Cyberloq Technologies, Inc.: Form 10-K for the period ended Dec 31, 2021

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of Cyberloq Technologies, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Cyberloq Technologies, Inc. (“the Company”) as of December 31, 2021 and 2020, and the related consolidated statements of operations, changes in stockholders’ equity (deficit), and cash flows for each of the years in the two-year period ended December 31, 2021, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020 and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company has a growing accumulated deficit since inception and continuing significant net losses. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there were no critical audit matters.

We have served as the Company’s auditor since 2017.

Spokane, Washington

March 31, 2022

CyberloQ Technologies, Inc.

CONSOLIDATED BALANCE SHEETS

See accompanying notes to financial statements

CyberloQ Technologies, Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS

See accompanying notes to financial statements

CyberloQ Technologies, Inc.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

For the Years Ended December 31, 2021 and December 31, 2020

See accompanying notes to financial statements

CyberloQ Technologies, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Years Ended December 31, 2021 and December 31, 2020

See accompanying notes to financial statements

CyberloQ Technologies, Inc.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Nature of Business

CyberloQ Technologies Inc. (“CLOQ”, ‘We” or the “Company”) is a development-stage technology company focused on fraud prevention and credit management. The Company was originally incorporated as Advanced Credit Technologies, Inc. in the State of Nevada on February 25, 2008. On November 20, 2019, the Company changed its name from Advanced Credit Technologies, Inc. to CyberloQ Technologies, Inc.

The Company offers a proprietary software platform branded as CyberloQ®. While previously the Company licensed CyberloQ, in the third quarter of 2017, the Company acquired the CyberloQ technology and is now the exclusive owner of CyberloQ.

CyberloQ is a banking fraud prevention technology that is offered to institutional clients in order to combat fraudulent transactions and unauthorized access to customer accounts. Through the use of a customer’s smart-phone, CyberloQ uses a multi-factor authentication system to control access to a bank card, transaction type or amount, website, database or digital service. The mobile applications for CyberloQ have been built, and have been successfully integrated into the banking ecosystem.

The CyberloQ Vault is a “cloud based’ security protocol that allows clients the ability to send/receive secure data without having to use traditional e-mail which is prone to a breach. This CyberloQ service uses cloud-based encryption and a secure web portal to send/receive confidential data, the sender and receiver both must have authenticated their position within the prescribed geo coordinates as well as authenticate their mobile devices prior to sending/receiving any data. Thus, rendering a hack or breach utterly useless for the encrypted data is unusable without the CyberloQ authentication component.

In addition to CyberloQ, the Company offers a web-based proprietary software platform under the brand name TurnScor® which allows customers to monitor and manage their credit from the privacy of their own homes. Although individuals can sign-up for TurnScor on their own, the Company also intends to market TurnScor to certain institutional clients, where appropriate, in conjunction with CyberloQ as a value-added benefit to offer their customers.

Basis of Presentation

The financial statements of the Company have been prepared using the accrual basis of accounting in accordance with generally accepted accounting principles in the United States of America and the rules of the Securities and Exchange Commission. All amounts are presented in U.S. dollars. The Company has adopted a December 31 fiscal year end.

Principles of Consolidation – The consolidated financial statements include the accounts of the Company and its wholly-owned or controlled operating subsidiaries. All intercompany accounts and transactions have been eliminated.

Use of Estimates

In preparing these financial statements, management makes estimates and assumptions that affect the reported amounts of assets and liabilities in the balance sheets and revenues and expenses during the year reported. Actual results may differ from these estimates. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

Cash and Cash Equivalents

Cash equivalents are comprised of certain highly liquid investments with maturities of three months or less when purchased. The Company maintains its cash in bank deposit accounts, which at times, may exceed federally insured limits. As of December 31, 2021, and December 31, 2020, the Company had no deposits in excess of federally-insured limits.

