CYCA 10-Q
CYTTA CORP. (CYCA)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarter ended:
OR
For the Transition Period from ___________ to____________
Commission File Number:
(Exact name of registrant as specified in its charter) |
| ||
(State or other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification No.) |
(Address of principal executive offices) (zip code)
(
(Registrant’s telephone number, including area code)
Not applicable.
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
| Trading Symbol(s) |
| Name of each exchange on which registered |
None |
| N/A |
| N/A |
Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.001 par value
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☐ Yes ☒
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ |
☐ | Smaller reporting company | ||
| Emerging growth company | ||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
As of May 20, 2024, there were
CYTTA CORP.
INDEX
PART I. FINANCIAL INFORMATION |
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ITEM 1 | Financial Statements (Unaudited) |
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| Balance Sheets as of March 31, 2024, and September 30, 2023 (Unaudited) |
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| Statements of Operations for the three and six months ended March 31, 2024, and 2023 (Unaudited) |
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| Statements of Cash Flows for the six months ended March 31, 2024, and 2023 (Unaudited) |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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| 2 |
| Table of Contents |
CYTTA CORP | ||||||||
BALANCE SHEETS | ||||||||
(Unaudited) | ||||||||
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| March 31, |
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| September 30, |
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| 2023 |
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ASSETS |
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Current Assets |
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Cash |
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Prepaid expenses |
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Total Current Assets |
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Prepaid expenses, non-current |
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Property and equipment, net |
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TOTAL ASSETS |
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LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) |
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Liabilities |
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Current Liabilities |
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Accounts payable and accrued expenses |
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Related party liabilities |
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Dividend payable |
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Deferred revenue |
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Note payable |
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Convertible notes payable, net of discount |
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Total Current Liabilities and Total Liabilities |
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COMMITMENTS AND CONTINGENCIES |
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Stockholders' Equity (Deficit) |
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Preferred stock par value $ |
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Series C Preferred Stock par value $ |
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Series D Preferred Stock par value $ |
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Series E Preferred Stock par value $ |
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Series F Preferred Stock par value $ |
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Common stock par value $ |
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Additional paid in capital |
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Accumulated Deficit |
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Total Stockholders' Equity (Deficit) |
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) |
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The accompanying notes are an integral part of these statements | ||||||||
| 3 |
| Table of Contents |
CYTTA CORP | ||||||||||||||||
STATEMENTS OF OPERATIONS | ||||||||||||||||
(Unaudited) | ||||||||||||||||
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| For the Three Months Ended March 31, |
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Revenues |
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Operating Expenses: |
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General and administration - related party expenses |
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General and administrative - other |
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Total operating expenses |
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Loss from Operations |
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Other expenses (income) |
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Interest expense |
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Interest income |
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Total Other Expenses (Income) |
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Loss before income taxes |
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Provision for income taxes |
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Net loss |
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Loss per share, basic and diluted |
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Weighted average shares outstanding Basic and diluted |
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The accompanying notes are an integral part of these statements | ||||||||||||||||
| 4 |
| Table of Contents |
Cytta Corp. | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Statement of Changes in Stockholders' Equity (Deficit) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
The Six Months Ended March 31, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Series C Preferred Stock |
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| Series D Preferred Stock |
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| Series E Preferred Stock |
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| Series F Preferred Stock |
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| Common Stock |
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| Additional Paid-in |
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| Accumulated |
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| Total Stockholders' Equity |
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| Capital |
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Balance September 30, 2023 |
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Common stock and warrants issued for services |
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Common stock issued for accounts payable and accrued liabilities |
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Net loss for the three months ended December 31, 2023 |
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Balance December 31, 2023 |
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Common stock issued for services |
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Common stock issued for accounts payable and accrued liabilities |
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Warrants vested to purchase common stock |
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Net loss for the three months ended March 31, 2024 |
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Balance March 31, 2024 |
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| 5 |
| Table of Contents |
Cytta Corp. | ||||||||||||||||||||||||||
Statement of Changes in Stockholders' Equity (Deficit) | ||||||||||||||||||||||||||
The Six Months Ended March 31, 2023 | ||||||||||||||||||||||||||
(Unaudited) |
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| Series C Preferred Stock |
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| Series D Preferred Stock |
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| Series E Preferred Stock |
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| Series F Preferred Stock |
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| Common Stock |
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| Additional Paid-in |
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| Accumulated |
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| Total Stockholders' Equity |
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| Shares |
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| Amount |
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| Capital |
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| Deficit |
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Balance September 30, 2022 |
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| $ |
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Common stock issued for services |
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Net loss for the three months ended December 31, 2022 |
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Balance December 31, 2022 |
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Common stock issued for services |
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Common stock issued for accounts payable |
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| - |
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Common stock issued for common stock payable |
|
| - |
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| - |
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| - |
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| - |
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Common stock issued for accrued liabilities, related party |
|
| - |
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| - |
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| - |
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| - |
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Common stock and warrants issued for cash |
|
| - |
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| - |
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| - |
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| - |
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Warrants issued in conjunction with notes payable |
|
| - |
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|
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| - |
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| - |
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| - |
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| - |
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Net loss for the three months ended March 31, 2023 |
|
| - |
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| - |
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| - |
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| - |
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| - |
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| ( | ) |
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| ( | ) | ||||||
Balance March 31, 2023 |
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| $ |
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| $ |
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| - |
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| $ |
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| - |
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| $ |
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| $ |
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| $ |
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| $ | ( | ) |
| $ | ( | ) | |||||||||
The accompanying notes are an integral part of these statements
| 6 |
| Table of Contents |
Cytta Corp. | |||||||
Statements of Cash Flows | |||||||
(Unaudited) | |||||||
|
|
| For the Six Months Ended March 31, |
| |||||
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| 2024 |
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| 2023 |
| ||
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| ||
CASH FLOWS FROM OPERATING ACTIVITIES |
|
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| ||
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| ||
Net loss |
| $ | ( | ) |
| $ | ( | ) |
Adjustments to reconcile net loss to net |
|
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cash used in operating activities: |
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Stock-based compensation expenses for services |
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| ||
Amortization of note discounts |
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| ||
Gain on debt extinguishment |
|
| ( | ) |
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| |
Depreciation expense |
|
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| ||
Changes in Operating Assets and Liabilities: |
|
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Prepaid expenses |
|
|
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|
| ( | ) | |
Accounts payable and accrued liabilities |
|
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| ( | ) | |
Accounts payable-related party |
|
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| |||
Deferred revenue |
|
| ( | ) |
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| |
Net cash used in operating activities |
|
| ( | ) |
|
| ( | ) |
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CASH FLOWS FROM FINANCING ACTIVITIES |
|
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Proceeds from stock subscriptions |
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| ||
Proceeds from issuance of note payable |
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| ||
Proceeds from issuance of short-term convertible notes payable |
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Net cash provided by financing activities |
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NET CHANGE IN CASH |
|
| ( | ) |
|
| ( | ) |
CASH AT BEGINNING OF PERIOD |
|
|
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| ||
CASH AT END OF PERIOD |
| $ |
|
| $ |
| ||
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SUPPLEMENTAL CASH FLOW DISCLOSURES |
|
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Cash paid for interest |
| $ |
|
| $ |
| ||
Cash paid for income taxes |
| $ |
|
| $ |
| ||
|
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NON-CASH INVESTING AND FINANCING ACTIVITIES |
|
|
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Common stock issued for services |
| $ |
|
| $ | |
| |
Common stock issued for accounts payable and accrued liabilities |
| $ |
|
| $ |
| ||
Common stock issued for accrued expenses, related party |
| $ |
|
| $ |
| ||
The accompanying notes are an integral part of these statements
| 7 |
| Table of Contents |
Cytta Corp.
