UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2023

 

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 000-56370

 

TEGO CYBER INC.

(Exact name of registrant as specified in its charter)

 

Nevada

 

84-2678167

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification Number)

 

8565 South Eastern Avenue, Suite 150

Las Vegas, Nevada, 89123

(Address of Principal Executive Offices) (Zip Code)

 

(855) 939-0100

(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

 

 

 

 

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. Yes ☐     No ☒.

 

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). Yes ☒     No ☐ 

 

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

Non-accelerated filer

Smaller reporting company

Emerging growth company

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes      No ☒.

 

As of January 17, 2024, there were 53,776,616 shares of common stock issued and outstanding, par value $0.001 per share.

 

 

 

 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

Certain information included in this Quarterly Report on Form 10-Q 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 Quarterly Report on Form 10-Q, 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 Quarterly Report on Form 10-Q.

 

 

2

 

 

TEGO CYBER INC.

FORM 10-Q

SEPTEMBER 30, 2023

 

INDEX

 

 

 

Page

Part I – Financial Information

 

Item 1.

Financial Statements (Unaudited)

F-1

Item 2.

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

4

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

8

Item 4.

Controls and Procedures

8

 

 

 

Part II – Other Information

 

Item 1.

Legal Proceedings

10

Item 1A.

Risk Factors

10

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

10

Item 3.

Defaults Upon Senior Securities

10

Item 4.

Mine Safety Disclosures

10

Item 5.

Other Information

10

Item 6.

Exhibits

11

 

 

 

Signatures

12

 

 

 

Certifications

13

 

 

3

Table of Contents

 

PART I – FINANCIAL INFORMATION

 

Item 1. Financial Information

 

 

 

Condensed Balance Sheets as of September 30, 2023 (Unaudited) and June 30, 2023 (Audited) 

F-2

 

 

Condensed Statements of Operations for the Three Months Ended September 30, 2023 and the Three Months Ended September 30, 2022 (Unaudited)

F-3

 

 

Condensed Statements of Changes in Shareholders’ Equity (Deficit) for the Three Months Ended September 30, 2023 and the Three Months Ended September 30, 2022 (Unaudited)

F-4

 

 

Condensed Statements of Cash Flows for the Three Months Ended September 30, 2023 and the Three Months Ended September 30, 2022 (Unaudited)

F-5

 

 

Notes to the Condensed Financial Statements for the Three Months Ended September 30, 2023 and the Three Months Ended September 30, 2022 (Unaudited)

F-6

 

 
F-1

Table of Contents

 

TEGO CYBER INC.

CONDENSED BALANCE SHEETS

(Expressed in US Dollars)

 

 

 

September 30, 2023

(Unaudited)

 

 

June 30,

2023

 

ASSETS

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

Cash

 

$-

 

 

$181,246

 

Prepaid expenses (Note 5)

 

 

21,722

 

 

 

30,226

 

Total current assets

 

 

21,722

 

 

 

211,472

 

Other assets

 

 

25,000

 

 

 

25,000

 

TOTAL ASSETS

 

$46,722

 

 

$236,472

 

 

 

 

 

 

 

 

 

 

LIABILITIES & SHAREHOLDERS’ DEFICIT

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses (Note 7)

 

$211,126

 

 

$129,273

 

Notes payable (Note 9)

 

 

880,000

 

 

 

891,694

 

TOTAL LIABILITIES

 

 

1,091,126

 

 

 

1,020,967

 

 

 

 

 

 

 

 

 

 

SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Common shares 100,000,000 shares authorized $0.001 par value 52,776,616 shares issued and outstanding at September 30, 2023 and 47,343,282 shares at June 30, 2023

 

 

52,777

 

 

 

47,343

 

Additional paid in capital

 

 

17,899,509

 

 

 

14,054,838

 

Accumulated deficit

 

 

(18,996,690 )

 

 

(14,886,676 )

 

 

 

 

 

 

 

 

 

TOTAL SHAREHOLDERS’ EQUITY

 

 

(1,044,404 )

 

 

(784,495 )

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES & SHAREHOLDERS’ EQUITY

 

$46,722

 

 

$236,472

 

 

The accompanying notes are an integral part of these financial statements

 

 
F-2

Table of Contents

 

TEGO CYBER INC.

CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

(Expressed in US Dollars)

 

 

 

Three Months Ended

September 30, 2023

 

 

Three Months Ended

September 30, 2022

 

REVENUE

 

 

 

 

 

 

Subscription Fees

 

$-

 

 

$-

 

TOTAL REVENUE

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES

 

 

 

 

 

 

 

 

General & administration

 

 

838,266

 

 

 

880,512

 

Professional fees

 

 

46,055

 

 

 

64,962

 

Sales & marketing

 

 

53,168

 

 

 

180,324

 

TOTAL OPERATING EXPENSES

 

 

937,489

 

 

 

1,125,798

 

 

 

 

 

 

 

 

 

 

NET OPERATING LOSS

 

 

(937,489 )

 

 

(1,125,798 )

 

 

 

 

 

 

 

 

 

OTHER INCOME (EXPENSE)

 

 

 

 

 

 

 

 

Accretion expense

 

 

(8,306 )

 

 

(192,332 )

Financing fees

 

 

(3,164,219 )

 

 

-

 

TOTAL OTHER INCOME (EXPENSE)

 

 

(3,172,525 )

 

 

(192,332 )

 

 

 

 

 

 

 

 

 

NET LOSS

 

$(4,110,014 )

 

$(1,318,130 )

 

 

 

 

 

 

 

 

 

BASIC AND DILUTED LOSS PER COMMON SHARE

 

$(0.08 )

 

$(0.05 )

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING

 

 

50,957,051

 

 

 

26,305,571

 

 

The accompanying notes are an integral part of these financial statements

 

 
F-3

Table of Contents

 

TEGO CYBER INC.

CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (DEFICIT)

(Unaudited)

(Expressed in US Dollars)

 

 

 

 Number

 of Shares

 

 

Common Stock

 

 

Additional

Paid-In Capital

 

 

Accumulated Deficit

 

 

 

Total Shareholder Equity

 

Balances, June 30, 2022

 

 

25,508,044

 

 

$25,508

 

 

$4,586,049

 

 

$(4,148,284)

 

$463,274

 

Shares issued as transaction costs for notes payable

 

 

700,000

 

 

 

700

 

 

 

151,442

 

 

 

-

 

 

 

152,142

 

Shares issued for services

 

 

275,000

 

 

 

275

 

 

 

137,225

 

 

 

-

 

 

 

137,500

 

Shares-based compensation

 

 

-

 

 

 

-

 

 

 

625,367

 

 

 

-

 

 

 

625,367

 

Warrants issued with promissory notes

 

 

-

 

 

 

-

 

 

 

187,489

 

 

 

-

 

 

 

187,489

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,318,130)

 

 

(1,318,130)

Balances, September 30, 2022

 

 

26,483,044

 

 

$26,483

 

 

$5,687,572

 

 

$(5,466,414)

