Tego Cyber, Inc 10-K for FY2023
Tego Cyber, Inc. (TGCB)
About this 10-K
Tego Cyber, Inc filed this 10-K on January 17, 2024, covering the fiscal year ended June 30, 2023 (FY2023).
Headline figures
Fiscal year ended June 30, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $0
- compared with $3550 a year earlier
- Net loss
- $10.74M
- compared with a net loss of $3.15M a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended:
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Transition Period from to.
Commission File Number
(Exact name of registrant as specified in its charter) |
| ||
(State or other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification Number) |
(Address of Principal Executive Offices) (Zip Code)
(
(Registrant’s Telephone Number, Including Area Code)
Not applicable
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
Securities registered pursuant to Section 12(b) of the Act: None
Title of each class | Trading Symbol(s) | Name of the principal U.S. market |
Securities registered pursuant to section 12(g) of the Act:
(Title of class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ |
☐ | Smaller reporting company | ||
Emerging growth company |
|
|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of January 17, 2024 there were
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain information included in this Annual Report on Form 10-K and other filings of the Registrant under the Securities Act of 1933, as amended (the “Securities Act”), and the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as well as information communicated orally or in writing between the dates of such filings, contains or may contain “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. Forward-looking statements in this Annual Report on Form 10-K, including without limitation, statements related to our plans, strategies, objectives, expectations, intentions and adequacy of resources, are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements are subject to certain risks, trends and uncertainties that could cause actual results to differ materially from expected results. Among these risks, trends and uncertainties are the availability of working capital to fund our operations, the competitive market in which we operate, the efficient and uninterrupted operation of our computer and communications systems, our ability to generate a profit and execute our business plan, the retention of key personnel, our ability to protect and defend our intellectual property, the effects of governmental regulation, and other risks identified in the Registrant’s filings with the Securities and Exchange Commission from time to time.
In some cases, forward-looking statements can be identified by terminology such as “may,” “will,” “should,” “could,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of such terms or other comparable terminology. Although the Registrant believes that the expectations reflected in the forward-looking statements contained herein are reasonable, the Registrant cannot guarantee future results, levels of activity, performance or achievements. Moreover, neither the Registrant, nor any other person, assumes responsibility for the accuracy and completeness of such statements. The Registrant is under no duty to update any of the forward-looking statements contained herein after the date of this Annual Report on Form 10-K.
TEGO CYBER INC.
FORM 10-K
JUNE 30, 2023
INDEX
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PART I
Item 1. Business
The Company Overview
Tego Cyber Inc. (the “Company” or “We” or “Our”) is a Nevada based publicly traded cybersecurity company. It was created to mitigate the disparity in the rapidly evolving cyber threat hunting, correlation, and threat intelligence market. The company is focused on developing solutions for threat intelligence and autonomous threat hunting/correlation. Tego’s curated threat intelligence feed not only contains a comprehensive list of indicators of compromise, but also provides additional context including specific details needed to counteract threats so that security teams can spend less time searching for disjointed indicators of compromise. Tego’s threat correlation engine integrates with top security and datalake platforms to proactively identify threats. The Tego threat correlation engine allows security teams to find threats faster using curated data feeds, powerful and low latency searches across large disparate data sets, and user-friendly visualizations that help reduce the time to detection and response.
Corporate History and General Information about the Company
Tego Cyber Inc. 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. We are engaged in the business of the development and commercialization of innovative cybersecurity applications that help enterprises reduce risk, remediate 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 general e-mail contact is info@tegocyber.com. Our website can be viewed at www.tegocyber.com. We have not filed for bankruptcy, receivership or any similar proceedings nor is in the process of filing for bankruptcy, receivership or any similar proceedings.
Business and Market Summary
The cybersecurity industry has emerged as a critical pillar in the digital age, where organizations and individuals face an ever-growing threat landscape. With the proliferation of technology and the interconnectedness of our world, protecting sensitive information and digital assets has become paramount. Cybersecurity encompasses the practices, processes, and technologies designed to safeguard computer systems, networks, and data from unauthorized access, theft, or damage.
In recent years, the cybersecurity landscape has witnessed a dramatic surge in attacks, leaving organizations at an increased risk of compromise. Cybercriminals are constantly refining their tactics, exploiting vulnerabilities in software, networks, and human behavior to gain unauthorized access and wreak havoc. The consequences of successful cyberattacks can be severe, ranging from financial losses and reputational damage to legal implications and the compromise of sensitive customer information.
One of the key challenges facing organizations today is the expanded attack surface resulting from the rise of remote work and the proliferation of Internet of Things (IoT) devices. The COVID-19 pandemic accelerated the adoption of remote work models, allowing employees to work from home or other locations outside the traditional office environment. While this provided flexibility and continuity, it also introduced new vulnerabilities and increased the potential for cyberattacks.
The cybersecurity industry plays a pivotal role in safeguarding organizations and individuals from the ever-increasing cyber threats. By prioritizing security, staying informed about emerging threats, and fostering collaboration, organizations can better protect themselves and mitigate the risks associated with the expanded attack surface in the digital landscape.
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The Industry/Marketplace
The market for cybersecurity 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 attacks they face, it is necessary for the enterprise to adopt cybersecurity awareness, prevention, and security best practices, as a part of their corporate culture, and invest and deploy technology solutions to defend and detect attacks to eliminate the inevitable financial risks presented by daily threats, attacks and breaches.
The cybersecurity marketplace is large and rapidly expanding. Projections have this market growing at a Compound Annual Growth Rate (CAGR) of 8% from $173 billion in 2020 to $270 billion by 2026 (Gartner). The cyber threat intelligence segment of the overall cybersecurity market is estimated to be currently valued at $5.3 billion in 2018 and is projected to grow at a CAGR of 19.7% to reach $12.9 billion by 2023, twice the projected growth rate of the overall cybersecurity market.
The Company’s Presence in the Market
As an emerging provider of ‘intelligent’ threat intelligence and threat correlation/hunting solutions, we will rely heavily on the established reputation and combined experience of our management team, specifically within intelligent and automated cybersecurity platforms. Members of our management team are globally recognized international speakers on cybersecurity specifically focusing on the topics of threat intelligence, ransomware, DDoS, cyber-crime trends, and cybersecurity 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.
In the past 12 months, we have been establishing brand recognition in the market through attending cybersecurity conferences and co-producing a cyber-crime TV series called “Dark Ops” which features Tego’s products in use in the episodes. We also have established strategic partnerships with technology resellers and service providers who are evangelizing Tego’s brand and products to their customer bases.
Our Products & Services
Products
Tego's threat intelligence feed is a combination of over 45 different open-sourced threat data and closed threat intelligence sources that are brought into the Tego threat intelligence platform. The Tego threat intelligence platform processes, deduplicates, and enriches the threat data/intelligence to provide additional context needed by Security Operations teams to investigate and remediate threats. Formatted in the Open Cybersecurity Schema Framework (OCSF) standard, the threat intelligence is provided to the customer in an easy to use format.
Tego's threat correlation and threat hunting application integrates directly into existing Security Information and Event Management (SIEM) and data lake solutions that provides enterprises the ability to quickly track threats, map out exposures, and expedite remediation to find the “signal in the noise.” With high performing and low latency searches, Tego's threat correlation engine saves security operations teams time and money in an environment where timing is everything as efforts are made to lower mean-time-to-detection (MTTD) and mean-time-to-response (MTTR). What makes Tego's threat correlation engine different from other cyber threat correlation applications, is that it is the first commercially available solution that was specifically developed for the customer’s existing SIEM or data lake platform. It operates within the customer’s existing SIEM or data lake environment, so security operations teams do not have to use multiple tools and views to complete a specific task or research a threat. Tego cross-correlates threats in real time and not only looks forward but also backwards in order to see if the organization’s network has been previously exposed (active foresight and hindsight).
The first version of the Tego threat detection engine is an integration with the industry-leading Splunk SIEM platform and is available for download via the Splunk app store (SplunkBase). A second integration has been developed for the Elastic SIEM platform. Tego also has developed the first fully-integrated threat detection engine for Amazon Security Lake.
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Tego also became the first threat intelligence provider on the Databricks Data Marketplace in June of 2023. A threat correlation integration for Databricks is currently under development with expected release in early 2024.
Services
We currently offer only one service: Cyber Threat Intelligence (CTI) reporting. 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. Management has received many requests to leverage the threat intelligence used by Tego 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 helps 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.
Pricing
Products
We offer our products on a subscription basis. End users download the application and then pay a non-refundable subscription fee of $54,000 - $75,000 per annum per license for the threat detection engine or $500 - $1500 per month for the threat intelligence feed. Upon receipt of payment, we issue a license key to the end user to activate the application. Revenue generated from subscription fees are recognized as unearned revenue which are amortized over the of the life of the license contract which typically is one calendar year.
Services
CTI reporting will be offered on an as needed basis and typically generates a fee of $2,500 per report.
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 diversified security software and services vendors, threat correlation companies, and providers of threat intelligence platforms that compete with some of the features present in our solution such as Anomali, Recorded Future, Threat Quotient, Cyware, and Anvilogic.
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 threat intelligence and threat correlation/hunting solutions and services.
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 SIEM platforms. 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.
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In 2023, we established a strategic relationship with a Top 15 managed security service provider (MSSP) and became an approved vendor with TD SYNNEX.
Operations
We will continue to develop additional integrations for the Tego threat detection engine and add additional threat intelligence sources to the Tego threat intelligence feed. We expect continued growth in the number of cloud and SaaS operations experts, to further our goal of delivering the best experience for our customers. Accordingly, personnel-related costs within our SaaS development, threat intelligence platform, sales, and operations teams, will increase in line with our projected revenue model.
Sales and Marketing
Sales
The initial sales strategy will focus on marketing the advantages of the Tego threat detection engine to existing Splunk and Amazon Security Lake users. At present Splunk has 22,000+ customers, in 110 countries including 89 of the Fortune 100. Tego has hired an experienced Chief Revenue Officer (CRO) who has been assembling a dedicated inside sales team who are specifically trained to market Tego to organizations using the Splunk SIEM platform or Amazon Security Lake. Tego has also launched a channel partner initiative to foster meaningful, profitable relationships with leading cybersecurity consultants and solution providers. These channel partners will offer Tego as an upsell to their current clients already using the Splunk SIEM platform or Amazon Security Lake. Some partners are also offering professional services to move their customers from Splunk to Amazon, including Tego in the package.
Marketing
We continue to 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.
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 and product integrations for threat correlation/hunting. We may rely on provisional patents in the near term, filing for full patent protection, as necessary.
Subsidiaries
We currently have no subsidiaries.
Employees
We currently employ 5 full-time employees and 2 part-time employees. Additionally, we have 12 contracted consultants.
Legal Proceedings
We know of no material, existing or pending legal proceedings against us, 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.
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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. |
(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.
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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.
Item 1.A Risk Factors
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.
Item 1.B Unresolved Staff Comments
None.
