors.

 

14

 

In addition, in December 2019, a novel strain of coronavirus (“COVID-19”) was reported in Wuhan, China and has since extensively impacted the global health and economic environment. In March 2020, the World Health Organization characterized COVID-19 as a pandemic. The COVID-19 pandemic and the government responses to the outbreak presents uncertainty and risk with respect to the Company and its performance and financial results.

 

In March 2020, the Coronavirus Aid, Relief, and Economic Security Act was passed in the United States, which included amongst other programs, loans to businesses under a Paycheck Protection Program (“PPP”) and Economic Injury Disaster Loan (“EIDL”). On May 12, 2020, the Company received an unsecured non-recourse promissory note in the amount of $161,069 under the PPP (the “PPP Note”). The PPP Note incurs interest at a fixed rate of 1.00% and is schedule to mature on May 3, 2022. The Company is required to make monthly payments on the PPP Note of $6,785 commencing on November 1, 2020.

 

On June 11, 2020, the Company received a secured non-recourse promissory note in the amount of $150,000 under the EIDL program (the “EIDL Loan”). The EIDL Loan incurs interest at a fixed rate of 3.75% and is scheduled to mature on 30 years from June 10, 2050. The Company is required to make monthly payments on the EIDL Loan of $731 which includes principal and interest beginning twelve months from the date of the EIDL Loan beginning June 11, 2021. Collateral for the loan includes all tangible and intangible personal property.

 

The extent of the impact of the COVID-19 pandemic on the Company's business is highly uncertain and difficult to predict, as the response to the pandemic is in its early stages and information is rapidly evolving. The severity of the impact of the COVID-19 pandemic on the Company's business will depend on a number of factors, including, but not limited to, the duration and severity of the pandemic and the extent and severity of the impact on the Company's customers, all of which are uncertain and cannot be predicted.

 

Summary of Financial Results

 

Select financial highlights for the three and six months ended June 30, 2020:

 

 

Total revenue decreased by 21% from $1,177,110 during the second quarter of 2019 to $926,184 during the second quarter of 2020, and decreased by 27% from $2,187,438 during the first half of 2019 to $1,595,976 during the first half of 2020.

 

 

 

 

Gross profit decreased by 20% from $738,944, in the second quarter of 2019 to $593,665, in the second quarter of 2020, and decreased by 26% from $1,360,872 in the first half of 2019 to $1,004,114 in the first half of 2020.

 

 

We recorded net loss of $35,636 in the second quarter of 2020, compared to net income of $85,184 for the second quarter of 2019. Net loss was $201,487 in the first half of 2020 compared to a net income of $89,961 for the first half of 2019.

 

 

 

 

The Company reported EBITDA(1) of $(34,779) and $(199,999) in the second quarter and first half of 2020, respectively, compared to $113,966 and $170,122 and in the second quarter and first half of 2019, respectively.

 

 

 

 

The Company had a cash balance of $605,853 at June 30, 2020 compared to a cash balance of $588,848 at December 31, 2019.

 

(1) We define EBITDA as net income (loss) plus interest, tax, depreciation and amortization expenses. We consider EBITDA to be a meaningful supplement to net income (loss) as a performance measure primarily because depreciation and amortization expenses are not actual cash costs, and interest and tax expenses are not related to our direct operating activities. See page 18 for a reconciliation of net income (loss) to EBITDA.

 

15

 

Sources of Revenue

 

Prior to the sale of McorpCX LLC, our revenue consisted primarily of fees from professional and consulting services and other revenue primarily related to the reimbursement of expenses entirely through the operations of McorpCX LLC. Through May 31 of last year, revenue was also derived from the Company’s software-enabled product sales. Consulting services include customer experience management consulting in the areas of strategy development, planning, education, training and program design, and includes the articulation of customer-centric strategies and implementation roadmaps in support of these strategies, while other revenue includes reimbursement of related travel costs and out-of-pocket expenses. Product revenue was from productized and software-enabled service sales not elsewhere classified.

