UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended:
or
For the transition period from ________ to ________
Commission File Number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) |
(Address of principal executive offices)
Tel:
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Title of each class |
| Trading Symbol(s) |
| Name of each exchange on which registered |
N/A |
| N/A |
| N/A |
Securities registered pursuant to Section 12(g) of the Act: None
Title of each class |
| Trading Symbol(s) |
| Name of each exchange on which registered |
Common Stock, $0.001 par value |
| SCTH |
| OTC Pink Exchange |
Indicate by check mark whether the registrant (1) has filed all reports to be filed by Section 13 or Section 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulations S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated Filer ¨ | Accelerated Filer ¨ |
Smaller Reporting Company | |
| Emerging Growth Company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes ¨
The number of shares outstanding of the Registrant’s common stock, $0.001 par value, as of May 15, 2024, was .
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TABLE OF CONTENTS
PART I – FINANCIAL INFORMATION
CONSOLIDATED STATEMENTS OF OPERATIONS6
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY7
CONSOLIDATED STATEMENTS OF CASH FLOWS8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS9
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations16
Item 3. Quantitative and Qualitative Disclosures About Market Risk25
Item 4. Controls and Procedures25
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds27
Item 3. Default Upon Senior Securities27
Item 4. Mine Safety Disclosures27
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Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements about us and our industry that involve substantial risks and uncertainties. All statements other than statements of historical fact contained in this Quarterly Report on Form 10-Q, including statements regarding our future results of operations or financial condition, business strategy, and plans and objectives of management for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements because they contain words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will,” or “would,” and other similar expressions and variations, or comparable terminology, or the negatives of any of the foregoing, may identify forward-looking statements (collectively, “forward-looking statements”), but the absence of these words does not mean that a statement is not forward-looking. Our actual results or outcomes could differ materially from those indicated in these forward-looking statements for a variety of reasons, including, among others:
• |
| Our ability to execute our growth strategies |
• |
| Supply chain disruptions and general price inflation |
• |
| Our ability to maintain favorable relationships with suppliers and manufacturers |
• |
| Competition from more established and better financed competitors |
• |
| Our ability to attract and retain competent and qualified personnel |
• |
| Regulatory changes and developments affecting our business |
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| Our ability to obtain additional capital to finance operations |
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| Managing a “just right” product inventory size and mix |
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| Impacts on our business from epidemics, pandemics, or natural disasters |
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| Our ability to remediate the material weakness in our internal control over financial reporting or additional material weaknesses or other deficiencies in the future or to maintain effective disclosure controls and procedures and internal control over financial reporting |
• |
| Other risks and uncertainties, including those listed in the section titled “Risk Factors” contained in our filings with the United States Securities and Exchange Commission (“SEC”), including our Annual Report on |
You should not rely on forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, and operating results described in the “Risk Factors” section of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, as filed with the SEC. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties, and other factors described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report. The results, events, and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results or outcomes could differ materially from those described in the forward-looking statements.
In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based on information available to us as of the date of this Quarterly Report, and while we believe that information provides a reasonable basis for these statements, that information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into or review of all relevant information. These statements are inherently uncertain, and investors are cautioned not to rely unduly on these statements.
The forward-looking statements made in this Quarterly Report are based on events or circumstances as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report to reflect events or circumstances after the date of this Quarterly Report or to reflect new information or the occurrence of unanticipated events except as required by law. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, or investments.
As used in this Quarterly Report, the terms “we,” “us,” “our,” “SecureTech,” “Registrant,” “Company,” and “Issuer” mean SecureTech Innovations, Inc. unless the context clearly requires otherwise.
4
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
SECURETECH INNOVATIONS, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
March 31, 2024 (unaudited) |
December 31, 2023 | |||||||
| Current assets: | ||||||||
| Cash and equivalents | $ | $ | ||||||
| Inventories | ||||||||
| Deposits | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | $ | $ | ||||||
| Total assets: | $ | $ | ||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued payroll | ||||||||
| Credit cards payable | ||||||||
| Taxes payable | ||||||||
| Total current liabilities | $ | $ | ||||||
| Total liabilities | $ | $ | ||||||
| Stockholders’ equity: | ||||||||
| Preferred stock, par value, shares authorized; and shares issued and outstanding, respectively | ||||||||
| Common stock, par value, shares authorized; and shares issued and outstanding, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ deficit | $ | ( | ) | $ | ( | ) | ||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
The accompanying notes to the financial statements are an integral part of these statements.
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SECURETECH INNOVATIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
| For the three months ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| Revenues: | ||||||||
| Sales | $ | $ | ||||||
| Cost of goods sold | ||||||||
| Gross profit | ||||||||
| Operating expenses: | ||||||||
| General and administrative | $ | |||||||
| Research and development | ||||||||
| Total operating expenses | ||||||||
| (Loss) from operations | ( | ) | ( | ) | ||||
| Other income (expense) | $ | ( | ) | $ | ||||
| Provision for income taxes | ||||||||
| Net (loss) | $ | ( | ) | $ | ( | ) | ||
Loss per share, basic and diluted | $ | ( | ) | $ | ( | ) | ||
| Weighted average number of common shares outstanding, basic and diluted | ||||||||
The accompanying notes to the financial statements are an integral part of these statements.
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SECURETECH INNOVATIONS, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
(unaudited)
| Series A | Additional | Accumulated | ||||||||||||||||||||||||||
Preferred Stock | Common Stock | Paid In | ||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Deficit | Total | ||||||||||||||||||||||
| Balance, December 31, 2023 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Share exchange – unrelated party | ( | ) | ( | ) | ||||||||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance, March 31, 2024 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Series A | Additional | Accumulated | ||||||||||||||||||||||||||
Preferred Stock | Common Stock | Paid In | ||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Deficit | Total | ||||||||||||||||||||||
| Balance, December 31, 2022 | — | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||
| Issuance of common shares for cash | — | |||||||||||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance, March 31, 2023 | — | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||
The accompanying notes to the consolidated financial statements are an integral part of these statements.
