Invest in Tap Systems, Inc.

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

We have developed a wearable that allows fast, accurate input and control for any digital device, including augmented and virtual reality wearables.

Milestones

Tap Systems Inc. ("TAP SYSTEM") was incorporated in the State of Delaware in February 2015. TAP WITH US LTD (“TAP LTD”) was incorporated on November 6, 2017 under the laws of Israel, which is a 100 percent owned subsidiary of TAP SYSTEM. TAP LTD is funded by TAP SYSTEM and solely provides R&D services to TAP SYSTEM. Collective, TAP SYSTEM and TAP LTD will be referred to as the “Company”. The financial statements provide the position and the results of TAP SYSTEM and TAP LTD as consolidated financial statements of the Company.

Since then, we have:

• Tap solves a critical problem in the multi-billion dollar AR and VR industry.
• Tap has over $3.5 million in sales to date, tens of thousands of customers, and a 4 star Amazon rating
• Founders include co-inventor of the Cell Phone Camera & inventor of Digital Xray, w/IPO, Acquisition
• We have raised over $13 million to date from founders, investors, and individuals.
• Our 2018 crowdfunding offering sold out, and was oversubscribed by almost 50%.
• Facebook, Apple, Google & other leading companies are investing billions in developing AR/VR systems.
• The AR/VR market is projected to be almost $300 billion by 2024.

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, compared to 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

Since 2019, the company has been financed with $7,329,232 in debt, $875,000 in convertibles, and $3,763,008 in equity.

After the conclusion of this Offering, should we hit our minimum funding target, our projected runway is 6 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 6 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 $291,221, as of February 2024. Over the last three months, revenues have averaged $100,000/month, cost of goods sold has averaged $50,000/month, and operational expenses have averaged $150,000/month, for an average burn rate of $100,000 per month. Our intent is to be profitable in 24 months.

Since the date of our financials, the most significant change was the Company's release of its TAPXR product in late 2023.  In addition to an expected increase in revenues resulting from the introduction of TAPXR, the Company is also incurring increased tooling and inventory costs in connection with the production of this new product and increased sales and marketing costs in connection with its release.  

In the next 6 months, the Company expects its revenues to be approximately $750,000 and expenses in the same period to be approximately $1,200,000.

The company is not yet profitable.  We believe that approximately $1.5 to $2.0 Million in funding will be needed to reach a point of profitability.  We expect that to occur in or about 24 months from now.

Aside from Wefunder, the Company has historically been able to draw funding, in the form of low-interest loans, from the company's founders and believes that it will be able to continue to do so if and when necessary to cover short-term burn.  Additionally, the Company has had a number of successful fundraises and believes that it can raise additional funds should it become necessary to do so.

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