KwikClick, Inc 10-Q for FY2023 Q2
KwikClick, Inc. (KWIK)
About this 10-Q
KwikClick, Inc filed this 10-Q on August 14, 2023, covering the quarter ended June 30, 2023 (FY2023 Q2).
Headline figures
Quarter ended June 30, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $51.48K
- down 76.8% from $222.19K a year earlier
- Net loss
- $793.47K
- compared with a net loss of $1.35M a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
For quarterly period ended
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 No.) |
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(Address of principal executive offices) | (Zip Code) |
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Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $0.0001 per share
(Title of Class)
KWIK
Trading Symbol
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 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. x
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). x
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
| Large Accelerated Filer ¨ | Accelerated Filer ¨ |
| Small Reporting Company | |
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| 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 Exchange Act)
As of August 14, 2023 the issuer had
KWIKCLICK, INC.
TABLE OF CONTENTS
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PART I | FINANCIAL INFORMATION |
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Item 1. | 1 | |
| Balance Sheets, June 30, 2023 and December 31, 2022 (Unaudited) | 1 |
| Statements of Operations for the Six Months ended June 30, 2023 and 2022 (Unaudited) | 2 |
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| Statements of Cash Flows for the Six Months ended June 30, 2023 and 2022 (Unaudited) | 4 |
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Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 10 |
Item 3. | 12 | |
Item 4. | 12 | |
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PART II. | OTHER INFORMATION |
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Item 1A. | 13 | |
Item 2. | 13 | |
Item 3. | 13 | |
Item 4. | 14 | |
Item 5. | 14 | |
Item 6. | 14 | |
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PART I FINANCIAL INFORMATION
Item 1 Financial Statements
KWIKCLICK, INC
CONSOLIDATED BALANCE SHEETS
(Unaudited)
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ASSETS |
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Current assets: |
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Cash and cash equivalents | $ |
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Total current assets |
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Equipment, net |
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Intellectual property, net |
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Right of use asset |
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Total assets | $ |
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LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) |
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Current liabilities: |
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Accounts payable | $ |
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Accrued liabilities |
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Lease obligation |
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Shareholder loans |
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Stock issuable |
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Total current liabilities |
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Long-term liabilities: |
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Lease obligation, net of current portion |
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Total liabilities |
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Stockholders' equity (deficit) |
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Preferred stock, $ |
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Common stock, $ |
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Additional paid-in-capital |
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Subscription receivable |
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Accumulated deficit |
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Total stockholders' equity (deficit) |
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Total liabilities and stockholders' equity (deficit) | $ |
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The accompanying condensed footnotes are an integral part of these unaudited consolidated financial statements.
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KWIKCLICK, INC
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
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Revenues: |
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Brand Services |
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Software Licensing |
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Net revenue |
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Operating costs and expenses: |
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Cost of Sales |
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Management and payroll |
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Research and development |
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General and administrative |
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Total operating costs and expenses |
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Other expenses |
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Interest expense |
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Loss before income taxes |
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Provision for (benefit from) income taxes |
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Net loss |
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Basic and diluted Loss per share |
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Weighted average shares outstanding - basic and diluted |
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The accompanying condensed footnotes are an integral part of these unaudited consolidated financial statements.
2
KWIKCLICK, INC
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
Six Months Ended June 30, 2023 and 2022
(Unaudited)
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BALANCE, December 31, 2022 |
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Capital contribution |
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Issuance of common stock for services |
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Proceeds from subscription receivable |
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Net loss |
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Balance March 31, 2023 |
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Issuance of common stock for services |
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Stock based compensation |
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Net loss |
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Balance June 30, 2023 |
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BALANCE, December 31, 2021 |
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Net loss |
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Balance March 31, 2022 |
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Issuance of common stock for settlement of stock issuable |
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Issuance of common stock for accrued compensation |
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Issuance of common stock for services |
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Issuance of common stock for intellectual property acquisition |
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Net loss |
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BALANCE, June 30, 2022 |
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The accompanying condensed footnotes are an integral part of these unaudited consolidated financial statements.
