Item 5. Market for
Registrant’s Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity
Common Stock
Our Articles of Incorporation authorize us to issue fifty million
(50,000,000) shares of common stock, par value $0.001.
The
following statements relating to the capital stock set forth the
material terms of the securities of the Company. Reference is also
made to the more detailed provisions of the certificate of
incorporation and the by-laws, copies of which are filed as
exhibits to this registration statement.
Voting Rights
Except as otherwise required by law or as may be provided by the
resolutions of the board of directors authorizing the issuance of
Common Stock, all rights to vote and all voting power shall be
vested in the holders of Common Stock. Each share of Common
Stock shall entitle the holder thereof to one vote.
No Cumulative Voting
Except as may be provided by the resolutions of the board of
directors authorizing the issuance of Common Stock, cumulative
voting by any shareholder is expressly denied.
No Preemptive Rights
Preemptive rights shall not exist with respect to shares of Common
Stock or securities convertible into shares of Common Stock of the
Company.
Dividends
We have not paid any cash dividends on our Common Stock since
inception and presently anticipate that all earnings, if any, will
be retained for development of our business and that no dividends
on our Common Stock will be declared in the foreseeable future. Any
future dividends will be subject to the discretion of our Board of
Directors and will depend upon, among other things, future
earnings, operating and financial condition, capital requirements,
general business conditions and other pertinent facts. Therefore,
there can be no assurance that any dividends on our Common Stock
will be paid in the future.
Rights upon Liquidation, Dissolution or Winding-Up of the
Company
Upon any liquidation, dissolution or winding-up of the Company,
whether voluntary or involuntary, the remaining net assets of the
Company shall be distributed pro rata to the holders of the Common
Stock.
Preferred Stock
The Company has no preferred stock authorized.
Warrants and Options
Options. The Company has not
issued any options.
Common Stock Purchase Warrants. As of September 28, 2021, there are an aggregate
3,014,246 outstanding Common Stock Purchase Warrants
(“Warrants”), the terms of which are summarized
below:
Exercisability. The
outstanding Common Stock Purchase Warrants (“Warrants”)
are exercisable immediately upon issuance and at any time up to the
date that is two years from the date of issuance. The warrants will
be exercisable, at the option of each holder, in whole or in part,
by delivering to us a duly executed exercise notice accompanied by
payment in full for the number of shares of our common stock
purchased upon such exercise (except in the case of a cashless
exercise as discussed below). Unless otherwise specified in the
warrant, the holder will not have the right to exercise any portion
of the Warrant if the holder (together with its affiliates) would
beneficially own in excess of 4.99% of the number of shares of our
common stock outstanding immediately after giving effect to the
exercise (or, upon election by a Holder prior to the issuance of
any warrants, 9.99%), as such percentage ownership is determined in
accordance with the terms of the Warrants.
Certain Adjustments. The
exercise price and the number of shares of common stock purchasable
upon the exercise of the Warrants are subject to adjustment upon
the occurrence of specific events, including stock dividends, stock
splits, combinations and reclassifications of our common stock, and
dilutive issuances as defined in the Warrants.
Transferability. Subject
to applicable laws, the Warrants may be transferred at the option
of the holders upon surrender of the Warrants to the Company
together with the appropriate instruments of
transfer.
Rights as a Stockholder. Except as otherwise provided in the Warrants
or by virtue of such holder’s ownership of shares of our
common stock, the holder of a warrant does not have the rights or
privileges of a holder of our common stock, including any voting
rights, until the holder exercises the warrant.
Beneficial Ownership Limitation. Holder’s exercise shall be limited 4.99%
of the Company’s outstanding common stock (or, upon election
by a Holder prior to the issuance of any Warrants, 9.99%) of the
number of shares of the common stock outstanding immediately after
giving effect to the issuance of shares of common stock issuable
upon exercise. The Holder, upon notice to the Company, may increase
or decrease the beneficial ownership limitation provided that the
beneficial ownership limitation in no event exceeds 9.99% of the
number of shares of the common stock outstanding immediately after
giving effect to the issuance of shares of common stock upon
exercise of the warrant held by the Holder. Any increase in the
beneficial ownership limitation will not be effective until the
61st day
after such notice is delivered to the Company.
Governing Law. The
Warrants are governed by New York law.
Holders
As of September 28, 2021, we have 23,755,321 issued and outstanding
shares of Common Stock, which are held by approximately 230
shareholders of record.
Securities Authorized for Issuance Under Equity Compensation
Plans
None
Transfer Agent and Registrar
Tego Cyber Inc. has appointed Signature Stock Transfer Inc. as its
transfer agent. Signature’s address is 14673 Midway Road,
Suite #220, Addison, Texas, 75001. The transfer agent is
responsible for all record-keeping and administrative functions in
connection with the common shares.
Market Information
Our
common shares are currently quoted on the OTCQB under the symbol
"TGCB". The following table sets forth the range of the high and
low sale prices of the common stock for the periods indicated. The
quotations reflect inter-dealer prices, without retail markup,
markdown or commission, and may not represent actual transactions.
Consequently, the information provided below may not be indicative
of our common stock price under different conditions.
Trades
in our common stock may be subject to Rule 15g-9 of the Exchange
Act, which imposes requirements on broker/dealers who sell
securities subject to the rule to persons other than established
customers and accredited investors. For transactions covered by the
rule, broker/dealers must make a special suitability determination
for purchasers of the securities and receive the purchaser’s
written agreement to the transaction before the sale.
The Company’s common stock was approved for trading on the
OTCQB on February 19, 2021. As of September 28, 2021, the
high and low sales price of our common stock was $1.25 per share
and $0.30 per share, respectively. As of September 28, 2021, there
were 23,755,321 shares of common stock outstanding held by
approximately 230 stockholders of record.
Penny Stock Regulation
Penny
stocks generally are equity securities with a price of less than
$5.00 per share other than securities registered on national
securities exchanges or listed on the Nasdaq Stock Market, provided
that current price and volume information with respect to
transactions in such securities are provided by the exchange or
system. The penny stock rules impose additional sales practice
requirements on broker-dealers who sell such securities to persons
other than established customers and accredited investors
(generally those with assets in excess of $1,000,000 or annual
income exceeding $200,000, or $300,000 together with their spouse).