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SECURETECH INNOVATIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
| For the three months ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| Cash flows from operating activities: | ||||||||
| Net (loss) | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net (loss) to net cash used in operating activities: | ||||||||
| Depreciation | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Decrease (increase) in inventories | ||||||||
| Increase (decrease) in accounts payable | ( | ) | ||||||
| Increase (decrease) in credit cards payable | ( | ) | ||||||
| Increase (decrease) in accrued payroll | ||||||||
| Increase (decrease) in taxes payable | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities: | ||||||||
| Issuance of common stock for cash | $ | $ | ||||||
| Net cash provided by financing activities | $ | $ | ||||||
| Net increase (decrease) in cash | ( | ) | ( | ) | ||||
| Cash – beginning of period | ||||||||
| Cash – end of period | $ | $ | ||||||
| Non-cash financing activities: | ||||||||
| Exchange of common shares for preferred shares – unrelated party | $ | $ | ||||||
The accompanying notes to the financial statements are an integral part of these statements.
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SECURETECH INNOVATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2024
(unaudited)
NOTE 1 – Summary of Significant Accounting Policies
Organization
SecureTech Innovations, Inc. (“Company” or “SecureTech”) was incorporated under the laws of the State of Wyoming on March 2, 2017, under the name SecureTech, Inc. The Company amended its Articles of Incorporation on December 20, 2017, to change its name to SecureTech Innovations, Inc. On November 19, 2021 and November 25, 2021, SecureTech incorporated wholly-owned subsidiaries Piranha Blockchain, Inc. under the laws of the State of Wyoming and Piranha Blockchain, Ltd. under the International Business Company (IBC) laws of Anguilla, British West Indies, respectively (collectively, “Piranha”).
SecureTech, an innovative growth company, specializes in developing and marketing cutting-edge security and safety devices and technologies. Our mission is to preserve life, protect property, and prevent crime. Notably, SecureTech is the creator of Top Kontrol®, a groundbreaking anti-theft and anti-carjacking system that can halt an in-progress carjacking without any intervention from the driver. Additionally, we are developing advanced cybersecurity technologies for blockchain and cryptocurrency ecosystems, covering areas such as mining, digital asset storage, and secure trading exchanges through our subsidiary, Piranha Blockchain.
Unaudited Interim Financial Information
The unaudited condensed interim financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements. In the opinion of Management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.
The balance sheet as of December 31, 2023, has been derived from audited financial statements.
Operating results for the three months ended March 31, 2024, are not necessarily indicative of results that may be expected for the year ending December 31, 2024. These condensed financial statements should be read in conjunction with the audited financial statements for the year ended December 31, 2023, filed with the Company’s Annual Report on Form 10-K with the Securities and Exchange Commission on May 1, 2024.
Basis of Presentation
The accompanying financial statements have been prepared in accordance with United States Generally Accepted Accounting Principles (“US GAAP”) for financial information and in accordance with the Securities and Exchange Commission’s (“SEC”) Regulation S-X. They reflect all adjustments which are, in the opinion of the Company’s Management, necessary for a fair presentation of the financial position and operating results as of and for the fiscal period ended March 31, 2024.
Use of Estimates
The accompanying financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America. Because a precise determination of many assets and liabilities is dependent upon future events, the preparation of financial statements for a period necessarily involves the use of estimates that have been made using careful judgment. Actual results may vary from these estimates.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers highly liquid financial instruments purchased with a maturity of three months or less to be cash equivalents. As of March 31, 2024, the Company had no cash equivalents.
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Fair Value of Financial Instruments
ASC 820, “Fair Value Measurements” and ASC 825, Financial Instruments, requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. It establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. It prioritizes the inputs into three levels that may be used to measure fair value:
Level |
| Description |
|
|
|
Level 1 |
| Applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities. |
Level 2 |
| Applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data. |
Level 3 |
| Applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities. |
Inventory and Cost of Sales
Inventories are stated at the lower of cost or realizable value, using the weighted average cost method. When an impairment indicator suggests that the carrying amounts of inventories might not be recoverable, the Company reviews such carrying amounts and estimates the net realizable value based on the most reliable evidence available at that time. An impairment loss is recorded if the net realizable value is less than the carrying value. Impairment indicators considered for these purposes are, among others, obsolescence, decrease in market prices, damage, and a firm commitment to sell.
Deposits
Refundable deposits are carried on the Company’s balance sheet at their fair market refundable value under current assets.
Basic net loss per common share is computed by dividing the net loss attributable to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share is calculated similarly to basic 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. SecureTech excludes all potentially dilutive securities from its diluted net loss per share computation since their effect would be anti-dilutive because SecureTech recorded a loss for the three months ended March 31, 2024 and 2023. The Company had no dilutive securities outstanding as of March 31, 2024 and 2023.
Property and Equipment and Depreciation
Property and equipment are recorded at cost and are depreciated using the straight-line method over their estimated useful lives in years as follows:
| Computer software and equipment | 2-15 | |||
| Furniture, fixtures, and equipment | 3-10 | |||
| Leasehold improvements | Life of Lease |
Repair and maintenance costs are expensed as incurred. Costs associated with improvements that extend the life, increase the capacity, or improve the efficiency of our property and equipment are capitalized and depreciated over the remaining life of the related asset. Gains and losses on the disposition of equipment are reflected in operations. Depreciation is provided using the straight-line method over the estimated useful lives of the assets.
Depreciation expenses totaled $245 and $246 for the three months ended March 31, 2024 and 2023, respectively. Cumulative depreciation for each asset class is as follows:
| March 31, 2024 | December 31, 2023 | |||||||
| Computer, software, and equipment | $ | 4,916 | $ | 4,916 | ||||
| Accumulated depreciation | $ | (1,675 | ) | $ | (1,430 | ) | ||
| PPE, net | $ | 3,241 | $ | 3,486 | ||||
Revenue Recognition
Effective January 1, 2018, the Company adopted ASC 606 — Revenue from Contracts with Customers.
The Company’s primary revenue source is selling our Top Kontrol product, which we began selling in late April 2020.
