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)
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(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
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(Address of principal executive offices) |
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Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $0.0001 per share
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(Title of Class)
KWIK
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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.
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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).
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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:
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Large Accelerated Filer ¨ |
Accelerated Filer ¨ |
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Small Reporting Company
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Emerging Growth Company
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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 May 13, 2022:
KWIKCLICK, INC.
TABLE OF CONTENTS
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PART I |
FINANCIAL INFORMATION |
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Item 1. |
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Balance Sheets at December 31, 2021 and March 31, 2022 (Unaudited) |
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Statements of Operations for the three months ended March 31, 2022 and 2021 (Unaudited) |
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Statements of Stockholder Deficit for the three months ended March 31, 2022 and 2021 (Unaudited) |
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Statements of Cash Flows for the three months ended March 31, 2022 and 2021 (Unaudited) |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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Item 4. |
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PART II . |
OTHER INFORMATION |
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Item 1. |
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Item 1A. |
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Item 2. |
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Item 3. |
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Item 4. |
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Item 5. |
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Item 6. |
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PART I FINCANCIAL INFORMATION
Item 1 Financial Statements
KWIKCLICK, INC
CONSOLIDATED BALANCE SHEETS
(Unaudited)
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March 31 |
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December 31, |
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2022 |
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2021 |
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ASSETS |
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Current Assets |
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Cash and Equivalents |
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$
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$
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Accounts Receivable |
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Total Current Assets |
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Fixed Assets |
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Office Equipment |
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Less Depreciation |
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(
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Net Fixed Assets |
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Intangible Assets |
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Patents |
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Less Amortization |
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(
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Net Intangible Assets |
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Right-of-Use Asset |
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TOTAL ASSETS |
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$
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$
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LIABILITIES STOCKHOLDERS' DEFICIT |
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Liabilities |
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Current Liabilities |
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Accounts Payable |
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$
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$
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Shareholder Loans |
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Accrued Liabilities – Related Party |
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Accrued Liabilities |
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Stock Issuance Liability |
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Taxes Payable |
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Lease Obligation - Current |
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Total Current Liabilities |
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Lease Obligation |
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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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(
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TOTAL LIABILITIES STOCKHOLDERS' DEFICIT |
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$
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$
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The accompanying footnotes are an integral part of these unaudited consolidated financial statements
1
KWIKCLICK, INC
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
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For the Three
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For the Three
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2022 |
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2021 |
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Revenue – Sales of Product |
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$
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$
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Revenue – Related Party |
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Total Revenue |
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Cost of Goods Sold |
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Product |
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Kwik Points |
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Shipping |
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Total Cost of Goods Sold |
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Gross Profit |
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Operating Expenses |
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General and Administrative |
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Amortization |
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Depreciation |
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Legal and Professional |
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Marketing |
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Office Supplies |
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Outside Services |
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Payroll Expense |
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Rent |
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Total Operating Expenses |
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Operating Loss |
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Net Loss |
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$
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$
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Basic and Diluted Loss per Common Share |
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$
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$
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Basic and Diluted Weighted Average Common Shares Outstanding |
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The accompanying footnotes are an integral part of these unaudited consolidated financial statements.
2
KWIKCLICK, INC
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
THREE MONTHS ENDED MARCH 31, 2022 AND 2021
(Unaudited)
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Additional |
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Totals |
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Preferred Stock |
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Common Stock |
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Paid in |
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Accumulated |
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Stockholders' |
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Shares |
Amount |
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Shares |
Amount |
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Capital |
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Deficit |
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Deficit |
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Balance - December 31, 2020 |
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$
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$
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$
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$
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$
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Net Loss |
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Balance - Mar 31, 2021 |
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Balance - December 31, 2021 |
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Net Loss |
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Balance - Mar 31, 2022 |
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The accompanying footnotes are an integral part of these unaudited consolidated financial statements.