 

$247,641

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances, June 30, 2023

 

 

47,343,282

 

 

$47,343

 

 

$14,054,838

 

 

$(14,886,676)

 

$(784,495)

Shares issued as transaction costs for notes payable

 

 

3,033,334

 

 

 

3,034

 

 

 

1,528,633

 

 

 

-

 

 

 

1,533,667

 

Shares issued for services

 

 

750,000

 

 

 

750

 

 

 

229,250

 

 

 

-

 

 

 

230,000

 

Shares issued from private placements

 

 

1,200,000

 

 

 

1,200

 

 

 

148,800

 

 

 

-

 

 

 

150,000

 

Share-based compensation

 

 

450,000

 

 

 

450

 

 

 

 146,030

 

 

 

-

 

 

 

 146,480

 

 Share-based compensation – options

 

 

 -

 

 

 

-

 

 

 

 189,406

 

 

 

 -

 

 

 

 189,406

 

Warrants issued with promissory notes

 

 

-

 

 

 

-

 

 

 

 1,602,552

 

 

 

-

 

 

 

 1,602,552

 

Net loss 3

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(4,110,014)

 

 

(4,110,014)

Balances, September 30, 2023

 

 

52,776,616

 

 

$52,777

 

 

$17,899,509

 

 

$(18,996,690)

 

$(1,044,404)

 

The accompanying notes are an integral part of these financial statements

 

 
F-4

Table of Contents

 

TEGO CYBER INC.

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

(Expressed in US Dollars)

 

 

 

Three Months Ended

September 30, 2023

 

 

 Three Months Ended September 30, 2022

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

Net loss for the period

 

$(4,110,014)

 

$(1,318,130)

Items not affecting cash

 

 

 

 

 

 

 

 

Shares issued for services

 

 

230,000

 

 

 

137,500

 

Amortization

 

 

-

 

 

 

1,809

 

Amortization of discount of debt issuance

 

 

 8,306

 

 

 

192,332

 

Share-based compensation

 

 

335,886

 

 

 

625,367

 

     Penalty on debt

 

 

 30,000

 

 

 

 -

 

Financing fees in settlement of default

 

 

3,134,219

 

 

 

-

 

Changes in non-cash working capital items:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

-

 

 

1,150

 

Prepaid expenses

 

 

8,504

 

 

 

(45,859)

Accounts payable and accrued liabilities

 

 

81,853

 

 

 

1,611

 

NET CASH USED IN OPERATING ACTIVITIES

 

 

(281,246)

 

 

(404,220)

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

Capitalized software development costs

 

 

-

 

 

 

(96,063)

NET CASH USED IN INVESTING ACTIVITIES

 

 

-

 

 

 

(96,063)

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

Proceeds from private placements

 

 

150,000

 

 

 

-

 

Cash received from issuance of notes payable

 

 

-

 

 

 

540,000

 

 Repayment of notes payable

 

 

 (50,000

)

 

 

 -

 

Cash costs related to issuance of promissory notes

 

 

 -

 

 

 

(50,000)

NET CASH PROVIDED BY FINANCING ACTIVITIES

 

 

100,000

 

 

 

490,000

 

 

 

 

 

 

 

 

 

 

NET INCREASE (DECREASE) IN CASH

 

 

(181,246)

 

 

(10,283)

CASH AT BEGINNING OF THE PERIOD

 

 

181,246

 

 

 

47,742

 

CASH AT END OF THE PERIOD

 

$-

 

$37,459

 

 

 

 

 

 

 

 

 

 

 Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

 

 Interest paid in cash

 

 $

 11,250

 

 

 $

 12,666

 

 Income taxes paid in cash

 

 $

 -

 

 

 $

 -

 

 

 

 

 

 

 

 

 

 

Non-cash investing and financing activities:

 

 

 

 

 

 

 

 

Shares issued as transaction costs with notes payable

 

$-

 

$152,142

 

Shares issued for services

 

$

-

 

 

$137,500

 

Warrants issued with notes payable

 

$

-

 

 

$187,489

 

 

The accompanying notes are an integral part of these audited financial statements 

 

 
F-5

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 three-month period ended September 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. As of September 30, 2023, the Company had a working capital deficit of $1,069,404. For the three-months ended September 30, 2023, the Company sustained net losses of $4,110,014 and generated negative cash flows from operations of $281,246. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that may be necessary should the Company be unable to continue as a going concern. These adjustments could be material. The Company’s continuation as a going concern is contingent upon its ability to earn adequate revenues from operations and to obtain additional financing. There is no assurance that the Company will be able to obtain such financings or obtain them on favorable terms.

 

 
F-6

Table of Contents

 

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.

 

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 there-months ended September 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.

 

Reclassification

 

Certain prior period amounts have been reclassified to conform to current period presentation.

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 of September 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 three-months ended September 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 September 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 5 years. During the three-months ended September 30, 2023, all development costs were expensed as incurred as management determined the costs were associated with minor updates and upgrades that did not impact the overall carrying value of the underlying software.  

 

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 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.

 

 

 

 
F-7

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 of September 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

 

We derive revenue from the sale of software subscriptions, and data feed subscriptions. We enter into contracts with customers that include promises to transfer various products and services, which are generally capable of being distinct and accounted for as separate performance obligations. Revenue is recognized when the promised goods or services are transferred to customers, in an amount that reflects the consideration allocated to the respective performance obligation.

 

 

 

 
F-8

Table of Contents

 

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) as of September 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

 

 

7,000,000

 

 

 

4,014,246

 

Performance Stock Units

 

 

2,700,000

 

 

 

4,000,000

 

Potentially dilutive shares outstanding

 

 

10,900,000

 

 

 

8,014,246

 

 

Recently Issued Accounting Pronouncements

 

In August 2020, the FASB issued ASU 2020-06Debt—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.

 

 
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Management does not believe that any recently issued, but not yet effective, accounting standards could have a material effect on the accompanying 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 September 30, 2023 and June 30, 2023 consist of prepaid software development expenses.

 

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.

 

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 $646,271 on the software assets. The Company has no software assets recorded as of September 30, 2023.

 

NOTE 7 – 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 three-months ended September 30, 2023, there were transactions incurred between the Company and Shannon Wilkinson, a Director, former Chief Executive Office (CEO) of the Company, for gross wages of $15,000 (September 30, 2022 - $30,000) and management fees of $26,000 (September  30, 2023 - $Nil) ).  

 

During the three-months  ended September 30, 2023, there were transactions incurred between the Company and Earl Johnson, former Chief Financial Officer (CFO) of the Company, for gross wages of $4,500 (September 30, 2022 - $9,000) and management fees of $1,500 (September 30, 2022 - $Nil). During the period the Company issued Mr. Johnson 100,000 common shares as part of a separation release agreement.

 

During the three-months ended September 30, 2023, there were transactions incurred between the Company and Robert Mikkelsen, current CEO and CFO of the Company, for 250,000 common shares as part of a management consulting agreement.  