Notes to Financial Statements
March 31, 2024
(Unaudited)
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Cytta Corp., (“Cytta” or the “Company”) was incorporated on May 30, 2006, under the laws of the State of Nevada. It is located in Las Vegas, Nevada. Cytta is in the business of imagineering, developing and securing disruptive technologies.
NOTE 2 - GOING CONCERN
The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As of March 31, 2024, the Company had an accumulated deficit of $
The Company's proprietary CyttaCOMMS incident management system offers real-time integration of video and audio streams, enabling improved collaboration and providing ongoing, relevant, actionable intelligence. Their innovative new product, CyttaCARES, is a game-changer in ensuring the safety and well-being of individuals in educational institutions and beyond. Cytta's CyttaCOMP ISTAR (Intelligence, Surveillance, Target Acquisition and Reconnaissance) technology delivers real-time compression of video streams with ultra-low latency, even in low bandwidth environments in conjunction with their compression Licensee Reticulate Micro, Inc.
We also offer a combination of technical and consulting services, proprietary software products, hardware products utilizing our software and system integration team to meet the needs of customers. Cytta places extreme value on satisfying our customers’ needs with innovative, well-engineered, high-quality products and service solutions.
Cytta’s proprietary SUPR Intelligence, Surveillance and Reconnaissance (ISR) technology designated CyttaCOMP, is now licensed to Reticulate Micro, Inc., CyttaCOMP, is at the core of our products and is the most potent software codec commercially available. CyttaCOMP is explicitly designed for realtime streaming of HD, 4K, and higher resolution video while requiring only limited bandwidth and minimal computational resources.
Cytta’s IGAN Incident Command System (ICS) system seamlessly streams and integrates all available video and audio sources during emergencies, enabling sharing of multiple video and audio inputs. The IGAN ICS introduces immediate real-time video and audio situational awareness, which is valuable for police, firefighters, first responders, emergency medical workers, industry, environmental and emergencies, security, military, and all their command centers in any emergency. The IGAN technology powers, Cytta’s SaaS Based COMMS system creates an integrated communications platform which seamlessly streams all available video and audio sources in all critical situations, for first responders enabling real time event and interactive mapping information. Also based upon the IGAN technology, Cytta’s CARES (Crisis Alert and Response Emergency System) system is an innovative SAAS solution designed to enhance safety and security in educational institutions especially during emergency situations. This comprehensive system provides real-time alerts, rapid two-way secure video communication, and efficient response coordination with live location tracking to emergency response teams.
We have created advanced video compression, video/audio collaboration software, and portable hardware systems that solve real world problems in large markets. We believe our products will enable and empower the world to consume higher quality video anywhere, anytime. Our ultimate goal is to deliver such high-quality video that it is not discernible from reality with the naked eye creating ‘Reality Delivered’ for the Metaverse.
The Company intends to fund operations through equity and/or debt financing arrangements, which may not be sufficient to fund its capital expenditures, working capital and other cash requirements for the foreseeable future.
| 8 |
| Table of Contents |
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial statements and with the instructions to Form 10-Q and Article 8 of Regulation S-X of the United States Securities and Exchange Commission (“SEC”). Accordingly, they do not contain all information and footnotes required by accounting principles generally accepted in the United States of America for annual financial statements. In the opinion of the Company’s management, the accompanying unaudited financial statements contain all the adjustments necessary (consisting only of normal recurring accruals) to present the financial position of the Company as of March 31, 2024, and the results of operations and cash flows for the periods presented. The results of operations for the three and six months ended March 31, 2024, are not necessarily indicative of the operating results for the full fiscal year or any future period.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reported period. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original term of three months or less to be cash equivalents. These investments are carried at cost, which approximates fair value. Cash and cash equivalent balances may, at certain times, exceed federally insured limits. The Company has no cash equivalents at March 31, 2024, and September 30, 2023.
Prepaid expenses
The Company considers expenses or services paid for prior to the period the expense is completed to be recorded as a prepaid expense. Included in this account is the value of common stock, options and warrants issued to consultants. Such issuances are pursuant to consulting agreements that can have a one-to-three-year term. The Company amortized the value of the stock issued over the term of the agreement. The activity for the six months ended March 31, 2024, and 2023 is summarized as:
|
| March 31, |
| |||||
|
| 2024 |
|
| 2023 |
| ||
Balance beginning of period |
| $ |
|
| $ |
| ||
Stock-based compensation |
|
|
|
|
|
|
| |
Amortization of stock-based compensation |
|
| ( | ) |
|
|
| |
Other prepaid expense activity |
|
| ( | ) |
|
|
| |
Sub-total |
|
|
|
|
|
| ||
Less non-current portion |
|
|
|
|
|
| ||
Prepaid expenses, current portion |
| $ |
|
| $ |
| ||
| 9 |
| Table of Contents |
Property and equipment
Property and equipment are stated at cost, and depreciation is provided by use of a straight-line method over the estimated useful lives of the assets.
The Company reviews property and equipment for potential impairment whenever events or changes in circumstances indicate that the carrying amounts of assets may not be recoverable. The estimated useful lives of property and equipment is as follows:
| Vehicles and equipment | |
| Software |
Convertible Instruments
The Company evaluates and accounts for conversion options embedded in convertible instruments in accordance with ASC 815, Derivatives and Hedging Activities.
GAAP requires companies to bifurcate conversion options from their host instruments and account for them as free-standing derivative financial instruments according to certain criteria. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not remeasured at fair value under other GAAP with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument.
In August 2020, the FASB issued Accounting Standards Update 2020-06 (ASU 2020-06). ASU 2020-06 eliminates the beneficial conversion feature and cash conversion models in Accounting Standards Codification 470-20 that require separate accounting for embedded conversion features in convertible instruments. The new guidance also eliminates some of the conditions that must be met for equity classification under ASC 815-40-25. The standard is effective for smaller reporting companies for annual periods beginning after December 15, 2023. Early adoption is permitted. The Company chose to early adopt this standard. As a result, financial results contained herein are reported in accordance with this standard as applicable.
The convertible debt issued by the company referred to in Note 7, did not require separate accounting for the conversion feature as it was not considered to be a derivative. The company issued warrants in connection with the debt financing and in accordance with ASC 470-20-25-2 the proceeds from the sale of the debt instruments have been allocated to the debt and warrants based on the relative fair value of the two components. The amount allocated to the warrants has been recorded as a debt discount to be amortized of the life of the note.
Fair value of financial instruments
The Company measures assets and liabilities at fair value based on an expected exit price as defined by the authoritative guidance on fair value measurements, which represents the amount that would be received on the sale of an asset or paid to transfer a liability, as the case may be, in an orderly transaction between market participants. As such, fair value may be based on assumptions that market participants would use in pricing an asset or liability. The authoritative guidance on fair value measurements establishes a consistent framework for measuring fair value on either a recurring or nonrecurring basis whereby inputs, used in valuation techniques, are assigned a hierarchical level.
| 10 |
| Table of Contents |
The following are the hierarchical levels of inputs to measure fair value:
| ● | Level 1 - Observable inputs that reflect quoted market prices in active markets for identical assets or liabilities. |
| ● | Level 2 - Inputs reflect quoted prices for identical assets or liabilities in markets that are not active; quoted prices for similar assets or liabilities in active markets; inputs other than quoted prices that are observable for the assets or liabilities; or inputs that are derived principally from or corroborated by observable market data by correlation or other means. |
| ● | Level 3 - Unobservable inputs reflecting the Company’s assumptions incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available. |
The carrying amounts of the Company’s financial assets and liabilities, such as cash, prepaid expenses, accounts payable and accrued expenses, related party liabilities, dividends payable, convertible notes payable and note payable, approximate their fair values because of the short maturity of these instruments.
