Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and the related notes and other financial information included elsewhere in this offering. Some of the information contained in this discussion and analysis, including information regarding the strategy and plans for our business, includes forward-looking statements that involve risks and uncertainties. You should review the "Risk Factors" section for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Overview

The next generation of input technology, creating an all-in-one wearable keyboard, mouse and remote controller.

Milestones

Tap Systems Inc. was incorporated in the State of Delaware in February 2015.

Since then, we have:

• Proven Technology: $4.5M+ revenue, 50K units sold, strong market validation for Tapping.
• Patent Protection: 8 patents issued, ensuring competitive edge and unique innovation.
• Growing Market: Positioned for AR & Smartglasses boom with 300M input devices needed in 3 years.
• Expert Leadership: Legendary inventors with proven track record of commercialization and exits.
• Diverse Applications: Gaming, AR/VR, productivity, and education drive multiple revenue streams.
• Scalable Growth: Proven fit, IP, and booming markets position Tap for exponential success.
• Engaged Community: 7,500+ user-created layouts, fostering growth, and product adaptability.

Historical Results of Operations

• Revenues & Gross Margin. For the period ended December 31, 2023, the Company had revenues of $534,204 compared to the year ended December 31, 2022, when the Company had revenues of $356,522. Our gross margin was 25.27% in fiscal year 2023, and 67.51% in 2022.
• Assets. As of December 31, 2023, the Company had total assets of $1,030,413, including $328,157 in cash. As of December 31, 2022, the Company had $740,949 in total assets, including $417,532 in cash.
• Net Loss. The Company has had net losses of $2,567,649 and net losses of $1,788,861 for the fiscal years ended December 31, 2023 and December 31, 2022, respectively.
• Liabilities. The Company's liabilities totaled $9,210,298 for the fiscal year ended December 31, 2023 and $6,308,437 for the fiscal year ended December 31, 2022.

Related Party Transaction

Refer to Question 26 of this Form C for disclosure of all related party transactions.

Liquidity & Capital Resources

To-date, the company has been financed with $7,329,232 in debt, $4,372,174 in equity, and $875,000 in convertibles.

After the conclusion of this Offering, should we hit our minimum funding target, our projected runway is 2 months before we need to raise further capital.

We plan to use the proceeds as set forth in this Form C under "Use of Funds". We don’t have any other sources of capital in the immediate future.

We will likely require additional financing in excess of the proceeds from the Offering in order to perform operations over the lifetime of the Company. We plan to raise capital in 12 months. Except as otherwise described in this Form C, we do not have additional sources of capital other than the proceeds from the offering. Because of the complexities and uncertainties in establishing a new business strategy, it is not possible to adequately project whether the proceeds of this offering will be sufficient to enable us to implement our strategy. This complexity and uncertainty will be increased if less than the maximum amount of securities offered in this offering is sold. The Company intends to raise additional capital in the future from investors. Although capital may be available for early-stage companies, there is no guarantee that the Company will receive any investments from investors.

Runway & Short/Mid Term Expenses

Tap Systems Inc. cash in hand is $214,741.56, as of December 2024. Over the last three months, revenues have averaged $20,000/month, cost of goods sold has averaged $15,000/month, and operational expenses have averaged $180,000/month, for an average burn rate of $175,000 per month. Our intent is to be profitable in 18 months.

There have been no material changes or trends in our financials and operations since the date that our financials cover.

Over the next 6 months, we expect to generate approximately $250k in revenue and incur roughly $800k in expenses.

We are not yet profitable. We believe we'll need approximately $2M funding to be profitable in Q2 of 2026. 

For additional sources of capital outside of this offering, we have approximately 8 months of runway between founder loans from our CEO and proceeds from a parallel Reg D.

All projections in the above narrative are forward-looking and not guaranteed.