NOTE
1 – Condensed Financial Statements
The
accompanying unaudited financial statements of Outdoor Specialty Products, Inc. (the “Company”) were prepared pursuant to
the rules and regulations of the United States Securities and Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America
have been condensed or omitted pursuant to such rules and regulations. Management of the Company (“Management”) believes
that the following disclosures are adequate to make the information presented not misleading. These financial statements should be read
in conjunction with the audited financial statements and the notes thereto for the year ended September 30, 2021.
These
unaudited financial statements reflect all adjustments, consisting only of normal recurring adjustments that, in the opinion of Management,
are necessary to present fairly the financial position and results of operations of the Company for the periods presented. Operating
results for the three months ended March 31, 2022 are not necessarily indicative of the results that may be expected for the year ending
September 30, 2022.
NOTE
2 – Going Concern
The
accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. As shown in the accompanying financial statements, the Company did not generate
sufficient revenue to generate net income, has a negative working capital, and has a limited operating history. These factors, among others, may indicate that there is
substantial doubt that the Company will be unable to continue as a going concern for a reasonable period of time.
The
financial statements do not include any adjustments relating to the recoverability and classification of assets and liabilities that
might be necessary should the Company be unable to continue as a going concern. The Company’s continuation as a going
concern is dependent upon its ability to generate sufficient cash flow to meet its obligations on a timely basis and ultimately to attain
profitability. The Company intends to seek additional funding through debt or equity offerings and additional stockholder
loans if required to fund its business plan. There is no assurance that the Company will be successful in raising additional
funds.
NOTE
3 – LINE OF CREDIT – RELATED PARTY
During
the six months ending March 31, 2022, the Company amended the revolving promissory note agreement with its related party to extend the
maturity date to June 30, 2022. The revolving promissory note bears interest at the rate of 3.5%. The Company received proceeds under
the line of credit of $14,897 during the six months ended March 31, 2022, resulting in balances of $45,147 and $30,250, with accrued
interest of $1,059 and $409, at March 31, 2022 and September 30, 2021, respectively.
Also,
during the six months ended March 31, 2022, the Company entered into a new revolving promissory note agreement with another principal
stockholder providing for loans of up to $7,000 at an interest rate of 3.5% per annum, which is repayable on or before June 30, 2022.
During the six months ended March 31, 2022, we borrowed an aggregate principal amount of $6,344 under this second revolving loan agreement.
The balance on this line of credit on March 31, 2022, was $6,344 with accrued interest of $51.
NOTE
4 – SUBSEQUENT EVENTS
The
Company has evaluated subsequent events from the balance sheet date through the date of the financial statements were issued and determined
that there are no events requiring disclosure.
Item
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
You
should read the following discussion in conjunction with our financial statements, which are included elsewhere in this report.
Overview
We
are and have since our inception in 2014 been engaged in the business of developing, selling, and marketing products in niche markets
within the specialty outdoor products marketplace. We introduced our proprietary “Reel Guard” product in 2014 and continue
to offer it for sale on our website and on eBay. We intend to commence manufacturing, marketing, and selling our new “SLINKOR”
product in the near future, pursuant to a license agreement entered into with the inventor in May 2021.
In
March 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID-19) as a pandemic, which continues to spread
throughout the world. The full impact of the COVID-19 pandemic is inherently uncertain at the time of this report. The COVID-19 pandemic
has resulted in travel restrictions and in some cases, prohibitions of non-essential activities, disruption and shutdown of businesses
and greater uncertainty in global financial markets. As a result of COVID-19 mobility restrictions globally, there have been changes
in consumer behavior. We expect these changes in behavior to continue to evolve as the pandemic progresses. The impacts seen to date
may continue to create a wider range of outcomes as consumer behaviors and mobility restrictions continue to evolve.
Our
financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. We did not generate sufficient revenue to generate net income, we have negative working capital, and we have a
limited operating history. These factors, among others, may indicate that there is substantial doubt that we will be unable to continue
as a going concern for a reasonable period of time. Our financial statements do not include any adjustments relating to the recoverability
and classification of assets and liabilities that might be necessary should we be unable to continue as a going concern. Our
continuation as a going concern is dependent upon our ability to generate sufficient cash flow to meet our obligations on a timely basis
and ultimately to attain profitability. We intend to increase our sales through the addition of our SLINKOR product and, if
required, to seek additional funding through debt or equity offerings to fund our business plan. There is no assurance that
the SLINKOR product will result in an increase in sales or that we will be successful in raising additional funds.
Results
of Operations for the Three and Six Months Ended March 31, 2022 and 2021
Revenues
From our inception in 2014 through the present, our revenues have resulted
solely from sales of our proprietary Reel Guard product and our costs of sales also relate solely to that product. Our Reel Guard product
is offered for sale on our website and on eBay and sales vary from quarter to quarter based on the number of customers that become aware
of the product and decide to purchase it. Total revenues for the three months ended March 31, 2022 were $26, compared to $97 for the three
months ended March 31, 2021, a decrease of $71, or approximately 73%. Total revenues for the six months ended March 31, 2022 were $147,
compared to $151 for the six months ended March 31, 2021, a decrease of $4, or approximately 3%.
Cost
of Sales
Cost of sales for the three months ended March 31, 2022 was $2, compared
to $9 for the three months ended March 31, 2021, a decrease of $7, or approximately 78%. Cost of sales for the six months ended March
31, 2022 was $15, compared to $13 for the six months ended March 31, 2021, an increase of $2, or approximately 15%. Cost of sales as a
percentage of revenue for the six months ended March 31, 2022 was approximately 10% compared to approximately 9% for the six months ended
March 31, 2021. Our cost of sales as a percentage of revenue did not differ significantly from 2021 to 2022 since we offered only one
product for sale and there have been no material change in the sales price or manufacturing cost of our product.