 

 
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NOTE 8 – NOTES PAYABLE (convertible only at default)

 

The following table summarizes the Company’s notes payable as of September 30, 2023 and June 30, 2023.

 

 

 

 

 

 

 

 

 

Principal Outstanding as of

 

 

Effective Date

 

Annual Interest Rate

 

 

Maturity Date

 

September 30, 2023

 

 

June 30, 2023

 

 

7/12/22

 

 

15%

 

7/12/23

 

$265,000

 

 

$299,926

 

 

7/15/22

 

 

15%

 

7/12/23

 

 

165,000

 

 

 

149,963

 

 

7/18/22

 

 

15%

 

7/12/23

 

 

150,000

 

 

 

149,962

 

 

10/13/22

 

 

10%

 

4/23/23

 

 

150,000

 

 

 

145,923

 

 

10/13/22

 

 

10%

 

4/23/23

 

 

75,000

 

 

 

72,960

 

 

10/13/22

 

 

10%

 

4/23/23

 

 

75,000

 

 

 

72,960

 

 

 

 

 

 

 

 

 

 

$880,000

 

 

$891,694

 

 

(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 $300,000 at $270,000 cash with a $30,000 original issue discount. In connection with this note, the Company paid an additional $27,500 in cash transaction costs, issued 350,000 common shares valued at $178,500 in transaction costs, and issued 500,000 warrants exercisable at $0.25 per share, expiring on July 12, 2027. The warrants were calculated to have a fair value of $249,971 as at July 12, 2022. This note payable is unsecured, bears interest at 10% per annum compounded on the basis of a 365-day year and actual days lapsed payable monthly.

 

(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 $150,000 at $135,000 cash with $15,000 original issue discount. In connection with this note, the Company paid an additional $11,250 in cash transaction costs, issued 175,000 common shares valued at $89,250 in transaction costs, and issued 250,000 warrants exercisable at $0.25 per share, expiring on July 15, 2027. The warrants were calculated to have a fair value of $124,984 as at July 15, 2022. This promissory note is unsecured, bears interest at 10% per annum compounded on the basis of a 365-day year and actual days lapsed payable monthly.

 

(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 $150,000 at $135,000 cash with $15,000 original issue discount. In connection with this note, the Company paid an additional $11,250 in cash transaction costs, issued 175,000 common shares valued at $89,250 in transaction costs, and issued 250,000 warrants exercisable at $0.25 per share, expiring on July 18, 2027. The warrants were calculated to have a fair value of $124,994 as at July 18, 2022. This note payable is unsecured, bears interest at 10% per annum compounded on the basis of a 365-day year and actual days lapsed payable monthly.

 

(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 $150,000 at $135,000 cash with a $15,000 original issue discount. In connection with this note, the Company paid an additional $23,750 in cash transaction costs, issued 416,667 common shares valued at $187,625 in transaction costs, and issued 500,000 warrants exercisable at $0.25 per share, expiring on October 12, 2027. The warrants were calculated to have a fair value of $220,526 as at October 13, 2022. This note payable matures on April 13, 2023, is unsecured, bears interest at 10% per annum compounded on the basis of a 365-day year and actual days lapsed payable monthly.

 

(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 $75,000 at $67,500 cash with $7,500 original issue discount. In connection with this note, the Company paid an additional $5,625 in cash transaction costs, issued 208,333 common shares valued at $93,812 in transaction costs, and issued 250,000 warrants exercisable at $0.25 per share, expiring on October 12, 2027. The warrants were calculated to have a fair value of $110,263 as at October 13, 2022. This promissory note matures on April 13, 2023, is unsecured, bears interest at 10% per annum compounded on the basis of a 365-day year and actual days lapsed payable monthly.

 

(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 $75,000 at $67,500 cash with $7,500 original issue discount. In connection with this note, the Company paid an additional $5,625 in cash transaction costs, issued 208,333 common shares valued at $93,812 in transaction costs, and issued 250,000 warrants exercisable at $0.25 per share, expiring on October 12, 2027. The warrants were calculated to have a fair value of $110,263 as at October 13, 2022. This promissory note matures on April 13, 2023, is unsecured, bears interest at 10% per annum compounded on the basis of a 365-day year and actual days lapsed payable monthly.

 

The Company incurred financing expenses totaling $3,164,219 during the 3 months ended September 30, 2023, $3,134,219 of which was relating to extension fees of its note obligations described in (a-f). The extension fees were paid by issuing 3,033,334 restricted shares and 5 year warrants to purchase 2,500,000 restricted common shares of the Company for $0.25 per share, and were expensed as they were deemed to be extinguishments of the original obligations under ASC 470 50. Additionally, the Company agreed to increase the notes payable balances by $30,000 as part of the extension.

 

NOTE 9 – COMMON SHARES

 

Common Stock

 

At September 30, 2023, the Company’s authorized capital consisted of 100,000,000 of common shares with a $0.001 par value and 52,776,616 shares were issued and outstanding.

 

During the three months ended September 30, 2023, the Company issued 1,200,000 shares of common stock at accredited investors for gross cash proceeds of $150,000.

 

During the three months ended September 30, 2023, the Company issued 1,200,000 shares of common stock in exchange for services valued at $376,480.(based on market price at the time of the agreement).

 

During the three months ended September 30, 2023, the Company issued 3,033,334 shares of common stock valued at $1,531,667 (based on market price at the time of the agreement) as part of a default settlement and extension agreement.

 

Warrants

 

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     

 $0.65

 

Risk-free interest rate      

 4.19

%

Expected life      

5 Years

 

Expected dividend rate      

0

 

Expected volatility 

 199.985

%

  

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, 2023

 

 

4,500,000

 

 

$0.25

 

Granted

 

 

2,500,000

 

 

 

0.25

 

Exercised

 

 

-

 

 

 

-

 

Expired

 

 

-

 

 

 

-

 

Outstanding, September 30, 2023

 

 

7,000,000

 

 

$0.25

 

 

 
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Grant

Date

 

Number

Outstanding

 

 

Number

Exercisable

 

 

Exercise

Price

 

 

Weighted Average

Life (Years)

 

 

Expiry Date

 

July 12, 2022

 

 

500,000

 

 

 

500,000

 

 

 

0.25

 

 

 

3.78

 

 

July 12, 2027

 

July 15, 2022

 

 

250,000

 

 

 

250,000

 

 

 

0.25

 

 

 

3.79

 

 

July 15, 2027

 

July 18, 2022

 

 

250,000

 

 

 

250,000

 

 

 

0.25

 

 

 

3.80

 

 

July 18, 2027

 

October 13, 2022

 

 

500,000

 

 

 

500,000

 

 

 

0.25

 

 

 

4.04

 

 

October 13, 2027

 

October 13, 2022

 

 

250,000

 

 

 

250,000

 

 

 

0.25

 

 

 

4.04

 

 

October 13, 2027

 

October 13, 2022

 

 

250,000

 

 

 

250,000

 

 

 

0.25

 

 

 

4.04

 

 

October 13, 2027

 

March 12, 2023

 

 

2,500,000

 

 

 

2,500,000

 

 

 

0.25

 

 

 

4.45

 

 

March 12, 2028

 

August 12, 2023

 

 

2,500,000

 

 

 

2,500,000

 

 

 

0.25

 

 

 

4.87

 

 

August 12, 2028

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

7,000,000

 

 

 

7,000,000

 

 

 

0.25

 

 

 

4.45

 

 

 

 

 

As of September 30, 2023, the weighted average remaining contractual life of warrants outstanding was 4.45 years with an intrinsic value of $0.