Research and Development, Software Development Costs, and Internal Use Software Development Costs

Software development costs are accounted for in accordance with ASC Topic No. 985. Software development costs are capitalized once technological feasibility of a product is established and such costs are determined to be recoverable. For products where proven technology exists, this may occur very early in the development cycle. Factors we consider in determining when technological feasibility has been established include (i) whether a proven technology exists; (ii) the quality and experience levels of the individuals developing the software; (iii) whether the software is similar to previously developed software which has used the same or similar technology; and (iv) whether the software is being developed with a proven underlying engine. Technological feasibility is evaluated on a product-by-product basis. Capitalized costs for those products that are cancelled or abandoned are charged immediately to cost of sales. The recoverability of capitalized software development costs is evaluated on the expected performance of the specific products for which the costs relate.

Internal use software development costs are accounted for in accordance with ASC Topic No. 350 which requires the capitalization of certain external and internal computer software costs incurred during the application development stage. The application development stage is characterized by software design and configuration activities, coding, testing and installation. Training costs and maintenance are expensed as incurred, while upgrades and enhancements are capitalized if it is probable that such expenditures will result in additional functionality.

In accounting for website software development costs, we have adopted the provisions of ASC Topic No. 350. ASC Topic No. 350 provides that certain planning and training costs incurred in the development of website software be expensed as incurred, while application development stage costs are to be capitalized. During the periods ended December 31, 2021 and 2020, we expensed $180,063 and $2,100, respectively, for expenditures on research and development. None was paid to related parties.

Fixed Assets, Intangibles and Long-Lived Assets

The Company records its fixed assets at historical cost. The Company expenses maintenance and repairs as incurred. Upon disposition of fixed assets, the gross cost and accumulated depreciation are written off and the difference between the proceeds and the net book value is recorded as a gain or loss on sale of assets. The Company depreciates its fixed assets over their respective estimated useful lives ranging from three to fifteen years.

The Company follows FASB ASC 360-10, “Property, Plant, and Equipment,” which established a “primary asset” approach to determine the cash flow estimation period for a group of assets and liabilities that represents the unit of accounting for a long-lived asset to be held and used. Long-lived assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less cost to sell. As of December 31, 2020, the Company wrote-off the book value of the Cyberloq technology software fixed asset and recorded software impairment expense of $321,735.

Revenue Recognition

Effective January 1, 2018, the Company adopted the requirements of ASU No. 2014-09, Revenue from Contracts with Customers: Topic 606 (ASU 2014-09 or ASC 606). The adoption of ASC 606 resulted in changes to the Company’s accounting policies for revenue recognition previously recognized under ASC 605 (Legacy GAAP), as detailed below. However, since the Company had not earned any revenue prior to adopting ASC 606, this policy change had no effect on any financial statements from prior periods, thus no adjustments have been made to any prior periods related to the adoption of ASC 606.

Revenue Recognition Policy

Under ASC 606, the Company recognizes revenue upon transfer of control of promised products or services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those products or services. To achieve the core principle of ASC 606, the Company performs the following steps:

1) Identify the contract(s) with a customer;

2) Identify the performance obligations in the contract;

3) Determine the transaction price;

4) Allocate the transaction price to the performance obligations in the contract; and

5) Recognize revenue when (or as) we satisfy a performance obligation.

The Company derives its revenue from development, customization and user fees for the CyberloQ banking fraud technology products, including CyberloQ Vault, and from licensing fees for the TurnScor product.

The revenue derived from the CyberloQ banking fraud technology products are comprised of two components. First, there is a development and customization fee paid to the Company to integrate CyberloQ with the banking institution or program manager’s ecosystem in order to add the CyberloQ authentication to the bank’s payment cards, website or digital service. This fee is customarily paid in multiple payments based upon the Company reaching certain milestones as set forth in the scope of work for each customer. Since completion of a milestone is subject to each customer’s approval, there are significant judgments involved in the determination of timing and satisfaction of performance obligations and the payments are recognized as revenue upon the completion of each milestone. Second, revenue from user fees are accrued monthly based over the number of individual card users each month.

The revenue derived from CyberloQ Vault is also comprised of two components. First, there is a development and customization fee paid to the Company to build a customized cloud-based encryption and a secure web portal to send/receive confidential data. This fee is customarily paid in multiple payments based upon the Company reaching certain milestones as set forth in the scope of work for each customer. Since completion of a milestone is subject to each customer’s approval, there are significant judgments involved in the determination of timing and satisfaction of performance obligations and the payments are recognized as revenue over the completion of each milestone. Second, revenue from a monthly user fee is accrued monthly based upon the number of individual users of the product each month.

