RemSleep Holdings Inc.: Form 10-Q for the period ended Jun 30, 2022

Forward-looking Statements

Except for statements of historical fact, the information presented herein constitutes forward-looking statements. These forward-looking statements generally can be identified by phrases such as “anticipates,” “believes,” “estimates,” “expects,” “forecasts,” “foresees,” “intends,” “plans,” or other words of similar import. Similarly, statements herein that describe our business strategy, outlook, objectives, plans, intentions or goals also are forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, but are not limited to, our ability to: successfully commercialize our technology; generate revenues and achieve profitability in an intensely competitive industry; compete in products and prices with substantially larger and better capitalized competitors; secure, maintain and enforce a strong intellectual property portfolio; attract additional capital sufficient to finance our working capital requirements, as well as any investment of plant, property and equipment; develop a sales and marketing infrastructure; identify and maintain relationships with third party suppliers who can provide us a reliable source of raw materials; acquire, develop, or identify for our own use, a manufacturing capability; attract and retain talented individuals; continue operations during periods of uncertain general economic or market conditions, and; other events, factors and risks previously and from time to time disclosed in our filings with the Securities and Exchange Commission, including, specifically, the “Risk Factors” enumerated herein. Although we believe the expectations reflected in our forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. You should not place undue reliance on our forward-looking statements, which speak only as of the date of this report. Except as required by law, we do not undertake to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

Overview

We were incorporated in the State of Nevada on June 6, 2007. On August 2, 2010, we changed our name from Bella Viaggio, Inc. to Kat Gold Holdings Corp. Effective January 1, 2015, we completed an exchange agreement to purchase 100% of the outstanding interests of REMSleep LLC in exchange for 50,000,000 common shares of REMSleep Holdings, Inc.’s stock, at which time REMSleep LLC became our wholly-owned subsidiary and adopted their business of developing and distributing our sleep apnea products. On January 5, 2015, we changed our name to REMSleep Holdings, Inc. to reflect our new business model.

Our officers have 35 years of sleep-industry experience, including having been employed at sleep industry companies. Our officers invented our DeltaWave CPAP interface (the “DeltaWave”) as an innovative new device to treat patients with sleep apnea. The patent-pending DeltaWave product is a nasal-pillows type interface that will result in better comfort and, therefore, better compliance since it was specifically designed with unique airflow characteristics to enable patients with sleep apnea to breathe normally. A survey that appeared in DME Business found that 89% of patients stated that mask-interface comfort was their primary concern. The primary issue that we have addressed with the DeltaWave is the “work of breathing” component. We believe that our DeltaWave is designed to effectively address the stubborn issues that continue to affect a patient’s ability to comply with treatment, as follows:

• Does not disrupt normal breathing mechanics;
• Is not claustrophobic;

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• Causes zero work of breathing (WOB);
• Minimizes or eliminates drying of the sinuses;
• Uses less driving pressure; and
• Allows users to feel safe and secure while sleeping.

Pending adequate financing, we plan to conduct clinical trials to test product effectiveness.

On June 28, 2016, we applied for a patent for a new, innovative sleep apnea product that serves as an interface for the delivery of CPAP therapy and other respiratory needs. Our goal is to develop sleep products that achieve optimum compliance and comfort for CPAP patients.

Our website is located at: http://remsleep.com.

Results of Operations

The three months ended June 30, 2022 compared to the three months ended June 30, 2021

We began to sell our ResPlus CPAP system in the second quarter. We recognized revenue and cost of goods of $119,670 and $89,760, respectively for the three months ended June 30, 2022.

Professional fees were $59,965 compared to $27,545 for the three months ended June 30, 2022 and 2021, respectively, an increase of $32,420, or 117.7.%. Professional fees consist mostly of accounting, audit and legal fees. The increase is attributed to an increase in legal fees of approximately $28,000.