 

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.

 

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, 2023

 

 

6,000,000

 

 

USD

0.65

 

Granted

 

 

-

 

 

USD

-

 

Exercised

 

 

-

 

 

USD

-

 

Cancelled

 

 

-

 

 

USD

-

 

Outstanding, September 30, 2023

 

 

6,000,000

 

 

USD

0.65

 

 

As of September 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

 

 

USD

0.65

 

 

8.52

 

 

January 3, 2032

 

January 4, 2022

 

 

5,750,000

 

 

 

1,150,000

 

 

USD

0.65

 

 

8.52

 

 

January 4, 2032

 

March 1, 2023

 

 

125,000

 

 

 

25,000

 

 

USD

0.65

 

 

8.52

 

 

January 4, 2032

 

Total

 

 

6,000,000

 

 

 

1,200,000

 

 

USD

0.65

 

 

8.52

 

 

 

 

 

During the three months ended September 30, 2023, the Company recorded $189,406 as share-based compensation relating to the non-qualified stock options with an intrinsic value of $0.$1,865,511 has been recorded as share-based compensation relating to the outstanding options to date. The remaining $1,027,179 will be recorded as share-based compensation over the remaining vesting periods of the options.

 

 

 
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Table of Contents

 

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

 

187.07

%

Expected option life (years)

 

6 years

 

Risk-free interest rate (10-year U.S. treasury yield)

 

4.22

%

Expected dividend yield

 

 

0%

 

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.

 

Each unit represents one common share:

 

Number of

Performance Units

 

 

Vesting Conditions

 

 

Expiry Dates

-

 

Market capitalization of the Company reaches $25 million

 

December 31, 2026

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

 

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, 2023

 

 

2,700,000

 

 

$-

 

Granted

 

 

-

 

 

 

-

 

Exercised

 

 

-

 

 

 

-

 

Forfeited or cancelled

 

 

-

 

 

 

-

 

Outstanding, September 30, 2023

 

 

2,700,000

 

 

$-

 

 

As of September 30, 2023, 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

 

 

2,700,000

 

 

 

-

 

 

USD$

0.00

 

 

3.51

 

 

December 31, 2026

 

Total

 

 

2,700,000

 

 

 

-

 

 

USD$

0.00

 

 

3.51

 

 

 

 

 

During the three months ended September 30, 2023, the Company recorded $91,127 as share-based compensation relating to the issuance of the performance units. $866,428 has been recorded as share-based compensation relating to the outstanding performance units to date. The remaining $33,572 will be recorded as share-based compensation over the remaining life of the units.

 

NOTE 10 – 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.

 

 
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Table of Contents

 

NOTE 11 – INCOME TAXES

 

As of September 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 $7,406,198 (September 30, 2022 - $2,909,935) for the three-months ended September 30, 2023. The net operating loss carry forwards are available to be utilized against future taxable income for years through calendar year 2043. In assessing the reliability of deferred income tax assets, management considers whether it is more likely than not that some portion or all of the deferred income tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled projected future taxable income, and tax planning strategies in making this assessment.

 

NOTE 12 – SUBSEQUENT EVENTS

 

On October 6, 2023, the Company issued 1,000,000 common shares as consideration for extension of the maturity date related to a note payable financing transaction (Note 8).

 

 
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

You should read the following discussion and analysis of our financial condition and results of operations together with our condensed financial statements and related notes appearing in this Quarterly Report on Form 10-Q. This discussion and other parts of this Quarterly Report contain forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations and intentions. As a result of many factors, including those factors set forth in the “Risk Factors” section of this Quarterly Report, our actual results could differ materially from the results described in, or implied by, the forward-looking statements contained in the following discussion and analysis.

 

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 the three months ended September 30, 2023 compared to the three months ended September 30, 2022

 

Revenues

 

During the three months ended September 30, 2023, we completed the first sale of our threat intelligence application. For the three months ended September 30, 2022, we did not generate any revenue.

 

Operating Expenses

 

We incurred total operating expenses of $937,489 for the three-months ended September 30, 2023 compared to $1,125,798 for the three months ended September 30, 2022. These amounts consisted of the following:

 

 

 

2023

 

 

2022

 

General & administration

 

$838,266

 

 

$880,512

 

Professional fees

 

 

46,055

 

 

 

64,962

 

Sales & marketing

 

 

53,168

 

 

 

180,324

 

Total operating expenses

 

$937,489

 

 

$1,125,798

 

 

General & administration decreased by $42,246 to $838,266 for the three-months ended September 30, 2023 as compared to $880,512 for the three-months ended September 30, 2022.

 

Net Operating Loss

 

We incurred a net operating loss of $937,489 for the three-months ended September 30, 2023 compared to a net operating loss of $1,125,798 for the three-months ended September 30, 2022.

 

Net Loss

 

We incurred a net loss of $4,110,014 for the three-months ended September 30, 2023 compared to a net loss of $1,318,130 for the three months ended September 30, 2022.

 

 
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Table of Contents

 

Liquidity and Capital Resources

 

As of September 30, 2023, we have a working capital deficit of $1,069,404, and negative cash flow from operations of $281,246. We have $-cash and our burn rate is approximately $120,000 per month. We intend to fund future operations through 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 three-months ended September 30, 2023, the cash flows used in our operating activities was $281,246 compared to $404,220 for the three-months ended September 30, 2022. This amount was primarily related to cash flows to pay operating expenses.

 

Cash Flow from Investing Activities

 

For the three-months ended September 30, 2023, the net cash used in investing activities by the Company was $- compared to $96,063 for the three-months ended September 30, 2022. The amount was related to the capitalization of software development costs.

 

Cash Flow from Financing Activities

 

For the three-months ended September 30, 2023, the net cash provided by financing activities by the Company was $100,000 compared to $490,000 for the three-months ended September 30, 2022. The cash provided by financing activities is related to the proceeds received from the issuance of notes payable and sales of our common stock.

 

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. Issuance 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.

 

 
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Table of Contents

 

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 three months ended September 30, 2023, and the three months ended September 30, 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. During the fiscal periods ended September 30, 2023 and 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 three-month period ended September 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 September 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.

 

 
6

Table of Contents

 

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.

 

The Company has no revenue in this period, however, when the Company has revenue from providing consulting and management services under Topic 606 will be recognized in a manner that reasonably reflects the delivery of services to customers in return for expected consideration and includes the following elements:  

 

 

-

executed contracts with the Company’s customers that it believes are legally enforceable;

 

-

identification of performance obligations in the respective contract;

 

-

determination of the transaction price for each performance obligation in the respective contract;

 

-

allocation of the transaction price to each performance obligation; and

 

-

recognition of revenue only when the Company satisfies each performance obligation.