 

The consulting services are contracted under master terms and conditions with statements of work (“SOW”) defined for each project. A typical consulting SOW will span a period of 60-180 days and will usually be billed to the client based on certain milestones being achieved throughout the SOW. The Company recognizes revenue based upon a percentage of completion of each SOW during each project. In addition, we typically incur travel and other miscellaneous expenses during work on each SOW which we bill to our clients for reimbursement. The travel and miscellaneous expenses are recognized in revenue on a percentage of work complete basis.

 

During the second half of 2017, we stopped further development of our software products and in 2018 we suspended actively selling Touchpoint Mapping and McorpCX | Persona in order to re-assess the product roadmap to better define the future direction of our software platform. On May 31, 2019, the last remaining contract for Touchpoint Mapping was closed, and we believe no further revenue will be recognized from this date, unless we decide to further develop, upgrade and provide support to resume actively selling our software products and obtain material stand-alone sales commitments for them.

 

When we were actively selling the products, we found that the implementation stage of on-demand software and software-enabled services engagements (the time between a client placing an order to the live deployment of our product ordered) averaged between 30 and 45 days. We typically invoiced clients upon inception of subscription agreements for setup and total subscription fees contracted over the term of the agreements, with payment due within 30 days. We then recognized the subscription fee revenue, including any associated professional services or separate set-up fee revenue, on a straight-line basis over the life of the agreement.

 

Subscription agreements for our software solutions had been offered as monthly term agreements which contain a minimum commitment period of at least 12 months, and which have included related setup, upgrades, hosting and support. Professional services have included consulting fees related to implementation, customization, configuration, training and other services.

 

Professional services related to the subscription agreements are invoiced at the inception of the professional services agreement at a negotiated percentage of total fees, often but not exclusively one-third or one-half of the total estimated professional services fees, with the balance of payments due over the duration of the contract as project milestones are met. Amounts invoiced are recorded in accounts receivable and deferred revenue or revenue, depending on whether revenue recognition criteria have been met.

 

Cost of Goods Sold and General and Administrative Expenses

 

Cost of Goods Sold

 

Cost of goods sold has historically consisted primarily of expenses directly related to providing professional and consulting services. Those expenses include contract labor, third-party services, and materials and travel expenses related to providing professional services to our clients. Costs of goods also includes, but is not limited to, product-related hosting and monitoring costs, the cost of licenses for products embedded in the application, amortization of capitalized software development costs, service support costs, and costs related to account and subscription management, as applicable.

 

General and Administrative Expenses

 

General and administrative expenses consist primarily of salary and related expenses for management, client delivery, finance and accounting, and sales and marketing. These expenses also include contract services, as well as marketing and promotion costs, professional fees, software license fee expenses, administrative costs, insurance, rent and a portion of travel expenses and other overhead, which are categorized as “other general and administrative expenses” in our consolidated financial statements. In addition, the other general and administrative expenses include the professional fees, filing, and registration costs necessary to meet the requirements associated with having to file reports with the United States Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as well as having our stock listed on the TSX Venture Exchange in Canada and quoted on the OTCQB venture marketplace in the United States.

 

Sales and marketing expenses are currently reflected in salaries and wages, commissions, contract labor, sales, marketing and promotion, and other related overhead expense categories. Since we currently recognize revenue over the term of the consulting and professional services engagements or any software subscriptions, we expect to experience a delay between increases in selling and marketing expenses and the recognition of revenue.