Item 2. Properties
Our executive offices are located at 8565 South Eastern Avenue, Suite 150 Las Vegas, Nevada 89123. 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.
Item 3. Legal Proceedings
From time to time, we may become subject to various legal proceedings that are incidental to the ordinary conduct of its business. Although we cannot accurately predict the amount of any liability that may ultimately arise with respect to any of these matters, it makes provision for potential liabilities when it deems them probable and reasonably estimable. These provisions are based on current information and legal advice and may be adjusted from time to time according to developments.
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 any of our directors, officers or affiliates, or any registered or beneficial stockholder, is an adverse party or has a material interest adverse to our interest.
Item 4. Mine Safety Disclosures
Not applicable.
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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Common Stock
Our Articles of Incorporation authorize us to issue 100,000,000 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 our 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 our company, whether voluntary or involuntary, the remaining net assets shall be distributed pro rata to the holders of the Common Stock.
Preferred Stock
We have no preferred stock authorized.
Securities Authorized for Issuance Under Equity Compensation Plans
On December 8, 2021, our Board of Directors approved the adoption of the 2021 Equity Compensation Plan (the “Equity Compensation Plan”) to provide employees, certain consultants and advisors who perform services for us, and non-employee members of our Board of Directors, with the opportunity to receive grants of incentive stock options, nonqualified stock options, stock appreciation rights, stock awards, stock units and other stock-based awards. We have 10,000,000 common stock shares authorized under the Equity Compensation Plan
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Stock Options
During the year ended June 30, 2023, we had outstanding a total of 6,000,000 non-qualified stock options (the “options”) to directors, officers and certain key consultants. These options are subject to the terms and conditions of the Equity Compensation Plan. All granted options are subject to a five-year vesting schedule equal to 20% per year starting on the 1st day of each year following the effective date. All options have an exercise price of $0.65 which was the closing price of our common stock on the day the day granted.
The following is a continuity schedule for the Company’s outstanding non-qualified stock options:
|
| Number of options |
|
| Weighted Average Exercise Price |
| ||
Outstanding, June 30, 2022 |
|
| 6,000,000 |
|
| $ | 0.65 |
|
Granted |
|
| 125,000 |
|
|
| - |
|
Exercised |
|
| - |
|
|
| - |
|
Cancelled |
|
| 125,000 |
|
|
| - |
|
Outstanding, June 30, 2023 |
|
| 6,000,000 |
|
| $ | 0.65 |
|
As of June 30, 2023, the Company had the following stock options outstanding:
Grant Date |
| Number Outstanding |
|
| Number Exercisable |
|
| Exercise Price |
|
| Weighted Average Life (Years) |
|
| Expiry Date | |||||
January 3, 2022 |
|
| 125,000 |
|
|
| 25,000 |
|
| $ | 0.65 |
|
|
| 8.52 |
|
| January 3, 2032 | |
January 4, 2022 |
|
| 5,750,000 |
|
|
| 1,150,000 |
|
|
| 0.65 |
|
|
| 8.52 |
|
| January 4, 2032 | |
March 1, 2023 |
|
| 125,000 |
|
|
| 25,000 |
|
|
| 0.65 |
|
|
| 8.52 |
|
| January 4, 2032 | |
Total |
|
| 6,000,000 |
|
|
| 1,200,000 |
|
| $ | 0.65 |
|
|
| 8.52 |
|
|
| |
Performance Stock Units
During the year ended June 30, 2023, we had outstanding a total of 2,700,000 performance stock units (“performance units”) to directors, officers and certain key consultants. These performance units are subject to the terms and conditions of the Equity Compensation Plan. The performance units will be earned and vest upon reaching certain market capitalization goals during the performance period ending on December 31, 2026. The following table sets forth the number of performance stock units, their vesting conditions and expiry dates.
Each unit represents one common share:
Number of Performance Units |
|
| Vesting Conditions |
| Expiry Dates | |
| 900,000 |
|
| Market capitalization of the Company reaches $50 million |
| December 31, 2026 |
| 900,000 |
|
| Market capitalization of the Company reaches $75 million |
| December 31, 2026 |
| 900,000 |
|
| Market capitalization of the Company reaches $100 million |
| December 31, 2026 |
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The following is a continuity schedule for the Company’s outstanding performance stock units:
|
| Number of Performance Units |
|
| Weighted Average Exercise Price |
| ||
Outstanding, June 30, 2022 |
|
| 4,000,000 |
|
| $ | - |
|
Granted |
|
| - |
|
|
| - |
|
Released |
|
| - |
|
|
| - |
|
Exercised |
|
| (900,000 | ) |
|
|
|
|
Forfeited or cancelled |
|
| (400,000 | ) |
|
| - |
|
Outstanding, June 30, 2023 |
|
| 2,700,000 |
|
| $ | - |
|
Warrants
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. The warrants were valued at $148,438 using the Black Scholes Option Pricing Model. These warrants expired during the three months ended March 31, 2023.
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. 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. The warrants were valued at $196,399 using the Black Scholes Option Pricing Model.
On July 12, 2022, the Company granted 500,000 warrants with a contractual life of five years and exercise price of $0.25 per share to a lender as part of a note payable financing transaction (Note 9). The warrants were valued at $249,971 using the Black Scholes Option Pricing Model and they were recorded at $102,943 in additional paid-in capital using the relative fair value method.
On July 15, 2022, the Company granted 250,000 warrants with a contractual life of five years and exercise price of $0.25 per share to a lender as part of a note payable financing transaction (Note 9). The warrants were valued at $124,984 using the Black Scholes Option Pricing Model and they were recorded at $51,471 in additional paid-in capital using the relative fair value method.
On July 18, 2022, the Company granted 250,000 warrants with a contractual life of five years and exercise price of $0.25 per share to a lender as part of a note payable financing transaction (Note 9). The warrants were valued at $124,994 using the Black Scholes Option Pricing Model and they were recorded at $51,474 in additional paid-in capital using the relative fair value method.
On October 13, 2022, the Company granted 500,000 warrants with a contractual life of five years and exercise price of $0.25 per share to a lender as part of a note payable financing transaction (Note 9). The warrants were valued at $220,526 using the Black Scholes Option Pricing Model and they were recorded at $59,265 in additional paid-in capital using the relative fair value method.
On October 13, 2022, the Company granted 250,000 warrants with a contractual life of five years and exercise price of $0.25 per share to a lender as part of a note payable financing transaction (Note 9). The warrants were valued at $110,263 using the Black Scholes Option Pricing Model and they were recorded at $29,633 in additional paid-in capital using the relative fair value method.
On October 13, 2022, the Company granted 250,000 warrants with a contractual life of five years and exercise price of $0.25 per share to a lender as part of a note payable financing transaction (Note 9). The warrants were valued at $110,263 using the Black Scholes Option Pricing Model and they were recorded at $29,633 in additional paid-in capital using the relative fair value method.
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| Table of Contents |
On March 12, 2023, the Company granted 2,500,000 warrants with a contractual life of five years and exercise price of $0.25 per share to a lender as part of a default settlement related to a note payable financing transaction (Note 9). The warrants were valued at $1,847,450 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, 2023 |
| |
Stock price |
| $0.25 - 0.83 |
| |
Risk-free interest rate |
| 1.06%-4.213 | % | |
Expected life |
| 2 - 5 Years |
| |
Expected dividend rate |
|
| 0 |
|
Expected volatility |
| 100.00–195.25 | % | |
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, 2022 |
|
| 3,014,246 |
|
| $ | 0.25 |
|
Granted |
|
| 4,500,000 |
|
|
| 0.25 |
|
Exercised |
|
| - |
|
|
| - |
|
Expired |
|
| (3,014,246 | ) |
|
| - |
|
Outstanding, June 30, 2023 |
|
| 4,500,000 |
|
| $ | 0.25 |
|
Grant Date |
| Number Outstanding |
|
| Number Exercisable |
|
| Exercise Price |
|
| Expiry Date | ||||
July 12, 2022 |
|
| 500,000 |
|
|
| 500,000 |
|
| $ | 0.25 |
|
| July 12, 2027 | |
July 15, 2022 |
|
| 250,000 |
|
|
| 250,000 |
|
|
| 0.25 |
|
| July 15, 2027 | |
July 18, 2022 |
|
| 250,000 |
|
|
| 250,000 |
|
|
| 0.25 |
|
| July 18, 2027 | |
October 13, 2022 |
|
| 500,000 |
|
|
| 500,000 |
|
|
| 0.25 |
|
| October 13, 2027 | |
October 13, 2022 |
|
| 250,000 |
|
|
| 250,000 |
|
|
| 0.25 |
|
| October 13, 2027 | |
October 13, 2022 |
|
| 250,000 |
|
|
| 250,000 |
|
|
| 0.25 |
|
| October 13, 2027 | |
March 12, 2023 |
|
| 2,500,000 |
|
|
| 2,500,000 |
|
|
| 0.25 |
|
| March 12, 2028 | |
Total |
|
| 4,500,000 |
|
|
| 4,500,000 |
|
| $ | 0.25 |
|
|
| |
Dividend Policy
We have never paid any cash dividends and intend, for the foreseeable future, to retain any future earnings for the development of our business. Our future dividend policy will be determined by the board of directors on the basis of various factors, including our results of operations, financial condition, capital requirements and investment opportunities.
Holders
As of January 17, 2024, we have 53,776,616 issued and outstanding shares of Common Stock, which are held by approximately 266 shareholders of record.
| 12 |
| Table of Contents |
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.
Market Information
Our common shares are currently quoted on the OTCQB under the symbol "TGCB”. The following table sets forth the range of the high and low sale prices of the common stock for the periods indicated. The quotations reflect inter-dealer prices, without retail markup, markdown or commission, and may not represent actual transactions. Consequently, the information provided below may not be indicative of our common stock price under different conditions.
Period Ended |
| High |
|
| Low |
| ||
Year Ended June 30, 2023 |
|
|
|
|
|
| ||
June 30, 2023 |
| $ | 0.45 |
|
| $ | 0.90 |
|
March 31, 2023 |
| $ | 1.10 |
|
| $ | 0.18 |
|
December 31, 2022 |
| $ | 0.52 |
|
| $ | 0.31 |
|
September 30, 2022 |
| $ | 0.52 |
|
| $ | 0.25 |
|
Year Ended June 30, 2022 |
|
|
|
|
|
|
|
|
June 30, 2022 |
| $ | 0.80 |
|
| $ | 0.53 |
|
March 31, 2022 |
| $ | 0.94 |
|
| $ | 0.53 |
|
December 31, 2021 |
| $ | 0.90 |
|
| $ | 0.52 |
|
September 30, 2021 |
| $ | 0.97 |
|
| $ | 0.51 |
|
As of January 17, 2024, the highest trading price of our common stock was $1.10 per share and the lowest trading price was $0.045 per share. As of January 17, 2024, there were 53,776,616 shares of common stock outstanding held by approximately 266 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.