For transactions covered by these rules, the broker-dealer must
make a special suitability determination for the purchase of such
securities and have received the purchaser's written consent to the
transaction prior to the purchase. Additionally, for any
transaction involving a penny stock, unless exempt, the rules
require the delivery, prior to the transaction, of a disclosure
schedule prescribed by the SEC relating to the penny stock market.
The broker-dealer also must disclose the commissions payable to
both the broker-dealer and the registered representative and
current quotations for the securities. Finally, monthly statements
must be sent disclosing recent price information on the limited
market in penny stocks. Because of these penny stock rules,
broker-dealers may be restricted in their ability to sell the
Company’s common stock. The foregoing required penny stock
restrictions will not apply to the Company’s common stock if
such stock reaches and maintains a market price of $5.00 per share
or greater.
Additional Information
We refer you to our Articles of Incorporation, Bylaws, and the
applicable provisions of the Nevada Revised Statues for a more
complete description of the rights and liabilities of holders of
our securities.
We are a smaller reporting company as defined by Rule 12b-2 of the
Exchange Act and are not required to provide the information
required under this item.
Item 7. Management’s Discussion and Analysis of Financial
Condition and Results of Operations.
The following discussion of our financial condition and results of
operations should be read in conjunction with the financial
statements and related notes to the financial statements included
elsewhere in this Registration Statement. Some of the
statements under “Management’s Discussion and
Analysis,” “Description of Business” and
elsewhere herein may include forward-looking statements which
reflect our current views with respect to future events and
financial performance. These statements include forward-looking
statements both with respect to us specifically and the renewable
energy industry in general. Statements which include the words
“expect,” “intend,” “plan,”
“believe,” “project,”
“anticipate,” “will,” and similar
statements of a future or forward-looking nature identify
forward-looking statements for purposes of the federal securities
laws or otherwise. The safe harbor provisions of the federal
securities laws do not apply to any forward-looking statements
contained in this Registration Statement. All forward-looking
statements address such matters that involve risks and
uncertainties. Accordingly, there are or will be important factors
that could cause our actual results to differ materially from those
indicated in these statements. We undertake no obligation to
publicly update or review any forward-looking statements, whether
as a result of new information, future developments or otherwise.
If one or more of these or other risks or uncertainties
materialize, or if our underlying assumptions prove to be
incorrect, actual results may vary materially from what we
projected. Any forward-looking statements you read herein reflect
our current views with respect to future events and are subject to
these and other risks, uncertainties and assumptions relating to
our written and oral forward-looking statements attributable to us
or individuals acting on our behalf and such statements are
expressly qualified in their entirety by this
paragraph.
Overview
Tego Cyber, Inc. (was incorporated in the State of Nevada on
September 6, 2019. We are an early-stage provider
of advanced cyberthreat intelligence applications for larger
business enterprises. The Company has
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
Threat Intelligence Platform (TTIP) takes in vetted and curated
threat data and after utilizing a proprietary process, the platform
compiles, analyzes, and then delivers that data to an enterprise
network in a format that is timely, informative, and relevant. The
threat data provides additional context including specific details
needed to identify and counteract threats so that security teams
can spend less time searching for disparate information. The first
version of the TTIP will integrate with the widely accepted SPLUNK
platform to provide real-time threat intelligence to macro
enterprises using the SPLUNK architecture. The Company plans on
developing future versions of the TTIP for integration with other
established SIEM systems and platforms including: Elastic, IBM
QRadar, AT&T AlienVault, Exabeam, and
LogRhythm.
Results of operations for fiscal year ended June 30, 2021 compared
to period September 6, 2019 (inception) to June 30,
2020
Revenues
We are in our development stage and only generated $8,100 of
revenue for the fiscal year ended June 30, 2021 compared to $2,325
for the period September 6, 2019 (inception) to June 30,
2020.
We incurred total operating expenses of $674,918 for the fiscal
year ended June 30, 2021 compared to $79,527 for the period
September 6, 2019 (inception) to June 30, 2020. Of that was
$168,077 in legal and accounting expenses relating to the listing
of our common shares on the OTCQB compared to $26,429 for the
period September 6, 2019 (inception) to June 30, 2020. We also
incurred $167,250 in management fees compared to $34,700 for the
period September 6, 2019 (inception) to June 30, 2020. We also
incurred consulting and contracting fees in the amount of $95,938
relating to the development of the threat intelligence application
compared to $263 for the period September 6, 2019 (inception) to
June 30, 2020. We incurred $67,597 in investor relations and
shareholder communications compared to $nil for the period
September 6, 2019 (inception) to June 30, 2020.
Net Loss
We incurred a net loss of $923,180 for the fiscal year ended June
30, 2021 compared to a net loss of $77,202 for the period September
6, 2019 (date of inception) to June 30, 2020.
Liquidity and Capital Resources
As at June 30, 2021, the Company has a working capital surplus of
$652,296, a net loss of $923,180 and has earned limited revenue to
cover its operating costs. We have $583,015 cash on hand and our
burn rate is approximately $85,000 per month. Presently, our
operations are being funded by funds previously raised and we
believe our currently available capital resources are sufficient to
sustain our operations for a minimum of six (6) months. The Company
intends to fund future operations through equity financing
arrangements. The ability of the Company to realize its business
plan is dependent upon, among other things, obtaining additional
financing to continue operations, and development of its business
plan. In response to these problems, management intends to raise
additional funds through public or private placement offerings.
These factors, among others, raise substantial doubt about the
Company’s 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 fiscal year ended June 30, 2021, the cash flows used
in the Company’s operating activities was $578,415 compared
to $45,690 for the period September 6, 2019 (date of inception) to
June 30, 2020.
Cash Flow from Investing Activities
For the fiscal year ended June 30, 2021, the net cash used
in investing activities by the Company was $54,250 compared to
$18,250 for the period September 6, 2019 (date of inception) to
June 30, 2020.
