OMNIA WELLNESS INC. Management's Discussion and Analysis of Financial Condition and Results of Operations. (form 10-Q) | MarketScreener

2022-11-09 16:42:53 By : Mr. Geraint Guan

The following discussion should be read in conjunction with our unaudited financial statements and related notes included in Item 1, "Financial Statements," of this Quarterly Report on Form 10-Q, as well as our Annual Report on Form 10-K for the fiscal year ended March 31, 2021. Certain information contained in this MD&A includes "forward-looking statements." Statements which are not historical reflect our current expectations and projections about our future results, performance, liquidity, financial condition and results of operations, prospects and opportunities and are based upon information currently available to us and our management and their interpretation of what is believed to be significant factors affecting our existing and proposed business, including many assumptions regarding future events. Actual results, performance, liquidity, financial condition and results of operations, prospects and opportunities could differ materially and perhaps substantially from those expressed in, or implied by, these forward-looking statements as a result of various risks, uncertainties and other factors, including those risks described in detail in the section entitled "Risk Factors" of our Annual Report on Form 10-K for the fiscal year ended March 31, 2021.

Forward-looking statements, which involve assumptions and describe our future plans, strategies, and expectations, are generally identifiable by use of the words "may," "should," "would," "will," "could," "scheduled," "expect," "anticipate," "estimate," "believe," "intend," "seek," or "project" or the negative of these words or other variations on these words or comparable terminology.

In light of these risks and uncertainties, and especially given the nature of our existing and proposed business, there can be no assurance that the forward-looking statements contained in this section and elsewhere in this Quarterly Report on Form 10-Q will in fact occur. Potential investors should not place undue reliance on any forward-looking statements. Except as expressly required by the federal securities laws, there is no undertaking to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances or any other reason.

We develop and market products for wellness and physical therapy markets, using patented dry-hydro therapy equipment and other related modalities that we plan to offer and market in wellness, fitness and medical markets.

Our mission is to redefine the wellness industry by introducing affordable, "on demand" wellness memberships through a network of retail locations, which we refer to as BodyStop® Centers, which feature patented, touchless SOLAJET™ endokinetic therapy, a technology that we believe exceeds the capability and effect of hands-on massage. We seek to become the leading provider of therapeutic wellness treatments and the most recognized brand in the wellness category through the rapid and focused expansion of BodyStop® Relaxation Centers in key markets throughout the U.S. and Europe. The goal is not only to capture a significant share of the existing market but also to expand the wellness market as a whole by attracting a large segment of potential customers who are averse to human touch.

We plan to introduce a disruptive business model into the traditional wellness massage and spa industry by delivering the important benefits of our endokinetic therapies in a more affordable and convenient way. We have created a unique and expandable business model that we believe breaks through the main barriers of wellness treatments which include cost, scheduling, and quality/consistency.

Central to our business plan is the creation of the BodyStop® Relaxation Centers, which are premium, spa-like locations that can be located, and an appointment booked, by customers or "members" using a smartphone app or the web - massage on demand. We expect that each typical BodyStop® Relaxation Center will have six to ten patented dry-hydrotherapy SOLAJET™ systems, two Aquavive® contrast therapy units, one SolaSauna, a SolaPro percussive treatment tower, one full body cryo-therapy chamber, one HyperCryo® spot therapy unit, one SolaDerm® LED therapy system and an assisted TheraStretch® zone where customers can choose and receive private, deeply relaxing, consistent and therapeutic treatments with the multiple modalities available. We believe that the customized wellness experience provided at a BodyStop® is unequaled in our goal to provide the client the ability to "Feel Better Fast" at our one stop locations.

Our retail membership model is currently based upon a price from $5 to $10 per fifteen minute session on the modality of the customer's choice. Due to our technology, we expect to operate the BodyStop® Relaxation Centers with a minimal amount of staffing, as well as potentially franchise BodyStop® Relaxation Centers to third parties to enhance the rate of growth. Based on projected usage rates determined by us after multiple years of product development and market testing, we estimate that a single BodyStop® center servicing up to 800 members, may generate approximately $1,000,000 in annual revenue with a target gross margin of approximately 60%.

To develop our proprietary technology and prepare our product for commercialization, Omnia Corp. and its founder and affiliates have spent multiple years designing and placing over 500 units in high volume usage commercial settings. This product verification program was important to validate the product's reliability, performance, consumer features and production capacity. The Company is continuing to develop additional products to offer in the wellness market and will incur research and development expenses on an ongoing basis.

The SolaJet® Dry-Hydrotherapy System, is an exhilarating new wave in health and wellness. Inside, a powerful traveling water jet performs a relaxing full body Endo-Kinetic™ treatment but is also able to isolate to any part of the body at the touch of a button. Throughout this TOUCH-LESS self- administered session, the client remains clothed and dry.