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 our common stock. The foregoing required penny stock restrictions will not apply to our common stock if such stock reaches and maintains a market price of $5.00 per share or greater.
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| Table of Contents |
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.
Item 6. [Reserved]
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
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
We were incorporated in the State of Nevada on September 6, 2019. We were founded to mitigate the disparity in the rapidly evolving cyber threat hunting, correlation, and threat intelligence market. The Company is focused on developing solutions for threat intelligence and autonomous threat hunting/correlation. Tego’s curated threat intelligence feed not only contains a comprehensive list of indicators of compromise, but also provides additional context including specific details needed to counteract threats so that security teams can spend less time searching for disjointed indicators of compromise. Tego’s threat correlation engine integrates with top security and data lake platforms to proactively identify threats. The Tego threat correlation engine allows security teams to find threats faster using curated data feeds, powerful and low latency searches across large disparate data sets, and user-friendly visualizations that help reduce the time to detection and response. For more information, please visit https://tegocyber.com.
Results of operations for fiscal year ended June 30, 2023 compared to year ended June 30, 2022
Revenues
We are in development stage and generated $NIL of revenue for the fiscal year ended June 30, 2023 compared to $1,050 for the fiscal year ended June 30, 2022.
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| Table of Contents |
Operating Expenses
We incurred total operating expenses of $5,830,693 for the fiscal year ended June 30, 2023, compared to $3,085,319 for the fiscal year ended June 30, 2022. These amounts consisted of the following:
|
| For Year Ended June 30, 2023 |
|
| For Year Ended June 30, 2022 |
| ||
General & administration |
| $ | 4,878,234 |
|
| $ | 1,258,539 |
|
Professional fees |
|
| 582,565 |
|
|
| 749,607 |
|
Sales & marketing |
|
| 369,894 |
|
|
| 171,211 |
|
Share-based compensation |
|
| - |
|
|
| 905,962 |
|
Impairment of software |
|
|
|
|
|
|
| |
Total operating expenses |
| $ | 5,830,693 |
|
| $ | 3,085,319 |
|
Overall operating expenses increased by $2,745,374 to $5,830,693 for the year ended June 30, 2023, as compared to $3,085,319 for the year ended June 30, 2022. General and administration increased by $3,619,695 due to an increase of operational expenses due to the growth of the overall business and ongoing development of the infrastructure in preparation of full commercialization of the first version of the Tego threat detection engine and threat intelligence feed.
Professional fees decreased by $167,042 as a result of the completion of the initial public offering. Sales and marketing increased by $198,683 due to increased spending setting up and implementing the path to market strategy for the first version of the Tego threat application.
Net Loss
We incurred a net loss of $10,738,393 for the fiscal year ended June 30, 2023, compared to a net loss of $3,147,901 for the fiscal year ended June 30, 2022.
Liquidity and Capital Resources
As at June 30, 2023, we have a working capital deficit of $809,495, a net loss of $10,738,393 and have earned limited revenue to cover our operating costs. We have $181,246 cash on hand and our burn rate is approximately $150,000 per month. We intend to fund future operations through debt or equity financing arrangements. Our ability to realize our business plan is dependent upon, among other things, obtaining additional financing to continue operations, and development of our business plan. In response to these problems, management intends to raise additional funds through debt, public or private placement offerings. These factors, among others, raise substantial doubt about our 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, 2023, the net cash flows used in our operating activities was $1,645,851 compared to $1,618,526 for the same period ended June 30, 2022. This amount was primarily related to a (i) net loss of $10,738,393; (ii) share issued for services valued at $2,096,304; (iii) share based compensation of $1,993,585; and (iv) financing fees in settlement of default of $3,522,449.
Cash Flow from Investing Activities
For the fiscal year ended June 30, 2023, the net cash used in investing activities by the Company was $327,645 compared to $341,949 for the same period ended June 30, 2022. The amount was related to the capitalization of software development costs.
Cash Flow from Financing Activities
For the fiscal year ended June 30, 2023, the net cash provided by financing activities by the Company was $2,107,000 compared to $1,425,202 for the same period ended June 30, 2022. This amount was related to cash received from the sale of our common stock of $1,297,000 and cash received from issuance of notes payable of $810,000.
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| Table of Contents |
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 in order 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.
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.
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 balance sheets the statements of operations, statements of changes in shareholders’ equity and cash flows of the Company for the fiscal year ended June 30, 2023 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 periods ended June 30, 2023 and 2022, 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.
| 16 |
| Table of Contents |
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, 2023, 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, 2023, 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.
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. |
| 17 |
| Table of Contents |
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.
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 following table summarizes the securities outstanding and exercisable, (regardless of exercise price) at June 30, 2023 and 2022 that were excluded from the diluted net loss per share calculation because the effect of including these potential shares was antidilutive due to the Company’s net loss.
|
| 2023 |
|
| 2022 |
| ||
Potentially dilutive common share equivalents |
|
|
|
|
|
| ||
Options |
|
| 1,200,000 |
|
|
| - |
|
Warrants |
|
| 4,500,000 |
|
|
| 3,014,246 |
|
Performance Stock Units |
|
| 2,700,000 |
|
|
| 4,000,000 |
|
Potentially dilutive shares outstanding |
|
| 8,400,000 |
|
|
| 7,014,246 |
|
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.
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.
Item 7.A Quantitative and Qualitative Disclosures about Market Risk.
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.
Item 8. Financial Statements and Supplementary Data.
| 18 |
| Table of Contents |
TABLE OF CONTENTS
| 19 |
| Table of Contents |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Stockholders 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, 2023, and the related statements of operations, changes in shareholders’ equity, and cash flows for the year June 30, 2023, 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, 2023, and the results of its operations and its cash flows for the year ended June 30, 2023, in conformity with accounting principles generally accepted in the United States of America.
Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company has sustained net losses, has a net capital deficiency, and has generated negative cash flows from operations which raises substantial doubt about its ability to continue as a going concern. Management’s plans regarding those matters are discussed in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s 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 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 included 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.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Black Scholes Calculations
As discussed in Note 10 to the Financial Statements, the Company utilizes Black Scholes calculations to determine fair value of the Company’s stock options and warrants.
Auditing management’s calculations of fair value of stock options involves significant judgements and estimates to determine the proper value. Volatility and term are the major assumptions used by management in determining the value of the stock options.
To evaluate the appropriateness of fair value calculation, we evaluated management’s significant judgements and estimates in what inputs were utilized within the Black Scholes calculations.
/s/ | |
|
|
We have served as the Company’s auditor since 2023. | |
|
|
| |
January 17, 2024 | |
| 20 |
| Table of Contents |
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders 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, 2022, and the related statement of operations, stockholders’ 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, 2022, 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.
Substantial Doubt about the Company’s Ability to Continue as a Going Concern
The accompanying financial statements have been prepared assuming that the Company 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.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s 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 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 included 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.
/S/ BF Borgers CPA PC
BF Borgers CPA PC
Served as auditor since 2022
Lakewood, CO
November 10, 2022
| 21 |
| Table of Contents |
TEGO CYBER INC.
BALANCE SHEETS
(Expressed in US Dollars)
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| June 30, 2023 |
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| June 30, 2022 |
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ASSETS |
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Current assets |
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Cash |
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Accounts receivable |
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Prepaid expenses (Note 5) |
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Total current assets |
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Other assets |
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Computer equipment, net |
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Software (Note 6) |
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TOTAL ASSETS |
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| $ |
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LIABILITIES & SHAREHOLDERS’ DEFICIT |
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Current liabilities |
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Accounts payable (Note 7) |
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Notes payable (Note Convertible debts |
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TOTAL LIABILITIES |
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SHAREHOLDERS’ EQUITY |
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Common shares |
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Additional paid in capital |
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Accumulated deficit |
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TOTAL SHAREHOLDERS’ EQUITY |
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TOTAL LIABILITIES & SHAREHOLDERS’ EQUITY |
| $ |
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| $ |
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The accompanying notes are an integral part of these financial statements
| 22 |
| Table of Contents |
TEGO CYBER INC.
STATEMENTS OF OPERATIONS
(Expressed in US Dollars)
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| Year Ended June 30, 2023 |
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| Year Ended June 30, 2022 |
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REVENUE |
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Consulting fees |
| $ |
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| $ |
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Subscription Revenue |
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TOTAL REVENUE |
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OPERATING EXPENSES |
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General & administration |
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Professional fees |
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Sales & marketing |
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Share based compensation |
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TOTAL OPERATING EXPENSES |
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NET OPERATING LOSS |
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OTHER INCOME (EXPENSE) |
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Accretion expense |
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Financing fees |
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Impairment of software |
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TOTAL OTHER INCOME (EXPENSE) |
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NET LOSS |
| $ | ( | ) |
| $ | ( | ) |
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BASIC AND DILUTED LOSS PER COMMON SHARE |
| $ | ( | ) |
| $ | ( | ) |
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WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING |
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The accompanying notes are an integral part of these financial statements
| 23 |
| Table of Contents |
TEGO CYBER INC.
STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
FOR THE YEARS ENDED JUNE 30, 2023 AND JUNE 30, 2022
(Expressed in US Dollars)
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| Number of Shares |
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| Common Stock |
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| Additional Paid-In Capital |
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| Subscriptions Receivable |
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| Accumulated Deficit |
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| Total Shareholder Equity |
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Balances, June 30, 2021 |
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| $ |
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| $ | ( | ) |
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Shares issued for cash |
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Shares issued for services |
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Shares issued for settlement of convertible debts |
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Share-based compensation |
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| - |
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Net loss for the year ended June 30, 2022 |
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| - |
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Balances, June 30, 2022 |
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| $ |
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| $ |
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| $ |
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| $ | ( | ) |
| $ |
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Shares issued as transaction costs for notes payable |
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Warrants issued as transaction costs for notes payable |
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| - |
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Shares issued for services |
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Shares issued from private placements |
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Shares issued for debts |
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Share-based compensation |
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Shares issued for financing fees |
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Warrants issued for financing fees |
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| - |
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Net loss for the year ended June 30, 2023 |
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| - |
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Balances, June 30, 2023 |
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| $ |
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| $ |
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| $ |
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| $ | ( | ) |
| $ | ( | ) | ||||
The accompanying notes are an integral part of these financial statements
| 24 |
| Table of Contents |
TEGO CYBER INC.
