Cyberloq Technologies, Inc.: Form 10-Q for the period ended Sep 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 September 30, 2024, the Company’s assets were $1,670,307 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 $335,894 due to the capitalization of the Cyberloq Platform and website development, and an increase in the Company’s prepaid expense from $44,564 to $46,231. This increase in fixed assets was partially offset by a decrease in the Company’s cash assets to $190,155 as of September 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 September 30, 2024, the Company’s liabilities were $2,495,078 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 $556,859, 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 $37,631 in accounts payable and accrued expenses, along with an increase of $169,209 in accrued interest.

Net cash used in operating activities for the nine-month period ending September 30, 2024 was $461,784 compared to $262,541 for 2023. Cash provided by or used by operating activities is driven by our net loss and adjusted by noncash items as well as changes in operating assets and liabilities. At September 30, 2024, there was $79,000 in stock compensation and $25,000 in bad debt.

Net cash used by investing activities was $337,094 for the nine months ended September 30, 2024 as compared to $554,997 for 2023.

Net cash provided by financing activities was $681,859 for the nine months ended September 30, 2024 as compared to $859,250 for 2023.

The Company had gross revenue of $15,000 for the nine months ended September 30, 2024 compared to gross revenue of $993 for the nine months ended September 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 nine Months Ended September 30, 2024 and 2023

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

The Company’s operating expenses were $517,419 for the nine months ended September 30, 2024 as compared to $272,596 for the nine months ended September 30, 2023.

This increase in operating expenses was primarily due to an increase in professional fees which were $228,486 for the nine months ended September 30, 2024, compared to $69,489 for the nine months ended September 30, 2023. This increase in professional fees was due to the fact that in the first nine months ended September 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 $182,500 for the nine months ended September 30, 2024 as compared to $142,500 for the nine months ended September 30, 2023. This increase was due to the officers monthly salary increasing as of July 31, 2023.

Computer and internet expenses were $33,443 for the nine months ended September 30, 2024 as compared to $14,266 for the nine months ended September 30, 2023.

Other operating expenses were $48,859 for the nine months ended September 30, 2024 as compared to $28,827 for the nine months ended September 30,2023. This increase in other operating expenses was due to the recognition of bad debt.

Office supplies and expenses were $10,216 for the nine months ended September 30, 2024, compared to $7,415 for the nine months ended September 30, 2023.

Travel and entertainment expenses were $6,510 for the nine months ended September 30, 2024, compared to $2,939 for the nine months ended September 30, 2023.

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

As a result of the foregoing, the Company experienced a net loss from operations of $502,419 in the nine months ended September 30, 2024 compared to a net loss from operations of $271,603 in the nine months ended September 30, 2023.

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

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

The Company’s operating expenses were $144,365 for the three months ended September 30, 2024 as compared to $81,422 for the three months ended September 30, 2023. This increase in operating expenses was primarily due to an increase in professional fees which was $60,162 for the three months ended September 30, 2024 compared to $17,181 for the three months ended September 30, 2023 related to increased software development costs associated with upgrading the source code and infrastructure to accommodate increased capacity demands.

In addition, there was an increase in computer and internet expense which was $15,664 for the three months ended September 30, 2024 compared to $5,937 for the three months ended September 30, 2023.

There was also an increase in officer compensation which was $60,000 for the three months ended September 30, 2024, compared to $52,500 for the three months ended September 30, 2023 due to the Board of Directors approving a salary increase for the Company’s President in 2023.

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

Travel expenses were $1,779 for the three months ended September 30, 2024 as compared to $226 for the three months ended September 30, 2023.

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

As a result of the foregoing, the Company experienced a net loss from operations of $144,365 in the three months ended September 30, 2024 compared to a net loss from operations of $81,422 in the three months ended September 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 September 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 September 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.