 

These five elements as applied to the Company’s consulting and management services results in revenue recorded as services are provided.

 

Income Taxes

 

The Company uses the asset and liability method of accounting for income taxes pursuant to ASC 740 “Income Taxes”. ASC 740 requires an asset and liability approach for financial accounting and reporting for income taxes and allows recognition and measurement of deferred tax assets based upon the likelihood of realization of tax benefits in future years. Under the asset and liability approach, deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Valuation allowances are provided for deferred tax assets if it is more likely than not these items will either expire before the Company is able to realize their benefits, or that future deductibility is uncertain. The provision for income taxes represents current taxes payable net of the change during the period in deferred tax assets and liabilities.

 

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.

 

 
7

Table of Contents

 

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 3. 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 4. 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 September 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: 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 three-months ended September 30, 2023, in accordance with GAAP. 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.

 

 
8

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 September 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 September 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 three-month period ended September 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.

 

 
9

Table of Contents

 

PART II - OTHER INFORMATION

 

Item 1. 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 1A. 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 2. Unregistered Sales of Equity Securities and Use of Proceeds. 

 

Unless otherwise indicated, all of the following sales or issuances of Company securities were conducted under the exemption from registration as provided under Section 4(2) of the Securities Act of 1933 (and also qualified for exemption under 4(5), formerly 4(6) of the Securities Act of 1933, except as noted below). All of the shares issued were issued in transactions not involving a public offering, are considered to be restricted stock as defined in Rule 144 promulgated under the Securities Act of 1933 and stock certificates issued with respect thereto bear legends to that effect.

 

1. Quarterly Issuances:

 

The Company issued 5,433,334 shares during the three months ended September 30, 2023. 1,200,000 were issued for private placements with proceeds of $150,000. 1,200,000 shares were issued for services valued at $376,480. 3,033,334 shares were issued to extend notes payable.

 

2. Subsequent Issuances:

 

Subsequent to September 30, 2023, the Company issued 1,000,000 shares.

 

Item 3. Defaults Upon Senior Securities. 

 

None.

 

Item 4. Mine Safety Disclosures.

 

Not applicable.

 

Item 5. Other Information.

 

None.

 

 
10

Table of Contents

 

Item 6. Exhibits.

 

3.1

 

Articles of Incorporation filed with the Nevada Secretary of State on September 6, 2019 (2) 

3.2

 

Amendment to Company’s Articles of Incorporation increasing the authorized common stock from 50,000,000 to 100,000,000 (22)

3.3

 

Bylaws (2)

4.1

 

2021 Equity Compensation Plan (3)

10.1

 

Compilation of Website or Software Development Agreement and Addendum between Company and Cistck, dated June 4, 2020 (4)

10.2

 

Compilation of FirstFire Global Opportunities Fund, LLC Securities Purchase Agreement, Convertible Promissory Note and Other Agreements dated December 28, 2020 (5)

10.3

 

Compilation of GS Capital Partners, LLC Securities Purchase Agreement, Convertible Promissory Note and Other Agreements dated March 25, 2021 (6)

10.4

 

Compilation of Analytico Services Conseils Inc. Securities Purchase Agreement, Convertible Promissory Note and Warrant agreement dated April 22, 2021 (7)

10.5

 

Compilation of Reynald Thauvette and Dominique Joyal  Securities Purchase Agreement, Convertible Promissory Note and Warrant agreement dated April 28, 2021 (8)

10.6

 

Master Services Agreement between the Company and IONnovate, LLC dated September 3, 2021 (9)

10.7

 

Employment Agreement between the Company and Shannon Wilkinson dated January 3, 2022 (10)

10.8

 

Employment Agreement between the Company and Chris C. White dated January 3, 2022 (11)

10.9

 

Employment Agreement between the Company and Earl R. Johnson dated April 26, 2022 (12)

10.10

 

Compilation of AJB Capital Investments, LLC  Securities Purchase Agreement, Convertible Promissory Note and Warrant agreement dated July 12, 2022 (13)

10.11

 

Compilation of Bigger Capital Fund, LP  Securities Purchase Agreement, Convertible Promissory Note and Warrant agreement dated July 15, 2022 (14)

10.12

 

Compilation of District 2 Capital Fund LP Securities Purchase Agreement, Convertible Promissory Note and Warrant agreement dated July 18, 2022 (15)

10.13

 

Employment Agreement between the Company and Alissa V. Knight dated July 26, 2022 (16)

10.14

 

Amendment to Employment Agreement between the Company and Chris C. White dated August 1,  2022 (17)

10.15

 

Compilation of AJB Capital Investments, LLC  Securities Purchase Agreement, Convertible Promissory Note and Warrant agreement dated October 13, 2022 (18)

10.16

 

Compilation of Bigger Capital Fund, LP  Securities Purchase Agreement, Convertible Promissory Note and Warrant agreement dated October 13, 2022 (19)

10.17

 

Compilation of District 2 Capital Fund LP Securities Purchase Agreement, Convertible Promissory Note and Warrant agreement dated October 13, 2022 (20)

10.18

 

Entry into Separation Agreement and Release with Chris C. White dated March 20, 2023 (21)

10.19

 

Entry into Separation Agreement and Release with Earl Johnson dated September 15, 2023 (23)

10.20

 

Entry into Consulting Agreement with Merremia Consulting LLC dated September 15, 2023 (24)

10.21

 

Entry into Employment Agreement with Robert Mikkelsen dated January 2, 2024 (25)

 

 

 

31.1

 

Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (1)

31.2

 

Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (1)

32.1

 

Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (1)

32.2

 

Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (1)

 

 
11

Table of Contents

 

101.INS*

 

Inline XBRL Instance Document

 

 

 

101.SCH*

 

Inline XBRL Taxonomy Extension Schema Document

 

 

101.CAL*

 

Inline XBRL Taxonomy Extension Calculation Linkbase Document

 

 

 

101.DEF*

 

Inline XBRL Taxonomy Extension Definition Linkbase Document

 

 

 

101.LAB*

 

Inline XBRL Taxonomy Extension Label Linkbase Document

 

 

 

101.PRE*

 

Inline XBRL Taxonomy Extension Presentation Linkbase Document

 

 

 

104*

 

Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

 

(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.

 

 
12

Table of Contents

 

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.

 

 

 

 

 

Date: January 17, 2024

By:

/s/ Robert Mikkelsen

 

 

 

Robert Mikkelsen 

 

 

 

Chief Executive Officer

(Principal Executive Officer)

 

 

 

Tego Cyber Inc.