3
KWIKCLICK, INC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
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For the Three |
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For the Three |
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Months
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Months
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March 31, |
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March 31, |
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2022 |
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2021 |
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OPERATING ACTIVITIES |
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Net Loss |
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$
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$
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Adjustments to reconcile net loss
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Amortization |
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Depreciation |
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Change in operating assets and liabilities |
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Accounts Receivable |
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Accounts Payable |
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Accrued Liabilities – Related Party |
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Accrued Liabilities |
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Taxes Payable |
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Net cash used by Operating Activities |
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INVESTING ACTIVITIES |
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Purchase of Equipment |
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Purchase of Patents |
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Net cash used by Investing Activities |
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FINANCING ACTIVITIES |
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Proceeds from shareholder loans |
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Lease Deposits |
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Repayment of stock issuance liability |
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Proceeds from stock issuance liability |
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Net cash provided by Financing Activities |
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Net cash decrease for period |
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Cash at the beginning of period |
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Cash at the end of period |
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$
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$
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Supplemental Cash Flow Information |
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Cash Paid for Interest |
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$
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$
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Cash Paid for Income Taxes |
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$
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$
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Schedule of Non-Cash Investing and Financing Activities |
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Initial recognition of right of use asset |
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$
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$
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The accompanying footnotes are an integral part of these unaudited consolidated financial statements.
4
KWIKCLICK, INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three Months Ended March 31, 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 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. The Company commenced revenue generation in September 2021 in connection with its software license with NewAge. Despite the 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 KwikClick platform. The platform is designed to allow sellers to make products or services available on the KwikClick platform and offer a self-determined discount on good(s) or service(s) or entire order(s) in exchange for exposure and substantially increased sales volume from KwikClick participants. This discount provided by third-party sellers of products is divided among the purchaser (0-10%), KwikClick (15-25%) and the balance is paid in the form of commissions to other participants on social media who introduce the product to contacts, friends, followers etc. that result in additional purchases.
On September 2, 2021 the Company entered into a Software Licensing and Exclusivity Agreement (SL Agreement) with NewAge, Inc, a Delaware corporation (NewAge). NewAge is a seller of products through so-called network marketing or direct selling. NewAge is a related party, as Fred Cooper (our CEO and majority shareholder) is a shareholder in NewAge and has significant influence. The SL Agreement grants NewAge exclusive rights to use the Company's software in the direct selling industry. The SL Agreement requires that NewAge pay a monthly $50,000 base license fee. In addition to the license fee, NewAge is required to pay commissions generally ranging from 3.0% to 4.0% of net sales of product using the KwikClick platform. NewAge was unable to meet the minimum revenues set out in the SL Agreement necessary to maintain exclusivity. However, we are discussing amending the SL Agreement to extend the exclusivity period for NewAge.
5
KWIKCLICK, INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three Months Ended March 31, 2022 and 2021
(Unaudited)
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 three 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.
These consolidated financial statements are prepared on the accrual basis of accounting in conformity with accounting principles generally accepted in the United States of America. The Company's fiscal year end is December 31.
Principles of Consolidation
The accompanying consolidated0 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.
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Loss Per Share |
For the Three |
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For the Three |
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Months Ended |
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Months Ended |
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March 31, |
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March 31, |
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2022 |
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2021 |
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Net Loss |
$
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$
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Basic and Diluted Loss per Common Share |
$
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$
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Basic and Diluted Weighted Average Common Shares |
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Shares Outstanding |
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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 did not have any potential common shares during the three months ended March 31, 2022 and the dilutive effect of potential common shares related to convertible preferred stock during the three months ended 2021 is not reflected in diluted earnings per share because the Company incurred a net loss and the effect of including these potential common shares in the net loss per share calculations would be anti-dilutive.
6
KWIKCLICK, INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three Months Ended March 31, 2022 and 2021
(Unaudited)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES—Continued
Property and Equipment
Property and equipment is recorded at cost. Expenditures for major betterments and additions are charges to the asset accounts, while replacements, maintenance and repairs which do not improve or extend the lives of the respective assets are charged to expense as incurred.
Property and Equipment as of March 31, 2022 and December 31, 2021 were as follows:
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March 31, |
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December 31, |
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2022 |
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2021 |
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Office Equipment |
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$
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$
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Less Depreciation |
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(
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$
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$
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Intangible Assets
Patents are recorded at cost. Expenditures for securing the patents are charges to the asset account.
Intangible Assets as of March 31, 2022 and December 31, 2021 were as follows:
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March 31, |
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December 31, |
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2022 |
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2021 |
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Patents |
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$
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$
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Less Amortization |
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$
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$
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Depreciation and Amortization
Depreciation of property and equipment is computed by the straight-line method using various rates based generally on the useful lives of the assets, which range from five to seven years.