The AquaVive, is the world's first hyper-thermic massaging system that uses the penetrating power of water to both relax muscles with therapeutic heat or to quell inflammation with cooling to 40 degrees F. The AquaVive also provides gentle stretching and side to side movement.

The SolaPro, provides deep and rapid vibration which provides many individuals fast and advanced relief from aches and pains and helps promote faster recovery. Sola-Pro creates a targeted therapeutic effect. In the case of the SolaPro™, our "smooth- force" penetrating power can deliver gentle strength massage or powerful deep penetrating action.

SolaDerm, aids in the reduction of inflammation using cold therapy works by reducing blood flow to a particular area, which can significantly reduce swelling that causes pain, especially around a joint or a tendon. It can temporarily reduce nerve activity, which can also relieve pain. Compression assists in a similar manner through the restriction of blood flow and the reduction of swelling and fluid build-up.

HyperCryo Spot Cryotherapy, uses extremely cold temperatures in order to induce healing processes. Cryotherapy has been used to stimulate the body's own natural ability to recover, repair, and rebuild. Using extremely cold temperatures over a short time has an effect much easier to administer than traditional ice packs used for cold therapy or treatment. Spot cryo targets a local area vs the whole body.

Full Body Cryotherapy, refers to the process of stimulating the body's natural healing and recovery systems by applying extremely cold temperatures to the entire body. Eliminating pain, reducing inflammation, and improving the blood flow are just a few of its many possible positive benefits.

SolaSauna, is the only true full spectrum infrared saunas available offering advanced near, mid and far infrared technologies. Our robust True Wave™ Full Spectrum heating system provides all wavelengths 100% of the time to optimize your sauna session.

EarthCord. "Grounding" or natural diffusion refers to the health benefits of direct contact with the earth's negative electrical field. As static electricity build up is discharged through direct skin contact, grounding to the earth may help rebalance electrons in the body to naturally optimize its electrical system, thus helping the user to relax and reduce inflammation.

BodyVibe. Whole body vibration can help reduce pain and stiffness by improving local circulation and even reverse the effects of limited mobility naturally. We believe that whole body vibration therapy is a great treatment prior to stretching or exercise, with gentle motion or aggressive vibration set to the user's preference.

BodyStretch. Many people go through daily activity with stiff muscles resulting from sedentary lifestyles or overworked and stressed muscle. Stretching can help reestablish a more normalized muscle tone, relieving stiffness and soreness.

The Company's business model is to create a national chain of BodyStop® "Relaxation Centers". Earlier Company focus groups have shown that individuals introduced to the proposed BodyStop® Relaxation Center concept had a high interest in the services offered. The Company also had similar results selling SOLAJET™ memberships in commercial settings with a compelling conversion rate for users to purchase a monthly massage membership. The Company believes this is a strong indication that retention or membership sales will be high once consumers experience a SOLAJET™ massage in a relaxing and stress-free environment. The Company's first two BodyStop® locations are currently planned on Long Island, New York and at the LA Fitness in Fountain Valley, California, with an expected opening date of November, 2022.

For the BodyStop® Relaxation Centers, the Company continues to develop product branding and marketing using professional marketing agencies and intends to hire consultants to develop various store layouts and associated marketing concepts. The locations are intended to represent a "human oasis" or an affordable "recharge station" for our stressed-out world. The Company intends to work closely with franchise consultants during the testing and modeling of the centers to make certain any future franchise offering, if any, has the best opportunity to be successful.

After our Relaxation Centers have been in service for a reasonable test period, management plans to evaluate each location's results and determine the proper course of action for the identification and installation of future locations. If results from the test market demonstrate that the concept is profitable and scalable, we intend to open approximately 50 to 100 Company-owned Relaxation Centers in the U.S. within the following 12 - 24 months, subject to the availability of funds. Following this, we expect to expand first into Europe. Our target is to have 1,000 Relaxation Centers in the U.S. and additional locations in Europe, within 6-8 years after the initial launch. We believe that there will be opportunities to expand the business into other areas worldwide, if and when we have the resources available.

Along with the retail and commercial elements of the business plan, we expect to launch a medical rental program targeting physical therapists and chiropractors, which we believe removes the cost factor that would otherwise prevent practitioners from purchasing our products - a major barrier of entry.

