10-Q: CyberloQ Technologies Reports Q3 2024 Results, Cites Increased Development Costs and Convertible Debt

CyberloQ Technologies' Q3 2024 report reveals a net loss of $215,900, with increased operating expenses driven by software development and a rise in convertible debt.

Summary

• CyberloQ Technologies reported its financial results for the third quarter of 2024, showing a net loss of $215,900.
• The company's total revenue for the nine months ended September 30, 2024, was $15,000, compared to $993 for the same period in 2023.
• Operating expenses for the nine months ended September 30, 2024, increased to $517,419 from $272,596 in 2023, primarily due to higher professional fees related to software development.
• The company's assets totaled $1,670,307 as of September 30, 2024, up from $1,458,565 at the end of 2023, with the increase mainly due to capitalized software development costs.
• Liabilities significantly increased to $2,495,078 from $1,021,359, largely due to a rise in convertible debt to $1,916,859.
• The company's cash position decreased to $190,155 from $307,174 at the end of 2023.
• The company has an accumulated deficit of $8,373,129 as of September 30, 2024, and anticipates further losses.
• There is substantial doubt about the entity's ability to continue as a going concern within one year after the financial statements are issued.

Sentiment

Score: 3

Explanation: The document presents a concerning financial picture with significant losses, increased debt, and a going concern warning. While there is some revenue growth, the overall sentiment is negative due to the company's financial instability and operational challenges.

Positives

• The company's revenue increased significantly to $15,000 for the first nine months of 2024, compared to $993 for the same period in 2023.
• The company has successfully capitalized $335,894 in software development costs for the CyberloQ platform, indicating progress in product development.
• The company has secured $556,859 in convertible debt, providing necessary capital for operations.

Negatives

• The company reported a net loss of $215,900 for the third quarter of 2024.
• Operating expenses increased significantly to $517,419 for the nine months ended September 30, 2024, primarily due to increased software development costs.
• The company's cash balance decreased to $190,155 as of September 30, 2024.
• The company has an accumulated deficit of $8,373,129 as of September 30, 2024.
• There is substantial doubt about the company's ability to continue as a going concern.

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 its ability to raise additional capital to continue operations.
• The company's business involves the collection, storage, processing and transmission of customers personal data, including financial information, which could be subject to cyber-attacks.
• The company's disclosure controls and procedures were not effective as of September 30, 2024.
• The company does not have sufficient staff to maintain appropriate segregation of duties.

Future Outlook

The company anticipates further losses 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, but there are no assurances of success.

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 nine months of 2024 is very low compared to established companies in the fraud prevention and credit management space.
• The company's significant increase in operating expenses, particularly in professional fees related to software development, is not uncommon for early-stage technology companies but needs to be balanced with revenue generation.
• The company's reliance on convertible debt for funding is a common practice for startups but also increases financial risk.
• The company's accumulated deficit and going concern warning are significant concerns that are not typical for more established companies in the industry.
• The company's lack of effective disclosure controls and procedures is a serious issue that needs to be addressed to meet industry standards for financial reporting.

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 several notes payable to stockholders and related parties.
• The company has commission agreements with a shareholder and director, as well as two sales managers.

Stakeholder Impact

• Shareholders face significant risk due to the company's financial instability and going concern status.
• Employees may be impacted by the company's financial challenges and potential need for restructuring.
• Customers may be concerned about the company's ability to continue providing services.
• Creditors face increased risk due to the company's high level of debt and financial instability.

Next Steps

• The company needs to focus on generating operational revenue to reduce its reliance on external funding.
• The company needs to improve its internal controls and procedures to ensure accurate financial reporting.
• The company needs to secure additional funding to continue its operations and address its going concern status.

Key Dates

Keywords

CyberloQ, fraud prevention, credit management, software platform, multi-factor authentication, convertible debt, software development, financial results, operating expenses, net loss