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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