Cash Flow from Financing Activities
For the fiscal year ended June 30, 2021, the net cash
provided by financing activities by the Company was $1,133,808
compared to $145,812 for the period September 6, 2019 (date of
inception) to June 30, 2020. The cash provided by financing
activities is related to the 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 and
debt proceeds 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.
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
Other than the disclosure of uncertainty regarding the ability for
us to continue as a going concern which was included in our
accountant’s report on the financial statements for the
fiscal year ended June 30, 2021; Harbouside CPA’s (formerly
known as Buckley Dodds) report on the financial statements of the
Company for the fiscal year ended June 30, 2021 did not contain an
adverse opinion or a disclaimer of opinion, nor were they qualified
or modified as to uncertainty, audit scope, or accounting
principles.
In connection with the audit and review of the financial statements
of the Company from the fiscal year ended June 30, 2021, there
were no disagreements on any matter of accounting principles or
practices, financial statement disclosures, or auditing scope or
procedures, which disagreements if not resolved to their
satisfaction would have caused them to make reference in connection
with Harbouside CPA’s opinion to the subject matter of the
disagreement.
In connection with the audited financial statements of the Company
for the fiscal year June 30, 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 the Company’s
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 of the Company for the
fiscal year ended June 30, 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 the Company to
significant concentrations of credit risk consist principally of
cash and accounts receivable. During the fiscal period ended June
30, 2021, substantially all of the Company’s 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, the Company extended credit based on an
evaluation of the customer’s financial condition. The Company
generally did not require collateral for accounts receivable and
maintained an allowance for doubtful accounts of accounts
receivable if necessary.
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 period ended June 30, 2021, based on management’s
best estimate of the amount of probable credit losses in accounts
receivable. The Company evaluates its allowance for doubtful
accounts based upon knowledge of its 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
June 30, 2021, there was no allowance for doubtful accounts and the
Company does 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. The
Company’s 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 the Company as of September 6, 2019. The
Company’s revenue recognition disclosure reflects its updated
accounting policies that are affected by this new standard. The
Company applied the “modified retrospective” transition
method for open contracts for the implementation of Topic 606. As
revenues are and have been primarily from consulting and management
services, and the Company has no significant post-delivery
obligations, this new standard did not result in a material
recognition of revenue on the Company’s accompanying
financial statements for the cumulative impact of applying this new
standard. The Company 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 and management 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 the Company’s 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 the Company satisfies each performance
obligation.
These five elements as applied to the Company’s consulting
and management services results in revenue recorded as services are
provided.
Income Taxes
The Company uses 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 the Company is 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
The Company’s functional and reporting currency is United
States dollars (“USD”). The Company maintains its
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. The Company had no dilutive securities for the period ended
June 30, 2021.
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. At this time, the Company does not expect
this standard to affect the Company’s 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 the Company's present or
future financial statements.
Item 8. Financial Statements and Supplementary Data.
TABLE OF CONTENTS
|
|
Report of Independent Registered Public
Accounting Firm
|
F-2
|
|
|
FINANCIAL STATEMENTS
|
|
|
|
|
|
|
Balance
Sheet
|
F-3
|
|
|
|
|
|
Statement
of Operations and Comprehensive Loss
|
F-4
|
|
|
|
|
|
Statement
of Changes in Shareholders’ Equity
|
F-5
|
|
|
|
|
Statement
of Cash Flows
|
F-6
|
|
|
|
|
Notes
to the Financial Statements
|
F-7
|
REPORT OF INDEPENDENT PUBLIC ACCOUNTING FIRM
To the
Shareholders and Board of Directors of Tego Cyber Inc.
Opinion on the Financial Statements
We have
audited the accompanying balance sheet of Tego Cyber Inc. (the
“Company”) as of June 30, 2021, and the related
statements of operations and comprehensive loss, changes in
shareholders’ equity, and cash flows for the year then ended
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 June 30, 2021, and the results of its operations and
its cash flows for the year then ended, in conformity with
accounting principles generally accepted in the United States of
America.
Basis for Opinion
These
financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on these
financial statements based on our audit. 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 audit in accordance with the auditing 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 audit, 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
audit 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 including examining, on a test basis,
evidence regarding the amounts and disclosures in the financial
statements. Our audit 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 audit provides a reasonable basis
for our opinion.
Emphasis of matter
The
accompanying financial statements have been prepared assuming that
Tego Cyber Inc. will continue as a going concern. As discussed in
Note 3 to the financial statements, the Company’s significant
operating losses raise substantial doubt about its ability to
continue as a going concern. The financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.
Vancouver,
British Columbia
|
/s/
Harbourside CPA LLP
|
Date
September 28, 2021
|
Chartered
Professional Accountants
|
TEGO CYBER INC.
BALANCE SHEET
(Expressed in US Dollars)
|
|
|
ASSETS
|
|
|
Current
assets
|
|
|
Cash
|
$583,015
|
$81,872
|
Accounts
receivable
|
1,450
|
150
|
Prepaid
expenses
|
113,462
|
-
|
Total current
assets
|
697,927
|
82,022
|
Software
|
75,750
|
21,500
|
TOTAL
ASSETS
|
$773,677
|
$103,522
|
|
|
|
LIABILITIES
& SHAREHOLDERS’ DEFICIT
|
|
|
Current
liabilities
|
|
|
Accounts payable
and accrued liabilities
|
$23,010
|
$15,554
|
Due to related
parties
|
-
|
1,358
|
Convertible
debts
|
22,621
|
-
|
TOTAL
LIABILITIES
|
45,631
|
16,912
|
SHAREHOLDERS’
EQUITY
|
|
|
Common
shares
50,000,000 shares
authorized
$0.001 par
value18,296,511shares issued and outstanding at June 30,
2021
|
18,297
|
12,406
|
Additional paid in
capital
|
1,720,631
|
175,906
|
Subscriptions
receivable
|
(10,500)
|
(24,500)
|
Accumulated
deficit
|
(1,000,382)
|
(77,202)
|
TOTAL
SHAREHOLDERS’ EQUITY
|
728,046
|
86,610
|
TOTAL
LIABILITIES & SHAREHOLDERS’ EQUITY
|
$773,677
|
$103,522
|
The
accompanying notes are an integral part of these financial
statements
TEGO CYBER INC.