 

 

 

 

 

Date: January 17, 2024

By:

/s/ Robert Mikkelsen

 

 

 

Robert Mikkelsen 

 

 

 

Chief Financial Officer

(Principal Financial and Accounting Officer)

 

 

 
13

 

nullnullnullnullv3.23.4
Cover - shares
3 Months Ended
Sep. 30, 2023
Jan. 17, 2024
Cover [Abstract]    
Entity Registrant Name TEGO CYBER INC.  
Entity Central Index Key 0001815632  
Document Type 10-Q  
Amendment Flag false  
Current Fiscal Year End Date --06-30  
Entity Small Business true  
Entity Shell Company false  
Entity Emerging Growth Company true  
Entity Current Reporting Status No  
Document Period End Date Sep. 30, 2023  
Entity Filer Category Non-accelerated Filer  
Document Fiscal Period Focus Q1  
Document Fiscal Year Focus 2024  
Entity Ex Transition Period false  
Entity Common Stock Shares Outstanding   53,776,616
Document Quarterly Report true  
Document Transition Report false  
Entity File Number 000-56370  
Entity Incorporation State Country Code NV  
Entity Tax Identification Number 84-2678167  
Entity Address Address Line 1 8565 South Eastern Avenue  
Entity Address Address Line 2 Suite 150  
Entity Address City Or Town Las Vegas  
Entity Address State Or Province NV  
Entity Address Postal Zip Code 89123  
City Area Code 855  
Local Phone Number 939-0100  
Entity Interactive Data Current Yes  
v3.23.4
CONDENSED BALANCE SHEETS - USD ($)
Sep. 30, 2023
Jun. 30, 2023
Current assets    
Cash $ 0 $ 181,246
Prepaid expenses (Note 5) 21,722 30,226
Total current assets 21,722 211,472
Other assets 25,000 25,000
TOTAL ASSETS 46,722 236,472
Current liabilities    
Accounts payable and accrued expenses (Note 7) 211,126 129,273
Notes payable (Note 9) 880,000 891,694
TOTAL LIABILITIES 1,091,126 1,020,967
Common shares 100,000,000 shares authorized $0.001 par value 52,776,616 shares issued and outstanding at September 30, 2023 and 47,343,282 shares at June 30, 2023 52,777 47,343
Additional paid in capital 17,899,509 14,054,838
Accumulated deficit (18,996,690) (14,886,676)
TOTAL SHAREHOLDERS' EQUITY (1,044,404) (784,495)
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 46,722 $ 236,472
v3.23.4
CONDENSED BALANCE SHEETS (Parenthetical) - $ / shares
Sep. 30, 2023
Jun. 30, 2023
CONDENSED BALANCE SHEETS    
Common stock, par value $ 0.001 $ 0.001
Common stock, authorized 100,000,000 100,000,000
Common stock, issued 52,776,616 47,343,282
Common stock, outstanding 52,776,616 47,343,282
v3.23.4
CONDENSED STATEMENTS OF OPERATIONS (Unaudited) - USD ($)
3 Months Ended
Sep. 30, 2023
Sep. 30, 2022
REVENUE    
Subscription Fees $ 0 $ 0
TOTAL REVENUE 0 0
OPERATING EXPENSES    
General & administration 838,266 880,512
Professional fees 46,055 64,962
Sales & marketing 53,168 180,324
TOTAL OPERATING EXPENSES 937,489 1,125,798
NET OPERATING LOSS (937,489) (1,125,798)
OTHER INCOME (EXPENSE)    
Accretion expense (8,306) (192,332)
Financing fees (3,164,219) 0
TOTAL OTHER INCOME (EXPENSE) (3,172,525) (192,332)
NET LOSS $ (4,110,014) $ (1,318,130)
BASIC AND DILUTED LOSS PER COMMON SHARE $ (0.08) $ (0.05)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 50,957,051 26,305,571
v3.23.4
CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY (DEFICIT) (Unaudited) - USD ($)
Total
Common Stock [Member]
Additional Paid-In Capital [Member]
Retained Earnings (Accumulated Deficit)
Balance, shares at Jun. 30, 2022   25,508,044    
Balance, amount at Jun. 30, 2022 $ 463,274 $ 25,508 $ 4,586,049 $ (4,148,284)
Shares issued as transaction costs for notes payable, shares   700,000    
Shares issued as transaction costs for notes payable, amount 152,142 $ 700 151,442 0
Shares issued for services, shares   275,000    
Shares issued for services, amount 137,500 $ 275 137,225 0
Shares-based compensation 625,367 0 625,367 0
Warrants issued with promissory notes 187,489 0 187,489 0
Net loss (1,318,130) $ 0 0 (1,318,130)
Balance, shares at Sep. 30, 2022   26,483,044    
Balance, amount at Sep. 30, 2022 247,641 $ 26,483 5,687,572 (5,466,414)
Balance, shares at Jun. 30, 2023   47,343,282    
Balance, amount at Jun. 30, 2023 (784,495) $ 47,343 14,054,838 (14,886,676)
Shares issued as transaction costs for notes payable, shares   3,033,334    
Shares issued as transaction costs for notes payable, amount 1,533,667 $ 3,034 1,528,633 0
Shares issued for services, shares   750,000    
Shares issued for services, amount 230,000 $ 750 229,250 0
Shares-based compensation 146,480 450 146,030 0
Warrants issued with promissory notes 1,602,552 0 1,602,552 0
Net loss (4,110,014) $ 0 0 (4,110,014)
Shares issued from private placements, shares   1,200,000    
Shares issued from private placements, amount 150,000 $ 1,200 148,800 0
Share-based compensation, shares   450,000    
Share-based compensation - options 189,406 $ 0 189,406 0
Balance, shares at Sep. 30, 2023   52,776,616    
Balance, amount at Sep. 30, 2023 $ (1,044,404) $ 52,777 $ 17,899,509 $ (18,996,690)
v3.23.4
CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($)
3 Months Ended
Sep. 30, 2023
Sep. 30, 2022
CASH FLOWS FROM OPERATING ACTIVITIES    
Net loss for the period $ (4,110,014) $ (1,318,130)
Items not affecting cash    
Shares issued for services 230,000 137,500
Amortization 0 1,809
Amortization of discount of debt issuance 8,306 192,332
Share-based compensation 335,886 625,367
Penalty on debt 30,000 0
Financing fees in settlement of default 3,134,219 0
Changes in non-cash working capital items:    
Accounts receivable 0 1,150
Prepaid expenses 8,504 (45,859)
Accounts payable and accrued liabilities 81,853 1,611
NET CASH USED IN OPERATING ACTIVITIES (281,246) (404,220)
CASH FLOWS FROM INVESTING ACTIVITIES    
Capitalized software development costs 0 (96,063)
NET CASH USED IN INVESTING ACTIVITIES 0 (96,063)
CASH FLOWS FROM FINANCING ACTIVITIES    
Proceeds from private placements 150,000 0
Cash received from issuance of notes payable 0 540,000
Repayment of notes payable (50,000) 0
Cash costs related to issuance of promissory notes 0 50,000
NET CASH PROVIDED BY FINANCING ACTIVITIES 100,000 490,000
NET INCREASE (DECREASE) IN CASH (181,246) (10,283)
CASH AT BEGINNING OF THE PERIOD 181,246 47,742
CASH AT END OF THE PERIOD 0 37,459
Supplemental disclosure of cash flow information:    
Interest paid in cash 11,250 12,666
Income taxes paid in cash 0 0
Non-cash investing and financing activities:    
Shares issued as transaction costs with notes payable 0 152,142
Shares issued for services 0 137,500
Warrants issued with notes payable $ 0 $ 187,489
v3.23.4
ORGANIZATION AND DESCRIPTION OF BUSINESS
3 Months Ended
Sep. 30, 2023
ORGANIZATION AND DESCRIPTION OF BUSINESS  
ORGANIZATION AND DESCRIPTION OF BUSINESS

