What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2020-12-29 compared with 2020-01-10 · 95 added, 114 removed, 99 unchanged (68% of the section changed)

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Company’s common stock is traded on the over-the-counter market and quoted on the OTCQB Venture Market run by OTC Markets

Group under the symbol “CLOK.”

of January 9, 2020, there were 40,792,510 shares of common stock of the Company issued and outstanding, and there were 1,189 holders

of the Company’s common stock.

common stock is traded on the over-the-counter market and quoted on the OTCQB Venture Market run by OTC Markets Group under the

symbol “CLOK.”

of December 23, 2020, there were 27,505,196 shares of common stock of the Company issued and outstanding, and there were

1,121 holders of the Company’s common stock.

The actual number of holders of our common stock is greater than this

number of record holders, and includes stockholders who are beneficial owners, but whose shares are held in street name by brokers

or held by other nominees.

This number of holders of record also does not include stockholders whose shares may be held in trust

by other entities.

did not declare any dividends for the year ended September 30, 2020.

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in the foreseeable future.

The declaration, payment, and amount of any future dividends will be made at the discretion of the

Board of Directors, and will depend upon, among other things, the results of our operations, cash flows and financial condition,

operating and capital requirements, and other factors as the Board of Directors considers relevant.

There is no assurance that

future dividends will be paid, and if dividends are paid, there is no assurance with respect to the amount of any such dividend.

Cipherloc’s

Transfer Agent and Registrar for the common stock is Pacific Stock Transfer Corporation located in Las Vegas, Nevada.

The declaration, payment, and amount of any future dividends will be made at the discretion our Board

of Directors, and will depend upon, among other things, the results of our operations, cash flows and financial condition, operating

and capital requirements, and other factors as the Board of Directors considers relevant.

There is no assurance that future dividends

will be paid, and if dividends are paid, there is no assurance with respect to the amount of any such dividend.

Transfer Agent and Registrar for our common stock is Pacific Stock Transfer Company located in Las Vegas, Nevada.

Sales of Unregistered Securities

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and Stock Options Issued to Board of Directors and Officers

the year ended September 30, 2020, the Company issued 620,000 stock options to employees that were subsequently forfeited due

to employee terminations.

Stock compensation expense for $194,896 was recognized in the period.

the year ended September 30, 2019, the Company issued 9,346 shares of common stock with a fair value of $11,216 to its employees

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with a Black Scholes value of $862,000 to vest ratably over a three-year period.

Stock compensation expense for $45,942 was recognized

in the period.

Stock compensation expense for $45,942

was recognized in the period.

the year ended September 30, 2020, 300,000 stock options were cancelled due to the termination of employment.

As of September

30, 2020, 800,000 stock options are outstanding.

None of the shares are in the money and the unamortized amount of stock compensation

as of September 30, 2020 is $383,453.

Issued for Services

the year ended September 30, 2019, the Company issued 20,000 shares of common stock with a fair value of $40,000 to Pycnocline,

LLC for consulting services rendered.

the year ended September 30,2020, the Company did not issue any stock for services.

the year ended September 30, 2019, the Company issued 20,000 shares of common stock with a fair value of $40,000 to a consultant

for consulting services rendered.

foregoing offers, sales and issuances were exempt from registration under Section 4(a)(2) of the Securities Act.

SELECTED FINANCIAL DATA

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elsewhere in this Annual Report on Form 10-K.

are developing products and services around its patented polymorphic encryption technology designed to enable a more efficient

and stronger layer of protection to be added to existing solutions which we believe could be the industry’s first “Polymorphic

Cipher Engine”, which we call Cipherloc ®

We anticipate offering the first secure commercially viable advanced

“Polymorphic Key Progression Algorithmic Cipher Engine”

(“PKPA”).

We believe this morphing cipher can

be used in any commercial data security industry and/or in sensitive applications.

are developing products and services around our patented polymorphic encryption technology designed to enable a more efficient

and stronger layer of protection to be added to existing solutions.

