KwikClick, Inc 10-Q for FY2022 Q3
KwikClick, Inc. (KWIK)
About this 10-Q
KwikClick, Inc filed this 10-Q on November 21, 2022, covering the quarter ended September 30, 2022 (FY2022 Q3).
Headline figures
Quarter ended September 30, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $166.72K
- up 233.4% from $50K a year earlier
- Net loss
- $839.98K
- compared with a net loss of $345.56K 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)
Number of shares of issuer’s common stock outstanding at November 21, 2022:
KWIKCLICK, INC.
TABLE OF CONTENTS
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PART I | FINANCIAL INFORMATION |
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Item 1. | 1 | |
| Balance Sheets, September 30, 2022 and December 31, 2021 (Unaudited) | 2 |
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| Statements of Cash Flows for the Nine Months ended September 30, 2022 and 2021 (Unaudited) | 5 |
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Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 9 |
Item 3. | 12 | |
Item 4. | 13 | |
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PART II. | OTHER INFORMATION |
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Item 1A. | 14 | |
Item 2. | 14 | |
Item 3. | 15 | |
Item 4. | 15 | |
Item 5. | 15 | |
Item 6. | 16 | |
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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' DEFICIT |
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Current liabilities: |
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Accounts payable | $ |
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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' 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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Accumulated deficit |
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Total stockholders' deficit |
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Total liabilities and stockholders' deficit | $ |
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The accompanying condensed footnotes are an integral part of these unaudited consolidated financial statements.
1
KWIKCLICK, INC
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
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Revenues: |
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Product sales |
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Licensing - related party |
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Net revenue |
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Operating expenses: |
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Cost of revenues |
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Management and payroll |
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General and administrative |
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Total operating expenses |
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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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See accompanying condensed footnotes are an integral part of these unaudited consolidated financial statements.
2
KWIKCLICK, INC
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)
As of and For the Periods Ended September 30, 2022 and 2021
(Unaudited)
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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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Stock based compensation |
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Net loss |
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BALANCE, June 30, 2022 |
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Issuance of common stock for cash |
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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, September 30, 2022 |
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BALANCE, December 31, 2020 |
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Net loss |
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Balance March 31, 2021 |
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Issuance of common stock for cash |
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Net loss |
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BALANCE, June 30, 2021 |
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Cancellation of preferred shares |
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Issuance of common stock for cash |
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Net loss |
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BALANCE, September 30, 2021 |
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The accompanying condensed footnotes are an integral part of these unaudited consolidated financial statements.
3
KWIKCLICK, INC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
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Cash flows from operating activities: |
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Net loss |
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Adjustments to reconcile net loss to net cash used in operating activities: |
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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 provided by (used in) operating 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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Payments on shareholder loans |
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Proceeds from issuance of common stock |
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Net cash provided by financing activities |
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Net 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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Supplemental Cash Flow Disclosures |
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Cash paid for income taxes |
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Cash paid for interest |
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Schedule of Non-Cash Investing and Financing Activities |
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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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The accompanying condensed footnotes are an integral part of these unaudited consolidated financial statements.
4
KWIKCLICK, INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 2022 and 2021
Unaudited
NOTE 1. BUSINESS
KwikClick, Inc., (the Company) was organized pursuant to the laws of the State of Delaware on November 16, 1993. Beginning in 2020, the Company commenced its KwikClick business operations to allow sellers to make products or services available on the KwikClick platform, at Kwik.com, offering a self-determined discount on goods or services in exchange for exposure and substantially increased sales volume.
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, 2021.
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 six and nine-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 accounting principles generally accepted in the United States of America 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 KwikClick 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 September 30, 2022 or December 31, 2021.
Loss Per Share
Basic earnings (loss) per share is calculated using the weighted average number of common shares outstanding for the periods presented. Diluted earnings (loss) per share is computed using the weighted-average number of common shares and, if dilutive, potential common shares outstanding during the period. The Company had
Revenue Recognition
5
The Company provides its customers a platform to sell their products and services in which it earns a fee based on a percentage of the products sold. Additionally, the Company has licensed the use of the technology platform under a Software Licensing and Exclusivity Agreement (“SL Agreement”). 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
The Company has two main revenue sources: sales of products on the KWIK app and technology licensing. The Company recognizes revenue at the completion of its applicable performance obligations.