 

16

 

Results of Operations

 

                   

Change from

   

Percent Change

 

Revenue

 

2020

   

2019

   

Prior Year

   

from Prior Year

 

Three Months Ended June 30,

  $ 926,184     $ 1,177,110     $ (250,926 )     (21% )

Six Months Ended June 30,

  $ 1,595,976     $ 2,187,438     $ (591,462 )     (27% )

 

Overall, the 21% decrease in revenue in the second quarter of 2020 compared to the second quarter of 2019 was attributed to a 21% decrease in consulting services revenue and a 32% decrease in products and other revenue in the three months ended June 30, 2020 compared to the same period in the prior year. The decrease in consulting services revenue from $1,129,852 in 2019 to $894,094 in 2020 was primarily the result of the loss of a major client account. The decrease in product and other revenue from $47,258 for the three months ended June 30, 2019 to $32,090 for the same period in 2020, was primarily the result of our decision to suspend selling each of our software products in 2019 combined with a decrease in reimbursable expense mostly resulting from less travel required to execute the projects in 2020 compared to the same period in 2019 as well as travel restrictions due to COVID-19 shelter-in-place orders in the second quarter of 2020.

 

Overall, the 27% decrease in revenue in the first half of 2020 compared to the first half of 2019 was attributed to a 27% decrease in consulting services revenue and a 30% decrease in products and other revenue in the six months ended June 30, 2020 compared to the same period in the prior year. The decrease in consulting services revenue from $2,095,765 in 2019 to $1,531,519 in 2020 was primarily the result of the loss of a major client account. The decrease in product and other revenue from $91,673 for the six months ended June 30, 2019 to $64,457 for the same period in 2020, was primarily the result of our decision to suspend selling each of our software products in 2019 combined with a decrease in reimbursable expense mostly resulting from less travel required to execute the projects and travel restrictions due to COVID-19 shelter-in-place orders in the second quarter of 2020 compared to the same period in 2019.

 

                   

Change from

   

Percent Change

 

Cost of Goods Sold

 

2020

   

2019

   

Prior Year

   

from Prior Year

 

Three Months Ended June 30,

  $ 332,519     $ 438,166     $ (105,647 )     (24% )

Six Months Ended June 30,

  $ 591,862     $ 826,566     $ (234,704 )     (28% )

 

Cost of goods sold decreased by $105,647, for the three months ended June 30, 2020, compared to the same period in 2019 primarily as a result of a 9% decrease in professional fees and a 63% decrease in reimbursable and non-reimbursable expenses. The decrease in professional fees from $337,504 in 2019 to $307,963 for 2020 was primarily the result of a decrease in billings from our contract consultants mostly due to less consulting revenue volume described above. The decrease in reimbursable and non-reimbursable expenses from $65,513 in 2019 to $24,556 for 2020 was primarily the result of less travel due to the COVID-19 shelter-in-place orders. The remainder of the decrease in cost of goods sold in the second quarter of 2020 compared to the second quarter of 2019 was mostly attributable to a decrease in amortization of capitalized software development costs in the second quarter months of 2020 compared to the same period in the prior year.

 

Cost of goods sold decreased by $234,704, for the six months ended June 30, 2020, compared to the same period in 2019 primarily as a result of a 12% decrease in professional fees and a 54% decrease in reimbursable and non-reimbursable expenses. The decrease in professional fees from $595,656 in 2019 to $523,458 for 2020 was primarily the result of a decrease in billings from our contract consultants mostly due to less consulting revenue volume described above. The decrease in reimbursable and non-reimbursable expenses from $148,494 in 2019 to $68,404 for 2020 was primarily the result of less travel due to the COVID-19 shelter-in-place orders. The remainder of the decrease in cost of goods sold in the first half of 2020 compared to the first half of 2019 was mostly attributable to a decrease in amortization of capitalized software development costs as well as a reduction in vendors providing services to the Company in the first six months of 2020 compared to the same period in the prior year.