STATEMENT OF OPERATIONS AND COMPREHENSIVE LOSS
(Expressed in US Dollars)
|
|
From
September 6,
2019
(date of
inception)
to June 30,
2020
|
REVENUE
|
|
|
|
$5,600
|
$2,325
|
|
2,500
|
-
|
TOTAL
REVENUE
|
8,100
|
2,325
|
OPERATING
EXPENSES
|
|
|
Adverting
& promotion
|
62,238
|
13,944
|
Bank
charges & fees
|
3,199
|
777
|
Consultants
& contractors
|
95,938
|
263
|
Exchange
& listing fees
|
47,176
|
-
|
Interest
on short term debt
|
9,865
|
-
|
Investor
relations & shareholder communications
|
67,597
|
-
|
Legal
& accounting
|
168,077
|
26,429
|
Management
fees
|
167,250
|
34,700
|
Meals
& entertainment
|
4,138
|
268
|
Office
& administration
|
9,569
|
798
|
Rent
& utilities
|
488
|
351
|
Subscriptions
& dues
|
1,672
|
493
|
Travel
& hotel
|
1,794
|
677
|
Website
& platform cost
|
35,917
|
827
|
TOTAL
OPERATING EXPENSES
|
674,918
|
79,527
|
|
|
|
OTHER
INCOME & EXPENSE
|
|
|
Accretion
expense
|
(168,638)
|
-
|
Financing
fees
|
(26,966)
|
-
|
Gain on
extinguishment of convertible debts
|
36,731
|
-
|
Loss on
settlement of convertible debts
|
(97,489)
|
-
|
TOTAL
OTHER INCOME & EXPENSE
|
(256,362)
|
-
|
|
|
|
NET
AND COMPREHENSIVE LOSS
|
$(923,180)
|
$(77,202)
|
BASIC
AND DILUTED LOSS PER COMMON SHARE
|
$(0.07)
|
$(0.01)
|
WEIGHTED
AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
|
13,566,628
|
7,790,648
|
The
accompanying notes are an integral part of these financial
statements
TEGO CYBER INC.
STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY
JUNE 30, 2021
(Expressed in US Dollars)
|
|
|
Additional
Paid-In
Capital
|
|
|
Total
Shareholders'
Equity
|
Balance,
September 6, 2019 (date of inception)
|
-
|
$-
|
$-
|
$-
|
$-
|
$-
|
Shares issued to
founders for services
|
8,000,000
|
8,000
|
-
|
-
|
-
|
8,000
|
Shares issued for
services
|
1,000,000
|
1,000
|
9,000
|
-
|
-
|
10,000
|
Shares issued for
cash
|
3,406,236
|
3,406
|
166,906
|
(24,500)
|
-
|
145,812
|
Net loss for period
ended June 30, 2020
|
-
|
-
|
-
|
-
|
(77,202)
|
(77,202)
|
Balance,
June 30, 2020
|
12,406,236
|
$12,406
|
$175,906
|
$(24,500)
|
$(77,202)
|
$86,610
|
|
|
|
|
|
|
|
Shares issued for
cash
|
5,041,190
|
5,042
|
1,155, 256
|
14,000
|
-
|
1,174,298
|
Shares issued for
services
|
299,752
|
300
|
74,638
|
-
|
-
|
74,938
|
Shares issued as
prepaid expenses
|
300,248
|
300
|
74,762
|
-
|
-
|
75,062
|
Shares issued for
settlement of debt
|
51,085
|
51
|
38,449
|
-
|
-
|
38,500
|
Shares issued as
transaction costs for convertible debts
|
198,000
|
198
|
32,802
|
-
|
-
|
33,000
|
Equity portion of
convertible debts
|
-
|
-
|
10,167
|
-
|
-
|
10,167
|
Warrants issued
with convertible debts
|
-
|
-
|
158,651
|
-
|
-
|
158,651
|
Net loss for the
year ended June 30, 2021
|
-
|
-
|
-
|
-
|
(923,180)
|
(923,180)
|
|
-
|
|
|
|
|
|
Balance, June 30, 2021
|
18,296,511
|
$18,297
|
$1,720,631
|
$(10,500)
|
$(1,000,382)
|
$728,046
|
The
accompanying notes are an integral part of these financial
statements
TEGO CYBER INC.
STATEMENT OF CASH FLOWS
(Expressed in US Dollars)
|
|
From
September 6,
2019
(date of
inception)
to June 30,
2020
|
CASH
FLOWS FROM OPERATING ACTIVITIES
|
|
|
Net loss for the
year
|
$(923,180)
|
$(77,202)
|
Items not affecting
cash
|
|
|
Shares
issued for services
|
74,938
|
18,000
|
Interest
on short term debt
|
8,567
|
-
|
Accretion
expense
|
168,638
|
-
|
Financing
fees
|
26,966
|
-
|
Gain on
extinguishment of convertible debts
|
(36,731)
|
-
|
Loss on
settlement of convertible debts
|
97,489
|
-
|
Changes in non-cash
working capital items:
|
|
|
Accounts
receivable
|
(1,300)
|
(150)
|
Prepaid
expenses
|
(38,400)
|
-
|
Accounts
payable and accrued liabilities
|
45,956
|
12,304
|
|
(1,358)
|
1,358
|
NET
CASH USED IN OPERATING ACTIVITIES
|
(578,415)
|
(45,690)
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES
|
|
|
Software
|
(54,250)
|
(18,250)
|
NET
CASH USED IN INVESTING ACTIVITIES
|
(54,250)
|
(18,250)
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES
|
|
|
Proceeds from
shares issued
|
1,149,798
|
145,812
|
Proceeds from
issuance of convertible debt
|
300,000
|
-
|
Repayment of
convertible debt
|
(312,240)
|
-
|
Convertible debt
issuance costs
|
(28,250)
|
-
|
Collection of
subscription receivable
|
24,500
|
-
|
NET
CASH PROVIDED BY FINANCING ACTIVITIES
|
1,133,808
|
145,812
|
|
|
|
NET
INCREASE IN CASH
|
501,143
|
81,872
|
CASH
AT BEGINNING OF THE PERIOD
|
81,872
|
-
|
CASH
AT END OF THE PERIOD
|
$583,015
|
$81,872
|
|
|
|
Non-cash
investing and financing activities:
|
|
|
Software
included in accounts payable
|
$-
|
$3,250
|
Shares
issued included in subscriptions receivable
|
$10,500
|
$24,500
|
Shares
issued for prepaid expenses
|
$75,062
|
$-
|
Shares
issued for settlement of debt
|
$38,500
|
$-
|
Shares
issued with convertible debts
|
$33,000
|
$-
|
Equity
portion of convertible debts
|
$10,167
|
$-
|
Warrants
issued with convertible debt
|
$158,651
|
$-
|
The
accompanying notes are an integral part of these audited financial
statements
NOTE 1 – ORGANIZATION AND DESCRIPTION OF
BUSINESS
Tego
Cyber Inc. (the “Company”) was incorporated on
September 6, 2019 in the State of Nevada. The Company has developed
an automated threat intelligence defense platform that provides
real-time protection against cyber-threats. The Company is focused
on filling the cyber-security skills gap with automated cyber
defense solutions, including a monthly software subscription to
users of the multiple router and firewall
manufacturers.