For product sales, the customer pays at the time of purchase and the Company’s performance obligations are complete at the time of shipment. Shipping and handling costs, if any, are recognized as revenue and recorded at gross when incurred.
Technology licensing revenue is recognized over time as the Company’s performance obligation is to provide the functionality over the contract period.
NOTE 3. GOING CONCERN
As reflected in the accompanying unaudited consolidated financial statements, the Company has an accumulated deficit of $
NOTE 4. STOCKHOLDERS' EQUITY
On September 12, 2022, the Company amended its certificate of incorporation to increase the number of authorized shares of Common Stock to 400,000,000. The Company is authorized to issue
The following provides a description of the common stock issuances during the nine months ended September 30, 2022.
In September 2022, the Company issued
In July and August 2022, the Company issued
During the three months ended September 30, 2022 the Company issued
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In May 2022, the Company issued 75,000 shares of common stock valued at $
In May 2022, the Company issued
In May 2022, the Company issued
In April 2022, the Company issued
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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Outstanding at January 1, 2022 |
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Granted |
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Forfeited or cancelled |
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During the nine months ended September 30, 2022, the Company granted
For the three and nine months ended September 30, 2022, the Company recognized total stock-based compensation of $
As of September 30, 2022, the Company has committed 4,330,884 shares of stock for the fulfillment of the unissued vested (
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Stock Options
As of September 30, 2022, the Company had
NOTE 5. RELATED PARTY TRANSACTIONS
Shareholder Loans Payable
During the nine months ended September 30, 2022, Fred Cooper, our majority shareholder, loaned the Company $
Licensing Agreement
The Company entered into a software licensing agreement with NewAge, an entity controlled by Mr. Fred Cooper, our Former Chairman, Chief Executive Officer ("CEO"), and founding shareholder whereby the Company licensed the use of its technology platform for an initial period of one year at a rate of $50,000 per month that expired on September 2, 2022. During the three months ended September 30, 2022, the Company determined NewAge did not have the ability or intention to pay the monthly licensing fee when it became due resulting in no revenue recognition under the SL agreement for the three months ended September 30, 2022. See Footnote 6 – Commitments and Contingencies. The Company recognized licensing revenue totaling $
NOTE 6 COMMITMENTS AND CONTINGENCIES
On October 7 2022, NewAge, the licensee of the related party SL Agreement, filed an adversary proceeding against the Company as part of their Chapter 11 bankruptcy filing (Delaware Case #22-10819). NewAge contends they are the rightful owner of the intellectual property used in our operations and the underlying technology of the SL Agreement. NewAge's adversary proceeding contends that the Company's intellectual property was developed by Ariix, LLC which Mr. Fred Cooper was a founder, major shareholder, and CEO. In November 2020, Ariix, LLC was acquired by NewAge and Mr. Cooper became a Director of NewAge. NewAge alleges it purchased the intellectual property in the acquisition of Ariix, LLC.
The Company believes that the code base and functionality of its software platform differs materially from any intellectual property owned by NewAge. The Company has expended significant resources in developing its software platform independent of NewAge and 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 $852,000 at September 30, 2022 and may be forced to discontinue its on-going fee-based sales platform. The adversary Complaint filed by NewAge claims money damages in an amount to be determined at trial, but does not state any specific dollar amount of alleged damages. 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 statements of financial position, results of operations, or cash flows as of and for the nine months ended September 30, 2022.
NOTE 7. SUBSEQUENT EVENTS
The Company evaluated events occurring subsequent to September 30, 2022 through the date the financial statements were issued, and noted the following item:
During October and November 2022, the Company’s majority shareholder and Former CEO advanced the Company $300,000 to fund its on-going working capital needs. The advances are non-interest bearing and are due on demand.
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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.
Forward-Looking Statements
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 15, 2022. 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 15, 2022, 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.