License fees generated by the nonexclusive licensing of the Company’s TurnScor product are accrued monthly.

As of December 31, 2021, the Company had $0 in contract assets and contract liabilities. As of December 31, 2020, the Company has $0 in contract assets and a contract liability. The contract liability reduced by $2,083 per month as the Company provided a non-exclusive, non-transferable license to use the CyberloQ Vault Services for the customer’s internal purposes.

Accounts Receivable

The Company extends credit to customers in the normal course of business. The allowance for doubtful accounts represents the Company’s best estimate of the amount of the probable credit losses related to the Company’s existing accounts receivable. The Company determines the allowance based on specific customer information, historical write-off experience and current industry and economic data. Account balances are charged off against the allowance when the Company believes that it is probable that the receivable will not be recovered. Management believes that there are no concentrations of credit risk for which an allowance has not been established. Although management believes that the allowance is adequate, it is possible that the estimated amount of cash collections with respect to accounts receivable could change. As of December 31, 2020, management deemed $40,000 uncollectible and this amount was recorded as bad debt expense

Fair Value Measurements

For certain financial instruments, including accounts receivable, accounts payable, accrued expenses, interest payable, advances payable and notes payable, the carrying amounts approximate fair value due to their relatively short maturities.

The Company has adopted FASB ASC 820-10, “Fair Value Measurements and Disclosures.” FASB ASC 820-10 defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The carrying amounts reported in the consolidated balance sheets for receivables and current liabilities each qualify as financial instruments and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest. The three levels of valuation hierarchy 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 asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
• Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The Company did not identify any other non-recurring assets and liabilities that are required to be presented in the balance sheets at fair value in accordance with FASB ASC 815.

In February 2007, the FASB issued FAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities,” now known as ASC Topic 825-10 “Financial Instruments.” ASC Topic 825-10 permits entities to choose to measure many financial assets and financial liabilities at fair value. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. FASB ASC 825-10 is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. The Company has adopted FASB ASC 825-10. The Company chose not to elect the option to measure the fair value of eligible financial assets and liabilities.

Segment Reporting

FASB ASC 280, “Segment Reporting” requires use of the “management approach” model for segment reporting. The management approach model is based on the way a company’s management organizes segments within the company for making operating decisions and assessing performance. The Company determined it has one operating segment.

Advertising

Advertising costs are expensed as incurred. Advertising expense for the year ended December 31, 2021 and 2020 was $5,920 and $6,787 respectively.

Income Taxes

Deferred income taxes are provided using the liability method (in accordance with ASC 740) whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry forwards, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all-of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of the changes in tax laws and rates of the date of enactment.

When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination. Applicable interest and penalties associated with unrecognized tax benefits are classified as additional income taxes in the statements of operations. The Company is not aware of uncertain tax positions.

Earnings (Loss) Per Share

Earnings per share is calculated in accordance with the FASB ASC 260-10, “Earnings Per Share.” Basic earnings (loss) per share is based upon the weighted average number of common shares outstanding. Diluted earnings (loss) per share is based on the assumption that all dilutive convertible shares and stock options were converted or exercised. Dilution is computed by applying the treasury stock method. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period.

At December 31, 2021 and 2020 the Company had no warrants or options outstanding that could have been exercised and could have been dilutive to the existing number of shares issued and outstanding.

The computation of earnings per share of common stock is based on the weighted average number of shares outstanding at the date of the financial statements.

Stock Based Compensation

The Company adopted FASB ASC Topic 718 – Compensation – Stock Compensation (formerly SFAS 123R), which establishes the use of the fair value-based method of accounting for stock-based compensation arrangements under which compensation cost is determined using the fair value of stock-based compensation determined as of the date of grant and is recognized over the periods in which the related services are rendered. For stock-based compensation, the Company recognizes an expense in accordance with FASB ASC Topic 718 and values the equity securities based on the fair value of the security on the date of grant. Stock option and warrant awards are valued using the Black-Scholes option-pricing model, which according to ASC 820-10 is a level 3 value on the hierarchy.

