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    TGCB   US87901L1008

TEGO CYBER INC.

(TGCB)
Delayed OTC Markets  -  03:00 2022-06-30 pm EDT
0.5000 USD   +2.04%
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05/16TEGO CYBER, INC. Management's Discussion and Analysis of Financial Condition and Results of Operations. (form 10-Q)
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TEGO CYBER, INC. Management's Discussion and Analysis of Financial Condition and Results of Operations. (form 10-Q)

05/16/2022 | 06:44am EDT

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed financial statements and related notes included in this Quarterly Report on Form 10-Q.



Overview


We were incorporated in the State of Nevada on September 6, 2019. We have developed a cyber threat intelligence application that integrates with top end security platforms to gather, analyze, then proactively identify threats to an enterprise network. The Tego Guardian app takes in vetted and curated threat data and through a proprietary process compiles, analyzes, and delivers that data to an enterprise network in a format that is timely, informative and relevant. The first version of the Tego Guardian app integrates with the Splunk SIEM (Security Information and Event Management) platform. Splunk is a recognized industry leader in data analytics and has an established user base of over 15,000 enterprise clients including 90 of the Fortune 100 companies. The Tego Guardian app will be marketed as a value-add enhancement to an existing Splunk SIEM environment. Tego Guardian adds value by providing data enrichment: a detailed 'who, what, when and where' of any potential cyberthreat within an enterprise network environment. Other similar applications identify that something is 'bad' but do not provide any additional context, so it is up to the enterprise's cybersecurity team to analyze the threat data to establish which threats need to be acted upon. It is then up to the enterprise's cybersecurity team to analyze the threat data to establish which threats need to be acted upon. Tego Guardian automates this process thereby saving the enterprise time and money. The Tego Guardian app is now available to Splunk SIEM platform users via direct download through Splunk's app store: Splunkbase. Tego Cyber plans to develop future versions of the Tego Guardian app for integration with other leading SIEM platforms including Elastic, Devo, IBM QRadar, AT&T Cybersecurity, Exabeam and Google Chronical. The goal is to have a version of the Tego Guardian available for integration with these SIEM platforms within the next two years. For more information, please visit www.tegocyber.com.

Results of Operations for the three months ended March 31, 2022 and March 31, 2021




Revenues



We are in development stage and only generated $2,500 total revenue for the three month period ended March 31, 2022 compared to $900 for the three month period ended March 31, 2021.



Operating Expenses


We incurred total operating expenses of $874,018 for the three month period ended March 31, 2022 compared to $125,735 total operating expenses for the three month period ended March 31, 2021. All of these expenses are related to the development and commercialization of our threat intelligence application and administrative expenses. The increase in operating expenses is primarily related to an increase in share based compensation expense, contractor and consultant expenses, and wages and benefits expenses.



Net Loss


We incurred a net loss of $871,518 for the three month period ended March 31, 2022 compared to a net loss of $199,530 for the three month period ended March 31, 2021.

Results of Operations for the nine months ended March 31, 2022 and March 31, 2021




Revenues



We are in development stage and only generated $3,550 in total revenue for the nine month period ended March 31, 2022 compared to $4,700 total revenue for the nine month period ended March 31, 2021.




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Operating Expenses


We incurred total operating expenses of $1,845,168 for the nine month period ended March 31, 2022 compared to $302,286 total operating expenses for the nine month period ended March 31, 2021. All of these expenses related to the development and commercialization of our threat intelligence application and administrative expenses. The increase in operating expenses is primarily related to an increase in share based compensation expense, contractor and consultant expenses, investor relations and shareholder communication, and wages and benefits expenses.



Net Loss


We incurred a net loss of $1,907,750 for the nine month period ended March 31, 2022 compared to a net loss of $396,276 for the nine month period ended March 31, 2021.

Liquidity and Capital Resources

As at March 31, 2022, we have a working capital surplus of $630,773, an accumulated net loss of $2,908132 and have earned limited revenue to cover operating costs. We have $522,800 cash on hand and our burn rate is approximately $120,000 per month. Presently, our operations are being funded by funds raised through the sales of our common stock and we believe our current available capital resources are sufficient to sustain our operations for a minimum of five months. We intend to fund future operations through equity financing arrangements. The ability for us to execute our business plan is dependent upon, among other things, obtaining additional financing to continue operations. In response to these issues, management intends to raise additional funds through 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 nine months ended March 31, 2022, the net cash flows used in our operating activities was $1,237,266 compared to $258,608 for the nine months ended March 31, 2021.

Cash Flow from Investing Activities

For the nine months ended March 31, 2022, the net cash used in investing activities was $248,151 compared to $39,250 for the nine months ended March 31, 2021.

Cash Flow from Financing Activities

For the nine months ended March 31, 2022, the net cash provided by financing activities was $1,425,202 compared to $322,250 for the nine months ended March 31, 2021. The cash flow provided by financing activities is related to proceeds received from sales of our common stock.



Going Concern


We have not attained profitable operations and are dependent upon obtaining financing to pursue any extensive activities. For these reasons, our auditors stated in their report on our audited financial statements that they have substantial doubt that we will be able to continue as a going concern without further financing.