 

                   

Change from

   

Percent Change

 

Net Operating Income (Loss)

 

2020

   

2019

   

Prior Year

   

from Prior Year

 

Three Months Ended June 30,

  $ (40,304 )   $ 83,526     $ (123,830 )     (148% )

Six Months Ended June 30,

  $ (200,579 )   $ 94,034     $ (294,613 )     (313% )

 

For the three months ended June 30, 2020 we had net operating loss of $40,304 compared to a net operating income of $83,526 for the six months ended June 30, 2019. The decrease in net operating income in the second quarter of 2020 was primarily a result of decreased total revenues, and an increase in general and administrative costs being partially offset by decrease in costs of goods sold and salaries and wages when compared to the same quarter in 2019.

 

For the six months ended June 30, 2020 we had net operating loss of $200,579 compared to a net operating income of $94,034 for the six months ended June 30, 2019. The decrease in net operating income in the current period was primarily a result of decreased total revenues combined with an increase in general and administrative costs being partially offset by a decrease in costs of goods sold and sales and wages when compared to the same period in 2019.

 

Net income decreased from $85,184 in the second quarter of 2019 to a net loss of $35,636 in the same quarter of 2020, while EBITDA decreased by $148,745 to a loss of $34,779 for the three months ended March 31, 2020 from earnings of $113,966 for the three months ended March 31, 2019. 

 

Net income decreased from $89,961 in the first half of 2019 to a net loss of $201,487 in the first half of 2020, while EBITDA decreased by $370,121 to a loss of $199,999 for the six months ended June 30, 2020 from earnings of $170,122 for the six months ended June 30, 2019. 

 

17

 

We consider EBITDA to be a meaningful supplement to net income (loss) as a performance measure primarily because depreciation and amortization expenses are not an actual cash costs, and interest and tax expenses are not related to our direct operating activities. In addition, we believe EBITDA is commonly used by investors and other interested parties to evaluate our financial performance. EBITDA does not reflect the impact of a number of items that affect our net income (loss), including financing costs. EBITDA should not be considered as an alternative to net income (loss) or income (loss) from operations as a measure of performance, or as an alternative to net cash from operating activities as a measure of liquidity. EBITDA is an internal measure and therefore may not be comparable to other companies. EBITDA has significant limitations as an analytical tool, and should not be considered in isolation, or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are that EBITDA does not reflect: (i) our cash expenditures, or future requirements, for capital expenditures or contractual commitments; (ii) changes in, or cash requirements for, working capital needs; and (iii) the interest expense, or the cash requirements necessary to service interest or principal payments, on our outstanding debt (if any). Because of these limitations, EBITDA should only be considered as a supplemental performance measure and should not be considered as a measure of liquidity or cash available to us to invest in the growth of our business. Because all companies do not calculate EBITDA in the same manner, EBITDA as calculated by us may differ from EBITDA as calculated by other companies. We compensate for these limitations by using EBITDA as a supplemental measure of our performance and by relying primarily on our GAAP consolidated financial statements.

 

The following table provides a reconciliation of net income (loss) to EBITDA for the periods indicated:

 

   

Three Months Ended

   

Six Months Ended

 
   

June 30,

   

June 30,

 
   

2020

   

2019

   

2020

   

2019

 
                                 

Net (Loss) Income

  $ (35,636 )   $ 85,184     $ (201,487 )   $ 89,961  

Depreciation and Amortization

    658       28,258       1,289       78,406  

Interest expense

    199       524       199       1,755  
                                 

EBITDA

  $ (34,779 )   $ 113,966     $ (199,999 )   $ 170,122  

 

 

                   

Change from

   

Percent Change

 

Salaries and Wages

 

2020

   

2019

   

Prior Year

   

from Prior Year

 

Three Months Ended June 30,

  $ 270,079     $ 294,220     $ (24,141 )     (8% )

Six Months Ended June 30,

  $ 548,991     $ 587,930     $ (38,939 )     (7% )

 

 

Salaries and wages decreased by $24,141 during the three months ended June 30, 2020 compared to the same quarter in 2019 primarily due to a decrease in the compensation of our executives officers in the current quarter compared to the same quarter in 2019 and a reduction in staff salaries due to the outsourcing of our bookkeeping function.