Through a licensing program, we anticipate offering the first

secure commercially viable advanced “Polymorphic Encryption Core”

(“PEC”) software developers kit to be

used in any commercial data security industry and/or in sensitive applications.

innovative and patented polymorphic technology eliminates the flaws and inadequacies associated with today’s encryption

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financial statements are prepared in accordance with accounting principles generally accepted in the United States of America

The preparation of these financial statements requires the use of estimates and assumptions that affect the reported amounts of

assets and liabilities and the disclosure of contingent liabilities at the date of the financial statements and the reported amount

of revenues and expenses during the reporting period.

Our management periodically evaluates the estimates and judgments made.

The preparation of these financial statements requires the use of estimates and assumptions that affect the reported amounts

of assets and liabilities and the disclosure of contingent liabilities at the date of the financial statements and the reported

amount of revenues and expenses during the reporting period.

Our management periodically evaluates the estimates and judgments

Management bases its estimates and judgments on historical experience and on various factors that are believed to be reasonable

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Accounting Policies.

recognize revenue in accordance with the authoritative guidance issued by the FASB on revenue recognition when persuasive evidence

of an arrangement exists, the fee is fixed or determinable, delivery has occurred, and collection of the resulting receivable

is deemed probable.

Products delivered to a customer on a trial basis are not recognized as revenue until the trial period has

ended and acceptance has occurred by the customer.

Reseller and distributor customers typically send us a purchase order when

they have an end user identified.

Company’s contracts with customers often include promises to transfer multiple products and services to a customer.

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for Share-Based Payments .

As discussed further in Note (10) Share-Based Payment Arrangements, to our consolidated

financial statements, we account for share-based awards in accordance with the authoritative guidance issued by the FASB on stock

compensation.

As discussed further in Note (10) Share-Based Payment Arrangements , to our consolidated financial

statements, we account for share-based awards in accordance with the authoritative guidance issued by the FASB on stock compensation.

have used and expect to continue to use the Black-Scholes option-pricing model to compute the estimated fair value of share-based

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periods, share-based compensation expense could be materially impacted in the future.

for Convertible Debt and Embedded Derivatives.

Convertible debt is accounted for under the guidelines established by Accounting

Standards Topic (“ASC”) 470-20, Debt with Conversion and Other Options .

ASC 470-20 governs the calculation

of an embedded beneficial conversion feature, a derivative instrument, which is treated as an additional discount to the instruments

where derivative accounting does not apply.

This applies during the period for which embedded conversion features are either fixed,

contingently convertible, or cash or net settlement is in control of the Company.

When equity instruments, such as warrants, are

issued with convertible debt, the net proceeds from the transaction are allocated to the convertible debt and equity instruments

based on their relative fair values.

The proceeds allocated to the equity instruments may reduce the carrying value of the convertible

debt, and such discount is amortized to interest expense over the term of the debt.

The amount of the warrants and beneficial

conversion feature will reduce the carrying value of the debt instrument to zero, but no further.

The discount relating to the

initial recording of the original issue discounts, issue costs, warrants and beneficial conversion feature are accreted, together

with the premium, over the estimated term of the debt.

excess of fair value of the embedded conversion feature, together with the original issue discounts, warrants, and issue costs

over the face value of the debt, is recorded as an immediate charge in the accompanying statements of operations and cash flows.

Each reporting period, the Company will compute the estimated fair value of derivatives and record changes to operations.

ASC 718-20-35-7, Repurchase or Cancellation of equity awards, the amount of cash or other assets transferred (or liabilities incurred)

to repurchase an equity award shall be charged to equity, to the extent that the amount paid does not exceed the fair value of

the equity instruments repurchased at the repurchase date.

Any excess of the repurchase price over the fair value of the instruments

repurchased shall be recognized as additional compensation cost.

of Operations

Year Ended September 30, 2020 Compared to Fiscal Year Ended September 30, 2019

decreased to $46,600 from $316,248 for the years ended September 30, 2019 compared with the same period in 2018.

the cost of revenue decreased to zero from $89,230 for the years ended September 30, 2019 compared with 2018.