Top Kontrol requires installation by a Certified Top Kontrol Technician. To become a Certified Top Kontrol Technician, an automotive technician must complete a one-day hands-on course hosted by the Company. Failure to have Top Kontrol installed by a Certified Top Kontrol Technician voids the product’s limited liability warranty.
Because of this professional installation requirement, the Company sells its products to and through Authorized Dealers and Certified Top Kontrol Technicians. In the instances where the Company sells directly to the end user, product installation must be performed by authorized Company personnel.
Revenue is recognized when performance obligations under a contract with our customers are satisfied. Revenue is recorded net of marketing allowances, volume discounts, and other forms of variable consideration. Generally, this occurs when we transfer control of our product to the customer and payment has been received. The Company presently does not offer terms or credit to any of its customers.
Revenue Recognition; ASC 606 Five-Step Model
Under ASC 606, the Company recognizes revenue from the sale of service contracts by applying the following steps: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to each performance obligation in the contract; and (5) recognize revenue when each performance obligation is satisfied.
Revenue Recognition; General Right of Return
Customers are allowed to return defective goods (warranty returns). In some instances, customers may be allowed to return a limited number of units for periodic stock adjustment returns. Such stock adjustment returns would be limited to no more than 5% of their total units sold.
As is standard in the industry, we will only accept returns from active customers. If a customer discontinues conducting business with us, we are not obligated to accept additional product returns from that customer.
Income Taxes
The Company accounts for income taxes pursuant to FASB ASC 740, Income Taxes. Under FASB ASC 740-10-25, deferred tax assets and liabilities are determined based on temporary differences between the bases of certain assets and liabilities for income tax and financial reporting purposes. The deferred tax assets and liabilities are classified according to the financial statement classification of the assets and liabilities generating the differences.
The Company maintains a valuation allowance with respect to deferred tax assets. The Company establishes a valuation allowance based upon the potential likelihood of realizing the deferred tax asset and taking into consideration the Company’s financial position and results of operations for the current period. Future realization of the deferred tax benefit depends on the existence of sufficient taxable income within the carryforward period under the Federal tax laws.
Changes in circumstances, such as the Company generating taxable income, could cause a change in judgment about its ability to realize the related deferred tax asset. Any change in the valuation allowance will be included in income in the year of the change in estimate.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the following majority-owned subsidiaries as of March 31, 2024:
| Subsidiary | Percentage Owned | |||
| Piranha Blockchain, Inc. | 100.0 | % | ||
| Piranha Blockchain, Ltd. | 100.0 | % | ||
Fiscal Year
The Company elected December 31st for its fiscal year end.
Recent Accounting Pronouncements
There are various updates recently issued, most of which represent technical corrections to the accounting literature or application to specific industries and are not expected to have a material impact on the Company’s financial position, results of operations, or cash flows.
NOTE 2 – GOING CONCERN
The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the ordinary course of business. As shown in the accompanying financial statements during the fiscal period ended March 31, 2024, the Company has not established a source of revenues sufficient to cover its operating costs. As such, it has incurred an operating loss since its inception. Further, as of March 31, 2024, the Company had an accumulated deficit of ($
The Company’s existence depends on Management’s ability to develop profitable operations and obtain additional financing sources. There can be no assurance that the Company’s financing efforts will result in profitable operations or resolve the Company’s liquidity problems. The accompanying statements do not include any adjustments that might result should the Company be unable to continue as a going concern.
NOTE 3 – INVENTORIES
Inventory is stated at the lower of cost or realizable value, using the weighted average cost method. When an impairment indicator suggests that the carrying amounts of inventories might not be recoverable, the Company reviews such carrying amounts and estimates the net realizable value based on the most reliable evidence available at that time. An impairment loss is recorded if the net realizable value is less than the carrying value. Impairment indicators considered for these purposes are, among others, obsolescence, decrease in market prices, damage, and a firm commitment to sell. The following table summarizes the Company’s inventories as of March 31, 2024 and December 31, 2023:
March 31, 2024 | December 31, 2023 | |||||||
| Inventories: | ||||||||
| Raw materials and work-in-progress | $ | $ | ||||||
| Finished goods | ||||||||
| Gross inventories | ||||||||
| Inventory valuation reserves | ||||||||
| Inventories, net | $ | $ | ||||||
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NOTE 4 – STOCKHOLDERS’ EQUITY
Preferred stock
The Company has authorized shares of preferred stock, par value. The Company’s Board of Directors is authorized, without further action by the shareholders, to issue shares of preferred stock and to fix the designations, number, rights, preferences, privileges, and restrictions thereof, including dividend rights, conversion rights, voting rights, terms of redemption, liquidation preferences, and sinking fund terms.
On May 31, 2023, the Company’s Board of Directors created a new class of preferred stock designated as Series A Preferred Stock, $0.001 par value. The Company may issue up to shares of Series A Preferred Stock with the following terms, rights, and privileges:
Designation and Amount |
| This class of preferred stock shall be designated Series A Preferred Stock (“Preferred Stock”), $0.001 par value. The Corporation’s Board of Directors may issue up to two-hundred fifty thousand (250,000) shares of this Preferred Stock. |
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|
|
Rank |
| The Preferred Stock shall rank superior to the Corporation’s common stock and all other classes, including currently outstanding or future preferred stock designations. |
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Dividends |
| The Preferred Stock is eligible for all legal dividends as may be approved by the Corporation’s Board of Directors. If a dividend is declared across multiple classes of stock, the amount of any dividend to be received by holders of the Preferred Stock shall be calculated on a fully diluted, pro-rata basis with the other classes of stock participating in said dividend. |
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Voting Rights |
| Holders of the Preferred Stock shall have the right to vote on all matters with holders of common stock (and other eligible classes of preferred stock, if any) by aggregating votes into one (1) voting class of stock. |
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Redemption by the Company |
| After a minimum period of one (1) year from the date of issue the Company may, at its sole discretion, redeem some or all of the Preferred Stock in either cash (the then market value), the Company’s common stock at a fixed ratio of ten thousand (10,000) shares of common stock for each share of Preferred Stock redeemed, or a combination thereof. |
Series A Preferred Stock Issuances
During the three months ended March 31, 2024, the Company issued shares of Series A Preferred Stock pursuant to a Share Exchange Agreement with a common stockholder.
