Cyberloq Technologies, Inc.: Form 10-Q for the period ended Jun 30, 2024

The following discussion is intended to assist you in understanding our business and the results of our operations. It should be read in conjunction with the Condensed Financial Statements and the related notes that appear elsewhere in this report as well as our Report on Form 10K filed with the Securities and Exchange Commission for the period ending December 31, 2023. Statements made in this Form 10-Q that are not historical or current facts are “forward-looking statements”. These statements often can be identified by the use of terms such as “may,” “will,” “expect,” “believe,” “anticipate,” “estimate,” “approximate” or “continue,” or the negative thereof. We wish to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. Any forward-looking statements represent management’s best judgment as to what may occur in the future. However, forward-looking statements are subject to risks, uncertainties and important factors beyond our control that could cause actual results and events to differ materially from historical results of operations and events and those presently anticipated or projected. We disclaim any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statement or to reflect the occurrence of anticipated or unanticipated events.

Company History

CyberloQ Technologies Inc. (“CLOQ”, ‘We” or the “Company”) was incorporated in Nevada on February 5, 2008 as Advanced Credit Technologies, Inc. The Company changed its name to CyberloQ Technologies, Inc. on November 20, 2019. The Company has never been the subject of any bankruptcy, receivership or similar proceeding. The Company has never been involved in any material reclassification, merger, or consolidation.

On June 15, 2017, the Company created a private limited company in the United Kingdom named CyberloQ Technologies LTD. CyberloQ Technologies LTD is a wholly-owned subsidiary of the Company, and any business that the Company has in the United Kingdom will be transacted through CyberloQ Technologies LTD. However, to date CyberloQ Technologies LTD has had no activity, operational or otherwise and is now dissolved.

Current Overview of the Company

The Company is a development-stage technology company focused on fraud prevention and credit management.

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 MFA (Multi Factor Authentication) protocol technology that is offered to institutional clients in order to combat fraudulent transactions and unauthorized access to customer accounts or any digital asset. 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 Company has also updated the entire infrastructure, UI/UX and streamlined the deliverable services per strategic partnerships with clients in multiple channels in order to increase the scalability of the original platform.

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.

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.

The Company currently has two full-time employees — its President and Vice-President. There are no other employees of the Company at this time.

The Company also has a Board of Advisors comprised of individuals from the banking, business development, and technical sectors to advise the Company as it moves forward with its business strategy. The Board of Advisors does not have any decision-making authority.

Liquidity, Capital Resources and Material Changes in Financial Condition

As of June 30, 2024, the Company’s assets were $1,502,984 compared to $1,458,565 in assets as of December 31, 2023.

This change in the Company’s financial condition can be primarily attributed to an increase in fixed assets of $208,414 due to the capitalization of the Cyberloq Platform and website development, and an increase in the Company’s prepaid expense from $44,564 to $56,231. This increase in fixed assets was partially offset by a decrease in the Company’s cash assets to $141,512 as of June 30, 2024 as opposed to $307,174 as of December 31, 2023, and a decrease in the company’s accounts receivable from $10,000 to $0.

As of June 30, 2024, the Company’s liabilities were $2,126,855 compared to $1,021,359 in liabilities as of December 31, 2023. This change in the Company’s financial condition can be primarily attributed to an increase in convertible debt of $256,859, related to the Company raising operating capital through the issuance of convertible notes. Additionally, as a result of adoption of ASU 2020-06 a cumulative adjustment of $481,181 was recognized. In addition, there was a decrease of $42,340 in accounts payable and accrued expenses, along with an increase of $105,696 in accrued interest.

Net cash used in operating activities for the six-month period ending June 30, 2024 was $324,107 compared to $248,267 for 2023. 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. At June 30, 2024, there was $79,000 in stock compensation.

Net cash used by investing activities was $208,414 for the six months ended June 30, 2024 as compared to $306,691 for 2023.

Net cash provided by financing activities was $366,859 for the three months ended June 30, 2024 as compared to $574,250 for 2023.

The Company had gross revenue of $15,000 for the six months ended June 30, 2024 compared to gross revenue of $993 for the six months ended June 30, 2023, and is currently reliant on its ability to raise additional capital 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 the remainder of 2024. Unless the Company begins to generate operational revenue, it will be reliant on its ability to raise additional capital in order to continue its operations.

