What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2021-12-21 compared with 2020-12-29 · 162 added, 149 removed, 10 unchanged (97% of the section changed)

Corporation (the “Company”

or “Cipherloc”) was incorporated in the State of Texas on June 22, 1953 as

American Mortgage Company.

Effective August 27, 2014, we changed our name to Cipherloc Corporation.

Our headquarters are located

at 6836 Bee Cave Road, Building 1, S#279, Austin, TX 78746.

Our website is www.cipherloc.net .

The information contained,

or referred to, on our website is not part of this Annual Report on Form 10-K unless expressly noted.

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

Instead of dealing with large monolithic blocks of data, our approach decomposes the information to be protected into

multiple segments.

These individual segments each have a unique encryption key, utilize different encryption algorithms, are randomly

grouped into different lengths, and can be further re-encrypted.

Since segments are independent from each other and are individually

protected, our technology is not susceptible to computational attacks.

In fact, the strength of our technology improves as compute

power increases.

2018 and 2019, we attempted to market several products, services and solutions.

The initial solution suite was marketed under

several product names.

CipherLoc EDGE, a solution to be installed on mobile/handset devices, was designed to enable data to be

securely sent between any two mobile devices.

CipherLoc ENTERPRISE, a solution to be installed on desktops, laptops and tablet

computers, was designed to enable data to be securely sent between any two platforms.

CipherLoc GATEWAY, a solution to be installed

on servers, was designed to enable end-to-end data protection to and from servers, computers, tablets, and/or mobile devices via

the GATEWAY-protected servers.

CipherLoc SHIELD was designed as a solution to be used as a data storage platform.

2018 and 2019, there were forward-looking public announcements by the Company’s then-management of product names or segments

that were not delivered to the market and are not presently available to customers.

Our current management restructured the Company

to invest material resources into only products and services that are deliverable, have viable economic potential, and may be

publicly disclosed without adversely affecting our competitive position.

The core of our product and service offerings will continue

to be built around our patents and our polymorphic encryption technology ,which is a highly secure, quantum-ready data protection

technology carrying FIPS 140-2 (Federal Information Processing Standard 140-2) validation certificate #3381 for the “CipherLoc

Polymorphic Encryption Engine Core”

solution by the National Institute of Standards and Technology (NIST).

We focused our

development efforts during 2020 to develop commercial application of its technology by advancing a Software Development Kit (“SDK”)

for the Polymorphic Encryption Core.

By doing so, we have allowed potential customers to integrate and configure the PEC using

are developing products and services around our patented polymorphic encryption technology, which is designed to enable secure and private

data transmission.

Through our licensing program, we are offering what we believe to be the first secure, commercially viable, advanced

Polymorphic Encryption Core, or PEC, data-in-motion product that can be used in virtually any commercial data security industry or in

sensitive application.

We believe that our PEC data-in-motion product allows our customers to securely send data, with little setup time

in 2019, we retained an entirely new management team.

Our current management restructured our business to focus our resources on only

products and services that we believe are deliverable, have viable economic potential, and may be publicly disclosed without adversely

affecting our competitive position.

The core of our product and service offerings will continue to be built around our patents and encryption

We believe that our Cipherloc Polymorphic Encryption Engine Core technology is a highly secure data protection technology,

which has received a validation certificate from the National Institute of Standards and Technology (NIST).

to September 30, 2021, we were a Texas corporation.

We are now a Delaware corporation.

Our headquarters is located at 6836 Bee Cave Road,

Building 1, Suite 279, Austin, TX 78746.

transition to becoming a Delaware corporation was approved by our shareholders at our 2021 annual meeting

that was held on September 13, 2021.

In addition to the reincorporation in Delaware, our shareholders approved other governance

actions designed to reduce risk and accelerate our growth were approved by the shareholders.

Other actions by our shareholders

at the annual meeting included:

Election of Anthony Ambrose,

Sammy Davis, David Chasteen and Tom Wilkinson to our board of directors;

Ratification of the appointment

of Briggs & Veselka Co.

as our independent auditor;

Approval and adoption of our

2021 Omnibus Equity Incentive Plan;

Granting discretionary

authority to our board of directors to combine the outstanding shares of our common stock into a lesser number

of outstanding shares in a reverse stock split, with the exact ratio to be determined by our board of directors, within

a range of 1-for-2 to a maximum of 1-for-20;

Approval an amendment to

our Amended and Restated Articles of Incorporation to eliminate the statutory preemptive rights pursuant to Section 21.208 of

the Texas Business Organizations Code in the event that the reincorporation from the State of Texas to the State of Delaware is not

Approval , by non-binding

advisory vote, of a resolution approving named executive officer compensation;

Approval , by non-binding

advisory vote, of future non-binding advisory votes regarding future named executive officer compensation to occur

every three years.