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.

v3.23.4
BASIS OF PRESENTATION
3 Months Ended
Sep. 30, 2023
BASIS OF PRESENTATION  
BASIS OF PRESENTATION

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 three-month period ended September 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.

v3.23.4
GOING CONCERN UNCERTAINTY
3 Months Ended
Sep. 30, 2023
GOING CONCERN UNCERTAINTY  
GOING CONCERN UNCERTAINTY

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. As of September 30, 2023, the Company had a working capital deficit of $1,069,404. For the three-months ended September 30, 2023, the Company sustained net losses of $4,110,014 and generated negative cash flows from operations of $281,246. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that may be necessary should the Company be unable to continue as a going concern. These adjustments could be material. The Company’s continuation as a going concern is contingent upon its ability to earn adequate revenues from operations and to obtain additional financing. There is no assurance that the Company will be able to obtain such financings or obtain them on favorable terms.

v3.23.4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
3 Months Ended
Sep. 30, 2023
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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.

 

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 there-months ended September 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.

 

Reclassification

 

Certain prior period amounts have been reclassified to conform to current period presentation.

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 of September 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 three-months ended September 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 September 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 5 years. During the three-months ended September 30, 2023, all development costs were expensed as incurred as management determined the costs were associated with minor updates and upgrades that did not impact the overall carrying value of the underlying software.  

 

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 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.

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 of September 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

 

We derive revenue from the sale of software subscriptions, and data feed subscriptions. We enter into contracts with customers that include promises to transfer various products and services, which are generally capable of being distinct and accounted for as separate performance obligations. Revenue is recognized when the promised goods or services are transferred to customers, in an amount that reflects the consideration allocated to the respective performance obligation.

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) as of September 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

 

 

7,000,000

 

 

 

4,014,246

 

Performance Stock Units

 

 

2,700,000

 

 

 

4,000,000

 

Potentially dilutive shares outstanding

 

 

10,900,000

 

 

 

8,014,246

 

 

Recently Issued Accounting Pronouncements

 

In August 2020, the FASB issued ASU 2020-06Debt—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.

Management does not believe that any recently issued, but not yet effective, accounting standards could have a material effect on the accompanying financial statements. As new accounting pronouncements are issued, we will adopt those that are applicable under the circumstances.

v3.23.4
PREPAID EXPENSES
3 Months Ended
Sep. 30, 2023
PREPAID EXPENSES  
PREPAID EXPENSES

NOTE 5 – PREPAID EXPENSES

 

Prepaid expense balance as of September 30, 2023 and June 30, 2023 consist of prepaid software development expenses.

v3.23.4
SOFTWARE
3 Months Ended
Sep. 30, 2023
SOFTWARE  
SOFTWARE

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.

 

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 $646,271 on the software assets. The Company has no software assets recorded as of September 30, 2023.

v3.23.4
RELATED PARTY TRANSACTIONS
3 Months Ended
Sep. 30, 2023
RELATED PARTY TRANSACTIONS  
RELATED PARTY TRANSACTIONS

NOTE 7 – 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 three-months ended September 30, 2023, there were transactions incurred between the Company and Shannon Wilkinson, a Director, former Chief Executive Office (CEO) of the Company, for gross wages of $15,000 (September 30, 2022 - $30,000) and management fees of $26,000 (September  30, 2023 - $Nil) ).  

 

During the three-months  ended September 30, 2023, there were transactions incurred between the Company and Earl Johnson, former Chief Financial Officer (CFO) of the Company, for gross wages of $4,500 (September 30, 2022 - $9,000) and management fees of $1,500 (September 30, 2022 - $Nil). During the period the Company issued Mr. Johnson 100,000 common shares as part of a separation release agreement.

 

During the three-months ended September 30, 2023, there were transactions incurred between the Company and Robert Mikkelsen, current CEO and CFO of the Company, for 250,000 common shares as part of a management consulting agreement.  

v3.23.4
NOTES PAYABLE
3 Months Ended
Sep. 30, 2023
NOTES PAYABLE  
NOTES PAYABLE

NOTE 8 – NOTES PAYABLE (convertible only at default)

 

The following table summarizes the Company’s notes payable as of September 30, 2023 and June 30, 2023.

 

 

 

 

 

 

 

 

 

Principal Outstanding as of

 

 

Effective Date

 

Annual Interest Rate

 

 

Maturity Date

 

September 30, 2023

 

 

June 30, 2023

 

 

7/12/22

 

 

15%

 

7/12/23

 

$265,000

 

 

$299,926

 

 

7/15/22

 

 

15%

 

7/12/23

 

 

165,000

 

 

 

149,963

 

 

7/18/22

 

 

15%

 

7/12/23

 

 

150,000

 

 

 

149,962

 

 

10/13/22

 

 

10%

 

4/23/23

 

 

150,000

 

 

 

145,923

 

 

10/13/22

 

 

10%

 

4/23/23

 

 

75,000

 

 

 

72,960

 

 

10/13/22

 

 

10%

 

4/23/23

 

 

75,000

 

 

 

72,960

 

 

 

 

 

 

 

 

 

 

$880,000

 

 

$891,694

 

 

(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 $300,000 at $270,000 cash with a $30,000 original issue discount. In connection with this note, the Company paid an additional $27,500 in cash transaction costs, issued 350,000 common shares valued at $178,500 in transaction costs, and issued 500,000 warrants exercisable at $0.25 per share, expiring on July 12, 2027. The warrants were calculated to have a fair value of $249,971 as at July 12, 2022. This note payable is unsecured, bears interest at 10% per annum compounded on the basis of a 365-day year and actual days lapsed payable monthly.

 

(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 $150,000 at $135,000 cash with $15,000 original issue discount. In connection with this note, the Company paid an additional $11,250 in cash transaction costs, issued 175,000 common shares valued at $89,250 in transaction costs, and issued 250,000 warrants exercisable at $0.25 per share, expiring on July 15, 2027. The warrants were calculated to have a fair value of $124,984 as at July 15, 2022. This promissory note is unsecured, bears interest at 10% per annum compounded on the basis of a 365-day year and actual days lapsed payable monthly.

 

(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 $150,000 at $135,000 cash with $15,000 original issue discount. In connection with this note, the Company paid an additional $11,250 in cash transaction costs, issued 175,000 common shares valued at $89,250 in transaction costs, and issued 250,000 warrants exercisable at $0.25 per share, expiring on July 18, 2027. The warrants were calculated to have a fair value of $124,994 as at July 18, 2022. This note payable is unsecured, bears interest at 10% per annum compounded on the basis of a 365-day year and actual days lapsed payable monthly.