Revenue recognition
Effective January 1, 2018, the Company adopted ASC 606 — Revenue from Contracts with Customers. Under ASC 606, the Company recognizes revenue from the commercial sales of products by: (1) identify the contract (if any) with a customer; (2) identify the performance obligations in the contract (if any); (3) determine the transaction price; (4) allocate the transaction price to each performance obligation in the contract (if any); and (5) recognize revenue when each performance obligation is satisfied. The Company has no outstanding contracts with any of its’ customers. The Company recognizes revenue when title, ownership, and risk of loss pass to the customer, all of which occurs upon shipment or delivery of the product and is based on the applicable shipping terms.
Stock-based compensation
The Company accounts for its stock based compensation under the recognition and measurement principles of the fair value recognition provisions of Statement of Financial Accounting Standards No. 123 (revised 2004) “Share-Based Payment” (ASC 718) using the modified prospective method for transactions in which the Company obtains employee services in share-based payment transactions and the Financial Accounting Standards Board Emerging Issues Task Force Issue No. 96-18 “Accounting For Equity Instruments That Are Issued To Other Than Employees For Acquiring, Or In Conjunction With Selling Goods Or Services” (“EITF No. 96-18”) for share-based payment transactions with parties other than employees provided in (ASC 718). All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. The measurement date used to determine the fair value of the equity instrument issued is the earlier of the date on which the third-party performance is complete or the date on which it is probable that performance will occur.
Income taxes
The Company accounts for income taxes under Statement of Financial Accounting Standards No. 109 “Accounting for Income Taxes” (“SFAS No. 109”) (ASC 740). Deferred income tax assets and liabilities are determined based upon differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the statements of operations in the period that includes the enactment date.
Cash flows reporting
The Company follows the provisions of ASC 230 for cash flows reporting and accordingly classifies cash receipts and payments according to whether they stem from operating, investing, or financing activities and provides definitions of each category, and uses the indirect or reconciliation method (“Indirect method”) as defined by ASC 230 to report net cash flow from operating activities by adjusting net income to reconcile it to net cash flow from operating activities by removing the effects of (a) all deferrals of past operating cash receipts and payments and all accruals of expected future operating cash receipts and payments and (b) all items that are included in net income that do not affect operating cash receipts and payments.
| 11 |
| Table of Contents |
Reporting segments
ASC 280 establishes standards for the way that public enterprises report information about operating segments in annual financial statements and requires reporting of selected information about operating segments in interim financial statements regarding products and services, geographic areas and major customers. ASC 280 defines operating segments as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performances. Currently, ASC 280 has no effect on the Company’s financial statements as substantially all of the Company’s operations are conducted in one industry segment.
Concentrations of Credit Risk
The Company’s financial instruments that are exposed to concentrations of credit risk primarily consist of its cash and cash equivalents and related party payables it will likely incur in the near future. The Company places its cash and cash equivalents with financial institutions of high credit worthiness. At times, its cash and cash equivalents with a particular financial institution may exceed any applicable government insurance limits. The Company’s management plans to assess the financial strength and credit worthiness of any parties to which it extends funds, and as such, it believes that any associated credit risk exposures are limited.
Earnings (Loss) Per Share of Common Stock
The Company has adopted ASC 260-10-20, “Earnings per Share,” (“EPS”) which requires presentation of basic and diluted EPS on the face of the income statement for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation. In the accompanying financial statements, basic earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period.
Recent Accounting Pronouncements
Other than the above there have been no recent accounting pronouncements or changes in accounting pronouncements during the three and six months ended March 31, 2024, that are of significance or potential significance to the Company.
NOTE 4 - PROPERTY AND EQUIPMENT
The following table represents the Company’s property and equipment as of March 31, 2024, and September 30, 2023:
|
| March 31, 2024 |
|
| September 30, 2023 |
| ||
Property and equipment |
| $ |
|
| $ |
| ||
Accumulated depreciation |
|
| ( | ) |
|
| ( | ) |
Property and equipment, net |
| $ |
|
| $ |
| ||
Depreciation expense was $
| 12 |
| Table of Contents |
NOTE 5 - RELATED PARTY TRANSACTIONS
Related Party agreements and fees
For the three and six months ended March 31, 2024, and 2023, the Company recorded expenses to related parties in the following amounts:
|
| Three months ended March 31, |
|
| Six months ended March 31, |
| ||||||||||
Description |
| 2024 |
|
| 2023 |
|
| 2024 |
|
| 2023 |
| ||||
CEO-Management fees |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
Chief Technology Officer (CTO) |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Chief Administration Officer (CAO), through January 31, 2023 |
|
|
|
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|
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|
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|
|
| ||||
President and Chief Operating Officer |
|
|
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|
|
| ||||
Stock-based compensation expense, officers |
|
|
|
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|
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|
| ||||
Office rent and expenses |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
On January 1, 2022, the Company increased the monthly fee from $
Effective February 1, 2023, the Company entered a Consulting Executive Officer Agreement with a three- year term to an entity to provide the services of a Chief Operating Officer (the “COO”) of the Company. On October 1, 2023, the BOD also appointed the COO as the President. Pursuant to the agreement, the Company agreed to a monthly fee of $
On October 25, 2020, the Company entered a sublease with its CTO, whereby the Company agreed to an annual lease payment of $
Accounts payable, related parties
As of March 31, 2024, and September 30, 2023, the Company owes $
|
| March 31, 2024 |
|
| September 30, 2023 |
| ||
Management fees, Chief Executive Officer (CEO) |
| $ |
|
| $ |
| ||
Bonus, CEO |
|
|
|
|
|
| ||
Stock to be issued President and COO |
|
|
|
|
|
| ||
Fees, bonus, and accounts payable, former CTO |
|
|
|
|
|
| ||
Total |
| $ |
|
| $ |
| ||
| 13 |
| Table of Contents |
NOTE 6 - NOTE PAYABLE
On January 10, 2023, the Company entered into an 8%, $
NOTE 7 - CONVERTIBLE NOTES PAYABLE
On February 10, 2023, (the “Issuance Date”) the Company issued a convertible promissory note, in the principal amount of $
On February 17, 2023, (the “Issuance Date”) the Company issued a convertible promissory note, in the principal amount of $
On February 24, 2023, (the “Issuance Date”) the Company issued a convertible promissory note, in the principal amount of $
On February 28, 2023, (the “Issuance Date”) the Company issued a convertible promissory note, in the principal amount of $
| 14 |
| Table of Contents |
On March 3, 2023, (the “Issuance Date”) the Company issued a convertible promissory note, in the principal amount of $
On May 3, 2023, (the “Issuance Date”) the Company issued a convertible promissory note, in the principal amount of $