10
Overview
KwikClick, Inc. was organized pursuant to the laws of the State of Delaware on November 16, 1993 under the name of CSL Lighting Manufacturing, Inc. On February 5, 2001, the Company amended its Certificate of Incorporation with the Delaware Secretary of State to change its name to “TBDOne, Inc.” On November 14, 2012, the Company amended its Certificate of Incorporation with the Delaware Secretary of State to change its name to “Fortecx, Inc.” to reflect the Company’s business of working with and acquiring and developing software platforms in the foreign exchange trading industry.
In 2020, the Company’s focus turned to its current KwikClick business by acquiring KwikClick, LLC on June 10, 2020. The Company commenced revenue generation in September 2021 in connection with its SL License with NewAge. Despite the SL License Agreement being the source of the Company’s initial revenue related to its recent business pivot, revenues are anticipated to be primarily sourced from the Company taking a portion of revenue generated through the KWIK platform. The platform is designed to allow sellers to make products or services available on the KWIK platform and offer a self-determined discount on goods or services or entire orders in exchange for exposure and substantially increased sales volume from KwikClick participants.
Comparison of the balance sheet at September 30, 2022 to December 31, 2021
Total current assets at September 30, 2022 of $24,476 were adequate for us to fund current operations, but are not adequate to fund our future operations without continued funding which is anticipated to come from sales of equity, such as our common stock shares. We do not currently anticipate raising capital from the sale of debt, but do not rule out the possibility. Total current assets is made up solely of cash on hand of $24,476 and $609,862 at September 30, 2022 and December 31, 2021 respectively.
At September 30, 2022 and December 31, 2021, our other assets primarily included intellectual property, net of accumulated amortization, of $851,721 and $613,507, respectively, related substantially to the capitalized costs of dozens of patent applications and the acquisition of kwik.com. The Intellectual property increased by the acquisition of the kwik.com in exchange for the issuance of 100,000 shares of common stock with estimated fair value of $100,000 to our President and approximately $138,000 of on-going patent application costs, inclusive of the current period amortization. At September 30, 2022 and December 31, 2021, we also had equipment of $5,900 and $2,635, respectively, net of accumulated depreciation, primarily consisting of office and computer equipment. At September 30, 2022, we also had a right-of-use asset of $131,613 associated with an operating lease with an expected term of three years that was entered into in February 2022
During the nine months ended September 30, 2022 our current liabilities decreased by $818,400 from $2,038,398 at December 31, 2021 to $1,219,998 at September 30, 2022. This decrease is primarily the result of issuance of 730,000 shares of common stock of which $1,041,200 in cash was received prior to December 31, 2021 and classified as a current liability as of December 31, 2021; and the settlement of accrued stock compensation due to our President via the issuance of 1,000,000 shares of common stock with an estimated fair value of $1,000,000, of which $333,334 was accrued at December 31, 2021. These reductions were off-set by due on demand shareholder loans in which the Company received cash proceeds netting $650,000. The Company’s only non-current liability at September 30, 2022 consists of operating lease liabilities totaling $81,536.
Comparison of operations for the three and nine months ended September 30, 2022 to September 30, 2021
Revenues
In 2022, we commenced our consumer sales platform in which we earn a percentage of the customer products sold. During the three and nine months ended September 30, 2022 we recognized net revenues of $166,723 and $341,632, respectively related to the KWIK platform. As of September 30, 2022, the product revenues have been trending upward. Management anticipates that these revenues will continue to increase as we continue to develop our KWIK platform, add vendors, and add users. Our KWIK platform remains under development. We have recently completed what we internally characterize as version 3.0. We anticipate continued development of the platform in terms of technology and addition of features on the platform, however, there is no guarantee these upgrades, if fully implemented, will result in increased users or revenue.
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During the nine months ended September 30,2022 the Company generated revenue totaling $300,000 related to a related party licensing agreement. As of September 2, 2022 the related party licensing agreement was terminated and the licensee did not make the required $50,000 monthly payments during the three months ended September 30, 2022. See Part II Item 1 Legal Proceedings.