 

Salaries and wages decreased by $38,939 during the six months ended June 30, 2020 compared to the same period in 2019 primarily due to a decrease in the compensation of our executives officers in the current period compared to the same period in 2019 and a reduction in staff salaries due to the outsourcing of our bookkeeping function.

 

                   

Change from

   

Percent Change

 

Contract Services

 

2020

   

2019

   

Prior Year

   

from Prior Year

 

Three Months Ended June 30,

  $ 10,596     $ 30,158     $ (19,562 )     (65% )

Six Months Ended June 30,

  $ 13,625     $ 72,338     $ (58,713 )     (81% )

 

Expenses related to contract services decreased in the three and six months ending June 30, 2020 compared to the same periods in 2019 primarily due to more finance and administration and marketing services provided by contractors in 2019.

 

                   

Change from

   

Percent Change

 

Other General and Administrative

 

2020

   

2019

   

Prior Year

   

from Prior Year

 

Three Months Ended June 30,

  $ 353,294     $ 331,040     $ 22,254       7 %

Six Months Ended June 30,

  $ 642,077     $ 606,570     $ 35,507       6 %

 

Other general and administrative costs increased $22,254 and $35,507 during the three and six months ended June 30, 2020 compared to the same periods in 2019, primarily due to increases in professional fees, insurance, dues and subscriptions, rent, and computers and software partially offset by decreases in sales, marketing and promotion expenses, travel, meals, and entertainment as well as administration expenses.

  

                   

Change from

   

Percent Change

 

Other Income/Expense

 

2020

   

2019

   

Prior Year

   

from Prior Year

 

Three Months Ended June 30,

  $ 4,867     $ 2,182     $ 2,685       123 %

Six Months Ended June 30,

  $ (709 )   $ (2,318 )   $ 1,609       (69% )

 

Other income increased for the three months ended June 30, 2020 compared to the three months ended June 30, 2019, primarily due to an EIDL loan received in the second quarter in the amount of $5,000 which is not required to be repaid.  This loan is in addition to the EIDL loan discussed in Note 8 of the Notes to Consolidated Financial Statements included with this report.

 

Other expense decreased for the six months ended June 30, 2020 compared to the six months ended June 30, 2019, primarily due to decreased state use tax expenses and unrealized losses as well as a decrease in interest income from the Company’s investment accounts.

 

18

 

Liquidity and Capital Resources

 

We measure our liquidity in a variety of ways, including the following:

   

June 30,

   

December 31,

 
   

2020

   

2019

 

Cash and cash equivalents

  $ 605,853     $ 588,848  

Working capital

  $ 875,027     $ 779,762  

 

 

Anticipated Uses of Cash

 

As of June 30, 2020, our cash and cash equivalents and working capital had increased to $605,853 and $875,027, respectively, from $588,848 and $779,762 as of December 31, 2019. The increase in cash during the first half of 2020 was primarily the result of proceeds from new debt acquired during the first six months of 2020.  See Note 8 of the Notes to the Consolidated Financial Statements included with this report.

 

For the six months ended June 30, 2020 and the year ended December 31, 2019, we were able to finance our operations with cash generated through financing activities, and cash on hand. The accompanying consolidated financial statements have been prepared in accordance with GAAP applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business.

 

During the six months ended June 30, 2020, our primary uses of cash included cash paid to professional staff to support our consulting services, general and administrative support and new business development activities.

 

We currently plan to fund our expenditures with cash flows generated from ongoing operations, or new revenue sources, and/or if needed, the possibility may exist to raise additional capital through debt financing and/or through sales of common stock. We do not intend to pay dividends in the foreseeable future. We believe that cash flow from operations and available cash will be adequate to finance the capital requirements for our business during the next 12 months.

 

Pursuant to the terms of the Purchase Agreement, we received total consideration of $1,108,000 consisting of $352,000 in cash and a $756,000 promissory note for the sale of McorpCX, LLC, which was completed on August 3, 2020.

