Tego Cyber, Inc S-1/A, filed Oct 15, 2021
Tego Cyber, Inc. (TGCB)
S-1/A
2021-10-15
View Original
Added on
October 25, 2026
As filed with the U.S. Securities and Exchange
Commission on October 15, 2021.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1/A
Amendment
No. 1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
Commission File Number: 333-259482
TEGO CYBER INC.
(Exact name of registrant as specified in its charter)
|
Nevada
|
7370
|
84-2678167
|
|
(State or other jurisdiction of
incorporation or organization)
|
(Primary Standard Industrial
Classification Code Number)
|
(I.R.S. Employer Identification
Number)
|
8565 South Eastern Avenue, Suite 150
Las Vegas, Nevada 89123
(855) 939-0100
(Address, including zip code, and telephone number,
including
area code, of registrant’s principal executive
offices)
Shannon Wilkinson
8565 South Eastern Avenue, Suite 150
Las Vegas, Nevada 89123
(855) 939-0100
(Name, address, including zip code, and telephone
number,
including area code, of agent for service)
Copies to:
Jessica M. Lockett, Esq.
Lockett + Horwitz
A Professional Law Corporation
2 South Pointe Dr. Ste. 275, Lake Forest, California
92630
(949) 540-6540
Approximate date of commencement of proposed sale to the public: As
soon as practicable after the effective date of this registration
statement.
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under
the Securities Act of 1933, check the following
box. ☑.
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, check
the following box and list the Securities Act registration
statement number of the earlier effective registration statement
for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier
effective registration statement for the same
offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier
effective registration statement for the same
offering. ☐
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer,
or a smaller reporting company. See the definitions of “large
accelerated filer,” “accelerated filer” and
“smaller reporting company” in Rule 12b-2 of the
Exchange Act. (Check one):
|
Large
accelerated filer ☐
|
|
Accelerated
filer ☐
|
|
Non-accelerated filer
☒
|
|
Smaller
reporting company ☒
|
|
|
|
Emerging
growth company ☒
|
CALCULATION OF REGISTRATION FEE
|
Title of Each Class
of Securities to be
Registered
|
|
Amount to be
Registered
(1)(3)
|
|
|
Proposed Maximum Offering Price Per Share
|
|
|
Proposed Maximum
Aggregate Offering Price
|
|
|
Amount of
Registration
Fee (2)
|
|
||||
|
Common stock. $0.001 par value (4)
|
|
|
5,000,000
|
|
|
$
|
0.50
|
|
|
$
|
2,500,000
|
|
|
$
|
272.75
|
|
|
Total
|
|
|
5,000,000
|
|
|
|
|
|
|
$
|
2,500,000
|
|
|
$
|
272.75
|
|
|
|
(1)
|
Estimated solely for purposes of calculating the registration fee
pursuant to Rule 457(o) under the Securities Act of 1933, as
amended.
|
|
|
(2)
|
The fee is calculated by multiplying the aggregate offering amount
by .0001091, pursuant to Section 6(b) of the Securities Act of
1933. The Registration Fee was previously paid.
|
|
|
(3)
|
Direct public offering
|
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH
DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL
THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY
STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME
EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF
1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. THESE SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS
EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE
SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
PRELIMINARY PROSPECTUS
DATED OCTOBER 15, 2021
TEGO CYBER INC.
8565 S. Eastern Avenue, Suite 150
Las Vegas, NV, 89123
(855) 939-0100
Tego
Cyber, Inc. (the “Company”) is offering for sale a
total of 5,000,000 shares of Common Stock at a fixed price of $0.50
per share for the duration of this Offering (the
“Offering”). Our Common Stock is presently quoted
on the OTCQB Venture Marketplace (“OTCQB”), operated by
OTC Markets Group under the symbol “TGCB”. On October
14, 2021, the last reported sale price for our common stock on the
OTCQB Marketplace was $0.80 per share. We have agreed to bear the
expenses relating to the registration of the shares. There is no
minimum number of shares that must be sold by us for the Offering
to proceed, and we will retain the proceeds from the sale of
any of the offered shares. The Offering is being conducted on
a self-underwritten, best-efforts basis, which means our Officers
and Directors will attempt to sell the shares directly to friends,
family members and business acquaintances. Our Officers and
Directors will not receive commissions or any other remuneration
from any such sales. In offering the securities on our behalf, our
Officers and Directors will rely on the “safe harbor”
provisions of SEC Rule 3a4-1, promulgated under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”).
Generally speaking, Rule 3a4-1 provides an exemption from the
broker-dealer registration requirements of the Exchange Act for
persons associated with an issuer that participate in the sale of
the securities of such issuer. We are an “emerging growth
company” under applicable Securities and Exchange Commission
rules and will be subject to reduced public company reporting
requirements.
The shares will be offered for sale at a fixed price of $0.50 per
share for a period of one hundred and eighty (180) days from the
effective date of this Prospectus, unless extended by our Board of
Directors for an additional 90 days. If all of the shares offered
by us are purchased, the gross proceeds to us will be $2,500,000.
All funds raised hereunder will become immediately available
to the Company and will be used in accordance with the
Company’s intended “Use of Proceeds” as set forth
herein. Investors are advised that they will not be entitled to a
refund and could lose their entire investment.
The Company is a development stage company and currently has
limited operations. Any investment in the shares offered
herein involves a high degree of risk. You should only
purchase shares if you can afford a loss of your
investment. Our independent registered public accountant has
issued an audit opinion for the Company, which includes a statement
expressing substantial doubt as to our ability to continue as a
going concern.
This Prospectus covers the primary public offering by the Company
of 5,000,000 shares of Common
Stock.
INVESTING IN OUR SECURITIES INVOLVES A HIGH DEGREE OF RISK. SEE THE
SECTION ENTITLED "RISK FACTORS" BEGINNING ON PAGE 5 IN THIS
PROSPECTUS. YOU SHOULD CAREFULLY CONSIDER THESE RISK FACTORS, AS
WELL AS THE INFORMATION CONTAINED IN THIS PROSPECTUS, BEFORE YOU
INVEST.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE
SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
No dealer, salesperson or any other person is authorized to give
any information or make any representations in connection with this
offering other than those contained in this Prospectus and, if
given or made, the information or representations must not be
relied upon as having been authorized by us. This Prospectus does
not constitute an offer to sell or a solicitation of an offer to
buy any security other than the securities offered by this
Prospectus, or an offer to sell or a solicitation of an offer to
buy any securities by anyone in any jurisdiction in which the offer
or solicitation is not authorized or is unlawful.
The date of this Prospectus is [●], 2021.
TABLE OF CONTENTS
|
|
Page
|
|
Legal
Matters
|
|
You should rely only on the information contained in this
prospectus and any applicable prospectus supplement. We have not
authorized anyone to provide you with different or additional
information. If anyone provides you with different or inconsistent
information, you should not rely on it. The information contained
in this prospectus is accurate only as of the date of this
prospectus, regardless of the time of delivery of this prospectus
or any sale of securities described in this prospectus. This
prospectus is not an offer to sell these securities and it is not
soliciting an offer to buy these securities in any jurisdiction
where the offer or sale is not permitted. You should assume that
the information appearing in this prospectus or any prospectus
supplement, as well as information we have previously filed with
the Securities and Exchange Commission, is accurate as of the date
on the front of those documents only. Our business, financial
condition, results of operations and prospects may have changed
since those dates.
For investors outside the United States: neither we nor the
underwriters have done anything that would permit this offering or
possession or distribution of this prospectus or any free writing
prospectus we may provide to you in connection with this offering
in any jurisdiction where action for that purpose is required,
other than in the United States. You are required to inform
yourselves about and to observe any restrictions relating to this
offering and the distribution of this prospectus and any such free
writing prospectus outside of the United States.
Unless otherwise indicated, information contained in this
prospectus concerning our industry and the markets in which we
operate, including our general expectations and market position,
market opportunity and market share, is based on information from
our own management estimates and research, as well as from industry
and general publications and research, surveys and studies
conducted by third parties. Management estimates are derived from
publicly available information, our knowledge of our industry and
assumptions based on such information and knowledge, which we
believe to be reasonable. Our management estimates have not been
verified by any independent source, and we have not independently
verified any third-party information. In addition, assumptions and
estimates of our and our industry's future performance are
necessarily subject to a high degree of uncertainty and risk due to
a variety of factors, including those described in "Risk Factors".
These and other factors could cause our future performance to
differ materially from our assumptions and estimates. See "Special
Note Regarding Forward-Looking Statements".
PROSPECTUS
SUMMARY
The following summary highlights material information contained
elsewhere in this prospectus. This summary does not contain all of
the information you should consider before investing in our common
stock. Before making an investment decision, you should read the
entire prospectus carefully, including the “Risk
Factors” section, the “Management’s Discussion
and Analysis of Financial Condition and Results of
Operations” section, the financial statements and the notes
to the financial statements. You should also review the other
available information referred to in the section entitled
“Where You Can Find More Information” in this
prospectus and any amendment or supplement hereto. Unless otherwise
indicated, the terms the “Company,” “Tego
Cyber,” “we,” “us,” and
“our” refer and relate to Tego Cyber,
Inc.
Corporate History and General Information about the
Company
Tego Cyber Inc. (the “Company”) is an early-stage
company which was incorporated in the State of Nevada on September
6, 2019. Our year end is June 30. We are a development stage
enterprise. The Company is engaged in the business of the
development and commercialization of high‐quality,
innovative cybersecurity services and solutions that reduce risk,
prevent cyber-attacks, and protect intellectual property and
data.
Our
principal office is located at 8565 South Eastern Avenue, Suite
150, Las Vegas, Nevada, 89123. Our telephone number is (855)
939-0100 and our e-mail contact is info@tegocyber.com. Our website
can be viewed at https://tegocyber.com. The Company has not
filed for bankruptcy, receivership or any similar proceedings nor
is in the process of filing for bankruptcy, receivership or any
similar proceedings.
The Company Overview
The Company was incorporated in the State of Nevada on September 6,
2019. We are an early-stage provider of advanced cyberthreat intelligence for larger
business enterprises. The Company has
developed a cyber threat intelligence application that integrates
with top end security platforms to gather, analyze, then
proactively identify threats to an enterprise network. The Tego
Threat Intelligence Platform (TTIP) takes in vetted and curated
threat data and after utilizing a proprietary process, the platform
compiles, analyzes, and then delivers that data to an enterprise
network in a format that is timely, informative, and relevant. The
threat data provides additional context including specific details
needed to identify and counteract threats so that security teams
can spend less time searching for disparate information. The first
version of the TTIP will integrate with the widely accepted SPLUNK
platform to provide real-time threat intelligence to macro
enterprises using the SPLUNK architecture. The Company plans on
developing future versions of the TTIP for integration with other
established SIEM systems and platforms including: Elastic, IBM
QRadar, AT&T AlienVault, Exabeam, and Google Chronical. For
more information, please visit www.tegocyber.com. We also
currently offer a suite of related cyber security services
including vulnerability assessments, penetration testing,
vCISO services, dark web monitoring, cybersecurity policy creation
and review as well as ongoing enterprise employee
training.
Our
product portfolio is built on the TTIP and works cohesively to
improve the operational efficiency of the enterprises' core digital
security processes. TTIP is a comprehensive and curated source of
threat intelligence that provides not only threat data but
additional context so that the client understands the potential
threats within their environment. The platform automatically
creates updates for the client from its curated and aggregated
threat intelligence feeds, identifying not only current threats but
through its recursive searches, can help identify threats that have
occurred in the past, even before the client installed the TTIP.
The TTIP identifies known threat indicators and malicious actors
using data that is relevant and timely. The platform identifies
threats through utilization of its aggregated, real-time threat
intelligence data feeds, enabling customers to be agile and rapid
in response to detected digital threats, while reducing their total
cost of technology ownership and increasing the return on
investment (ROI) of their current technologies.
1
Competition
We compete with an array of established and emerging security
software and services vendors. As organizations increasingly
embrace cloud platforms, IoT and other new networking technologies,
they are becoming increasingly exposed to ever evolving
cybercrimes. The introduction of new technologies and market
entrants will continue to fuel an intense competitive environment
as companies seek solutions to cybersecurity breaches. Our
competitors include vulnerability management and external
assessment vendors, diversified security software and services
vendors, and providers of threat intelligence platforms that
compete with some of the features present in our solution such as
Anomali, Recorded Future and Threat Quotient. We compete based on
several factors, including product functionality; scope of
offerings; performance; brand, reputation, and customer
satisfaction; ease of implementation, use and service; price,
scalability, reliability, and security. We believe that we will
compete favorably with respect to these factors and are well
positioned as an emerging provider of digital risk protection, data
analysis, and professional services.
Our Growth Strategy
Tego’s growth strategy will focus initially on integration
into the Security Information and Event Management (SIEM) market,
using the Gartner Magic Quadrant and Forrester reports on who has
the largest market share and which companies are visionaries in the
industry. Tego will grow its sales and customer base through the
use of both an inside sales team, utilizing SIEM customer lists,
selected technology channel partners, of which the founders have
direct personal relationships with and have expressed an interest
in carrying Tego’s platform in their product offering, and
attending technology-specific conferences/tradeshows, either
virtually or in person. For integration, we will target those that
are found on the Gartner Magic Quadrant and Forrester reports as
these have the largest market share. Initially, we will focus on
integration within the SIEM market because the SIEM is where the
data for all devices (hardware and software) resides for the
enterprise. For future growth beyond the SIEM market, we will look
to also add integration into the firewall (hardware) and
antivirus/endpoint-detection-response (software) markets but
realistically, for the largest of enterprises, they are pulling the
data from these devices into their SIEM and we go back to the idea
that we live where the data lives. But the idea that Troy and I had
is that a license to Tego will allow the customer to deploy our TIP
to any of their implemented solutions so in the future should we
launch a plugin for Palo Alto firewalls and the client has a
license for SIEM integration, they could use the Palo plugin
without having to purchase an
additional license.
Recent developments
In
October 2019, Shannon Wilkinson, CEO Tego Cyber Inc, developed a
business requirement documentation (BRD) for developing a prototype
of the Tego threat intelligence platform. In November 2019, Tego
engaged a senior software developer begin development of a
prototype of the Tego threat intelligence platform. The development
of the prototype was performed on a part-time basis due to
fundraising by Tego Cyber Inc. until March 2020 when the prototype
was completed. Once Tego was able to raise enough money to engage a
full-time development team, in May 2020, Shannon Wilkinson worked
with a project manager to develop a BRD for integrating the Tego
threat intelligence platform to a security incident and event
manage (SIEM). In June 2020, Tego contracted two full-time senior
software developers and the project manager to take the prototype
and finish the development of the threat intelligence platform
along with completing development of the first integration plugin
of the Tego threat intelligence platform to a SIEM.
On June 4, 2020, the Company entered into a Website Development or
Software Development Agreement with CIS Training Center Kosovo
(“Cistck”) for the development of the Threat
Intelligence Platform and Splunk App Code (the
“Agreement”). Pursuant to the Agreement Cistck was
hired to take the prototype and finish the development of
the threat intelligence platform along with completing development
of the first integration plugin of the Tego threat intelligence
platform to a SIEM. On June 5, 2020,
the parties entered into an addendum to the Agreement setting forth
the maximum compensation of Cistck at $20,000 USD payable in
monthly installments until project completion or maximum fee is
reached. We have verbally approved an extension of services period
while Cistck further develops for us at approximately $5,000 per
month, which we may cancel at any time.
On February 19, 2021, the common shares of the Company were
approved for trading on the OTCQB under the symbol
“TGCB”.
2
On April 14, 2021, the Company announced the appointment of Chris
C. White to its board of directors.
On May 12, 2021, the Company announced the completion of the
development of its first version of its Threat Intelligence
Platform. The application is currently being prepared to enter beta
testing.
On June 3, 2021, the Company announced the commercial launch of its Cyber
Threat Intelligence (CTI) reporting service. CTI reporting provides
individuals or enterprises with custom cyber threat intelligence on
issues such as social media impersonation, compromised email
credentials, look-a-like domains, social media trends and possible
DarkWeb presence. Tego had received many requests to leverage the
threat intelligence used by the Tego Threat Intelligence Platform
(TTIP) in a customized report and responded to this by developing a
threat intelligence product aimed at providing real-time data to
specific corporations and individuals. CTI reporting help
individuals and organizations understand the threats that have,
will, or are currently directly targeting them. Tego’s CTI
reporting service is provided in real time based on emerging
threats and on customized cadences defined by the client. The cost
to the client will depend on the size and complexity of the
client’s cyber footprint. Tego has signed one contract with
an enterprise client.
On June
15, 2021, the Company announced that it had commenced a beta test
of the first version of its Threat Intelligence
Platform.
On August 17, 2021, the Company announced that it has
appointed director Chris White, as Chief Information Security
Officer (CISO). Mr. White will be responsible for overseeing cyber
security operations, cyber intelligence, data loss and fraud
prevention, assisting with development of application, overseeing
beta testing, developing additional security architecture,
overseeing program rollout, governance and
documentation.
On September 16, 2021, the Company announced that it has entered a Master Services
Agreement (MSA) with IONnovate, LLC, a premier application
development firm based in Las Vegas, Nevada, to supplement the
current development team with additional resources to enhance the
scalability and expedite the rollout of the Company’s threat intelligence
platform. The services to be performed by IONnovate will include
application programming interface (API) integration to third party
SIEM applications.
On October 12, 2021, the Company announced it has commercially launched the first
version of its Tego Threat Intelligence Platform under the name:
Tego Guardian. The first version of the Tego Guardian integrates
with the widely used Splunk security information and event
management platform. Splunk is
the leading SIEM provider trusted by 92 of the Fortune 100. The
Tego Guardian is now available for direct download by Splunk users
through Splunk’s app store: splunkbase - an online community
marketplace where users can interact and download apps and add-ons
designed to enhance their existing Splunk environment.
Risks and Uncertainties facing the Company
As an
early-stage company with a limited operating history, the Company
has experienced losses since its inception. The Company’s
independent auditors have issued a report questioning the
Company’s ability to continue as a going concern. That is,
the Company needs to create a source of revenue or locate
additional financing in order to continue its developmental plans.
As a development stage company, management of the Company has
experience in developing technology and cybersecurity similar to
that planned by the Company but limitation in marketing and
distributing such services and products on a broad
scale.
One of
the biggest challenges facing the Company is the ability
to increase its sales revenue and raise adequate capital to
develop and execute project opportunities.
Due to
financial constraints, the Company has to date conducted limited
operations. If the Company were unable to develop strong and
reliable sources of funding for future growth opportunities, it is
unlikely that the Company could develop its operations to return
revenue sufficient to further develop its business plan. Moreover,
the above assumes that the Company’s efforts are met with
customer satisfaction in the marketplace and exhibit steady
adoption of its solutions amongst the potential base of customers,
neither of which are currently known or guaranteed.
Due to
these and other factors, the Company’s need for additional
capital, the Company’s independent auditors have issued a
report raising substantial doubt of the Company’s ability to
continue as a going concern.
3
SUMMARY OF THIS OFFERING
|
Securities being offered
|
|
Up to
5,000,000 shares of Common Stock is being offered for sale by the
Company, this collectively represents 17.4% of the currently issued
and outstanding shares of the Company’s Common Stock, if the
offering is fully subscribed. Our Common Stock is described in
further detail in the section of this prospectus titled
“DESCRIPTION OF SECURITIES.”
|
|
|
|
|
|
Per Share Price
|
|
$0.50
|
|
|
|
|
|
Duration of Offering
|
|
The
Shares are offered for a period of one hundred and eighty (180)
days from the effective date of this Prospectus unless extended by
our Board of Directors.
|
|
|
|
|
|
Number of shares Outstanding before the Offering(1)
|
|
23,755,321
|
|
|
|
|
|
Number of shares Outstanding after the Offering(1)
|
|
28,755,321
|
|
|
|
|
|
Net Proceeds to the Company
|
|
We will receive net proceeds of $2,500,000 if the offering is fully
subscribed for all 5,000,000 shares of Common Stock at the offering
price of $0.50 per Share. The full subscription price will be
payable at the time of subscription and accordingly, funds received
from subscribers in the Offering will be released to the Company
when subscriptions are received and accepted. No assurance can be
given that the net proceeds from the total number of shares offered
hereby, or any lesser net amount will be sufficient to accomplish
our goals. If proceeds from this offering are insufficient, we may
be required to seek additional capital. No assurance can be given
that we will be able to obtain such additional capital, or even if
available, that such additional capital will be available on terms
acceptable to us.
|
|
|
|
|
|
Use of Proceeds
|
|
The Company shall use the proceeds from the sale of the Shares for
working capital and general corporate purposes and shall not,
directly or indirectly, use such proceeds for any loan to or
investment in any other corporation, partnership, enterprise, or
other person (except in connection with its currently existing
direct or indirect Subsidiaries).
|
|
|
|
|
|
Risk Factors
|
|
An investment in our Common Stock involves a high degree of risk.
You should carefully consider the risk factors set forth under
“Risk Factors” section hereunder and the other
information contained in the prospectus before making an investment
decision regarding our Common Stock.
|
|
|
|
|
|
OTCQB Symbol
|
|
Our
Common Stock is currently quoted on the OTCQB Venture Marketplace
operated by OTC Markets Group (the “OTCQB”) under the
symbol “TGCB”.
|
(1) The
number of shares of our Common Stock outstanding before this
offering is based on 23,755,321 shares of our common stock
outstanding as of October 15, 2021, and excludes, as of that date
the issuance of 3,014,246 shares of Common Stock issuable upon
exercise of warrants outstanding as of October 15, 2021, having a
weighted average exercise price of $0.25 per
share;
4
SUMMARY FINANCIAL
INFORMATION
The following tables set forth a summary of our historical
financial data as of, and for the period ended on, the dates
indicated. We have derived the statements of operations data for
the fiscal years ended June 30, 2021 and September 6, 2019
(inception) to June 30, 2020 from our audited financial statements
included in this prospectus. Historical results for any prior
period are not necessarily indicative of results to be expected in
any future period. You should read the following summary financial
data together with our financial statements and the related notes
appearing at the end of this prospectus and the
"Capitalization” and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" sections of this
prospectus.
|
|
Fiscal Year
Ended June 30, 2021
|
September 6,
2019 (inception) to June 30, 2020
|
|
STATEMENT OF
OPERATIONS DATA
|
|
|
|
Revenue
|
$8,100
|
$2,325
|
|
Operating &
administration expenses
|
$674,918
|
$79,527
|
|
Net income (loss)
from operations
|
$(666,818)
|
$(77,202)
|
|
Other income
(expense)
|
$(256,362)
|
$-
|
|
Net income
(loss)
|
$(923,180)
|
$(77,202)
|
|
Net loss per
share
|
$(0.07)
|
$(0.01)
|
|
Weighted average
number of shares
|
$13,566,628
|
$7,790,648
|
|
BALANCE SHEET
DATA
|
|
|
|
Total current
assets
|
$697,927
|
$82,022
|
|
Total
assets
|
$773,677
|
$103,522
|
|
Total current
liabilities
|
$45,631
|
$16,912
|
|
Total
liabilities
|
$45,631
|
$16,912
|
|
Stockholders’
equity
|
$728,046
|
$86,610
|
5
RISK
FACTORS
Investing in our common stock involves a great deal of risk.
Careful consideration should be made of the following factors as
well as other information included in this prospectus before
deciding to purchase our common stock. There are many risks that
affect our business and results of operations, some of which are
beyond our control. Our business, financial condition or operating
results could be materially harmed by any of these risks. This
could cause the trading price of our common stock to decline, and
you may lose all or part of your investment. Additional risks that
we do not yet know of or that we currently think are immaterial may
also affect our business and results of operations.
SUMMARY OF RISKS
●
The Company has
limited revenues to date and limited operating history of its own,
and as such, any prospective investor can only assess the
Company’s profitability or performance on a limited basis to
date.
●
We have a limited
history of operations and unless we are able to successfully
execute our business plan, our business and operating results will
suffer, resulting in the complete failure of our
business.
●
The Company has a
correspondingly small financial and accounting
organization.
●
Being a public
company may strain the Company's resources, divert
management’s attention and affect its ability to attract and
retain qualified officers and director
●
The Company may not
be able to continue as a going concern.
●
Because we do not
have an audit committee, shareholders will have to rely on the
directors, who are not independent, to perform these
functions.
●
To date, we have
not generated sufficient revenues from operations, and we may have
additional capital requirements to continue our operations, but
they might not be available to us on favorable terms or at all, and
if unavailable our ability to run our business will be
impaired.
●
The Company depends
on its management team and employees to operate its business
effectively.
●
If the Company is
unable to develop and introduce new products and improvements, the
Company may be unable to compete in the
marketplace.
●
If
the IT security market does not continue to adopt our security
solutions, our sales will not grow as quickly as anticipated, or at
all, and our business, results of operations and financial
condition would be harmed.
●
Real
or perceived defects, errors or vulnerabilities in our products or
services, the misconfiguration of our products, the failure of our
products or services to block malware or prevent a security breach,
or the failure of customers to take action on attacks identified by
our products could harm our reputation and adversely impact our
business, financial position and results of operations
●
If
the prices we charge for our services are unacceptable to our
customers, our operating results will be harmed.
6
RISKS RELATED TO OUR BUSINESS AND INDUSTRY
The Company has limited operating history of its own, and as such,
any prospective investor can only assess the Company’s
profitability or performance on a limited basis to
date.
The
Company was incorporated on September 6, 2019. Because the Company
is an early-stage company with limited operating history, it is
impossible for an investor to assess the performance of the Company
or to determine whether the Company will meet its projected
business plan. The Company has limited financial results upon which
an investor may judge its potential. As a company that only
recently emerged from the development-stage; We have had de minimis revenues to date.
Consequently, we are subject to all the risks and uncertainties
inherent in a new business and in connection with the development
and sale of new products and services. As a result, we still must
establish many corporate functions necessary to operate our
business, including finalizing our administrative structure,
continuing our product development, assessing and expanding our
marketing activities, implementing financial systems and controls
and personnel recruitment. Accordingly, you should consider the
Company’s prospects in light of the costs, uncertainties,
delays, and difficulties frequently encountered by companies in
this early stage of development. You should carefully consider the
risks and uncertainties that a company, such as ours, with a
limited operating history will face. In particular, you should
consider that we cannot provide assurance that we will be able
to:
|
|
●
|
successfully
implement or execute our current business plan;
|
|
|
●
|
maintain
our management team;
|
|
|
●
|
raise
sufficient funds in the capital markets to effectuate our business
plan;
|
|
|
●
|
attract,
enter into or maintain contracts with, and retain customers;
and/or
|
|
|
●
|
compete
effectively in the extremely competitive environment in which we
operate.
|
If we cannot successfully accomplish any of the foregoing
objectives, our business may not succeed.
The Company has a correspondingly small financial and accounting
organization. Being a public company may strain the Company's
resources, divert management’s attention and affect its
ability to attract and retain qualified officers and
directors.
The
Company is an early-stage company with no developed finance and
accounting organization and the rigorous demands of being a public
company require a structured and developed finance and accounting
group. The requirements of being a public company subject to the
Securities Act of 1933 and Securities Exchange Act of 1934, which
we intend to register under, and regulations promulgated thereunder
entail significant accounting, legal and financial compliance costs
which may be prohibitive to the Company as it develops its business
plan, services and scope. These costs have made, and will continue
to make, some activities more difficult, time consuming or costly
and may place significant strain on its personnel, systems and
resources.
7
The
Securities Exchange Act requires, among other things, that
companies maintain effective disclosure controls and procedures and
internal control over financial reporting. In order to maintain the
requisite disclosure controls and procedures and internal control
over financial reporting, significant resources and management
oversight are required. As a result, management’s attention
may be diverted from other business concerns, which could have a
material adverse effect on the development of the Company's
business, financial condition and results of
operations.
These
rules and regulations may also make it difficult and expensive for
the Company to obtain director and officer liability insurance. If
the Company is unable to obtain adequate director and officer
insurance, its ability to recruit and retain qualified officers and
directors, especially those directors who may be deemed
independent, will be significantly curtailed.
The Company expects to incur additional expenses and may ultimately
never be profitable.
The
Company has only recently emerged from its status as a
development-stage company, and it has limited operations to date.