The decrease in

the cost of revenues resulted from limited licensing income earned from the Company requiring no cost of revenues.

in revenues resulted from expiration in the prior year of a four-year software license sold in 2014.

and administrative expenses increased to $3,372,047 from $1,844,903 for the years ended September 30, 2019 compared with the same

period in 2018.

The increases in general and administrative expenses primarily resulted from higher professional fees, including

for legal and accounting, higher consulting and contract services, higher salaries and higher rent expense.

Payroll tax expense

increased by $244,000 related to both employer and employee expense associated with historical stock grants issued to employees.

Additionally, general and administrative expenses include payments totaling $416,000 to Quality Healthcare International, Inc.

(“QHI”) and Noun Energy which are currently under investigation.

and marketing expenses increased to $1,772,197 from $545,250 for the years ended September 30, 2019 compared with the same period

Sales and marketing expenses increased primarily due to payments made to Ageos during 2019 as well as the hiring of individual

sales consultants under contract with the Company.

and development expenses increased to $1,744,480 from $873,107 for the years ended September 30, 2019 compared with the same period

Research and development expenses increased primarily as a result higher salaries and consulting costs.

expense was $0 for the year ended September 30, 2019, as compared to $81,000 for the year ended September 30, 2018.

expense for the year ended September 30, 2018 was due to the issuance of 50,000 shares of common stock to settle a legal claim.

other expenses, net, decreased to $8,101 from $(1,303,541) for the years ended September 30, 2019 and 2018, respectively.

The decrease was due to the following expenses from 2018:

loss on extinguishment of convertible notes totaling $317,268.

The Company recognized

a $358,038 loss on extinguishment related to the amendment of the convertible note with

FirstFire Global Opportunities Fund, LLC (“FirstFire”) in December 2017,

as well as a $153,621 loss on extinguishment related to the redemption of the convertible

note with Peak One Opportunity Fund LP (“Peak One”) in April 2018.

losses were partially offset by a $194,391 gain on extinguishment related to the settlement

of the amended FirstFire convertible note in March 2018.

Company recognized a loss of $486,745 in December 2017, resulting from the excess fair

value of the embedded conversion feature in the Peak One convertible note and of the

equity instruments issued with the Peak One convertible note.

in the fair value of the embedded conversion features in the FirstFire and Peak One convertible

notes during the year ended September 30, 2018, totaling $8,536.

increase in interest income (expense), net, to $8,101 from $(490,992) for

the years ended September 30, 2019 and 2018, respectively, due to interest

incurred on the Company’s convertible notes with FirstFire and Peak One that were

outstanding during the year ended September 30, 2018 and interest income earned on

excess cash equivalents during the year ended September 30, 2019.

increased to $47,983 for the year ended September 30, 2020 from $46,600 for the year ended September 30, 2019.

There was no cost

of revenues for the years ended September 30, 2020 or September 30, 2019.

and administrative expenses increased to $4,573,673 for the year ended September 30, 2020 from $3,372,047 for the year ended September

The increases in general and administrative expenses primarily resulted from higher legal expenses of $1,043,820, an

impairment loss related to the operating leases of $382,962, increase in stock compensation of $153,355 , an increase in

corporate insurance of $142,197 and an increase in salary expense of $101,099 offset by decrease in payroll taxes of $236,369

along with, the decrease in miscellaneous expense over last year that included payments totaling $416,000 to Quality Healthcare

International, Inc.