Compensation expense was $72,000 and $21,000 for the three months ended June 30, 2022 and 2021, respectively, an increase of $51,000, or 242.9%. On April 1, 2022, compensation expense for our CEO and Chairman increased.

Development expense related to our CPAP systems was $38,051 and $0 for the three months ended June 30, 2022 and 2021, respectively, an increase of $38,051. Development expense increased over the prior period as we worked to bring our product to market.

Lease expense was $29,864 and $0 for the three months ended June 30, 2022 and 2021, respectively. During the three months ended June 30, 2022, we began to incur lease/rent expense for both our corporate office and short term apartment rental for employees to stay at when in town.

General and administrative expense (“G&A”) was $174,673 and $86,541 for the three months ended June 30, 2022 and 2021, respectively, an increase of $88,132, or 101.8%. During the current period we incurred additional expense related to the process of obtaining our 510k for DeltaWave (~$16,500), travel expense of $14,272 and other compensation expense of $32,450 We also incurred additional expense involved with moving our corporate headquarters and setting up our offices.

Total other expense for the three months ended June 30, 2022, was $95,649. Other expense includes a loss in the change of fair value of $14,995, a loss on disposal of fixed assets of $28,264 and interest expense of $52,430 (includes $46,774 amortization of debt discount). Total other expense for the three months ended June 30, 2021, was $2,228,609. Other expense in the prior period includes a loss in the change of fair value of $1,890,407, a loss on the issuance of convertible debt of $99,190, and interest expense of $239,012 (includes $208,072 amortization of debt discount).

Net Loss

For the three months ended June 30, 2022, we had a net loss of $440,292 as compared to a loss of $2,363,695 for the three months ended June 30, 2021. Our net loss decreased due to the decrease in other expense during the period, which consists mostly of non-cash expense related to our convertible debt.

Our loss from operations increased $209,557 to $344,643 in the current period from $135,086 in the prior period

The six months ended June 30, 2022 compared to the six months ended June 30, 2021

We began to sell our ResPlus CPAP system in the second quarter. We recognized revenue and cost of goods of $119,670 and $89,760, respectively for the six months ended June 30, 2022.

Professional fees were $85,965 compared to $52,143 for the six months ended June 30, 2022 and 2021, respectively, an increase of $33,822, or 64.9.%. Professional fees consist mostly of accounting, audit and legal fees. The increase is attributed to an increase in legal fees of approximately $31,000.

Compensation expense was $93,000 and $42,000 for the six months ended June 30, 2022 and 2021, respectively, an increase of $51,000 or 121.4.%. On April 1, 2022, compensation expense for our CEO and Chairman.

Development expense related to our CPAP systems was $63,718 and $0 for the six months ended June 30, 2022 and 2021, respectively, an increase of $63,718. Development expense increased over the prior period as we worked to bring our product to market.

Lease expense was $29,864 and $0 for the six months ended June 30, 2022 and 2021, respectively. During the six months ended June 30, 2022, we began to incur lease/rent expense for both our corporate office and short term apartment rental for employees to stay at when in town.

General and administrative expense (“G&A”) was $256,564 and $135,207 for the six months ended June 30, 2022 and 2021, respectively, an increase of $121,357 or 89.8%. During the current period we incurred additional expense related to the process of obtaining our 510k for DeltaWave (~$30,500), travel expense of $18,715 and other compensation expense of $32,450 We also incurred additional expense involved with moving our corporate headquarters and setting up our offices.

Total other expense for the six months ended June 30, 2022, was $257,390. Other expense includes a loss in the change of fair value of $3,048, a loss on disposal of fixed assets of $28,264 and interest expense of $226,078 (includes $206,157 amortization of debt discount). Total other expense for the six months ended June 30, 2021, was $2,605,811. Other expense in the prior period includes a loss in the change of fair value of $1,495,259, a loss on the issuance of convertible debt of $542,169, a penalty for default on convertible debt of $162,798 and interest expense of $405,585 (includes $346,694 amortization of debt discount).