The Company will need to continue to generate revenue to achieve
and maintain profitability. To become profitable, the Company must
successfully develop and operate its product sales and marketing
business. These processes involve many factors that are beyond the
Company’s control, including the type of competition that the
Company may encounter. Ultimately, in spite of the Company’s
best or reasonable efforts, the Company may never actually generate
revenues sufficient to cover operating expenses or become
profitable.
The
Company may not be able to continue as a going
concern.
The
ability of the Company to continue as a going concern is dependent
on the Company’s ability to fund future operations through
additional financing from investors and/or lenders or through the
sale of its securities or through development of its operations.
Due to these and other factors, there is substantial doubt of the
Company’s ability to continue as a going
concern.
The Company’s independent auditors have issued a report
raising a substantial doubt of the Company’s ability to
continue as a going concern.
In
their audited financial report, the Company’s independent
auditors have issued added an explanatory paragraph that unless the
Company is able to generate sufficient cash flows from operations
and/or obtain additional financing, there is a substantial doubt as
to its ability to continue as a going concern. The Company
anticipates that it would need substantial capital over the next 12
months to continue as a going concern to expand its operations in
accordance with its current business plan.
No assurance of market acceptance.
Even if
the Company successfully markets, sells and distributes technology
products and services, there can be no assurance that the market
reception will be positive for the Company or its
ventures.
The
widespread adoption and use of the Company’s cybersecurity
products will represent fundamental change in the cybersecurity
industry. As with any new technology, there is a substantial risk
that potential customers may not accept the potential benefits of
the Company’s products. Market acceptance of Company’s
products will depend, in large part, upon the ability of Company to
demonstrate the performance advantages and cost-effectiveness of
its products over competing products. There can be no assurance
that Company will be able to market its technology successfully on
a widespread basis or that any of Company’s current or future
products or services will be accepted in the marketplace.
Furthermore, Company intends to develop products and systems and
sell them at a price assumed by Company sufficient to generate a
profit. Even if Company’s products and services are accepted
in the industry, the market for its products may not be able to
support Company’s pricing structure.
We incur increased costs and demands upon management as a result of
complying with the laws and regulations affecting public companies,
which could harm our operating results.
8
As a
public company, we incur significant additional legal, accounting
and other expenses that we did not incur as a private company,
including costs associated with public company reporting
requirements. We also incur costs associated with current corporate
governance requirements, including requirements under Section 404
and other provisions of the Sarbanes-Oxley Act, as well as rules
implemented by the Securities and Exchange Commission, or SEC, and
the exchange on which we list our shares of common stock for
trading. The expenses incurred by public companies for reporting
and corporate governance purposes have increased dramatically in
recent years. We expect these rules and regulations to
substantially increase our legal and financial compliance costs and
to make some activities more time consuming and costly. We are
unable to currently estimate these costs with any degree of
certainty. We also expect these new rules and regulations may make
it more difficult and more expensive for us to obtain director and
officer liability insurance, and we may be required to accept
reduced policy limits and coverage or incur substantially higher
costs to obtain the same or similar coverage previously available.
As a result, it may be more difficult for us to attract and retain
qualified individuals to serve on our board of directors or as our
executive officers. Currently we do not have a system of checks and
balances in place covering our financial operations and investors
will bear the economic risk associated with the lack such
oversight.
Because we do not have an audit committee, shareholders will have
to rely on the directors, who are not independent, to perform these
functions.
We do
not have an audit or compensation committee comprised of
independent directors. These functions are performed by the board
of directors as a whole. The members of the Board of Directors are
not independent directors. Thus, there is a potential conflict in
that the board members are also engaged in management and
participates in decisions concerning management compensation and
audit issues that may affect management performance.
To date, we have not generated sufficient revenues from operations,
and we may have additional capital requirements to continue our
operations, but they might not be available to us on favorable
terms or at all, and if unavailable our ability to run our business
will be impaired.
As of
the date of this Prospectus, we have limited working capital
and the Company has relied primarily
on equity and debt financing to carry on its business. As a
result, it is impossible to expand our operations and we are
totally dependent upon future financings to sustain and grow our
business. We have warrants outstanding, which if exercised in full
we may receive up to $753,562 however, there is no assurance
shareholders will exercise. If we were to receive no further funds
and investor warrants are not exercised, we may not have sufficient
capital to fully implement our business strategy and would have to
stagger our development. If we are unable to generate sufficient
revenues to cover operating expenses or raise additional funds, we
are unlikely establish or maintain our business operations. We
currently have no other plans or arrangements to raise capital for
our business.
The proposed operations of the Company are speculative; there are
no assurances that we will receive any revenue.
The
success of the proposed business plan of the Company will depend to
a great extent on the operations, financial condition and
management of the Company. Although the Company has a business plan
and intends to execute its overall business strategy, limited
operations have been conducted to date and the proposed operations
of the Company remain speculative. Technology development generally
may continue for years before any revenue is realized or generated,
if at all.
The Company’s success is dependent on current management, who
may be unable to devote sufficient time to the development of the
Company’s business plan, which could cause the business to
fail.
The
Company's future success is dependent in large part upon its
ability to understand and develop the business plan and to attract
and retain highly skilled management, operational and executive
personnel. The Company is heavily dependent on the management
experience of our officers, directors and advisors. Currently there
are no employment contracts by and between any
officer/director/employee of the Company. If the Company lost any
of its officers or directors, it would negatively impact and delay
operations and there is no assurance that suitable replacements
could be found. Additionally, all our officers and directors are
employed outside of the Company, and some will only be able to
devote a limited amount of time to the development of the
Company’s business plan. If management is required to spend
additional time with their outside employment, they may not have
sufficient time to devote to the Company and we would be unable to
develop our business plan, resulting in the failure of our
business.
9
The Company depends on its management team and employees to operate
its business effectively.
In
particular, due to the relatively early stage of the Company's
business, its future success is highly dependent on its officers,
to provide the necessary experience and background to execute the
Company's business plan. We presently expect each of our officers
and directors to devote such amount of time as they reasonably
believe is necessary to our business; our CEO is currently working
full time for the Company while our President devotes 8-10 hours a
week. The loss of any officer’s services could impede,
particularly initially as the Company builds a record and
reputation, its ability to develop its objectives, particularly in
its ability to develop, commercialize and further its business and
products.
The
Company’s business also depends on its ability to attract and
retain talented product marketing and sales professionals. Any loss
of key members of the team and the customer relationship associated
with the member can impact the business significantly.
Costs associated with our business, including production and input
costs are not fixed and might increase, creating uncertainty about
our ability to meet our plan of operations.
We have
not established long-term contracts with our consultants or other
third-party suppliers we intend to rely on. The lack of long-term
contracts could result in an increase in what we pay these
individuals for their services. An increase in the production costs
will reduce our margins and might make our projects uneconomical,
leading to the failure of our business.
We are in the development stage and have conducted no market
research on the viability of our products or services. There is no
guarantee that we will be able to sell enough of our products or
services to generate a profit, and failure to become profitable
will result in the failure of our business.
The
market for our products and services is limited in scope and there
is no assurance that our products or services will generate market
acceptance and result in revenue. We have developed the products
and services with no market research and there is no assurance that
we will be able to respond to the rapidly evolving markets in the
entertainment industry. The inability to sell our products or
services will result in the failure of our business.
Government regulation could
negatively impact the business.
The
Company’s business segments may be subject to various
government regulations in the jurisdictions in which they operate.
Due to the potential wide scope of the Company’s operations,
the Company could be subject to regulation by various political and
regulatory entities, including various local and municipal agencies
and government sub-divisions. The Company may incur increased costs
necessary to comply with existing and newly adopted laws and
regulations or penalties for any failure to comply. The
Company’s operations could be adversely affected, directly or
indirectly, by existing or future laws and regulations relating to
its business or industry.
The Company's election not to opt out of JOBS Act extended
accounting transition period may not make its financial statements
easily comparable to other companies.
Pursuant
to the JOBS Act of 2012, as an emerging growth company the Company
can elect to opt out of the extended transition period for any new
or revised accounting standards that may be issued by the PCAOB or
the SEC. The Company has elected not to opt out of such extended
transition period which means that when a standard is issued or
revised and it has different application dates for public or
private companies, the Company, as an emerging growth company, can
adopt the standard for the private company. This may make
comparison of the Company's financial statements with any other
public company which is not either an emerging growth company nor
an emerging growth company which has opted out of using the
extended transition period difficult or impossible as possible
different or revised standards may be used.
The recently enacted JOBS Act will also allow the Company to
postpone the date by which it must comply with certain laws and
regulations intended to protect investors and to reduce the amount
of information provided in reports filed with the SEC.
10
The
recently enacted JOBS Act is intended to reduce the regulatory
burden on “emerging growth companies. The Company meets the
definition of an emerging growth company and so long as it
qualifies as an “emerging growth company,” it will,
among other things: be exempt from the provisions of Section 404(b)
of the Sarbanes-Oxley Act requiring that its independent registered
public accounting firm provide an attestation report on the
effectiveness of its internal control over financial reporting; be
exempt from the “say on pay” provisions (requiring a
non-binding shareholder vote to approve compensation of certain
executive officers) and the “say on golden parachute”
provisions (requiring a non-binding shareholder vote to approve
golden parachute arrangements for certain executive officers in
connection with mergers and certain other business combinations) of
the Dodd-Frank Act and certain disclosure requirements of the Dodd-
Frank Act relating to compensation of its chief executive officer;
be permitted to omit the detailed compensation discussion and
analysis from proxy statements and reports filed under the
Securities Exchange Act of 1934 and instead provide a reduced level
of disclosure concerning executive compensation; and be exempt from
any rules that may be adopted by the Public Company Accounting
Oversight Board requiring mandatory audit firm rotation or a
supplement to the auditor’s report on the financial
statements.
Although
the Company is still evaluating the JOBS Act, it currently intends
to take advantage of some or all of the reduced regulatory and
reporting requirements that will be available to it so long as it
qualifies as an “emerging growth company”. The Company
has elected not to opt out of the extension of time to comply with
new or revised financial accounting standards available under
Section 102(b) of the JOBS Act. Among other things, this means that
the Company's independent registered public accounting firm will
not be required to provide an attestation report on the
effectiveness of the Company's internal control over financial
reporting so long as it qualifies as an emerging growth company,
which may increase the risk that weaknesses or deficiencies in the
internal control over financial reporting go undetected. Likewise,
so long as it qualifies as an emerging growth company, the Company
may elect not to provide certain information, including certain
financial information and certain information regarding
compensation of executive officers that would otherwise have been
required to provide in filings with the SEC, which may make it more
difficult for investors and securities analysts to evaluate the
Company. As a result, investor confidence in the Company and the
market price of its common stock may be adversely
affected.
If the Company is unable to develop
and introduce new products and improvements, the Company may be
unable to compete in the marketplace.
The
market for the Company’s cybersecurity products and services
is characterized by evolving industry requirements. Accordingly,
the Company’s future performance depends on a number of
factors, including its ability to identify emerging technological
trends in its target markets, to develop and maintain competitive
products, to enhance its products by adding innovative features
that differentiate the Company’s products from those of its
competitors, and to manufacture and bring products to market
quickly at cost-effective prices. There can be no assurance,
however, that the Company will successfully complete the
development of any products, that such products will achieve market
acceptance that such products will receive regulatory approvals
where required, that any required regulatory approvals will be
received in a timely manner, or that such products can be produced
at competitive prices, or at all. In the event that its products
are not timely developed, do not gain market acceptance or cannot
be manufactured at competitive prices, the Company’s business
could be materially adversely affected
War, terrorism, other acts of violence or natural or manmade
disasters such as a global pandemic may affect the markets in which
the Company operates, the Company’s customers, the
Company’s delivery of products and customer service, and
could have a material adverse impact on our business, results of
operations, or financial condition.
The Company’s business may be adversely affected by
instability, disruption or destruction in a geographic region in
which it operates, regardless of cause, including war, terrorism,
riot, civil insurrection or social unrest, and natural or manmade
disasters, including famine, food, fire, earthquake, storm or
pandemic events and spread of disease (including the recent
outbreak of the coronavirus commonly referred to as “COVID-
19”).
Such events may cause customers to suspend their decisions on using
the Company’s products and services and give rise to sudden
significant changes in regional and global economic conditions and
cycles that could interfere with purchases of goods or services.
These events also pose significant risks to the Company’s
personnel and operations, which could materially adversely affect
the Company’s financial results.
11
Any significant disruption to communications and travel, including
travel restrictions and other potential protective quarantine
measures against COVID-19 by governmental agencies, could make it
difficult for the Company to deliver goods services to its
customers. War, riots, or other disasters may increase the need for
our products and demand may make it difficult for use to provide
products to customers. Further, travel restrictions and protective
measures against COVID-19 could cause the Company to incur
additional unexpected labor costs and expenses or could restrain
the Company’s ability to retain the highly skilled personnel
the Company needs for its operations. The extent to which COVID-19
impacts the Company’s business, sales and results of
operations will depend on future developments, which are highly
uncertain and cannot be predicted.
We believe COVID-19 has not negatively affected our corporate
operations but could at any time and without notice in the
foreseeable future. As a result of COVID-19, at any time we may be
subject to increased costs, supply interruptions, and difficulties
in obtaining raw materials and components. COVID-19 has resulted in
restrictions, postponements and cancelations and the impact, extent
and duration of the government-imposed restrictions on travel and
public gatherings, including most recent talks of vaccine mandates
for travel, as well as the overall effect of the COVID-19 virus is
currently unknown.
Risks Relating to the Cyber Security Industry
If the IT security market does not continue to adopt our security
solutions, our sales will not grow as quickly as anticipated, or at
all, and our business, results of operations and financial
condition would be harmed.
Our future success depends on market adoption of our approach to IT
security, which combines our technology, threat intelligence and
security expertise in solutions that detect and prevent threats,
measure security effectiveness, investigate and respond to breaches
and enable customers to adapt to changes in the threat environment.
We are seeking to disrupt the IT security market with our security
solutions. Our solutions interoperate with, but do not replace,
other IT security products. Enterprises that use other security
products, including signature-based and advanced products, for
their IT security may be hesitant to purchase our security
solutions if they believe their existing products provide a level
of IT security that is sufficient to meet their needs. Currently,
many enterprises have not allocated a fixed portion of their
budgets to separate standalone threat intelligence or solutions
that evaluate security effectiveness. As a result, to expand our
customer base, we need to convince potential customers to allocate
a portion of their discretionary budgets to purchase our
technology, threat intelligence and expertise. However, even if we
are successful in doing so, any future deterioration in general
economic conditions may cause our customers to cut their overall IT
spending, and such cuts may fall disproportionately on solutions
like ours. If we do not succeed in convincing customers that our
solutions should be an integral part of their overall approach to
IT security and that a fixed portion of their annual IT budgets
should be allocated to our solutions, our sales will not grow as
quickly as anticipated, or at all, which would have an adverse
impact on our business, results of operations and financial
condition
Even if there is significant demand for security solutions like
ours, if our competitors include functionality that is, or is
perceived to be, better than or equivalent to that of our
solutions, we may have difficulty increasing the market penetration
of our solutions. Furthermore, even if the functionality offered by
other IT security providers is different and more limited than the
functionality of our solutions, organizations may elect to accept
such limited functionality in lieu of adding solutions and services
from additional vendors like us, especially if competitor offerings
are free or available at a lower cost.
In addition, if one or more enterprises share, on a free or nearly
free basis, threat intelligence with other organizations, then
those agencies or organizations might have less demand for
additional threat intelligence and may purchase less of our
standalone threat intelligence offerings.
If enterprises do not adopt our security solutions for any of the
reasons discussed above or for other reasons not contemplated, our
sales would not grow as quickly as anticipated, or at all, and our
business, results of operations and financial condition would be
harmed.
We face intense competition and
could lose market share to our competitors, which could adversely
affect our business, financial condition and results of
operations.
12
The market for security products and services is intensely
competitive and characterized by rapid changes in technology,
customer requirements, industry standards, threat vectors and
frequent new product introductions and improvements. We anticipate
continued challenges from current competitors, which in many cases
are more established and enjoy greater resources than us, as well
as by new entrants into the industry. If we are unable to
anticipate or effectively react to these competitive challenges,
our competitive position could weaken, and we could experience a
decline in our growth rate or revenue that could adversely affect
our business and results of operations.
Our competitors and potential competitors include threat
intelligence vendors of substantial size such as Recorded Future or
ThreatQuotient that may emulate or integrate security features
similar to ours into their own products; independent security
vendors that offer products or features that claim to perform
similar functions to our platform; small and large companies,
including new market entrants, that offer niche security solutions
that compete with some of the features present in our solutions;
and other providers of incident response and compromise assessment
services. Other IT providers offer, and may continue to introduce,
security features that compete with our platform, either in
stand-alone security products or as additional features in their
network infrastructure products. Many of our existing competitors
have, and some of our potential competitors could have, substantial
competitive advantages such as:
|
●
|
greater name recognition, longer operating histories and larger
customer bases;
|
|
||||||
|
●
|
larger sales and marketing budgets and resources;
|
|
|
|||||
|
●
|
broader distribution and established relationships with channel and
distribution partners and customers;
|
|||||||
|
●
|
greater customer support resources;
|
|
|
|
||||
|
●
|
greater resources to make acquisitions or enter into strategic
partnerships;
|
|
|
|
|
|||
|
●
|
lower labor and research and development costs;
|
|
|
|
|
|
||
|
●
|
larger
and more mature intellectual property portfolios; and
|
|
|
|
|
|
||
|
●
|
substantially greater financial, technical, and other
resources.
|
|
|
|
|
|
|
|
In addition, some of our competitors have substantially broader
product offerings and may be able to leverage their relationships
with distribution partners and customers based on other products or
incorporate functionality into existing products to gain business
in a manner that discourages users from purchasing our products,
subscriptions and services, including by selling at zero or
negative margins, product bundling or offering closed technology
platforms. Potential customers may also prefer to purchase from
their existing suppliers rather than a new supplier regardless of
product performance or features. As a result, even if the features
of our platform are superior, customers may not purchase our
products. In addition, new innovative start-up companies, and
larger companies that are making significant investments in
research and development, may invent similar or superior products
and technologies that compete with our platform. Our current and
potential competitors may also establish cooperative relationships
among themselves or with third parties that may further enhance
their resources. Further, as our customers refresh the security
products bought in prior years, they may seek to consolidate
vendors, which may result in current customers choosing to purchase
products from our competitors on an ongoing basis.
Some of our competitors have made or could make acquisitions of
businesses that allow them to offer more competitive and
comprehensive solutions. As a result of such acquisitions, our
current or potential competitors may accelerate the adoption of new
technologies that better address end-customer needs, devote greater
resources to bring these products and services to market, initiate
or withstand substantial price competition, or develop and expand
their product and service offerings more quickly than we do. These
competitive pressures in our market or our failure to compete
effectively may result in price reductions, fewer orders, reduced
revenue and gross margins, and loss of market share.
If we are unable to compete successfully, or if competing
successfully requires us to take costly actions in response to the
actions of our competitors, our business, financial condition and
results of operations could be adversely affected.
Real or perceived defects, errors or vulnerabilities in our
products or services, the misconfiguration of our products, the
failure of our products or services to block malware or prevent a
security breach, or the failure of customers to take action on
attacks identified by our products could harm our reputation and
adversely impact our business, financial position and results of
operations.
13
Because our products and services are complex, they have contained
and may contain design or manufacturing defects or errors that are
not detected until after their deployment. Our products also
provide our customers with the ability to customize a multitude of
settings, and it is possible that a customer could misconfigure our
products or otherwise fail to configure our products in an optimal
manner. Such defects and misconfigurations of our products could
cause our products or services to be vulnerable to security
attacks, cause them to fail to secure networks and detect threats,
or temporarily interrupt the networking traffic of our customers.
In addition, because the techniques used by cyber-criminals to
access or sabotage networks change frequently and generally are not
recognized until launched against a target, there is a risk that an
advanced attack could emerge that our products and services are
unable to detect or prevent. Moreover, as our products and services
are adopted by an increasing number of enterprises, it is possible
that the individuals and organizations behind advanced malware
attacks will focus on finding ways to defeat our products and
services. If this happens, our networks, products, services and
subscriptions could be targeted by attacks specifically designed to
disrupt our business and undermine the perception that our products
and services are capable of providing superior IT security, which,
in turn, could have a serious impact on our reputation as a
provider of security solutions. In addition, defects or errors in
our subscription updates or our products could result in a failure
of our subscriptions to effectively update customers' hardware and
cloud-based products. Our data centers and networks may experience
technical failures and downtime, may fail to distribute appropriate
updates, or may fail to meet the increased requirements of a
growing installed customer base, any of which could temporarily or
permanently expose our customers’ networks, leaving their
networks unprotected against the latest security threats. Moreover,
our products must interoperate with our customers’ existing
infrastructure, which often have different specifications, utilize
multiple protocol standards, deploy products from multiple vendors,
and contain multiple generations of products that have been added
over time. As a result, unanticipated failures could occur if a
customer deploys our products in an untested configuration.
Similarly, if we inadvertently update our products with an
erroneous configuration or untested detection content, invalid
detections or product downtime could occur. Any of these situations
could result in negative publicity to us, damage to our reputation,
declining sales, increased expenses and customer relations issues,
and therefore adversely impact our business, financial position and
results of operations.
If any of our customers becomes infected with malware after using
our products or services, such customer could be disappointed with
our products and services, regardless of whether our products or
services blocked the theft of any of such customer’s data or
would have blocked such theft if configured properly. Similarly, if
our products detect attacks against a customer but the customer
does not take action against the attack, the public may erroneously
believe that our products were not effective. Furthermore, if any
enterprises that are publicly known to use our products or services
are the subject of an advanced cyber attack that becomes
publicized, our other current or potential customers may look to
our competitors for alternatives to our products and services. Real
or perceived security breaches of our customers’ networks
could cause disruption or damage to their networks or other
negative consequences and could result in negative publicity to us,
damage to our reputation, declining sales, increased expenses and
customer relations issues.
Furthermore, our products and services may fail to detect malware,
ransomware, viruses, worms or similar threats for any number of
reasons, including our failure to enhance and expand our products
and services to reflect industry trends, new technologies and new
operating environments, the complexity of the environment of our
clients and the sophistication of malware, viruses and other
threats. In addition, from time to time, firms test our products
against other security products. Our products may fail to detect or
prevent threats in any particular test for a number of reasons,
including misconfiguration. To the extent potential customers,
industry analysts or testing firms believe that the occurrence of a
failure to detect any particular threat is a flaw or indicates that
our products or services do not provide significant value, our
reputation and business could be harmed. Failure to keep pace with
technological changes in the IT security industry and changes in
the threat landscape could adversely affect our ability to protect
against security breaches and could cause us to lose customers. In
addition, in the event that a customer suffers a cyber attack, we
could be subject to claims based on a misunderstanding of the scope
of our contractual warranties or the protection afforded by the
Support Anti-Terrorism by Fostering Effective Technologies Act of
2002 (the "SAFETY Act").
14
In addition, we cannot assure you that any limitation of liability
provisions in our customer agreements, contracts with third-party
vendors and service providers or other contracts would be
enforceable or adequate or would otherwise protect us from any
liabilities or damages with respect to any particular claim
relating to a security breach or other security-related matter.
While our insurance policies include liability coverage for certain
of these matters, if we experienced a widespread security breach or
other incident that impacted a significant number of our customers
to whom we owe indemnity obligations, we could be subject to
indemnity claims or other damages that exceed our insurance
coverage. We also cannot be certain that our insurance coverage
will be adequate for data handling or data security liabilities
actually incurred, that insurance will continue to be available to
us on economically reasonable terms, or at all, or that any future
claim will not be excluded or otherwise be denied coverage by any
insurer. The successful assertion of one or more large claims
against us that exceed available insurance coverage, or the
occurrence of changes in our insurance policies, including premium
increases or the imposition of large deductible or co-insurance
requirements, could have a material adverse effect on our business,
including our financial condition, operating results and
reputation.
Any real or perceived defects, errors or vulnerabilities in our
products and services, or any other failure of our products and
services to detect an advanced threat, could result
in:
|
●
|
a loss of existing or potential customers or channel
partners;
|
|
|
||
|
●
|
delayed or lost revenue and harm to our financial condition and
results of operations;
|
|
|||
|
●
|
a delay in attaining, or the failure to attain, market
acceptance;
|
|
|
|
|
|
●
|
the expenditure of significant financial and product development
resources in efforts to analyze, correct, eliminate, or work around
errors or defects, to address and eliminate vulnerabilities, or to
identify and ramp up production with alternative third-party
manufacturers;
|
||||
|
●
|
an increase in warranty and other claims, or an increase in the
cost of servicing warranty and other claims, either of which would
adversely affect our gross margins;
|
||||
|
●
|
harm
to our reputation or brand; and
|
||||
|
●
|
claims and litigation, regulatory inquiries, or investigations,
enforcement actions, and other claims and liabilities, all of which
may be costly and burdensome and further harm our
reputation.
|
||||
A network or data security incident against us, whether actual,
alleged or perceived, may harm our reputation, create liability and
adversely impact our financial results.
Increasingly, companies are subject to a wide variety of attacks on
their networks on an ongoing basis. In addition to traditional
cyber-criminals, malicious code (such as viruses and worms),
phishing attempts, employee theft or misuse, and denial of service
attacks, sophisticated nation-state and nation-state supported
actors engage in intrusions and attacks (including advanced
persistent threat intrusions) and add to the risks to our internal
networks, cloud deployed enterprise and customer facing
environments and the information they store and process. We and/or
our third-party service providers may face security threats and
attacks from a variety of sources. Our data, corporate systems,
third-party systems and security measures may be breached due to
the actions of outside parties, employee error, malfeasance, a
combination of these, or otherwise, including social engineering
and employee and contractor error or malfeasance, and, as a result,
an unauthorized party may obtain access to our systems, networks,
or data. We may face difficulties or delays in identifying or
otherwise responding to any attacks or actual or potential breaches
of security. Furthermore, as a provider of security solutions, we
may be a more attractive target for such attacks. A breach in our
data security or an attack against our service availability, or
that of our third-party service providers, could impact our
networks or networks secured by our products and subscriptions,
creating system disruptions or slowdowns and exploiting security
vulnerabilities of our products, and the information stored on our
networks or those of our third-party service providers could be
accessed, publicly disclosed, altered, lost, or stolen, which could
result in a loss of intellectual property or loss of data and
subject us to liability and cause us financial
harm.
Any actual, alleged or perceived breach of network security in our
systems or networks, or any other actual, alleged or perceived data
security incident we or our third-party service providers suffer,
could result in damage to our reputation, negative publicity, loss
of channel partners, customers and sales, loss of competitive
advantages over our competitors, increased costs to remedy any
problems and otherwise respond to any incident, regulatory
investigations and enforcement actions, costly litigation, and
other liability. In addition, we may incur significant costs and
operational consequences of investigating, remediating, eliminating
and putting in place additional tools and devices designed to
prevent actual or perceived security breaches and other security
incidents, as well as the costs to comply with any notification
obligations resulting from any security incidents. Any of these
negative outcomes could adversely impact the market perception of
our products and subscriptions and end-customer and investor
confidence in our company and could seriously harm our business or
operating results.
15
If we are unable to retain our customers, renew and expand our
relationships with them, and add new customers, we may not be able
to sustain revenue growth and we may not achieve or maintain
profitability in the future.
We are a relatively new company with limited operating history.
Although we anticipate rapid growth based on our industry
experience, we may not experience growth due to a myriad of factors
and any success that we may experience will depend, in large part,
on our ability to, among other things:
|
●
|
maintain, renew and expand our existing customer base;
|
|
||||||
|
●
|
win new customers to our solutions;
|
|
|
|||||
|
●
|
increase revenues from existing customers through increased use of
our products, subscriptions and services within their
organizations;
|
|||||||
|
●
|
improve the capabilities of our products and subscriptions through
research and development;
|
|
|
|
||||
|
●
|
continue to develop our cloud-based solutions;
|
|
|
|
|
|||
|
●
|
maintain the rate at which customers purchase our subscriptions and
support;
|
|
|
|
|
|
||
|
●
|
continue to successfully expand our business domestically and
internationally; and
|
|
|
|
|
|
|
|
|
●
|
successfully
compete with other companies.
|
|||||||
If
we are unable to maintain consistent or increasing revenue growth
or if our revenues decline, it may be difficult to achieve and
maintain profitability and our business and financial results could
be adversely affected.