On June 16, 2023, (the “Issuance Date”) the Company issued a convertible promissory note, in the principal amount of $
On August 2, 2023, (the “Issuance Date”) the Company issued a convertible promissory note, in the principal amount of $
On August 2, 2023, (the “Issuance Date”) the Company issued a convertible promissory note, in the principal amount of $
| 15 |
| Table of Contents |
On December 28, 2023, (the “Issuance Date”) the Company issued a convertible promissory note, in the principal amount of $
On January 12, 2024, (the “Issuance Date”) the Company issued a convertible promissory note, in the principal amount of $
On March 21, 2024, (the “Issuance Date”) the Company issued a convertible promissory note, in the principal amount of $
On March 26, 2024, (the “Issuance Date”) the Company issued a convertible promissory note, in the principal amount of $
On March 26, 2024, (the “Issuance Date”) the Company issued a convertible promissory note, in the principal amount of $
On March 26, 2024, (the “Issuance Date”) the Company issued a convertible promissory note, in the principal amount of $
| 16 |
| Table of Contents |
On March 27, 2024, (the “Issuance Date”) the Company issued a convertible promissory note, in the principal amount of $
On March 28, 2024, (the “Issuance Date”) the Company issued a convertible promissory note, in the principal amount of $
On March 28, 2024, (the “Issuance Date”) the Company issued a convertible promissory note, in the principal amount of $
On March 29, 2024, (the “Issuance Date”) the Company issued a convertible promissory note, in the principal amount of $
The Company has the following convertible notes payable outstanding as of March 31, 2024, and September 30, 2023:
SCHEDULE OF NOTES PAYABLE
|
| March 31, 2024 |
|
| September 30, 2023 |
| ||
Convertible note payable, interest at |
| $ |
|
| $ |
| ||
Convertible note payable, interest at |
|
|
|
|
|
| ||
Convertible note payable, interest at |
|
|
|
|
|
| ||
Convertible note payable, interest at |
|
|
|
|
|
| ||
Convertible note payable, interest at |
|
|
|
|
|
| ||
Convertible note payable, $50,000 face value, interest at |
|
|
|
|
|
| ||
Convertible note payable, $50,000 face value, interest at |
|
|
|
|
|
| ||
Convertible note payable, interest at |
|
|
|
|
|
| ||
Convertible note payable, interest at |
|
|
|
|
|
| ||
Convertible note payable, interest at |
|
|
|
|
|
| ||
Convertible note payable, interest at |
|
|
|
|
|
| ||
Convertible note payable, interest at |
|
|
|
|
|
| ||
Convertible notes payable, interest at |
|
|
|
|
|
| ||
Convertible note payable, interest at |
|
|
|
|
|
| ||
Convertible notes payable, interest at |
|
|
|
|
|
| ||
Convertible note payable, interest at |
|
|
|
|
|
| ||
Convertible notes payable, net of discounts of $17,505 (March 31, 2024) and $48,212 (September 30, 2023) |
| $ |
|
| $ |
| ||
| 17 |
| Table of Contents |
NOTE 8 - CAPITAL STOCK
Common Stock
The Company has authorized
During the three and six months ended March 31, 2024, the following shares of common stock were issued:
| · | On January 18, 2024, the Company issued |
|
|
|
| · | On January 12, 2024, the Company issued |
|
|
|
| · | On December 14, 2023, the Company issued |
|
|
|
| · | On November 30, 2023, the Company issued |
During the three and six months ended March 31, 2023, the following shares of common stock were issued:
| · | |
|
|
|
| · | |
|
|
|
| · | |
|
|
|
| · | |
|
|
|
| · |
| 18 |
| Table of Contents |
Preferred Stock
The Company has
Series C Preferred Stock
Under the terms of the Certificate of Designation of Series C Preferred Stock,
Series D Preferred Stock
On September 30, 2020, the Company filed an Amended and Restated Certificate of Designation with the State of Nevada of the Company’s Series D Preferred Stock. Under the terms of the Amendment to Certificate of Designation of Series D Preferred Stock,
Series E Preferred Stock
On June 2, 2021, the Company filed a Certificate of Designation with the State of Nevada. Under the terms of the Certificate of Designation
Series F Preferred Stock
On November 24, 2021, the Company filed a Certificate of Designation with the State of Nevada. Under the terms of the Certificate of Designation
| 19 |
| Table of Contents |
Stock Options
On February 1, 2023, pursuant to a three-year consulting agreement, the Company granted an option to purchase
On March 3, 2023, pursuant to a one-year consulting agreement, the Company granted an option to purchase
The following table summarizes activities related to stock options of the Company for the six months ended March 31, 2024, and the year ended September 30, 2023.
|
| Number of Options |
|
| Weighted- Average Exercise Price per Share |
|
| Weighted- Average Remaining Life (Years) |
| |||
Outstanding at October 1, 2022 |
|
| - |
|
| $ | - |
|
|
| - |
|
Issued |
|
|
|
|
|
|
|
| ||||
Outstanding at September 30, 2023 |
|
|
|
| $ |
|
|
|
| |||
Exercisable at September 30, 2023 |
|
|
|
| $ |
|
|
| - |
| ||
Outstanding at March 31, 2024 |
|
|
|
| $ |
|
|
|
| |||
Exercisable at March 31, 2024 |
|
|
|
| $ |
|
|
| - |
| ||
As of March 31, 2024, and September 30, 2023,
Warrants
On February 1, 2023, pursuant to a three-year consulting agreement, the Company granted a warrant to purchase
On February 8, 2023, an investor paid $
On February 10, 2023, pursuant to a convertible note with a current shareholder of the Company, the Company issued a warrant to the investor to purchase
| 20 |
| Table of Contents |
On March 1, 2023, an investor paid $
On March 3, 2023, pursuant to a convertible note with a current shareholder of the Company, the Company issued a warrant to the investor to purchase
On March 3, 2023, pursuant to a one-year consulting agreement with a Company shareholder, the Company issued to the shareholder a warrant to purchase
The following table summarizes activities related to warrants of the Company for the year ended September 30, 2023, and the six months ended March 31, 2024.
|
| Number of Warrants |
|
| Weighted Average Exercise Price Per Share |
|
| Weighted Average Remining Life (Years) |
| |||
Outstanding at October 1, 2022 |
| -0- |
|
| $ | -0- |
|
| -0- |
| ||
Issued |
|
|
|
|
|
|
|
|
| |||
Outstanding and exercisable at September 30, 2023 |
|
|
|
| $ |
|
|
|
| |||
Outstanding and exercisable at March 31, 2024 |
|
|
|
| $ |
|
|
|
| |||
The following table summarizes activities related to warrants to purchase RM Stock from the Company for the year ended September 30, 2023, and the six months ended March 31, 2024.
|
| Number of Warrants |
|
| Weighted Average Exercise Price Per Share |
|
| Weighted Average Remining Life (Years) |
| |||
Outstanding at October 1, 2022 |
| -0- |
|
| $ | -0- |
|
| -0- |
| ||
Issued |
|
|
|
|
|
|
|
|
| |||
Outstanding and exercisable at September 30, 2023 |
|
|
|
| $ |
|
|
|
| |||
Outstanding and exercisable at March 31, 2024 |
|
|
|
| $ |
|
|
|
| |||
NOTE 9 - COMMITMENTS AND CONTINGENCIES
On November 24, 2020, a plaintiff (the “Plaintiff”) filed a complaint in the State District Court for Clark County, Nevada, naming Cytta as a Defendant. The Plaintiff contended that the Company had breached a written contract, or, in the alternative was liable to the Plaintiff for unjust enrichment. Cytta contended that no contract formation had ever occurred and that it had not been unjustly enriched by the Plaintiff. On or about January 15, 2021, the Defendant filed an Answer and Counterclaim in the litigation and contended that in fact the Plaintiff owed money to Cytta. A bench trial was held in June of 2022. In May of 2023, the Court which had presided over the bench trial ruled against the Plaintiff and in favor of Cytta, rejecting all the Plaintiff’s claims against Cytta. The Court also awarded damages to Cytta, and against the Plaintiff, on one of Cytta’s counterclaims, and subsequently also ruled that Cytta is entitled to recover certain of its costs and fees from the Plaintiff. The Plaintiff’s lawyer subsequently withdrew from representing the Plaintiff. The Plaintiff thereafter filed a pro se appeal without a lawyer. That Pro Se appeal has now been dismissed.