3
| For the Six Months Ended | ||||
| June 30, |
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Cash flows from operating activities: |
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Net loss | $ | ( |
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Depreciation and amortization |
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Stock based compensation |
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Loss on sale of equipment |
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Changes in operating assets and liabilities: |
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Accounts receivable |
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Operating leases |
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Accrued liabilities |
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Accounts payable |
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Net cash used in operating activities |
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Cash flows from investing activities: |
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Purchase of intellectual property |
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Proceeds from sale of equipment |
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Purchases of equipment |
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Net cash used in investing activities |
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Cash flows from financing activities: |
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Refund of stock payable |
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Proceeds from shareholders loans |
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Proceeds from common stock issuable |
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Proceeds from issuance of common stock |
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Proceeds from subscription receivable |
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Net cash provided by financing activities |
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Net increase (decrease) in cash and cash equivalents |
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Cash and cash equivalents at beginning of period |
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Cash and cash equivalents at end of period | $ |
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Cash paid for income taxes | $ |
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Cash paid for interest | $ |
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Non-Cash Supplemental Disclosures |
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Common stock issued for intellectual property | $ |
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Common stock issued for stock issuable settlement | $ |
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Common stock issued for accrued compensation | $ |
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Recognition of right of use asset and lease obligations | $ |
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Capital contribution for settlement of stock issuable | $ |
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The accompanying condensed footnotes are an integral part of these unaudited consolidated financial statements.
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KWIKCLICK, INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 2023 and 2022
(Unaudited)
NOTE 1. BUSINESS
KwikClick, Inc., (the “Company” or “Kwik”) was organized pursuant to the laws of the State of Delaware on November 16, 1993. Beginning in 2020, the Company commenced its Kwik business operations to allow sellers to make products or services available on the Kwik platform, at Kwik.com, offering a self-determined incentive budget on goods or services in exchange for exposure and substantially increased sales volume. Kwik is a social interaction, selling, and referral software platform.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”), including the instructions to Form 10-Q and Regulation S-X. Certain information and note disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”), have been condensed or omitted from these statements pursuant to such rules and regulations and, accordingly, they do not include all the information and notes necessary for comprehensive financial statements and should be read in conjunction with our audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2022.
In the opinion of the management of the Company, all adjustments, which are of a normal recurring nature, necessary for a fair statement of the results for the three and six-month periods have been made. Results for the interim periods presented are not necessarily indicative of the results that might be expected for the entire fiscal year.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary Kwik LLC. Intercompany transactions and balances have been eliminated in consolidation.
Cash and Cash Equivalents
Cash equivalents include all highly liquid investments with an original maturity of three months or less when purchased. The Company did not have any cash equivalents as of June 30, 2023 or December 31, 2022.
Loss Per Share
The Company presents both basic and diluted earnings per share (EPS) on the face of the statements of operations. Basic EPS is computed by dividing net loss by the weighted average number of shares outstanding during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period under the treasury stock or if-converted method as applicable. Due to the incurrence of net losses, the Company did not include outstanding instruments convertible into common stock that would be anti-dilutive. As of June 30, 2023, the Company had
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common stock that were potentially dilutive. As of June 30, 2022, the Company had
Research and Development
Research and development costs primarily consist of internal and external engineering staff wages, coding, and related on-going activities associated with upgrading and enhancing the Company’s internally developed software platform. Research and development costs that do not meet the criteria for capitalization, including those costs determined to be probable to not result in additional functionality, are expensed as incurred. For the six months ended June 30, 2023 and June 30, 2022 the Company did not capitalize any research and development costs.