16
If we are unable to sell additional products, subscriptions and
services, as well as renewals of our subscriptions and services, to
our customers, our future revenue and operating results will be
harmed.
As existing customers that purchase our platform have no
contractual obligation to renew their subscriptions and support and
maintenance services after the initial contract period, and given
our limited operating history, we may not be able to accurately
predict our retention rates. Our customers’ retention rates
may decline or fluctuate as a result of a number of factors,
including the level of their satisfaction with our platform, our
customer support, customer budgets and the pricing of our platform
compared with the products and services offered by our competitors.
If our customers renew their subscriptions, they may renew for
shorter contract lengths or on other terms that are less
economically beneficial to us. We cannot assure you that our
customers will renew their subscriptions, and if our customers do
not renew their subscriptions or renew them on less favorable
terms, our revenue may grow more slowly than expected, not grow at
all, or even decline.
We also depend on our installed customer base for future support
and maintenance revenue. We offer our support and maintenance
agreements for terms that generally range between one and three
years. If customers choose not to renew their support and
maintenance agreements or seek to renegotiate the terms of their
support and maintenance agreements prior to renewing such
agreements, our revenue may grow more slowly than expected, not
grow at all, or even decline.
Fluctuating
economic conditions make it difficult to predict revenue for a
particular period, and a shortfall in revenue may harm our business
and operating results.
Our revenue depends significantly on general economic conditions
and the demand for products in the IT security market. Economic
weakness, customer financial difficulties, and constrained spending
on IT security may result in decreased revenue and earnings. Such
factors could make it difficult to accurately forecast our sales
and operating results and could negatively affect our ability to
provide accurate forecasts to our contract manufacturers and manage
our inventory purchases, contract manufacturer relationships and
other costs and expenses. General economic weakness may lead to
longer collection cycles for payments due from our customers, an
increase in customer bad debt, restructuring initiatives and
associated expenses, and impairment of investments. Furthermore,
the continued uncertainty in worldwide credit markets may adversely
impact the ability of our customers to adequately fund their
expected capital expenditures, which could lead to delays or
cancellations of planned purchases of our platform.
Uncertainty about future economic conditions also makes it
difficult to forecast operating results and to make decisions about
future investments. Future or continued economic weakness for us or
our customers, failure of our customers and markets to recover from
such weakness, customer financial difficulties, and reductions in
spending on IT security could have a material adverse effect on
demand for our platform and consequently on our business, financial
condition and results of operations.
If the general level of advanced cyber attacks declines, or is
perceived by our current or potential customers to have declined,
our business could be harmed.
Our business is substantially dependent on enterprises recognizing
that advanced cyber attacks are pervasive and are not effectively
prevented by legacy security solutions. High visibility attacks on
prominent enterprises have increased market awareness of the
problem of advanced cyber attacks and help to provide an impetus
for enterprises to devote resources to protecting against advanced
cyber attacks, such as testing our platform, purchasing it, and
broadly deploying it within their organizations. If advanced cyber
attacks were to decline, or enterprises perceived that the general
level of advanced cyber attacks have declined, our ability to
attract new customers and expand our offerings within existing
customers could be materially and adversely affected. A change in
the threat landscape may reduce the demand from customers or
prospects for our solutions, and therefore could increase our sales
cycles and harm our business, results of operations and financial
condition.
17
If organizations do not adopt cloud-based SaaS-delivered security
solutions, our ability to grow our business and
results of
operations may be adversely affected.
We believe our future success will depend in large part on the
growth, if any, in the market for cloud-based SaaS-delivered
security solutions. The use of SaaS solutions to manage and
automate security and IT operations is at an early stage and
rapidly evolving. As such, it is difficult to predict its potential
growth, if any, customer adoption and retention rates, customer
demand for our solutions, or the success of existing competitive
products. Any expansion in our market depends on a number of
factors, including the cost, performance, and perceived value
associated with our solutions and those of our competitors. If our
solutions do not achieve widespread adoption or there is a
reduction in demand for our solutions due to a lack of customer
acceptance, technological challenges, competing products, privacy
concerns, decreases in corporate spending, weakening economic
conditions or otherwise, it could result in early terminations,
reduced customer retention rates, or decreased revenue, any of
which would adversely affect our business, results of operations,
and financial results. We do not know whether the trend in adoption
of cloud-based SaaS-delivered security solutions we have
experienced in the past will continue in the future. Furthermore,
if we or other SaaS security providers experience security
incidents, loss or disclosure of customer data, disruptions in
delivery, or other problems, the market for SaaS solutions as a
whole, including our security solutions, may be negatively
affected. You should consider our business and prospects in light
of the risks and difficulties we encounter in this new and evolving
market.
If we do not accurately anticipate and respond promptly to changes
in our customers’ technologies, business plans or security
needs, our competitive position and prospects could be
harmed.
The IT security market has grown quickly and is expected to
continue to evolve rapidly. Moreover, many of our customers operate
in markets characterized by rapidly changing technologies and
business plans, which require them to add numerous network access
points and adapt to increasingly complex IT networks, incorporating
a variety of hardware, software applications, operating systems and
networking protocols. As their technologies and business plans grow
more complex, we expect these customers to face new and
increasingly sophisticated methods of attack. We face
significant challenges in ensuring that our platform effectively
identifies and responds to these advanced and evolving attacks
without disrupting our customers’ network performance. As a
result of the continued rapid innovations in the technology
industry, including the rapid growth of smart phones, tablets and
other devices, the trend of “bring your own device” in
enterprises, an increasingly remote workforce, and the rapidly
evolving Internet of Things ("IOT"), we expect the networks of our
customers to continue to change rapidly and become more
complex.
We have identified a number of new products and enhancements to
that we believe are important to our success in the IT security
market, including our threat intelligence platform and continued
integration to existing cybersecurity SIEM solutions. There can be
no assurance that we will be successful in developing and
marketing, on a timely basis, such new products or enhancements or
that our new products or enhancements will adequately address the
changing needs of the marketplace. We may experience unanticipated
delays in the availability of new products and enhancements to our
platform and fail to meet customer expectations with respect to the
timing of such availability. If we do not quickly respond to the
rapidly changing and rigorous needs of our customers by developing,
releasing and making available on a timely basis new products and
enhancements to our platform, such as our threat intelligence
platform and enhancements to our SIEM integration solutions, that
can adequately respond to advanced threats and our customers’
needs, our competitive position and business prospects will be
harmed. Furthermore, from time to time, we or our competitors may
announce new products with capabilities or technologies that could
have the potential to replace or shorten the life cycles of our
existing products. There can be no assurance that announcements of
new products will not cause customers to defer purchasing our
existing products.
18
Additionally, the process of developing new technology is
expensive, complex and uncertain. The success of new products and
enhancements depends on several factors, including appropriate
component costs, timely completion and introduction,
differentiation of new products and enhancements from those of our
competitors, and market acceptance. To maintain our competitive
position, we must continue to commit significant resources to
developing new products or enhancements to our platform before
knowing whether these investments will be cost-effective or achieve
the intended results. There can be no assurance that we will
successfully identify new product opportunities, develop and bring
new products or enhancements to market in a timely manner, or
achieve market acceptance of our platform, or that products and
technologies developed by others will not render our platform
obsolete or noncompetitive. If we expend significant resources on
researching and developing products or enhancements to our platform
and such products or enhancements are not successful, our business,
financial position and results of operations may be adversely
affected.
Our current research and development efforts may not produce
successful products or enhancements to our platform that result in
significant revenue, cost savings or other benefits in the near
future, if at all.
We must continue to dedicate significant financial and other
resources to our research and development efforts if we are to
maintain our competitive position. However, developing products and
enhancements to our platform is expensive and time consuming, and
there is no assurance that such activities will result in
significant new marketable products or enhancements to our
platform, design improvements, cost savings, revenue or other
expected benefits. If we spend significant resources on research
and development and are unable to generate an adequate return on
our investment, our business and results of operations may be
materially and adversely affected.
If we are unable to increase sales to large organizations while
mitigating the risks associated with serving such customers, our
business, financial position and results of operations may
suffer.
Our growth strategy is dependent, in part, upon increasing sales of
our solutions to large enterprises. Sales to large customers
involve risks that may not be present (or that are present to a
lesser extent) with sales to smaller entities. These risks
include:
|
●
|
increased purchasing power and leverage held by large customers in
negotiating contractual arrangements with us;
|
||
|
●
|
more stringent or costly requirements imposed upon us in our
support service contracts with such customers, including stricter
support response times and penalties for any failure to meet
support requirements;
|
||
|
●
|
more complicated implementation processes;
|
|
|
|
●
|
longer sales cycles and the associated risk that substantial time
and resources may be spent on a potential customer that ultimately
elects not to purchase our platform or purchases less than we
hoped;
|
||
|
●
|
closer relationships with, and dependence upon, large technology
companies who offer competitive products; and
|
||
|
●
|
more
pressure for discounts and write-offs.
|
||
In addition, because security breaches with respect to larger,
high-profile enterprises are likely to be heavily publicized, there
is increased reputational risk associated with serving such
customers. If we are unable to increase sales of our offerings to
large enterprise customers while mitigating the risks associated
with serving such customers, our business, financial position and
results of operations may suffer.
If the prices we charge for our services are unacceptable to our
customers, our operating results will be harmed.
As the market for our services matures, or as new or existing
competitors introduce new products or services that compete with
ours, we may experience pricing pressure and be unable to renew our
agreements with existing customers or attract new customers at
prices that are consistent with our pricing model and operating
budget. If this were to occur, it is possible that we would have to
change our pricing model or reduce our prices, which could harm our
revenue, gross margin and operating results.
19
Seasonality may cause fluctuations in our revenue.
We believe there are significant seasonal factors that may cause us
to record higher revenue in some quarters compared with others. We
believe this variability is largely due to (i) our customers’
budgetary and spending patterns, as many customers spend the unused
portions of their discretionary budgets prior to the end of their
fiscal years, and (ii) our sales compensation plans, which are
typically structured around annual quotas and commission
rates.
Claims by others that we infringe their proprietary technology or
other rights could harm our business.
Technology companies frequently enter into litigation based on
allegations of patent infringement or other violations of
intellectual property rights. In addition, patent holding companies
seek to monetize patents they have purchased or otherwise obtained.
As we face increasing competition and gain an increasingly higher
profile, the possibility of intellectual property rights claims
against us grows. From time to time, third parties may assert, and
we expect that third parties will assert, claims of infringement of
intellectual property rights against us. Third parties may in the
future also assert claims against our customers or channel
partners, whom our standard license and other agreements obligate
us to indemnify against claims that our products infringe the
intellectual property rights of third parties. While we intend to
increase the size of our patent portfolio, many of our competitors
and others may now and in the future have significantly larger and
more mature patent portfolios than we have. In addition, future
litigation may involve patent holding companies or other patent
owners who have no relevant product offerings or revenue and
against whom our own patents may therefore provide little or no
deterrence or protection. Any claim of intellectual property
infringement by a third party, even a claim without merit, could
cause us to incur substantial costs defending against such claim,
could distract our management from our business and could require
us to cease use of such intellectual property.
Although third parties may offer a license to their technology or
other intellectual property, the terms of any offered license may
not be acceptable, and the failure to obtain a license or the costs
associated with any license could cause our business, financial
condition and results of operations to be materially and adversely
affected. We may also be subject to additional fees or be required
to obtain new licenses if any of our licensors allege that we have
not properly paid for such licenses or that we have improperly used
the technologies under such licenses. In addition, some licenses
may be non-exclusive, and therefore our competitors may have access
to the same technology licensed to us. If a third party does not
offer us a license to its technology or other intellectual property
on reasonable terms, or at all, we could be enjoined from continued
use of such intellectual property. As a result, we may be required
to develop alternative, non-infringing technology, which could
require significant time (during which we could be unable to
continue to offer our affected products, subscriptions or
services), effort, and expense and may ultimately not be
successful. Furthermore, a successful claimant could secure a
judgment or we may agree to a settlement that prevents us from
distributing certain products, providing certain subscriptions or
performing certain services or that requires us to pay substantial
damages, royalties or other fees. Any of these events could harm
our business, financial condition and results of
operations.
RISKS ASSOCIATED WITH OUR COMMON STOCK
The Company’s stock price may be volatile.
The market price of the Company’s common stock is likely to
be highly volatile and could fluctuate widely in price in response
to various potential factors, many of which will be beyond the
Company’s control, including the following:
|
●
|
competition;
|
|
|
|
||||
|
●
|
additions
or departures of key personnel;
|
|
|
|||||
|
●
|
the
Company’s ability to execute its business plan;
|
|
||||||
|
●
|
operating
results that fall below expectations;
|
|
|
|
|
|||
|
●
|
loss of
any strategic relationship;
|
|
|
|
|
|
||
|
●
|
industry
developments;
|
|
|
|
|
|
|
|
|
●
|
economic and other
external factors; and
|
|||||||
|
●
|
period-to-period
fluctuations in the Company’s financial results.
|
|||||||
20
In addition, the securities markets have from time-to-time
experienced significant price and volume fluctuations that are
unrelated to the operating performance of particular companies.
These market fluctuations may also materially and adversely affect
the market price of the Company’s common stock.
Our officers, directors and 5% stockholders may exert significant
influence over our affairs, including the outcome of matters
requiring stockholder approval.
As of the date of this prospectus, our officers, directors, and 5%
stockholders collectively have an approximately 52% beneficial
ownership of our company. As a result, when acting together, such
individuals will have a controlling influence over the election of
our directors and in determining the outcome of any corporate
action, including corporate actions requiring stockholder approval,
such as: (i) a merger or a sale of our company, (ii) a sale of all
or substantially all of our assets, and (iii) amendments to our
articles of incorporation and bylaws. This concentration of voting
power and influence could have a significant effect in delaying,
deferring or preventing an action that might otherwise be
beneficial to our other stockholders and be disadvantageous to our
stockholders with interests different from those individuals.
Certain of these individuals also have significant control over our
business, policies and affairs as officers or directors of our
company. Therefore, you should not invest in reliance on your
ability to have any control over our company.
There can be no assurance we will have market makers in our
stock.
If the number of market makers in our stock should decline, the
liquidity of our common stock could be impaired, not only in the
number of shares of common stock which could be bought and sold,
but also through possible delays in the timing of transactions, and
lower prices for the common stock than might otherwise prevail.
Furthermore, the lack of market makers could result in persons
being unable to buy or sell shares of the common stock on any
secondary market.
If securities or industry analysts do not publish or cease
publishing research or reports about us, or publish inaccurate or
unfavorable reports about, our business or our market, or if they
change their recommendations regarding our stock adversely, our
stock price and trading volume could decline.
The trading market for our common stock, to some extent, will be
influenced by the research and reports that industry or securities
analysts may publish about us, our business, our market or our
competitors. We do not have any control over these
analysts.
We do not expect to pay dividends in the foreseeable
future.
We do not intend to declare dividends for the foreseeable future,
as we anticipate that we will reinvest any future earnings in the
development and growth of our business. Therefore, investors will
not receive any funds unless they sell their common stock, and
stockholders may be unable to sell their shares on favorable terms
or at all. We cannot assure you of a positive return on investment
or that you will not lose the entire amount of your investment in
our common stock.
We may in the future issue additional shares of our common stock
which would reduce investors’ ownership interests in the
Company, and which may dilute our share value.
Our Articles of Incorporation authorize the issuance of 50,000,000
shares of common stock, par value $0.001 per share. The future
issuance of all or part of our remaining authorized common stock
may result in substantial dilution in the percentage of our common
stock held by our then existing stockholders. We may value any
common stock issued in the future on an arbitrary basis. The
issuance of common stock for future services or acquisitions or
other corporate actions may have the effect of diluting the value
of the shares held by our investors, and might have an adverse
effect on any trading market for our common stock.
21
An active trading market for our common stock may never develop or
be sustained.
We
cannot assure you that an active trading market for our Common
Stock will develop in the future or, if developed, that any market
will be sustained. Accordingly, you may be required to hold your
Shares indefinitely or to sell them at a price that does not meet
your expectations, if at all.
There is no Assurance of Continued Public Trading Market, and Being
a Low-Priced Security May Affect the Market Value of Our
Stock
To date, there has been only a limited public market for our common
stock. Our common stock is currently quoted on the OTCQB Venture
Market operated by OTC Markets Group. As a result, an investor may
find it difficult to dispose of, or to obtain accurate quotations
as to the market value of our stock. Our stock is subject to the
low-priced security or so called “penny stock” rules
that impose additional sales practice requirements on
broker-dealers who sell such securities. The Securities Enforcement
and Penny Stock Reform Act of 1990 requires additional disclosure
in connection with any trades involving a stock defined as a penny
stock (generally, according to recent regulations adopted by the
SEC, any equity security that has a market price of less than $5.00
per share, subject to certain exceptions). For example,
brokers/dealers selling such securities must, prior to effecting
the transaction, provide their customers with a document that
discloses the risks of investing in such securities. Included in
this document are the following:
|
● the bid and offer
price quotes in and for the “penny stock,” and the
number of shares to which the quoted prices apply,
|
|
|
● the brokerage
firm’s compensation for the trade, and,
|
|
|
● the compensation
received by the brokerage firm’s sales person for the
trade.
|
In addition, the brokerage firm must send the
investor:
|
● a monthly account
statement that gives an estimate of the value of each “penny
stock” in the investor’s account, and,
|
|
|
● a written statement
of the investor’s financial situation and investment
goals.
|
If the person purchasing the securities is someone other than an
accredited investor or an established customer of the
broker/dealer, the broker/dealer must also approve the potential
customer’s account by obtaining information concerning the
customer’s financial situation, investment experience and
investment objectives. The broker/dealer must also make a
determination whether the transaction is suitable for the customer
and whether the customer has sufficient knowledge and experience in
financial matters to be reasonably expected to be capable of
evaluating the risk of transactions in such securities.
Accordingly, the Commission’s rules may limit the number of
potential purchasers of the shares of our common
stock.
Resale restrictions on transferring “penny stocks” are
sometimes imposed by some states, which may make transaction in our
stock more difficult and may reduce the value of the investment.
Various state securities laws pose restrictions on transferring
“penny stocks” and as a result, investors in our common
stock may have the ability to sell their shares of our common stock
impaired.
FINRA sales practice requirements may limit a stockholder’s
ability to buy and sell our stock.
The Financial Industry Regulatory Authority (“FINRA”)
has adopted rules that relate to the application of the SEC’s
penny stock rules in trading our securities and require that a
broker/dealer have reasonable grounds for believing that the
investment is suitable for that customer, prior to recommending the
investment. Prior to recommending speculative, low-priced
securities to their non-institutional customers, broker/dealers
must make reasonable efforts to obtain information about the
customer’s financial status, tax status, investment
objectives and other information.
|
|
Under interpretations of these rules, FINRA believes that there is
a high probability that speculative, low priced securities will not
be suitable for at least some customers. FINRA’s requirements
make it more difficult for broker/dealers to recommend that their
customers buy our common stock, which may have the effect of
reducing the level of trading activity and liquidity of our common
stock. Further, many brokers charge higher transactional fees for
penny stock transactions. As a result, fewer broker/dealers may be
willing to make a market in our common stock, reducing a
shareholder’s ability to resell shares of our common
stock.
22
Nevada Law and Our Charter May Inhibit a Takeover of Our Company
That Stockholders May Consider Favorable
Provisions of Nevada law, such as its business combination statute,
may have the effect of delaying, deferring or preventing a change
in control of our company. As a result, these provisions could
limit the price some investors might be willing to pay in the
future for shares of our common stock.
FORWARD-LOOKING STATEMENTS
This
prospectus contains, in addition to historical information, certain
information, assumptions and discussions that may constitute
forward-looking statements. Such statements are subject to certain
risks and uncertainties which could cause actual results to differ
materially than those projected or anticipated. Actual results
could differ materially from those projected in the forward-looking
statements. Although the Company believes its assumptions
underlying the forward-looking statements are reasonable, the
Company cannot assure an investor that the forward-looking
statements set out in this prospectus will prove to be accurate.
The Company’s businesses can be affected by, without
limitation, such things as natural disasters, economic trends,
international strife or upheavals, consumer demand patterns, labor
relations, existing and new competition, consolidation, and growth
patterns within the industries in which the Company competes and
any deterioration in the economy may individually or in combination
impact future results.
DETERMINATION OF OFFERING
PRICE
As a result of there being a limited public market for our shares,
the offering price and other terms and conditions relative to our
shares have been arbitrarily determined by the Company and do not
bear any relationship to assets, earnings, book value, or any other
objective criteria of value. In determining the number of
shares to be offered and the Offering price, we took into
consideration our capital structure and the amount of money we
would need to implement our business plan. Accordingly, the
Offering price should not be considered an indication of the actual
value of our securities. In addition,
no investment banker, appraiser, or other independent third party
has been consulted concerning the offering price for the shares or
the fairness of the offering price used for the
shares.
USE OF
PROCEEDS
Our offering is being made in a direct public offering without the
involvement of underwriters or broker-dealers. We intend to
disburse the proceeds from this offering in the priority set forth
below within the first 12 months after successful completion of
this offering.
Not taking into account any possible additional funding or
revenues, we intend to use the proceeds from this offering as
follows. We intend to use a portion of proceeds of this offering to
pay a $10,000 per month salary for our full time Chief Executive
Officer, as described in footnote 6.
The following chart indicates the approximate amount of funds that
we will allocate to each item but does not indicate the total
fee/cost of each item. The amount of proceeds we allocate to
each item is dependent upon the amount of proceeds we receive from
this offering:
If we sell all of the Shares being offered, our net proceeds will
be $2,500,000. If the Offering is fully subscribed, the
proceeds will be applied in the manner described below. If less
than the full numbers of shares are subscribed, the proceeds will
be applied in the order of priority listed. The following table sets forth a breakdown of the
estimated use of the net proceeds as we currently expect to use
them, assuming the sale of 100%, 75%, 50% and 25% of the Shares
offered for sale in this offering:
23
|
Assumed Percentage of Shares Sold
|
25%
Shares
Sold
|
50%
Shares
Sold
|
75%
Shares
Sold
|
100%
Shares
Sold
|
|
GROSS
PROCEEDS FROM OFFERING
|
$625,000
|
$1,250,000
|
$1,875,000
|
$2,500,000
|
|
LESS OFFERING
EXPENSES
|
|
|
|
|
|
Legal, accounting
& professional fees
|
40,000
|
40,000
|
40,000
|
40,000
|
|
Miscellaneous
|
15,000
|
15,000
|
15,000
|
15,000
|
|
SUBTOTAL
|
55,000
|
55,000
|
55,000
|
55,000
|
|
LESS
USE OF PROCEEDS
|
|
|
|
|
|
Capital
purchases(1)
|
40,000
|
75,000
|
150,000
|
200,000
|
|
Contractors(2)
|
30,000
|
175,000
|
250,000
|
300,000
|
|
General &
administrative(3)
|
80,000
|
175,000
|
250,000
|
270,000
|
|
Marketing &
promotion(4)
|
80,000
|
150,000
|
250,000
|
350,000
|
|
Research &
development(5)
|
130,000
|
220,000
|
350,000
|
475,000
|
|
Wages &
benefits(6)
|
210,000
|
400,000
|
570,000
|
850,000
|
|
SUBTOTAL
|
570,000
|
1,195,000
|
1,820,000
|
2,445,000
|
|
TOTAL
|
$625,000
|
$1,250,000
|
$1,875,000
|
$2,500,000
|
The
above figures represent only estimated costs. As indicated in the table above, if we sell only
75%, or 50%, or 25% of the Shares offered for sale in this
offering, we expect to use the resulting net proceeds for the same
purposes as we would use the net proceeds from a sale of 100% of
the Shares, and in approximately the same proportions. However, the
lower our net proceeds, the less we would expect to use the funds
in the expenditure categories.
|
(1)
|
Capital
Purchases - This may include but is not limited to purchase of
computers, computer monitors, laptops, cell phones, desk
telephones, and servers.
|
|
(2)
|
Contractors
- This may include but is not limited to contractor services for
content writing, sales representatives, technical support staff,
network engineers, and administrative staff.
|
|
(3)
|
General
& Administrative - This may include, but is not be limited to
rent, insurance, internet, office equipment, office supplies,
postage, subscriptions, overnight delivery services, telephone,
utilities, web hosting.
|
|
(4)
|
Marketing
& Brand Promotion - This may include but is not limited to
development of corporate presentations, graphic design services,
document printing, conference attendance fees, web design, speaking
engagements and industry support initiatives.
|
|
(5)
|
Research
& Development - This may include but is not limited to software
developer contractor costs, rental of development servers, software
licenses for development purposes, purchase of hardware for testing
and
|
|
(6)
|
Salaries
and Consulting Expense - We anticipate meeting all staffing need
through a combination of outside third-party service providers
(contractors) and salaried employees. Some of our officers and
directors are employed outside of Tego Cyber Inc. and will only be
able to devote a limited amount of time to the development of our
business unless this Offering is successful. Our CEO receives a
salary of $10,000 per month for full-time services which may be
paid from proceeds of this offering. Our CISO receives a salary of
$7,500 per month for part-time services which may be paid from
proceeds of this offering. Other than the $10,000 monthly salary
for our CEO and the $7,500 for our CISO, the allocation of funds
for salaries and consulting expense is for new-hires and filling
part and fulltime positions necessary to expand the Company
operations. At 25% of the proceeds we estimate it will be able to
accommodate up to 2 employees; at 50% of the proceeds we will be
able to accommodate up to 5-8 employees and at 75-100% of the
proceeds we estimate we can accommodate a staff of up to 8-10
people.
|
In the event we do not sell all of the Shares being offered, we may
seek additional financing to support the intended use of proceeds
discussed above. If we secure additional equity funding, investors
in this offering would be diluted. In all events, there can be no
assurance that additional financing would be available when needed
and, if available, on terms acceptable to us.
24
PRICE RANGE OF OUR COMMON
STOCK
Our
common stock is currently quoted on the OTCQB under the symbol
‘TGCB’. Our common stock
was approved for trading on the OTCQB on February 19, 2021.
As of October 15, 2021, the high and low sales price of our common
stock was $1.25 per share and $0.30 per share, respectively. As of
October 15, 2021, there are 23,755,321 shares of common stock
outstanding held by approximately 230 stockholders of
record.
Trades
in our common stock may be subject to Rule 15g-9 of the Exchange
Act, which imposes requirements on broker/dealers who sell
securities subject to the rule to persons other than established
customers and accredited investors. For transactions covered by the
rule, broker/dealers must make a special suitability determination
for purchasers of the securities and receive the purchaser’s
written agreement to the transaction before the sale.
DIVIDEND
POLICY
We have not paid any dividends on our common stock since inception
and we currently expect that, in the foreseeable future, all
earnings (if any) will be retained for the development of our
business and no dividends will be declared or paid. Any future
dividends will be subject to the discretion of our board of
directors and will depend upon, among other things, our earnings
(if any), operating results, financial condition and capital
requirements, general business conditions and other pertinent
facts.
PLAN OF
DISTRIBUTION; TERMS OF THE OFFERING
Tego Cyber Inc. has issued and outstanding as of October 15,
2021, 23,755,321 shares of
Common Stock. The Company is registering an additional
5,000,000 shares of its Common Stock for sale at the price of $0.50
per share. There is no arrangement to address the possible effect
of the offering on the price of the stock. In connection with the
Company’s selling efforts in the offering, our officers and
directors will not register as broker-dealers pursuant to Section
15 of the Exchange Act, but rather will rely upon the “safe
harbor” provisions of SEC Rule 3a4-1, promulgated under the
Securities Exchange Act of 1934, as amended (the “Exchange
Act”). Generally speaking, Rule 3a4-1 provides an exemption
from the broker-dealer registration requirements of the Exchange
Act for persons associated with an issuer that participate in the
sale of the securities of such issuer.