Leases

FASB issued ASU No. 2016-02, Leases (Topic 842), which establishes a comprehensive new lease accounting model. The new standard: (a) clarifies the definition of a lease; (b) requires a dual approach to lease classification similar to current lease classifications; and, (c) causes lessees to recognize leases on the balance sheet as a lease liability with a corresponding right-of-use asset for leases. The standard became effective for calendar years beginning after December 15, 2018.

The Company has made an accounting policy election not to recognize right of use assets and lease liabilities that arise from short term leases for any class of asset.

In June, 2020, the Company entered into a 12-month lease for office space at a rate of $426 per month, and paid a deposit of $500. In September 2020, the Company moved to a different suite, the lease was amended to a rate of $639 per month, beginning on October 1, 2020. The Company paid an additional deposit of $200.

In April, 2021, the Company entered into a 12-month lease for office space at a rate of $730 per month, and paid a deposit of $1,415.

Recent Accounting Pronouncements

None.

Reclassification

Certain reclassifications have been made to conform previously reported data to the current presentation. These reclassifications have no effect on our net income (loss) or financial position as previously reported.

NOTE 2 – FIXED ASSETS

Software and computer equipment, recorded at cost, consisted of the following:

Depreciation expense was $0 and $122,675 for the years ended December 31, 2021 and 2020, respectively. As of December 31, 2020, the Company wrote-off the book value of the Cyberloq technology software fixed asset and recorded software impairment expense of $321,735.

NOTE 3 – GOING CONCERN

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company 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 could result from the outcome of this uncertainty.

The Company has incurred losses since Inception resulting in an accumulated deficit of $6,254,074 as of December 31, 2021 that includes a loss of $1,087,712 for the year ended December 31, 2021. Further losses are anticipated in the development of its business. Accordingly, there is substantial doubt about the entity’s ability to continue as a going concern within one year after the financial statements are issued.

The ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and, or, obtaining the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due.

Management anticipates that the Company will be dependent, for the near future, on additional debt and/or investment capital to fund operating expenses. The Company intends to position itself so that it may be able to raise additional funds through the capital markets. In light of management’s efforts, there are no assurances that the Company will be successful in this or any of its endeavors or become financially viable and continue as a going concern.

NOTE 4 – STOCKHOLDERS’ EQUITY

Common Stock

The Company has 100,000,000 shares of $.001 par value common stock authorized as of December 31, 2021 and December 31, 2020.

During 2021, the Company received $193,000 in payment for 8,000,000 shares of common stock that were recorded as “shares to be issued”, $490,200 in payment of 5,335,000 shares of common stock, 1,000,000 shares of common stock to the Company’s Advisory Board for future services valued at $482,500. The shares were recorded as prepaid expense and are being expensed over the term of the 12-month contract. Additionally, the Company issued 175,000 shares of common stock for services valued at $82,390, 1,600,000 shares of common stock that had previously been recorded as “shares to be issued” and issued 600,000 shares of common stock for officers’ compensation also previously recorded as “shares to be issued”. Also, the Company recorded $92,400 for 300,000 shares of common stock as “to be issued” for officers’ compensation in the current year.

During 2020, the Company received $60,000 in payment for 923,076 shares of common stock that were recorded as “Shares to be issued”, $66,666 in payment for 1,024,000 shares of common stock, $10,000 in payment for 160,000 shares and issued 80,000 shares of common stock for services valued at $8,000.

Additionally, the Company had an agreement to issue 3,333,333 common shares for $300,000, or $0.09 per share. The Company has collected $265,000 towards that agreement, and had previously disclosed the full amount and the related 3,333,333 common shares as “to be issued”. In June 2020, the Company amended the stock subscription agreement and issued 2,650,000 shares in exchange for the $265,000 that had previously been collected.

Also, the Company issued 2,000,000 shares of common stock in settlement of a promissory note in the amount of $40,000 to a related party, resulting in a loss on extinguishment of debt of $120,000. See Note 7.

At December 31, 2020, the “shares to be issued” is comprised of 600,000 shares issuable to officers of the Company valued at $70,140 and 923,076 shares issuable in the amount of $60,000.