 

In connection with the completion of the sale of McorpCX LLC, we intend to continue to seek ways to expand upon our business and as such, in the future we may make acquisitions of businesses or assets or commitments to additional capital projects. To achieve the long-term goals of expanding our assets and earnings, including through acquisitions, capital resources may be required. Depending on the size of a transaction, the capital resources that may be required can be substantial. The necessary resources may be generated from cash flow from operations, cash on hand, the proceeds of the sale of McorpCX, LLC, borrowing against our assets or the issuance of securities, and there is no assurance these capital resources will be available to us when required.

 

Cash Flow – Six months ended June 30, 2020 and 2019

 

Operating Activities. Net cash used in operating activities decreased to $294,064 for the six months ended June 30, 2020 compared to net cash used in operating activities of $433,454 for the six months ended June 30, 2019. This decrease in cash used in 2020 compared to 2019 was primarily due to a greater increase in accounts receivable in the first half of 2019 compared to the first half of 2020, combined with increased accounts payable and deferred revenues in the first half of 2020 compared to a decrease in accounts payable and deferred revenues in same period of 2019.

 

Days Sales Outstanding (“DSO”), which the Company defines as the average number of days it takes to collect revenue once a sale has been made, increased in the first six months of 2020 compared to the same period of the prior year. During the six months ended June 30, 2020, DSO was approximately 76 days, up from approximately 67 days during six months ended June 30, 2019. This increase was largely attributed to the impact of the COVID-19 pandemic during the current period. DSO can fluctuate due to the timing and nature of contracts that lead to up-front billings related to deferred revenue on services not yet performed.

 

Investing Activities. There was no cash provided by, or used in, investing activities for six months ended June 30, 2020 and 2019.

 

Financing Activities. The Company had cash provided by financing activities of $311,069 due to proceeds from the PPP Note and EIDL Note for the six months ended June 30, 2020. There was no cash provided by, or used in, financing activities for the six months ended June 30, 2019.

 

Off Balance Sheet Arrangements

 

We did not have any off-balance sheet arrangements as of June 30, 2020.

  

19

 

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.

  

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and as such, are not required to provide the associated information under this item.

 

ITEM 4.

CONTROLS AND PROCEDURES.

 

Disclosure Controls and Procedure

 

Pursuant to Rule 13a-15(b) and Rule 15d-15(b) under the Exchange Act, the Company carried out an evaluation, with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) or Rule 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the Company’s management concluded that, as of the period covered by this report, and as reported in Item 9A of the Company’s Fiscal 2019 Form 10-K, the Company’s disclosure controls and procedures were not effective to ensure that information required to be disclosed by the Company in the reports that the Company 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, and that such information is accumulated and communicated to the Company’s management to allow timely decisions regarding required disclosure.

 

It should be noted that any system of controls is based in part upon certain assumptions designed to obtain reasonable (and not absolute) assurance as to its effectiveness, and there can be no assurance that any design will succeed in achieving its stated goals.

 

Changes in Internal Controls

 

There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

PART II. OTHER INFORMATION

 

ITEM 1.

LEGAL PROCEEDINGS.

 

We are not involved in any legal actions or claims and to our knowledge no such actions or claims are pending.

  

ITEM 1A.

RISK FACTORS.

 

In addition to the other information set forth in this Quarterly Report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 (the “2019 Annual Report”), which could materially affect our business, results of operations or financial condition. In addition to the risks outlined in the 2019 Annual Report we are subject to the following risks:

 

The COVID-19 pandemic could adversely affect our financial results, operations and outlook for an extended period of time.

 

The COVID-19 pandemic and restrictions imposed by federal, state and local governments in response to the outbreak have disrupted and will continue to disrupt our business. We expect the stay-at-home orders and the sudden increase in unemployment caused by the closure of businesses in response to the COVID-19 pandemic to adversely affect our revenues, which adversely impacts our liquidity, financial condition and results of operations.