March 31, 2021 and April 16, 2021, we entered into a securities purchase agreement with certain accredited investors, pursuant to which

we sold an aggregate of 55,549,615 shares of our common stock, and warrants to purchase an equal number shares of our common stock, for

$0.18 per share of common stock sold, in a private placement.

The price of $0.18 per share was equal to 80% of the closing sales price

of our common stock on the OTCQB Market on March 30, 2021.

The warrants issued with the shares of common stock have an exercise price

of $0.36 per share, and may be exercised at any time prior to March 31, 2026.

The warrants have anti-dilution protection that applies

if we issue shares of our common stock at less than the $0.36 per share exercise price of the warrants.

received approximately $10 million in gross proceeds from the sale of the shares and warrants.

In connection with the private placement,

we agreed to use the proceeds for working capital, and not for (i) debt repayment, other than the payment of trade payables in the ordinary

course of our business or the repayment of funds we received under the paycheck protection program of the Cares Act, (ii) redemption

of our stock, (iii) settlement of any litigation, or (iv) in violation of the law.

Investment Company, LLC acted as the placement agent for the offering.

Pursuant to our agreement then, we paid the placement agent a

cash commission of $1,334,861, 13% of the gross proceeds we received from the placement, and we granted to the placement agent a ten-year

warrant to purchase 8,332,439 shares of our common stock at the price of $0.18 per share.

April 29, 2021, we filed a registration statement on Form S-1 with the SEC, registering the resale of up to 119,431,669 shares of our

common stock, representing (i) the shares sold in the private placement referred to above, (i) the shares issuable upon exercise of warrants

issued in that private placement, and (iii) the shares issuable upon exercise of warrants issued to the placement agent in the private

As a result of the filing of that registration statement, the holders of the registered shares may sell those shares into

have focused our development efforts on the commercial application of our technology by advancing a Software Development Kit or SDK,

for our solution.

We believe that this effort has advanced our technology from theory to commercial application in the form of several

products, named Sentinel, Armor, and Shield, which we make available to licensees through our SDK.

In the past, we have relied on indirect

sales efforts.

We are currently developing new products and services designed for direct sales to customers, rather than sales through

third parties.

core technology is protected by six patents that expire between 2034 and 2037.

and Development

research and development expenditures for the years ended September 30, 2020 and 2019 were $1,689,455 and $1,744,480, respectively.

During December 2019, management determined that the maturity of our patented technology justified a cessation of academic research

activity and the elimination of the chief scientist’s role leading academic efforts.

Cost savings from those actions are

now allocated entirely to product development, product engineering, and revenue-generating sales activity.

Management continued

to emphasis these three areas during fiscal year 2020 and intends to do so during fiscal year 2021 as well.

research and development expenditures for the fiscal years ended September 30, 2021 and September 30, 2020 were $616,746 and $1,689,455,

respectively.

During December of 2019, our management determined that the pending maturity of our patented technology justified a cessation

of our academic research activities, including the elimination of our chief scientist’s role in leading various academic efforts.

We allocated the cost savings from ceasing those activities entirely to product development, product engineering, and revenue-generating

sales activities.

Our management continued to emphasis these three areas during fiscal year 2021 and intends to continue that emphasis

in our fiscal year 2022 and beyond.

encryption software market sector is highly competitive, subject to rapid change, and significantly affected by new product introductions

and other activities of market participants.

of our competitors in certain markets have greater financial, technical, sales, marketing and other resources than we do.

of these and other factors, competitive conditions in these industries are likely to continue to intensify in the future.

competition could result in price reductions, reduced net revenue and profit margins and loss of market share, any of which could

harm our business.

believe that our future results depend largely upon our ability to better serve customers and by offering new product enhancements

whether by internal development or acquisition.

We also believe we must continue to provide existing product offerings that compete

favorably with respect to ease of use, reliability, performance, range of useful features, reputation, and price.

anticipate we will face increasing pricing pressures from competitors in the future.

Given that there are low barriers to entry

into the software market and that the market is subject to rapid technological change, we believe that competition will persist

of our competitors have greater financial, technical, sales, marketing and other resources than we do.

Because of these and other factors,

competitive conditions in the markets we compete in are likely to continue to intensify in the future.