Revenue Recognition
The Company determines the measurement of revenue and the timing of revenue recognition utilizing the following core principles:
·Step 1: Identify the contract with the customer
·Step 2: Identify the performance obligations in the contract
·Step 3: Determine the transaction price
·Step 4: Allocate the transaction price to the performance obligations in the contract
·Step 5: Recognize revenue when the Company satisfies a performance obligation
Revenue is measured based on the amount of consideration that the Company expects to receive, reduced by estimates for return allowances, promotional discounts, and rebates. Revenue excludes any amounts collected on behalf of third parties, including product costs for goods not owned and indirect taxes.
A description of the Company’s revenue generating activities is as follows:
Third-Party Seller Services (Brand Services Revenue):
The Company offers programs that provide sellers a software platform to sell their products. For some contracts the Company provides payment processing and order fulfillment facilitation. The Company is not the seller of record in these transactions.
The Company generally determines stand-alone revenue based on a percentage of the prices charged by the seller to deliver products sold. The commissions and any related fulfillment, shipping, and transaction processing fees the Company earns from these arrangements are recognized when the services are rendered, which generally occurs upon delivery of the related products to a third-party carrier or to the product purchaser. The Company does not incur material costs in obtaining third party seller contracts.
Software Licensing (Hosting Arrangement):
The Company licenses the use of its internally developed software to third parties for a fixed fee over a specified term. Revenue under these arrangements is recognized ratably over the contract term. The Company currently does not have any licensing agreements.
Applicable sales commissions paid in connection with contracts exceeding one year are capitalized and amortized over the contract term. During the six months ended June 30, 2023 and 2022, the Company did not incur material sales commissions.
Return Allowances
The fees earned by the Company are subject to returns under similar terms as set by the third-party services using the Company’s software platform. The Company does not assume responsibility for refund or replacement of product
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costs. Return allowances are estimated using historical experience. During the six months ended June 30, 2023 and 2022, the Company did not incur material returns.
Reclassifications
The Company reclassified certain general and administrative and management and payroll costs totaling approximately $
NOTE 3. GOING CONCERN
Since the commencement of the Kwik platform, the Company has accumulated a deficit of $
NOTE 4. STOCKHOLDERS' EQUITY
The following provides a description of the common stock issuances during the six months ended June 30, 2023.
During the six months ended June 30, 2023,
On May 31, 2023, the Company issued
On May 31, 2023, the Company issued
In January 2023, the Company received $
Common Stock Compensation
At the discretion of the compensation committee, the Company has granted common stock awards for various employees. The awards issued to date are earned and recognized over the requisite service period. The fair value of the award is estimated on the grant date.
A summary of the stock-based compensation associated with common stock awards is as follows:
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During 2022, the Company granted
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For the six months ended June 30, 2023, and 2022 the Company recognized total stock-based compensation of $
As of June 30, 2023, the Company has committed 2,528,453 shares of stock for the fulfillment of the unissued vested (
Warrants
During the quarter ended June 30, 2023 the Company issued
The grant date fair value of the warrants not previously recognized totaled $
The Company estimated the fair value of the warrants on the grant date using a Black-Scholes options pricing model using the quoted market price on the grant date; exercise price of $0.01 per share; expected volatility of approximately 80%; the expected term of two years; and the risk free interest rate of 0.2%.
A summary of the common stock warrant activity is as follows:
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Exercised |
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Forfeited, cancelled or expired |
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Outstanding at June 30, 2023 |
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Exercisable at June 30, 2023 |
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NOTE 5. RELATED PARTY TRANSACTIONS
Shareholder Loans Payable
During the six months ended June 30, 2023, Mr. Cooper funded the remainder of the Subscription Receivable of $
NOTE 6. COMMITMENTS AND CONTINGENCIES
On May 31, 2023, NAI Liquidation Trust, the successor in interest to the defunct NewAge, Inc. by and through its Liquidation Trustee, Steven Balasiano, filed an adversary proceeding against the Company in the Newage Chapter 11 bankruptcy case (Delaware Case #22-10819). The Company licensed some of its technology to NewAge pursuant to a license agreement that started in September 2021 and terminated in late 2022. A prior adversarial action was brought
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by NewAge in the same bankruptcy case but was never served and was dismissed on June 1, 2023. Like the prior dismissed action, NAI Liquidation Trust contends that they are the rightful owner of KwikClick’s intellectual property. NAI Liquidation Trust brings several causes of action related to that contention.