Net Loss

For the six months ended June 30, 2022, we had a net loss of $756,591 as compared to a loss of $2,835,161 for the six months ended June 30, 2021. Our net loss decreased due to the decrease in other expense during the period, which consists mostly of non-cash expense related to our convertible debt.

Our loss from operations increased $269,854 to $499,201 in the current period from $229,350 in the prior period.

Liquidity and Capital Resources

Cash flow from operations

Cash used in operating activities for the six months ended June 30, 2022 was $1,739,810 as compared to $205,224 of cash used in operating activities for the six months ended June 30, 2021. During the current period the Company used more cash for activities related to bringing its product to market. Our largest cash expenditures were for inventory and an advance payment on our new lease.

Cash Flows from Investing

Cash used in investing activities for the purchase of equipment and tooling for the six months ended June 30, 2022 was $71,462 as compared to $17,773 of cash used in investing activities for the six months ended June 30, 2021.

Cash Flows from Financing

For the six months ended June 30, 2022, we received $855,000 from the sale of common stock and repaid a $45,000 loan. For the six months ended June 30, 2021 we received $366,300 from the issuance of convertible loans, $96,000 from the sale of common stock and we repaid $2,367 on other loans.

As of June 30, 2022, we have we have current assets of $3,685,535, which includes $2,393,372 of cash and $1,214,637 of recently purchased inventory. As of June 30, 2022, we no longer have any outstanding convertible notes payable.

Going Concern

As of June 30, 2022, there is substantial doubt regarding our ability to continue as a going concern as we have not generated sufficient cash flow to fund our proposed business.

We have suffered recurring losses from operations since our inception. In addition, we have yet to generate an internal cash flow from our business operations or successfully raised the financing required to develop our proposed business. As a result of these and other factors, our independent auditor has expressed substantial doubt about our ability to continue as a going concern. Our future success and viability, therefore, are dependent upon our ability to generate capital financing. The failure to generate sufficient revenues or raise additional capital may have a material and adverse effect upon us and our shareholders.

Management’s plans with regard to these matters encompass the following actions: (i) obtaining funding from new investors to alleviate our working capital deficiency, and (ii) implementing a plan to generate sales. Our continued existence is dependent upon our ability to resolve our liquidity problems and increase profitability in our current business operations. However, the outcome of management’s plans cannot be ascertained with any degree of certainty. Our financial statements do not include any adjustments that might result from the outcome of these risks and uncertainties.

The industry in which we operate depends heavily upon our ability to obtain raw material and manufacture our product as well as the overall level of consumer and business spending. A sustained deterioration in general economic conditions (including distress in financial markets, turmoil in specific economies around the world, public health crises, and additional government intervention), particularly in the United States, may have a negative financial impact to our Company. Adverse conditions as a result of the global COVID-19 outbreak, will and may continue to impact our manufacturing processes and ultimately our ability to sell our product.

Off Balance Sheet Arrangements

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

Critical Accounting Policies

Refer to Note 2 to the Financial Statements for the six months ended June 30, 2022, for a condensed discussion of our critical accounting policies and our Form 10-K for the year ended December 31, 2021, for a full discussion of our critical accounting policies and procedures.

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 information under this Item.

Disclosure Controls and Procedures

Each of our principal executive and principal financial officer has evaluated the effectiveness of our disclosure controls and procedures, as defined in Rules 13a - 15(e) and 15d - 15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this quarterly report. Based on their evaluation, each such person concluded that our disclosure controls and procedures were not effective as of June 30, 2022 due to a lack of segregation of duties.

In designing and evaluating disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute assurance of achieving the desired objectives. Also, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs.

Changes in Internal Control over Financial Reporting.

Our management has evaluated whether any change in our internal control over financial reporting occurred during the last fiscal quarter. Based on that evaluation, management concluded that there has been no change in our internal control over financial reporting during the relevant period that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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 information under this Item.