As of March 31, 2024, the Company had one class of preferred stock, Series A Preferred Stock, and shares of it issued and outstanding.
Common stock
The Company has authorized shares of common stock with a par value of per share.
Share Exchange and Cancellations
During the three months ended March 31, 2024, the Company entered into a Share Exchange Agreements whereby it issued
All of the shares of common stock received in this stock exchange were subsequently canceled. No consideration was paid or received in connection to the share exchange, which also is deemed a non-taxable event pursuant to Section 351 of the Internal Revenue Code.
As of March 31, 2024, the Company had shares of common stock issued and outstanding.
NOTE 5 – RELATED PARTY FOUNDER’S SHARE ISSUANCES
Founder’s Shares
On March 2, 2017, the Company issued an aggregate of shares of its common stock, par value, as Founder’s Shares with $-- value.
Of these Founder’s Shares, were issued to the Company’s officers, to an entity controlled by one of the Company’s directors, and to outside consultants who assisted with the Company’s formation and early organization.
As of March 31, 2024, an aggregate of Founder’s Shares have been returned to the Company and cancelled and an aggregate of have been tendered as part of the Share Exchange Agreement with Kao Lee described below.
Share Exchange and Cancellations
During the fiscal year ended December 31, 2023, the Company entered into a Share Exchange Agreement with its President and CEO, Kao Lee, whereby it issued shares of its Series A Preferred Stock in exchange for an aggregate of shares of its common stock. The common shares tendered by Mr. Lee were canceled and returned to the Company’s Treasury.
Accrued Payroll
As of March 31, 2024, the Company had aggregated $
Patent Royalties
On March 2, 2017, the Company entered into a Patent License Agreement with Shongkawh, LLC, which is controlled by our executive officers Kao Lee and Anthony Vang (and directly owned by Mr. Lee and his brother, Thao Lee). Under this agreement, ShongKawh is to receive a royalty of 2% of all products manufactured under this covered patent.
On March 13, 2024, the Company and Shongkawh amended the Patent License Agreement to adjust royalty payments due under this agreement to $1 per annum, payable within ten business days of the end of each fiscal year.
As of March 31, 2024, ShongKawh accrued $
NOTE 6 – CONTINGENCY/LEGAL
As of March 31, 2024, and during the preceding ten years, no director, person nominated to become a director or executive officer, or promoter of the Company has been involved in any legal proceeding that would require disclosure hereunder.
From time to time, the Company may become subject to various legal proceedings and claims that arise in the ordinary course of our business activities. However, litigation is subject to inherent uncertainties for which the outcome cannot be predicted. Any adverse result in these or other legal matters could arise and cause harm to the Company’s business. The Company currently is not a party to any claim or litigation, the outcome of which, if determined adversely to the Company, would individually or in the aggregate be reasonably expected to have a material adverse effect on the Company’s business.
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NOTE 7 – SUBSEQUENT EVENTS
Common Stock Issuance
On April 19, 2024, the Company sold an aggregate of 5,000 shares of its common stock, $0.001 par value, in exchange for $5,000 in cash, or $1.00 a share.
No other material events or transactions have occurred during this subsequent event reporting period that required recognition or disclosure in the financial statements.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Our independent registered public accounting firm has issued a going concern opinion in their audit report dated May 1, 2024, which can be found in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on May 1, 2024. This means that our auditors believe there is substantial doubt that we can continue as an ongoing business for the next 12 months.
The following discussion should be read in conjunction with our financial statements and the notes thereto and the other information included in this Quarterly Report as filed with the SEC on Form 10-Q.
Business Overview
SecureTech, an innovative growth company, specializes in developing and marketing cutting-edge security and safety devices and technologies. Our mission is to preserve life, protect property, and prevent crime. Notably, SecureTech is the creator of Top Kontrol®, a groundbreaking anti-theft and anti-carjacking system that can halt an in-progress carjacking without any intervention from the driver. Additionally, we are developing advanced cybersecurity technologies for blockchain and cryptocurrency ecosystems, covering areas such as mining, digital asset storage, and secure trading exchanges through our subsidiary, Piranha Blockchain.
Corporate Structure
The following diagram illustrates our corporate structure as of March 31, 2024:
Corporate History
SecureTech, initially incorporated in Wyoming as SecureTech, Inc. on March 2, 2017, later changed its name to SecureTech Innovations, Inc. on December 20, 2017, reflecting our commitment to technological leadership and innovation.
With an eye on future growth, SecureTech subsequently established two wholly-owned subsidiaries: Piranha Blockchain, Inc. (incorporated in Wyoming on November 19, 2021) and Piranha Blockchain, Ltd. (established under Anguilla’s International Business Company laws on November 25, 2021). These subsidiaries will drive our mission to advance cybersecurity
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technologies within blockchain and cryptocurrency ecosystems, emphasizing mining, digital asset storage, and secure trading exchanges.
Top Kontrol
Top Kontrol stands as the world’s most advanced anti-theft and anti-carjacking system. Unlike our competitors’ products, which merely safeguard vehicles from unattended theft, Top Kontrol elevates vehicle security and passenger safety. It uniquely thwarts active carjacking attempts without requiring any action from the driver.
Key Advantages of Top Kontrol:
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| Anti-theft Circuits: Actively prevent automobile theft and carjacking. |
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| Idle Theft Prevention: Automatically stops theft even when keys are in the ignition and the engine is idling. |
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| Carjacking Defense: Provides both active and passive prevention against carjacking. |
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| Non-Interference: Does not disrupt other vehicle systems. |
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| Universal Compatibility: Compatible with most car and truck makes and models. |
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| Manual Engine Kill Switch: Allows manual shutdown of the engine. |
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| Wireless Security: Thwarts thieves attempting to hack wirelessly transmitted security codes. |
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| Battery-Independent Operation: Works even with a disabled car battery. |
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Retail Package Top |
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For additional information on Top Kontrol or to view product demonstration videos, please visit the Top Kontrol website at www.topkontrol.com or the Top Kontrol YouTube Channel, respectively.