(“QHI”) and Noun Energy.

and marketing expenses decreased to $710,595 for the year ended September 30, 2020 from $1,772,197 for the year ended September

Sales and marketing expenses decreased primarily due to non-recurring payments made to Ageos during 2019 to hire individual

sales consultants under contract with the Company for $1,217,072 and a decrease in travel related costs of $49,559 offset by an

increase in salary expense of $205,029.

and development expenses decreased to $1,689,455 for the year ended September 30, 2020 from $1,744,480 for the year ended September

Research and development expenses decreased primarily as a result lower salary expense of $604,489, a decrease in stock

compensation of $15,615 offset by an increase in consulting expense of $565,079

other expenses, net, increased to $44,332 for the year ended September 30, 2020 from $8,101 for the year ended September 30, 2019.

The increase is a result of losses on the disposal of fixed assets.

and Capital Resources

have an accumulated deficit at September 30, 2019 of $61,456,536.

We expect to incur substantial expenses and generate continued

operating losses until we generate revenues sufficient to meet our obligations.

At September 30, 2019, the Company had cash of

We believe that our existing cash balances are sufficient to fund future operations for the next 12 months.

had an accumulated deficit as of September 30, 2020 of $68,426,608.

We expect to generate continued operating losses until

we generate revenues sufficient to exceed our operating expenses.

At September 30, 2020, we had $1,079,839 in cash.

believe that our existing cash balances are sufficient to fund future operations for the next 12 months.

We are considering options

to issue additional equity as a means to increase liquidity sufficient to fund operations through December 31, 2021.

following table summarizes, for the periods indicated, selected items in our Statements of Cash Flows:

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Net cash (used in) provided by:

$ (6,139,815 )

$ (2,299,459 )

Investing activities

Financing activities

used in operating activities was $6,139,815 and $2,299,459 for the years ended September 30, 2019 and 2018, respectively.

increase in cash used for operating activities was primarily an increase in net operating loss net of noncash items of $5,176,984,

a favorable increase in prepaid expense of $116,719, offset by an unfavorable increase in liabilities of $1,453,348.

used in investing activities was $37,059 and $14,429 for the years ended September 30, 2019 and 2018, respectively.

in cash used for investing activities was due to an increase in fixed asset purchases.

used by financing activities was $40,000 versus cash provided of $16,142,838 for the years ended September 30, 2019 and 2018,

respectively.

The decrease in cash provided by financing activities was due to a payout related to an oversubscription on a capital

raise as opposed to last year increase due to the issuances of common stock for cash.

For the year ended September 30, 2020, cash

used in operating activities was $6,646,091, primarily attributable to a net loss of $6,970,072 non-cash items of $640,433

and a net change in net operating assets and liabilities of $316,452.

Non-cash items primarily consisted of an impairment

loss of $382,961 related to operating leases, stock compensation expense of $194,896, a net loss on disposal of assets of $44,332

and depreciation of $18,243.

The change in our net operating assets and liabilities was primarily due to an increase in prepaid

and other assets of $322,912 and an increase in accounts payable and accrued liabilities of $6,460.

The Company used cash

during the year to pay for the cost of general and administrative, sales and marketing, and research and development activities

which combined to be $6,973,723.

the year ended September 30, 2019, cash used in operating activities was $6,139,815, primarily attributable to a net loss of $6,834,023,

partially offset by the net change in our net operating assets and liabilities of $580,123 and non-cash charges of $114,085.

change in our net operating assets and liabilities was primarily due to an increase in prepaid expenses and other assets of $116,719

and an increase in accounts payable and accrued liabilities of $696,842.

Non-cash charges consisted of stock compensation of $57,158,

shares issued in exchange for services of $40,000 and depreciation of $16,927.

used in investing activities was $28,972 and $37,059, attributable to the purchases of property and equipment for the years ended

September 30, 2020 and 2019, respectively.

the year ended September 30, 2020, cash provided by financing activities was $215,430, primarily derived from the proceeds from

the PPA loan of $365,430, offset by a payment of $450,000 for the repurchase of treasury stock.

the years ended September 30, 2019, cash used in financing activities was $40,000, was due to a payout related to an oversubscription

on a capital raise.

Sheet Arrangements

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 5. Market for Registrant’s Common Equity