Increased competition could result

in price reductions for our products and services, reductions in our net revenue and profit margins and the loss of our market share,

any of which would likely harm our business.

believe that our future results depend largely upon our ability to serve our customers better than our competitors, and by offering new

product enhancements, whether by internal development or acquisition.

We also believe that we must provide product offerings that compete

favorably against those of our competitors with respect to ease of use, reliability, performance, range of useful features, reputation

anticipate that we will face increasing pricing pressures from our competitors in the future.

Since there are low barriers to entry into

the encryption software market, which is subject to rapid technological change, we believe that competition in our market will persist

and intensify in the future.

intellectual property is an important and vital asset of our company that enables us to develop, market, and sell our products

and services and enhance our competitive position.

Intellectual property includes our proprietary business and technical know-how,

inventions, works of authorship, and confidential information.

To protect our intellectual property, we rely primarily upon legal

rights in trade secrets, patents, copyrights, and trademarks, in addition to company policies and procedures, security practices,

contracts, and relevant operational measures.

protect the confidentiality of proprietary information by entering into non-disclosure agreements with our employees, contractors,

and channel and business partners, and we enter into license agreements with respect to our software and proprietary information

that include confidentiality terms.

These agreements are generally non-transferable and have either a perpetual or time-limited

We also employ access controls and associated security measures to protect our facilities, equipment, and networks.

believe that our intellectual property is an important and vital asset, which enables us to develop, market, and sell our products and

services, and enhance our competitive position.

Our intellectual property includes our proprietary business and technical know-how, inventions,

works of authorship, and confidential information.

To protect our intellectual property, we rely primarily upon legal rights in trade

secrets, patents, copyrights, and trademarks, in addition to our policies and procedures, security practices, contracts, and relevant

operational measures.

protect the confidentiality of our proprietary information by entering into non-disclosure agreements with our employees, contractors,

and other entities with which we do business.

In addition, our license agreements related to our software and proprietary information

includes confidentiality terms.

These agreements are generally non-transferable.

We also employ access controls and associated security

measures to protect our facilities, equipment, and networks.

Copyrights, Trademarks, and Licenses

products, particularly our software and related documentation, are protected under U.S.

and international copyright laws and laws

related to the protection of intellectual property and proprietary rights.

Currently, we have 6 patents, with approximately 5

patents pending with the U.S.

products, particularly our software and related documentation, are protected under domestic and international copyright laws and other

laws related to the protection of intellectual property and proprietary rights.

Currently, we have six patents filed with the U.S.

and Trademark Office.

We employ procedures to label copyrightable works with the appropriate proprietary rights notices, and we actively

enforce our rights in the United States and abroad.

However, these measures may not provide us with adequate protection from infringement,

and our intellectual property rights may be challenged.

Cipherloc logo is a registered trademark with the U.S.

Patent and Trademark Office.

We employ procedures to label copyrightable works with the appropriate

proprietary rights notices, and we actively enforce these rights in the U.S.

However, these measures may not provide

adequate protection, and our intellectual property rights may be challenged.

Cipherloc’s

logo, is a registered trademark of the Company in the U.S.

In the U.S., we are generally able to maintain our trademark rights

and renew trademark registrations for as long as the trademarks are in use.

In the United States, we are generally able to maintain

our trademark rights and renew trademark registrations for as long as the trademarks are in use.

Control Regulations .

It is expected that all our products will be subject to U.S.

export control laws and applicable foreign

government import, export and/or use requirements.

The level of control generally depends on the nature of the goods and services

For example, the level of control is impacted by the nature of the software and encryption incorporated into our

Where controls apply, the export of our products may require an export license or authorization or that the transaction

qualifies for a license exception or the equivalent and may also be subject to corresponding reporting requirements.

We expect that all of our products will be subject to U.S.

export control laws and applicable foreign government

import, export and/or use requirements.

The level of such control generally depends on the nature of the products in question.

the level of export control is impacted by the nature of the software and encryption incorporated into our products.

In those countries

where such controls apply, the export of our products may require an export license or authorization.

However, even if a transaction

qualifies for a license exception or the equivalent, it may still be subject to corresponding reporting requirements.

For the export

of some of our products, we may be subject to various post-shipment reporting requirements.

export restrictions apply

to all our products, whether or not they perform encryption functions.

In the event we become a Department of Defense contractor,

there are certain registration requirements that may be triggered by our sales.

In addition, certain of our items and/or transactions

may be subject to the International Traffic in Arms Regulations (ITAR) if our software or services are specifically designed or

modified for defense purposes.

