10-Q: CyberloQ Technologies Reports Mixed Results in Q2 2024, Cites Increased Development Costs and Convertible Debt

CyberloQ Technologies' Q2 2024 report reveals increased operating expenses due to software development and professional fees, alongside a rise in convertible debt, impacting overall financial performance.

Summary

• CyberloQ Technologies reported its financial results for the second quarter of 2024, showing a net loss of $217,987 for the three months ended June 30, 2024, compared to a net loss of $213,727 for the same period in 2023.
• For the six months ended June 30, 2024, the company's net loss was $464,796, compared to $370,239 for the same period in 2023.
• The company's revenue for the six months ended June 30, 2024 was $15,000, a slight increase from $993 in the same period of 2023.
• Operating expenses increased significantly to $373,055 for the six months ended June 30, 2024, up from $191,175 in the same period of 2023, primarily due to higher professional fees and officer compensation.
• The company's total assets increased to $1,502,984 as of June 30, 2024, from $1,458,565 at the end of 2023, while total liabilities rose to $2,126,855 from $1,021,359.
• The increase in liabilities is largely due to a rise in convertible debt, which reached $1,616,859 as of June 30, 2024, compared to $574,718 at the end of 2023.
• The company capitalized $207,214 in software development costs for the CyberloQ platform during the six months ended June 30, 2024.
• The company also capitalized $1,200 in website development costs during the same period.
• The company has an accumulated deficit of $8,157,229 as of June 30, 2024, and anticipates further losses in the development of its business.

Sentiment

Score: 3

Explanation: The document indicates a struggling company with increasing losses, high debt, and reliance on future capital raises. While there is some revenue growth, the overall financial picture is concerning.

Positives

• The company's revenue increased to $15,000 for the first six months of 2024, up from $993 in the same period of 2023.
• The company has successfully capitalized software development costs for the CyberloQ platform and website development, indicating progress in product development.

Negatives

• The company experienced a net loss of $464,796 for the first six months of 2024.
• Operating expenses significantly increased to $373,055 for the first six months of 2024.
• The company's total liabilities exceeded its total assets by $623,871 as of June 30, 2024.
• The company has an accumulated deficit of $8,157,229 as of June 30, 2024.
• The company is reliant on raising additional capital to continue operations.

Risks

• The company has a history of losses and negative operating cash flows.
• The company has a limited operating history.
• The company faces significant industry competition.
• The company is reliant on attracting and retaining key personnel.
• The company's ability to continue as a going concern is dependent on generating profitable operations or obtaining additional financing.
• The company's disclosure controls and procedures were not effective as of June 30, 2024.
• The company lacks sufficient staff to maintain appropriate segregation of duties related to internal control processes.
• The company could incur increased costs, decreased revenue, or suffer reputational damage in the event of a cyber-attack.

Future Outlook

The company anticipates further losses in the development of its business and is dependent on additional investment capital to fund operating expenses. The company intends to position itself to raise additional funds through the capital markets.

Management Comments

• Management believes that the multi-purpose functionality of CyberloQ, along with its multi-purpose applications will give the Company a distinct advantage by comparison.
• Management anticipates that the Company will be dependent, for the near future, on additional investment capital to fund operating expenses.

Industry Context

The company operates in the competitive fraud prevention and credit management technology sector, facing competition from established players like Wells Fargo, Discover Card, and Ondot Systems. The company is attempting to differentiate itself through the multi-purpose functionality of its CyberloQ platform and its ability to be white-labeled.

Comparison to Industry Standards

• The company's revenue of $15,000 for the first six months of 2024 is significantly lower than many established competitors in the fintech space, such as Ondot Systems, which has secured large contracts with major financial institutions.
• The company's net loss of $464,796 for the first six months of 2024 is indicative of a company still in its development stage, while established competitors are typically profitable or have significantly lower losses.
• The company's reliance on convertible debt for funding is a common practice for early-stage tech companies, but the high level of debt compared to its assets raises concerns about its long-term financial stability.
• The company's capitalization of software development costs is a standard accounting practice, but the amount of $207,214 for the CyberloQ platform suggests a significant investment in product development, which needs to translate into revenue growth.
• The company's lack of effective disclosure controls and procedures is a concern, as it indicates a potential weakness in its internal controls compared to industry best practices.

Legal Proceedings

• The litigation related to the Separation and Release of Claims Agreement has been dismissed without prejudice and is no longer pending.

Related Party Transactions

• The company has notes payable to stockholders totaling $35,000.
• The company has convertible debt to stockholders totaling $1,616,859.
• The company has notes payable to related parties totaling $150,000.

Stakeholder Impact

• Shareholders face the risk of further dilution due to potential capital raises.
• Employees are at risk due to the company's financial instability.
• Customers may be concerned about the company's ability to continue providing services.
• Creditors face the risk of non-payment due to the company's high debt levels.

Next Steps

• The company intends to position itself to raise additional funds through the capital markets.
• The company plans to continue the development of its CyberloQ platform and TurnScor product.

Key Dates

Keywords

CyberloQ, financial results, software development, convertible debt, operating expenses, net loss, revenue, fraud prevention, credit management, technology