Preferred Stock

The Company did not have any preferred stock prior to 2017. In April of 2017, the Company amended its articles of incorporation to create a new class of stock designated Series A Super Voting Preferred Stock consisting of thirty-thousand (30,000) shares at par value of $0.001 per share. Certain rights, preferences, privileges and restrictions were established for the Series A Preferred Stock as follows: (a) the amount to be represented in stated capital at all times for each share of Series A Preferred Stock shall be its par value of $0.001 per share; (b) except as otherwise required by law, holders of shares of Series A Preferred Stock shall vote together with the common stock as a single class and the holders of Series A Preferred Stock shall be entitled to five-thousand (5,000) votes per share of Series A Preferred Stock; and (c) in the event of any liquidation, dissolution or winding-up of the Company, either voluntary or involuntary, the holders of the Series A Preferred Stock shall be entitled to receive, prior and in preference to any distribution of assets of the Corporation to the holders of the common stock, the original purchase price paid for the Series A Preferred Stock. All 30,000 shares of the Series A Super Voting Preferred Stock were issued in 2017. On February 28, 2022, the 10,000 preferred shares held by Mark Carten were redeemed by the Company and returned to treasury.

NOTE 5 – SBA EIDL Loan and Grant

On June 9, 2020, the Company received an Economic Injury Disaster Loan from the Small Business Administration in the amount of $35,600. The loan has a term of thirty years and an interest rate of 3.75% per annum. Payments in the amount of $174 monthly will begin twelve months from the date of the note. During 2021, the Company repaid $1,050.

On April 30, 2020 the Company received a grant from the Small Business Administration in the amount of $3,000.

NOTE 6 – COMMITMENTS

In June 2020, the Company entered into a 12-month lease for office space at 871 Venetia Bay Blvd Suite #228Venice, FL 34285. The monthly rent is $426 per month. The Company paid a deposit of $500 and the first month rent of $426 for July in June 2020. All conditions have been met and paid by the Company. In September 2020, the lease was amended as the Company moved to Suite #228. The amended monthly rent is $639 per month. The Company paid an additional deposit of $200 for the new suite.

In April, 2021, the Company entered into a 12-month lease for office space at 4837 Swift Rd Sarasota, FL 34231 at a rate of $730 per month. The Company paid a deposit of $685, first month rent of $730 and last month’s rent of $730.

The Company has commission agreements as follows:

• An agreement with a shareholder and director of the Company stating that the executive will be entitled to a two-and-a half-percent (2.5%) commission of the gross revenue recorded by the Company for any customer contracts that are closed by the Company at the time of and during the duration of the agreement. These commissions are payable quarterly upon receipt of customer revenues.
• An agreement with two sales managers granting each manager a 1% commission on the gross revenue of the Company. These commissions are payable quarterly upon receipt of customer revenues.

NOTE 7 – RELATED PARTY TRANSACTIONS

Issuance of Warrants/Options

All outstanding warrants and options are fully vested and exercisable.

The following is a summary of the warrants issued and outstanding in connection with common stock:

F-12

Related Party Notes Payable

The following is a summary of related party notes payable:

Notes Payable - Stockholders

On April 26,2021, the Company into a promissory note with a stockholder in the amount of $10,000 with a maturity date of May 1, 2023. The note bears interest of 12.5% computed on a 365-day year. The Company is required to begin making monthly payments in the amount of $937.50 on May 1, 2022, continuing through April 1, 2023. The Company may prepay the note on or before May 1, 2022 by paying a prepayment penalty of $1,250.

On December 29, 2014, the Company entered into a partially-convertible promissory note with a stockholder in the amount of $35,000. In January of 2015, the stockholder partially-exercised its conversion option, and in May of 2016 the stockholder exercised the remainder of its conversion option. In December 2017, the remaining unpaid principal and interest due on the note was settled in full for a $50,000 note and the Company recognized $151,324 in gain on settlement of debt. The $50,000 note has a current principal balance of $35,000, a stated interest rate of 0%, required payments of $5,000 on or before June 10, 2019, $5,000 on or before August 10, 2019 and the remainder due by the extended due date of September 15, 2019. As of December 31, 2021, the payments due have not been extended and the Company plans to repay the notes in 2022.

Notes Payable - Related Parties

On November 7, 2019, the Company received a loan from a director in the amount of $30,000, with an interest rate of 0%. The loan was repaid in February 2020.