Cost of Revenue
Our costs of revenue, totaling $126,531 and $205,370 for the three and nine months ended September 30, 2022, respectively, primarily consist of product costs 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
Since KwikClick, LLC’s inception in 2020, the Company has spent considerable time and effort developing its intellectual property and business plan. During the three and nine months ended September 30, 2022, we incurred total other operating expenses of $880,171 and $3,549,091, approximately 80% of which related to management and payroll expenses and the remainder made up primarily of professional fees and other selling, general, and administrative expenses. Our other operating expenses continue to trend upward, and we anticipate will continue to do so, 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 adding approximately one full-time employee per month. We also expect these operating expenses to increase if we are successful in increasing our product sales and user volumes.
Liquidity and capital resources
At September 30, 2022, we had a working capital deficit of approximately $1,200,000. Approximately 56% of current liabilities as of September 30, 2022 are due to our former CEO and current major shareholder, Mr. Fred Cooper. Mr. Cooper has provided an additional $300,000 in working capital advances through November 15, 2022. 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 nine months ended September 30, 2022, the Company’s cash used in operations significantly increased to approximately $2,035,000 and is expected to not be sufficient to meet our on-going obligations for at least the next twelve months. Our increased cash used in operations has been due to a significantly larger number of employees and expanded business operations.
During the three months ended September 30, 2022, we lost our only source of licensing revenue from NewAge, a related party. There is no assurance that we can obtain new revenues, increase revenues and/or obtain the necessary equity financing to fund our operations, much less on reasonable terms.
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.
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 commission revenues and, most importantly, obtain additional equity financing. We have engaged a third party to assist in all facets of our equity raising efforts, but have not secured any Firm funding commitments subsequent to the $1,000,000 we raised during the three months ended September 30, 2022.
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On July 5, 2022, our board of directors authorized the sale of up to 30,000,000 shares of our common stock for a total of $5,000,000. We believe that we may be able to raise the $4,000,000 balance in November and December 2022 from several sources. However, there is no assurance that it will occur.
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.
Going Concern Risk
As reflected in the accompanying financial statements, the Company had a net loss of $3,112,829 for the nine months ended September 30, 2022, and an accumulated deficit of $5,665,489 at September 30, 2022. If the Company doesn’t begin to generate sufficient revenue or raise additional funds through equity financing, the Company may need to incur additional liabilities with certain related parties to sustain the Company’s existence. There are currently plans, but no binding agreements, in place to provide such funding. The Company will require additional funding to finance the growth of its future operations as well as to achieve its strategic objectives. The ability of the Company to continue as a going concern is dependent on the Company’s ability to raise additional capital and generate revenue. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
The ability of the Company to continue its operations in the future is dependent on the plans of the Company’s management, which will include the raising of capital through debt and/or equity markets, until such time that funds provided by operations are sufficient to fund working capital requirements. The Company may need to incur additional liabilities with certain related parties to sustain the Company’s existence. There can be no assurance that the Company will be able to raise any additional capital.
Off-Balance Sheet Arrangements
There are no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.
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 15, 2022.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
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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 September 30, 2022 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 September 30, 2022, 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.
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.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
On September 2, 2021, we entered into the SL Agreementwith NewAge. NewAge is in the business of running a multi-level marketing business. The SL Agreement granted NewAge a one-year exclusive right to use our KwikClick platform in the multi-level marketing industry. The SL Agreement required that NewAge pay a monthly $50,000 base license fee. Section 9.2 of the SL Agreement states that NewAge may terminate the SL Agreement at any time if it is not satisfied with the function or performance of the KwikClick software. Kwikclick performed under the SL Agreement and NewAge, in turn, made all but one of its monthly $50,000 payments through July 1, 2022. NewAge did not make an August payment and was $100,000 in arrears and in breach of the SL Agreement as of August 2022. On August 30, 2022, NewAge filed for Chapter 11 bankruptcy in Delaware, Case #22-10819. As a part of that bankruptcy, on October 7, 2022, NewAge filed an adversary proceeding against KwikClick claiming that NewAge bought the source code upon which the KwikClick platform is allegedly built when NewAge purchased a company called Ariix, LLC in November 2020. The basis for the NewAge lawsuit focusses on co-defendant Fred Cooper who is our former CEO, former board Chair, and current majority stockholder. Mr. Cooper also serves as a director at NewAge. Mr. Cooper became a director at NewAge because he was the CEO and a major shareholder of Ariix, LLC. when it was acquired by NewAge in November 2020.