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 in order to continue to fund our business operations. Issuances of additional shares will result in dilution to existing stockholders. There is no assurance that we will achieve any additional sales of the equity securities or arrange for debt or other financing to fund our operations and other activities.




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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.

Disagreements with Accountants on Accounting and Financial Disclosure

In connection with the review of our financial statements for the nine months ended March 31, 2022, there were no disagreements on any matter of accounting principles or practices, financial statement disclosures, or scope or procedures, which disagreements if not resolved to their satisfaction would have caused them to make reference in connection with Harbourside CPA's opinion to the subject matter of the disagreement.

In connection with our financial statements for the six months ended December 31, 2021, there have been no reportable events with the Company as set forth in Item 304(a)(1)(v) of Regulation S-K.



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 our 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 statements of financial position, the statements of operations and comprehensive loss, statements of changes in shareholders' deficit and cash flows for the nine months ended March 31, 2022 and March 31, 2021, 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 us to significant concentrations of credit risk consist principally of cash and accounts receivable. During the nine month period ended March 31, 2022, all of our 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, we extended credit based on an evaluation of the customer's financial condition. We generally do not require collateral for accounts receivable and maintained an allowance for doubtful accounts of accounts receivable if necessary.




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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 nine month period ended March 31, 2022, based on management's best estimate of the amount of probable credit losses in accounts receivable. We evaluate our allowance for doubtful accounts based upon knowledge of our 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 March 31, 2022, there was no allowance for doubtful accounts and we do 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. Our financial instruments include cash, current receivables and payables. These financial instruments are measured at their respective fair values. The three levels are defined as follows:

Level 1 - inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets.

Level 2 - inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments.

Level 3 - inputs to the valuation methodology are unobservable and significant to the fair value.

For cash, accounts receivables, subscription receivables, and accounts payable and accrued liabilities, it is management's opinion that the carrying values are a reasonable estimate of fair value because of the short period of time between the origination of such instruments and their expected realization and if applicable, their stated interest rate approximates current rates available.

Management believes it is not practical to estimate the fair value of related party receivables and payables because the transactions cannot be assumed to have been consummated at arm's length, the terms are not deemed to be market terms, there are no quoted values available for these instruments, and an independent valuation would not be practical due to the lack of data regarding similar instruments, if any, and the associated potential costs.



Revenue Recognition


Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers ("Topic 606"), was adopted by us as of September 6, 2019 (date of incorporation). Our revenue recognition disclosure reflects its updated accounting policies that are affected by this new standard. We applied the "modified retrospective" transition method for open contracts for the implementation of Topic 606. As revenues are and have been primarily from consulting services, and we have no significant post-delivery obligations, this new standard did not result in a material recognition of revenue on our accompanying financial statements for the cumulative impact of applying this new standard. We made no adjustments to its previously reported total revenues, as those periods continue to be presented in accordance with its historical accounting practices under Topic 605, Revenue Recognition.

Revenue from providing consulting services under Topic 606 is recognized in a manner that reasonably reflects the delivery of services to customers in return for expected consideration and includes the following elements:



    -   executed contracts with our 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 we satisfy each performance obligation.





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These five elements as applied to our consulting and management services results in revenue recorded as services are provided.



Income Taxes


We use 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 we are 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.



Foreign Currency Translation


Our functional and reporting currency is United States dollars ("USD"). We maintain our financial statements in the functional currency. Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency at rates of exchange prevailing at the balance sheet dates. Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Exchange gains or losses arising from foreign currency transactions are included in the determination of net income (loss) for the respective periods.



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. We had no dilutive securities as of March 31, 2022.

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. These changes become effective for our fiscal year beginning July 1, 2020. Early application is permitted. At this time, we do not expect this standard to affect our financial position, results of operations or cash flows and disclosures.

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 our present or future financial statements.

Effect of Covid-19 Outbreak on Business Operations

In December 2019, Covid-19 was first identified, and in March 2020, the World Health Organization categorized Covid-19 as a pandemic. The Covid-19 pandemic is affecting our customers, service providers and employees, and the ultimate impacts of Covid-19 on our business, results of operations, liquidity and prospects are not fully known at this time. However, the Covid-19 outbreak has had a relatively minimal impact on our business to date. We currently do not anticipate any significant asset impairments resulting from the Covid-19 pandemic. We believe that we have the resources required to attain our growth objectives and to meet any unforeseen difficulties resulting from the Covid-19 pandemic. However, we will continue to closely monitor the Covid-19 pandemic and its impact on our business in the coming months. There have been recent spikes in Covid-19 cases, and some health experts have predicted that the Covid-19 pandemic will worsen during the winter months.




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Financials (USD)
Sales 2021 0,01 M - -
Net income 2021 -0,92 M - -
Net cash 2021 0,56 M - -
P/E ratio 2021 -13,2x
Yield 2021 -
Capitalization 12,8 M 12,8 M -
EV / Sales 2020 -
EV / Sales 2021 1 780x
Nbr of Employees 3
Free-Float 71,6%
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Managers and Directors
Shannon Wilkinson President, CEO, Secretary, Treasurer & Director
Earl R Johnson Chief Financial Officer
Michael E. de Valera Independent Director
Troy Wilkinson Director
Chris C. White Director & Chief Information Security Officer
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