Our officers and directors meet the conditions of the Rule 3a4-1
exemption, as: (1) they are not subject to any statutory
disqualification, as that term is defined in Section 3(a)(39) of
the Exchange Act; (2) they will not be compensated in connection
with their participation in the direct public offering or resale
offering by the payment of commissions or other remuneration based
either directly or indirectly on transactions in our securities;
and (3) they will not be associated persons of a broker or dealer
at the time of their participation in the direct public offering
and resale offering. Further, our officers and directors: (1) at
the end of the offerings, will continue to primarily perform
substantial duties for the Company or on its behalf otherwise than
in connection with transactions in securities; (2) are not, nor
have been within the preceding 12 months, a broker or dealer, and
they are not, nor have they been within the preceding 12 months, an
associated person of a broker or dealer; and (3) they have not
participated in another offering of securities pursuant to the
Exchange Act Rule 3a4-1 in the past 12 months and they have not and
will not participate in selling an offering of securities for any
issuer more than once every 12 months other than in reliance on the
Exchange Act Rule 3a4-1(a)(4)(i) or (iii).
In order to comply with the applicable securities laws of certain
states, the securities will be offered or sold in those states only
if they have been registered or qualified for sale, an exemption
from such registration is available, or if qualification
requirement is available and with which the Company has complied.
In addition, and without limiting the foregoing, the Company will
be subject to applicable provisions, rules and regulations under
the Exchange Act with regard to security transactions during the
period of time when this Registration Statement is
effective.
Offering Period and Expiration Date
This offering will start on the date of this Prospectus and
continue for a period of up to 180 days, unless extended by our
board of directors for an additional 90 days
Procedures for Subscribing
If you decide to subscribe for any shares in this offering, you
must:
|
|
1.
|
execute and deliver a Subscription Agreement; and
|
|
|
2.
|
deliver
a check, certified funds or cash by wire transfer of immediately
available funds directly to the Company for acceptance or
rejection.
|
25
The Subscription Agreement requires you to disclose your name,
address, social security number, telephone number, number of shares
you are purchasing, and the price you are paying for your
shares.
All checks for subscriptions must be made payable
to Tego
Cyber Inc.
Acceptance of Subscriptions
Upon the Company’s acceptance of a Subscription Agreement and
receipt of full payment, the Company shall countersign the
Subscription Agreement and issue a stock certificate along with a
copy of the Subscription Agreement.
Right to Reject Subscriptions
We have the right to accept or reject subscriptions in whole or in
part, for any reason or for no reason. All monies from rejected
subscriptions will be returned immediately by us to the subscriber,
without interest or deductions. Subscriptions for securities will
be accepted or rejected within 48 hours after we receive
them.
No Minimum Subscription
There is no minimum number of shares that must be sold under the
offering. As such, there is no guarantee that the Company will
raise any funds from the offering.
Penny Stock Regulation
Our Common Shares are not quoted on any stock exchange or quotation
system. The SEC has adopted rules that regulate broker-dealer
practices in connection with transactions in penny stocks. Penny
stocks are generally equity securities with a price of less than
$5.00 (other than securities registered on certain national
securities exchanges or quoted on the NASDAQ system, provided that
current price and volume information with respect to transactions
in such securities is provided by the exchange
system).
The penny stock rules require a broker-dealer, prior to a
transaction in a penny stock not otherwise exempt from those rules,
to deliver a standardized risk disclosure document prepared by the
SEC, that:
|
●
|
contains a description of the nature and level of risk in the
market for penny stocks in both public offerings and secondary
trading;
|
|
●
|
contains a description of the broker’s or dealer’s
duties to the customer and of the rights and remedies
available to the customer with respect to a violation of such
duties;
|
|
●
|
contains a brief, clear, narrative description of a dealer
market, including “bid” and “ask”
prices for penny stocks and the significance of the spread
between the bid and ask price;
|
|
●
|
contains a toll-free telephone number for inquiries on
disciplinary actions;
|
|
●
|
defines significant terms in the disclosure document or in the
conduct of trading penny stocks; and,
|
|
●
|
contains such other information and is in such form (including
language, type, size, and format) as the SEC shall require by
rule or regulation.
|
|
|
26
The broker-dealer also must provide the customer with the
following, prior to proceeding with any transaction in a penny
stock:
|
●
|
bid and offer quotations for the penny stock;
|
|
●
|
details of the compensation of the broker-dealer and its
salesperson in the transaction;
|
|
●
|
the number of shares to which such bid and ask prices apply, or
other comparable information relating to the depth and
liquidity of the market for such stock; and
|
|
●
|
monthly account statements showing the market value of each penny
stock held in the customer’s account.
|
In addition, the penny stock rules require that prior to a
transaction in a penny stock not otherwise exempt from those rules,
the broker-dealer must make a special written determination that
the penny stock is a suitable investment for the purchaser and
receive the purchaser’s written acknowledgment of the receipt
of a risk disclosure statement and a signed and dated copy of a
written suitability statement. These disclosure requirements
will have the effect of reducing the trading activity in the
secondary market for our stock because it will be subject to these
penny stock rules. Therefore, stockholders may have difficulty
selling those securities.
Registration Rights
We have not granted registration rights to any
persons.
DILUTION
Net tangible book value per share represents the amount of the
Company’s tangible assets less total liabilities, divided
by 18,296,511 shares of Common
Stock outstanding pursuant to the June 30, 2021 financials enclosed
herein. Net tangible book value dilution per share represents
the difference between the amount per share paid by purchasers of
the Shares in this offering assuming the offering price of $0.50
per share of Common Stock and the pro forma net tangible book value
per share of Common Stock immediately after completion of the
offering.
After giving effect to the sale of the 5,000,000 shares offered by
the Company hereunder, at an Offering Price of $0.50 per share the
net tangible book value of the Company at June 30, 2021, would have
been $0.1336 per share, representing an immediate increase in
tangible book value of $0.1001 per share to existing shareholders
and an immediate dilution of $.3329 per share to purchasers of the
Shares.
The following table illustrates the foregoing information with
respect to new investors on a per share basis:
|
|
5,000,000
Shares
(100%)
|
3,7500,000
Shares
(75%)
|
2,500,000
Shares
(50%)
|
1,250,000
Shares
(25%)
|
|
Offering
price per share
|
$0.50
|
$0.50
|
$0.50
|
$0.50
|
|
Net
tangible book value per share before Offering
|
$0.0335
|
$0.0335
|
$0.0335
|
$0.0335
|
|
Increase
per share attributable to new investors
|
$0.1336
|
$0.0793
|
$0.0561
|
$0.0298
|
|
Net
tangible book value per share after Offering
|
$0.1001
|
$0.1129
|
$0.0896
|
$0.0633
|
|
Dilution
per share to new investors
|
$0.3329
|
$0.3871
|
$0.4104
|
$0.4367
|
DESCRIPTION OF PROPERTY
Our executive offices are located at 8565 South Eastern Avenue,
Suite 150 Las Vegas, Nevada 89123. We currently rent this space on
a month-to-month basis. This space is sufficient to meet our
needs, however, once we expand our business to a significant
degree, we will have to find a larger space. We do not foresee any
significant difficulties in obtaining any required additional
space. We do not currently own any real property.
27
|
|
DESCRIPTION OF
SECURITIES
Common Stock
Our Articles of Incorporation authorize us to issue fifty million
(50,000,000) shares of common stock, par value $0.001.
The
following statements relating to the capital stock set forth the
material terms of the securities of the Company. Reference is also
made to the more detailed provisions of the certificate of
incorporation and the by-laws, copies of which are filed as
exhibits to this registration statement.
Voting Rights
Except as otherwise required by law or as may be provided by the
resolutions of the board of directors authorizing the issuance of
Common Stock, all rights to vote and all voting power shall be
vested in the holders of Common Stock. Each share of Common
Stock shall entitle the holder thereof to one vote.
No Cumulative Voting
Except as may be provided by the resolutions of the board of
directors authorizing the issuance of Common Stock, cumulative
voting by any shareholder is expressly denied.
No Preemptive Rights
Preemptive rights shall not exist with respect to shares of Common
Stock or securities convertible into shares of Common Stock of the
Company.
Dividends
We have not paid any cash dividends on our Common Stock since
inception and presently anticipate that all earnings, if any, will
be retained for development of our business and that no dividends
on our Common Stock will be declared in the foreseeable future. Any
future dividends will be subject to the discretion of our Board of
Directors and will depend upon, among other things, future
earnings, operating and financial condition, capital requirements,
general business conditions and other pertinent facts. Therefore,
there can be no assurance that any dividends on our Common Stock
will be paid in the future.
Rights upon Liquidation, Dissolution or Winding-Up of the
Company
Upon any liquidation, dissolution or winding-up of the Company,
whether voluntary or involuntary, the remaining net assets of the
Company shall be distributed pro rata to the holders of the Common
Stock.
Preferred Stock
The Company has no preferred stock authorized.
Options
The Company has not issued any options.
Common Stock Purchase Warrants.
As of October 15, 2021, there are an aggregate 3,014,246
outstanding Common Stock Purchase Warrants
(“Warrants”), the terms of which are summarized
below:
28
Exercisability
The outstanding Common Stock Purchase Warrants
(“Warrants”) are exercisable immediately upon issuance
and at any time up to the date that is two years from the date of
issuance. The warrants will be exercisable, at the option of each
holder, in whole or in part, by delivering to us a duly executed
exercise notice accompanied by payment in full for the number of
shares of our common stock purchased upon such exercise (except in
the case of a cashless exercise as discussed below). Unless
otherwise specified in the warrant, the holder will not have the
right to exercise any portion of the Warrant if the holder
(together with its affiliates) would beneficially own in excess of
4.99% of the number of shares of our common stock outstanding
immediately after giving effect to the exercise (or, upon election
by a Holder prior to the issuance of any warrants, 9.99%), as such
percentage ownership is determined in accordance with the terms of
the Warrants.
Certain Adjustments
The exercise price and the number of shares of common stock
purchasable upon the exercise of the Warrants are subject to
adjustment upon the occurrence of specific events, including stock
dividends, stock splits, combinations and reclassifications of our
common stock, and dilutive issuances as defined in the
Warrants.
Transferability - Subject to applicable laws, the Warrants may be
transferred at the option of the holders upon surrender of the
Warrants to the Company together with the appropriate instruments
of transfer.
Rights as a Stockholder
Except as otherwise provided in the Warrants or by virtue of such
holder’s ownership of shares of our common stock, the holder
of a warrant does not have the rights or privileges of a holder of
our common stock, including any voting rights, until the holder
exercises the warrant.
Beneficial Ownership Limitation
Holder’s exercise shall be limited 4.99% of the
Company’s outstanding common stock (or, upon election by a
Holder prior to the issuance of any Warrants, 9.99%) of the number
of shares of the common stock outstanding immediately after giving
effect to the issuance of shares of common stock issuable upon
exercise. The Holder, upon notice to the Company, may increase or
decrease the beneficial ownership limitation provided that the
beneficial ownership limitation in no event exceeds 9.99% of the
number of shares of the common stock outstanding immediately after
giving effect to the issuance of shares of common stock upon
exercise of the warrant held by the Holder. Any increase in the
beneficial ownership limitation will not be effective until the
61st day
after such notice is delivered to the Company.
Governing Law
The Warrants are governed by New York law.
Holders
As of October 15, 2021, we have 23,755,321 issued and outstanding
shares of Common Stock, which are held by approximately 230
shareholders of record.
Securities Authorized for Issuance Under Equity Compensation
Plans
None
Transfer Agent and Registrar
Tego Cyber Inc. has appointed Signature Stock Transfer Inc. as its
transfer agent. Signature’s address is 14673 Midway Road,
Suite #220, Addison, Texas, 75001. The transfer agent is
responsible for all record-keeping and administrative functions in
connection with the common shares.
29
Penny Stock Regulation
Penny
stocks generally are equity securities with a price of less than
$5.00 per share other than securities registered on national
securities exchanges or listed on the Nasdaq Stock Market, provided
that current price and volume information with respect to
transactions in such securities are provided by the exchange or
system. The penny stock rules impose additional sales practice
requirements on broker-dealers who sell such securities to persons
other than established customers and accredited investors
(generally those with assets in excess of $1,000,000 or annual
income exceeding $200,000, or $300,000 together with their spouse).
For transactions covered by these rules, the broker-dealer must
make a special suitability determination for the purchase of such
securities and have received the purchaser's written consent to the
transaction prior to the purchase. Additionally, for any
transaction involving a penny stock, unless exempt, the rules
require the delivery, prior to the transaction, of a disclosure
schedule prescribed by the SEC relating to the penny stock market.
The broker-dealer also must disclose the commissions payable to
both the broker-dealer and the registered representative and
current quotations for the securities. Finally, monthly statements
must be sent disclosing recent price information on the limited
market in penny stocks. Because of these penny stock rules,
broker-dealers may be restricted in their ability to sell the
Company’s common stock. The foregoing required penny stock
restrictions will not apply to the Company’s common stock if
such stock reaches and maintains a market price of $5.00 per share
or greater.
Additional Information
We refer you to our Articles of Incorporation, Bylaws, and the
applicable provisions of the Nevada Revised Statues for a more
complete description of the rights and liabilities of holders of
our securities.
INFORMATION WITH RESPECT
TO REGISTRANT
THE
FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ TOGETHER WITH THE
CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY AND THE NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS INCLUDED ELSEWHERE IN THIS
REGISTRATION STATEMENT ON FORM S-1. THIS DISCUSSION SUMMARIZES THE
SIGNIFICANT FACTORS AFFECTING OUR OPERATING RESULTS, FINANCIAL
CONDITIONS AND LIQUIDITY AND CASH-FLOW SINCE
INCEPTION.
DESCRIPTION OF BUSINESS
The Company
Overview
Tego
Cyber Inc. is early-stage provider of advanced cyberthreat intelligence for larger
business enterprises. We currently offer a suite of related
cyber security services including vulnerability assessments,
cyber threat intelligence reporting, penetration testing, vCISO
services, dark web monitoring, cybersecurity policy creation and
review as well as ongoing enterprise employee training. We are also
developing a threat intelligence platform which will work
cohesively to improve the operational efficiency of an
enterprise’s existing cyber security infrastructure. The
platform, currently in beta testing, will be available for sale
upon completion.
Corporate History and General Information about the
Company
Tego
Cyber Inc. was incorporated in the State of Nevada on September 6,
2019. Our year end is June 30. We are a development stage
enterprise. Our principal office is located at 8565 S. Eastern
Avenue, Suite 150, Las Vegas, NV 89123. Our telephone number is
855-939-0100 and our e-mail contact is info@tegocyber.com. Our
website can be viewed at www.tegocyber.com.
We created Tego to take advantage of the potential growth within
the cyber security industry by capitalizing on our founding
team’s established experience and reputation within the
industry
Business and Market Summary
Organizations
are increasingly at risk of being compromised as recent trends
within cybersecurity statistics reveal huge increases in attacks
leaving a trail of hacked and breached data. Cybersecurity issues
continue to be a day-to-day struggle, for many businesses where
commonalities of attacks within the digital and growing virtual
workplace includes many end point opportunities such as local
networks, laptop, tablet, and desktop computers, mobile, industrial
control systems and more recently the expanding IoT (Internet of
Things).
30
Digital
risk protection is both a technical and business issue. It is a
technical issue because any type of digital device can be accessed
by cyber-criminals. It is also a business issue as many enterprises
still have limited experience and lack awareness on the importance
of securing personal customer and or private corporate
information.
The Industry/Marketplace
The
market for digital risk solutions is highly fragmented, intensely
competitive, and constantly evolving. In terms of overall
cyberthreats, a Juniper Research report on cybercrime
from 2019, suggests that the cost of such malicious attacks will
rise to US$5 trillion by 2024. To successfully defend against the
malicious intent they face, it is necessary for the enterprise to
adopt cybersecurity awareness, prevention, and security best
practices, as a part of their corporate culture, to reduce and
eliminate the inevitable financial risks presented by daily
threats, attacks and breaches.
Overall,
the cybersecurity marketplace is large. A consensus of current 2020
projections peg this market growing at a CAGR of 8% from USD $173
billion to USD $274 billion in 2026. The earlier stage, Threat Intelligence market segment
within, is presently estimated to be worth USD $5.1 billion and is
projected to grow at a CAGR of 19.7% to USD $12.53 billion by
2026.
The Company’s Presence in the Market
As an
emerging provider of 'intelligent' threat intelligence and
associated services, we will rely heavily on the established
reputation and combined experience of our management
team, specifically within
intelligent, automated, and self-healing cyber security platforms.
Members of our management team are globally recognized
international speakers on cyber security specifically focusing on
the topics of threat intelligence, ransomware, DDoS, cyber-crime
trends, and cyber security careers and appear regularly as
conference speakers and television security experts. We maintain a
current web presence and share an online blog delivering the latest
information on trends, threats, solutions, and general
cybersecurity information.
Our Products & Services
Services
The following services are currently available to enterprise
clients:
Vulnerability Assessments - Vulnerability Assessments are crucial
in helping organizations identify what critical and high
vulnerabilities may exist within their environments. Many clients
have been surprised to discover devices on their networks that were
not purchased by the organization and in some instanced, created a
way for bad actors to breach the organization’s network. The
vulnerability assessment is the first step in creating a complete
strategy to protect the organization
Penetration Testing - A penetration test is an authorized simulated
cyber-attack on the customer’s premise, network or devices to
evaluate the security posture of the organization. The penetration
test scope can vary widely from physical security tests to remote
network testing based on the client’s needs.
vCisco - All organizations regardless of size need a cybersecurity
leader to drive the cybersecurity strategy and reduce risk for the
company. With Tego Cyber, your organization will work with a highly
experienced virtual Chief Information Security Officer ("CISO"),
not a cybersecurity analyst or cybersecurity manager.
DarkWeb Monitoring - Keeping an eye on compromised credentials is
key in protecting an organization from credentialed cyber-attacks.
Studies have found that people are notoriously bad at reusing
passwords across accounts and when an employee’s personal
password is compromised, it can lead to a compromise of the
organization's security if the employee has recycled the
password.
31
Cybersecurity Policy Creation & Review - Creating
organizational policies on data security, data retention, and data
destruction are important for companies that request sensitive
information from customers. Additionally, organizations should
create policies to govern employee usage of technology, email
systems, and in some cases, social media.
Tabletop Exercises - Does your organization and employees know what
to do if a cyber-attack occurs? A table-top exercise will take the
company and key employees through the process so should an attack
happen, the organization is prepared to react and begin taking
appropriate steps towards recovery.
Cyber Threat Intelligence (CTI) reporting service -
CTI reporting
provides individuals or enterprises with custom cyber threat
intelligence on issues such as social media impersonation,
compromised email credentials, look-a-like domains, social media
trends and possible DarkWeb presence. Tego had received many
requests to leverage the threat intelligence used by the Tego
Threat Intelligence Platform (TTIP) in a customized report and
responded to this by developing a threat intelligence product aimed
at providing real-time data to specific corporations and
individuals. CTI reporting help individuals and organizations
understand the threats that have, will, or are currently directly
targeting them. Tego’s CTI reporting service is provided in
real time based on emerging threats and on customized cadences
defined by the client. The cost to the client will depend on the
size and complexity of the client’s cyber footprint. Tego has
signed one contract with an enterprise client.
The following product is currently under development:
Tego Threat Intelligence Platform
The Tego
Threat Intelligence Platform blocks bad traffic before it reaches your
network. The Tego Threat Intelligence Platform pulls in raw
cyber threat intelligence from highly trusted sources including FBI
Infragard, U.S. Department of Homeland Security, Abuse.CH, and
SpamHAUS. Using a proprietary process, the platform compiles,
analyzes, and then delivers that data to an enterprise network in a
format that is timely, informative, relevant, and compatible. Other
platforms currently in the marketplace only identify potential
threats, they do not provide specific details needed to counteract
the threat such as the source and type of threat. The Tego Threat
Intelligence Platform takes the process one step further by
providing this additional critical information allowing network
managers to proactively address any potential vulnerabilities
saving time and money. The first version of the platform to be
released will integrate with the widely accepted SPLUNK® platform to provide real-time threat intelligence to macro
enterprises using SPLUNK® architecture. Planned future developments
include developing the Tego Threat Intelligence Platform for
compatibility with other SIEM systems and platforms.
32
We
believe the Tego Guardian Threat
Intelligence Platform will advance the practice of cyber
security while becoming a critical component of a modern security
infrastructure. The platform has many digital risk protection
applications from ingestion by SIEM (Security Information and Event
Management) software applications to integration with hardware
devices. It ingests raw threat intelligence data from multiple open
feed sources for processing within where it compiles, de-risks and
reformats, then delivers in context and real-time, the threat
intelligence data to the client's software or hardware devices.
The first product to be released is an
application that will integrate with the SPLUNK SIEM to provide
real-time threat intelligence updates to assist companies with
identifying, understanding, and resolving malicious data traffic
and activities within their network. A simple diagram of how the
SPLUNK app will work follows.
Pricing
Services
The majority of our services will be offered on flat monthly fee
basis or limited engagement period as necessary to complete the
scope of work Vulnerability Assessments, Penetration Testing,
Tabletop Exercisesand Cybersecurity Policy Creation & Review
engagements typically will last 2 to 3 weeks per engagement and may
further depend on the scope of the testing required. vCiso
engagements will last 6 months on average and will be offered at a
flat monthly fee. We will offer DarkWeb Monitoring as an
accessible service to all clients at a low monthly fee
33
Products
We
license our platform through a recurring fee arrangement where
revenue is recognized on an annual basis following deployment to
the customer. We also derive revenue from maintenance and support
services on the licensed products. We recognize this revenue on a
monthly basis as maintenance and support services are provided to
customers. Purchasers of the Tego
Threat Intelligence Platform will be invoiced at $75,000 per
annum per installation.
Our
revenue to date has been from one general cyber security contract
which existed prior to the creation of Tego and belonged to our CEO
on an individual basis which was then transferred into the Company
upon incorporation.
Competition
We
compete with an array of established and emerging security software
and services vendors. As organizations increasingly embrace cloud
platforms, IoT and other new networking technologies, they are
becoming increasingly exposed to ever evolving cybercrimes. The
introduction of new technologies and market entrants will continue
to fuel an intense competitive environment as companies seek
solutions to cybersecurity breaches.
Our
competitors include vulnerability management and external
assessment vendors, diversified security software and services
vendors, and providers of threat intelligence platforms that
compete with some of the features present in our solution such as
Anomali, Recorded Future and Threat Quotient.
We
compete based on several factors, including product functionality;
scope of offerings; performance; brand, reputation, and customer
satisfaction; ease of implementation, use and service; price,
scalability, reliability, and security.
We
believe that we will compete favorably with respect to these
factors and are well positioned as an emerging provider of digital
risk protection, data analysis, and professional
services.
34
Strategic Partners and Suppliers
Our
channel partners will provide us with additional leverage by
assisting in closing customer transactions as part of larger
security purchases, sourcing new prospects and securing maintenance
renewals. Our first product
integration is with Splunk Inc., a leader in Gartner’s
2020 Magic Quadrant (MQ) for Security Information and Event
Management (SIEM). Splunk is recognized worldwide for the highest
overall ability to execute. Thousands of organizations use Splunk
as their SIEM for security monitoring, advanced threat detection,
incident investigation and forensics, incident response, SOC
automation and a wide range of security analytics and operations
use cases.
The Tego Threat
Intelligence Platform is an application that will be deployed and
hosted initially in Splunk’s SplunkBase. Essentially, SplunkBase is an app store for Splunk
users. You develop your app, submit it for approval and then post
it up to SplunkBase so that Splunk users can download and utilize
the app. https://splunkbase.splunk.com/apps/ Splunk
does not require developers to apply or have an agreement with
Splunk to develop for its platform. Information on Splunk’s
developer program can be found at https://dev.splunk.com/enterprise/docs/welcome/
Operations
We will
continue to develop the Tego
Threat Intelligence Platform, including through the
introduction of an SOC (Security Operations Center). We expect
continued growth in the number of cloud and SaaS operations
experts, to further our goal of delivering the best experience for
our SaaS and TEGO Threat
Intelligence Platform customers. Accordingly, personnel
related costs within our SaaS development, threat intelligence
platform, sales, and operations teams, will increase in line with
our projected ARR and service revenue model.
Sales and Marketing
We
leverage the uniqueness of our solution to create brand preference
and build a strong sales pipeline while cultivating customer
relationships to help drive revenue growth efficiently and
effectively. Our go-to-market strategy targets those companies that
are found on the Gartner Magic Quadrant and Forrester reports as
these have the largest market share. Initially we will focus on
integration within the SIEM market as this is where the data for
all devices (hardware and software) resides for the enterprise
customer.
Sales
We will
sell our products and services through a direct inside sales team,
a direct field sales team and indirect channel partner
relationships. Teams will be designed to efficiently sell to
organizations of all sizes and will initially focus on new customer
acquisitions. As we expand, they will pursue, up-selling and
cross-selling opportunities of new offerings to existing
customers.
Teams
will be organized by geography as well as by target organization
size. The inside and field sales teams will focus on small and
middle-market transactions, while larger or more complex
transactions will be handled by highly trained sales consulting
engineers to help define customer use cases, manage solution
evaluations, and train channel partners.
Our
sales force will work directly with, and be involved in sales to,
substantially all of the end customers of our channel partners and
we may sometimes engage a channel partner solely to assist with
finalizing a purchase if for example the customer is working on
broader software initiative with that channel partner. As growth
allows, we intend to invest in a dedicated sales team focused on
U.S. federal, state, and local government entities.
Marketing
We will
focus our marketing efforts on increasing the strength of the
‘TEGO’ brand, communicating product advantages and
business benefits, generating leads for our sales teams and channel
partners while driving product adoption. We will deliver targeted
content to demonstrate our threat intelligence platform and use
digital advertising methods to deliver opportunities to our sales
teams. We will engage with existing customers to provide education
and awareness to promote expanded use of our software. We will work
with our own researchers, as well as the broader security
community, to share important information about vulnerabilities and
threats through the online community, social media, and traditional
public relations.
35
Intellectual Property
To
protect our unpatented proprietary technologies and processes, we
rely on trade secret laws and confidentiality agreements with our
employee(s), consultants, channel partners and vendors. At present
our only intellectual property is the Tego Threat Intelligence Platform which
is currently still in development. The company will rely on
provisional patents in the near term, filing for full patent
protection, as necessary.
Subsidiaries
The
Company has no subsidiaries.
Employees
We
currently employ three full-time employees and eleven contracted
consultants.
Legal Proceedings
We know of no material, existing or pending legal proceedings
against our Company, nor are we involved as a plaintiff in any
material proceeding or pending litigation. There are no proceedings
in which our directors, officers or any affiliates, or any
registered or beneficial shareholder, is an adverse party or has a
material interest adverse to our interest.
Jumpstart Our Business Startups Act
In
April, 2012, the Jumpstart Our Business Startups Act ("JOBS Act")
was enacted into law. The JOBS Act provides, among other
things:
Exemptions
for emerging growth companies from certain financial disclosure and
governance requirements for up to five years and provides a new
form of financing to small companies;
Amendments
to certain provisions of the federal securities laws to simplify
the sale of securities and increase the threshold number of record
holders required to trigger the reporting requirements of the
Securities Exchange Act of 1934;
Relaxation
of the general solicitation and general advertising prohibition for
Rule 506 offerings;
Adoption
of a new exemption for public offerings of securities in amounts
not exceeding $50 million; and
Exemption
from registration by a non-reporting company of offers and sales of
securities of up to $1,000,000 that comply with rules to be adopted
by the SEC pursuant to Section 4(6) of the Securities Act and
exemption of such sales from state law registration, documentation
or offering requirements.
In
general, under the JOBS Act, a company is an emerging growth
company if its initial public offering ("IPO") of common equity
securities was effected after December 8, 2011 and the company had
less than $1 billion of total annual gross revenues during its last
completed fiscal year. A company will no longer qualify as an
emerging growth company after the earliest of: (i) the completion
of the fiscal year in which the company has total annual gross
revenues of $1 billion or more, (ii) the completion of the
fiscal year of the fifth anniversary of the company's IPO;
(iii) the company's issuance of more than $1 billion in
nonconvertible debt in the prior three-year period, or (iv)
the company becoming a "larger accelerated filer" as defined under
the Securities Exchange Act of 1934.
The
JOBS Act provides additional new guidelines and exemptions for
non-reporting companies and for non-public offerings. Those
exemptions that impact the Company are discussed
below.
