10-Q: Digital Locations, Inc. Reports Net Income Amidst Going Concern Uncertainty in Q2 2024

Sentiment:

Quarterly Report 12 August 2024 5:03 PM

Digital Locations, Inc. reports a net income of $2,463,861 for the three months ended June 30, 2024, despite ongoing concerns about its ability to continue as a going concern.

Capital raiseThe company's ability to continue as a going concern is dependent on raising additional capital.The company anticipates continuing to fund its operations through the issuance of convertible notes payable in the short term.The company estimates that it will need to raise substantial capital or financing over the next twelve months to explore business expansion opportunities and meet general and administrative expenses.

Worse than expectedThe company's revenues were significantly lower compared to the same period last year.The company's net loss increased for the six months ended June 30, 2024, compared to the same period last year.The company's working capital deficit and accumulated deficit worsened compared to the end of the previous fiscal year.

Summary

Digital Locations, Inc. filed its Form 10-Q for the quarter ended June 30, 2024.
The company reported a net income of $2,463,861 for the three months ended June 30, 2024, compared to a net loss of $1,267,992 for the same period in 2023.
For the six months ended June 30, 2024, the company reported a net loss of $4,291,638, compared to a net loss of $1,074,340 for the same period in 2023.
Revenues were $0 for the three and six months ended June 30, 2024, compared to $8,008 and $12,980 for the same periods in 2023, respectively.
The company's current liabilities exceeded its current assets by $6,087,304 as of June 30, 2024, and it had an accumulated deficit of $59,179,382.
The company's ability to continue as a going concern is dependent on raising additional capital.
The company is developing technology to deliver high-speed Internet service from satellites directly to smartphones through a research agreement with Florida International University (FIU).
The company received proceeds of $85,000 subsequent to June 30, 2023, in conjunction with a convertible promissory note dated March 12, 2024.

Sentiment

Score: 4

Explanation: The document presents a mixed picture. While the company reported net income for the quarter, it also faces significant financial challenges, including a going concern warning and a large working capital deficit. The innovative Satenna project offers potential, but its success is uncertain.

Positives

The company reported a net income of $2,463,861 for the three months ended June 30, 2024.
The company is actively pursuing innovative technology through its Satenna project, which could potentially revolutionize internet access.
The company is working with Florida International University (FIU) to develop technology for high-speed internet delivery from satellites to smartphones.

Negatives

The company's revenues were $0 for the three and six months ended June 30, 2024.
The company has a significant working capital deficit of $6,087,304 as of June 30, 2024.
The company has an accumulated deficit of $59,179,382 as of June 30, 2024.
The company's auditors have raised substantial doubt about its ability to continue as a going concern.
The company's disclosure controls and procedures were not effective as of June 30, 2024.

Risks

The company's ability to continue as a going concern is dependent on raising additional capital, and there is no assurance that it will be successful in doing so.
The company's Satenna project is in the research and development phase, and there is no guarantee that it will result in commercially viable technology.
The company's reliance on convertible debt financing could lead to further dilution of existing shareholders.
The company's lack of effective disclosure controls and procedures could lead to inaccurate or incomplete financial reporting.

Future Outlook

The company anticipates continuing to fund its operations through the issuance of convertible notes payable in the short term and estimates that it will need to raise substantial capital or financing over the next twelve months to explore business expansion opportunities and meet general and administrative expenses; the company anticipates incurring operating losses in the next twelve months and its revenue is not expected to exceed its investment and operating costs.

Management Comments

Management believes that funding from the issuance of convertible debt will continue and will provide the additional cash needed to meet the Company's obligations as they become due.
Management is realistic about the time, money and effort necessary for a breakthrough in the Satenna project.

Industry Context

The company is attempting to address the digital divide by developing technology to deliver high-speed internet from satellites directly to smartphones, which could provide access to underserved areas; this is a technically challenging but potentially lucrative market, as evidenced by the involvement of companies like SpaceX (Starlink) and Amazon (Project Kuiper) in similar endeavors.