 

Our operations could be further disrupted if any of our executives or employees are unable or unwilling to work, whether because of illness, quarantine, restrictions on travel or fear of contracting COVID-19, which could further materially adversely affect our liquidity, financial position and results of operations.

 

We cannot predict how long the COVID-19 pandemic will last or if it will recur, if new government restrictions and mandates will be imposed or how long they will be effective, or the economic impact of such restrictions on our clients, so we cannot predict how long our results of operations and financial performance will be adversely impacted.

 

20

 

You are not guaranteed any of the proceeds from the sale of McorpCX LLC.

 

The consideration for McorpCX LLC was paid by the Purchaser directly to the Company. The Company could spend or invest the net proceeds from the sale of McorpCX, LLC in ways with which our stockholders may not agree. The investment of these proceeds may not yield a favorable return.

 

The Company will be a very small public company.

 

Despite the completion of the sale of McorpCX LLC, the Company is expected to continue to file periodic annual, quarterly and current reports, as well as proxy statements with the SEC. As a result, the Company will continue to incur additional ongoing operating expenses and the Company cannot assure how much of the cash proceeds, if any, will ultimately be distributed to stockholders or invested in growing the Company’s technology services business.

 

The Company’s ability to execute its strategy following the sale of McorpCX LLC depends on the Company’s ability to retain and recruit qualified management and/or advisors.

 

The Company’s ability to execute its strategy following the recent closing of the sale of McorpCX LLC requires that the Company retain and recruit personnel with technology services experience. There are no assurances that the Company will be able to find and/or be able to recruit qualified personnel required to build the Company’s technology services business, and if the Company is not able to recruit such personnel the Company may not be able to successfully grow its technology services business and consequently may not develop a revenue generating business.

 

Following the sale of McorpCX LLC, the Company’s profitability and growth will depend on the success of the Company’s planned development of its technology services business, which is subject to a variety of business risks and uncertainties.

 

In connection with the recent completion of the sale of McorpCX LLC, the Company is expected to be focused on growing its technology services business. Any evaluation of our technology services business and our prospects going forward must be considered in light of the risks and uncertainties stated above, as well as the following:

 

 

the ability to maintain our relationships with our existing clients;

 

the ability to attract new clients; and

 

potential capital costs used for investment in the technology services business;

 

If the Company is unable to address these risks, the Company’s business, results of operations and prospects could suffer and the Company may not be able to successfully able to develop a revenue generating business.

 

21

 

It is important to note that the risks described above as well as in our 2019 Annual Report are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may eventually prove to materially adversely affect our business, results of operations or financial condition.

 

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

 

Recent Sales of Unregistered Securities

 

There were no unregistered sales of our equity securities during the three-month period ended on June 30, 2020.

 

Purchases of Equity Securities

 

During the six months ended June 30, 2020, there were no purchases of our common stock made by, or on behalf of, the Company or any "affiliated purchaser," as defined by Rule 10b-18 of the Exchange Act.

  

22

 

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4.

MINE SAFETY DISCLOSURES

 

Not applicable.

  

ITEM 5.

OTHER INFORMATION.

 

(a)

Not applicable.

  

23

 

ITEM 6.

EXHIBITS. 

 

3.1

Articles of Incorporation (Incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form S-1 filed with the Securities and Exchange Commission on April 25, 2012).

3.2

Amendment to the Articles of Incorporation (Incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement on Form S-1 filed with the Securities and Exchange Commission on April 25, 2012).

3.3

Amendment to the Articles of Incorporation (Incorporated by reference to Exhibit 3.3 to the Company’s Registration Statement on Form S-1 filed with the Securities and Exchange Commission on April 25, 2012).

3.4

Amendment to the Articles of Incorporation (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on July 13, 2015).