STATEMENTS OF CASH FLOWS
(Expressed in US Dollars)
|
| Year Ended June 30, 2023 |
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| Year Ended June 30, 2022 |
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CASH FLOWS FROM OPERATING ACTIVITIES |
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Net loss for the year |
| $ | ( | ) |
| $ | ( | ) |
Items not affecting cash |
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Shares issued for services |
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Interest on short term debt |
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Amortization |
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Accretion expense |
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Impairment of software |
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Share-based compensation |
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Financing fees in settlement of default |
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Changes in non-cash working capital items: |
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Accounts receivable |
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Prepaid expenses |
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Accounts payable and accrued liabilities |
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NET CASH USED IN OPERATING ACTIVITIES |
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CASH FLOWS FROM INVESTING ACTIVITIES |
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Purchase of computer equipment |
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Capitalized software development costs |
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NET CASH USED IN INVESTING ACTIVITIES |
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CASH FLOWS FROM FINANCING ACTIVITIES |
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Proceeds from shares issued |
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Proceeds from private placements |
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Cash received from issuance of notes payable |
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NET CASH PROVIDED BY FINANCING ACTIVITIES |
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NET INCREASE (DECREASE) IN CASH |
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CASH AT BEGINNING OF THE PERIOD |
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CASH AT END OF THE PERIOD |
| $ |
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| $ |
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Non-cash investing and financing activities: |
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Shares issued as transaction costs with notes payable |
| $ |
| $ |
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Shares issued for settlement of debt |
| $ |
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| $ |
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The accompanying notes are an integral part of these audited financial statements
| 25 |
| Table of Contents |
NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS
Tego Cyber Inc. 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. We are engaged in the business of the development and commercialization of innovative cybersecurity applications that help enterprises reduce risk, remediate 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 general e-mail contact is info@tegocyber.com. Our website can be viewed at www.tegocyber.com.
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 sheets, the statements of operations, statements of changes in shareholders’ equity and the statements of cash flows of the Company for the years ended June 30, 2023 and 2022. 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, 2023, the Company had a working capital deficit of $
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.
| 26 |
| Table of Contents |
Basis of Preparation
The accompanying financial statements have been prepared to present the balance sheets, the statements of operations, statements of changes in shareholders’ equity and statements of cash flows of the Company for the period ended June 30, 2023 and 2022 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, 2023, 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, 2023 and 2022, 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, 2023 and 2022, 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
Research and Development Costs
Research and Development Costs are expensed as incurred. During the years ended June 30, 2023 and 2022, the Company incurred $nil research and development costs.
Advertising Costs
Advertising Costs are expensed as incurred. During the years ended June 30, 2023 and 2022, the Company incurred $nil advertising costs.
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. The Company leases its corporate office located at 8565 S. Eastern Ave. #150, Las Vegas, Nevada. The initial lease term is for
| 27 |
| Table of Contents |
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, 2023. 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 is recognized under ASC 606, “Revenue from Contracts with Customers” using the modified retrospective method. Under this method, the Company follows the five-step model provided by ASC Topic 606 in order to recognize revenue in the following manner: 1) identify the contract; 2) identify the performance obligations of the contract; 3) determine the transaction price of the contract; 4) allocate the transaction price to the performance obligations; and 5) recognize revenue. The Company recognizes revenue for the transfer of promised goods or services to customers in an amount that reflects the consideration for which the entity expects to be entitled in exchange for those goods or services.
Revenue for the fiscal years ended June 30, 2023 and June 30, 2022 consisted of the following:
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| June 30, 2023 |
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| June 30, 2022 |
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Consulting fees |
| $ |
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| $ |
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Subscription revenue |
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Total |
| $ |
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| $ |
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| 28 |
| Table of Contents |
The Company currently has not generated any revenue from its threat intelligence software.
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.
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. Dilutive securities are not included in the weighted average number of shares when inclusion would be anti-dilutive. The following table summarizes the securities outstanding and exercisable, (regardless of exercise price) at June 30, 2023 and 2022 that were excluded from the diluted net loss per share calculation because the effect of including these potential shares was antidilutive due to the Company’s net loss.
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| 2023 |
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| 2022 |
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Potentially dilutive common share equivalents |
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Options |
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| - |
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Warrants |
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Performance Stock Units |
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Potentially dilutive shares outstanding |
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Recently Issued Accounting Pronouncements
In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40)—Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. ASU 2020-06 reduces the number of accounting models for convertible debt instruments and convertible preferred stock. For convertible instruments with conversion features that are not required to be accounted for as derivatives under Topic 815, Derivatives and Hedging, or that do not result in substantial premiums accounted for as paid-in capital, the embedded conversion features no longer are separated from the host contract. ASU 2020-06 also removes certain conditions that should be considered in the derivatives scope exception evaluation under Subtopic 815-40, Derivatives and Hedging—Contracts in Entity’s Own Equity, and clarify the scope and certain requirements under Subtopic 815-40. In addition, ASU 2020-06 improves the guidance related to the disclosures and earnings-per-share (EPS) for convertible instruments and contract in entity’s own equity. ASU 2020-06 is effective for public business entities that meet the definition of a SEC filer, excluding entities eligible to be smaller reporting companies as defined by the SEC, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Board specified that an entity should adopt the guidance as of the beginning of its annual fiscal year. The Company’s management is currently evaluating the impact this ASU will have on its financial statements.
| 29 |
| Table of Contents |
Management does not believe that any recently issued, but not yet effective, accounting standards could have a material effect on the accompanying consolidated financial statements. As new accounting pronouncements are issued, we will adopt those that are applicable under the circumstances.
NOTE 5 – PREPAID EXPENSES
Prepaid expense balance as of June 30, 2023 and June 30, 2022 consisted of the following:
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| June 30, 2023 |
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| June 30, 2022 |
| ||
Advertising & promotion |
| $ |
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| $ |
| ||
Consultants & contractors |
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Platform costs |
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Software development |
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Total |
| $ |
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| $ |
| ||
NOTE 6 – SOFTWARE
The Company has completed the first version of its technology for integration with the Splunk SIEM platform. That product is now commercially available. The Company is currently developing versions of its application for integration with AWS Security Lake and Elastic SIEM platform.
Balance, June 30, 2021 |
| $ |
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Additions |
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Depreciation |
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Balance, June 30, 2022 |
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Additions |
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Depreciation |
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| ( | ) |
Impairment |
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| ( | ) |
Balance, June 30, 2023 |
| $ |
|
During the year ended June 30, 2023, management identified indicators of impairment on its software and software under development. The indicators consisted of a current and historic cash flow loss from operations. As a result, management performed an impairment test that resulted in the recognition of an impairment loss of $
NOTE 7 – ACCOUNTS PAYABLE
Accounts payable balance as of June 30, 2023 and June 30, 2022 consisted of the following:
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| June 30, 2023 |
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| June 30, 2022 |
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Advertising & promotion |
| $ |
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| $ |
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Legal & accounting |
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Software development |
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Travel |
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Accrued interest on short term debt |
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Total |
| $ |
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| $ |
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| 30 |
| Table of Contents |
NOTE 8 – 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 year ended June 30, 2023, there were transactions incurred between the Company and Shannon Wilkinson, a Director, CEO, President, Secretary and Treasurer of the Company, for management fees of $Nil (June 30, 2022 - $
During the year ended June 30, 2023, there were transactions incurred between the Company and Earl Johnson, Chief Financial Officer of the Company, for gross wages of $
During the year ended June 30, 2023, there were transactions incurred between the Company and Chris White, a Director and Chief Information Security Officer of the Company, for management fees of $Nil (June 30, 2022 - $
During the year ended June 30, 2023, there were transactions incurred between the Company and Troy Wilkinson, a Director of the Company, for management fees of $
On May 25, 2023 Michael De Valera, a Director of the Company, was issued
NOTE 9 – NOTES PAYABLE (convertible only at default)
| (a) | On July 12, 2022, the Company entered into a securities purchase agreement with a non-related party. Pursuant to this agreement, the Company issued a note payable in the principal amount of $ |
|
|
|
|
| On January 11, 2023, the Company and the lender agreed to extend the maturity date to
The Company evaluated the agreement under ASC 815 Derivatives and Hedging (“ASC 815”). ASC 815 generally requires the analysis embedded terms and features that have characteristics of derivatives to be evaluated for bifurcation and separate accounting in instances where their economic risks and characteristics are not clearly and closely related to the risks of the host contract. None of the embedded terms required bifurcation and liability classification.
The proceeds were allocated between the note payable, warrants and shares issued on a relative fair value basis. The fair value of the note payable was calculated using the present value of the debt and related interest at |
| 31 |
| Table of Contents |
|
| In connection with the notes, the Company issued warrants indexed to an aggregate
The Company also agreed to pay a commitment fee of $
As at June 30, 2023, the carrying value of this note payable was $ |
|
|
|
| (b) | On July 15, 2022, the Company entered into a securities purchase agreement with a non-related party. Pursuant to this agreement, the Company issued a note payable in the principal amount of $ |
|
|
|
|
| On January 11, 2023, the Company and the lender agreed to extend the maturity date to
The Company evaluated the agreement under ASC 815 Derivatives and Hedging (“ASC 815”). ASC 815 generally requires the analysis embedded terms and features that have characteristics of derivatives to be evaluated for bifurcation and separate accounting in instances where their economic risks and characteristics are not clearly and closely related to the risks of the host contract. None of the embedded terms required bifurcation and liability classification.
The proceeds were allocated between the note payable, warrants and shares issued on a relative fair value basis. The fair value of the note payable was calculated using the present value of the debt and related interest at
In connection with the notes, the Company issued warrants indexed to an aggregate |
| 32 |
| Table of Contents |
|
| The Company also agreed to pay a commitment fee of $
As at June 30, 2023, the carrying value of this note payable was $ |
|
|
|
| (c) | On July 18, 2022, the Company entered into a securities purchase agreement with a non-related party. Pursuant to this agreement, the Company issued a note payable e in the principal amount of $ |
|
|
|
|
| On January 11, 2023, the Company and the lender agreed to extend the maturity date to
The Company evaluated the agreement under ASC 815 Derivatives and Hedging (“ASC 815”). ASC 815 generally requires the analysis embedded terms and features that have characteristics of derivatives to be evaluated for bifurcation and separate accounting in instances where their economic risks and characteristics are not clearly and closely related to the risks of the host contract. None of the embedded terms required bifurcation and liability classification.
The proceeds were allocated between the note payable, warrants and shares issued on a relative fair value basis. The fair value of the note payable was calculated using the present value of the debt and related interest at
In connection with the notes, the Company issued warrants indexed to an aggregate
The Company also agreed to pay a commitment fee of $
As at June 30, 2023, the carrying value of this note payable was $ |
| 33 |
| Table of Contents |
| (d) | On October 13, 2022, the Company entered into a securities purchase agreement with a non-related party. Pursuant to this agreement, the Company issued a note payable in the principal amount of $ |
|
|
|
|
| On April 12, 2023, the Company and the lender agreed to extend the maturity date to
The Company evaluated the agreement under ASC 815 Derivatives and Hedging (“ASC 815”). ASC 815 generally requires the analysis embedded terms and features that have characteristics of derivatives to be evaluated for bifurcation and separate accounting in instances where their economic risks and characteristics are not clearly and closely related to the risks of the host contract. None of the embedded terms required bifurcation and liability classification.