On March 24, 2020, the Company received a loan from a director in the amount of $40,000, with an interest rate of 0%. The maturity date for the loan is June 30, 2020. On July 7, 2020, 2,000,000 shares of stock were issued to retire the loan resulting in a loss on extinguishment of debt of $120,000.

On September 20, 2021, the Company received a promissory note from a director in the amount of $12,500, with an interest rate of 0% and a maturity date of October 20, 2021. This note was repaid on October 8, 2021.

On December 31, 2021, the Company entered into a loan modification agreement with a director which consolidated three outstanding promissory notes dated August 8, 2020, September 9, 2020, and December 28, 2020 into one loan. The total amount borrowed is $150,000, with an interest rate of 12.5% and a maturity date of April 1, 2023. The Company was required to pay an extension penalty in the amount of $2,500. Although the agreement was entered into on December 31, 2021, it did not become binding until the extension penalty was paid, which occurred in mid-January 2021.

As of December 31, 2021, accrued interest is $26,420. Payments of $25,000 plus interest are due to be paid each calendar quarter beginning on July 1, 2022.

NOTE 8 – INCOME TAXES

At December 31, 2021, the Company had available federal net operating loss carry forwards to reduce future taxable income. The amount available was approximately $5,682,184 for federal purposes. The federal net operating loss carry forwards begin to expire in 2029. Given the Company’s history of net operating losses, management has determined that it is more likely than not that the Company will not be able to realize the tax benefit of the net operating loss carry forwards. Accordingly, the Company has recognized a valuation allowance that offsets the deferred tax asset for this benefit.

FASB ASC Topic 740 – Income Taxes (formerly SFAS 109) requires that the Company establish a valuation allowance when it is more likely than not that all or a portion of deferred tax assets will not be realized. Due to restrictions imposed by Internal Revenue Code Section 382 regarding substantial changes in ownership of companies with net operating loss carry forwards, the utilization of the Company’s net operating loss carry-forward will likely be limited as a result of cumulative changes in stock ownership. The Company has not recognized a deferred asset and, as a result, the change in stock ownership will not result in any change to the valuation allowances. Upon the attainment of taxable income by the Company, management will assess the likelihood of realizing the tax benefit associated with the use of the carry forwards and will recognize a deferred tax asset at that time.

The provision for Federal income tax consists of the following:

The Tax Cuts and Jobs Act of 2018 will reduce the dollar value of the net operating loss carry-forwards due to the corporate tax rate decrease to 21%. However, the actual benefit will remain because, if allowed, the losses from prior years will offset taxable income in future years regardless of the tax rate. The cumulative tax effect at the expected rate of 21% of significant items comprising our net deferred tax amount is as follows:

The Company files income tax returns in the U.S. federal jurisdiction and various states. The Company is current on all income tax filings. The Company is subject to U.S. federal or state income tax examinations by tax authorities for three years following the filing of such returns. During the periods open to examination, the Company has net operating loss and tax credit carry forwards for U.S. federal and state tax purposes that have attributes from closed periods. Since these NOL’s and tax credit carry forwards may be utilized in future periods, they remain subject to examination.

NOTE 9 – SUBSEQUENT EVENTS

On February 23, 2022, the Company received a promissory note from a director in the amount of $50,000, with an interest rate of 12% and a maturity date of April 9, 2022.

On February 23, 2022, the Company received a promissory note from a director in the amount of $50,000, with an interest rate of 12% and a maturity date of April 9, 2022. This promissory note also has a conversion option at a conversion price of $0.02 per share.

On February 28, 2022, the Company and Mark Carten entered into a separation agreement as a result of which Mr. Carten is no longer an employee of the Company. In addition, the separation agreement includes resignations of Mr. Carten from his positions as the Chief Technology Officer of Company and as a director of the Company effective February 28, 2022. Pursuant to the separation agreement, the Company is redeeming all of Mr. Carten’s common and preferred shares (500,000 and 10,000, respectively) in the Company at a set redemption price of $0.10 per share.

On February 28, 2022 the Board of Directors of the Company (the “Board”) decided to reduce the number of directors of the Company to four.

