10-Q: Tego Cyber Inc. Reports Q3 2024 Results with Revenue Growth but Continued Losses

Tego Cyber Inc. reported its Q3 2024 results, showing initial revenue from its software subscriptions but also significant net losses and a working capital deficit.

Summary

• Tego Cyber Inc., a cybersecurity company, released its financial results for the quarter ended March 31, 2024.
• The company generated $14,231 in revenue from software subscriptions for the three months ended March 31, 2024, and $24,962 for the nine months ended March 31, 2024.
• Operating expenses were $695,686 for the quarter and $2,647,205 for the nine-month period.
• The company reported a net loss of $1,062,163 for the quarter and $7,389,314 for the nine-month period.
• Tego Cyber has a working capital deficit of $1,452,247 as of March 31, 2024, and a negative cash flow from operations of $673,962 for the nine-month period.
• The company's cash balance was $69,284 as of March 31, 2024, with a monthly burn rate of approximately $70,000.
• The company is relying on equity sales and debt financing to fund operations and has issued shares for services, debt settlements, and private placements.
• There is substantial doubt about the company's ability to continue as a going concern without additional financing.

Sentiment

Score: 3

Explanation: The document indicates significant financial challenges, including substantial losses, a working capital deficit, and a low cash balance, raising serious concerns about the company's viability. While there is some positive news about initial revenue, the overall sentiment is negative due to the financial instability and going concern uncertainty.

Positives

• The company successfully generated its first revenue from software subscriptions, indicating initial market traction.
• Operating expenses have decreased significantly compared to the previous year, reflecting cost-cutting measures.
• The company has completed the first version of its technology for integration with the Splunk SIEM platform, which is now commercially available.

Negatives

• The company continues to incur significant net losses, with a net loss of $7,389,314 for the nine months ended March 31, 2024.
• Tego Cyber has a substantial working capital deficit of $1,452,247, raising concerns about its short-term financial stability.
• The company's cash balance is low at $69,284, with a monthly burn rate of $70,000, indicating a need for immediate funding.
• There is substantial doubt about the company's ability to continue as a going concern without additional financing.
• The company has material weaknesses in its internal controls over financial reporting due to limited personnel and lack of segregation of duties.

Risks

• The company's ability to continue as a going concern is contingent upon its ability to secure additional financing and generate adequate revenue.
• The company faces risks related to the competitive market, the efficient operation of its systems, and the retention of key personnel.
• There is a risk of dilution for existing stockholders due to the company's reliance on equity sales to fund operations.
• The company has material weaknesses in its internal controls over financial reporting, which could lead to misstatements in financial reports.
• The company's limited personnel and lack of segregation of duties pose a risk to the accuracy and reliability of financial reporting.

Future Outlook

The company intends to fund future operations through equity financing arrangements and is exploring debt financing options, but there is no assurance that they will be successful in obtaining additional financing.

Management Comments

• Management intends to raise additional funds through debt, public or private placement offerings.
• Management believes the financial information presented herein is materially correct and fairly presents the financial position and operating results of the three months ended September 30, 2023, in accordance with GAAP.

Industry Context

The company operates in the competitive cybersecurity market, focusing on threat intelligence and autonomous threat hunting/correlation, which are areas of increasing importance for enterprises.

Comparison to Industry Standards

• It is difficult to directly compare Tego Cyber's results to industry standards due to its early stage and specific focus on threat intelligence and correlation.
• Many established cybersecurity companies have significantly higher revenue and lower losses, but they also have more mature products and larger customer bases.
• Companies like CrowdStrike and Palo Alto Networks, while operating in the broader cybersecurity space, have much larger scale and resources.
• Tego Cyber's revenue of $24,962 for the nine months is very low compared to industry benchmarks, indicating a need for significant growth.
• The company's high operating expenses and net losses are typical for early-stage tech companies, but the substantial working capital deficit and low cash balance are concerning.

Management Changes

Corporate Governance

Legal Proceedings

• The company is not currently involved in any material legal proceedings.

Related Party Transactions

• During the nine months ended March 31, 2024, there were transactions incurred between the Company and Shannon Wilkinson, a Director, Chief Technical Officer and former Chief Executive Officer (CEO) of the Company, for gross wages of $15,000 and management fees of $80,504.
• During the nine months ended March 31, 2024, there were transactions incurred between the Company and Robert Mikkelsen, current CEO and CFO of the Company, for management fees of $47,500.
• During the nine months ended March 31, 2024, there were transactions incurred between the Company and Earl Johnson, former Chief Financial Officer (CFO) of the Company, for gross wages of $4,500 and management fees of $4,500.

Stakeholder Impact

• Shareholders face the risk of dilution due to the company's reliance on equity sales.
• Employees may be concerned about the company's financial stability and ability to continue operations.
• Customers may be concerned about the company's long-term viability and ability to support its products.
• Creditors face the risk of non-payment due to the company's financial difficulties.

Next Steps

• The company intends to raise additional funds through debt, public or private placement offerings.
• The company intends to seek qualified accounting staff to expand its internal accounting and reporting functions.
• The Board expects to appoint an Audit Committee and to identify a committee Chairman who is an audit committee financial expert during 2024-2025.

Key Dates

Keywords

cybersecurity, software subscriptions, threat intelligence, financial results, net loss, working capital, going concern, equity financing, debt financing, internal controls