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Industry: Automobile Theft in America
Car theft in the United States continues to rise annually to new record levels. In 2023, car thefts surpassed all previous records from 2022.
Top Kontrol ensures your car’s safety even when you’re not around. It prevents thieves from stealing your parked and unattended vehicle. Here’s a snapshot of America’s auto theft crisis in 2023:
1,020,729 |
| Number of US cars stolen in 2023 |
$8.9+ Billion |
| Value of cars stolen in the US in 2023 |
$9,166 |
| Average dollar loss per theft |
Up 105% |
| Increase in US car thefts between 2019 and 2023 |
31 Seconds |
| How often a car is stolen in the US |
Industry: Carjackings Continue Skyrocketing
Carjackings in the US nearly doubled again during 2023!
Below are some highlighted major US cities that experienced record levels of carjackings in 2023:
Increase in Carjackings 2023 |
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US City |
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98% |
| Washington, DC |
222% |
| Minneapolis, MN |
133% |
| Chicago, IL |
121% |
| New Orleans, LA |
115% |
| Oakland, CA |
Recent statistics from the National Crime Information Center reveal a significant surge in car thefts and carjackings. Between 2019 and 2023, motor vehicle thefts increased by 105%, while carjackings rose by 93% nationwide.
Top Kontrol stands out as the sole automobile safety device capable of preventing an active carjacking without any driver intervention.
Competition
In a fiercely competitive industry, SecureTech faces formidable rivals across every aspect of its business. Our company’s success hinges on management’s ability to innovate compelling products and market them effectively. By attracting a substantial customer base, we aim to generate the necessary revenues for sustained profitability.
SecureTech faces stiff competition from well-established players armed with substantial financial resources and extensive operating histories. Their advantages in marketing, purchasing power, and negotiation leverage are significant. Notable competitors include Viper (www.viper.com), Clifford (www.clifford.com), and OnStar (www.onstar.com). Additionally, we contend with lesser-known rivals and potential newcomers who may emerge in the future.
While our industry’s size provides ample room for successful competition, we recognize that product technology continually evolves. New entrants consistently innovate, potentially surpassing our current offerings or rendering them obsolete. Adaptability and ongoing innovation are critical for maintaining our competitive edge.
Manufacturing
SecureTech collaborates with US-based contract manufacturers for product production, and the final assembly takes place at our Minnesota headquarters. Importantly, we maintain flexibility by not entering into long-term or exclusivity agreements with any specific manufacturer. This approach allows us to explore new partnerships and freely adapt as needed.
Our products at SecureTech proudly bear the coveted “Made in the USA” label.
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Piranha Blockchain
SecureTech, a forward-thinking company, is venturing into cutting-edge cybersecurity and blockchain technologies. This exciting initiative is spearheaded by its newly established Piranha Blockchain subsidiaries (collectively, “Piranha”). Through Piranha, SecureTech aims to:
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| Construct Secure, Low-Cost Green Energy Data Centers: Our data center focus will center around building environmentally friendly data centers that prioritize security while minimizing costs. |
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| Provide Advanced Cybersecurity Solutions: We intend to offer cutting-edge cybersecurity products to safeguard client data, protect identities, and defend digital assets against theft and ransom attacks. |
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| Develop Blockchain and Cryptocurrency Platforms: Our plans center around creating robust systems for mining, storage, and trading exchanges within the dynamic blockchain and cryptocurrency landscape. |
Piranha aims to diversify its revenue streams. Below are the four key sources through which Piranha intends to generate revenue:
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| Product Sales. Piranha will generate revenue through one-time sales of cybersecurity hardware and applications. |
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| Subscription Services. Recurring monthly revenue will come from cybersecurity subscriptions and hosting services. |
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| Cryptocurrency Ventures. Piranha will engage in cryptocurrency mining, hosting third-party mining rigs, and pursue trailblazing joint venture projects. |
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| Transaction Fees. Revenue will also be earned from transaction fees related to cryptocurrency exchanges, cryptocurrency trading, and conversions into and from fiat currencies. |
Piranha’s Growth Strategy: Innovation and Acquisitions
As Piranha looks to grow its business, it will combine internal innovation with strategic acquisitions. Internally, Piranha plans to invest in cutting-edge products and technologies, while externally, it seeks synergistic partnerships and acquisition candidates to accelerate overall growth.
Government Regulation
Our products are designed to meet all known existing or proposed governmental regulations. We currently meet all applicable standards for approvals by government regulatory agencies for our products and services.
Top Kontrol was issued a Federal Communications Commission (FCC) Declaration of Conformity certification in March 2020.
Compliance with Environmental Laws
We believe there are no material issues or costs associated with our compliance with current environmental laws. We did not incur environmental expenses in the fiscal period ended March 31, 2024, nor do we anticipate environmental expenses in the foreseeable future.
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Intellectual Property Rights and Proprietary Information
In our industry, innovation, investment in novel ideas, and safeguarding intellectual property rights play pivotal roles in achieving success. To protect our products and technologies, we leverage a combination of legal mechanisms, including patents, trademarks, trade secrets, and contractual obligations. Our commitment extends to robustly enforcing our intellectual property rights.
Notably, SecureTech holds a portfolio of issued and licensed patents, each with specific dates of issuance:
·On May 7, 2013, Shongkawh, LLC—a related party controlled by our President and CEO—was granted US Patent No. 8,436,721 titled “Automobile Theft Protection and Disablement System” by the US Patent & Trademark Office (“USPTO”). This patent is set to expire on March 19, 2030. SecureTech holds the exclusive license to utilize this patent until its expiration date.
Ensuring Our Competitive Edge
In addition to factors like innovation, technological expertise, and our skilled personnel, we recognize that maintaining a robust product portfolio is essential for staying competitive. Continual upgrades and enhancements to our offerings are key. When we achieve significant technological improvements, we actively seek patent protection.