Subsequent to December 31, 2021, the Company issued 8,748,701 shares of common stock for cash and shares that had previously been recorded as “shares to be issued”.

The Company is not aware of any other subsequent events through the date of this filing that require disclosure or recognition in these financial statements.

F-14

The Company qualifies as a smaller reporting company as defined by §229.10(f)(1) and therefore is not required to provide the information required by this Item. However, the Company does acknowledge that there are risks associated with the business of the Company.

We will be competing with a variety of companies, many of which have significantly greater financial, technical, marketing and other resources than us. If we fail to attract and retain a large base of customers for our products, or if our competitors establish a more prominent market position relative to ours, this will inhibit our ability to grow and successfully execute our business plan. For example, Wells Fargo has introduced an “on/off” feature for their customers, Discover Card has “Freeze It” functionality, and Ondot Systems has already been operating in the mobile card security space for quite some time. However, the Company believes that the multi-purpose functionality of CyberloQ, along with its multi-purpose applications will give the Company a distinct advantage by comparison. CyberloQ can be used in the banking system to protect debit/credit cards, in the Health Care industry to protect PII (Personal Identifying Information) now that medical records are kept digitally, and can protect corporate data bases in any industry from outside intrusion via geo-fencing. The Company believes that these distinct features, along with the ability to “White Label” the technology for marketing partners, give the Company a distinction in the marketplace. However, there can be no assurance that we will be able to successfully compete with other companies in the marketplace.

In addition, the Company could incur increased costs, decreased revenue, or suffer reputational damage in the event of a cyber-attack. The Company’s business involves the collection, storage, processing and transmission of customers’ personal data, including financial information. In the event that the Company’s security measures are breached due to human error, malfeasance, system errors or vulnerabilities, or other irregularities, such breach could adversely affect our business through possible interruption of the Company’s operations, improper disclosure of data, damage to the Company’s reputation, and/or legal exposure.

The Company’s corporate office is located at 4837 Swift Road Suite 210-1 Sarasota, FL 34231, and our telephone number is 612-961-4536. Rent is $730 per month including phone and internet.

The Company does not presently hold any investments or interests in real estate, investments in real estate mortgages or securities of or interests in persons primarily engaged in real estate activities.

The Company is not currently a party to any legal proceedings, nor is the Company a party to any administrative proceedings.

In addition, the Company’s officers and directors have not been convicted in any criminal proceedings nor have they been permanently or temporarily enjoined, barred, suspended or otherwise limited from involvement in any type of securities or banking activities.

Liquidity, Capital Resources and Material Changes in Financial Condition

As of December 31, 2021, our total assets were $264,503 compared to $27,441 in assets as of December 31, 2020. This increase in the total assets is primarily attributed to an increase in prepaid expense and cash. Prepaid expense increased due to the issuance of 1,250,000 shares of stock to consultants valued at $537,500 per consulting agreements entered into by the Company. The amount is being amortized over the one-year length of the contracts on a straight-line basis.

As of December 31, 2021, our liabilities were $299,530 compared to $337,464 in liabilities as of December 31, 2020. This change in the Company’s financial condition was due to decreases in accounts payable and accrued expenses of $67,780, and long term note payable of $1,050 partially offset by an increase of $10,000 in loans from stockholders, and an increase in accrued interest of $20,896.

Net cash used in operating activities for the year ending December 31, 2021 was $664,596 compared to net cash used in operating activities for the year ended December 31, 2020 of $306,161. Cash provided by or used by operating activities is driven by our net loss and adjusted by non-cash items as well as changes in operating assets and liabilities. Non-cash adjustments for the year ended December 31, 2021 include stock compensation of $460,708 and loss on settlement of payables of $6,343.

Net cash used by investing activities for the years ended December 31, 2021 and 2020 was $0.

Net cash provided by financing activities was $692,150 for the year ended December 31, 2021 as compared to $332,266 for the year ending December 31, 2020. Specifically, proceeds from common stock issuance were $490,200 for the year ended December 31, 2021as compared to $76,666 for the year ended December 31, 2020, and proceeds from common stock to be issued was $193,000 for the year ended December 31, 2021 as compared to $60,000 for the year ended December 31, 2020. Conversely, proceeds from notes payable were $22,500 for the year ended December 31, 2021compared to $232,100 for the year ended December 31, 2020.