The proceeds were allocated between the note payable, warrants and shares issued on a relative fair value basis. The fair value of the note payable was calculated using the present value of the debt and related interest at
In connection with the notes, the Company issued warrants indexed to an aggregate
The Company also agreed to pay a commitment fee of $
As at June 30, 2023, the carrying value of this note payable was $ |
|
|
|
| (e) | On October 13, 2022, the Company entered into a securities purchase agreement with a non-related party. Pursuant to this agreement, the Company issued a note payable in the principal amount of $ |
| 34 |
| Table of Contents |
|
| On April 12, 2023, the Company and the lender agreed to extend the maturity date to
The Company evaluated the agreement under ASC 815 Derivatives and Hedging (“ASC 815”). ASC 815 generally requires the analysis embedded terms and features that have characteristics of derivatives to be evaluated for bifurcation and separate accounting in instances where their economic risks and characteristics are not clearly and closely related to the risks of the host contract. None of the embedded terms required bifurcation and liability classification.
The proceeds were allocated between the note payable, warrants and shares issued on a relative fair value basis. The fair value of the note payable was calculated using the present value of the debt and related interest at
In connection with the notes, the Company issued warrants indexed to an aggregate
The Company also agreed to pay a commitment fee of $
As at June 30, 2023, the carrying value of this note payable was $ |
|
|
|
| (f) | On October 13, 2022, the Company entered into a securities purchase agreement with a non-related party. Pursuant to this agreement, the Company issued a note payable in the principal amount of $ |
|
|
|
|
| On April 12, 2023, the Company and the lender agreed to extend the maturity date to |
| 35 |
| Table of Contents |
|
| The Company evaluated the agreement under ASC 815 Derivatives and Hedging (“ASC 815”). ASC 815 generally requires the analysis embedded terms and features that have characteristics of derivatives to be evaluated for bifurcation and separate accounting in instances where their economic risks and characteristics are not clearly and closely related to the risks of the host contract. None of the embedded terms required bifurcation and liability classification.
The proceeds were allocated between the note payable, warrants and shares issued on a relative fair value basis. The fair value of the note payable was calculated using the present value of the debt and related interest at
In connection with the notes, the Company issued warrants indexed to an aggregate
The Company also agreed to pay a commitment fee of $
As at June 30, 2023, the carrying value of this note payable was $ |
NOTE 10 – COMMON SHARES
Common Stock
At June 30, 2023, the Company’s authorized capital consisted of
During the year ended June 30, 2023, the Company incurred the following transactions:
On July 12, 2022, the Company issued
On July 15, 2022, the Company issued
On July 18, 2022, the Company issued
On July 26, 2022, the Company issued
On October 12, 2022, the Company issued
| 36 |
| Table of Contents |
On October 13, 2022, the Company issued
On October 13, 2022, the Company issued
On November 29, 2022, the Company completed a private placement whereby a total of
On December 5, 2022, the Company completed a private placement whereby a total of
On January 6, 2023, the Company completed a private placement whereby a total of
On January 9, 2023, the Company issued
On January 9, 2023, the Company issued
On January 11, 2023, the Company completed a private placement whereby a total of
On January 15, 2023, the Company completed a private placement whereby a total of
On January 16, 2023, the Company completed a private placement whereby a total of
On January 17, 2023, the Company completed various private placements whereby a total of
On January 21, 2023, the Company completed various private placements whereby a total of
On January 23, 2023, the Company completed various private placements whereby a total of
On January 24, 2023, the Company completed a private placement whereby a total of
On January 25, 2023, the Company completed a private placement whereby a total of
On January 28, 2023, the Company completed a private placement whereby a total of
On January 30, 2023, the Company completed various private placements whereby a total of
On February 6, 2023, the Company issued
On February 6, 2023, the Company completed various private placements whereby a total of
| 37 |
| Table of Contents |
On February 7, 2023, the Company completed various private placements whereby a total of
On February 14, 2023, the Company completed various private placements whereby a total of
On February 15, 2023, the Company completed a private placement whereby a total of
On July 13, 2022, the Company entered into a securities purchase agreement with a non-related party in which the Company had issued a convertible debt in the principal amount of $
On March 23, 2023, the Company issued
On March 24, 2023, the Company completed a private placement whereby a total of
On April 4, 2023, the Company issued
On April 10, 2023, the Company issued
On May 24, 2023, the Company completed a private placement whereby a total of
On May 24, 2023, the Company completed a private placement whereby a total of
On May 25, 2023, the Company issued
On June 1, 2023, the Company issued
On June 16, 2023, the Company completed a private placement whereby a total of
During the year ended June 30, 2022, the Company incurred the following transactions:
During the period July 1, 2021 to October 28, 2021, the Company completed various private placements whereby a total of
On October 15, 2021, the Company issued
| 38 |
| Table of Contents |
On October 28, 2021, the Company issued
On December 8, 2021, the Company issued
On December 31, 2021, the Company issued
On December 31, 2021, the Company issued 353,215 common shares for the conversion of debt at a conversion price of $
On January 1, 2022, the Company issued
On March 25, 2022, the Company issued
On May 19, 2022, the Company issued
Warrants
On March 25, 2021, the Company granted
On April 22, 2021, the Company granted
On April 28, 2021, the Company granted
On July 12, 2022, the Company granted
On July 15, 2022, the Company granted
On July 18, 2022, the Company granted
On October 13, 2022, the Company granted
| 39 |
| Table of Contents |
On October 13, 2022, the Company granted
On October 13, 2022, the Company granted
On March 12, 2023, the Company granted
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, 2023 |
| |
Stock price |
| $ |
| |
Risk-free interest rate |
| % | ||
Expected life |
|
| ||
Expected dividend rate |
|
|
| |
Expected volatility |
| % | ||
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, 2021 |
|
|
|
| $ |
| ||
Granted |
|
| - |
|
|
| - |
|
Exercised |
|
| - |
|
|
| - |
|
Expired |
|
| - |
|
|
| - |
|
Outstanding, June 30, 2022 |
|
|
|
| $ |
| ||
Granted |
|
|
|
|
|
| ||
Exercised |
|
| - |
|
|
| - |
|
Expired |
|
| ( | ) |
|
| - |
|
Outstanding, June 30, 2023 |
|
|
|
| $ |
| ||
Grant Date |
| Number Outstanding |
|
| Number Exercisable |
|
| Exercise Price |
|
| Weighted Average Life (Years) |
|
| Expiry Date | |||||
July 12, 2022 |
|
|
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|
|
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|
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|
| ||||||
July 15, 2022 |
|
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|
| ||||||
July 18, 2022 |
|
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| ||||||
October 13, 2022 |
|
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| ||||||
October 13, 2022 |
|
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| ||||||
October 13, 2022 |
|
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|
|
| ||||||
March 12, 2023 |
|
|
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|
|
|
|
|
|
|
| ||||||
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
As of June 30, 2023, the weighted average remaining contractual life of warrants outstanding was
| 40 |
| Table of Contents |
Stock Options
On December 8, 2021, the Board of Directors of the Company approved the adoption of the 2021 Equity Compensation Plan (the “Equity Compensation Plan”) to provide employees, certain consultants and advisors who perform services for the Company, and non-employee members of the Board of Directors of the Company with the opportunity to receive grants of incentive stock options, nonqualified stock options, stock appreciation rights, stock awards, stock units and other stock-based awards.
During the year ended June 30, 2023 the Company issued a total of 6,000,000 non-qualified stock options (the “options”) to directors, officers and certain key consultants. The options are subject to the terms and conditions of the Equity Compensation Plan. All granted options are subject to a five-year vesting schedule equal to 20% per year starting on the 1st day of each year following the effective date. All options have an exercise price of $0.65 which was the closing price of the Company’s common stock on the day the day grant.
The following is a continuity schedule for the Company’s outstanding non-qualified stock options:
|
| Number of options |
|
| Weighted Average Exercise Price | ||
Outstanding, June 30, 2021 |
|
| - |
| $ | - | |
Granted |
|
| |
|
| |
|
Exercised |
|
| - |
|
| - |
|
Cancelled |
|
| - |
|
| - |
|
Outstanding, June 30, 2022 |
|
| |
| $ |
| |
Granted |
|
|
|
| | ||
Exercised |
|
| - |
|
| - | |
Cancelled |
|
| ( | ) |
| ||
Outstanding, June 30, 2023 |
|
|
| $ | | ||
As at June 30, 2023, the Company had the following stock options outstanding:
Grant Date |
| Number Outstanding |
|
| Number Exercisable |
|
| Exercise Price |
| Weighted Average Life (Years) |
|
| Expiry Date | ||||
January 3, 2022 |
|
|
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|
|
|
|
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|
|
| ||||||
January 4, 2022 |
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|
| ||||||
March 1, 2023 |
|
|
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|
|
|
|
| ||||||
Total |
|
|
|
|
|
|
|
|
|
|
|
| |||||
During the year ended June 30, 2023, the Company recorded $
The fair value of the options granted during the year ended June 30, 2023 was estimated on the date of the grant date using the Black-Scholes option pricing model with the following weighted average assumptions:
Expected volatility |
| % | ||
Expected option life (years) |
|
| ||
Risk-free interest rate (10-year U.S. treasury yield) |
| % | ||
Expected dividend yield |
|
| % | |
Performance Stock Units
On December 8, 2021, the Board of Directors of the Company approved the adoption of the 2021 Equity Compensation Plan (the “Equity Compensation Plan”) to provide employees, certain consultants and advisors who perform services for the Company, and non-employee members of the Board of Directors of the Company with the opportunity to receive grants of incentive stock options, nonqualified stock options, stock appreciation rights, stock awards, stock units and other stock-based awards.
| 41 |
| Table of Contents |
During the year ended June 30, 2022 the Company issued a total of
Each unit represents one common share:
Number of Performance Units |
|
| Vesting Conditions |
| Expiry Dates | |
| - |
|
|
| ||
|
|
|
| |||
|
|
|
| |||
|
|
|
| |||
On March 20, 2023, the Company terminated its employment relationship with one of the unit holders who had
During the year ended June 30, 2023, the Company’s market capitalization reached over $
The following is a continuity schedule for the Company’s outstanding performance stock units:
|
| Number of Performance Units |
|
| Weighted Average Exercise Price |
| ||
Outstanding, June 30, 2022 |
|
|
|
| $ |
| ||
Granted |
|
| - |
|
|
| - |
|
Exercised |
|
| ( | ) |
|
| - |
|
Forfeited or cancelled |
|
| ( | ) |
|
| - |
|
Outstanding, June 30, 2022 |
|
|
|
| $ | - |
| |
As of June 30, 2022, the Company had the following performance units outstanding:
Grant Date |
| Number Outstanding |
|
| Number Exercisable |
|
| Exercise Price |
| Weighted Average Life (Years) |
|
| Expiry Date | ||||
March 8, 2022 |
|
|
|
|
| - |
|
| USD $ |
|
|
|
| ||||
Total |
|
|
|
|
| - |
|
| USD $ |
|
|
|
|
| |||
During the year ended June 30, 2023, the Company recorded $
No performance units were granted during the year ended June 30, 2023.The fair value of the performance units granted during the year ended June 30, 2022 was estimated on the date of the grant date using output from a Black-Sholes model to calculate the value of the award multiplying by the current stock price as of the valuation date with the following weighted average assumptions:
Expected volatility |
|
| % | |
Requisite period |
|
| ||
Risk-free interest rate (US Treasury Bond rate as of the grant date) |
|
| % | |
Expected dividend yield |
|
| % | |
| 42 |
| Table of Contents |
NOTE 11 – 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 12 – INCOME TAXES
As of June 30, 2023, 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 $
NOTE 13 – RECLASSIFICATION OF PRIOR YEAR PRESENTATION
Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications are limited to the Balance Sheet and Statement of Operations and have no effect on the reported results of operations.