Our Patent Strategy
Our proactive approach involves filing patent applications to secure legal protections for the novel features of our products and technologies. Before filing and granting patents, we meticulously disclose critical elements to our patent counsel. Simultaneously, we safeguard these features as trade secrets until product introduction. It’s important to note that patent applications don’t always result in issued patents covering all crucial claims and may face denial.
Trademark Protection
Beyond patents, we also prioritize trade name and trademark protection. As proud owners of federally registered trademarks, including SECURETECH INNOVATIONS® and TOP KONTROL®, we safeguard our brand identity. Additionally, SecureTech has a pending trademark registration application with the USPTO for PIRANHA BLOCKCHAIN.
Confidentiality Agreements
To maintain the integrity of our proprietary information, we enter into nondisclosure agreements with employees, consultants, and third parties. These agreements strictly prohibit the disclosure of our confidential data during and after their employment or working relationships.
Employees
As of March 31, 2024, our workforce comprises five employees: two full-time, three part-time, and three independent commission-based sales representatives.
Property and Equipment
Our principal executive offices are located at 2355 Highway 36 West, Suite 400, Roseville, MN 55113. We lease this space for $552 per month on a month-to-month basis.
We do not hold ownership or leasehold interest in any other property or equipment.
Available Information
We maintain a website with the address www.securetechinnovations.com. We make available free of charge through our Internet website our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, Proxy Statements, and any amendments thereto, as soon as reasonably practicable after we electronically file such material with, or furnish such material to, the SEC. We are not including the information on our website as a part of, nor incorporating it by reference into, this report. Additionally, the SEC maintains a website that contains annual, quarterly, and current reports, proxy statements, and other information that issuers, including us, file electronically with the SEC. The SEC’s website address is www.sec.gov.
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Note Regarding Third-Party Information
This Quarterly Report on Form 10-Q incorporates market data, statistical information, and estimates drawn from various sources. These include reports by industry analysts, publications from market research firms, and other independent resources. Additionally, our management team provides its own well-founded estimates and analyses.
While we consider these third-party reports reputable, it’s important to note that we have not independently verified the underlying data sources, methodologies, or assumptions. Information based on estimates, forecasts, projections, or market research inherently carries uncertainties. As a result, actual events or circumstances may materially diverge from what is reflected in this information.
Results of Operations
Comparison of the Three Months Ended March 31, 2024 and 2023
The following table sets forth the results of our operations for the three months ended March 23, 2024 and 2023.
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| Three months ended March 31, | ||
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2024 |
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2023 |
Sales | $ | 12,885 | $ | 20,050 |
Cost of goods sold |
| (3,080) |
| (5,285) |
Gross profit |
| 9,805 |
| 14,765 |
Operating expenses |
| (90,496) |
| (129,606) |
Loss from operations |
| (80,691) |
| (114,841) |
Other income (expense) |
| (790) |
| 882 |
Net loss | $ | (81,481) | $ | (113,959) |
Sales
Sales for the three months ended March 31, 2024, were $12,885, compared to $20,050 for the same period of 2023, representing a decrease of ($7,165), or a (35.7%) decrease compared to the previous fiscal period. All sales were attributable to Top Kontrol.
Cost of Goods Sold
Our cost of goods sold consists primarily of purchasing components and circuitry from various vendors and then utilizing third-party contract manufacturing facilities to produce our products, with final assembly conducted at our Minnesota headquarters. Cost of goods sold for the three months ended March 31, 2024, was $3,080, compared to $5,285 for the same period of 2023. As a percentage of overall sales, the cost of goods sold was 23.9% during the three months ended March 23, 2024, compared to 26.4% for the same fiscal period a year ago.
Gross Profit
Gross profit for the three months ended March 31, 2024, was $9,805, compared to $14,765 for the same period of 2023. Our gross profit margin was 76.1% during the three months ended March 31, 2024, compared to 73.6% for the same fiscal period a year ago.
Operating Expenses
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| Three Months Ended March 31, | |||
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2024 |
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2023 | |
Operating expenses: |
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| General and administrative | $ | 90,496 | $ | 128,721 |
| Research and development |
| - |
| 885 |
| Operating expenses | $ | 90,496 | $ | 129,606 |
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Our operating expenses for the fiscal period consisted of two components: general and administrative expenses and research and development expenses. Total operating expenses were $90,496 during the three months ended March 31, 2024, compared to $129,606 for the same period of 2023, representing a decrease in operating expenses of ($39,110), or (30.2%), from the three months ended March 31, 2023. The decrease in operating expenses was primarily attributable to temporary reductions in general operating activities. When SecureTech secures adequate funding to resume normal and expanded levels of general operating activities, we anticipate these expenses will increase proportionately.
Loss From Operations
As a result of the foregoing, our loss from operations was ($80,691) during the three months ended March 31, 2024, compared with ($114,841) for the same period of 2023. This ($34,150), or (29.7%), decrease in our loss from operations was primarily attributable to temporary reductions in general operating activities. When SecureTech secures adequate funding to resume normal and expanded levels of general operating activities, we anticipate these expenses will increase proportionately.
Other Income (Expense)
Our other income (expense) is comprised of bank interest received on cash deposits, cashback rewards generated from a bank credit card, and finance charges incurred on carried outstanding balances on our bank credit card. During the three months that ended March 31, 2024, we incurred ($790) in other expenses, compared to $882 in other income for the same period of 2023.
Net Loss
The result was that our net loss was ($81,481) during the three months ended March 31, 2024, compared with ($113,959) for the same period of 2023. This ($32,478), or (28.5%), decrease in our net loss was primarily attributable to temporary reductions in general operating activities. When SecureTech secures adequate funding to resume normal and expanded levels of general operating activities, we anticipate these expenses will increase proportionately.
Total Stockholders’ Deficit
Our stockholders’ deficit was ($230,352) as of March 31, 2024.
Liquidity and Capital Resources
Our principal demands for liquidity are related to our efforts to generate sales, manufacturing inventory, and expenditures related to sales, regulatory compliance, and general corporate purposes. We intend to meet our liquidity demands, including capital expenditures related to the manufacture of inventory and the expansion of our business, primarily through cash flow provided by operations and sales of our securities.