Financial Disclosure. The financial disclosure in a
registration statement filed by an emerging growth company pursuant
to the Securities Act of 1933 will differ from registration
statements filed by other companies as follows: (i) audited
financial statements required for only two fiscal years; (ii)
selected financial data required for only the fiscal years that
were audited; (iii) executive compensation only needs to be
presented in the limited format now required for smaller reporting
companies.
36
(A
smaller reporting company is one with a public float of less than
$75 million as of the last day of its most recently completed
second fiscal quarter).
However,
the requirements for financial disclosure provided by Regulation
S-K promulgated by the Rules and Regulations of the SEC already
provide certain of these exemptions for smaller reporting
companies. The Company is a smaller reporting company. Currently a
smaller reporting company is not required to file as part of its
registration statement selected financial data and only needs
audited financial statements for its two most current fiscal years
and no tabular disclosure of contractual obligations.
The
JOBS Act also exempts the Company's independent registered public
accounting firm from complying with any rules adopted by the Public
Company Accounting Oversight Board ("PCAOB") after the date of the
JOBS Act's enactment, except as otherwise required by SEC
rule.
The
JOBS Act also exempts an emerging growth company from any
requirement adopted by the PCAOB for mandatory rotation of the
Company's accounting firm or for a supplemental auditor report
about the audit.
Internal Control Attestation. The JOBS Act also provides an
exemption from the requirement of the Company's independent
registered public accounting firm to file a report on the Company's
internal control over financial reporting, although management of
the Company is still required to file its report on the adequacy of
the Company's internal control over financial
reporting.
Section
102(a) of the JOBS Act exempts emerging growth companies from the
requirements in §14A(e) of the Securities Exchange Act of 1934
for companies with a class of securities registered under the 1934
Act to hold shareholder votes for executive compensation and golden
parachutes.
Other Items of the JOBS Act. The JOBS Act also provides that
an emerging growth company can communicate with potential investors
that are qualified institutional buyers or institutions that are
accredited to determine interest in a contemplated offering either
prior to or after the date of filing the respective registration
statement. The Act also permits research reports by a broker or
dealer about an emerging growth company regardless if such report
provides sufficient information for an investment decision. In
addition, the JOBS Act precludes the SEC and FINRA from adopting
certain restrictive rules or regulations regarding brokers, dealers
and potential investors, communications with management and
distribution of a research reports on the emerging growth company
IPO.
Section
106 of the JOBS Act permits emerging growth companies to submit
1933 Act registration statements on a confidential basis provided
that the registration statement and all amendments are publicly
filed at least 21 days before the issuer conducts any road show.
This is intended to allow the emerging growth company to explore
the IPO option without disclosing to the market the fact that it is
seeking to go public or disclosing the information contained in its
registration statement until the company is ready to conduct a
roadshow.
Election to Opt Out of Transition Period. Section 102(b)(1)
of the JOBS Act exempts emerging growth companies from being
required to comply with new or revised financial accounting
standards until private companies (that is, those that have not had
a 1933 Act registration statement declared effective or do not have
a class of securities registered under the 1934 Act) are required
to comply with the new or revised financial accounting
standard.
The
JOBS Act provides a company can elect to opt out of the extended
transition period and comply with the requirements that apply to
non-emerging growth companies but any such an election to opt out
is irrevocable. The Company has elected not to opt out of the
transition period.
LEGAL
PROCEEDINGS
We know of no material, existing or pending legal proceedings
against our Company, nor are we involved as a plaintiff in any
material proceeding or pending litigation. There are no proceedings
in which our directors, officers or any affiliates, or any
registered or beneficial shareholder, is an adverse party or has a
material interest adverse to our interest.
37
MANAGEMENT’S DISCUSSION
AND ANALYSIS
The following discussion of our financial condition and results of
operations should be read in conjunction with the financial
statements and related notes to the financial statements included
elsewhere in this Registration Statement. Some of the
statements under “Management’s Discussion and
Analysis,” “Description of Business” and
elsewhere herein may include forward-looking statements which
reflect our current views with respect to future events and
financial performance. These statements include forward-looking
statements both with respect to us specifically and the renewable
energy industry in general. Statements which include the words
“expect,” “intend,” “plan,”
“believe,” “project,”
“anticipate,” “will,” and similar
statements of a future or forward-looking nature identify
forward-looking statements for purposes of the federal securities
laws or otherwise. The safe harbor provisions of the federal
securities laws do not apply to any forward-looking statements
contained in this Registration Statement. All forward-looking
statements address such matters that involve risks and
uncertainties. Accordingly, there are or will be important factors
that could cause our actual results to differ materially from those
indicated in these statements. We undertake no obligation to
publicly update or review any forward-looking statements, whether
as a result of new information, future developments or otherwise.
If one or more of these or other risks or uncertainties
materialize, or if our underlying assumptions prove to be
incorrect, actual results may vary materially from what we
projected. Any forward-looking statements you read herein reflect
our current views with respect to future events and are subject to
these and other risks, uncertainties and assumptions relating to
our written and oral forward-looking statements attributable to us
or individuals acting on our behalf and such statements are
expressly qualified in their entirety by this
paragraph.
Overview
Tego Cyber, Inc. (was incorporated in the State of Nevada on
September 6, 2019. We are an early-stage provider
of advanced cyberthreat intelligence applications for larger
business enterprises. The Company has
developed a cyber threat intelligence application that integrates
with top end security platforms to gather, analyze, then
proactively identify threats to an enterprise network. The Tego
Threat Intelligence Platform (TTIP) takes in vetted and curated
threat data and after utilizing a proprietary process, the platform
compiles, analyzes, and then delivers that data to an enterprise
network in a format that is timely, informative, and relevant. The
threat data provides additional context including specific details
needed to identify and counteract threats so that security teams
can spend less time searching for disparate information. The first
version of the TTIP will integrate with the widely accepted SPLUNK
platform to provide real-time threat intelligence to macro
enterprises using the SPLUNK architecture. The Company plans on
developing future versions of the TTIP for integration with other
established SIEM systems and platforms including: Elastic, IBM
QRadar, AT&T AlienVault, Exabeam, and
LogRhythm.
Results of operations for fiscal year ended June 30, 2021, compared
to period September 6, 2019 (inception) to June 30,
2020
Revenues
We are in our development stage and only generated $8,100 of
revenue for the fiscal year ended June 30, 2021 compared to $2,325
for the period September 6, 2019 (inception) to June 30,
2020.
Operating Expenses
We incurred total operating expenses of $674,918 for the fiscal
year ended June 30, 2021, compared to $79,527 for the period
September 6, 2019 (inception) to June 30, 2020. Of that was
$168,077 in legal and accounting expenses relating to the listing
of our common shares on the OTCQB compared to $26,429 for the
period September 6, 2019 (inception) to June 30, 2020. We also
incurred $167,250 in management fees compared to $34,700 for the
period September 6, 2019 (inception) to June 30, 2020. We also
incurred consulting and contracting fees in the amount of $95,938
relating to the development of the threat intelligence application
compared to $263 for the period September 6, 2019 (inception) to
June 30, 2020. We incurred $67,597 in investor relations and
shareholder communications compared to $nil for the period
September 6, 2019 (inception) to June 30, 2020.
38
Net Loss
We incurred a net loss of $923,180 for the fiscal year ended June
30, 2021, compared to a net loss of $77,202 for the period
September 6, 2019 (date of inception) to June 30,
2020.
Liquidity and Capital Resources
As at June 30, 2021, the Company has a working capital surplus of
$652,296, a net loss of $923,180 and has earned limited revenue to
cover its operating costs. We have $583,015 cash on hand and our
burn rate is approximately $85,000 per month. Presently, our
operations are being funded by funds previously raised and we
believe our currently available capital resources are sufficient to
sustain our operations for a minimum of six (6) months. The Company
intends to fund future operations through equity financing
arrangements. The ability of the Company to realize its business
plan is dependent upon, among other things, obtaining additional
financing to continue operations, and development of its business
plan. In response to these problems, management intends to raise
additional funds through public or private placement offerings.
These factors, among others, raise substantial doubt about the
Company’s ability to continue as a going concern. The
accompanying financial statements do not include any adjustments
that might result from the outcome of this
uncertainty.
Cash Flow from Operating Activities
For the fiscal year ended June 30, 2021, the cash flows used
in the Company’s operating activities was $578,415 compared
to $45,690 for the period September 6, 2019 (date of inception) to
June 30, 2020.
Cash Flow from Investing Activities
For the fiscal year ended June 30, 2021, the net cash used
in investing activities by the Company was $54,250 compared to
$18,250 for the period September 6, 2019 (date of inception) to
June 30, 2020.
Cash Flow from Financing Activities
For the fiscal year ended June 30, 2021, the net cash
provided by financing activities by the Company was $1,133,808
compared to $145,812 for the period September 6, 2019 (date of
inception) to June 30, 2020. The cash provided by financing
activities is related to the proceeds received from sales of our
common stock.
Going Concern
We have
not attained profitable operations and are dependent upon obtaining
financing to pursue any extensive activities. For these reasons,
our auditors stated in their report on our audited financial
statements that they have substantial doubt that we will be able to
continue as a going concern without further financing.
Contractual Obligations
We are a smaller reporting company as defined by Rule 12b-2 of the
Securities Exchange Act of 1934 and are not required to provide the
information under this item.
Future
Financings
We will continue to rely on equity sales of our common shares and
debt proceeds to continue to fund our business operations.
Issuances of additional shares will result in dilution to existing
stockholders. There is no assurance that we will achieve any
additional sales of the equity securities or arrange for debt or
other financing to fund our operations and other
activities.
39
Expected Purchase or Sale of Significant Equipment
We do not anticipate the purchase or sale of any significant
equipment, as such items are not required by us at this time or in
the next twelve months.
Off-Balance Sheet Arrangements
We have no significant off-balance sheet arrangements that have or
are reasonably likely to have a current or future effect on our
financial condition, changes in financial condition, revenues or
expenses, results of operations, liquidity, capital expenditures or
capital resources that are material to stockholders.
Disagreements with Accountants on Accounting and Financial
Disclosure
Other than the disclosure of uncertainty regarding the ability for
us to continue as a going concern which was included in our
accountant’s report on the financial statements for the
fiscal year ended June 30, 2021; Harbouside CPA’s (formerly
known as Buckley Dodds) report on the financial statements of the
Company for the fiscal year ended June 30, 2021 did not contain an
adverse opinion or a disclaimer of opinion, nor were they qualified
or modified as to uncertainty, audit scope, or accounting
principles.
In connection with the audit and review of the financial statements
of the Company from the fiscal year ended June 30, 2021, there
were no disagreements on any matter of accounting principles or
practices, financial statement disclosures, or auditing scope or
procedures, which disagreements if not resolved to their
satisfaction would have caused them to refer in connection with
Harbouside CPA’s opinion to the subject matter of the
disagreement.
In connection with the audited financial statements of the Company
for the fiscal year June 30, 2021, there have been no reportable
events with the Company as set forth in Item 304(a)(1)(v) of
Regulation S-K.
Critical Accounting Policies
This summary of significant accounting policies is presented to
assist in understanding the financial statements. The financial
statements and notes are representations of the Company’s
management, who are responsible for their integrity and
objectivity. These accounting policies conform to US GAAP and have
been consistently applied in the preparation of the financial
statements.
Basis of Preparation
The accompanying financial statements have been prepared to present
the statements of financial position, the statements of operations
and comprehensive loss, statements of changes in
shareholders’ deficit and cash flows of the Company for the
fiscal year ended June 30, 2021, and have been prepared in
accordance with US GAAP.
Use of Estimates
In preparing financial statements in conformity with US GAAP,
management makes estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosures of contingent
assets and liabilities at the dates of the financial statements, as
well as the reported amounts of revenues and expenses during the
reporting periods. Management makes these estimates using the best
information available at the time the estimates are made. However,
actual results could differ materially from those
estimates.
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to
significant concentrations of credit risk consist principally of
cash and accounts receivable. During the fiscal period ended June
30, 2021, substantially all of the Company’s cash was held by
major financial institutions located in the United States, which
management believes are of high credit quality. With respect to
accounts receivable, the Company extended credit based on an
evaluation of the customer’s financial condition. The Company
generally did not require collateral for accounts receivable and
maintained an allowance for doubtful accounts of accounts
receivable if necessary.
40
Cash
Cash consists of cash held at major financial institutions and is
subject to insignificant risk of changes in value.
Receivables and Allowance for Doubtful Accounts
Trade accounts receivable are recorded at net realizable value and
do not bear interest. No allowance for doubtful accounts was made
during the period ended June 30, 2021, based on management’s
best estimate of the amount of probable credit losses in accounts
receivable. The Company evaluates its allowance for doubtful
accounts based upon knowledge of its customers and their compliance
with credit terms. The evaluation process includes a review of
customers’ accounts on a regular basis. The review process
evaluates all account balances with amounts outstanding for more
than 60 days and other specific amounts for which information
obtained indicates that the balance may be uncollectible. As of
June 30, 2021, there was no allowance for doubtful accounts and the
Company does not have any off-balance-sheet credit exposure related
to its customers.
Fair Value of Financial Instruments
Accounting Standards Codification (“ASC”) 820
“Fair Value Measurements and Disclosures”, adopted
January 1, 2008, defines fair value, establishes a three-level
valuation hierarchy for disclosures of fair value measurement and
enhances disclosure requirements for fair value measures. The
Company’s financial instruments include cash, current
receivables, and payables. These financial instruments are measured
at their respective fair values. The three levels are defined as
follows:
Level 1 - inputs to the valuation methodology are quoted prices for
identical assets or liabilities in active markets.
Level 2 - inputs to the valuation methodology include quoted prices
for similar assets and liabilities in active markets, and inputs
that are observable for the assets or liability, either directly or
indirectly, for substantially the full term of the financial
instruments.
Level 3 - inputs to the valuation methodology are unobservable and
significant to the fair value.
For cash, accounts receivables, subscription receivables, and
accounts payable and accrued liabilities, it is management’s
opinion that the carrying values are a reasonable estimate of fair
value because of the short period of time between the origination
of such instruments and their expected realization and if
applicable, their stated interest rate approximates current rates
available.
Management believes it is not practical to estimate the fair value
of related party receivables and payables because the transactions
cannot be assumed to have been consummated at arm’s length,
the terms are not deemed to be market terms, there are no quoted
values available for these instruments, and an independent
valuation would not be practical due to the lack of data regarding
similar instruments, if any, and the associated potential
costs.
Revenue Recognition
Accounting Standards Update (“ASU”) No. 2014-09,
Revenue from Contracts with Customers (“Topic 606”),
was adopted by the Company as of September 6, 2019. The
Company’s revenue recognition disclosure reflects its updated
accounting policies that are affected by this new standard. The
Company applied the “modified retrospective” transition
method for open contracts for the implementation of Topic 606. As
revenues are and have been primarily from consulting and management
services, and the Company has no significant post-delivery
obligations, this new standard did not result in a material
recognition of revenue on the Company’s accompanying
financial statements for the cumulative impact of applying this new
standard. The Company made no adjustments to its previously
reported total revenues, as those periods continue to be presented
in accordance with its historical accounting practices under Topic
605, Revenue Recognition.
41
Revenue from providing consulting and management services under
Topic 606 is recognized in a manner that reasonably reflects the
delivery of services to customers in return for expected
consideration and includes the following elements:
|
-
|
executed contracts with the Company’s customers that it
believes are legally enforceable;
|
|
-
|
identification of performance obligations in the respective
contract;
|
|
-
|
determination of the transaction price for each performance
obligation in the respective contract;
|
|
-
|
allocation of the transaction price to each performance obligation;
and
|
|
-
|
recognition of revenue only when the Company satisfies each
performance obligation.
|
These five elements as applied to the Company’s consulting
and management services results in revenue recorded as services are
provided.
Income Taxes
The Company uses the asset and liability method of accounting for
income taxes pursuant to ASC 740 “Income Taxes”. ASC
740 requires an asset and liability approach for financial
accounting and reporting for income taxes and allows recognition
and measurement of deferred tax assets based upon the likelihood of
realization of tax benefits in future years. Under the asset and
liability approach, deferred taxes are provided for the net tax
effects of temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the
amounts used for income tax purposes. Valuation allowances are
provided for deferred tax assets if it is more likely than not
these items will either expire before the Company is able to
realize their benefits, or that future deductibility is uncertain.
The provision for income taxes represents current taxes payable net
of the change during the period in deferred tax assets and
liabilities.
Foreign Currency Translation
The Company’s functional and reporting currency is United
States dollars (“USD”). The Company maintains its
financial statements in the functional currency. Monetary assets
and liabilities denominated in currencies other than the functional
currency are translated into the functional currency at rates of
exchange prevailing at the balance sheet dates. Transactions
denominated in currencies other than the functional currency are
translated into the functional currency at the exchange rates
prevailing at the dates of the transaction. Exchange gains or
losses arising from foreign currency transactions are included in
the determination of net income (loss) for the respective
periods.
Earnings per Share
Basic earnings per share are computed by dividing income available
to common shareholders by the weighted-average number of common
shares outstanding during the period. Diluted earnings per share is
computed similar to basic earnings per share except that the
denominator is increased to include the number of additional common
shares that would have been outstanding if the potential common
shares had been issued and if the additional common shares were
dilutive. If applicable, diluted earnings per share assume the
conversion, exercise or issuance of all common stock instruments
unless the effect is to reduce a loss or increase earnings per
share. The Company had no dilutive securities for the period ended
June 30, 2021.
Recently Issued Accounting Pronouncements
In June 2018, the Financial Accounting Standards Board (the
“FASB”) issued ASU 2018-07, “Compensation –
Stock Compensation (Topic 718): Improvements to Nonemployee
Share-Based Payment Accounting”, to include share-based
payment transactions for acquiring goods and services from
nonemployees. ASU 2018-07 simplifies the accounting for nonemployee
share-based payments, aligning it more closely with the accounting
for employee awards. At this time, the Company does not expect
this standard to affect the Company’s financial position,
results of operations or cash flows and disclosures.
Other recent accounting pronouncements issued by the FASB
(including its Emerging Issues Task Force) did not or are not
expected to have a material impact on the Company's present or
future financial statements.
42
DIRECTORS, EXECUTIVE
OFFICERS, PROMOTERS AND CONTROL PERSONS
Identification of Directors and Executive Officers
The following table sets forth the names and ages of our current
directors and executive officers as of October 15,
2021:
|
Name and Age
|
|
Position(s) Held
|
|
Date of Appointment
|
|
Other Public Company Directorships
|
|
Shannon
Wilkinson, 44
|
|
Director
Chief
Executive Officer
Chief
Financial Officer
Secretary
Treasurer
|
|
September 6, 2019
|
|
None
|
|
|
|
|
|
|
|
|
|
Troy
Wilkinson, 45
|
|
Director
President
|
|
September 6, 2019
|
|
None
|
|
|
|
|
|
|
|
|
|
Michael
De Valera, 56
|
|
Director
|
|
September 6, 2019
|
|
None
|
|
|
|
|
|
|
|
|
|
Chris
C. White, 50
|
|
Director
|
|
April 14, 2021
|
|
None
|
Term of Office
Should a vacancy exist, the Company’s Board of Directors has
the power to nominate and appoint a director or directors to fill
such vacancy, and each shall hold office until the next annual
meeting of stockholders and until his/her successor shall have been
duly elected and qualified.
Background and Business Experience
Shannon Wilkinson - Director, Chief Executive Officer, Chief
Financial Officer, Secretary and Treasurer
Shannon
Wilkinson is a graduate from the University of Nevada, Las Vegas
with a Bachelor's in Management Information Systems. She also
earned her Master’s in Information Systems Management from
the University of Phoenix. Shannon spent the first 12 years of her
career overseas working for the United Nations Department of
Peacekeeping Operations building mission critical software
platforms. Upon her return to the US in February 2013, Shannon
joined SocialWellth as Director of Software Development leading
development teams in building software platforms for some of the
largest healthcare organizations. She remained in that position
until summer of 2015 when she left to co-found Axiom Cyber
Solutions where she was responsible for the software development
arm of the company, developing Axiom’s cloud based
Polymorphic Cyber Defense Platform. She exited Axiom Cyber
Solutions in June 2019 when Axiom was acquired by a private equity
firm. In September 2019, Shannon co-founded Tego Cyber Inc. with a
mission to develop an innovative threat intelligence platform and
continue developing automated cybersecurity solutions to help
companies respond to the ever-changing cyber threat landscape.
Shannon works full time (30+ hours per week) in her capacity as
Director, CEO, CFO, Secretary and Treasurer of Tego Cyber
Inc.
Shannon
was selected as the 2018 Las Vegas Women in Technology -
Cybersecurity, 2017 Las Vegas Women in Technology Entrepreneur as
well as appeared in the MyVEGAS Magazine Top 100 Women of Las Vegas
in 2017 and 2018.
43
Troy Wilkinson - Director and President
Troy
Wilkinson began his career in January 2000 as a Law Enforcement
officer with the Conway Police Department where he remained until
June 2007 when he joined a Joint Terrorism Task Force as a lead
bomb investigator and violent crime homicide detective. In December
2008 Troy was recruited by the U.S. State Department to train
police officers in Kosovo on cybercrime related matters where he
earned a reputation as a top cybercrime investigator. Together with
a team of international investigators he built the first IT
forensics lab in the European Union Mission in Kosovo. After
returning home to the U.S. in February 2013, Troy joined
SocialWellth as its Infrastructure Security Director. He remained
in that position until June 2014 when he accepted the position of
Director of Information Technology for Litigation Services, LLC. In
the summer of 2015, he co-founded Axiom Cyber Solutions with his
wife Shannon Wilkinson and left in December of 2018 to accept the
position of Executive Director of Information Security (CISO) with
International Cruise and Excursion where he remained until August
2019. In addition to his role as Director and President of Tego
Cyber Inc., Troy currently is the Global Head of Cybersecurity
Operations for Interpublic Group of Companies (IPG) where he is
responsible for all aspects of cyber defense for over 60,000 users
in more than 130 countries. Troy spends 8-10 hours per week working
with Tego in his capacity as Director and President.
Troy is
a worldwide keynote speaker on cybersecurity, co-authored an Amazon
Best Seller, and is featured on several news sources as a
cybersecurity expert. Troy has contributed to numerous national
syndicated publications on cybersecurity topics including
ransomware, DDoS, cyber-crime trends, and cyber security
careers.
Michael De Valera - Director
Michael
De Valera has over thirty years of experience providing information
technology services. In 1989 he co-founded Internet Computers, Inc.
where he remained as one of the founding principles until January
2006 when he left to start his own company TechnoMedia Consulting,
Inc. where he remains the sole principal to this day. TechnoMedia
Consulting, Inc. provides information technology services for
companies and organizations that are either too small to have their
own dedicated IT departments or simply realize that specialized
functionality is more efficiently and economically provided by a
third party. His clients cover a broad range of organizations and
industries. His undergraduate BA Finance studies, majoring in
Finance and Economics, were at the University of Pennsylvania
Wharton School of Finance. Michael currently dedicates up to 5
hours a week to Tego Cyber Inc. and will allocate more time when
first product is launched. Michael has traveled extensively
around the world and his personal interests include wine and
cooking.
Chris White - Director
Chris
White has over thirty years of experience in cyber security,
telecommunications and automation. He most recently was the Deputy
CISO / Director of Global Security Operations for The Interpublic
Group of Companies, Inc. and has previously served as the Chief
Technology Officer for EY MSS, Senior Security Engineer at
AT&T, Senior Lead Engineer at General Dynamics AIS, and a
member of the US Air Force. He holds a master's degree in Systems
Engineering and a Bachelor of Science degree in Network Engineering
from Regis University.
Term of Office
Each
director serves for a term of one year and until his successor is
elected at the Annual Shareholders’ Meeting and is qualified,
subject to removal by the shareholders. Each
officer serves for a term of one year and until his successor is
elected at a meeting of the Board of Directors and is qualified.
Each member of the Advisory Board serves at the discretion of the
Board of Directors.
Employees
We have two executive officers. These individuals are not obligated
to devote any specific number of hours to our matters and intend to
devote only as much time as they deem necessary to our affairs. At
this time, our Chief Executive Officer is devoted full time to the
Company and our President devotes approximately 8-10 hours per week
to the Company. The amount of time they will devote will vary based
on the stage of the business and progress the company is making.
Accordingly, once we are beyond the developmental phase our
management will spend more time on our affairs.
44
Limitation of Liability and Indemnification Matters
Insofar
as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise,
we have been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy
as expressed in the Securities Act, and is, therefore,
unenforceable.
Identification of Significant Employees
We have no significant employees other than the aforementioned
Officers and Directors.
Family Relationship
Shannon and Troy Wilkinson are husband and wife. Other than the
foregoing, we currently do not have any officers or directors of
our Company who are related to each other.
Involvement in Certain Legal Proceedings
During the past ten years no director, executive officer, promoter,
or control person of the Company has been involved in the
following:
(1)
A petition under the Federal bankruptcy laws or any state
insolvency law which was filed by or against, or a receiver, fiscal
agent or similar officer was appointed by a court for the business
or property of such person, or any partnership in which he was a
general partner at or within two years before the time of such
filing, or any corporation or business association of which he was
an executive officer at or within two years before the time of such
filing;
(2)
Such person was convicted in a criminal proceeding or is a named
subject of a pending criminal proceeding (excluding traffic
violations and other minor offenses);
(3)
Such person was the subject of any order, judgment, or decree, not
subsequently reversed, suspended or vacated, of any court of
competent jurisdiction, permanently or temporarily enjoining him
from, or otherwise limiting, the following activities:
|
|
i.
|
Acting as a futures commission merchant, introducing broker,
commodity trading advisor, commodity pool operator, floor broker,
leverage transaction merchant, any other person regulated by the
Commodity Futures Trading Commission, or an associated person of
any of the foregoing, or as an investment adviser, underwriter,
broker or dealer in securities, or as an affiliated person,
director or employee of any investment company, bank, savings and
loan association or insurance company, or engaging in or continuing
any conduct or practice in connection with such
activity;
|
|
|
|
|
|
|
ii.
|
Engaging in any type of business practice; or
|
|
|
|
|
|
|
iii.
|
Engaging in any activity in connection with the purchase or sale of
any security or commodity or in connection with any violation of
Federal or State securities laws or Federal commodities
laws;
|
(4)
Such person was the subject of any order, judgment or decree, not
subsequently reversed, suspended or vacated, of any Federal or
State authority barring, suspending or otherwise limiting for more
than 60 days the right of such person to engage in any activity
described in paragraph (f)(3)(i) of this section, or to be
associated with persons engaged in any such activity;
|
|
(5)
Such person was found by a court of competent jurisdiction in a
civil action or by the Commission to have violated any Federal or
State securities law, and the judgment in such civil action or
finding by the Commission has not been subsequently reversed,
suspended, or vacated;
45
(6)
Such person was found by a court of competent jurisdiction in a
civil action or by the Commodity Futures Trading Commission to have
violated any Federal commodities law, and the judgment in such
civil action or finding by the Commodity Futures Trading Commission
has not been subsequently reversed, suspended or
vacated;
(7)
Such person was the subject of, or a party to, any Federal or State
judicial or administrative order, judgment, decree, or finding, not
subsequently reversed, suspended or vacated, relating to an alleged
violation of:
|
|
i.
|
Any Federal or State securities or commodities law or regulation;
or
|
|
|
|
|
|
|
ii.
|
Any
law or regulation respecting financial institutions or insurance
companies including, but not limited to, a temporary or permanent
injunction, order of disgorgement or restitution, civil money
penalty or temporary or permanent cease-and-desist order, or
removal or prohibition order; or
|
|
|
|
|
|
|
iii.
|
Any law or regulation prohibiting mail or wire fraud or fraud in
connection with any business entity; or
|
(8)
Such person was the subject of, or a party to, any sanction or
order, not subsequently reversed, suspended or vacated, of any
self-regulatory organization (as defined in Section 3(a)(26) of the
Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as
defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C.
1(a)(29))), or any equivalent exchange, association, entity or
organization that has disciplinary authority over its members or
persons associated with a member.
Independence of Directors
The
Board of Directors is currently composed of four members. Ms.