NOTE 14 – SUBSEQUENT EVENTS
On July 3, 2023, the Company granted
With reference to the Side Letter received on July 3, 2023 from the above lender, the Company agreed to issue
With regards to the securities purchase agreement entered on July 15, 2022 with above lender, the Company and the lender agreed to increase the principal amount of the note by $
On July 3, 2023, the Company granted
With reference to the Side Letter received on July 3, 2023 from the above lender, the Company agreed to issue
With regards to the securities purchase agreement entered on July 15, 2022 with above lender, the Company and the lender agreed to increase the principal amount of the note by $
On July 3, 2023, the Company issued
| 43 |
| Table of Contents |
On July 3, 2023, the Company issued
On July 27, 2023, the Company completed a private placement whereby a total of
On August 17, 2023, the Company completed a private placement whereby a total of
On August 21, 2023, the Company issued
On August 22, 2023, the Company completed a private placement whereby a total of
On September 1, 2023, the Company made a $
On September 15, 2023, the Company issued
On September 15, 2023, the Company issued
On September 19, 2023, the Company issued
On September 20, 2023, the Company received a purchase order for a license fee for its threat correlation application for integration with Splunk.
On October 6, 2023, the Company issued
44 |
| Table of Contents |
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
On April 10, 2023, we received notice of resignation from BF Borgers CPA PC (“BF Borgers”), as our registered independent registered public accountant. We appointed M&K CPAS, PLLC (“M&K”) as our registered independent public accounting firm on May 10, 2023. The decision to appoint M&Ks was approved by our Board of Directors on May 10, 2023.
Disagreements with Accountants on Accounting and Financial Disclosure
Borgers' report on the financial statements of the Company for the year ended June 30, 2022 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, with the exception of the emphasis of a matter raising substantial doubt about its ability to continue as a going concern.
During the year ended June 30, 2022 and subsequent interim periods from July 1, 2022 to April 10, 2023, there were (i) 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 make reference to the subject matter of the disagreements in connection with its reports on the Company's financial statements for such periods, and (ii) no “reportable events” within the meaning of Item 304(a)(1)(v) of Regulation S-K , other than as noted above regarding the Company’s ability to continue as a going concern and except for the material weaknesses identified related to (i) lack of an audit committee and financial expert, and (ii) limited personnel to assist with the accounting and financial reporting function resulting in (a) a lack of segregation of duties and (b) controls that may not be adequately designed or operating effectively.
During the two most recent fiscal years and in the subsequent interim period through May 10, 2023, the Company did not consult with M&K regarding (1) the application of accounting principles to specified transactions, either completed or proposed, (2) the type of audit opinion that might be rendered on the Company’s financial statements, (3) written or oral advice was provided that would be an important factor considered by the Company in reaching a decision as to an accounting, auditing or financial reporting issues, or (4) any matter that was the subject of a disagreement between the Company and its predecessor auditor as described in Item 304(a)(1)(iv) or a reportable event as described in Item 304(a)(1)(v) of Regulation S-K.
Item 9.A Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
We conducted an evaluation, under the supervision and with the participation of our management, of the effectiveness of the design and operation of our disclosure controls and procedures. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as amended (“Exchange Act”), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by the company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures also include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Based on this evaluation, our principal executive and principal financial officers concluded as of June 30, 2023 that our disclosure controls and procedures were not effective at the reasonable assurance level due to the material weaknesses in our internal controls over financial reporting discussed immediately below.
Identified Material Weakness
A material weakness in our internal control over financial reporting is a control deficiency, or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the financial statements will not be prevented or detected.
Management identified the following material weakness during its assessment of internal controls over financial reporting, which are primarily due to the size of the Company and available resources:
Personnel: We do not employ a full-time Chief Financial Officer. We utilize a consultant to assist with our financial reporting. There are limited personnel to assist with the accounting and financial reporting function, which results in: (i) a lack of segregation of duties and (ii) controls that may not be adequately designed or operating effectively. Despite the existence of material weaknesses, the Company believes the financial information presented herein is materially correct and fairly presents the financial position and operating results of the years ended June 30, 2023 and 2022, in accordance with GAAP. During 2022-2023, the Company intends to seek qualified accounting staff to expand its internal accounting and reporting functions.
Audit Committee: We do not yet have an audit committee, and we lack a financial expert. During 2022-2023, the Board expects to appoint an Audit Committee and to identify a committee Chairman who is an “audit committee financial expert” as defined by the Securities and Exchange Commission (“SEC”) and as adopted under the Sarbanes-Oxley Act of 2002.
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| Table of Contents |
Management's Report on Internal Control Over Financial Reporting.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. Our internal control over financial reporting is a process designed by, or under the supervision of, our CEO and CFO, or persons performing similar functions, and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America (GAAP). Our internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and disposition of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP and that receipts and expenditures of the Company are being made only in accordance with authorization of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.
Management assessed the effectiveness of the Company’s internal control over financial reporting as of June 30, 2023. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in the 2013 Internal Control-Integrated Framework. Based on its evaluation, management has concluded that the Company’s internal control over financial reporting was not effective as of June 30, 2023.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate. A control system, no matter how well designed and operated, can provide only reasonable, but not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their cost.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting subsequent to the fiscal year ended June 30, 2023, which were identified in connection with our management’s evaluation required by paragraph (d) of rules 13a-15 and 15d-15 under the Exchange Act, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
We are not required by current SEC rules to include an auditor's attestation report. Our registered public accounting firm has not attested to Management's reports on our internal control over financial reporting.
Limitations of the Effectiveness of Disclosure Controls and Internal Controls
Our management, including our Principal Executive Officer and Principal Financial Officer, does not expect that our disclosure controls and internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control.
The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving our stated goals under all potential future conditions; over time, a control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
Item 9.B Other Information
During the fiscal year ended June 30, 2023, we completed various private placements whereby a total of 12,970,000 common shares were issued for a total of $1,297,000 cash. We also issued 3,953,572 common shares for services valued at $2,096,304. We also issued 45,000 common shares in settlement of convertible debt valued at $9,000.
Item 9.C Disclosure Regarding Foreign Jurisdiction the Prevent Inspection
Not applicable.
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| Table of Contents |
PART III
Item 10. Directors, Executive Officers and Corporate Governance
Identification of Directors and Executive Officers
The following table sets forth the names and ages of our current directors and executive officers as of January 17, 2024:
Name and Age |
| Position(s) Held |
| Date of Appointment |
| Other Public Company Directorships |
Shannon Wilkinson, 46 |
| Director, President, Chief Executive Officer |
| September 6, 2019 |
| None |
Robert Mikkelsen, 42 |
| Chief Financial Officer |
| September 15, 2023 |
| None |
Troy Wilkinson, 47 |
| Director |
| September 6, 2019 |
| None |
Michael De Valera, 58 |
| Director |
| September 6, 2019 |
| None |
Chris White, 52 |
| Director |
| April 14, 2021 |
| None |
Term of Office
Should a vacancy exist, our 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, President, Chief Executive 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, Mrs. Wilkinson co-founded Tego Cyber Inc. with her husband, 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. Mrs. Wilkinson works full time in her capacity as Director, President, CEO, Secretary and Treasurer of Tego Cyber Inc. Mrs. Wilkinson 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.
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Robert Mikkelsen – Chief Financial Officer
Robet Mikkelsen has been instrumental in developing accounting systems and controls for complex organizations, corporate development, mergers and acquisitions, and fundraising, with total transactions valued over $100 million. Mr. Mikkelsen received his bachelor’s degree in accounting in 2004 from the Eller College of Business, University of Arizona. After graduating, Mr. Mikkelsen went on to work as an auditor for Henry & Horne, LLP in Arizona. Mr. Mikkelsen’s career in public accounting included working with a client base which was diverse in size and sector, revenue ranging from $100 thousand to $1 billion annually including those in the health care, pharmaceutical and tech sectors. Mr. Mikkelsen has also served as the Chief Financial Officer for Item Nine Labs Corp (“INLB”) since October 2018.
Troy Wilkinson – Director
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, Mr. Wilkinson 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 of Tego Cyber Inc., Mr. Wilkinson is currently is the Chief Information Security Officer 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. Mr. Wilkinson is a worldwide keynote speaker on cybersecurity, co-authored an Amazon Best Seller, is featured on several news sources as a cybersecurity expert and 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.
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Employees
We have a total of 5 employees, 2 of which are our executive officers. We currently employ 5 full-time employees and 2 part-time employees. 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 President and Chief Executive Officer is devoted full time to our operations and devotes approximately 40-50 hours per week. At this time, our Chief Financial Officer devotes approximately 10-15 hours per week to our operations. The amount of time they will devote in any time period will vary based on the stage of our business and the progress we make. Accordingly, once we are beyond the developmental phase our management will spend more time on our affairs. Additionally, we have 12 contracted consultants.
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 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 our 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; |
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| (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); |
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| (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; |
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| ii. | Engaging in any type of business practice; or |
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| 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; |
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| (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; |
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| (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; |
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| (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; |
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| (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 |
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| 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 |
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| 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 4 members. Mrs. Shannon Wilkinson, Mr. Troy Wilkinson, Mr. Michael De Valera and Mr. Chris White. Mrs. Wilkinson and Mr. White do not qualify as an independent Directors in accordance with the published listing requirements of the NASDAQ Global Market as they hold officer positions. Mr. Wilkinson does not qualify as an independent Directors in accordance with the published listing requirements of the NASDAQ Global Market as he is married to Mrs. Wilkinson. Mr. Michael De Valera does qualify as independent director as he is not an officer of our 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 acts 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.
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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.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Exchange Act requires the Company’s directors, executive officers and persons who beneficially own 10% or more of a class of securities registered under Section 12 of the Exchange Act to file reports of beneficial ownership and changes in beneficial ownership with the SEC. Directors, executive officers and greater than 10% stockholders are required by the rules and regulations of the SEC to furnish the Company with copies of all reports filed by them in compliance with Section 16(a). To the Company’s knowledge, based solely on a review of reports furnished to it, for the year ended June 30, 2023, all of the Company’s officers, directors and ten percent holders have made the required filings, except: Christopher White filed a Form 4 on April 13, 2023, which was delinquent, in connection with his departure as Chief Information Security Officer; Earl Johnson’s delinquent Form 3 in connection with his becoming an executive officer of the Company in May 2022.