The Company believes that the code base and functionality of its software platform differs materially from any intellectual property owned by NewAge. The Company intends to vigorously defend and assert its intellectual property rights. In the event the Company does not prevail it may be required to impair substantially all of its intangible assets with a carrying value of approximately $1.4 million at June 30, 2023 and may be forced to discontinue its on-going fee-based sales platform. The litigation is in its early stages, an estimate of reasonably possible loss cannot be made at this time. As such, there has been no further adjustment to the accompanying consolidated statements of financial position, results of operations, or cash flows as of and for the three months ended June 30, 2023.
NOTE 7. SUBSEQUENT EVENTS
The Company has evaluated subsequent events through the date the consolidated financial statements were issued and has determined that there are no material events that need to be disclosed, except as follows:
Subsequent to June 30, 2023, Mr. Cooper provided additional working capital advances totaling $215,000 to the Company. The balance of working capital advances through August 14, 2023 totaled $994,739. These advances bear interest of 10% per annum and are due on demand. Mr. Cooper has informally agreed to defer repayment of these loans until the Company has achieved a more stable liquidity position, however, he is not legally obligated to continue to do so.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
As used in this Form 10-Q, references to the “Company,” “KwikClick,” “KWIK,” “we,” “our” or “us” refer to KwikClick, Inc. and KwikClick, LLC, unless the context otherwise indicates.
This Management’s Discussion and Analysis (“MD&A”) section discusses our results of operations, liquidity and financial condition and certain factors that may affect our future results. You should read this MD&A in conjunction with our financial statements and accompanying notes included elsewhere in this report.
This Quarterly Report on Form 10-Q contains statements that are considered forward-looking statements. Forward-looking statements give the Company’s current expectations and forecasts of future events. All statements other than statements of current or historical fact contained in this quarterly report, including statements regarding the Company’s future financial position, business strategy, budgets, projected costs and plans and objectives of management for future operations, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “estimate,” “expect,” “intend,” “may,” “plan,” and similar expressions, as they relate to the Company, are intended to identify forward-looking statements. These statements are based on the Company’s current plans, and the Company’s actual future activities and results of operations may be materially different from those set forth in the forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from the statements made. Any or all of the forward-looking statements in this annual report may turn out to be inaccurate. The Company has based these forward-looking statements largely on its current expectations and projections about future events and financial trends that it believes may affect its financial condition, results of operations, business strategy and financial needs. The forward-looking statements can be affected by inaccurate assumptions or by known or unknown risks, uncertainties and assumptions. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect events occurring after the date hereof. All subsequent written and oral forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by the cautionary statements contained in this quarterly report.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes that appear in our annual report on Form 10-K filed with the U.S. Securities and Exchange Commission (“SEC”) on April 17, 2023. In addition to historical consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Certain information included herein contains statements that may be considered forward-looking statements, such as statements relating to our anticipated revenues and operating results, future performance and operations, plans for future expansion, capital spending, sources of liquidity and financing sources. Such forward-looking information involves important risks and uncertainties that could significantly affect anticipated results in the future, and accordingly, such results may differ from those expressed in any forward-looking statements made herein. These risks and uncertainties include the “Risk Factors” included in our annual report on Form 10-K filed with the SEC on April 17, 2023, that can be read at www.sec.gov.
Although we have sought to identify the most significant risks to our business, we cannot predict whether, or to what extent, any of such risks may be realized, nor can there be any assurance that we have identified all possible issues which we might face. For all of these reasons, the reader is cautioned not to place undue reliance on forward-looking statements contained herein, which speak only as of the date hereof. We assume no responsibility to update any forward-looking statements as a result of new information, future events, or otherwise except as required by law.