Shannon Wilkinson, Mr. Troy Wilkinson, Mr. Michael De Valera and
Mr. Chris White. Ms. Wilkinson and Mr. Wilkinson do not qualify as
an independent Directors in accordance with the published listing
requirements of the NASDAQ Global Market as they both hold officer
positions. Mr. Michael De Valera and Mr. Chris White do qualify as
independent directors and neither are an officer of the Company.
The NASDAQ independence definition includes a series of objective
tests, such as that the Director is not, and has not been for at
least three years, one of the Company’s employees and that
neither the Director, nor any of his family members has engaged in
various types of business dealings with us. In addition, the Board
of Directors has not made a subjective determination as to each
Director that no relationships exist which, in the opinion of the
Board of Directors, would interfere with the exercise of
independent judgment in carrying out the responsibilities of a
Director, though such subjective determination is required by the
NASDAQ rules. Had the Board of Directors made these determinations,
the Board of Directors would have reviewed and discussed
information provided by the Directors and the Company with regard
to each Director’s business and personal activities and
relationships as they may relate to the Company and its
management
Committees
We do not currently have an audit, compensation or nominating
committee. The Board of Directors as a whole currently act as our
audit, compensation and nominating committees. We intend to
establish an audit, compensation and nominating committee of our
Board of Directors once we expand the Board to include one or more
independent directors and intend to adopt a charter for each
committee.
Our audit committee shall be primarily responsible for reviewing
the services performed by our independent auditors, evaluating our
accounting policies and our system of internal controls. Our
compensation committee shall assist the Board in reviewing and
approving the compensation structure, including all forms of
compensation, relating to our directors and executive officers and
periodically reviewing and approving any long-term incentive
compensation or equity plans, programs or similar arrangements. Our
nominating committee shall assist the Board in selecting
individuals qualified to become our directors and in determining
the composition of the Board and its committees.
46
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934 requires our
directors and executive officers and persons who beneficially own
more than ten percent of a registered class of our equity
securities to file with the SEC initial reports of ownership and
reports of change in ownership of our common stock and other equity
securities. Officers, directors and greater than ten percent
stockholders are required by SEC regulations to furnish us with
copies of all Section 16(a) forms they file. Since inception, we
have not had a class of equity securities registered under the
Securities Exchange Act of 1934, as amended. Hence, compliance with
Section 16(a) thereof by our officers and directors was not
required.
Risk Oversight
Effective risk oversight is an important priority of the Board of
Directors. Because risks are considered in virtually every business
decision, the Board of Directors discusses risk throughout the year
generally or in connection with specific proposed actions. The
Board of Directors’ approach to risk oversight includes
understanding the critical risks in the Company’s business
and strategy, evaluating the Company’s risk management
processes, allocating responsibilities for risk oversight among the
full Board of Directors, and fostering an appropriate culture of
integrity and compliance with legal responsibilities.
Corporate Governance
The Company promotes accountability for adherence to honest and
ethical conduct; endeavors to provide full, fair, accurate, timely
and understandable disclosure in reports and documents that the
Company files with the SEC and in other public communications made
by the Company; and strives to be compliant with applicable
governmental laws, rules and regulations. The Company has not
formally adopted a written code of business conduct and ethics that
governs the Company’s employees, officers and Directors as
the Company is not required to do so.
In lieu of an Audit Committee, the Company’s Board of
Directors is responsible for reviewing and making recommendations
concerning the selection of outside auditors, reviewing the scope,
results and effectiveness of the annual audit of the Company's
financial statements and other services provided by the
Company’s independent public accountants. The Board of
Directors reviews the Company's internal accounting controls,
practices and policies.
Code of Ethics
Our
Board of Directors has not adopted a code of ethics. We anticipate
that we will adopt a code of ethics when we increase either the
number of our Directors or the number of our
employees.
|
|
EXECUTIVE
COMPENSATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
Position
|
Fiscal Year
June 30
|
Management
Fee
$
|
Stock
Awards
$
|
Option Awards
$
|
All Other
Compensation
$
|
Total
$
|
|
Shannon
Wilkinson (1)
|
2021
|
$134,750
|
$-
|
$-
|
$-
|
$134,750
|
|
Troy
Wilkinson
|
2021
|
$-
|
$-
|
$-
|
$-
|
$-
|
|
Michael
De Valera
|
2021
|
$-
|
$-
|
$-
|
$-
|
$-
|
|
Chris
White (2)
|
2021
|
$7,500
|
$25,000
|
$-
|
$-
|
$32,500
|
|
(1)
|
During
the fiscal year ending June 30, 2021, there was no formal
employment contract in place for her employment.
|
|
(2)
|
During
the fiscal year ending June 30, 2021, there was no formal
employment contract in place for his employment.
|
47
Narrative Disclosure to Summary Compensation Table
We compensate our CEO, Shannon Wilkinson, $10,000 per month. There
currently is no formal contract in place for her employment. Other
than the foregoing, there are no employment contracts, compensatory
plans or arrangements, including payments to be received from the
Company with respect to any executive officer, that would result in
payments to such person because of his or her resignation,
retirement or other termination of employment with the Company, or
its subsidiaries, any change in control, or a change in the
person’s responsibilities following a change in control of
the Company.
Outstanding Equity Awards at Fiscal Year-End
There are no current outstanding equity awards to our executive
officers.
Long-Term Incentive Plans
There are no arrangements or plans in which we provide pension,
retirement or similar benefits for directors or executive
officers.
Compensation of Directors
Our directors receive no annual salary or bonus for their service
as members of the Company’s board of directors.
Security Holders Recommendations to Board of Directors
Shareholders can direct communications to our Chief Executive
Officer, Shannon Wilkinson, at our executive offices. However,
while we appreciate all comments from shareholders, we may not be
able to individually respond to all communications. We attempt to
address shareholder questions and concerns in our press releases
and documents filed with the SEC so that all shareholders have
access to information about us at the same time. Ms. Wilkinson
collects and evaluates all shareholder communications. All
communications addressed to our directors and executive officers
will be reviewed by those parties unless the communication is
clearly frivolous.
48
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information concerning the
number of shares of our common stock owned beneficially as of
October 15, 2021, by: (i) each of our directors; (ii) each of our
named executive officers; and (iii) each person or group known by
us to beneficially own more than 5% of our outstanding shares of
common stock. Unless otherwise indicated, the shareholders listed
below possess sole voting and investment power with respect to the
shares they own. Unless otherwise specified, the address of
each of the persons set forth below is care of the Company at the
address 8565 South Eastern Avenue, Suite 150, Las Vegas, Nevada,
89123.
Beneficial ownership has been determined in accordance with Rule
13d-3 under the Exchange Act. Under this rule, certain shares may
be deemed to be beneficially owned by more than one person (if, for
example, persons share the power to vote or the power to dispose of
the shares). In addition, shares are deemed to be beneficially
owned by a person if the person has the right to acquire shares
(for example, upon exercise of an option or warrant) within 60 days
of the date as of which the information is provided. In computing
the percentage ownership of any person, the amount of shares is
deemed to include the amount of shares beneficially owned by such
person by reason of such acquisition rights. As a result, the
percentage of outstanding shares of any person as shown in the
following table does not necessarily reflect the person’s
actual voting power at any particular date.
|
Name and Address of Beneficial Owner
|
Amount and Nature
of Beneficial
Ownership (1) (#)
|
Percent of Class (2) (%)
|
|
Shannon Wilkinson (3)
|
3,000,000
|
12.63%
|
|
Troy Wilkinson (4)
|
3,000,000
|
12.63%
|
|
Michael De Valera (5)
|
1,020,000
|
4.29%
|
|
Chris C. White (6)
|
108,000
|
0.45%
|
|
All
Officers, Directors and Beneficial Owners as a Group (4
persons)
|
7,128,000
|
30.00%
|
(1) The number and percentage of shares beneficially owned is
determined under rules of the SEC and the information is not
necessarily indicative of beneficial ownership for any other
purpose. Under such rules, beneficial ownership includes any shares
as to which the individual has sole or shared voting power or
investment power and also any shares, which the individual has the
right to acquire within 60 days through the exercise of any stock
option or other right. The persons named in the table have sole
voting and investment power with respect to all shares of common
stock shown as beneficially owned by them, subject to community
property laws where applicable and the information contained in the
footnotes to this table.
(2) Based on 23,755,321 issued and outstanding shares of common
stock as of October 15, 2021.
(3) Shannon Wilkinson is a Director and the Company's CEO, CFO,
Secretary and Treasurer. Her beneficial ownership includes
3,000,000 common shares.
(4) Troy Wilkinson is a Director and the Company’s President.
His beneficial ownership includes 3,000,000 common
shares.
(5) Michael De Valera is member of the Company’s Board of
Directors. His beneficial ownership includes 1,020,000 common
shares directly owned.
(6) Chris C. White is a member of the Company’s Board of
Directors. His beneficial ownership includes 108,000 common shares
directly owned.
49
Changes in Control
There are no present arrangements or pledges of the Company’s
securities, which may result in a change in control of the
Company.
CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS
Related Party Transactions
Related party transactions are measured at the exchange amount,
which is the amount of consideration established and agreed to by
the related parties. Related parties are natural persons or other
entities that have the ability, directly, or indirectly, to control
another party or exercise significant influence over the party in
making financial and operating decisions. Related parties include
other parties that are subject to common control or that are
subject to common significant influences.
During the period ended June 30, 2021, there were transactions
incurred between the Company and Shannon Wilkinson, Director, CEO,
CFO, Secretary and Treasurer for management fees of $134,750
compared to $29,700 for the period September 6, 2019 (date
of inception) to June 30, 2020. As of June 30, 2021, the total
amount due to related parties is $nil comparted to $1,358 for the
period September 6, 2019 (date of inception) to June 30, 2020, of
which $1,308 was due to this
officer.
During the period ended June 30, 2021, there were no transactions
incurred between the Company and Troy Wilkinson, Director and
President of the Company compared to management fees of $3,000 for
the period September 6, 2019 (date of inception) to June 30,
2020. As of June 30, 2021, the amount due to related parties
is $nil comparted to $1,358 for the period September 6, 2019 (date
of inception) to June 30, 2020, of which $50 was due to this officer.
On
March 29, 2021, 100,000 shares were issued to Chris White, a
director of the Company at a value of $0.25 per share for a total
value of $25,000 in exchange for services.
During the period ended June 30, 2021, there were transactions
incurred between the Company and Chris White, Director, for
management fees of $7,500 compared to $nil for the period
September 6, 2019 (date of inception) to June 30,
2020.
50
Other than the foregoing, none of the directors or executive
officers of the Company, nor any person who owned of record or was
known to own beneficially more than 5% of the Company’s
outstanding shares of its Common Stock, nor any associate or
affiliate of such persons or companies, has any material interest,
direct or indirect, in any transaction that has occurred during the
past fiscal year, or in any proposed transaction, which has
materially affected or will affect the Company.
With regard to any future related party transaction, we plan to
fully disclose any and all related party transactions in the
following manner: disclosing such transactions in reports where
required; disclosing in any and all filings with the SEC, where
required; obtaining disinterested director’s consent; and
obtaining shareholder consent where required.
Review, Approval or Ratification of Transactions with Related
Persons
Given our small size and limited financial resources, we have not
adopted formal policies and procedures for the review, approval or
ratification of transactions, such as those described above, with
our executive officers, Directors and significant stockholders.
However, all of the transactions described above were approved and
ratified by our Board of Directors. In connection with the approval
of the transactions described above, our Board of Directors, took
into account several factors, including their fiduciary duties to
the Company; the relationships of the related parties described
above to the Company; the material facts underlying each
transaction; the anticipated benefits to the Company and related
costs associated with such benefits; whether comparable products or
services were available; and the terms the Company could receive
from an unrelated third party.
We intend to establish formal policies and procedures in the
future, once we have sufficient resources and have appointed
additional Directors, so that such transactions will be subject to
the review, approval or ratification of our Board of Directors, or
an appropriate committee thereof. With regard to any future
related party transaction, we plan to fully disclose any and all
related party transactions in the following manner:
disclosing such transactions in
reports where required; disclosing in any and all filings with the
SEC, where required; obtaining disinterested director’s
consent; and obtaining shareholder consent where
required.
Director Independence
Quotations
for the Company’s common stock are entered on the
Over-the-Counter Bulletin Board inter-dealer quotation system,
which does not have director independence requirements. For
purposes of determining director independence, the Company applied
the definitions set out in NASDAQ Rule 4200(a)(15). Under NASDAQ
Rule 4200(a)(15), a director is not considered to be independent if
he or she is also an executive officer or employee of the
corporation. As a result, the Company has two independent director,
Michael De Valera and Chris White, as our other directors, Shannon
Wilkinson and Troy Wilkinson, are each also an executive officer of
the Company.
INTERESTS OF NAMED EXPERTS AND
COUNSEL
Harbourside CPA (formerly known as Buckley Dodds LLP), our
independent registered public accountant, has audited our financial
statements included in this prospectus and Registration Statement
to the extent and for the periods set forth in their audit report.
Harbourside CPA has presented its report with respect to our
audited financial statements. The Company has included such
financial statements in the prospectus and elsewhere in the
registration statement in reliance on the report of September 28,
2021, given their authority as experts in accounting and
auditing.
No expert or counsel named in this prospectus as having prepared or
certified any part of this prospectus or having given an opinion
upon the validity of the securities being registered or upon other
legal matters in connection with the registration or offering of
the shares and warrants and its underlying securities was employed
on a contingency basis, or had, or is to receive, in connection
with the offering, a substantial interest, direct or indirect, in
the registrant or any of its parents or subsidiaries. Nor was any
such person connected with the registrant or any of its parents or
subsidiaries as a promoter, managing or principal underwriter,
voting trustee, director, officer, or employee.
51
Lockett + Horwitz, a Professional Law Corporation
of Lake Forest, California is acting as our counsel in connection with the
registration of our securities under the Securities Act, and as
such, will pass upon the validity of the securities offered in this
offering. In the past, we have paid the law firm of Lockett
+ Horwitz for a portion of its services with our common stock. As
of the filing of this Registration Statement, Lockett + Horwitz
holds 41,085 shares of our
common stock (which constitutes approximately 0.17% of the
Registrant’s total issued and outstanding common stock) with
a market value of approximately $32,868.
This prospectus is part of a registration statement on Form S-1
that we filed with the SEC. Certain information in the registration
statement has been omitted from this prospectus in accordance with
the rules and regulations of the SEC. We have also filed exhibits
and schedules with the registration statement that are excluded
from this prospectus. For further information you may read a
copy of the registration statement, including the exhibits and
schedules, without charge at the SEC’s Public Reference Room;
or obtain a copy from the SEC upon payment of the fees prescribed
by the SEC.
COMMISSION POSITION
ON
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Our directors and officers are indemnified as provided by the
Nevada corporate law and our bylaws. We have agreed to indemnify
each of our directors and certain officers against certain
liabilities, including liabilities under the Securities Act.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to our directors, officers and
controlling persons pursuant to the provisions described above, or
otherwise, we have been advised that in the opinion of the SEC such
indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that
a claim for indemnification against such liabilities (other than
our payment of expenses incurred or paid by our director, officer
or controlling person in the successful defense of any action, suit
or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, we will,
unless in the opinion of our counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will
be governed by the final adjudication of such issue.
We have been advised that in the opinion of the SEC indemnification
for liabilities arising under the Securities Act is against public
policy as expressed in the Securities Act, and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities is asserted by one of our directors,
officers, or controlling persons in connection with the securities
being registered, we will, unless in the opinion of our legal
counsel the matter has been settled by controlling precedent,
submit the question of whether such indemnification is against
public policy to a court of appropriate jurisdiction. We will then
be governed by the court’s decision.
WHERE YOU CAN FIND MORE INFORMATION
This prospectus, which constitutes a part of the registration
statement, does not contain all of the information set forth in the
registration statement and the exhibits thereto. Statements
contained in this prospectus as to the contents of any contract or
other document that is filed as an exhibit to the registration
statement are not necessarily complete and each such statement is
qualified in all respects by reference to the full text of such
contract or document. For further information with respect to us
and the common stock, reference is hereby made to the registration
statement and the exhibits thereto, which may be inspected and
copied at the principal office of the SEC, 100 F Street NE,
Washington, D.C. 20549, and copies of all or any part thereof may
be obtained at prescribed rates from the Commission’s Public
Reference Section at such addresses. Also, the SEC maintains a
World Wide Web site on the Internet at http://www.sec.gov that
contains reports and other information regarding registrants that
file electronically with the SEC. We also make available free of
charge our annual, quarterly and current reports, and other
information upon request. To request such materials, please contact
Ms. Shannon Wilkinson, Chief Executive Officer.
52
INDEX TO CONSOLIDATED FINANCIAL
STATEMENTS
TABLE OF CONTENTS
|
|
|
|||
|
|
|
|||
|
FINANCIAL STATEMENTS
|
|
|||
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
||||
|
|
|
|
||
|
|
||||
|
|
|
|
||
|
|
||||
F-1
REPORT OF INDEPENDENT PUBLIC
ACCOUNTING FIRM
To the
Shareholders and Board of Directors of Tego Cyber Inc.
Opinion on the Financial Statements
We have
audited the accompanying balance sheet of Tego Cyber Inc. (the
“Company”) as of June 30, 2021, and the related
statements of operations and comprehensive loss, changes in
shareholders’ equity, and cash flows for the year then ended
and the related notes (collectively referred to as the financial
statements). In our opinion, the financial statements present
fairly, in all material respects, the financial position of the
Company as of June 30, 2021, and the results of its operations and
its cash flows for the year then ended, in conformity with
accounting principles generally accepted in the United States of
America.
Basis for Opinion
These
financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on these
financial statements based on our audit. We are a public accounting
firm registered with the Public Company Accounting Oversight Board
(United States) (“PCAOB”) and are required to be
independent with respect to the Company in accordance with the U.S.
federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We
conducted our audit in accordance with the auditing standards of
the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement, whether due to error
or fraud. The Company is not required to have, nor were we engaged
to perform, an audit of its internal control over financial
reporting. As part of our audit, we are required to obtain an
understanding of internal control over financial reporting but not
for the purpose of expressing an opinion on the effectiveness of
the Company’s internal control over financial reporting.
Accordingly, we express no such opinion.
Our
audit included performing procedures to assess the risks of
material misstatement of the financial statements, whether due to
error or fraud, and performing procedures that respond to those
risks. Such procedures including examining, on a test basis,
evidence regarding the amounts and disclosures in the financial
statements. Our audit also included evaluating the accounting
principles used and significant estimates made by management, as
well as evaluating the overall presentation of the financial
statements. We believe that our audit provides a reasonable basis
for our opinion.
Emphasis of matter
The
accompanying financial statements have been prepared assuming that
Tego Cyber Inc. will continue as a going concern. As discussed in
Note 3 to the financial statements, the Company’s significant
operating losses raise substantial doubt about its ability to
continue as a going concern. The financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.
|
Vancouver,
British Columbia
|
/s/
Harbourside CPA LLP
|
|
Date
September 28, 2021
|
Chartered
Professional Accountants
|
F-2
TEGO CYBER INC.
BALANCE SHEET
(Expressed in US Dollars)
|
|
June 30,
2021
|
June 30,
2020
|
|
ASSETS
|
|
|
|
Current
assets
|
|
|
|
Cash
|
$583,015
|
$81,872
|
|
Accounts
receivable
|
1,450
|
150
|
|
Prepaid
expenses
|
113,462
|
-
|
|
Total current
assets
|
697,927
|
82,022
|
|
Software
|
75,750
|
21,500
|
|
TOTAL
ASSETS
|
$773,677
|
$103,522
|
|
|
|
|
|
LIABILITIES
& SHAREHOLDERS’ DEFICIT
|
|
|
|
Current
liabilities
|
|
|
|
Accounts payable
and accrued liabilities
|
$23,010
|
$15,554
|
|
Due to related
parties
|
-
|
1,358
|
|
Convertible
debts
|
22,621
|
-
|
|
TOTAL
LIABILITIES
|
45,631
|
16,912
|
|
|
|
|
|
SHAREHOLDERS’
EQUITY
|
|
|
|
Common
shares
50,000,000 shares
authorized
$0.001 par
value18,296,511shares issued and outstanding at June 30,
2021
|
18,297
|
12,406
|
|
Additional paid in
capital
|
1,720,631
|
175,906
|
|
Subscriptions
receivable
|
(10,500)
|
(24,500)
|
|
Accumulated
deficit
|
(1,000,382)
|
(77,202)
|
|
TOTAL
SHAREHOLDERS’ EQUITY
|
728,046
|
86,610
|
|
TOTAL
LIABILITIES & SHAREHOLDERS’ EQUITY
|
$773,677
|
$103,522
|
The
accompanying notes are an integral part of these financial
statements
F-3
TEGO CYBER INC.
STATEMENT OF OPERATIONS
AND COMPREHENSIVE LOSS
(Expressed in US Dollars)
|
|
Year
Ended
June 30,
2021
|
From
September 6,
2019
(Date of
Inception)
to June 30,
2020
|
|
REVENUE
|
|
|
|
Consulting
fees
|
$5,600
|
$2,325
|
|
Subscription
Revenue
|
2,500
|
-
|
|
TOTAL
REVENUE
|
8,100
|
2,325
|
|
|
|
|
|
OPERATING
EXPENSES
|
|
|
|
Adverting
& promotion
|
62,238
|
13,944
|
|
Bank
charges & fees
|
3,199
|
777
|
|
Consultants
& contractors
|
95,938
|
263
|
|
Exchange
& listing fees
|
47,176
|
-
|
|
Interest
on short term debt
|
9,865
|
-
|
|
Investor
relations & shareholder communications
|
67,597
|
-
|
|
Legal
& accounting
|
168,077
|
26,429
|
|
Management
fees
|
167,250
|
34,700
|
|
Meals
& entertainment
|
4,138
|
268
|
|
Office
& administration
|
9,569
|
798
|
|
Rent
& utilities
|
488
|
351
|
|
Subscriptions
& dues
|
1,672
|
493
|
|
Travel
& hotel
|
1,794
|
677
|
|
Website
& platform cost
|
35,917
|
827
|
|
TOTAL
OPERATING EXPENSES
|
674,918
|
79,527
|
|
|
|
|
|
OTHER
INCOME & EXPENSE
|
|
|
|
Accretion
expense
|
(168,638)
|
-
|
|
Financing
fees
|
(26,966)
|
-
|
|
Gain on
extinguishment of convertible debts
|
36,731
|
-
|
|
Loss on
settlement of convertible debts
|
(97,489)
|
-
|
|
TOTAL
OTHER INCOME & EXPENSE
|
(256,362)
|
-
|
|
|
|
|
|
NET
AND COMPREHENSIVE LOSS
|
$(923,180)
|
$(77,202)
|
|
|
|
|
|
BASIC
AND DILUTED LOSS PER COMMON SHARE
|
$(0.07)
|
$(0.01)
|
|
WEIGHTED
AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
|
13,566,628
|
7,790,648
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these financial
statements
F-4
TEGO CYBER INC.
STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY
JUNE 30, 2021
(Expressed in US Dollars)
|
|
Number
of
Shares
|
Common
Stock
Amount
|
Additional
Paid-In
Capital
|
Subscriptions
Receivable
|
Accumulated
Deficit
|
Total
Shareholders'
Equity
|
|
Balance,
September 6, 2019
(Date
of Inception)
|
-
|
$-
|
$-
|
$-
|
$-
|
$-
|
|
Shares issued to
founders for services
|
8,000,000
|
8,000
|
-
|
-
|
-
|
8,000
|
|
Shares issued for
services
|
1,000,000
|
1,000
|
9,000
|
-
|
-
|
10,000
|
|
Shares issued for
cash
|
3,406,236
|
3,406
|
166,906
|
(24,500)
|
-
|
145,812
|
|
Net loss for period
ended June 30, 2020
|
-
|
-
|
-
|
-
|
(77,202)
|
(77,202)
|
|
Balance,
June 30, 2020
|
12,406,236
|
$12,406
|
$175,906
|
$(24,500)
|
$(77,202)
|
$86,610
|
|
Shares issued for
cash
|
5,041,190
|
5,042
|
1,155, 256
|
14,000
|
-
|
1,174,298
|
|
Shares issued for
services
|
299,752
|
300
|
74,638
|
-
|
-
|
74,938
|
|
Shares issued as
prepaid expenses
|
300,248
|
300
|
74,762
|
-
|
-
|
75,062
|
|
Shares issued for
settlement of debt
|
51,085
|
51
|
38,449
|
-
|
-
|
38,500
|
|
Shares issued as
transaction costs for convertible debts
|
198,000
|
198
|
32,802
|
-
|
-
|
33,000
|
|
Equity portion of
convertible debts
|
-
|
-
|
10,167
|
-
|
-
|
10,167
|
|
Warrants issued
with convertible debts
|
-
|
-
|
158,651
|
-
|
-
|
158,651
|
|
Net loss for the
year ended June 30, 2021
|
-
|
-
|
-
|
-
|
(923,180)
|
(923,180)
|
|
Balance,
June 30, 2021
|
18,296,511
|
$18,297
|
$1,720,631
|
$(10,500)
|
$(1,000,382)
|
$728,046
|
|
|
|
|
|
|
|
|
See
accompanying notes are an integral part of these financial
statements
F-5
TEGO CYBER INC.
STATEMENT OF CASH FLOWS
(Expressed in US Dollars)
|
|
Year Ended
June 30,
2021
|
From
September 6,
2019
(Date of
Inception)
to June 30,
2020
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
Net loss for the
year
|
$(923,180)
|
$(77,202)
|
|
Items not affecting
cash
|
|
|
|
Shares
issued for services
|
74,938
|
18,000
|
|
Interest
on short term debt
|
8,567
|
-
|
|
Accretion
expense
|
168,638
|
-
|
|
Financing
fees
|
26,966
|
-
|
|
Gain on
extinguishment of convertible debts
|
(36,731)
|
-
|
|
Loss on
settlement of convertible debts
|
97,489
|
-
|
|
Changes in non-cash
working capital items:
|
|
|
|
Accounts
receivable
|
(1,300)
|
(150)
|
|
Prepaid
expenses
|
(38,400)
|
-
|
|
Accounts
payable and accrued liabilities
|
45,956
|
12,304
|
|
Due to
related parties
|
(1,358)
|
1,358
|
|
NET
CASH USED IN OPERATING ACTIVITIES
|
(578,415)
|
(45,690)
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
Software
|
(54,250)
|
(18,250)
|
|
NET
CASH USED IN INVESTING ACTIVITIES
|
(54,250)
|
(18,250)
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
Proceeds from
shares issued
|
1,149,798
|
145,812
|
|
Proceeds from
issuance of convertible debt
|
300,000
|
-
|
|
Repayment of
convertible debt
|
(312,240)
|
-
|
|
Convertible debt
issuance costs
|
(28,250)
|
-
|
|
Collection of
subscription receivable
|
24,500
|
-
|
|
NET
CASH PROVIDED BY FINANCING ACTIVITIES
|
1,133,808
|
145,812
|
|
|
|
|
|
NET
INCREASE IN CASH
|
501,143
|
81,872
|
|
CASH
AT BEGINNING OF THE PERIOD
|
81,872
|
-
|
|
CASH
AT END OF THE PERIOD
|
$583,015
|
$81,872
|
|
|
|
|
|
Non-cash
investing and financing activities:
|
|
|
|
Software
included in accounts payable
|
$-
|
$3,250
|
|
Shares
issued included in subscriptions receivable
|
$10,500
|
$24,500
|
|
Shares
issued for prepaid expenses
|
$75,062
|
$-
|
|
Shares
issued for settlement of debt
|
$38,500
|
$-
|
|
Shares
issued with convertible debts
|
$33,000
|
$-
|
|
Equity
portion of convertible debts
|
$10,167
|
$-
|
|
Warrants
issued with convertible debt
|
$158,651
|
$-
|
The
accompanying notes are an integral part of these audited financial
statements
F-6
NOTE 1 – ORGANIZATION AND
DESCRIPTION OF BUSINESS
Tego
Cyber Inc. (the “Company”) was incorporated on
September 6, 2019 in the State of Nevada. The Company has developed
an automated threat intelligence defense platform that provides
real-time protection against cyber-threats. The Company is focused
on filling the cyber-security skills gap with automated cyber
defense solutions, including a monthly software subscription to
users of the multiple router and firewall
manufacturers.