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 our business and strategy, evaluating our 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
We promote accountability for adherence to honest and ethical conduct; endeavors to provide full, fair, accurate, timely and understandable disclosure in reports and documents that we file with the SEC and in other public communications made; and we strive to be compliant with applicable governmental laws, rules and regulations. We have not yet formally adopted a written code of business conduct and ethics that govern our employees, officers and Directors as we are not currently required to do so.
In lieu of an Audit Committee, our 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 our financial statements and other services provided by our independent public accountants. The Board of Directors reviews our 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.
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Item 11. Executive Compensation
The following table sets forth for the years ended June 30, 2023 and 2022, information with respect to compensation earned for services in all capacities to us by the Company’s Chief Executive Officer and the Company’s Chief Financial Officer. The table sets forth for the years ended June 30, 2023 and 2022, information with respect to compensation for services in all capacities to us earned by the one other most highly compensated executive officer who received total compensation in excess of $100,000. No other executive officers received total annual salary and bonus compensation in excess of $100,000.
Name Position |
| Fiscal Year Ended 6/30 |
| Wages $ |
|
| Management Fees $ |
|
| Performance Stock Units Vested $ |
|
| All Other Compensation $ |
|
| Total $ |
| |||||
Shannon Wilkinson (1) |
| 2023 |
|
| 122,500 |
|
|
| - |
|
|
| 162,500 |
|
|
| - |
|
|
| 285,000 |
|
Earl Johnson (5) |
| 2023 |
|
| 36,000 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 36,000 |
|
Chris White (4) |
| 2023 |
|
| 20,000 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 20,000 |
|
Troy Wilkinson (2) |
| 2023 |
|
| - |
|
|
| 61,998 |
|
|
| 162,500 |
|
|
| - |
|
|
| 224,498 |
|
Michael De Valera (3) |
| 2023 |
|
| - |
|
|
| - |
|
|
| 65,000 |
|
|
| - |
|
|
| 65,000 |
|
|
|
|
|
| 178,500 |
|
|
| 61,998 |
|
|
| 390,000 |
|
|
| - |
|
|
| 630,498 |
|
Narrative Disclosure to Summary Compensation Table
(1) | On January 3, 2022, the Company entered into an employment agreement with Shannon Wilkinson (the “Wilkinson Employment Agreement”) having an effective date of January 1, 2022. The Wilkinson Employment Agreement provides for 5 year initial term. Thereafter, either the Company or Ms. Wilkinson has the right to extend the Wilkinson Employment Agreement for 3 additional one-year terms. The Company and Ms. Wilkinson can mutually elect to terminate the Wilkinson Employment Agreement at any time upon 90 days written notice. Ms. Wilkinson is entitled to a base salary of $120,000 per year. Ms. Wilkinson has been granted non-qualified options to purchase 2,000,000 shares under the terms and conditions of the Company’s 2021 Equity Compensation Plan (“Equity Compensation Plan”). The stock options shall be subject to a 5 year vesting schedule of 400,000 options on the 1st day of each year following the Effective Date. The option grant is priced at $0.65 per share. The Company has also granted to Mrs. Wilkinson, performance stock units of 1,000,000 shares of the Company’s common stock pursuant to the Equity Compensation Plan which shall vest in 250,000 share increments upon reaching certain market capitalization goals. On May 25, 2023 Mrs. Wilkinson was issued 250,000 common shares valued at $162,500 pursuant to Equity Compensation Plan. In the event Mrs. Wilkinson’s employment is terminated without Cause or Mrs. Wilkinson resigns for Good Reason (as Cause and Good Reason are defined in the Wilkinson Employment Agreement) within 12 months of a Change in Control (as defined in the Wilkinson Employment Agreement), Mrs. Wilkinson shall receive her salary for the duration of the term of the Wilkinson Employment Agreement and 100% of the total number of Options and Performance stock units due to Mrs. Wilkinson for the duration of the term of the Wilkinson Employment Agreement shall immediately become vested and issuable. |
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|
(2)
| There is no formal contract in place for Troy Wilkinson to act as director. Mr. Wilkinson has been granted non-qualified options to purchase 2,000,000 common shares under the terms and conditions of the Company’s 2021 Equity Compensation Plan. The stock options shall be subject to a 5 year vesting schedule of 400,000 options on the 1st day of each year following the Effective Date. The option grant is priced at $0.65 per share. The Company has also granted to Mr. Wilkinson performance stock units of 1,000,000 shares of the Company’s common stock pursuant to the Equity Compensation Plan which shall vest in 250,000 share increments upon reaching certain market capitalization goals. On May 25, 2023, Mr. Wilkinson was issued 250,000 common shares valued at $162,500 pursuant to Equity Compensation Plan |
(3) | There is no formal contract in place for Michael De Valera to act as director. Mr. De Valera has been granted non-qualified options to purchase 125,000 common shares under the terms and conditions of the Company’s 2021 Equity Compensation Plan. The stock options shall be subject to a 5 year vesting schedule of 25,000 options on the 1st day of each year following the Effective Date. The option grant is priced at $0.65 per share. The Company has also granted Mr. De Valera performance stock units of 400,000 shares of the Company’s common stock pursuant to the Equity Compensation Plan which shall vest in 100,000 share increments upon reaching certain market capitalization goals. On May 25, 2023, Mr. De Valera was issued 250,000 common shares valued at $65,000 pursuant to Equity Compensation Plan |
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(4) | On March 20, 2023, the Board accepted the resignation of Mr. Chris White as Chief Information Security Officer (“CISO”), effective March 1, 2023. Mr. White will remain serving as a member of the Board. In connection with Mr. White’s resignation as CISO, the Company and Mr. White entered into a Separation Agreement and Release dated as of March 20, 2023, pursuant to which Mr. White agreed to accept a lump sum payment of 100,000 restricted common shares of the Company stock in lieu of all and any amounts owing including (if applicable) backpay, vacation pay and severance and he has also agreed to forfeit any right to exercise any portion of the non-qualified stock options granted to him subject to the terms of the Equity Compensation Plan. Mr. White has also agreed to forfeit any right to exercise any portion of the performance stock units granted to him subject to the terms of the Equity Compensation Plan. |
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(5) | Mr. Johnson served as CFO from April 26, 2022 until his resignation effective September 15, 2023. The Company and Mr. Johnson entered into a Separation Agreement and Release dated as of September 15, 2023, pursuant to which Mr. Johnson have agreed upon certain terms related to his separation. Mr. Johnson has agreed to accept a lump sum payment of (i) $1,500 payable prior to September 30, 2023 and (ii) 100,000 restricted common shares of the Company stock in lieu of all and any amounts owing. |
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Outstanding Equity Awards at Fiscal Year-End
On December 8, 2021, the Board of Directors of the Company approved the adoption of the 2021 Equity Compensation Plan (the “Equity Compensation Plan”) to provide employees, certain consultants and advisors who perform services for the Company, and non-employee members of the Board of Directors of the Company with the opportunity to receive grants of incentive stock options, nonqualified stock options, stock appreciation rights, stock awards, stock units and other stock-based awards.
Stock Options
During the year ended June 30, 2022, the Company issued a total of 6,000,000 non-qualified stock options (the “options”) to directors, officers and certain key consultants. The options are subject to the terms and conditions of the Equity Compensation Plan. All granted options are subject to a five-year vesting schedule equal to 20% per year starting on the 1st day of each year following the effective date. All options have an exercise price of $0.65 which was the closing price of the Company’s common stock on the day the day grant. As of June 30, 2023, 1,200,000 of the options had vested but not yet exercised.
The following is a continuity schedule for the Company’s outstanding non-qualified stock options:
|
| Number of Options |
|
| Weighted Average Exercise Price |
| ||
Outstanding, June 30, 2022 |
|
| 6,000,000 |
|
| $ | 0.65 |
|
Granted |
|
| 125,000 |
|
|
| 0.65 |
|
Exercised |
|
| - |
|
|
| - |
|
Cancelled |
|
| 125,000 |
|
|
| 0.65 |
|
Outstanding, June 30, 2023 |
|
| 6,000,000 |
|
| $ | 0.65 |
|
As at June 30, 2023, the Company had the following stock options outstanding:
Grant Date |
| Number Outstanding |
|
| Number Exercisable |
|
| Exercise Price |
|
| Weighted Average Life (Years) |
|
| Expiry Date | |||||
January 3, 2022 |
|
| 125,000 |
|
|
| 25,000 |
|
| $ | 0.65 |
|
|
| 8.52 |
|
| January 3, 2032 | |
January 4, 2022 |
|
| 5,750,000 |
|
|
| 1,150,000 |
|
| $ | 0.65 |
|
|
| 8.52 |
|
| January 4, 2032 | |
March 1, 2023 |
|
| 125,000 |
|
|
| 25,000 |
|
| $ | 0.65 |
|
|
| 8.52 |
|
| January 4, 2032 | |
Total |
|
| 6,000,000 |
|
|
| 1,200,000 |
|
| $ | 0.65 |
|
|
| 8.52 |
|
|
| |
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Performance Stock Units
During the year ended June 30, 2023, the Company issued a total of 4,000,000 performance stock units (“performance units”) to directors, officers and certain key consultants. The performance units are subject to the terms and conditions of the Equity Compensation Plan. The performance units will be earned and vest upon reaching certain market capitalization goals during the performance period ending on December 31, 2026. As of June 30, 2023, 900,000 of the performance stock units had vested and were exercised.
The following is a continuity schedule for the Company’s outstanding performance stock units:
|
| Number of Units |
|
| Weighted Average Exercise Price |
| ||
Outstanding, June 30, 2022 |
|
| - |
|
| $ | - |
|
Granted |
|
| 4,000,000 |
|
|
| - |
|
Exercised |
|
| (900,000 | ) |
|
| - |
|
Cancelled |
|
| (400,000 | ) |
|
| - |
|
Outstanding, June 30, 2023 |
|
| 2,700,000 |
|
| $ | - |
|
As at June 30, 2023, the Company had the following performance stock units outstanding:
Grant Date |
| Number Outstanding |
|
| Number Exercisable |
|
| Exercise Price |
|
| Weighted Average Life (Years) |
|
| Expiry Date | |||||
March 8, 2022 |
|
| 2,700,000 |
|
|
| 2,700,000 |
|
| $ | - |
|
|
| 3.51 |
|
| December 31, 2026 | |
Total |
|
| 2,700,000 |
|
|
| 2,700,000 |
|
| $ | - |
|
|
| 3.51 |
|
|
| |
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. Mrs. 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.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholders Matters
The following table sets forth certain information concerning the number of shares of our common stock owned beneficially as of January 17, 2024, 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.
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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 (1) (%) |
| ||
AJB Capital Investments LLC (2) |
|
| 4,461,703 |
|
|
| 8.30 | % |
Shannon Wilkinson (3) |
|
| 3,250,000 |
|
|
| 6.04 | % |
Troy Wilkinson (4) |
|
| 3,250,000 |
|
|
| 6.04 | % |
Michael De Valera (5) |
|
| 1,120,000 |
|
|
| 2.08 | % |
Robert Mikkelsen (6) |
|
| 250,000 |
|
|
| 0.46 | % |
Chris White (7) |
|
| 208,000 |
|
|
| 0.40 | % |
All Officers, Directors and Beneficial Owners as a Group Total |
|
| 12,539,703 |
|
|
| 23.32 | % |
(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.