Overview
The Company was organized pursuant to the laws of the State of Delaware on November 16, 1993. Beginning in 2020, the Company commenced its Kwik business operations to allow sellers to make products or services available on the Kwik platform, at Kwik.com, offering a self-determined incentive budget on goods or services in exchange for exposure and substantially increased sales volume. Kwik is a social interaction, selling, and referral software platform. Stores and manufacturers (“Brands”) wishing to promote their products or services on the Kwik software platform, which connects them to promoters, influencers, and customers. When the Brand is paid for the consumer
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purchases through the Kwik platform, the Brand pays an incentive budget to Kwik. Kwik receives the entire incentive budget as revenue for generating the sales through its platform, and recognizes cost of sales upon calculation and payment of the commissions paid to the wave of affiliates.
Comparison of operations for the three and six months ended June 30, 2023 to June 30, 2022
Revenues
During the three and six months ended June 30, 2023, we recognized net revenues of $51,478 and $136,795, respectively. During the three months and six months ended June 30, 2023, Brand Services revenue decreased approximately 2% and 22% respectively, as a result of fewer vendor and influencer promotions. During the comparable period of 2022, we had a licensing agreement that expired in the third quarter of 2022. Management anticipates that Brand Services revenues will begin to increase as we continue to develop our KWIK services, add vendors, and add users. The Company is currently in negotiations with several new brands, influencers, and influencer agencies who anticipate joining the platform within the next three to six months.
Cost of Sales
Our costs of revenue, totaling $40,523 and $32,912, respectively, for the three months ended June 30, 2023 and 2022, and $70,682 and $80,030, respectively, for the six months ended June 30, 2023 and 2022, primarily consists of marketing incentives and services for products that are sold on our platform. We expect the costs of revenue to fluctuate consistent with our sales volume and future product mix which is currently unpredictable based on the early stages of the KWIK platform.
Other Operating Expenses
During the six months ended June 30, 2023 and 2022, we incurred total other operating expenses of $1,703,846 and $2,688,920, respectively. The majority of the approximate $965,000 decrease, totaling approximately $750,000, is the result of non-recurring management and payroll and other general and administrative costs incurred during 2022. The same non-recurring expenses incurred in 2022 primarily resulted in the approximate $750,000 reduction in other operating expense for the three months ended June 30, 2023 as compared to June 30, 2022.
We anticipate our total operating expenses will trend upward as we add additional employees and consultants to work on the execution of our business plan, which includes activities such as design and coding of our website and app, vendor acquisition, cybersecurity, and user acquisition. We anticipate that much of this work will be done by outside consultants and consulting firms. In the coming 12 months, we anticipate increasing our promotional and marketing activities which will increase our operating expenses in our efforts to increase our product sales and user volumes.
Liquidity and capital resources
At June 30, 2023, we had a working capital deficit of $2,049,072. Approximately 37% of current liabilities as of June 30, 2023 are due to our majority shareholder, Mr. Fred Cooper. Mr. Cooper has provided $779,739 in working capital advances through June 30, 2023 and an additional $215,000 through the date of this report. These advances are due on demand. Mr. Cooper has informally agreed to defer repayment of these loans until the Company has achieved a more stable liquidity position, however, he is not legally obligated to continue to do so.
Through the six months ended June 30, 2023, the Company’s cash used in operations was approximately $1,183,424. We expect our cash provided by operations to not be sufficient to meet our on-going obligations until such time that we increase our brand offerings and overall user volumes.
We require additional capital to continue to operate our business, and to develop and expand our business. Sources of additional capital through various financing transactions or arrangements with third parties may include equity or debt financing, bank loans or revolving credit facilities. We may not be successful in locating suitable financing transactions in the time period required or at all, and we may not obtain the capital we require by other means.