The
Company’s head office is at at 8565 S. Eastern Ave. #150, Las
Vegas, Nevada, 89123.
NOTE 2 – BASIS OF PRESENTATION
The
accompanying audited financial statements have been prepared in
accordance with generally accepted accounting principles in the
United States of America (“US GAAP”). In the opinion of
management, the financial statements include all adjustments of a
normal recurring nature necessary for a fair statement of the
results for the period presented.
The
accompanying financial statements have been prepared to present the
balance sheet, the statement of operations and comprehensive loss,
statement of changes in shareholders’ equity and the
statement of cash flows of the Company for the year ended June 30,
2021. The accompanying audited financial statements have been
prepared in accordance with US GAAP using Company-specific
information where available and allocations and estimates where
data is not maintained on a Company-specific basis within its books
and records. Due to the allocations and estimates used to prepare
the financial statements, they may not reflect the financial
position, cash flows and results of operations of the Company in
the future or its operations, cash flows and financial
position.
The
preparation of financial statements in accordance with US GAAP
requires the use of estimates and assumptions that affect the
reported amounts of assets and liabilities, disclosure of
contingent assets and liabilities known to exist as of the date the
financial statements are published, and the reported amounts of
revenues and expenses during the reporting period. Uncertainties
with respect to such estimates and assumptions are inherent in the
preparation of the Company’s financial statements;
accordingly, it is possible that the actual results could differ
from these estimates and assumptions and could have a material
effect on the reported amounts of the Company’s financial
position and results of operations.
NOTE 3 – GOING CONCERN UNCERTAINTY
The
accompanying financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and
satisfaction of liabilities in the normal course of the business.
The Company has incurred material losses from operations and has an
accumulated deficit. At June 30, 2021, the Company had a working
capital surplus of $652,296. For the year ended June 30, 2021, the
Company sustained net losses and generated negative cash flows from
operations. In March 2020, the World Health Organization recognized
the outbreak of COVID-19 as a global pandemic. The COVID-19
pandemic and government actions implemented to contain the further
spread of COVID-19 have severely restricted economic activity
around the world. These factors, among others, raise substantial
doubt about the Company’s ability to continue as a going
concern. The financial statements do not include any adjustments
relating to the recoverability and classification of recorded asset
amounts or the amounts and classification of liabilities that may
be necessary should the Company be unable to continue as a going
concern. These adjustments could be material. The Company’s
continuation as a going concern is contingent upon its ability to
earn adequate revenues from operations and to obtain additional
financing. There is no assurance that the Company will be able to
obtain such financings or obtain them on favorable
terms.
NOTE 4 – SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
This
summary of significant accounting policies is presented to assist
in understanding the financial statements. The financial statements
and notes are representations of the Company’s management,
who are responsible for their integrity and objectivity. These
accounting policies conform to US GAAP and have been consistently
applied in the preparation of the financial
statements.
F-7
Basis of Preparation
The
accompanying financial statements have been prepared to present the
balance sheet, the statement of operations and comprehensive loss,
statement of changes in shareholders’ equity and statement of
cash flows of the Company for the period ended June 30, 2021 and
have been prepared in accordance with US GAAP.
Use of Estimates
In
preparing financial statements in conformity with US GAAP,
management makes estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosures of contingent
assets and liabilities at the dates of the financial statements, as
well as the reported amounts of revenues and expenses during the
reporting periods. Management makes these estimates using the best
information available at the time the estimates are made. However,
actual results could differ materially from those
estimates.
Concentrations of Credit Risk
Financial
instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash and
accounts receivable. As at June 30, 2021, substantially all of the
Company’s cash was held by major financial institutions
located in the United States, which management believes are of high
credit quality. With respect to accounts receivable, the Company
extended credit based on an evaluation of the customer’s
financial condition. The Company generally did not require
collateral for accounts receivable and maintained an allowance for
doubtful accounts of accounts receivable if necessary.
Cash
Cash
consists of cash held at major financial institutions and is
subject to insignificant risk of changes in value.
Receivables and Allowance for Doubtful Accounts
Trade
accounts receivable are recorded at net realizable value and do not
bear interest. No allowance for doubtful accounts was made during
the period ended June 30, 2021, based on management’s best
estimate of the amount of probable credit losses in accounts
receivable. The Company evaluates its allowance for doubtful
accounts based upon knowledge of its customers and their compliance
with credit terms. The evaluation process includes a review of
customers’ accounts on a regular basis. The review process
evaluates all account balances with amounts outstanding for more
than 60 days and other specific amounts for which information
obtained indicates that the balance may be uncollectible. As of
June 30, 2021, there was no allowance for doubtful accounts and the
Company does not have any off-balance-sheet credit exposure related
to its customers.
Software
Software
is stated at cost less accumulated amortization and is depreciated
using the straight-line method over the estimated useful life of
the asset. The estimated useful life of the asset is 5 years and is
not depreciated until it is available for use by the
Company.
Leases
The
Company determines if an arrangement is a lease at inception.
Operating and financing right-of-use assets and lease liabilities
are included on the balance sheet. Right-of-use assets represent
the Company’s right to use an underlying asset for the lease
term and lease liabilities represent the Company’s obligation
to make lease payments arising from the lease. Right-of-use assets
and liabilities are recognized at commencement date based on the
present value of lease payments over the lease term. The Company
uses its incremental borrowing rate, based on the information
available at the commencement date, in determining the present
value of future lease payments. Right-of-use assets include any
prepaid lease payments and exclude any lease incentives and initial
direct costs incurred. Operating lease expenses are recognized on a
straight-line basis over the term of the lease, consisting of
interest accrued on the lease liability and depreciation of the
right-of-use asset. The lease terms may include options to extend
or terminate the lease is it is reasonably certain the Company will
exercise that option. As at June 30, 2021, the Company had no
leases.
F-8
Fair Value of Financial Instruments
Accounting
Standards Codification (“ASC”) 820 “Fair Value
Measurements and Disclosures”, adopted January 1, 2008,
defines fair value, establishes a three-level valuation hierarchy
for disclosures of fair value measurement and enhances disclosure
requirements for fair value measures. The Company’s financial
instruments include cash, current receivables and payables. These
financial instruments are measured at their respective fair values.
The three levels are defined as follows:
Level 1
- inputs to the valuation methodology are quoted prices for
identical assets or liabilities in active markets.
Level 2
- inputs to the valuation methodology include quoted prices for
similar assets and liabilities in active markets, and inputs that
are observable for the assets or liability, either directly or
indirectly, for substantially the full term of the financial
instruments.
Level 3
- inputs to the valuation methodology are unobservable and
significant to the fair value.
For
cash, accounts receivable, accounts payable and accrued liabilities
and due to related parties, it is management’s opinion that
the carrying values are a reasonable estimate of fair value because
of the short period of time between the origination of such
instruments and their expected realization and if applicable, their
stated interest rate approximates current rates
available.
For
convertible debts, the carrying values, excluding any unamortized
discounts, approximate the respective fair value. The convertible
debts have been discounted to reflect their net present value as at
June 30, 2021. The carrying values of embedded conversion features
not considered to be derivative instruments were determined by
allocating the remaining carrying value of the convertible debt
after deducting the estimated carrying value of the liability
portion.
Estimating
fair value for warrants require determining the most appropriate
valuation model which is dependent on the terms and conditions of
the grant. This estimate requires determining the most appropriate
inputs to the valuation model including the expected life of the
warrant, volatility, dividend yield, and rate of forfeitures and
making assumptions about them.
Revenue Recognition
Revenue
from providing consulting and management services is recognized in
a manner that reasonably reflects the delivery of services to
customers in return for expected consideration and includes the
following elements:
|
-
|
executed
contracts with the Company’s customers that it believes are
legally enforceable;
|
|
-
|
identification
of performance obligations in the respective contract;
|
|
-
|
determination
of the transaction price for each performance obligation in the
respective contract;
|
|
-
|
allocation
of the transaction price to each performance obligation;
and
|
|
-
|
recognition
of revenue only when the Company satisfies each performance
obligation.
|
These
five elements as applied to the Company’s consulting services
results in revenue recorded as services are provided.
F-9
Income Taxes
The
Company uses the asset and liability method of accounting for
income taxes pursuant to ASC 740 “Income Taxes”. ASC
740 requires an asset and liability approach for financial
accounting and reporting for income taxes and allows recognition
and measurement of deferred tax assets based upon the likelihood of
realization of tax benefits in future years. Under the asset and
liability approach, deferred taxes are provided for the net tax
effects of temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the
amounts used for income tax purposes. Valuation allowances are
provided for deferred tax assets if it is more likely than not
these items will either expire before the Company is able to
realize their benefits, or that future deductibility is uncertain.
The provision for income taxes represents current taxes payable net
of the change during the period in deferred tax assets and
liabilities.
Foreign Currency Translation
The
Company’s functional and reporting currency is United States
dollars (“USD”). The Company maintains its financial
statements in the functional currency. Monetary assets and
liabilities denominated in currencies other than the functional
currency are translated into the functional currency at rates of
exchange prevailing at the balance sheet dates. Transactions
denominated in currencies other than the functional currency are
translated into the functional currency at the exchange rates
prevailing at the dates of the transaction. Exchange gains or
losses arising from foreign currency transactions are included in
the determination of net income (loss).
Earnings (Loss) per Share
Basic
earnings (loss) per share is computed by dividing income (loss)
available to common shareholders by the weighted-average number of
common shares outstanding during the period. Diluted earnings
(loss) per share is computed similar to basic earnings (loss) per
share except that the denominator is increased to include the
number of additional common shares that would have been outstanding
if the potential common shares had been issued and if the
additional common shares were dilutive. If applicable, diluted
earnings (loss) per share assume the conversion, exercise or
issuance of all common stock instruments unless the effect is to
reduce a loss or increase earnings (loss) per share. The Company
had no dilutive securities for the year ended June 30,
2021.
Recently Issued Accounting Pronouncements
In
December 2019, the FASB issued ASU 2019-2, Simplifying the Accounting for Income
Taxes which amends ASC 740 Income Taxes (ASC 740). This update is
intended to simplify accounting for income taxes by removing
certain exceptions to the general principles in ASC 740 and
amending existing guidance to improve consistent application of ASC
740. This update is effective for fiscal years beginning after
December 15, 2021. The guidance in this update has various
elements, some of which are applied on a prospective basis and
others on a retrospective basis with earlier application permitted.
The Company is currently evaluating the effect of this ASU on the
Company’s financial statements and related
disclosures.
Other
recent accounting pronouncements issued by the FASB (including its
Emerging Issues Task Force) did not or are not expected to have a
material impact on the Company's present or future financial
statements.
NOTE 5 – SOFTWARE
|
Balance,
September 6, 2019 (Date of Inception)
|
$-
|
|
Additions
|
21,500
|
|
Depreciation
|
-
|
|
Balance,
June 30, 2020
|
21,500
|
|
Additions
|
54,250
|
|
Depreciation
|
-
|
|
Balance,
June 30, 2021
|
$75,750
|
|
|
|
As at
June 30, 2021 and 2020, the software is not in use and no
depreciation has been recorded for the periods then
ended.
F-10
NOTE 6 – RELATED PARTY TRANSACTIONS
Related
party transactions are measured at the exchange amount, which is
the amount of consideration established and agreed to by the
related parties. Related parties are natural persons or other
entities that have the ability, directly, or indirectly, to control
another party or exercise significant influence over the party in
making financial and operating decisions. Related parties include
other parties that are subject to common control or that are
subject to common significant influences.
On the
date of incorporation 8,000,000 shares were issued to directors and
founders at par value as per the following in exchange for concept
and services valued at $8,000: Shannon Wilkinson, Director, CEO,
CFO, Secretary, Treasurer: 3,000,000; Troy Wilkinson, Director,
President: 3,000,000; Michael De Valera, Director: 1,000,000; and
Stephen Seminew, Co-Founder 1,000,000.
During
the year ended June 30, 2021, there were transactions incurred
between the Company and Shannon Wilkinson, Director, CEO, CFO,
Secretary and Treasurer for management fees of $134,750 (June 30,
2020 - $29,700) and reimbursement of expenses incurred on behalf of
the Company. As of June 30, 2021, included in due to related
parties, is $Nil (June 30, 2020 - $1,308) due to this
officer.
During
the year ended June 30, 2021, there were transactions incurred
between the Company and Chris White, Director and President of the
Company for management fees of $32,500 (June 30, 2020 - $Nil). As
of June 30, 2021, included in due to related parties, is $Nil (June
30, 2020 - $Nil) due to this officer.
During
the year ended June 30, 2021, there were transactions incurred
between the Company and other related parties for management fees
of $Nil (June 30, 2020 - $5,000) and reimbursement of expenses
incurred on behalf of the Company. As of June 20, 2021, included in
due to related parties, is $Nil (June 30, 2020 - $50) due to
them.
NOTE 7 – COMMON SHARES
At June
30, 2021, the Company’s authorized capital consisted of
50,000,000 of common shares with a $0.001 par value and 18,296,511
shares were issued and outstanding.
During the period ended June 30, 2020, the Company incurred the
following transactions:
On
November 4, 2019, the Company issued 8,000,000 shares to the
founders with a fair value of $8,000 in exchange for
services.
On
November 15, 2019, the Company issued 1,000,000 shares to two
non-related parties with a fair value of $10,000 in exchange for
services.
During
the period from November 15, 2019 to June 30, 2020, the Company
completed various private placements whereby a total of 3,406,236
common shares were issued at a price of $0.05 per share for a total
value of $170,312. As at June 30, 2020, $24,500 of the
subscriptions still remained receivable.
During the year ended June 30, 2021, the Company incurred the
following transactions:
During
the period from July 2, 2020 to July 31, 2020, the Company
completed various private placements whereby a total of 500,000
common shares were issued at a price of $0.05 per share for a total
value of $25,000.
During
the period from November 24, 2020 to June 30, 2021, the Company
completed various private placements whereby a total of 4,541,190
common shares were issued at a price of $0.25 per share for a total
value of $1,135,298. As at June 31, 2021, $10,500 of the
subscriptions still remained receivable.
On
December 28, 2020, the Company issued 110,000 shares to a
non-related party at a price of $0.10 per share for a total value
of $11,000 as commitment shares in exchange for services related to
the issuance of convertible debt on Note 8 (c).
On
March 29, 2021, the Company issued 88,000 shares to a non-related
party at a price of $0.25 per share for a total value of $22,000 as
debt issuance costs related to the issuance of convertible debt on
Note 8 (d).
F-11
On
March 29, 2021, the Company issued 100,000 shares to a director of
the Company at a price of $0.25 per share for a total value of
$25,000 in exchange for services.
On
April 12, 2021, the Company issued 400,000 shares to a non-related
party at a price of $0.25 per share for a total value of $100,000
in exchange for services. A portion of the services are yet to be
incurred and have been recorded as prepaid expenses for a total
value of $56,312.
On
April 15, 2021, the Company issued 100,000 shares to a non-related
party at a price of $0.25 per share for a total value of $25,000 in
exchange for services. A portion of the services are yet to be
incurred and have been recorded as prepaid expenses for a total
value of $18,750.
On June
21, 2021, the Company issued 41,085 shares to a non-related party
at a price of $0.73 per share for a total value of $30,000 as
settlement of debt.
On June
25, 2021, the Company issued 10,000 shares to a non-related party
at a price of $0.85 per share for a total value of $8,500 as
settlement of debt.
Warrants
On
December 28, 2020, the Company granted 1,100,000 warrants with a
contractual life of two years and exercise price of $0.25 per share
to a lender as part of the convertible debt financing transaction
(Note 8 (b)). The warrants were valued at $145,744 using the Black
Scholes Option Pricing Model.
On
March 25, 2021, the Company granted 1,100,000 warrants with a
contractual life of two years and exercise price of $0.25 per share
to a lender as part of the convertible debt financing transaction
(Note 8 (c)). The warrants were valued at $147,266 using the Black
Scholes Option Pricing Model.
On
April 22, 2021, the Company granted 506,838 warrants with a
contractual life of two years and exercise price of $0.25 per share
to a lender as part of the convertible debt financing transaction
(Note 8 (a)). The warrants were valued at $399,087 using the Black
Scholes Option Pricing Model.
On
April 28, 2021, the Company granted 307,408 warrants with a
contractual life of two years and exercise price of $0.25 per share
to a lender as part of the convertible debt financing transaction
(Note 8 (a)). The warrants were valued at $196,399 using the Black
Scholes Option Pricing Model.
The
Black Scholes Option Pricing Model assumptions used in the
valuation of the warrants are outlined below. The stock price was
based on recent issuances. Expected life was based on the expiry
date of the warrants as the Company did not have historical
exercise data of such warrants.
|
|
June 30, 2021
|
|
Stock price
|
$0.85 - $0.25
|
|
Risk-free interest rate
|
0.13%-0.17%
|
|
Expected life
|
2 Years
|
|
Expected dividend rate
|
0
|
|
Expected volatility
|
102.03% - 206.63%
|
F-12
Continuity
of the Company’s common stock purchase warrants issued and
outstanding is as follows:
|
|
Number
of
Warrants
|
Weighted
Average
Exercise
Price
|
|
Outstanding,
June 30, 2020
|
-
|
$-
|
|
Granted
|
3,014,246
|
0.25
|
|
Exercised
|
-
|
-
|
|
Expired
|
-
|
-
|
|
Outstanding,
June 30, 2021
|
3,014,246
|
$0.25
|
As at
June 30, 2021, the weighted average remaining contractual life of
warrants outstanding was 1.21 years with an intrinsic value of
$0.25.
NOTE 8 – CONVERTIBLE DEBTS
|
(a)
|
On
November 10, 2020, the Company issued a convertible debt in the
principal amount of $20,000 each in exchange for cash. The
convertible debt is unsecured, bears interest at 8% per annum
compounded on the basis of a 365-day year and actual days lapsed,
is convertible at $0.10 per 1 common share, and has a maturity date
of May 10, 2021. The carrying value of beneficial conversion
features not considered to be derivative instruments were
determined by allocating the intrinsic value of the conversion
features from proceeds. As a result, total proceeds of $20,000 were
allocated to the beneficial conversion feature, recorded as equity
portions of convertible debt and there were no remaining proceeds
available for allocation to the liability portion of the
convertible debt. The convertible debt was discounted by the
amounts allocated to the conversion features.
|
On
April 22, 2021, the Company renegotiated the terms of the
convertible debt in exchange for a new convertible debt in the
principal amount of $55,245 at $50,684, with $4,561 original issue
discount, for additional cash proceeds of $30,000 and surrender of
the convertible note previously issued. In connection with the
note, the Company issued 506,838 warrants exercisable at $0.25 per
share, expiring on April 22, 2023. The warrants were calculated to
have a relative fair value of $44,088. The convertible debt is
unsecured, bears interest at 8% per annum compounded on the basis
of a 365-day year and actual days elapsed, is convertible at $0.10
per 1 common share, and matures on January 22, 2022. The terms of
the new convertible debt were substantially different and deemed
extinguished resulting in a gain of $18,049 recorded on
extinguishment of convertible debt.
The
proceeds were allocated between the convertible debt and warrants
on a relative fair value basis, and the issuance costs were
proportioned accordingly. The fair value of the convertible debt
was calculated using the present value of the debt and related
interest at 12% incremental borrowing rate as the discount rate.
The warrants were valued using the Black Scholes Option Pricing
Model (Note 7).
The
carrying value of beneficial conversion features not considered to
be derivative instruments was determined by allocating $5,912 for
the intrinsic value of the conversion features from the remaining
proceeds allocated to the convertible debt after deducting the
amount allocated to the warrants. As such, there were no remaining
proceeds available for allocating to the liability portion of the
convertible debt. As at June 30, 2021, the carrying value of this
convertible debt was $14,374 (June 30, 2020 - $Nil) net of $40,871
unamortized discounts.
|
(b)
|
On
November 10, 2020, the Company issued a convertible debt in the
principal amount of $20,000 each in exchange for cash. The
convertible debt is unsecured, bears interest at 8% per annum
compounded on the basis of a 365-day year and actual days lapsed,
is convertible at $0.10 per 1 common share, and has a maturity date
of May 10, 2021. The carrying value of beneficial conversion
features not considered to be derivative instruments were
determined by allocating the intrinsic value of the conversion
features from proceeds. As a result, total proceeds of $20,000 were
allocated to the beneficial conversion feature, recorded as equity
portions of convertible debt and there were no remaining proceeds
available for allocation to the liability portion of the
convertible debt. The convertible debt was discounted by the
amounts allocated to the conversion features.
|
F-13
On
April 28, 2021, the Company renegotiated the terms of the
convertible debt in exchange for a new convertible debt in the
principal amount of $33,508 at $30,741, with $$2,767 original issue
discount, for additional cash proceeds of $10,000 and surrender of
the convertible note previously issued. In connection with the
note, the Company issued 307,408 warrants exercisable at $0.25 per
share, expiring on April 28, 2023. The warrants were calculated to
have a relative fair value of $25,745. The convertible debt is
unsecured, bears interest at 8% per annum compounded on the basis
of a 365-day year and actual days elapsed, is convertible at $0.10
per 1 common share, and matures on January 28, 2022. The terms of
the new convertible debt were substantially different and deemed
extinguished resulting in a gain of $18,682 recorded on
extinguishment of convertible debt.
The
proceeds were allocated between the convertible debt and warrants
on a relative fair value basis, and the issuance costs were
proportioned accordingly. The fair value of the convertible debt
was calculated using the present value of the debt and related
interest at 12% incremental borrowing rate as the discount rate.
The warrants were valued using the Black Scholes Option Pricing
Model (Note 7).
The
carrying value of beneficial conversion features not considered to
be derivative instruments was determined by allocating $4,255 for
the intrinsic value of the conversion features from the remaining
proceeds allocated to the convertible debt after deducting the
amount allocated to the warrants. As such, there were no remaining
proceeds available for allocating to the liability portion of the
convertible debt. As at June 30, 2021, the carrying value of this
convertible debt was $8,247 (June 30, 2020 - $Nil) net of $25,261
unamortized discounts.
|
(c)
|
On
December 28, 2020, the Company entered into a securities purchase
agreement with a non-related party. Pursuant to this agreement, the
Company issued a convertible debt in the principal amount of
$120,000 at $110,000 with $10,000 original issue discount. In
connection with this note, the Company paid an additional $15,000
in cash transaction costs, issued 110,000 common shares valued at
$11,000 in transaction costs, and issued 1,100,000 warrants
exercisable at $0.25 per share, expiring on December 28, 2022. The
warrants were calculated to have a fair value of $67,555, which was
reduced by the equity components of the transaction costs of
$20,657, leaving a value of $46,898 as at March 31, 2021. This
convertible debt is unsecured, bears interest at 8% per annum
compounded on the basis of a 365-day year and actual days lapsed,
is convertible at $0.10 per 1 common share, and matures on
September 28, 2021.
|
The
proceeds were allocated between the convertible debt and warrants
on a relative fair value basis, and the issuance costs were
proportioned accordingly. The fair value of the convertible debt
was calculated using the present value of the debt and related
interest at 12% incremental borrowing rate as the discount rate.
The warrants were valued using the Black Scholes Option Pricing
Model (Note 7).
The
carrying value of beneficial conversion features not considered to
be derivative instruments was determined by allocating $41,961 for
the intrinsic value of the conversion features from the remaining
proceeds allocated to the convertible debt after conducting the
amount allocated to the warrants. As such, there were no remaining
proceeds available for allocating to the liability portion of the
convertible debt.
On June
18, 2021, the Company settled the convertible debt with a payment
of $165,360 resulting in a loss on settlement of convertible debt
of $41,037.
|
(d)
|
On
March 25, 2021, the Company entered into a securities purchase
agreement with a non-related party. Pursuant to this agreement, the
Company issued a convertible debt in the principal amount of
$120,000 at $110,000 with $10,000 original issue discount. In
connection with this note, the Company paid an additional $13,250
in cash transactions, issued 88,000 common shares valued at $22,000
in transaction costs, and issued 1,100,000 warrants exercisable at
$0.25 per share, expiring on March 25, 2023. The warrants were
calculated to have a fair value of $74,026, which was reduced by
the equity components of the transaction costs of $32,106, leaving
a value of $41,920 as at March 31, 2021. This convertible debt is
unsecured, bears interest at 8% per annum compounded on the basis
of a 365-day year and actual days lapsed, is convertible at $0.10
per 1 common share, and matures in nine months on December 25,
2021.
|
F-14
The
proceeds were allocated between the convertible debt and warrants
on a relative fair value basis, and the issuance costs were
proportioned accordingly. The fair value of the convertible debt
was calculated using the present value of the debt and related
interest at 12% incremental borrowing rate as the discount rate.
The warrants were valued using the Black Scholes Option Pricing
Model (Note 7).
The
carrying value of beneficial conversion features not considered to
be derivative instruments was determined by allocating $42,492 for
the intrinsic value of the conversion features from the remaining
proceeds allocated to the convertible debt after conducting the
amount allocated to the warrants. As such, there were no remaining
proceeds available for allocating to the liability portion of the
convertible debt.
On June
29, 2021, the Company settled the convertible debt with a payment
of $146,880 resulting in a loss on settlement of convertible debt
of $56,452.
NOTE 9 – COMMITMENTS AND CONTINGENCIES
The
Company leases its corporate office located at 8565 S. Eastern Ave.
#150, Las Vegas, Nevada. The initial lease term is for 12 months
commencing on September 8, 2019 after which the term is on a
month-to-month basis. After the initial term, the Company may
cancel the lease agreement at any time by providing 30 days written
notice. The Company has elected the short-term lease practical
expedient of 12 months and has not recorded a lease.
NOTE 10 – INCOME TAXES
As of
June 30, 2021, the Company was in a loss position; therefore no
deferred tax liability was recognized related to the undistributed
earnings subject to withholding tax.
Net
operating loss carry forward of the Company, amounted to $701,884
(June 30, 2020 - $79,527) for the period ended June 30, 2021. The
net operating loss carry forwards are available to be utilized
against future taxable income for years through calendar year 2041.
In assessing the reliability of deferred income tax assets,
management considers whether it is more likely than not that some
portion or all of the deferred income tax assets will not be
realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the
periods in which those temporary differences become deductible.
Management considers the scheduled projected future taxable income,
and tax planning strategies in making this assessment.
NOTE 11 – SUBSEQUENT EVENTS
Subsequent
to June 30, 2021, the Company completed various private placements
whereby a total of 5,458,810 common shares were issued at a price
of $0.25 per share for a total value of $1,364,703.
F-15
PART II – INFORMATION NOT REQUIRED IN PROSPECTUS
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth estimated expenses expected to be
incurred in connection with the issuance and distribution of the
securities being registered. We will pay all such
expenses.
|
Securities
and Exchange Commission Registration Fee
|
$275.00
|
|
Audit
Fees and Expenses
|
$2,500.00
|
|
Legal
Fees and Expenses
|
$20,000.00
|
|
Transfer
Agent and Registration Fees and Expenses
|
$2,500.00
|
|
|
|
|
Total
|
$25,275*
|
|
*
Estimate Only
|
|
INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Our Articles of Incorporation provide for the indemnification of
our officers and directors to the extent provided by the Nevada
Revised Statutes (“NRS”), as follows.
Nevada Revised Statutes
Pursuant to Section 78.7502(1) of the NRS, a corporation may
indemnify any officer or director who was or is a party or is
threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, except an action by or in the
right of the corporation, by reason of the fact that he or she was
an officer or director of the corporation, against expenses,
including attorneys’ fees, judgments, fines, and settlements
actually and reasonably incurred by the officer or director in
connection with the action, suit or proceeding if that officer or
director is not liable pursuant to NRS 78.138 or acted in good
faith and in a manner he or she reasonably believed to be in or not
opposed to the best interests of the corporation and, in the case
of a criminal action or proceeding, had no reasonable cause to
believe the conduct was unlawful. The termination of any action,
suit or proceeding by judgment, order, settlement, conviction, or
upon a plea of nolo contendere or its equivalent does not, of
itself, create a presumption that the officer or director is liable
pursuant to NRS 78.138 or did not act in good faith and in a manner
which he or she reasonably believed to be in or not opposed to the
best interests of the corporation or that, with respect to any
criminal action or proceeding, the officer or director had
reasonable cause to believe that his or her conduct was
unlawful.