General
and Administrative Expenses
General
and administrative expenses were $12,934 for the three months ended March 31, 2022, compared to $15,398 for the three months ended March
31, 2021, a decrease of $2,464 or approximately 16%. General and administrative expenses were $21,629 for the six months ended March
31, 2022, compared to $17,245 for the six months ended March 31, 2021, an increase of $4,384 or approximately 25%. General and administrative
expenses consist primarily of legal, accounting, and Edgar filing expenses and have generally increased as a result of our becoming an
SEC reporting company in 2021.
Depreciation
and Amortization Expense
Depreciation
and amortization expenses currently are not material to our business. Depreciation and amortization expense was $205 for the six months
ended March 31, 2022 as compared to $583 for the six months ended March 31, 2021.
Research
and Development Expenses
Research
and development expenses are not currently material to our business. We did not incur research and development expenses in the six months
ended March 31, 2022 or 2021.
Liquidity
and Capital Resources
As
of March 31, 2022, we had total current assets of $10,845, including cash of $2,510, and current liabilities of $52,601, resulting in
a working capital deficit of $41,756. Our current liabilities include an outstanding balance of $51,491, and $1,110 in accrued interest,
under the short-term revolving loan agreements with our president and another principal stockholder that are due on or before June 30,
2022. As of March 31, 2022, we had an accumulated deficit of $141,478 and a total stockholders’ deficit of $36,961. We have financed
our operations to date from sales of our Reel Guard product, proceeds from our 2014 private placement, and proceeds from the short-term
revolving loan agreements.
For the six months ended March 31, 2022, net cash used by operating
activities was $24,899, as a result of a net loss of $22,198, reduced by depreciation and amortization of $205, a decrease in inventory
of $16, and an increase in accrued interest of $701, and increased by an increase in prepaid expense of $3,209 and a decrease in accounts
payable of $414. By comparison, for the six months ended March 31, 2021 net cash used by operating activities was $19,302, as a result
of a net loss of $17,202, reduced by depreciation and amortization of $583, a decrease in inventory of $13, and an increase in accrued
interest of $95, and increased by an increase in prepaid expense of $2,791.
For
the six months ended March 31, 2022 and 2021, we had no cash flows used in or provided by investing activities.
For
the six months ended March 31, 2022, we had net cash provided by financing activities of $21,241 consisting of proceeds from the revolving
loan agreements. For the six months ended March 31, 2021, we had net cash provided by financing activities of $12,250, also consisting
of proceeds from the revolving loan agreements.
Following
our incorporation in 2014, we completed the private placement of 285,714 shares of our common stock to accredited investors in a private
placement at a price of $0.35 per share for total proceeds of $100,011. The proceeds from the private placement together with our limited
product sales were sufficient to fund our operations through our fiscal year ended September 30, 2020. On January 4, 2021, we entered
into a revolving promissory note agreement with our president and principal stockholder which provided for total loans of up to $40,000
at an interest rate 3.5% per annum, which was repayable on or before December 31, 2021. During December 2021, we amended the revolving
promissory note agreement to extend the maturity date to June 30, 2022. During December 2021, we also entered into a revolving promissory
note agreement with another principal stockholder providing for loans of up to $7,000 at an interest rate of 3.5% per annum, which is
repayable on or before June 30, 2022. We received proceeds under the revolving loan agreements of $21,241 during the six months ended
March 31, 2022, resulting in a balance of $51,491, with accrued interest of $1,110, at March 31, 2022.
We
believe we will be able to extend the term of the revolving loan agreements with our president and another principal stockholder and
that if we do so, we will have adequate funds to meet our obligations for the next twelve months from our current cash, the revolving
note agreements, and cash flows from operations. Cash flow from operations has not historically been sufficient to sustain our operations
without the additional sources of capital described above. Our future working capital requirements will depend on many factors, including
the extension of the revolving loan agreements and the expansion of our product line to include the new SLINKOR product. If we are unable
to extend the term of the revolving loan agreements or if our cash, cash equivalents, and cash flows from operating activities and the
revolving note agreements are insufficient to fund our future activities, we will need to raise additional funds through private equity
or debt financing or additional stockholder loans. We also may need to raise additional funds in the event we determine in the future
to effect one or more acquisitions of businesses, technologies, or products. If additional funding is required, we may not be able to
affect an equity or debt financing on terms acceptable to us or at all.
In
addition, COVID-19 and related measures to contain its impact have caused material disruptions in both national and global financial
markets and economies. The future impact of COVID-19 and these containment measures cannot be predicted with certainty and may increase
our borrowing costs and other costs of capital and otherwise adversely affect our business, results of operations, financial condition
and liquidity, and no assurance can be given that we will have access to external financing at times and on terms we consider acceptable,
or at all, or that we will not experience other liquidity issues going forward.
Cash
Requirements
As of March 31, 2022 and September 30, 2021, we did not have any lease
obligations or requirements or other agreements requiring a significant commitment of cash.
Off-Balance
Sheet Arrangements
As of March 31, 2022 and September 30, 2021, we did not have any off-balance
sheet financing arrangements.
Significant
Accounting Policies
There
have been no material changes to our significant accounting policies and estimates as previously disclosed in our Annual Report on Form
10-K for the fiscal year ended September 30, 2021.