Results of Operations for the Six Months Ended June 30, 2024 and 2023

Company revenue was $15,000 in the six months ended June 30, 2024 as compared to $993 for the six months ended June 30, 2023.

The Company’s operating expenses were $373,055 for the six months ended June 30, 2024 as compared to $191,175 for the six months ended June 30, 2023.

This increase in operating expenses was primarily due to an increase in professional fees which were $168,324 for the six months ended June 30, 2024, compared to $52,308 for the six months ended June 30, 2023. This increase in professional fees was due to the fact that in the first six months ended June 30, 2024 the Company had increased professional fees related to increased software development costs associated with upgrading the source code and infrastructure to accommodate increased capacity demands.

In addition, the Company experienced changes in expense categories as noted below.

Officers’ compensation was $122,500 for the six months ended June 30, 2024 as compared to $90,000 for the six months ended June 30, 2023. This increase was due to the officers monthly salary increasing as of July 31, 2023.

Computer and internet expenses were $17,779 for the six months ended June 30, 2024 as compared to $8,330 for the six months ended June 30, 2023.

Other operating expenses were $47,576 for the six months ended June 30, 2024 as compared to $27,700 for the six months ended June 30,2023. This increase in other operating expenses was due to up listing fees paid in the first and second quarters to OTC Markets and the recognition of bad debt.

Office supplies and expenses were $7,318 for the six months ended June 30, 2024, compared to $5,377 for the six months ended June 30, 2023.

Travel and entertainment expenses were $4,732 for the six months ended June 30, 2024, compared to $2,713 for the six months ended June 30, 2023.

Finally, there was no material changes in the Company’s rent expense in the six months ended June 30, 2024 as compared to the six months ended June 30, 2023.

As a result of the foregoing, the Company experienced a net loss from operations of $358,055 in the six months ended June 30, 2024 compared to a net loss from operations of $190,182 in the six months ended June 30, 2023.

Results of Operations for the Three Months Ended June 30, 2024 and 2023

Company revenue was $0 in the three months ended June 30, 2024 as compared to $0 for the three months ended June 30, 2023.

The Company’s operating expenses were $162,020 for the three months ended June 30, 2024 as compared to $93,468 for the three months ended June 30, 2023. This increase in operating expenses was primarily due to an increase in officer compensation which was $60,000 for the three months ended June 30, 2024, compared to $45,000 for the three months ended June 30, 2023 due to the Board of Directors approving a salary increase for the Company’s President, an increase in professional fees which was $53,550 for the three months ended June 30, 2024 compared to $18,489 for the three months ended June 30, 2023 and an increase in other operating expense which was $26,194 for the three months ended June 30, 2024 compared to $16,359 for the three months ended June 30, 2023 In addition, the Company experienced changes in expense categories as noted below.

Other operating expenses were $26,194 for the three months ended June 30, 2024 as compared to $16,359 for the three months ended June 30, 2023. This increase in other operating expenses was due to OTC Market fees and recognition of bad debt.

Computer and internet expenses were $12,067 for the three months ended June 30, 2024 as compared to $4,782 for the three months ended June 30, 2023.

Finally, there were no material changes in the Company’s office supplies and expenses, rent and travel expenses in the three months ended June 30, 2024 as compared to the three months ended June 30, 2023.

As a result of the foregoing, the Company experienced a net loss from operations of $162,020 in the three months ended June 30, 2024 compared to a net loss from operations of $93,468 in the three months ended June 30, 2023

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 June 30, 2024 in accordance with 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 June 30, 2024 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II

OTHER INFORMATION

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.

Finally, management has evaluated whether or not COVID-19 has had any material impact on the Company. The Company is a technology-based company with personnel already working remotely prior to COVID-19. Therefore, the Company has not been impacted by any stay-at-home orders or travel restrictions. Likewise, the Company has continued to have access to capital and funding sources, and COVID-19 has had no material effect on the demand for the Company’s services. Consequently, to date COVID-19 has not impacted the Company’s financial condition or the results of its operations, and the Company does not anticipate that there be any material impact in the future.