| 21 |
| Table of Contents |
On July 19, 2022, the Company entered an Investor Awareness Advisory Services Agreement with a third party. Pursuant to the agreement in exchange for $
On August 4, 2022 (the “Effective Date”), the Company entered a Consulting Agreement with a third party. Pursuant to the agreement in exchange for
On November 16, 2022 (the “Effective Date”), the Company entered a Consulting Agreement with a third party. Pursuant to the agreement in exchange for
On December 2, 2022 (the “Effective Date”), the Company entered a Consulting Agreement with a third party. Pursuant to the agreement in exchange for
On December 5, 2022, the Company issued
Effective February 1, 2023, the Company entered a Consulting Executive Officer Agreement with a three- year term to an entity to provide the services of a Chief Operating Officer ("the COO") of the Company. On October 1, 2023, the BOD also appointed the COO as the President. Pursuant to the agreement, the Company agreed to a monthly fee of $
| 22 |
| Table of Contents |
On March 3, 2023, the Company entered a Consulting Agreement with an investor. Pursuant to the agreement, the Company issued
On April 1, 2023, the Company entered a Consulting Agreement with a third party for marketing services in exchange for
On October 1, 2023, the Company entered into a one-year Agreement for Board of Advisor Services with a third party to provide general technical, AI, sales, and marketing services in exchange for
On January 1, 2024, the Company entered into a one-year Consulting Agreement with a third party to provide market awareness services and the identification, evaluation, structuring, negotiating, and closing of joint ventures, strategic alliances, and business acquisitions, in exchange for 3,000,000 shares of common stock. The Company valued the shares at $
On January 2, 2024, the Company entered into a one-year Consulting Agreement with a third party to provide market awareness services and the identification, evaluation, structuring, negotiating, and closing of joint ventures, strategic alliances, and business acquisitions, in exchange for a monthly fee of $
On March 19, 2024, the Company entered into a one-year Consulting Agreement with a third party to provide general business, military, governmental, technical, AI, and sales and marketing services, in exchange for
NOTE 10 - LICENSE AGREEMENT
On August 9, 2022, the Company signed an Intellectual Property License Agreement (the “IPLA”) with Reticulate Micro, Inc. (“RM”). Pursuant to the ten-year term (the “Term”) of IPLA, RM agreed to issue to the Company
| 23 |
| Table of Contents |
RM, a Nevada corporation, was formed on June 22, 2022. Mr. Collins, the Company’s’ former CTO was a co-founder, and a former Director and President and Treasurer of RM. Mr. Chermak, the Company’s former COO is a co-founder, Director and Vice-president and Secretary of RM. Mr. Ansari is a co-founder and former Director of RM. RM had initially issued
The Company accounts for its interest in RM under the cost method of accounting. Due to RM just being formed at the time of the license agreement no value had been assigned to the investment.
NOTE 11 - INCOME TAXES
The Company provides for income taxes under ASC 740, Accounting for Income Taxes. ASC 740 requires the use of an asset and liability approach in accounting for income taxes. Deferred tax assets and liabilities are recorded based on the differences between the financial statement and tax bases of assets and liabilities and the tax rates in effect when these differences are expected to reverse. ASC 740 requires the reduction of deferred tax assets by a valuation allowance if, based on the weight of available evidence, it is more likely- than not that some or all of the deferred tax assets will not be realized.
In assessing the need for a valuation allowance, management must determine that there will be sufficient taxable income to allow for the realization of deferred tax assets. Based upon the historical and anticipated future income, management has determined that the deferred tax assets do not meet the more-likely-than-not threshold for realizability. Accordingly, there is a full valuation allowance provided against the Company’s deferred tax assets as of March 31, 2024, and September 30, 2023.
A reconciliation of the provision for income taxes determined at the U.S. statutory rate to the Company’s effective income tax rate is as follows:
|
| Six Months ended March 31, 2024 |
|
| Six Months ended March 31, 2023 |
| ||
Pre-tax loss |
| $ | ( | ) |
| $ | ( | ) |
U.S. federal corporate income tax rate |
|
| % |
|
| % | ||
Expected U.S. income tax credit |
|
| ( | ) |
|
| ( | ) |
Permanent differences |
|
|
|
|
|
| ||
Change of valuation allowance |
|
|
|
|
|
| ||
Effective tax expense |
| $ |
|
| $ |
| ||
The Company had deferred tax assets as follows:
|
| March 31, 2024 |
|
| September 30, 2023 |
| ||
Net operating losses carried forward |
| $ |
|
| $ |
| ||
Less: Valuation allowance |
|
| ( | ) |
|
| ( | ) |
Net deferred tax assets |
| $ |
|
| $ |
| ||
| 24 |
| Table of Contents |
As of March 31, 2024, and September 30, 2023, the Company has approximately $
NOTE 12 - DEFERRED REVENUE
The Company records the agreed amounts over the one-year term of the subscription agreements as deferred revenue, classified as a liability on the balance sheet, and amortizes the deferred revenue over the subscription period. For the three and six months ended March 31, 2024, the Company recognized $
NOTE 13 - SUBSEQUENT EVENTS
Since April 1, 2024, the Company has issued in the aggregate $
On April 1, 2024, the Company entered an Agreement for Board of Advisor Services with a third party to provide general business, military, governmental, technical, AI, and sales and marketing services, in exchange for
On April 1, 2024, the Company recorded the transfer of
On April 23, 2024, the Company entered an Agreement for Board of Advisor Services with a third party to provide assistance to the Company in building its in house development team and manage software projects, in exchange for
On April 23, 2024, the Company entered an Agreement for Board of Advisor Services with a third party to provide general business, military, governmental, technical, AI, and sales and marketing services, in exchange for
On May 8, 2024, the Company issued
On May 8, 2024, the Company issued
On May 8, 2024, the Company issued
On May 8, 2024, the Company issued
On May 14, 2024, the lender and the Company agreed to settle a $
On May 16, 2024, the Company issued
On May 16, 2024, the Company issued
In April 2024, the Company increased the authorized common shares to
The Company has evaluated subsequent events through the date the financial statements were issued. The Company has determined that there are no other such events that warrant disclosure or recognition in the financial statements.
| 25 |
| Table of Contents |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following is management’s discussion and analysis of certain significant factors that have affected our financial position and operating results during the periods included in the accompanying consolidated financial statements, as well as information relating to the plans of our current management. This report includes forward-looking statements. Generally, the words “believes,” “anticipates,” “may,” “will,” “should,” “expect,” “intend,” “estimate,” “continue,” and similar expressions or the negative thereof or comparable terminology are intended to identify forward-looking statements. Such statements are subject to certain risks and uncertainties, including the matters set forth in this report or other reports or documents we file with the Securities and Exchange Commission from time to time, which could cause actual results or outcomes to differ materially from those projected. Undue reliance should not be placed on these forward-looking statements which speak only as of the date hereof. We undertake no obligation to update these forward-looking statements.
Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future results, levels of activity, performance, or achievements. Except as required by applicable law, including the securities laws of the United States, the Company does not intend to update any of the forward-looking statements to conform these statements to actual results.
Our financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). These accounting principles require us to make certain estimates, judgments, and assumptions. We believe that the estimates, judgments, and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments, and assumptions are made. These estimates, judgments, and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the reported amounts of revenues and expenses during the periods presented. Our financial statements would be affected to the extent there are material differences between these estimates.
The following discussion should be read in conjunction with our unaudited financial statements and the related notes that appear elsewhere in this Quarterly Report on Form 10-Q.
THE COMPANY
Cytta Corp., (“Cytta” or the “Company”) was incorporated on May 30, 2006, under the laws of the State of Nevada. It is located in Las Vegas, Nevada. Cytta is in the business of imagineering, developing and securing disruptive technologies.
Results of Operations for the three and six months ended March 31, 2024, and 2023:
Revenues for the three and six months ended March 31, 2024, were $-0- and $2,411, respectively, compared to $8,118 and $13,824 for the three and six months ended March 31, 2023, respectively, were from deferred revenue on subscription agreements being recognized.
Revenues consist of our proprietary software, integration consulting services, tech support and product maintenance billed to the customer. Revenues decreased for the three and six months ended March 31, 2024, compared to the three and six months ended March 31, 2023, due to the lower deferred revenue recognized on subscription agreements entered into and being recognized in the current quarter.
| 26 |
| Table of Contents |
Operating expenses increased by $245,589 and $129,598, respectively, for the three and six months ended March 31, 2024, compared to three and six months ended March 31, 2023, as shown in the table below:
|
| Three months ended March 31, |
|
| Six months ended March 31, |
| ||||||||||
Description |
| 2024 |
|
| 2023 |
|
| 2024 |
|
| 2023 |
| ||||
Related party expenses (excluding stock-based compensation) |
| $ | 90,000 |
|
| $ | 132,869 |
|
| $ | 180,000 |
|
| $ | 310,737 |
|
Stock based compensation |
|
| 265,692 |
|
|
| 285,192 |
|
|
| 742,000 |
|
|
| 836,860 |
|
Stock based compensation, officers |
|
| 126,834 |
|
|
| 92,747 |
|
|
| 250,042 |
|
|
| 92,747 |
|
Professional fees |
|
| 61,500 |
|
|
| 60,409 |
|
|
| 106,501 |
|
|
| 113,555 |
|
Consulting expenses (excluding stock-based compensation) |
|
| 55,000 |
|
|
| 100 |
|
|
| 222,000 |
|
|
| 199,887 |
|
Depreciation expense |
|
| 10,508 |
|
|
| 11,738 |
|
|
| 21,084 |
|
|
| 23,642 |
|
Software and demo expenses |
|
| 187,174 |
|
|
| 416 |
|
|
| 187,460 |
|
|
| 25,785 |
|
General and Administrative, officers |
|
| 3,187 |
|
|
| 6,288 |
|
|
| 5,805 |
|
|
| 7,894 |
|
Auto, travel and entertainment |
|
| 14,643 |
|
|
| 21,900 |
|
|
| 21,889 |
|
|
| 47,430 |
|
Rent expense |
|
| 6,372 |
|
|
| 6,575 |
|
|
| 13,182 |
|
|
| 12,691 |
|
Transfer agent and filing fees |
|
| 7,926 |
|
|
| 8,134 |
|
|
| 16,610 |
|
|
| 15,317 |
|
Investor relations |
|
| 57,560 |
|
|
| 19,250 |
|
|
| 89,481 |
|
|
| 50,412 |
|
Gain on debt extinguishment |
|
| (8,789 | ) |
|
| - |
|
|
| (4,834 | ) |
|
| - |
|
Other operating expenses |
|
| 28,103 |
|
|
| 14,503 |
|
|
| 44,942 |
|
|
| 29,607 |
|
Total |
| $ | 905,710 |
|
| $ | 660,121 |
|
| $ | 1,896,162 |
|
| $ | 1,766,564 |
|
For the three and six months ended March 31, 2024, and 2023, the Company recorded expenses to related parties in the following amounts:
|
| Three months ended March 31, |
|
| Six months ended March 31, |
| ||||||||||
Description |
| 2024 |
|
| 2023 |
|
| 2024 |
|
| 2023 |
| ||||
CEO-Management fees |
| $ | 45,000 |
|
| $ | 45,000 |
|
| $ | 90,000 |
|
| $ | 105,000 |
|
Chief Technology Officer (CTO) |
|
| - |
|
|
| 45,000 |
|
|
| - |
|
|
| 105,000 |
|
Chief Administration Officer (CAO) |
|
| - |
|
|
| 10,000 |
|
|
| - |
|
|
| 55,000 |
|
Chief Operation Officer (COO) |
|
| 45,000 |
|
|
| 20,000 |
|
|
| 90,000 |
|
|
| 20,000 |
|
Office rent and expenses |
|
| - |
|
|
| 12,869 |
|
|
| - |
|
|
| 25,737 |
|
Total |
| $ | 90,000 |
|
| $ | 132,869 |
|
| $ | 180,000 |
|
| $ | 310,737 |
|
On January 1, 2022, the Company increased the monthly fee from $15,000 to $18,000 for the CEO and CTO, respectively, and on February 1, 2022, the monthly fee for the CEO and CTO was increased to $20,000. Effective January 1, 2023, the monthly fee for the CEO and CTO was reduced to $15,000. Effective April 1, 2023, the Company was no longer compensating the CTO and did not incur any additional office rent and expenses.
Effective February 1, 2023, the Company entered a Consulting Executive Officer Agreement with a three- year term to an entity to provide the services of a Chief Operating Officer (the “COO”) of the Company. The monthly fee was increased to $15,000 per month effective September 1, 2023. On October 1, 2023, the BOD also appointed the COO as the President.
On October 25, 2020, the Company entered a sublease with its CTO, whereby the Company agreed to an annual lease payment of $50,000. On October 26, 2021, the Company renewed the lease for an additional year for $3,500 per month, and on October 26, 2022, the lease was renewed on a month-to-month basis. The last month to month lease payment was for March 2023, and accordingly, there is no rent expense for the three and six months ended March 31, 2024. Included in office rent for the three and six months ended March 31, 2023, is $10,500 and $21,000 respectively.
| 27 |
| Table of Contents |
Stock based compensation, officers for the three and six months ended March 31, 2023, was comprised pursuant to the agreement with the COO to issue 250,000 shares per month, to be certificated semi-annually. On May 8, 2024, the Company issued 3,000,000 shares of common stock for the months of February 2023, through January 2024. Additionally, the Company granted an option to purchase 10,000,000 shares of the Company’s common stock at $0.02 per share with an expiry date of July 1, 2025 (the “CYCA Option”). The CYCA option vests at the rate of 25% beginning on the first six-month anniversary of the agreement, as well as a warrant to purchase 250,000 shares of the Reticulate Micro common stock the Company owns (the “RM Warrant”). The RM Warrant has an exercise price of $1.00 per share and an expiry date of July 1, 2025. For the three and six months ended March 31, 2024, the Company recorded an expense of $21,500 and $39,375 related to the 250,000 shares per month. For the three and six months ended March 31, 2023, the Company recorded an expense of $22,525 related to the 250,000 shares per month for February and March 2023. The Company valued the CYCA Option at $639,543 based on the Black-Scholes option pricing method and will be amortized through the term of the agreement, and accordingly, $53,295, and $106,590 is included in General and Administrative expenses-related party for the three and six months ended March 31, 2024, and $35,530 is included in stock-based compensation expense for the three and six months ended March 31, 2023. The Company valued the RM Warrant at $624,458 based on the Black-Scholes option pricing method and will be amortized through the term of the agreement, and accordingly, $52,038, and $104,076 is included in General and Administrative expenses-related party for the three and six months ended March 31, 2024, and $34,692 is included in stock-based compensation expense for the three and six months ended March 31, 2023.