3.5

Amendment to the Articles of Incorporation (Incorporated by reference to the Company’s Form 10-Q filed with the Securities and Exchange Commission on November 14, 2016).

3.6

Amendments to the Articles of Incorporation.

3.7 

Amended and Restated Bylaws.

31.1

Certification of Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a).

31.2

Certification of Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a).

32.1*

Certification of Chief Executive Officer required by Rule 13a-14(b) or Rule 15d-14(b) and Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350

32.2*

Certification of Chief Financial Officer required by Rule 13a-14(b) or Rule 15d-14(b) and Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350

 

101.INS

XBRL Instance Document

101.SCH

XBRL Taxonomy Extension – Schema

101.CAL

XBRL Taxonomy Extension – Calculations

101.DEF

XBRL Taxonomy Extension – Definitions

101.LAB

XBRL Taxonomy Extension – Labels

101.PRE

XBRL Taxonomy Extension – Presentation

 

*Furnished, not filed

 

Notes to Exhibits List:

 

Attached as Exhibit 101 to this report are the following formatted in XBRL (Extensible Business Reporting Language): (i) Balance Sheet, (ii) Statements of Operations, (iii) Statements of Cash Flows, and (iv)Notes to the Financial Statements. In accordance with Rule 406T of Regulation S-T, the XBRL related information in Exhibit 101 to this Quarterly Report on Form 10-Q shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be part of any registration statement or other document filed under the Securities Act or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

 

24

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report has been signed on its behalf by the undersigned, thereunto duly authorized on this 14th day of August 2020.

 

 

MCX TECHNOLOGIES CORPORATION

 

 

 

 

 

BY:

/s/ Matthew Kruchko

 

 

Matthew Kruchko

 

 

Chief Executive Officer

  

  

  

  

BY:

/s/ Barry MacNeil

  

 

Barry MacNeil

  

 

Chief Financial Officer

 

25

 

EXHIBIT INDEX

 

3.1

Articles of Incorporation (Incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form S-1 filed with the Securities and Exchange Commission on April 25, 2012).

3.2

Amendment to the Articles of Incorporation (Incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement on Form S-1 filed with the Securities and Exchange Commission on April 25, 2012).

3.3

Amendment to the Articles of Incorporation (Incorporated by reference to Exhibit 3.3 to the Company’s Registration Statement on Form S-1 filed with the Securities and Exchange Commission on April 25, 2012).

3.4

Amendment to the Articles of Incorporation (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on July 13, 2015).

3.5

Amendment to the Articles of Incorporation (Incorporated by reference to the Company’s Form 10-Q filed with the Securities and Exchange Commission on November 14, 2016).

3.6

Amendments to the Articles of Incorporation.

3.7 

Amended and Restated Bylaws. 

31.1

Certification of Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a).

31.2

Certification of Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a).

32.1*

Certification of Chief Executive Officer and Chief Financial Officer required by Rule 13a-14(b) or Rule 15d-14(b) and Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350

32.2*

Certification of Chief Financial Officer required by Rule 13a-14(b) or Rule 15d-14(b) and Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350

 

101.INS

XBRL Instance Document

101.SCH

XBRL Taxonomy Extension - Schema

101.CAL

XBRL Taxonomy Extension - Calculations

101.DEF

XBRL Taxonomy Extension - Definitions

101.LAB

XBRL Taxonomy Extension - Labels

101.PRE

XBRL Taxonomy Extension - Presentation

 

*Furnished, not filed

 

Notes to Exhibits List:

 

Attached as Exhibit 101 to this report are the following formatted in XBRL (Extensible Business Reporting Language): (i) Balance Sheet, (ii) Statements of Operations, (iii) Statements of Cash Flows, and (iv)Notes to the Financial Statements. In accordance with Rule 406T of Regulation S-T, the XBRL related information in Exhibit 101 to this Quarterly Report on Form 10-Q shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be part of any registration statement or other document filed under the Securities Act or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

 

26