The
Company’s head office is at at 8565 S. Eastern Ave. #150, Las
Vegas, Nevada, 89123.
NOTE 2 – BASIS OF PRESENTATION
The
accompanying audited financial statements have been prepared in
accordance with generally accepted accounting principles in the
United States of America (“US GAAP”). In the opinion of
management, the financial statements include all adjustments of a
normal recurring nature necessary for a fair statement of the
results for the period presented.
The
accompanying financial statements have been prepared to present the
balance sheet, the statement of operations and comprehensive loss,
statement of changes in shareholders’ equity and the
statement of cash flows of the Company for the year ended June 30,
2021. The accompanying audited financial statements have been
prepared in accordance with US GAAP using Company-specific
information where available and allocations and estimates where
data is not maintained on a Company-specific basis within its books
and records. Due to the allocations and estimates used to prepare
the financial statements, they may not reflect the financial
position, cash flows and results of operations of the Company in
the future or its operations, cash flows and financial
position.
The
preparation of financial statements in accordance with US GAAP
requires the use of estimates and assumptions that affect the
reported amounts of assets and liabilities, disclosure of
contingent assets and liabilities known to exist as of the date the
financial statements are published, and the reported amounts of
revenues and expenses during the reporting period. Uncertainties
with respect to such estimates and assumptions are inherent in the
preparation of the Company’s financial statements;
accordingly, it is possible that the actual results could differ
from these estimates and assumptions and could have a material
effect on the reported amounts of the Company’s financial
position and results of operations.
NOTE 3 – GOING CONCERN UNCERTAINTY
The
accompanying financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and
satisfaction of liabilities in the normal course of the business.
The Company has incurred material losses from operations and has an
accumulated deficit. At June 30, 2021, the Company had a working
capital surplus of $652,296. For the year ended June 30, 2021, the
Company sustained net losses and generated negative cash flows from
operations. In March 2020, the World Health Organization recognized
the outbreak of COVID-19 as a global pandemic. The COVID-19
pandemic and government actions implemented to contain the further
spread of COVID-19 have severely restricted economic activity
around the world. These factors, among others, raise substantial
doubt about the Company’s ability to continue 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 may
be necessary should the Company be unable to continue as a going
concern. These adjustments could be material. The Company’s
continuation as a going concern is contingent upon its ability to
earn adequate revenues from operations and to obtain additional
financing. There is no assurance that the Company will be able to
obtain such financings or obtain them on favorable
terms.
NOTE 4 – SUMMARY OF SIGNIFICANT 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 the Company’s 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
balance sheet, the statement of operations and comprehensive loss,
statement of changes in shareholders’ equity and statement of
cash flows of the Company for the period ended June 30, 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 the Company to significant
concentrations of credit risk consist principally of cash and
accounts receivable. As at June 30, 2021, substantially all of the
Company’s 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, the Company
extended credit based on an evaluation of the customer’s
financial condition. The Company generally did not require
collateral for accounts receivable and maintained an allowance for
doubtful accounts of accounts receivable if necessary.
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 period ended June 30, 2021, based on management’s best
estimate of the amount of probable credit losses in accounts
receivable. The Company evaluates its allowance for doubtful
accounts based upon knowledge of its 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
June 30, 2021, there was no allowance for doubtful accounts and the
Company does not have any off-balance-sheet credit exposure related
to its customers.
Software
Software
is stated at cost less accumulated amortization and is depreciated
using the straight-line method over the estimated useful life of
the asset. The estimated useful life of the asset is 5 years and is
not depreciated until it is available for use by the
Company.
Leases
The
Company determines if an arrangement is a lease at inception.
Operating and financing right-of-use assets and lease liabilities
are included on the balance sheet. Right-of-use assets represent
the Company’s right to use an underlying asset for the lease
term and lease liabilities represent the Company’s obligation
to make lease payments arising from the lease. Right-of-use assets
and liabilities are recognized at commencement date based on the
present value of lease payments over the lease term. The Company
uses its incremental borrowing rate, based on the information
available at the commencement date, in determining the present
value of future lease payments. Right-of-use assets include any
prepaid lease payments and exclude any lease incentives and initial
direct costs incurred. Operating lease expenses are recognized on a
straight-line basis over the term of the lease, consisting of
interest accrued on the lease liability and depreciation of the
right-of-use asset. The lease terms may include options to extend
or terminate the lease is it is reasonably certain the Company will
exercise that option. As at June 30, 2021, the Company had no
leases.
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. The Company’s 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:
Fair Value of Financial Instruments (continued)
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 receivable, accounts payable and accrued liabilities
and due to related parties, 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.