Stock based expense for the three and six months ended March 31, 2024, were related to shares issued to consultants of $-0- and $169,200, respectively and the amortization of common stock (pursuant to the terms of each consultant’s contracts), options and warrants of $265,692 and $572,800, respectively.
Stock based expense for the three and six months ended March 31, 2023, were related to shares issued to consultants of $195,675 and $747,343, respectively, as well as the amortization of options and warrants of $89,517 for the three and six months ended March 31, 2023.
During the three and six months ended March 31, 2024, software and demo expenses increased due to the Company during the three- and six-months ending March 31, 2024, engaging consultants in the transitioning from the product software development stage to the full SaaS commercial release stage of Cytta's proprietary technologies, including the CyttaCARES system for schools and the CyttaCOMMS IGAN Incident Command System.
Consulting expenses increased for the three and six months ended March 31, 2024, as a result of additional consultants engaged beginning January 1, 2024.
Investor relations fees increased for the three- and six-months ending March 31, 2024, compared to the three- and six-months ending March 31, 2023. The increases were primarily a result of the Company engaging additional consultants as well as the Company attending trade shows and conferences to expose the Company to potential investors.
Other expense, net, for the three and six months ended March 31, 2024, was $82,831 and $153,918, respectively, compared to $11,308 and $11,279, for the three and six months ended March 31, 2023.
|
| Three months ended March 31, |
|
| Six months ended March 31, |
| ||||||||||
Description |
| 2024 |
|
| 2023 |
|
| 2024 |
|
| 2023 |
| ||||
Interest expense |
| $ | 82,954 |
|
| $ | 11,308 |
|
| $ | 154,241 |
|
| $ | 11,334 |
|
Interest income |
|
| (123 | ) |
|
| - |
|
|
| (323 | ) |
|
| (55 | ) |
Total |
| $ | 82,831 |
|
| $ | 11,308 |
|
| $ | 153,918 |
|
| $ | 11,279 |
|
The increase in interest expense for the three and six months ended March 31, 2024, is primarily a result of the interest on convertible notes, as well as the amortization of note discounts.
| 28 |
| Table of Contents |
The following tables set forth key components of our balance sheets as of March 31, 2024, and September 30, 2023.
|
| March 31, 2024 |
|
| September 30, 2023 |
| ||
|
|
|
|
|
|
| ||
Current Assets |
| $ | 962,868 |
|
| $ | 1,661,800 |
|
|
|
|
|
|
|
|
|
|
Long term assets |
| $ | 407,583 |
|
| $ | 639,334 |
|
|
|
|
|
|
|
|
|
|
Total Assets |
| $ | 1,370,451 |
|
| $ | 2,301,134 |
|
|
|
|
|
|
|
|
|
|
Current Liabilities |
| $ | 3,035,863 |
|
| $ | 2,561,493 |
|
|
|
|
|
|
|
|
|
|
Total Liabilities |
| $ | 3,035,863 |
|
| $ | 2,561,493 |
|
|
|
|
|
|
|
|
|
|
Stockholders’ Deficit |
| $ | (1,665.412 | ) |
| $ | (260,359 | ) |
|
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders’ Deficit |
| $ | 1,370,451 |
|
| $ | 2,301,134 |
|
Liquidity and Capital Resources
As of March 31, 2024, we had limited operating capital. Our current capital and our other existing resources will not be sufficient to provide the working capital needed for our current business. Additional capital will be required to meet our obligations, and to further expand our business. We may be unable to obtain the additional capital required. Our inability to generate capital or raise additional funds when required will have a negative impact on our business development and financial results. These conditions raise substantial doubt about our ability to continue as a going concern as well as our recurring losses from operations and the need to raise additional capital to fund operations. This “going concern” could impair our ability to finance our operations through the sale of debt or equity securities. From April 1, 2024, through May 14, 2024, the Company received proceeds of $1,537,950 in exchange for convertible notes issued.
The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As of March 31, 2024, the Company had an accumulated deficit of $34,651,149 and has also generated losses since inception. These factors, among others, raise substantial doubt about the ability of the Company to continue as a going concern.
As of March 31, 2024, we had cash of $441,664 compared to $674,824 at September 30, 2023. As of March 31, 2024, we had current assets of $962,868 and current liabilities of $3,035,863, which resulted in working capital deficiency of $2,072,995. The current liabilities are comprised of accounts payable and accrued expenses, related party payables, convertible notes payable, note payable, and dividends payable.
Operating Activities
For the six months ended March 31, 2024, net cash used in operating activities was $790,660 compared to $840,939 for the six months ended March 31, 2023. For the six months ended March 31, 2024, our net cash used in operating activities was primarily attributable to the net loss of $2,047,669 and gain on debt extinguishment of $4,834, adjusted by stock-based compensation of $992,042, amortization of note discounts of $30,706, and amortization and depreciation of $21,084. Net changes of $218,011 in operating assets and liabilities decreased the cash used in operating activities.
For the six months ended March 31, 2023, our net cash used in operating activities was primarily attributable to the net loss of $1,764,019, adjusted by stock-based compensation of $929,607, depreciation of $23,642 and non-cash interest expense of $6,707. Net changes of $36,876 in operating assets and liabilities increased the cash used in operating activities.
Investing Activities
For the six months ended March 31, 2024, and 2023, there was no cash provided by investing activities.
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Financing Activities
For the six months ended March 31, 2024, the Company received $557,500 in exchange for the issuance of various convertible promissory notes.
For the six months ended March 31, 2023, cash provided by financing activities was $300,000; comprised of $100,000 from sale of common stock and warrants, $160,000 from the issuance of convertible promissory notes and $40,000 from the issuance of a promissory note.
Critical Accounting Policies and Estimates
Our significant accounting policies are summarized in Note 3 of our financial statements. While all these significant accounting policies impact our financial condition and results of operations, we view certain of these policies as critical. Policies determined to be critical are those policies that have the most significant impact on our financial statements and require management to use a greater degree of judgment and estimates. Actual results may differ from those estimates. Our management believes that given current facts and circumstances, it is unlikely that applying any other reasonable judgments or estimate methodologies would cause an effect on our results of operations, financial position or liquidity for the periods presented in this report.
Convertible Instruments
The Company evaluates and accounts for conversion options embedded in convertible instruments in accordance with ASC 815, Derivatives and Hedging Activities.
GAAP requires companies to bifurcate conversion options from their host instruments and account for them as free-standing derivative financial instruments according to certain criteria. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not remeasured at fair value under other GAAP with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument.
In August 2020, the FASB issued Accounting Standards Update 2020-06 (ASU 2020-06). ASU 2020-06 eliminates the beneficial conversion feature and cash conversion models in Accounting Standards Codification 470-20 that require separate accounting for embedded conversion features in convertible instruments. The new guidance also eliminates some of the conditions that must be met for equity classification under ASC 815-40-25. The standard is effective for smaller reporting companies for annual periods beginning after December 15, 2023. Early adoption is permitted. The Company chose to early adopt this standard. As a result, financial results contained herein are reported in accordance with this standard as applicable.