 

(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 $150,000 at $135,000 cash with a $15,000 original issue discount. In connection with this note, the Company paid an additional $23,750 in cash transaction costs, issued 416,667 common shares valued at $187,625 in transaction costs, and issued 500,000 warrants exercisable at $0.25 per share, expiring on October 12, 2027. The warrants were calculated to have a fair value of $220,526 as at October 13, 2022. This note payable matures on April 13, 2023, is unsecured, bears interest at 10% per annum compounded on the basis of a 365-day year and actual days lapsed payable monthly.

 

(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 $75,000 at $67,500 cash with $7,500 original issue discount. In connection with this note, the Company paid an additional $5,625 in cash transaction costs, issued 208,333 common shares valued at $93,812 in transaction costs, and issued 250,000 warrants exercisable at $0.25 per share, expiring on October 12, 2027. The warrants were calculated to have a fair value of $110,263 as at October 13, 2022. This promissory note matures on April 13, 2023, is unsecured, bears interest at 10% per annum compounded on the basis of a 365-day year and actual days lapsed payable monthly.

 

(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 $75,000 at $67,500 cash with $7,500 original issue discount. In connection with this note, the Company paid an additional $5,625 in cash transaction costs, issued 208,333 common shares valued at $93,812 in transaction costs, and issued 250,000 warrants exercisable at $0.25 per share, expiring on October 12, 2027. The warrants were calculated to have a fair value of $110,263 as at October 13, 2022. This promissory note matures on April 13, 2023, is unsecured, bears interest at 10% per annum compounded on the basis of a 365-day year and actual days lapsed payable monthly.

 

The Company incurred financing expenses totaling $3,164,219 during the 3 months ended September 30, 2023, $3,134,219 of which was relating to extension fees of its note obligations described in (a-f). The extension fees were paid by issuing 3,033,334 restricted shares and 5 year warrants to purchase 2,500,000 restricted common shares of the Company for $0.25 per share, and were expensed as they were deemed to be extinguishments of the original obligations under ASC 470 50. Additionally, the Company agreed to increase the notes payable balances by $30,000 as part of the extension.

v3.23.4
COMMON SHARES
3 Months Ended
Sep. 30, 2023
COMMON SHARES  
COMMON SHARES

NOTE 9 – COMMON SHARES

 

Common Stock

 

At September 30, 2023, the Company’s authorized capital consisted of 100,000,000 of common shares with a $0.001 par value and 52,776,616 shares were issued and outstanding.

 

During the three months ended September 30, 2023, the Company issued 1,200,000 shares of common stock at accredited investors for gross cash proceeds of $150,000.

 

During the three months ended September 30, 2023, the Company issued 1,200,000 shares of common stock in exchange for services valued at $376,480.(based on market price at the time of the agreement).

 

During the three months ended September 30, 2023, the Company issued 3,033,334 shares of common stock valued at $1,531,667 (based on market price at the time of the agreement) as part of a default settlement and extension agreement.

 

Warrants

 

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     

 $0.65

 

Risk-free interest rate      

 4.19

%

Expected life      

5 Years

 

Expected dividend rate      

0

 

Expected volatility 

 199.985

%

  

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, 2023

 

 

4,500,000

 

 

$0.25

 

Granted

 

 

2,500,000

 

 

 

0.25

 

Exercised

 

 

-

 

 

 

-

 

Expired

 

 

-

 

 

 

-

 

Outstanding, September 30, 2023

 

 

7,000,000

 

 

$0.25

 

Grant

Date

 

Number

Outstanding

 

 

Number

Exercisable

 

 

Exercise

Price

 

 

Weighted Average

Life (Years)

 

 

Expiry Date

 

July 12, 2022

 

 

500,000

 

 

 

500,000

 

 

 

0.25

 

 

 

3.78

 

 

July 12, 2027

 

July 15, 2022

 

 

250,000

 

 

 

250,000

 

 

 

0.25

 

 

 

3.79

 

 

July 15, 2027

 

July 18, 2022

 

 

250,000

 

 

 

250,000

 

 

 

0.25

 

 

 

3.80

 

 

July 18, 2027

 

October 13, 2022

 

 

500,000

 

 

 

500,000

 

 

 

0.25

 

 

 

4.04

 

 

October 13, 2027

 

October 13, 2022

 

 

250,000

 

 

 

250,000

 

 

 

0.25

 

 

 

4.04

 

 

October 13, 2027

 

October 13, 2022

 

 

250,000

 

 

 

250,000

 

 

 

0.25

 

 

 

4.04

 

 

October 13, 2027

 

March 12, 2023

 

 

2,500,000

 

 

 

2,500,000

 

 

 

0.25

 

 

 

4.45

 

 

March 12, 2028

 

August 12, 2023

 

 

2,500,000

 

 

 

2,500,000

 

 

 

0.25

 

 

 

4.87

 

 

August 12, 2028

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

7,000,000

 

 

 

7,000,000

 

 

 

0.25

 

 

 

4.45

 

 

 

 

 

As of September 30, 2023, the weighted average remaining contractual life of warrants outstanding was 4.45 years with an intrinsic value of $0.

 

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.

 

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, 2023

 

 

6,000,000

 

 

USD

0.65

 

Granted

 

 

-

 

 

USD

-

 

Exercised

 

 

-

 

 

USD

-

 

Cancelled

 

 

-

 

 

USD

-

 

Outstanding, September 30, 2023

 

 

6,000,000

 

 

USD

0.65

 

 

As of September 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

 

 

USD

0.65

 

 

8.52

 

 

January 3, 2032

 

January 4, 2022

 

 

5,750,000

 

 

 

1,150,000

 

 

USD

0.65

 

 

8.52

 

 

January 4, 2032

 

March 1, 2023

 

 

125,000

 

 

 

25,000

 

 

USD

0.65

 

 

8.52

 

 

January 4, 2032

 

Total

 

 

6,000,000

 

 

 

1,200,000

 

 

USD

0.65

 

 

8.52

 

 

 

 

 

During the three months ended September 30, 2023, the Company recorded $189,406 as share-based compensation relating to the non-qualified stock options with an intrinsic value of $0.$1,865,511 has been recorded as share-based compensation relating to the outstanding options to date. The remaining $1,027,179 will be recorded as share-based compensation over the remaining vesting periods of the options.

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

 

187.07

%

Expected option life (years)

 

6 years

 

Risk-free interest rate (10-year U.S. treasury yield)

 

4.22

%

Expected dividend yield

 

 

0%

 

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.

 

Each unit represents one common share:

 

Number of

Performance Units

 

 

Vesting Conditions

 

 

Expiry Dates

-

 

Market capitalization of the Company reaches $25 million

 

December 31, 2026

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

 

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, 2023

 

 

2,700,000

 

 

$-

 

Granted