For
convertible debts, the carrying values, excluding any unamortized
discounts, approximate the respective fair value. The convertible
debts have been discounted to reflect their net present value as at
June 30, 2021. The carrying values of embedded conversion features
not considered to be derivative instruments were determined by
allocating the remaining carrying value of the convertible debt
after deducting the estimated carrying value of the liability
portion.
Estimating
fair value for warrants require determining the most appropriate
valuation model which is dependent on the terms and conditions of
the grant. This estimate requires determining the most appropriate
inputs to the valuation model including the expected life of the
warrant, volatility, dividend yield, and rate of forfeitures and
making assumptions about them.
Revenue Recognition
Revenue
from providing consulting and management services 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 the Company’s 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 the Company satisfies each performance
obligation.
These
five elements as applied to the Company’s consulting services
results in revenue recorded as services are provided.
Income Taxes
The
Company uses 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 the Company is 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
The
Company’s functional and reporting currency is United States
dollars (“USD”). The Company maintains its 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).
Earnings (Loss) per Share
Basic
earnings (loss) per share is computed by dividing income (loss)
available to common shareholders by the weighted-average number of
common shares outstanding during the period. Diluted earnings
(loss) per share is computed similar to basic earnings (loss) 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 (loss) per share assume the conversion, exercise or
issuance of all common stock instruments unless the effect is to
reduce a loss or increase earnings (loss) per share. The Company
had no dilutive securities for the year ended June 30,
2021.
Recently Issued Accounting Pronouncements
In
December 2019, the FASB issued ASU 2019-2, Simplifying the Accounting for Income
Taxes which amends ASC 740 Income Taxes (ASC 740). This update is
intended to simplify accounting for income taxes by removing
certain exceptions to the general principles in ASC 740 and
amending existing guidance to improve consistent application of ASC
740. This update is effective for fiscal years beginning after
December 15, 2021. The guidance in this update has various
elements, some of which are applied on a prospective basis and
others on a retrospective basis with earlier application permitted.
The Company is currently evaluating the effect of this ASU on the
Company’s financial statements and related
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 the Company's present or future financial
statements.
NOTE 5 – SOFTWARE
Balance, September
6, 2019
|
$-
|
Additions
|
21,500
|
Depreciation
|
-
|
|
21,500
|
Additions
|
54,250
|
Depreciation
|
-
|
Balance, June 30,
2021
|
$75,750
|
As at
June 30, 2021 and 2020, the software is not in use and no
depreciation has been recorded for the periods then
ended.
NOTE 6 – RELATED PARTY TRANSACTIONS
Related
party transactions are measured at the exchange amount, which is
the amount of consideration established and agreed to by the
related parties. Related parties are natural persons or other
entities that have the ability, directly, or indirectly, to control
another party or exercise significant influence over the party in
making financial and operating decisions. Related parties include
other parties that are subject to common control or that are
subject to common significant influences.
On the
date of incorporation 8,000,000 shares were issued to directors and
founders at par value as per the following in exchange for concept
and services valued at $8,000: Shannon Wilkinson, Director, CEO,
CFO, Secretary, Treasurer: 3,000,000; Troy Wilkinson, Director,
President: 3,000,000; Michael De Valera, Director: 1,000,000; and
Stephen Seminew, Co-Founder 1,000,000.
During
the year ended June 30, 2021, there were transactions incurred
between the Company and Shannon Wilkinson, Director, CEO, CFO,
Secretary and Treasurer for management fees of $134,750 (June 30,
2020 - $29,700) and reimbursement of expenses incurred on behalf of
the Company. As of June 30, 2021, included in due to related
parties, is $Nil (June 30, 2020 - $1,308) due to this
officer.
During
the year ended June 30, 2021, there were transactions incurred
between the Company and Chris White, Director and President of the
Company for management fees of $32,500 (June 30, 2020 -
$Nil). As of June 30, 2021, included in due to related
parties, is $Nil (June 30, 2020 - $Nil) due to this
officer.
During
the year ended June 30, 2021, there were transactions incurred
between the Company and other related parties for management fees
of $Nil (June 30, 2020 - $5,000) and reimbursement of expenses
incurred on behalf of the Company. As of June 20, 2021, included in
due to related parties, is $Nil (June 30, 2020 - $50) due to
them.
NOTE 7 – COMMON SHARES
At June
30, 2021, the Company’s authorized capital consisted of
50,000,000 of common shares with a $0.001 par value and 18,296,511
shares were issued and outstanding.
During the period ended June 30, 2020, the Company incurred the
following transactions:
On
November 4, 2019, the Company issued 8,000,000 shares to the
founders with a fair value of $8,000 in exchange for
services.
On
November 15, 2019, the Company issued 1,000,000 shares to two
non-related parties with a fair value of $10,000 in exchange for
services.
During
the period from November 15, 2019 to June 30, 2020, the Company
completed various private placements whereby a total of 3,406,236
common shares were issued at a price of $0.05 per share for a total
value of $170,312. As at June 30, 2020, $24,500 of the
subscriptions still remained receivable.
During the year ended June 30, 2021, the Company incurred the
following transactions:
During
the period from July 2, 2020 to July 31, 2020, the Company
completed various private placements whereby a total of 500,000
common shares were issued at a price of $0.05 per share for a total
value of $25,000.
During
the period from November 24, 2020 to June 30, 2021, the Company
completed various private placements whereby a total of 4,541,190
common shares were issued at a price of $0.25 per share for a total
value of $1,135,298. As at June 31, 2021, $10,500 of the
subscriptions still remained receivable.
On
December 28, 2020, the Company issued 110,000 shares to a
non-related party at a price of $0.10 per share for a total value
of $11,000 as commitment shares in exchange for services related to
the issuance of convertible debt on Note 8 (c).
On
March 29, 2021, the Company issued 88,000 shares to a non-related
party at a price of $0.25 per share for a total value of $22,000 as
debt issuance costs related to the issuance of convertible debt on
Note 8 (d).
On
March 29, 2021, the Company issued 100,000 shares to a director of
the Company at a price of $0.25 per share for a total value of
$25,000 in exchange for services.