The convertible debt issued by the company referred to in Note 7, did not require separate accounting for the conversion feature as it was not considered to be a derivative. The company issued warrants in connection with the debt financing and in accordance with ASC 470-20-25-2 the proceeds from the sale of the debt instruments have been allocated to the debt and warrants based on the relative fair value of the two components. The amount allocated to the warrants has been recorded as a debt discount to be amortized of the life of the note.
Fair value of financial instruments
The Company measures assets and liabilities at fair value based on an expected exit price as defined by the authoritative guidance on fair value measurements, which represents the amount that would be received on the sale of an asset or paid to transfer a liability, as the case may be, in an orderly transaction between market participants. As such, fair value may be based on assumptions that market participants would use in pricing an asset or liability. The authoritative guidance on fair value measurements establishes a consistent framework for measuring fair value on either a recurring or nonrecurring basis whereby inputs, used in valuation techniques, are assigned a hierarchical level.
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The following are the hierarchical levels of inputs to measure fair value:
| ● | Level 1 - Observable inputs that reflect quoted market prices in active markets for identical assets or liabilities. |
| ● | Level 2 - Inputs reflect quoted prices for identical assets or liabilities in markets that are not active; quoted prices for similar assets or liabilities in active markets; inputs other than quoted prices that are observable for the assets or liabilities; or inputs that are derived principally from or corroborated by observable market data by correlation or other means. |
| ● | Level 3 - Unobservable inputs reflecting the Company’s assumptions incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available. |
The carrying amounts of the Company’s financial assets and liabilities, such as cash, prepaid expenses, accounts payable and accrued expenses, related party liabilities, dividends payable, convertible notes payable and note payable, approximate their fair values because of the short maturity of these instruments.
Stock-Based Compensation
The Company accounts for its stock based compensation under the recognition and measurement principles of the fair value recognition provisions of Statement of Financial Accounting Standards No. 123 (revised 2004) “Share-Based Payment” (“SFAS No. 123R”)(ASC 718) using the modified prospective method for transactions in which the Company obtains employee services in share-based payment transactions and the Financial Accounting Standards Board Emerging Issues Task Force Issue No. 96-18 “Accounting For Equity Instruments That Are Issued To Other Than Employees For Acquiring, Or In Conjunction With Selling Goods Or Services” (“EITF No. 96-18”) for share-based payment transactions with parties other than employees provided in SFAS No. 123(R) (ASC 718). All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. The measurement date used to determine the fair value of the equity instrument issued is the earlier of the date on which the third-party performance is complete or the date on which it is probable that performance will occur.
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Off Balance Sheet Arrangements
We have no off-balance sheet arrangements, including arrangements that would affect our liquidity, capital resources, market risk support and credit risk support or other benefits.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
Not Applicable.
Item 4. Controls and Procedures.
Disclosure Controls and Procedures
We maintain disclosure controls and procedures, as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934 (the “Exchange Act”), that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as of March 31, 2024. Based on the evaluation of these disclosure controls and procedures, and in light of the material weaknesses found in our internal controls over financial reporting, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective for the reasons discussed below.
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. In its assessment of the effectiveness of internal control over financial reporting as of March 31, 2024, the Company determined that there were control deficiencies that constituted material weaknesses, as described below.
| 1. | We do not have an Audit Committee – While not being legally obligated to have an audit committee, it is the management’s view that such a committee, including a financial expert member, is an utmost important entity level control over the Company’s financial statement. Currently the Board of Directors acts in the capacity of the Audit Committee and does not include a member that is considered to be independent of management to provide the necessary oversight over management’s activities. |
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| 2. | We did not maintain appropriate cash controls – As of March 31, 2024, the Company has not maintained sufficient internal controls over financial reporting for cash, including failure to segregate cash handling and accounting functions, and did not require dual signatures on the Company’s bank accounts. |
Accordingly, the Company concluded that these control deficiencies resulted in a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis by the company’s internal controls.
Our management, including our Chief Executive Officer and our Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, 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. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected.
Changes in Internal Controls over Financial Reporting
There has been no change in our internal control over financial reporting occurred during the three and six months ended March 31, 2024, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
None.
Item 1A. RISK FACTORS
Not applicable for smaller reporting companies.
Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The following represents all shares issued during the quarter ended March 31, 2024:
On January 12, 2024, the Company issued 18,148 shares of restricted common stock in settlement of $454 of accrued interest.
On January 12, 2024, the Company issued 90,740 shares of restricted common stock in settlement of $2,268 of accrued interest.
On January 12, 2024, the Company issued another 90,740 shares of restricted common stock in settlement of $2,268 of accrued interest.
On January 12, 2024, the Company issued 1,823,868 shares of restricted common stock in settlement of $45,597 of accrued interest.
On January 12, 2024, the Company issued 45,370 shares of restricted common stock in settlement of $1,134 of accrued interest.
On January 12, 2024, the Company issued 45,370 shares of restricted common stock in settlement of $1,134 of accrued interest.
On January 12, 2024, the Company issued 113,425 shares of restricted common stock in settlement of $2,268 of accrued interest.
On January 18, 2024, the Company issued 5,000,000 shares of restricted common stock in exchange for consulting services provided to the Company. The shares were valued at $0.0208 per share, the market price, on the date the Company agreed to issue the shares.
The Company issued the foregoing securities in reliance on an exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended, and/or Rule 506(b) promulgated thereunder, as there was no general solicitation to the investors and the transactions did not involve a public offering.
Item 3. DEFAULTS UPON SENIOR SECURITIES
None.
Item 4. MINE SAFETY DISCLOSURE
Not applicable.
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Item 5. OTHER INFORMATION
| (a) | None. |
| (b) | During the quarter ended March 31, 2024, there have not been any material changes to the procedures by which security holders may recommend nominees to the Board of Directors. |
Item 6. EXHIBITS
The following documents are filed as part of this report:
Exhibit No. |
| Description |
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| Amendment to Articles of Incorporation Amending Authorized Common and Preferred Stock * | |
| Amended and Restated Certificate of Designation of Series D Preferred Stock * | |
| Amended and Restated Certificate of Designation of Series E Preferred Stock * | |
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| Agreement by and between Cytta Corp and Makena Investment Advisors, LLC dated April 1, 2020 * | |
| Sublease Agreement by and between Cytta Corp and Michael Collins dated October 25, 2020 * | |
| Agreement by and between Cytta Corp and Peter Rettman dated August 27, 2020 * | |
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| Technology Access Agreement by and between Cytta Corp and Michael Collins dated July 19, 2018 * | |
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101.INS |
| Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document).*** |
101.SCH |
| Inline XBRL Taxonomy Extension Schema Document.*** |
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document.*** | |
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document.*** | |
101.LAB |
| Inline XBRL Taxonomy Extension Labels Linkbase Document.*** |
101.PRE |
| Inline XBRL Taxonomy Extension Presentation Linkbase Document.*** |
104 |
| Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101). |
* Incorporated by reference to the same exhibit to the registration statement filed by the Company on June 28, 2021.
** Incorporated by reference to exhibit 4.1 to the Current Report on Form 8-K filed by the Company on November 26, 2021.
*** Filed herewith
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Dated: May 20, 2024
/s/ Gary Campbell |
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Gary Campbell |
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Chief Executive Officer |
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(principal executive officer) |
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(principal financial and accounting officer) |
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