Pursuant to Section 78.7502(2) of the NRS, a corporation may
indemnify any officer or director who was or is a party or is
threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to
procure a judgment in its favor by reason of the fact that he or
she was an officer or director of the corporation, against
expenses, including attorneys’ fees and settlements actually
and reasonably incurred by the officer or director in connection
with the defense or settlement of the action or suit if that
officer or director is not liable pursuant to NRS 78.138 or acted
in good faith and in a manner he or she reasonably believed to be
in or not opposed to the best interests of the corporation.
Indemnification may not be made for any claim, issue or matter as
to which an officer or director has been adjudged by a court of
competent jurisdiction, after exhaustion of all appeals therefrom,
to be liable to the corporation or for amounts paid in settlement
to the corporation, unless and only to the extent that the court in
which the action or suit was brought or other court of competent
jurisdiction determines upon application that in view of all the
circumstances of the case, the officer or director is fairly and
reasonably entitled to indemnity for such expenses as the court
deems proper.
53
RECENT SALES OF UNREGISTERED SECURITIES.
The following sets forth information regarding all unregistered
securities sold by us in transactions that were exempt from the
requirements of the Securities Act in the last three years. Except
where noted, all of the securities discussed in this Item 15 were
all issued in reliance on an exemption from registration, discussed
below:
On November 4, 2019, the Company issued 8,000,000 shares to the
founders with a fair value of $8,000 in exchange for concept
development and services valued at $8,000.
On November 15, 2019, the Company issued 1,000,000 shares to two
non-related parties with a fair value of $10,000 in exchange for
services.
During the period from November 21, 2019 to June 30, 2020, the
Company sold a total of 3,706,236 common shares in a private
placement to friends and family at a price of $0.05 per share for a
total value of $185,312. These shares were subsequently registered
with the SEC under file number 333-248929.
During the period July 1, 2020 to September 30, 2020, the Company
completed various private placements whereby a total of 500,000
common shares were issued at a price of $0.05 per share for a total
value of $25,000.
These shares were
subsequently registered SEC file number
333-248929.
During the period October 1, 2020 to December 31, 2020, the Company
completed various private placements whereby a total of 54,000
common shares were issued at a price of $0.25 per share for a total
value of $13,500. These shares
were registered under SEC file number 333-248929.
The Company
also issued 110,000 common shares at a price of $0.10 for
services. These shares were not
registered.
During the period January 1, 2021 to March 31, 2021, the Company
completed various private placements whereby a total of 142,000
common shares were issued at a price of $0.25 per share for a total
value of $35,500. These shares were registered under SEC file
number 333-248929. The Company also issued 188,000 common shares
for services valued at $47,000 which were not
registered.
During the period April 1, 2021 to June 30, 2021, the Company
completed various private placements whereby a total of 4,345,190
common shares were issued at a price of $0.25 per share for a total
value of $1,086,298. These
shares were registered under SEC file number
333-248929
During the period July 1, 2021 to August 8, 2021, the Company
completed various private placements whereby a total of 5,458,810
common shares were issued at a price of $0.25 per share for a total
value of $1,364,703. These
shares were registered under SEC file number
333-248929
Exemption From Registration. The shares of Common Stock referenced
herein were issued in reliance upon one of the following
exemptions:
(a) The shares of Common Stock referenced herein were issued in
reliance upon the exemption from securities registration afforded
by the provisions of Section 4(a)(2) of the Securities Act of 1933,
as amended, ("Securities Act"), based upon the following: (a) each
of the persons to whom the shares of Common Stock were issued (each
such person, an "Investor") confirmed to the Company that it or he
is a sophisticated investor and has such background, education and
experience in financial and business matters as to be able to
evaluate the merits and risks of an investment in the securities,
(b) there was no public offering or general solicitation with
respect to the offering of such shares, (c) each Investor was
provided with certain disclosure materials and all other
information requested with respect to the Company, (d) each
Investor acknowledged that all securities being purchased were
being purchased for investment intent and were "restricted
securities" for purposes of the Securities Act, and agreed to
transfer such securities only in a transaction registered under the
Securities Act or exempt from registration under the Securities Act
and (e) a legend has been, or will be, placed on the certificates
representing each such security stating that it was restricted and
could only be transferred if subsequently registered under the
Securities Act or transferred in a transaction exempt from
registration under the Securities Act.
54
(b) The shares of
Common Stock referenced herein were issued pursuant to and in
accordance with Rule 903 of Regulation S of the Act. No commissions
were paid in connection with the completion of this offering,
except as noted above. We completed the offering of the shares
pursuant to Rule 903 of Regulation S of the Act on the basis that
the sale of the shares was completed in an "offshore transaction",
as defined in Rule 902(h) of Regulation S. We did not engage in any
directed selling efforts, as defined in Regulation S, in the United
States in connection with the sale of the shares. Each investor
represented to us that the investor was not a "U.S. person", as
defined in Regulation S, and was not acquiring the shares for the
account or benefit of a U.S. person. The agreement executed between
us and each investor included statements that the securities had
not been registered pursuant to the Act and that the securities may
not be offered or sold in the United States unless the securities
are registered under the Act or pursuant to an exemption from the
Act. Each investor agreed by execution of the agreement for the
shares: (i) to resell the securities purchased only in accordance
with the provisions of Regulation S, pursuant to registration under
the Act or pursuant to an exemption from registration under the
Act; (ii) that we are required to refuse to register any sale of
the securities purchased unless the transfer is in accordance with
the provisions of Regulation S, pursuant to registration under the
Act or pursuant to an exemption from registration under the Act;
and (iii) not to engage in hedging transactions with regards to the
securities purchased unless in compliance with the Act. All
certificates representing the shares were or upon issuance will be
endorsed with a restrictive legend confirming that the securities
had been issued pursuant to Regulation S of the Act and could not
be resold without registration under the Act or an applicable
exemption from the registration requirements of the
Act.
(c) The shares of common stock referenced herein were issued
pursuant to and in accordance with Regulation D Rule 506 and
Section 4(a)(2) of the Securities Act. We made this determination
in part based on the representations of Investors, which included,
in pertinent part, that such Investors were an “accredited
investor” as defined in Rule 501(a) under the Securities Act,
and upon such further representations from the Investors that (a)
the Investor is acquiring the securities for his, her or its own
account for investment and not for the account of any other person
and not with a view to or for distribution, assignment or resale in
connection with any distribution within the meaning of the
Securities Act, (b) the Investor agrees not to sell or otherwise
transfer the purchased securities unless they are registered under
the Securities Act and any applicable state securities laws, or an
exemption or exemptions from such registration are available, (c)
the Investor either alone or together with its representatives has
knowledge and experience in financial and business matters such
that he, she or it is capable of evaluating the merits and risks of
an investment in us, and (d) the Investor has no need for the
liquidity in its investment in us and could afford the complete
loss of such investment. Our determination is made based
further upon our action of (a) making written disclosure to each
Investor prior to the closing of sale that the securities have not
been registered under the Securities Act and therefore cannot be
resold unless they are registered or unless an exemption from
registration is available, (b) making written descriptions of the
securities being offered, the use of the proceeds from the offering
and any material changes in the Company’s affairs that are
not disclosed in the documents furnished, and (c) placement of a
legend on the certificate that evidences the securities stating
that the securities have not been registered under the Securities
Act and setting forth the restrictions on transferability and sale
of the securities, and upon such inaction of the Company
of any general solicitation or advertising for securities herein
issued in reliance upon Regulation D Rule 506 and Section 4(a)(2)
of the Securities Act.
(d) The shares of common stock referenced herein were issued
pursuant to and in accordance with Regulation D Rule 504 and
Section 4(a)(2) of the Securities Act. We made this determination
in part based on the fact that, at the time of each sale of stock,
the Company was not a blank check company, did not have to file
reports under the Securities Exchange Act of 1934 and sales of our
stock under this exemption did not exceed $1,000,000 of our
securities in any 12-month period. Our determination is made based
further upon our action of (a) making written disclosure to each
Investor prior to the closing of sale that the securities have not
been registered under the Securities Act and therefore cannot be
resold unless they are registered or unless an exemption from
registration is available, (b) making written descriptions of the
securities being offered, the use of the proceeds from the offering
and any material changes in the Company’s affairs that are
not disclosed in the documents furnished, and (c) placement of a
legend on the certificate that evidences the securities stating
that the securities have not been registered under the Securities
Act and setting forth the restrictions on transferability and sale
of the securities, and upon such inaction of the Company of any
general solicitation or advertising for securities herein issued in
reliance upon Regulation D Rule 504 and Section 4(a)(2) of the
Securities Act.
55
EXHIBITS
The following is a list of exhibits filed as part of this
registration statement. Any statement contained in an incorporated
document shall be deemed to be modified or superseded for purposes
of this Registration Statement to the extent that a statement
contained herein or in any other subsequently filed incorporated
document modifies or supersedes such statement. Any such statement
so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Registration
Statement.
|
|
Exhibit
Number
|
|
Description
|
|
|
|
Articles of Incorporation filed with the Nevada Secretary of
State on September 6, 2019 (2)
|
|
|
|
|
Bylaws (2)
|
|
|
|
5.1
|
|
Opinion of Lockett + Horwitz regarding the legality of the
securities being registered (1)
|
|
|
|
Compilation
of Website or Software Development Agreement and Addendum between
Company and CISTCK, dated June 4, 2020 (3)
|
|
|
|
10.2
|
|
Compilation
of FirstFire Securities Purchase Agreement, Convertible Promissory
Note and Other Agreements (4)
|
|
|
10.3
|
|
Compilation
of GS Capital Partner Securities Purchase Agreement, Convertible
Promissory Note and Other Agreements (5)
|
|
|
10.4
|
|
Compilation
of Analytico Services Conseils Inc Securities Purchase Agreement,
Convertible Promissory Note and Other Agreements (6)
|
|
|
10.5
|
|
Compilation
of Reynald Thauvette and Dominique Joyal Securities Purchase
Agreement, Convertible Promissory Note and Other Agreements
(7)
|
|
|
10.6
|
|
Compilation
of Master Services Agreement between the Company and IONnovate, LLC
(8)
|
|
|
10.7
|
|
Form of
Subscription Agreement (1)
|
|
|
|
Auditor Consent (1)
|
|
|
|
23.2
|
|
Consent of Lockett + Horwitz (included in Exhibit
5.1)
|
|
|
101.INS
|
|
Inline
XBRL Instance Document (the instance document does not appear in
the Interactive Data File because iXBRL tags are embedded within
the Inline XBRL document). (1)
|
|
|
101.SCH
|
|
Inline
XBRL Taxonomy Extension Schema Document (1)
|
|
|
101.CAL
|
|
Inline
XBRL Taxonomy Extension Calculation Linkbase Document (1)
|
|
|
101.DEF
|
|
Inline
XBRL Taxonomy Extension Definition Linkbase Document (1)
|
|
|
101.LAB
|
|
Inline
XBRL Taxonomy Extension Labels Linkbase Document (1)
|
|
|
101.PRE
|
|
Inline
XBRL Taxonomy Extension Presentation Linkbase Document (1)
|
|
|
104
|
|
The
Cover Page Interactive Data File, formatted in Inline XBRL
(included within the Exhibit 101 attachments) (1)
|
(1)
Filed herewith.
(2)
Previously Filed as an exhibit to our Form S-1 on September 21,
2020.
(3)
Previously Filed as an exhibit to our Form S-1 Amendment No. 1 on
October 27, 2020
(4)
Previously filed with the SEC on December 31, 2020 as an exhibit to
our Form 8-K.
(5)
Previously filed with the SEC on March 30, 2021 as an exhibit to
our Form 8-K.
(6)
Previously filed with the SEC on April 26, 2021 as an exhibit to
our Form 8-K.
(7)
Previously filed with the SEC on April 30, 2021 as an exhibit to
our Form 8-K.
(8)
Previously filed with the SEC on September 16, 2021 as an exhibit
to our Form 8-K.
56
UNDERTAKINGS.
(a) The
undersigned Registrant hereby undertakes to:
|
|
1.
|
To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration
statement:
|
|
|
i.
|
To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
|
|
|
ii.
|
To
reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form
of prospectus filed with the Commission pursuant to Rule 424(b) if,
in the aggregate, the changes in volume and price represent no more
than 20% change in the maximum aggregate offering price set forth
in the "Calculation of Registration Fee" table in the effective
registration statement.
|
|
|
iii.
|
To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
|
Provided
however, that:
|
|
A.
|
Paragraphs (a)(1)(i) and (a)(1)(ii) of this section do not apply if
the registration statement is on Form S-8, and the information
required to be included in a post-effective amendment by those
paragraphs is contained in reports filed with or furnished to the
Commission by the registrant pursuant to section 13 or section
15(d) of the Securities Exchange Act of 1934 that are incorporated
by reference in the registration statement; and
|
|
|
B.
|
Paragraphs (a)(1)(i), (a)(1)(ii) and (a)(1)(iii) of this section do
not apply if the registration statement is on Form S-3 or Form F-3
and the information required to be included in a post-effective
amendment by those paragraphs is contained in reports filed with or
furnished to the Commission by the registrant pursuant to section
13 or section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the registration statement, or is
contained in a form of prospectus filed pursuant to Rule 424(b)
that is part of the registration statement.
|
|
|
2.
|
That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
|
|
|
3.
|
To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
|
|
|
4.
|
If the registrant is a foreign private issuer, to file a
post-effective amendment to the registration statement to include
any financial statements required by Item 8.A. of Form 20-F at the
start of any delayed offering or throughout a continuous offering.
Financial statements and information otherwise required by Section
10(a)(3) of the Act need not be furnished, provided that the registrant includes in the
prospectus, by means of a post-effective amendment, financial
statements required pursuant to this paragraph (a)(4) and other
information necessary to ensure that all other information in the
prospectus is at least as current as the date of those financial
statements. Notwithstanding the foregoing, with respect to
registration statements on Form F-3, a post-effective amendment
need not be filed to include financial statements and information
required by Section 10(a)(3) of the Act or Rule 3-19 of this
chapter if such financial statements and information are contained
in periodic reports filed with or furnished to the Commission by
the registrant pursuant to section 13 or section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference
in the Form F-3.
|
57
|
|
5.
|
That, for the purpose of determining liability under the Securities
Act of 1933 to any purchaser:
|
|
|
i.
|
If the registrant is relying on Rule 430B:
|
|
|
A.
|
Each prospectus filed by the registrant pursuant to Rule
424(b)(3)shall be deemed to be part of the registration statement
as of the date the filed prospectus was deemed part of and included
in the registration statement; and
|
|
|
B.
|
Each prospectus required to be filed pursuant to Rule 424(b)(2),
(b)(5), or (b)(7) as part of a registration statement in reliance
on Rule 430B relating to an offering made pursuant to Rule
415(a)(1)(i), (vii), or (x) for the purpose of providing the
information required by section 10(a) of the Securities Act of 1933
shall be deemed to be part of and included in the registration
statement as of the earlier of the date such form of prospectus is
first used after effectiveness or the date of the first contract of
sale of securities in the offering described in the prospectus. As
provided in Rule 430B, for liability purposes of the issuer and any
person that is at that date an underwriter, such date shall be
deemed to be a new effective date of the registration statement
relating to the securities in the registration statement to which
that prospectus relates, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof. Provided, however, that no statement made in a
registration statement or prospectus that is part of the
registration statement or made in a document incorporated or deemed
incorporated by reference into the registration statement or
prospectus that is part of the registration statement will, as to a
purchaser with a time of contract of sale prior to such effective
date, supersede or modify any statement that was made in the
registration statement or prospectus that was part of the
registration statement or made in any such document immediately
prior to such effective date; or
|
|
|
ii.
|
If
the registrant is subject to Rule 430C, each prospectus filed
pursuant to Rule 424(b) as part of a registration statement
relating to an offering, other than registration statements relying
on Rule 430B or other than prospectuses filed in reliance on Rule
430A, shall be deemed to be part of and included in the
registration statement as of the date it is first used after
effectiveness. Provided, however, that no statement made in a
registration statement or prospectus that is part of the
registration statement or made in a document incorporated or deemed
incorporated by reference into the registration statement or
prospectus that is part of the registration statement will, as to a
purchaser with a time of contract of sale prior to such first use,
supersede or modify any statement that was made in the registration
statement or prospectus that was part of the registration statement
or made in any such document immediately prior to such date of
first use.
|
|
|
6.
|
That, for the purpose of determining liability of the registrant
under the Securities Act of 1933 to any purchaser in the initial
distribution of the securities: The undersigned registrant
undertakes that in a primary offering of securities of the
undersigned registrant pursuant to this registration statement,
regardless of the underwriting method used to sell the securities
to the purchaser, if the securities are offered or sold to such
purchaser by means of any of the following communications, the
undersigned registrant will be a seller to the purchaser and will
be considered to offer or sell such securities to such
purchaser:
|
|
|
i.
|
Any preliminary prospectus or prospectus of the undersigned
registrant relating to the offering required to be filed pursuant
to Rule 424;
|
|
|
ii.
|
Any free writing prospectus relating to the offering prepared by or
on behalf of the undersigned registrant or used or referred to by
the undersigned registrant;
|
|
|
iii.
|
The
portion of any other free writing prospectus relating to the
offering containing material information about the undersigned
registrant or its securities provided by or on behalf of the
undersigned registrant; and
|
|
|
iv.
|
Any other communication that is an offer in the offering made by
the undersigned registrant to the purchaser.
|
58
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the registrant certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form
S-1/A and has duly caused this registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized, on the
15th day of October, 2021.
TEGO CYBER INC.
/s/ Shannon Wilkinson
By: Shannon Wilkinson
Title: Chief Executive Officer (Principal Executive Officer)
and
Chief Financial Officer (Principal Financial and
Principal Accounting Officer)
/s/ Troy Wilkinson
By: Troy Wilkinson
Title: President
In accordance with the requirements of the Securities Act of 1933,
this Registration Statement has been signed below by or on behalf
of the following persons in the capacities and on the dates
stated.
|
Signature
|
Title
|
Date
|
|
|
|
|
|
/s/ Shannon Wilkinson
|
Director
|
October
15, 2021
|
|
By: Shannon Wilkinson
|
|
|
|
Director,
Chief Executive Officer (Principal
Executive Officer) and
Chief Financial Officer (Principal Financial and
Principal Accounting Officer)
|
|
|
|
|
|
|
|
/s/ Troy Wilkinson
|
Director
|
October
15, 2021
|
|
By: Troy Wilkinson
|
|
|
|
President
and Director
|
|
|
|
|
|
|
|
/s/ Michael De Valera
|
Director
|
October
15, 2021
|
|
By: Michael De Valera
Director
|
|
|
|
|
|
|
|
/s/ Chris White
|
Director
|
October
15, 2021
|
|
By: Chris White
Director
|
|
|
59
Exhibit 5.1
2
South Pointe Dr. Suite 275
Lake
Forest, CA 92630
E:
jlockett@lhlawpc.com
P:
949.540.6540 | F: 949.540.6578
October
15, 2021
Tego
Cyber Inc.
8565 S.
Eastern Avenue, Suite 150
Las
Vegas, NV, 89123
Ladies and Gentlemen:
We have acted as counsel to
Tego Cyber Inc., a Nevada corporation (the “Company”),
in connection with the Company’s Registration Statement on
Form S-1,
as amended (File Number 333-259482) (the
“Registration Statement”) filed with the Securities and
Exchange Commission (the “Commission”) pursuant to the
Securities Act of 1933, as amended (the “Securities
Act”) with respect to the offering by the Company of
5,000,000 of the Company’s common shares, par value $0.001
(the “Offering Shares”).
This opinion is being furnished in accordance with the requirements
of Item 601(b)(5) of Regulation S-K under the Securities
Act.
As such counsel, we have examined such matters of fact and
questions of law as we have considered appropriate for purposes of
this letter. With your consent, we have relied upon certificates
and other assurances of officers of the Company and others as to
factual matters without having independently verified such factual
matters. We are opining herein as to the laws of the State of
Nevada, including the Constitution of the State of Nevada, and we
express no opinion with respect to any other laws.
Based upon the foregoing and in reliance thereon, and subject to
the qualifications, limitations, exceptions and assumptions set
forth herein, we are of the opinion that the Offering Shares, when
issued upon the exercise of warrants against payment therefor as
set forth in the Registration Statement, will be validly issued,
fully paid and non-assessable.
This opinion letter speaks only as of the date hereof and we assume
no obligation to update or supplement this opinion letter if any
applicable laws change after the date of this opinion letter or if
we become aware after the date of this opinion letter of any facts,
whether existing before or arising after the date hereof, that
might change the opinions expressed above.
This opinion letter is furnished in connection with the filing of
the Registration Statement and may not be relied upon for any other
purpose without our prior written consent in each instance.
Further, no portion of this letter may be quoted, circulated or
referred to in any other document for any other purpose without our
prior written consent.
We hereby consent to the filing of this opinion with the Commission
as an exhibit to the Registration Statement and to the use of our
name as it appears in the prospectus included in the Registration
Statement. In giving such consent, we do not thereby admit that we
come within the category of persons whose consent is required under
Section 7 of the Securities Act or the rules and regulations of the
Commission promulgated thereunder. This opinion is expressed as of
the date hereof unless otherwise expressly stated, and we disclaim
any undertaking to advise you of any subsequent changes in the
facts stated or assumed herein or of any subsequent changes in
applicable laws.
/s/Lockett
+ Horwitz
Lockett
+ Horwitz
a
Professional Law Corporation
Exhibit 10.7
SUBSCRIPTION AGREEMENT
The undersigned (the “Subscriber”),
desires to become a holder of common shares (the
“Shares”) of Tego Cyber
Inc., a corporation organized
under the laws of the state of Nevada (the
“Company”).
Accordingly, the Subscriber hereby agrees as follows:
1.
Subscription.
|
|
a.
|
The
Subscriber hereby subscribes for and agrees to accept from the
Company that number of Shares set forth on the Signature Page
attached to this Subscription Agreement (the
“Agreement”), in consideration of $0.50 per share
(“Purchase Price”). This offer to purchase
is submitted in accordance with and subject to the terms and
conditions described in this Agreement. The Subscriber acknowledges
that the Company reserves the right, in its sole and absolute
discretion, to accept or reject this subscription and the
subscription will not be binding until accepted by the Company in
writing.
|
|
|
b.
|
The
closing of the Subscription of Shares hereunder (the
“Closing”) shall occur immediately upon: (i) receipt
and acceptance by the Company of a properly executed Signature Page
to this Agreement; and (ii) receipt of all funds for the
subscription of shares hereunder.
|
2.
Purchase
Procedure. The
Subscriber acknowledges that, in order to subscribe for Shares, he
must, and he does hereby, deliver to the
Company:
a. A check, ACH debit transferor wire
payment in the amount set forth on the Signature Page attached to
this Agreement, representing payment in full for the Shares desired
to be purchased hereunder, made payable to the order
of Tego Cyber
Inc.
b. This subscription shall be deemed to be
accepted only when this Agreement has been signed by an authorized
officer or agent of the Company, and the deposit of the payment of
the purchase price for clearance will not be deemed an acceptance
of this Agreement;
c. The
Company shall have the right to reject this subscription, in whole
or in part;
d. The
payment of the Purchase Price (or, in the case of rejection of a
portion of the subscriber's subscription, the part of the payment
relating to such rejected portion) will be returned promptly,
without interest or deduction, if subscriber's subscription is
rejected in whole or in part or if the Offering is withdrawn or
canceled;
e. Upon
acceptance by the Company Subscriber shall receive notice and
evidence of the digital entry (or other manner of record) of the
number of the shares owned by subscriber reflected on the books and
records of Company and verified by Company's transfer agent (the
"Transfer Agent"), which books and records shall bear a notation
that the shares were sold in reliance upon the Registration
Statement on Form S-1, as defined below.
3.
Representations of
Subscriber. By
executing this Agreement, the Subscriber makes the following
representations, declarations and warranties to the Company, with
the intent and understanding that the Company will rely
thereon:
|
|
a.
|
Such
Subscriber acknowledges the public availability of the Company's
current prospectus (the "Prospectus") which is made available in
the Company's Registration Statement on Form S-1 (File No.
333-259482), declared effective by the Securities and Exchange
Commission on __________ __, 2021. This Prospectus sets forth the
terms and conditions of the offering of Shares (the
“Offering”) and the risks associated therewith are
described. Such Subscriber acknowledges the public availability of
the Company’s current prospectus.
|
|
|
b.
|
All
information herein concerning the Subscriber is correct and
complete as of the date hereof and as of the date of
Closing.
|
|
|
c.
|
Such subscriber has all necessary power and authority under all
applicable provisions of law to execute and deliver this Agreement.
Upon execution and delivery, this Agreement will be a valid and
binding obligation of subscriber, enforceable in accordance with
its terms, except (a) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general
application affecting enforcement of creditors' rights and (b) as
limited by general principles of equity that restrict the
availability of equitable remedies.
|
d. If the Subscriber is purchasing the
Shares in a fiduciary capacity for another person or entity,
including without limitation a corporation, partnership, trust or
any other entity, the Subscriber has been duly authorized and
empowered to execute this Agreement and all other subscription
documents. Upon request of the Company, the Subscriber
will provide true, complete and current copies of all relevant
documents creating the Subscriber, authorizing its investment in
the Company and/or evidencing the satisfaction of the
foregoing.
e.
Subscriber acknowledges and agrees that there is a limited public
market for the securities and Subscriber acknowledges that
subscriber is able to bear the economic risk of losing subscriber's
entire investment in the securities. Subscriber also understands
that an investment in Company involves significant risks and has
taken full cognizance of and understands all of the risk factors
relating to the purchase of securities.
f.
Subscriber understands that Company is subject to all the risks
that apply to early-stage companies, whether or not those risks are
explicitly set out in the Prospectus.
4.
Applicable
Law. This Agreement
shall be construed in accordance with and governed by the laws
applicable to contracts made and wholly performed in the State of
Nevada.
5.
Execution in
Counterparts. This
Agreement may be executed in one or more
counterparts.
6.
Persons
Bound. This
Agreement shall, except as otherwise provided herein, inure to the
benefit of and be binding on the Company and its successors and
assigns and on each Subscriber and his respective heirs, executors,
administrators, successors and assigns.
7.
Notices. Any
notice or other communication required or permitted hereunder shall
be in writing and shall be delivered personally, telegraphed,
telexed, sent by facsimile transmission or sent by certified,
registered or express mail, postage prepaid, to the address of each
party set forth herein.
8.
CERTIFICATION. THE
SUBSCRIBER CERTIFIES THAT HE HAS READ THIS ENTIRE SUBSCRIPTION
AGREEMENT AND THAT EVERY STATEMENT MADE BY THE SUBSCRIBER HEREIN IS
TRUE AND COMPLETE.
SUBSCRIBER SIGNATURE
The undersigned, desiring to subscribe for the number of Shares of
Tego Cyber, Inc. (the “Company”) as is set forth below,
acknowledges that he/she has received and understands the terms and
conditions of the Agreement attached hereto and that he/she does
hereby agree to all the terms and conditions contained
therein.
IN WITNESS
WHEREOF, the undersigned has
hereby executed this Subscription Agreement as of the date set
forth below.
(PLEASE PRINT OR TYPE)
|
Number
of Shares x $0.50 Per
Share:___________________________
|
|
|
|
Total
Amount of
Subscription: ___________________________
|
|
|
|
Exact
name(s) of
Subscriber(s): ___________________________
|
|
|
|
Signature
of
Subscriber(s): ___________________________
|
|
|
|
(Print
Name) ___________________________
|
|
|
|
Date:
___________________________
|
|
|
|
Address:
___________________________
|
|
|
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
We
consent to the use in this Registration Statement on Form S-1, as
amended, of our report dated September 28, 2021, relating
to the financial statements of Tego Cyber Inc. (which report
expresses an unqualified opinion and includes an explanatory
paragraph related to the preparation of the financial statements
assuming that the Company will continue as a going concern),
appearing in the Prospectus, which is part of this Registration
Statement. We also consent to the reference to us under the heading
“Experts”, in such Registration Statement.
/s/
HARBOURSIDE CPA LLP
(formerly
Buckley Dodds LLP)
Vancouver,
British Columbia
October
15, 2021