The Company had operating revenue of $197 in 2021 and is currently reliant on its ability to raise additional capital and/or debt to continue execution of its business plan to move the Company forward towards profitability. The Company does not anticipate any significant decrease in its operating expenses for 2022. Unless the Company begins to generate operation revenue, it will be reliant on its ability to raise additional debt and/or capital in order to continue its operations.

Results of Operations for the Years Ended December 31, 2021 and 2020

The Company experienced a net loss of $1,087,712 for the year ended December 31, 2021 compared to net loss of $983,271 for the year ended December 31, 2020.

This increase in the Company’s net loss was primarily due to a substantial increase in professional fees as well as research and development fees, partially offset by substantial decreases in software impairment expenses and depreciation expenses.

Service revenue was $197 for 2021 in comparison to $19,944 for 2020. This decrease in revenue was due to the Company recognizing $14,589 of revenue from a customer’s non-refundable two-year (beginning August 28, 2018) service contract that ended in the third quarter of 2020.

Professional fees were $468,449 in 2021, compared to $56,483 in 2020. This increase in professional fees was due to increased consulting services as a result of increased software development costs associated with upgrading the source code and infrastructure to accommodate increased capacity demands and higher accounting fees during the period.

Research and development expenses were $180,063 in 2021, compared to $2,100 in 2020. This increase in research expenses was due to increased development costs associated with the Company’s re-factoring of the Cyberloq technology for scalability.

Officers’ compensation expense was $370,400 in 2021 as compared to $306,140 in 2020. This increase was due to an increase in stock price attributed to Officers’ share issuances.

In addition to the foregoing, rent expense was $9,031 for 2021, compared to $3,585 for 2020. This increase was due to the Company signing a new lease agreement in 2020.

The foregoing drivers of the increase in the Company’s net loss for the year ended December 31, 2021 were partially offset by decreases in the Company’s other operating expenses.

Software impairment expense was $0 in 2021, compared to $321,735 in 2020. This decrease in software impairment expense is due to the one-time write-off of the book value of the Cyberloq technology software fixed asset in 2020.

Depreciation expense was $0 in 2021, compared to $122,675 in 2020. This decrease in depreciation expense was due to a one-time software impairment expense in 2020. Since the write-off occurred in 2020, it could no longer be depreciated in 2021.

The Company had recognition of bad debt expense of $40,000 in 2020, as opposed to no recognition of bad debt in 2021.

Computer and internet expenses were $10,859 in 2021 as compared to $7,759 in 2020. This increase was due to additional hosting costs associated with the Company’s private blockchain product.

Office supplies and expenses were $6,608 in 2021, compared to $4,369 in 2020.

Sales commissions were $0 in 2021, compared to $2,011 in 2020.

For 2021, there were no material changes in travel and entertainment and other operating expenses as compared to 2020.

In summary, total revenue was $197 for 2021, and the Company is currently reliant on its ability to raise additional debt and/or capital to continue execution of its business plan to move forward towards profitability. Whether or not there are any material changes in operational revenues or expenses in 2022 will be highly-dependent upon the Company’s ability to enter into material revenue contracts with customers.

The Company qualifies as a smaller reporting company as defined by §229.10(f)(1) and therefore is not required to provide the information required by this Item.

Our management is responsible for establishing and maintaining a system of disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) that is designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

An evaluation was conducted under the supervision and with the participation of our management of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2021 in accordance with the Committee of Sponsoring Organizations of the Treadway Commission’s 2013 Integrated Framework. Based on that evaluation, our management concluded that our disclosure controls and procedures were not effective as of such date to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms. In addition, due to its current size, the Company currently does not have sufficient staff to maintain appropriate segregation of duties, as it pertains to application and oversight of internal control processes. Material weaknesses have previously been identified, including lack of segregation of duties and lack of formal written policies and procedures surrounding financial close and reporting. However, the Company anticipates that as it grows and formalizes its internal control processes and procedures, it will add sufficient staff to perform internal control processes, as well as adequately provided oversight to ensure processes are working as designed. Such officer also confirmed that there was no change in our internal control over financial reporting during the three-month period ended December 31, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.