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Our working capital deficit and current revenue levels make continued operation of our business not viable without accessing additional capital. However, as our current monthly capital needs or “burn rate” is approximately $275,000, we cannot survive as a going concern for more than a month or two unless we increase Brand Services revenues and, most importantly, obtain additional equity financing.
We have historically been funded primarily from private placements of stock and loans from Company affiliates and may continue to be so funded in for the foreseeable future. However, there is no assurance that we can obtain additional funds from any source. We have generated limited revenue though we have developed much of our technology in order to conduct business in the online, social media, consumer product marketing space. We have also been required to maintain our corporate existence and satisfy the requirements of being a public company since we have become a filer with the SEC. We will need to obtain capital to continue operations. There is no assurance that our Company will be able to secure such funding on acceptable (or any) terms.
Management has determined that additional capital will be required in the form of equity or debt securities. There is no assurance that management will be able to raise capital on terms acceptable to the Company. If we are unable to obtain enough additional capital, we may have to cease filing the required reports and cease operations completely. If we obtain additional funds by selling any of our equity securities or by issuing common stock to pay current or future obligations, the percentage ownership of our shareholders will be reduced, shareholders may experience additional dilution, or the equity securities may have rights preferences or privileges senior to the common stock.
Off-Balance Sheet Arrangements
The Company does not have any off-balance sheet arrangements.
Critical Accounting Estimates
There has been no change in our critical accounting estimates from those disclosed in our annual report on Form 10-K filed with the SEC on April 17, 2023.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Based on an evaluation under the supervision and with the participation of our management, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act were not effective as of June 30, 2023 to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms and (ii) accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. Based on this evaluation, our management concluded that, as of June 30,2023, our internal control over financial reporting was not effective due to (i) insufficient segregation of duties in the finance and accounting functions due to limited personnel; and (ii) inadequate corporate governance policies. In the future, subject to working capital limitations, we intend to take appropriate and reasonable steps to make improvements to remediate these deficiencies.
Changes in Internal Control Over Financial Reporting
There have not been any changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) under the Exchange Act) during the fiscal period to which this report relates that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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Inherent Limitations of the Effectiveness of Internal Controls
A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the internal control system are met. Because of the inherent limitations of any internal control system, no evaluation of controls can provide absolute assurance that all control issues, if any, within a company have been detected.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
On May 31, 2023, NAI Liquidation Trust, the successor in interest to the defunct NewAge, Inc. by and through its Liquidation Trustee, Steven, Balasiano filed an adversary proceeding against the Company in the Newage Chapter 11 bankruptcy case (Delaware Case #22-10819). The Company licensed some of its technology to NewAge pursuant to a license agreement that started in September 2021 and terminated in late 2022. A prior adversarial action was brought by NewAge in the same bankruptcy case but was never served and was dismissed on June 1, 2023. Like the prior dismissed action, NAI Liquidation Trust contends that they are the rightful owner of KwikClick’s intellectual property. NAI Liquidation Trust brings several causes of action related to that contention.
The Company believes that the code base and functionality of its software platform differs materially from any intellectual property owned by NewAge. The Company intends to vigorously defend and assert its intellectual property rights. In the event the Company does not prevail it may be required to impair substantially all of its intangible assets with a carrying value of approximately $___ million at June 30, 2023 and may be forced to discontinue its on-going fee-based sales platform. The litigation is in its early stages, an estimate of reasonably possible loss cannot be made at this time. As such, there has been no further adjustment to the accompanying consolidated statements of financial position, results of operations, or cash flows as of and for the three months ended June 30, 2023.
Item 1A. Risk Factors
The Risk Factors identified in our Annual Report on Form 10-K for the year ended December 31, 2022, which was filed on April 17, 2023, continue to represent the most significant risks to the Company’s future results of operations and financial condition.
Item 2. Unregistered Sales of Equity Securities
On May 31, 2023, the Company issued 6,000 shares of restricted common stock for services totaling $2,700.