Based on 53,776,616 issued and outstanding shares of common stock as of January 17, 2024.
(2) AJB Capital Investments LLC is controlled by AJB Capital Managers LLC, in its capacity as the Manager of AJB Investments, and has the ability to direct the management of the business. The address for AJB Capital Investments LLC is 4700 Sheridan Street, Suite J, Hollywood, FL 33031.
(3) Shannon Wilkinson is a Director and the Company's Chief Executive Officer and President. Her beneficial ownership includes 3,250,000 common shares.
(4) Troy Wilkinson is a Director of the Company. His beneficial ownership includes 3,250,000 common shares.
(5) Michael De Valera is a Director of the Company. His beneficial ownership includes 1,120,000 common shares directly owned.
(6) Robert Mikkelsen is the Chief Financial Officer of the Company. His beneficial ownership includes 250,000 common shares directly owned.
(7) Chris White is a Director of the Company and the Company’s former Chief Information Security Officer. His beneficial ownership includes 208,000 common shares directly owned.
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.
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| Table of Contents |
Item 13. Certain Relationships and Related Transactions, and Director Independence
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 year ended June 30, 2023, there were transactions incurred between the Company and Shannon Wilkinson, a Director, CEO, President, Secretary and Treasurer of the Company, for management fees of $Nil (June 30, 2022 - $101,750), gross wages of $122,500 (June 30, 2022 - $98,692) and on May 25, 2023 Shannon Wilkinson was issued 250,000 common shares valued at $162,500 pursuant to the Equity Compensation Plan.
During the year ended June 30, 2023, there were transactions incurred between the Company and Earl Johnson, Chief Financial Officer of the Company, for gross wages of $36,000 (June 30, 2022 - $5,455).
During the year ended June 30, 2023, there were transactions incurred between the Company and Chris White, a Director and Chief Information Security Officer of the Company, for management fees of $Nil (June 30, 2022 - $12,500) and gross wages of $20,000 (June 30, 2022 - $74,019).
During the year ended June 30, 2023, there were transactions incurred between the Company and Troy Wilkinson, a Director of the Company, for management fees of $61,998 (June 30, 2022 - $62,500) and on May 25, 2023 Troy Wilkinson was issued 250,000 common shares valued at $162,500 pursuant to the Equity Compensation Plan.
On May 25, 2023 Michael De Valera, a Director of the Company, was issued 100,000 common shares valued at $65,000 pursuant to the Equity Compensation Plan.
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 directors 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 directors consent; and |
- | obtaining shareholder consent where required. |
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Director Independence
Quotations for our 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, we apply 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 we have one independent director, Michael De Valera, as our other directors are each also an executive officers or related to an executive officer.
Item 14. Principle Accountant Fees and Services
|
| For Year Ended June 30, 2023 |
|
| For Year Ended June 30, 2022 |
| ||
Audit Fees |
| $ | 60,000 |
|
| $ | 45,000 |
|
Audit Related Fees |
|
| 10,000 |
|
|
| 7,500 |
|
Tax Preparation |
|
| 2,000 |
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|
| 2,000 |
|
Total |
| $ | 72,000 |
|
| $ | 54,500 |
|
Audit Fees consist of fees billed for professional services rendered for the audit of our financial statements and review of the interim financial statements included in quarterly reports and services that are normally provided by the above auditors in connection with statutory and regulatory fillings or engagements.
Audit-Related Fees are fees for assurance and related services by the principal accountant that are traditionally performed by the principal accountant and which are reasonably related to the performance of the audit or review of the registrant's financial statements and fees attributed to the audit of.
In the absence of a formal audit committee, the full Board of Directors pre-approves all audit and non-audit services to be performed by the independent registered public accounting firm in accordance with the rules and regulations promulgated under the Securities Exchange Act of 1934, as amended. The Board of Directors pre-approved 100% of the audit, audit-related and tax services performed by the independent registered public accounting firm for the fiscal periods ended June 30, 2023 and June 30, 2022.
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PART IV
Item 15. Exhibits and Financial Statements.
101.INS* |
| Inline XBRL Instance Document |
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101.SCH* |
| Inline XBRL Taxonomy Extension Schema Document |
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101.CAL* |
| Inline XBRL Taxonomy Extension Calculation Linkbase Document |
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101.DEF* |
| Inline XBRL Taxonomy Extension Definition Linkbase Document |
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101.LAB* |
| Inline XBRL Taxonomy Extension Label Linkbase Document |
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101.PRE* |
| Inline XBRL Taxonomy Extension Presentation Linkbase Document |
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104* |
| Cover Page Interactive Data File (embedded within the Inline XBRL document) |
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| Table of Contents |
| (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 Post Effective Form S-8 Amendment No 1. on February 18, 2022. |
| (4) | Previously filed as an exhibit to our Form S-1 Amendment No. 1 on October 27, 2020. |
| (5) | Previously filed with the SEC on December 31, 2020 as an exhibit to our Form 8-K. |
| (6) | Previously filed with the SEC on March 30, 2021 as an exhibit to our Form 8-K. |
| (7) | Previously filed with the SEC on April 26, 2021 as an exhibit to our Form 8-K. |
| (8) | Previously filed with the SEC on April 30, 2021 as an exhibit to our Form 8-K. |
| (9) | Previously filed with the SEC on September 16, 2021 as an exhibit to our Form 8-K. |
| (10) | Previously filed with the SEC on January 4, 2022 as an exhibit to our Form 8-K. |
| (11) | Previously filed with the SEC on January 4, 2022 as an exhibit to our Form 8-K. |
| (12) | Previously filed with the SEC on April 27, 2022 as an exhibit to our Form 8-K. |
| (13) | Previously filed with the SEC on July 15, 2022 as an exhibit to our Form 8-K. |
| (14) | Previously filed with the SEC on July 19, 2022 as an exhibit to our Form 8-K. |
| (15) | Previously filed with the SEC on July 20, 2022 as an exhibit to our Form 8-K. |
| (16) | Previously filed with the SEC on July 28, 2022 as an exhibit to our Form 8-K. |
| (17) | Previously filed with the SEC on August 2, 2022 as an exhibit to our Form 8-K. |
| (18) | Previously filed with the SEC on October 14, 2022 as an exhibit to our Form 8-K. |
| (19) | Previously filed with the SEC on October 17, 2022 as an exhibit to our Form 8-K. |
| (20) | Previously filed with the SEC on October 18, 2022 as an exhibit to our Form 8-K. |
| (21) | Previously filed with the SEC on March 23, 2023 as an exhibit to our Form 8-K. |
| (22) | Previously filed with the SEC on May 24, 2023 as an exhibit to our Form 8-K. |
| (23) | Previously filed with the SEC on September 19, 2023 as an exhibit to our Form 8-K. |
| (24) | Previously filed with the SEC on September 19, 2023 as an exhibit to our Form 8-K. |
| (25) | Previously filed with the SEC on January 4, 2024 as an exhibit to our Form 8-K. |
Item 16. Form 10-K Summary
None.
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SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Tego Cyber Inc. |
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Date: January 16, 2024 | By: | /s/ Robert Mikkelsen |
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| Robert Mikkelsen |
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| Chief Executive Officer (Principal Executive Officer) |
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| Tego Cyber Inc. |
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Date: January 16, 2024 | By: | /s/ Robert Mikkelsen |
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| Robert Mikkelsen |
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| Chief Financial Officer (Principal Financial and Accounting Officer) |
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| 60 |
EXHIBIT 31.1
CERTIFICATION OF
PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO SECTION 302(a) OF THE SARBANES-OXLEY ACT OF 2002
I, Robert Mikkelsen, certify that:
| 1. | I have reviewed this Annual Report on Form 10-K of the Registrant for the year ended June 30, 2023; |
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| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
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| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report; |
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| 4. | As the Registrant’s certifying officer, I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have: |
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| a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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| b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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| c. | Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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| d. | Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and |
| 5. | As the Registrant’s certifying officer, I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant auditors and the audit committee of the Registrant’s Board of Directors (or persons performing the equivalent functions): |
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| a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and |
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| b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting. |
| Tego Cyber Inc. | |||
| Date: January 17, 2024 | By: | /s/ Robert Mikkelsen | |
| Name: | Robert Mikkelsen | ||
| Title: | Chief Executive Officer (Principal Executive Officer) | ||
EXHIBIT 31.2
CERTIFICATION OF
PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER
PURSUANT TO SECTION 302(a) OF THE SARBANES-OXLEY ACT OF 2002
I, Robert Mikkelsen, certify that:
| 1. | I have reviewed this Annual Report on Form 10-K of the Registrant for the year ended June 30, 2023; |
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| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
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| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report; |
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| 4. | As the Registrant’s certifying officer, I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have: |
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| a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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| b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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| c. | Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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| d. | Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and |
| 5. | As the Registrant’s certifying officer, I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant auditors and the audit committee of the Registrant’s Board of Directors (or persons performing the equivalent functions): |
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| a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and |
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| b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting. |
| Tego Cyber Inc. | |||
| Date: January 17, 2024 | By: | /s/ Robert Mikkelsen | |
| Name: | Robert Mikkelsen | ||
| Title: | Chief Financial Officer (Principal Financial and Accounting Officer) | ||
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Tego Cyber Inc. (the “Company”) on Form 10-K for the year ended June 30, 2023, as filed with the Securities and Exchange Commission (the “Report”), I, Shannon Wilkinson, the Chief Executive Officer (Principal Executive Officer), certify, pursuant to 18 U.S.C. §1350, as added by §906 of the Sarbanes-Oxley Act of 2002, that:
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| (1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
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| (2) | To my knowledge, the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the period covered by the Report. |
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| Tego Cyber Inc. | ||
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| Date: January 17, 2024 | By: | /s/ Robert Mikkelsen |
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| Name: | Robert Mikkelsen | |
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| Title: | Chief Executive Officer (Principal Executive Officer) | |
EXHIBIT 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Tego Cyber Inc. (the “Company”) on Form 10-K for the year ended June 30, 2023, as filed with the Securities and Exchange Commission (the “Report”), I, Robbert Mikkelsen, the Chief Financial Officer (Principal Financial and Accounting Officer), certify, pursuant to 18 U.S.C. §1350, as added by §906 of the Sarbanes-Oxley Act of 2002, that:
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| (1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
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| (2) | To my knowledge, the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the period covered by the Report. |
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| Tego Cyber Inc. | ||
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| Date: January 17, 2024 | By: | /s/ Robert Mikkelsen |
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| Name: | Robert Mikkelsen | |
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| Title: | Chief Financial Officer (Principal Financial and Principal Accounting Officer) | |