On April 17, 2020, we entered into the Exchange Agreement with Omnia Corp. and the beneficial stockholders of Omnia Corp. to acquire 100% of the issued and outstanding shares of capital stock of Omnia Corp. The transactions contemplated by the Exchange Agreement were consummated on January 5, 2021 and, pursuant to the terms of the Exchange Agreement, among other things, all outstanding Omnia Corp. Shares were exchanged for shares of our common stock, par value $0.001 per share, based on the exchange ratio of one share of our common stock for every one Omnia Corp. Share. Accordingly, we acquired 100% of Omnia Corp. in exchange for the issuance of 10,000,000 shares of our common stock and Omnia Corp. became our wholly-owned subsidiary. As of the Closing, Mr. Amer Samad, formerly our sole director and executive officer, agreed to cancel 52,656,888 (pre-stock split) shares of our common stock owned beneficially and of record by him as part of the conditions to Closing, which were cancelled immediately after the Closing. We also issued an aggregate of 1,269,665 shares of common stock on January 5, 2021 as a result of the conversion in accordance with their terms of outstanding convertible promissory notes in the aggregate principal amount of approximately $539,000.

As of immediately prior to the closing of the Acquisition, we entered into an Assignment and Assumption Agreement with RZI Consulting LLC (the "Assignment Agreement"), pursuant to which RZI Consulting LLC assumed substantially all of our remaining assets and liabilities through the closing of the Acquisition. Accordingly, as of the closing of the Acquisition, we had no assets or liabilities (other than relating to general and administrative expenses).

Significant Accounting Policies and Estimates

The discussion and analysis of the financial condition and results of operations are based upon the financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of any contingent liabilities at the financial statement date and reported amounts of revenue and expenses during the reporting period. On an on-going basis we review our estimates and assumptions. The estimates were based on historical experience and other assumptions that we believe to be reasonable under the circumstances. Actual results are likely to differ from those estimates under different assumptions or conditions, but we do not believe such differences will materially affect our financial position or results of operations.

We have incurred recurring losses to date. Our financial statements have been prepared assuming that we will continue as a going concern and, accordingly, do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should we be unable to continue in operation.

We expect we will require additional capital to meet our long-term operating requirements. We expect to raise additional capital through, among other things, the sale of equity or debt securities.

Fiscal Quarter Ended June 30, 2022 Compared to Fiscal Quarter Ended June 30, 2021

Total revenue was $133,646 for the fiscal quarter ended June 30, 2022, compared to $37,121 for the fiscal quarter ended June 30, 2021. The increased revenue during the 2022 period is due to selling our subscription based share revenue program and obtaining customers who are in the process of opening many stores and are in need for our beds in there stores. The subscription based shared revenue program was just implemented in the first fiscal quarter of 2021.

Total cost of goods sold was $20,966 for the fiscal quarter ended June 30, 2022, compared to $6,532 for the fiscal quarter ended June 30, 2021. The increase in cost of goods sold during the 2022 period is due to the increase sales of beds to customers and the increase in shipping and installation costs to the customers. .

Total operating expenses was $446,991 for the fiscal quarter ended June 30, 2022, compared to $590,704 for the fiscal quarter ended June 30, 2021. There was a decrease due to less spending within R&D Expense. During the first fiscal quarter of June 30, 2021 there was a reclass entry to move R&D as an intangible asset to expense creating an increase of $335,000. Offsetting this change, as of June 30, 2022 there is an increase in payroll expense, legal and professional fees, Royalty expense, and general and administrative expenses due to increased production and sales.

Interest expense was $233,524 for the fiscal quarter ended June 30, 2022, compared to $126,831 for the fiscal quarter ended June 30, 2021. The increase in interest expense from 2021 is due to the Company issuing notes payable for funding current operations. The Company issued convertible notes during the period in the amount of $158,750, that convert into shares at a lower cost than the cost that was offered to the current market (the Beneficial Conversion Feature). The convertible notes convert within 12 months at an average of $.20/ share and were issued when the market for the shares ranged from $.17 to $.36/share. The Company is recognizing the cost for the price difference in those shares, which represents the share's intrinsic value and is considered an additional cost of financing and is recorded as an interest expense for the period of $77,561. Finance lease costs are split, where amortization of the ROU asset is recorded in operating expenses and an implied interest component is recorded in interest expense. The ROU interest expense for the period is $4,313.

The net loss for the fiscal quarter ended June 30, 2022 was $(579,525), compared to a net loss for the fiscal quarter ended June 30, 2021 of $(390,032). The net loss of $(579,525) as of the fiscal quarter ended June 30, 2022 resulted in a loss per share of (0.00) compared to a net loss of $(390,032) as of June 30, 2021, resulting in a loss per share of (0.00).