On
April 12, 2021, the Company issued 400,000 shares to a non-related
party at a price of $0.25 per share for a total value of $100,000
in exchange for services. A portion of the services are yet to be
incurred and have been recorded as prepaid expenses for a total
value of $56,312.
On
April 15, 2021, the Company issued 100,000 shares to a non-related
party at a price of $0.25 per share for a total value of $25,000 in
exchange for services. A portion of the services are yet to be
incurred and have been recorded as prepaid expenses for a total
value of $18,750.
On June
21, 2021, the Company issued 41,085 shares to a non-related party
at a price of $0.73 per share for a total value of $30,000 as
settlement of debt.
On June
25, 2021, the Company issued 10,000 shares to a non-related party
at a price of $0.85 per share for a total value of $8,500 as
settlement of debt.
Warrants
On
December 28, 2020, the Company granted 1,100,000 warrants with a
contractual life of two years and exercise price of $0.25 per share
to a lender as part of the convertible debt financing transaction
(Note 8 (b)). The warrants were valued at $145,744 using the Black
Scholes Option Pricing Model.
On
March 25, 2021, the Company granted 1,100,000 warrants with a
contractual life of two years and exercise price of $0.25 per share
to a lender as part of the convertible debt financing transaction
(Note 8 (c)). The warrants were valued at $147,266 using the Black
Scholes Option Pricing Model.
On
April 22, 2021, the Company granted 506,838 warrants with a
contractual life of two years and exercise price of $0.25 per share
to a lender as part of the convertible debt financing transaction
(Note 8 (a)). The warrants were valued at $399,087 using the Black
Scholes Option Pricing Model.
On
April 28, 2021, the Company granted 307,408 warrants with a
contractual life of two years and exercise price of $0.25 per share
to a lender as part of the convertible debt financing transaction
(Note 8 (a)). The warrants were valued at $196,399 using the Black
Scholes Option Pricing Model.
The
Black Scholes Option Pricing Model assumptions used in the
valuation of the warrants are outlined below. The stock price was
based on recent issuances. Expected life was based on the expiry
date of the warrants as the Company did not have historical
exercise data of such warrants.
|
|
Stock
price
|
$0.85 - $0.25
|
Risk-free
interest rate
|
0.13% - 0.17%
|
Expected life
|
|
Expected
dividend rate
|
0%
|
Expected
volatility
|
102.03% - 206.63%
|
Continuity
of the Company’s common stock purchase warrants issued and
outstanding is as follows:
|
|
Weighted
Average
Exercise
Price
|
Outstanding, June
30, 2020
|
-
|
$-
|
Granted
|
3,014,246
|
0.25
|
Exercised
|
-
|
-
|
Expired
|
-
|
-
|
Outstanding, June
30, 2021
|
3,014,246
|
$0.25
|
As at
June 30, 2021, the weighted average remaining contractual life of
warrants outstanding was 1.21 years with an intrinsic value of
$0.25.
NOTE 8 – CONVERTIBLE DEBTS
(a)
On November 10,
2020, the Company issued a convertible debt in the principal amount
of $20,000 each in exchange for cash. The convertible debt is
unsecured, bears interest at 8% per annum compounded on the basis
of a 365-day year and actual days lapsed, is convertible at $0.10
per 1 common share, and has a maturity date of May 10, 2021. The
carrying value of beneficial conversion features not considered to
be derivative instruments were determined by allocating the
intrinsic value of the conversion features from proceeds. As a
result, total proceeds of $20,000 were allocated to the beneficial
conversion feature, recorded as equity portions of convertible debt
and there were no remaining proceeds available for allocation to
the liability portion of the convertible debt. The convertible debt
was discounted by the amounts allocated to the conversion
features.
On
April 22, 2021, the Company renegotiated the terms of the
convertible debt in exchange for a new convertible debt in the
principal amount of $55,245 at $50,684, with $4,561 original issue
discount, for additional cash proceeds of $30,000 and surrender of
the convertible note previously issued. In connection with the
note, the Company issued 506,838 warrants exercisable at $0.25 per
share, expiring on April 22, 2023. The warrants were calculated to
have a relative fair value of $44,088. The convertible debt is
unsecured, bears interest at 8% per annum compounded on the basis
of a 365-day year and actual days elapsed, is convertible at $0.10
per 1 common share, and matures on January 22, 2022. The terms of
the new convertible debt were substantially different and deemed
extinguished resulting in a gain of $18,049 recorded on
extinguishment of convertible debt.
The
proceeds were allocated between the convertible debt and warrants
on a relative fair value basis, and the issuance costs were
proportioned accordingly. The fair value of the convertible debt
was calculated using the present value of the debt and related
interest at 12% incremental borrowing rate as the discount rate.
The warrants were valued using the Black Scholes Option Pricing
Model (Note 7).
The
carrying value of beneficial conversion features not considered to
be derivative instruments was determined by allocating $5,912 for
the intrinsic value of the conversion features from the remaining
proceeds allocated to the convertible debt after deducting the
amount allocated to the warrants. As such, there were no remaining
proceeds available for allocating to the liability portion of the
convertible debt. As at June 30, 2021, the carrying value of this
convertible debt was $14,374 (June 30, 2020 - $Nil) net of $40,871
unamortized discounts.
(b)
On November 10,
2020, the Company issued a convertible debt in the principal amount
of $20,000 each in exchange for cash. The convertible debt is
unsecured, bears interest at 8% per annum compounded on the basis
of a 365-day year and actual days lapsed, is convertible at $0.10
per 1 common share, and has a maturity date of May 10, 2021. The
carrying value of beneficial conversion features not considered to
be derivative instruments were determined by allocating the
intrinsic value of the conversion features from proceeds. As a
result, total proceeds of $20,000 were allocated to the beneficial
conversion feature, recorded as equity portions of convertible debt
and there were no remaining proceeds available for allocation to
the liability portion of the convertible debt. The convertible debt
was discounted by the amounts allocated to the conversion
features.