Companies engaged in manufacturing or exporting ITAR-controlled goods and services (even if these

companies do not export such items) are required to register with the U.S.

export restrictions apply to

all our products, whether or not they perform encryption functions.

If we become a Department of Defense contractor in the future, certain

registration requirements may be triggered by our sales.

In addition, certain of our products and related services may be subject to

the International Traffic in Arms Regulations (ITAR) if our software or services are specifically designed or modified for defense purposes.

If we become engaged in manufacturing or exporting ITAR-controlled goods and services (even if we do not export such items), we will

be required to register with the U.S.

State Department.

to existing products may, and new products will, be subject to review under the Export Administration Act to determine what export

classification they will receive.

In light of the ongoing discussions regarding anti-terrorism legislation in the U.S.

there continues to be discussions regarding the correct level of export control.

Export regulations may be modified at any time.

Modifications to the export regulations could reduce or eliminate our ability to export some or all of our products from the U.S.

without a license in the future, which could put us at a disadvantage in competing for international sales compared to companies

located outside of the U.S.

that would not be subject to these restrictions.

Modifications to the export regulations could prevent

us from exporting our existing and future products in an unrestricted manner without a license or make it more difficult to receive

the desired classification.

If export regulations were to be modified in such a way, we may be put at a competitive disadvantage

with respect to selling our products internationally.

We will complete technical reviews on any new products that we acquire or

develop that may be subject to these regulations before we can export them.

We may be subject to various international, federal and state regulations regarding the treatment and protection

of personally identifying and other regulated information.

Applicable laws may include, without limitation, U.S.

and implementing regulations such as the GLBA and HIPAA, as well as state laws and regulations, and international laws and regulations

including the European Union General Data Protection Regulation, or the GDPR, which replaced the European Union Data Protection

Directive in May 2018.

Additionally, some of these laws have requirements on the transmittal of data from one jurisdiction to

In the event our systems are compromised by an unauthorized party, many of these privacy laws require that we provide

notices to our customers whose personally identifiable data we reasonably believe may have been compromised.

Additionally, if

we transfer data in violation of these laws, we could be subjected to substantial fines.

To mitigate the risk of compromised information,

we use encryption and other security to protect our databases.

of the date of this Annual Report on Form 10-K, we have full-time employee, 1 part-time employee and two full-time contractors.

These low employee and contractor counts reflect the actions made by the Company in March and April to reduce the monthly operating

The Company has determined this level of staffing is appropriate to continue pursuing applications of its technology

with prospective customers.

YOU CAN FIND MORE INFORMATION

are advised to read this Form 10-K in conjunction with other reports and documents that we file from time to time with the SEC.

In particular, please read our Quarterly Reports on Form 10-Q and Current Reports on Form 8-K that we file from time to time.

You may obtain copies of these reports directly from us or from the SEC at the SEC’s Public Reference Room at 100 F.

Washington, D.C.

20549, and you may obtain information about obtaining access to the Reference Room by calling the SEC at

1-800-SEC-0330.

In addition, the SEC maintains information for electronic filers at its website http://www.sec.gov.

to our existing products may be subject to review under the Export Administration Act to determine what export classification they will

In addition, any new products that we release in the future will also be subject to such review before we can export them.

Congress continues to discuss t the correct level of export control in possible anti-terrorism legislation.

Such export regulations

may be modified at any time.

Modifications to these export regulations could reduce or eliminate our ability to export some or all of

our products from the United States in the future, which could put us at a disadvantage in competing with companies located outside of

Modifications to U.S.

export regulations could restrict us from exporting our existing and future products.

Any such modifications

to export regulations may put us at a competitive disadvantage with respect to selling our products internationally.

We may be subject to various international, federal and state regulations regarding the treatment and protection of personally

identifying and other regulated information.

Applicable laws may include U.S.

federal laws and implementing regulations, such as the

[GLBA and HIPAA], as well as state and international laws and regulations, including the European Union General Data Protection Regulation

Some of these laws have requirements on the transmittal of data from one jurisdiction to another.

In the event our systems are

compromised, many of these privacy laws require that we provide notices to our customers whose personally identifiable data may have

been compromised.

Additionally, if we transfer data in violation of these laws, we could be subjected to substantial fines.

the risk of having such data compromised, we use encryption and other security to protect our databases.

of the date of this Annual Report on Form 10-K, we have three full-time employees and one part-time employee.

We also have four independent

contractors that provide services to us.

We anticipate that we will need to increase our staffing in the foreseeable future.

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 1. Business