10-Q: Digital Locations Inc. Reports Q1 2024 Results, Cites Going Concern Uncertainty Amidst Satellite Internet Development

Digital Locations Inc. reports a net loss for Q1 2024 and expresses substantial doubt about its ability to continue as a going concern due to significant liabilities and the need for additional capital to fund its satellite internet project.

Summary

• Digital Locations Inc. reported its financial results for the quarter ended March 31, 2024.
• The company is developing technology to deliver high-speed internet from satellites directly to smartphones.
• A research agreement is in place with Florida International University (FIU) to develop this technology.
• The company's current liabilities exceeded its current and total assets by $8,960,049 as of March 31, 2024.
• The company had an accumulated deficit of $61,643,243.
• There is substantial doubt about the company's ability to continue as a going concern.
• The company's ability to continue as a going concern is dependent on raising additional capital.
• Revenues for the quarter were $0, compared to $4,972 for the same period in 2023.
• General and administrative expenses were $836,596, compared to $937,860 in the prior year.
• The company reported a net loss of $6,755,499, compared to a net income of $193,652 in the prior year.
• The company used $469,744 in operating activities during the quarter.
• The company received $475,000 from convertible notes payable during the quarter.
• The company estimates it will need to raise substantial capital or financing over the next twelve months.
• The company anticipates incurring operating losses in the next twelve months.

Sentiment

Score: 2

Explanation: The document presents a highly negative outlook due to the company's significant financial challenges, going concern uncertainty, and lack of revenue growth. While the Satenna project offers potential, the company's current financial situation raises serious concerns about its viability.

Positives

• The company is pursuing a potentially high-growth opportunity in satellite-based internet for smartphones.
• The company has secured a research agreement with Florida International University (FIU) to develop its Satenna technology.
• The company received $475,000 from convertible notes payable during the quarter, providing short-term funding.
• General and administrative expenses decreased from $937,860 to $836,596.

Negatives

• The company's current liabilities significantly exceed its current and total assets, resulting in a working capital deficit of $8,960,049.
• The company has an accumulated deficit of $61,643,243.
• There is substantial doubt about the company's ability to continue as a going concern.
• Revenues for Q1 2024 were $0, a significant decrease from $4,972 in Q1 2023.
• The company reported a net loss of $6,755,499 for Q1 2024, compared to a net income of $193,652 for Q1 2023.
• The company's interest expense increased significantly to $1,449,100 due to new convertible loans.
• The company anticipates incurring operating losses in the next twelve months.

Risks

• The company's ability to continue as a going concern is dependent on raising additional capital, which is not assured.
• The company's Satenna technology development may not be successful or commercially viable.
• The company faces significant financial challenges, including a large working capital deficit and accumulated deficit.
• The company's future operations are dependent on securing additional financing, which may be difficult due to market conditions.
• The company's revenue is not expected to exceed its investment and operating costs in the next twelve months.
• The company's disclosure controls and procedures were not effective as of March 31, 2024.

Future Outlook

The company anticipates 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, and expects to incur operating losses during this period.

Management Comments

• Management believes funding from the issuance of convertible debt will continue and provide the additional cash needed to meet the company's obligations.
• Management acknowledges there can be no assurance that the company will be successful in accomplishing its objectives.
• Management states that the company is realistic about the time, money and effort necessary for a breakthrough in its Satenna project.

Industry Context

The company is attempting to address the digitally divided world by developing technology to deliver high-speed internet from satellites directly to smartphones, a challenging but potentially lucrative market.

Comparison to Industry Standards

• It is difficult to compare Digital Locations' results to industry standards due to its unique focus on satellite-to-smartphone internet connectivity and its early stage of development.
• Companies like SpaceX (Starlink) and AST SpaceMobile are also working on satellite-based communication, but their approaches and target markets differ.
• Starlink focuses on providing broadband internet to underserved areas using dedicated user terminals, while AST SpaceMobile aims to provide cellular connectivity through partnerships with mobile network operators.
• Digital Locations' Satenna project, if successful, could offer a more direct and potentially cost-effective solution by eliminating the need for specialized hardware on the user end.

Related Party Transactions

• The company recorded compensation expense to Mr. Berliner of $60,000 for each of the three months ended March 31, 2024 and 2023.
• The company accrued compensation expense to Mr. Beifuss of $15,000 and $30,000 for each of the three months ended March 31, 2024 and 2023, respectively.

Stakeholder Impact

• Shareholders face significant risk due to the company's financial instability and going concern uncertainty.
• Employees' jobs are at risk if the company is unable to secure additional financing and continue operations.
• The company's ability to deliver on its Satenna project and provide high-speed internet to underserved areas is uncertain.

Next Steps

• The company needs to secure additional financing to continue operations and develop its Satenna technology.
• The company needs to demonstrate progress in its research and development efforts with FIU.
• The company needs to improve its financial performance and reduce its working capital deficit.

Key Dates

Keywords

Digital Locations, Satenna, Convertible Notes, Going Concern, Satellite Internet, Financial Results, Q1 2024, Deficit, Loss