As of March 31, 2024, we had a cashback revolving credit line of $15,000 and an outstanding balance of $15,000 on this credit line. Under the terms of this line of credit, SecureTech is to receive 1.5% back on all purchases made through this credit line. Management strives to put as many ordinary operating expenses as possible through this credit line to reduce operating expenses passively.
We rely primarily on internally generated cash flow and available working capital to support operations and growth. Although we believe that our current cash and anticipated cash receipts from sales of Top Kontrol will be sufficient to meet our planned working capital requirements and capital expenditures over the next 12 months, we are constantly exploring additional sources of new capital. Without limiting our available options, future financings will most likely be through the sale of additional shares of our common stock. We may also include warrants, options, and/or rights in conjunction with any future issuances of our common stock. However, we can give no assurance that future financing will be available to us and, if available to us, in amounts or on terms acceptable to us.
We had a net working capital deficit of ($233,593) as of March 31, 2024, a decrease of ($81,236), or (53.3%), from a net working capital deficit of ($152,357) as of December 31, 2023.
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The following is a summary of cash provided by or used in each of the indicated types of activities during the three months ended March 31, 2024 and 2023:
| Three Months Ended March, | |||
| 2024 |
| 2023 | |
Cash provided by (used in): |
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| Operating activities | ($4,865) |
| ($108,352) |
| Financing activities | - |
| $20,000 |
Net cash used in operating activities was ($4,865), a decrease of ($103,487), or (95.5%), from cash used in operating activities of ($108,352) during the same period of 2023. The increase in our cash used by operating activities was primarily attributable to temporary reductions in general operating activities. When SecureTech secures adequate funding to resume normal and expanded levels of general operating activities, we anticipate these expenses will increase proportionately.
Net cash provided by financing activities was $-0- compared to $20,000 during the same period of 2023.
Ongoing and Future Capital Funding Efforts
As of May 15, 2024, SecureTech was preparing a Regulation A+ registered securities offering. Funds generated from this planned securities offering will be used for general working capital, producing the initial inventory for the 2nd Generation Top Kontrol product line, and starting construction on Piranha Blockchain’s first data center.
Going Concern Consideration
Our independent registered public accounting firm has issued a going concern opinion in their audit report dated May 1, 2024, which can be found in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on May 1, 2024. This means that our auditors believe there is substantial doubt that we can continue as an ongoing business for the next 12 months.
Off-Balance Sheet Operations
As of March 31, 2024, we had no off-balance sheet activities or operations.
Contractual Obligations
As of March 31, 2024, we did not have any contractual obligations.
Critical Accounting Policies
Use of Estimates
The accompanying financial statements of SecureTech have been prepared in accordance with generally accepted accounting principles in the United States of America. Because a precise determination of many assets and liabilities is dependent upon future events, the preparation of financial statements for a period necessarily involves the use of estimates which have been made using careful judgment. Actual results may vary from these estimates.
Cash and Cash Equivalents
For purposes of the statement of cash flows, SecureTech considers highly liquid financial instruments purchased with a maturity of three months or less to be cash equivalents. As of March 31, 2024 and December 31, 2023, SecureTech had no cash equivalents.
Fair Value of Financial Instruments
ASC 820, “Fair Value Measurements” and ASC 825, Financial Instruments, requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. It establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. It prioritizes the inputs into three levels that may be used to measure fair value:
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| Description |
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Level 1 |
| Applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities. |
Level 2 |
| Applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data. |
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| Applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities. |
Inventory and Cost of Sales
Inventories are stated at the lower of cost or realizable value, using the weighted average cost method. When an impairment indicator suggests that the carrying amounts of inventories might not be recoverable, Management reviews such carrying amounts and estimates the net realizable value based on the most reliable evidence available at that time. An impairment loss is recorded if the net realizable value is less than the carrying value. Impairment indicators considered for these purposes are, among others, obsolescence, decrease in market prices, damage, and a firm commitment to sell.
Net Loss per Share Calculation
Basic net loss per common share is computed by dividing the net loss attributable to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share is calculated similarly to basic 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. SecureTech excludes all potentially dilutive securities from its diluted net loss per share computation since their effect would be anti-dilutive because SecureTech recorded a loss for the three months ended March 31, 2024.
Revenue Recognition
Effective January 1, 2018, SecureTech adopted ASC 606 — Revenue from Contracts with Customers.
SecureTech’s primary source of revenue is the sale of our Top Kontrol product, which we began selling in late April 2020.
Top Kontrol requires installation by a Certified Top Kontrol Technician. To become a Certified Top Kontrol Technician, an automotive technician must complete a one-day hands-on course hosted by SecureTech. Failure to have Top Kontrol installed by a Certified Top Kontrol Technician voids the product’s limited liability warranty.
Because of this professional installation requirement, SecureTech generally sells its products to and through Certified Top Kontrol Technicians. In the instances where SecureTech sells directly to the end-user, product installation is performed by authorized SecureTech personnel.
Revenue is recognized when performance obligations under the terms of a contract with our customers are satisfied. Revenue is recorded net of marketing allowances, volume discounts, and other forms of variable consideration. Generally, this occurs with the transfer of control of our product to the customer and payment has been received. SecureTech does not offer terms or credit to any of its customers.
Revenue Recognition; ASC 606 Five-Step Model
Under ASC 606, SecureTech recognizes revenue from the sale of service contracts by applying the following steps: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to each performance obligation in the contract; and (5) recognize revenue when each performance obligation is satisfied.
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Revenue Recognition; General Right of Return
Customers are allowed to return defective goods (warranty returns). In some instances, customers may be allowed to return a limited number of units for periodic stock adjustment returns. Such stock adjustment returns would be limited to no more than 5% of their total units sold.
As is standard in the industry, we only will accept returns from active customers. If a customer ceases doing business with us, we have no further obligation to accept additional product returns from that customer.