Comparison to Industry Standards

It is difficult to compare Digital Locations' financial performance to industry standards due to its unique business model and early stage of development.
Companies like SpaceX and Amazon are investing billions of dollars in satellite-based internet services, while Digital Locations is pursuing a more targeted approach focused on direct-to-smartphone connectivity with a significantly smaller budget.
The company's reliance on convertible debt financing is a common practice for early-stage companies but carries significant risks, as evidenced by the company's going concern warning.

Related Party Transactions

The company issued 5% convertible promissory notes to two employees in exchange for services rendered in the aggregate amount of $58,600.
The company recorded compensation expense to Mr. Berliner of $120,000 for each of the six months ended June 30, 2024 and 2023.
The company recorded compensation expense to Mr. Beifuss of 30,000 and $60,000 for each of the six months ended June 30, 2024 and 2023.

Stakeholder Impact

Shareholders face the risk of further dilution if the company issues additional equity or debt securities.
Employees' jobs are at risk if the company is unable to secure additional financing and continue operations.
The company's customers (wireless carriers and property owners) may be affected by the company's financial instability.
Creditors face the risk of non-payment if the company is unable to continue as a going concern.

Next Steps

The company needs to secure additional financing to continue operations.
The company needs to continue research and development efforts on the Satenna project.
The company needs to improve its disclosure controls and procedures.

Key Dates

Date	Description
2006-08-25	Digital Locations, Inc. was incorporated in the State of Nevada as Zingerang, Inc.
2007-04-02	The Company changed its name to Carbon Sciences, Inc.
2012-12-31	Issued 5% convertible promissory notes to two employees in exchange for services rendered in the aggregate amount of $58,600.
2013-03-14	Entered into an agreement to issue a 5% convertible promissory note in the principal amount of $29,500.
2016-03-02	Filed a Certificate of Designation for its Series B Preferred Stock with the Secretary of State of Nevada.
2016-11-01	Amended consulting agreement with William E. Beifuss, Jr.
2017-11-14	The Company changed its name to Digital Locations, Inc.
2020-12-22	Issued non-qualified stock options to purchase up to a total of 205,000,000 shares of our common stock to four officers, directors, and consultants of the Company.
2021-01-07	Issued two long-term convertible notes payable, each in the principal amount of $500,000, in conjunction with the business acquisition of SCS.
2021-04-02	Filed a Certificate of Designation with the State of Nevada designating 45,000 shares of its authorized preferred stock as Series E Preferred Stock.
2021-12-01	Appointed Rich Berliner as the Chief Executive Officer of the Company and a member of the Board of Directors.
2022-02-08	Issued non-qualified stock options to purchase up to a total of 75,000,000 shares of our common stock to Mr. Beifuss and 45,000,000 shares to a consultant.
2023-06-06	Engaged Florida International University (FIU) to perform the research necessary to develop technology that will enable high-speed Internet service to be delivered from satellites directly to smartphones.
2023-06-20	The Company entered into a 10 % note in the principal amount of $ 135,000 with a maturity date of June 20, 2024 to fund their operations.
2023-07-31	The Company entered into a 10 % convertible note with a principal sum up to $ 500,000 which replaced the June 20, 2023 note and the $ 135,000 became the initial funding under the new note.
2023-08-01	Verbal modification to consulting agreement with William E. Beifuss, Jr.
2023-11-06	The Company entered into a 10 % note with a principal sum up to $ 500,000 and received initial funding of $ 42,000.
2023-11-09	The Company and Smartify agreed to cancel and terminate a prior Marketing Agreement.
2024-01-01	Extended the lease arrangement for another twelve-month term.
2024-03-12	The Company entered into a 10 % note with a principal sum up to $ 500,000 and received initial funding of $ 102,000.
2024-06-30	End of the quarterly period.
2024-08-09	Date common stock outstanding was calculated.
2024-08-12	Date of report signatures.

Keywords

Digital Locations, Satenna, Convertible Notes, Financial Results, Going Concern, Internet, Smartphones, Satellite

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