The specific causes of action against KwikClick include tortious interference with contractual relations, fraud (license agreement), breach of contract (license agreement), aiding and abetting a breach of fiduciary duty, violation of the Defend Trade Secrets Act, misappropriation of trade secrets, tortious interference with contractual relations, conspiracy, unjust enrichment, declaratory judgment, turnover (bankruptcy), avoidance (bankruptcy), constructive trust (bankruptcy) and fraudulent transfer (bankruptcy).
KwikClick, LLC was founded on February 20, 2020, nine months prior to NewAge’s acquisition of Ariix LLC, and was unaware of the contentions and theories brought by NewAge in its adversary proceeding; Kwikclick, LLC acclaims ownership rights to all of the source code upon which the KwikClick platform is built. NewAge had previously induced KwikClick to grant it exclusive rights to use the KwikClick platform in the multilevel marketing space. KwikClick vehemently disputes NewAge’s allegations, disputes that NewAge owns the source code upon which KwickClick is built, and seeks to vigorously defend itself and may file third party claims and counterclaims in connection with the litigation.
If KwikClick is unable to defend itself in the adversary proceeding, it is unlikely that the Company will be able to continue as a going concern. Other than the reference above, to the knowledge of management, no director or executive officer is party to any other action in which any party has an interest adverse to us.
Item 1A. Risk Factors
The Risk Factors identified in our Annual Report on Form 10-K for the year ended December 31, 2021, which was filed on April 15, 2022, continue to represent the most significant risks to the Company’s future results of operations and financial conditions, inclusive of the adverse proceeding mentioned in Part II, Item 1. Legal Proceedings in this report that describes the adversary proceeding brought in the Delaware Bankruptcy Court by NewAge.
Item 2. Unregistered Sales of Equity Securities
During the quarter ended September 30, 2022, we sold 10,000,000 shares of our common stock at approximately $0.10 per share to three persons. The net proceeds to the Company from the sale of the 10,000,000 shares was $1,000,000
We issued 5,000,000 shares of our common stock to Investrio, Inc. for consulting and 800,000 have vested and are considered issued and outstanding.
We issued 75,000 shares of our common stock for the benefit of our former secretary. At the direction of the former secretary, the shares were issued to a limited liability company controlled by him.
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We claimed exemption from registration under the Securities Act for the sales and issuances of securities in the above transactions under Section 4(a)(2) of the Securities Act and/or Regulations D and S promulgated thereunder, in that such sales and issuances (i) did not involve a public offering, or (ii) were made to non-U.S. Persons and otherwise complied with Rule 903 promulgated under the Securities Act, or (iii) were made pursuant to Rule 701 promulgated under the Securities Act, in that they were offered and sold either pursuant to written compensatory plans or pursuant to a written contract relating to compensation, as provided by Rule 701. All of the purchasers of unregistered securities for which we relied on Section 4(a)(2) and/or Regulation D represented that they were accredited investors as defined under the Securities Act. We claimed such exemption on the basis that (a) the purchasers in each case represented that they intended to acquire the securities for investment only and not with a view to the distribution thereof and that they either received adequate information about the registrant or had access, through employment or other relationships, to such information and (b) appropriate legends were affixed to the stock certificates issued in such transactions.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not Applicable.
Item 5. Other Information
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Item 6. Exhibit
Exhibit No. |
| Description |
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/ Matt Williams |
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Matt Williams |
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President |
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Principal Executive Officer |
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Date: November 21, 2022 |
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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: November 21, 2022 |
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Exhibit 31.1
CERTIFICATION
I, Matt Williams, 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: November 18, 2022 |
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/s/ Matt Williams |
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Matt Williams |
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President (Principal Executive Officer) |
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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.
Date: November 21, 2022 |
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/s/ Jeffrey Yates |
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Jeffrey Yates |
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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 September 30, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Matt Williams, 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: November 18, 2022 |
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/s/ Matt Williams |
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Matt Williams |
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President (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.
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 September 30, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jeffrey Yates, Principal Financial 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: November 21, 2022 |
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/s/ Jeffrey Yates |
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Jeffrey Yates |
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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.