Income Taxes
SecureTech accounts for income taxes pursuant to FASB ASC 740, Income Taxes. Under FASB ASC 740-10-25, deferred tax assets and liabilities are determined based on temporary differences between the bases of certain assets and liabilities for income tax and financial reporting purposes. The deferred tax assets and liabilities are classified according to the financial statement classification of the assets and liabilities generating the differences.
SecureTech maintains a valuation allowance with respect to deferred tax assets. SecureTech establishes a valuation allowance based upon the potential likelihood of realizing the deferred tax asset and taking into consideration SecureTech’s financial position and results of operations for the current period. Future realization of the deferred tax benefit depends on the existence of sufficient taxable income within the carryforward period under the Federal tax laws.
Changes in circumstances, such as SecureTech generating taxable income, could cause a change in judgment about its ability to realize the related deferred tax asset. Any change in the valuation allowance will be included in income in the year of the change in estimate.
Election to Use Extended Transitional Period Under Jumpstart Our Business Startups Act (“JOBS Act”)
We have elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(2) of the JOBS Act, which allows us to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. As a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates.
Recent Accounting Pronouncements
There are various updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to have a material impact on SecureTech’s financial position, results of operations or cash flows.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable since we are a smaller reporting company.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain a set of disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in rules and forms adopted by the SEC.
In accordance with Rule 13a-15(b) under the Exchange Act, as of the end of the period covered by this Quarterly Report on Form 10-Q, an evaluation was carried out under the supervision and with the participation of our Management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), to assess the effectiveness of our disclosure controls and procedures as of March 31, 2024. Based upon that evaluation, our CEO and CFO concluded that our disclosure controls and procedures were not effective in providing reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to our Management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosure due to a material weakness.
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A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement in SecureTech’s annual or interim financial statements will not be prevented or detected on a timely basis.
Management’s Quarterly Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining effective internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Management, under the supervision and with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our internal control over financial reporting as of the end of the period covered by this report. Management’s evaluation of our internal control over financial reporting was based on the framework in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In designing and evaluating our internal control over financial reporting and related procedures, Management recognizes that because of inherent limitations, any controls and procedures, no matter how well designed and operated, may not prevent or detect misstatements and can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of internal control over financial reporting procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.
Based on Management’s assessment, we have concluded that, as of March 31, 2024, our internal control over financial reporting was not effective in timely alerting Management to the material information relating to us required to be included in our annual and interim filings with the SEC.
Management has concluded that our internal control over financial reporting had the following material weaknesses:
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| SecureTech's system of internal controls failed to identify multiple journal entries that were identified by the SecureTech's external auditor; |
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| SecureTech has no formal control process related to the identification and approval of related party transactions; |
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| SecureTech could not maintain any segregation of duties within our financial operations due to our reliance on limited personnel in the finance function; |
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| SecureTech lacks sufficient financial resources and adequate personnel to perform the internal audit function and currently does not have an Audit Committee; |
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| SecureTech lacks an independent Board of Directors, and there is no designated board member serving as an independent financial expert. Currently, the Board of Directors consists of two members, both of whom also hold executive officer positions. Consequently, there is a lack of independent oversight of the management team, as well as insufficient independent review of our operating and financial results and disclosures made by SecureTech; and |
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| Documentation of all proper accounting procedures is not yet complete. |
These weaknesses have existed since SecureTech’s inception on March 2, 2017, and have not been remedied as of March 31, 2024.
Management believes in order to cure the aforementioned material weaknesses, SecureTech needs to take the following steps:
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| Engage outside consultants to ensure consistency in accounting policies and procedures across the organization. This step would enhance our control over financial statement disclosures; |
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| Hire additional qualified financial personnel, including a full-time Chief Financial Officer; |
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| Expand our current board of directors to include additional independent individuals who are willing to perform directorial functions; and |
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| Increase our workforce to accommodate growing sales and higher volumes. |
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Management believes that effectively addressing these material weaknesses would necessitate the addition of at least three independent board members and one executive financial officer who is independent and not a board member. We estimate that the minimum annual expense for SecureTech to retain qualified personnel to fill these vacant roles would be at least $650,000, and possibly even more.
Given that these remedial actions require hiring additional personnel at a substantial cost, these material weaknesses are likely to remain unremediated until SecureTech can generate sufficient revenues or raise significant outside funding necessary to address them. In the meantime, we will continue to rely on the limited advice of outside professionals and consultants.
Changes in Controls and Procedures
There have been no changes in our internal control over financial reporting that occurred during the period covered by this report that has materially affected or is reasonably likely to affect our internal control over financial reporting materially.
PART II – OTHER INFORMATION
Item 1. Legal Proceedings
During the past ten years, no director, person nominated to become a director or executive officer, or promoter of SecureTech has been involved in any legal proceeding that would require disclosure hereunder.
From time to time, we may become subject to various legal proceedings and claims that arise in the ordinary course of our business activities. However, litigation is subject to inherent uncertainties for which the outcome cannot be predicted. Any adverse result in these or other legal matters could arise and cause harm to our business. We currently are not a party to any claim or litigation, the outcome of which, if determined adversely to us, would individually or in the aggregate be reasonably expected to have a material adverse effect on our business.
Item 1A. Risk Factors
Not applicable since we are a smaller reporting company.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Default Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not Applicable.
Item 5. Other Information
None.
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Item 6. Exhibits
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101.CAL |
| XBRL Taxonomy Extension Calculation Linkbase Document |
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101.LAB |
| XBRL Taxonomy Extension Labels Linkbase Document |
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101.PRE |
| XBRL Taxonomy Extension Presentation Linkbase Document |
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101.DEF |
| XBRL Taxonomy Extension Definition Linkbase Document |
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104 |
| Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
SECURETECH INNOVATIONS, INC.
Dated: May 15, 2024 | By: | /s/ Kao Lee |
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| President, Chief Executive Officer, Principal Executive Officer, and Director |
Dated: May 15, 2024 | By: | /s/ Anthony Vang |
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| Treasurer, Secretary, Principal Financial Officer, Principal Accounting Officer, and Director |
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