On
April 28, 2021, the Company renegotiated the terms of the
convertible debt in exchange for a new convertible debt in the
principal amount of $33,508 at $30,741, with $$2,767 original issue
discount, for additional cash proceeds of $10,000 and surrender of
the convertible note previously issued. In connection with the
note, the Company issued 307,408 warrants exercisable at $0.25 per
share, expiring on April 28, 2023. The warrants were calculated to
have a relative fair value of $25,745. The convertible debt is
unsecured, bears interest at 8% per annum compounded on the basis
of a 365-day year and actual days elapsed, is convertible at $0.10
per 1 common share, and matures on January 28, 2022. The terms of
the new convertible debt were substantially different and deemed
extinguished resulting in a gain of $18,682 recorded on
extinguishment of convertible debt.
The
proceeds were allocated between the convertible debt and warrants
on a relative fair value basis, and the issuance costs were
proportioned accordingly. The fair value of the convertible debt
was calculated using the present value of the debt and related
interest at 12% incremental borrowing rate as the discount rate.
The warrants were valued using the Black Scholes Option Pricing
Model (Note 7).
The
carrying value of beneficial conversion features not considered to
be derivative instruments was determined by allocating $4,255 for
the intrinsic value of the conversion features from the remaining
proceeds allocated to the convertible debt after deducting the
amount allocated to the warrants. As such, there were no remaining
proceeds available for allocating to the liability portion of the
convertible debt. As at June 30, 2021, the carrying value of this
convertible debt was $8,247 (June 30, 2020 - $Nil) net of $25,261
unamortized discounts.
(c)
On December 28,
2020, the Company entered into a securities purchase agreement with
a non-related party. Pursuant to this agreement, the Company issued
a convertible debt in the principal amount of $120,000 at $110,000
with $10,000 original issue discount. In connection with this note,
the Company paid an additional $15,000 in cash transaction costs,
issued 110,000 common shares valued at $11,000 in transaction
costs, and issued 1,100,000 warrants exercisable at $0.25 per
share, expiring on December 28, 2022. The warrants were calculated
to have a fair value of $67,555, which was reduced by the equity
components of the transaction costs of $20,657, leaving a value of
$46,898 as at March 31, 2021. This convertible debt is unsecured,
bears interest at 8% per annum compounded on the basis of a 365-day
year and actual days lapsed, is convertible at $0.10 per 1 common
share, and matures on September 28, 2021.
The
proceeds were allocated between the convertible debt and warrants
on a relative fair value basis, and the issuance costs were
proportioned accordingly. The fair value of the convertible debt
was calculated using the present value of the debt and related
interest at 12% incremental borrowing rate as the discount rate.
The warrants were valued using the Black Scholes Option Pricing
Model (Note 7).
The
carrying value of beneficial conversion features not considered to
be derivative instruments was determined by allocating $41,961 for
the intrinsic value of the conversion features from the remaining
proceeds allocated to the convertible debt after conducting the
amount allocated to the warrants. As such, there were no remaining
proceeds available for allocating to the liability portion of the
convertible debt.
On June
18, 2021, the Company settled the convertible debt with a payment
of $165,360 resulting in a loss on settlement of convertible debt
of $41,037.
(d)
On March 25, 2021,
the Company entered into a securities purchase agreement with a
non-related party. Pursuant to this agreement, the Company issued a
convertible debt in the principal amount of $120,000 at $110,000
with $10,000 original issue discount. In connection with this note,
the Company paid an additional $13,250 in cash transactions, issued
88,000 common shares valued at $22,000 in transaction costs, and
issued 1,100,000 warrants exercisable at $0.25 per share, expiring
on March 25, 2023. The warrants were calculated to have a fair
value of $74,026, which was reduced by the equity components of the
transaction costs of $32,106, leaving a value of $41,920 as at
March 31, 2021. This convertible debt is unsecured, bears interest
at 8% per annum compounded on the basis of a 365-day year and
actual days lapsed, is convertible at $0.10 per 1 common share, and
matures in nine months on December 25, 2021.
The
proceeds were allocated between the convertible debt and warrants
on a relative fair value basis, and the issuance costs were
proportioned accordingly. The fair value of the convertible debt
was calculated using the present value of the debt and related
interest at 12% incremental borrowing rate as the discount rate.
The warrants were valued using the Black Scholes Option Pricing
Model (Note 7).
The
carrying value of beneficial conversion features not considered to
be derivative instruments was determined by allocating $42,492 for
the intrinsic value of the conversion features from the remaining
proceeds allocated to the convertible debt after conducting the
amount allocated to the warrants. As such, there were no remaining
proceeds available for allocating to the liability portion of the
convertible debt.
On June
29, 2021, the Company settled the convertible debt with a payment
of $146,880 resulting in a loss on settlement of convertible debt
of $56,452.
NOTE 9 – COMMITMENTS AND CONTINGENCIES
The
Company leases its corporate office located at 8565 S. Eastern Ave.
#150, Las Vegas, Nevada. The initial lease term is for 12 months
commencing on September 8, 2019 after which the term is on a
month-to-month basis. After the initial term, the Company may
cancel the lease agreement at any time by providing 30 days written
notice. The Company has elected the short-term lease practical
expedient of 12 months and has not recorded a lease.
NOTE 10 – INCOME TAXES
As of
June 30, 2021, the Company was in a loss position; therefore no
deferred tax liability was recognized related to the undistributed
earnings subject to withholding tax.
Net
operating loss carry forward of the Company, amounted to $701,884
(June 30, 2020 - $79,527) for the period ended June 30, 2021. The
net operating loss carry forwards are available to be utilized
against future taxable income for years through calendar year 2041.
In assessing the reliability of deferred income tax assets,
management considers whether it is more likely than not
that
NOTE 10 – INCOME TAXES (CONTINUED)
some
portion or all of the deferred income tax assets will not be
realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the
periods in which those temporary differences become deductible.
Management considers the scheduled projected future taxable income,
and tax planning strategies in making this assessment.
NOTE 11 – SUBSEQUENT EVENTS
Subsequent
to June 30, 2021, the Company completed various private placements
whereby a total of 5,458,810 common shares were issued at a price
of $0.25 per share for a total value of $1,364,703.