On May 31, 2023, the Company issued 65,100 shares of restricted common stock for the fulfillment of previously vested stock-based compensation awards.
No underwriters were involved in the issuance of the securities noted above. All of the securities issued were deemed to be exempt from registration under the Securities Act in reliance upon Section 4(a)(2) of the Securities Act. The issuance of stock that was exempt under Section 4(a)(2) was a private offering to an accredited investor. Each of the investors represented to the Company that it (i) is an “accredited investor” as defined in Rule 501(a) of Regulation D promulgated under the Securities Act of 1933, as amended, (ii) is knowledgeable, sophisticated, and experienced in making investment decisions of this kind, and (iii) has had adequate access to information about the Company.
Item 3. Defaults Upon Senior Securities
None.
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Item 4. Mine Safety Disclosures
Not Applicable.
Item 5. Other Information
Item 6. Exhibit
Exhibit No. |
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This Form 10-Q | ||
31.1 |
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31.2 |
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32.1 |
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32.2 |
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101.INS |
| XBRL Instance Document |
101.PRE |
| XBRL Taxonomy Extension Presentation Linkbase |
101.LAB |
| XBRL Taxonomy Extension Label Linkbase |
101.DEF |
| XBRL Taxonomy Extension Definition Linkbase |
101.CAL |
| XBRL Taxonomy Extension Calculation Linkbase |
101.SCH |
| XBRL Taxonomy Extension Schema |
*Filed with the Registration Statement Form 10-12(g) on September 30, 2021
**Filed with the Registration Statement Form 10-12(g)/A on December 14, 2021
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
KwikClick, Inc. |
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By: /s/ Fred Cooper |
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Fred Cooper |
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Chief Executive Officer |
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Principal Executive Officer |
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Date: August 14, 2023 |
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By: /s/ Jeffrey Yates |
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Jeffrey Yates |
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Principal Financial Officer |
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Date: August 14, 2023 |
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Exhibit 31.1
CERTIFICATION
I, Fred Cooper, hereby certify that:
1.I have reviewed this Quarterly Report on Form 10-Q of KwikClick, Inc. (the “Company”);
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;
4.The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:
a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the Company’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and
5.The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent functions):
a.All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and
b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.
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Date: August 14, 2023 |
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/s/ Fred Cooper |
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Fred Cooper |
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Chief Executive Officer (Principal Executive Officer) |
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Exhibit 31.2
CERTIFICATION
I, Jeffrey Yates, hereby certify that:
1.I have reviewed this Quarterly Report on Form 10-Q of KwikClick, Inc. (the “Company”);
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;
4.The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:
a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the Company’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and
5.The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent functions):
a.All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and
b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.
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Date: August 14, 2023 |
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/s/ Jeffrey Yates |
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Jeffrey Yates |
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Chief Financial Officer (Principal Financial Officer) |
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Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT
TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of KwikClick, Inc., a Delaware corporation (the “Company”), on Form 10-Q for the period ended June 30, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Fred Cooper, Chief Executive Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: August 14, 2023 |
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/s/ Fred Cooper |
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Fred Cooper |
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Chief Executive Officer (Principal Executive Officer) |
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This certification accompanies each report of the Company on Form 10-Q and Form 10-K pursuant to §906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of §18 of the Securities Exchange Act of 1934, as amended.
A signed original of this written statement required by §906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT
TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of KwikClick, Inc., a Delaware corporation (the “Company”), on Form 10-Q for the period ended June 30, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Fred Cooper, Chief Executive Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: August 14, 2023 |
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/s/ Jeffrey Yates |
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Jeffrey Yates |
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Chief Financial Officer (Principal Financial Officer) |
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This certification accompanies each report of the Company on Form 10-Q and Form 10-K pursuant to §906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of §18 of the Securities Exchange Act of 1934, as amended.
A signed original of this written statement required by §906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.