We have historically funded operations through the issuance of loans, evidenced by convertible and non-convertible promissory notes. Since inception, we have raised an aggregate of $9,993,908 through the sale of such promissory notes, of which approximately $6,042,955 principal amount remains outstanding and either is currently due and continuing to accrue default interest, or will be due in 2023

Based on our current burn rate, we need to raise additional capital in the short term to fund operations, including the opening of Relaxation Centers, and meet expected future liquidity requirements, as well as to repay our remaining existing total indebtedness of approximately $7,397,930, if not converted to equity, or we will be required to curtail or terminate some or all of our installations or our operations. We are continuously in discussions to raise additional capital, which may include or be a combination of convertible or term loans and equity which, if successful, will enable us to continue operations based on our current burn rate, for the next 12 months; however, we cannot give any assurance at this time that we will successfully raise all or some of such capital or any other capital. In addition, the COVID-19 pandemic has presented unprecedented challenges to businesses and the investing landscape around the world, including our business. Therefore, there can be no assurance that management's plans will be successful. We may not be able to negotiate any such financing arrangements on acceptable terms, if at all. If we are unable to obtain additional funding on a timely basis, we may be required to curtail or terminate some or all of our product lines or our operations. Furthermore, at this time, we do not have an established source of funds sufficient to cover operating costs after January, 2023. Funds raised, if any, are anticipated to fund not just repayment of existing obligations, but our ongoing operations including validating the business model for Relaxation Centers, hiring additional personnel, and expanding the revenue share model with additional facilities.

We do not have available funds to repay currently due liabilities or note indebtedness that is expected to become due in 2023, and are exploring refinancing, extending the maturity date and/or converting some or all of such indebtedness into equity.

There can be no assurance that necessary debt or equity financing will be available, or will be available on terms acceptable to us, in which case we may be unable to meet our obligations or fully implement our business plan, if at all. These conditions raise substantial doubt about the Company's ability to continue as a going concern. The accompanying condensed consolidated financial statements do not include any adjustments to reflect the possible future effects on recoverability and reclassification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.

Additionally, we will need additional funds to respond to business opportunities including potential acquisitions of complementary technologies, protect our intellectual property, develop new lines of business, and enhance our operating infrastructure. While we may need to seek additional funding for any such purposes, we may not be able to obtain financing on acceptable terms, or at all. In addition, the terms of our financings may be dilutive to, or otherwise adversely affect, holders of our common stock.

As a result of the COVID-19 pandemic and actions taken to slow its spread, the global credit and financial markets have experienced extreme volatility, including diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates and uncertainty about economic stability. There can be no assurance that further deterioration in credit and financial markets and confidence in economic conditions will not occur. If equity and credit markets deteriorate, it may make any necessary debt or equity financing more difficult to obtain, more costly and/or more dilutive. Any of these actions could materially harm our business, results of operations and future prospects.

The following table provides a summary of the net cash flow activity for each of the periods set forth below:

Cash used in operating activities $ (117,451 ) $ (630,586 ) Cash provided by investing activities (34,300 ) (113,250 ) Cash provided by financing activities 148,750 1,045,914 Change in cash

Cash used in operating activities for the three months ended June 30, 2022 was $(117,451). Cash used in operating activities for the three months ended June 30, 2021 was $(630,586). The decrease in cash used in our operating activities is associated to a large increase in accounts payable and accrued liabilities as we are working on obtaining capital for our operations. . As of June 30, 2022 operating cash flows included interest on beneficial conversion feature, amortization of the ROU Asset, and Royalty expense for DryRX and Drywave. . Additionally, in 2021 we received funding for a total of $588,891, pursuant to the federal Paycheck Protection Program under the Coronavirus Aid, Relief and Economic Security (CARES) Act, of which $294,066 was forgiven within the 3 months ending June 30, 2021.

Cash provided by investing activities for the three months ended June 30, 2022 was $(34,300), compared to $(113,250) for the three months ended June 30, 2021, which consisted of acquiring fixed assets.

Cash provided by financing activities for the three months ended June 30, 2022 was $148,750, compared to $1,045,914 for the three months ended June 30, 2021, which consisted of payments of advances, and proceeds from issuance of notes and advances

The independent auditors' report accompanying our March 31, 2021, financial statements contain an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern. The financial statements have been prepared "assuming that we will continue as a going concern," which contemplates that we will realize our assets and satisfy our liabilities and commitments in the ordinary course of business.

Our financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern, which contemplate the realization of assets and liquidation of liabilities in the normal course of business. We have incurred continuous losses from operations, have an accumulated deficit of $(11,591,567) and had a working capital deficit of $(7,146,976) at June 30, 2022, and have reported negative cash flows from operations since inception. In addition, we do not currently have the cash resources to meet our operating commitments for the next twelve months. Our ability to continue as a going concern must be considered in light of the problems, expenses, and complications frequently encountered by entrance into established markets and the competitive nature in which we operate.

Our ability to continue as a going concern is dependent on our ability to generate sufficient cash from operations to meet our cash needs and/or to raise funds to finance ongoing operations and repay debt. There can be no assurance, however, that we will be successful in our efforts to raise additional debt or equity capital and/or that our cash generated by any of our future operations will be adequate to meet our needs. These factors, among others, indicate that we may be unable to continue as a going concern for a reasonable period of time.

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