During the three months ended March 31, 2022 and 2021, the Company recorded depreciation expense of $
Amortization of Patents is computed by the straight-line method over the useful lives of the patents, which are twenty years.
During the three months ended March 31, 2022 and 2021, the Company recorded amortization expense of $
7
KWIKCLICK, INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three Months Ended March 31, 2022 and 2021
(Unaudited)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES—Continued
Revenue Recognition
The Company recognizes revenue under Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers . The core principle of the revenue standard is that a Company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The following five steps are applied to achieve that core principle:
· 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
In order to identify the performance obligations in a contract with a customer, a company must assess the promised goods or services in the contract and identify each promised good or service that is distinct. A performance obligation meets ASC 606’s definition of a “distinct” good or service if both of the following criteria are met: The customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer, and the company’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract.
The Company has two main revenue sources: sales of products on the KWIKClick app and license revenue. The KWIKClick app help stores market their products through affiliate marketing. Stores list their product on the KWIKClick app and give a discount off of their regular retail price to pay the affiliates that share the product with friends or family. Sales of products on the KWIKClick app are recognized at the time the goods leave the shipper. Generally, a principal provides goods or services directly to the end customer, while an agent arranges for another party to provide its goods or services to the end customer. The Company is considered a principal because the Company assumes all risk of loss and is responsible for the sale and any refunds.
The license revenue is an agreement with NewAge Inc (SL Agreement) giving exclusive rights to the Company’s software. The SL Agreement requires that NewAge pay a monthly $50,000 base license fee. In addition to the license fee, NewAge is required to pay commissions generally ranging from 3.0% to 4.0% of net sales of product using the KwikClick platform. NewAge was unable to meet the minimum revenues set out in the SL Agreement necessary to maintain exclusivity. However, we are discussing amending the SL Agreement to extend the exclusivity period for NewAge.
Shipping and handling costs are recognized as revenue and recorded at gross when incurred.
Stock Based Compensation
The Company recognizes stock-based compensation under ASC 718, Compensation – Stock Compensation. ASC 718 requires all share-based payments to employees and non-employees, including grants of stock options, to be recognized in the financial statements based on the grant-date fair value of the award. That cost will be recognized over the period during which an employee or non-employee is required to provide service in exchange for the reward- known as the requisite service period or vesting period. The grant-date fair value of employee share options and similar instruments are estimated using the Black Scholes option-pricing model adjusted for the unique characteristics of those instruments.
8
KWIKCLICK, INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three Months Ended March 31, 2022 and 2021
(Unaudited)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES—Continued
Fair Value of Financial Investments
The fair value of cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities – related party, taxes payable, and shareholder loans payable approximates the carrying amount of these financial instruments due to their short-term maturity.
Advertising
The Company will expense advertising as incurred. Advertising expense was $
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.
Recent Authoritative Accounting Pronouncements
The Company has reviewed all recently-issued pronouncements, and has determined them to have no current applicability to the Company, or their effect on the financial statements is not significant.
Concentration of Credit Risk
The Company maintains its cash in institutions insured by the Federal Deposit Insurance Corporation (FDIC) up to $
NOTE 3. GOING CONCERN
As reflected in the accompanying unaudited consolidated financial statements, the Company has a net loss of $
9
KWIKCLICK, INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three Months Ended March 31, 2022 and 2021
(Unaudited)
NOTE 4. STOCKHOLDERS' EQUITY
Preferred Stock
The Company is authorized to issue up to 5,000,000 shares of preferred stock, $0.0001 par value, of which 100,000 have been designated as Series B Super Voting Convertible Preferred Stock. The Company's Series B Super Voting Convertible Preferred Stock, par value $0.0001, has voting rights equal to 1,500 common stock votes for each share of Series B Super Voting Convertible Preferred Stock held. The holders of shares of Preferred Stock are entitled to vote on all matters on which the Common Stock is entitled to vote, unless otherwise required by applicable law and except in cases where the rights and privileges of the holders of Common Stock may be altered or diminished. The holders of Preferred Stock are entitled to notice of any stockholders meeting in accordance with the Bylaws of the Company. The Series B Super Voting Convertible Preferred Stock shares are not entitled to dividends or liquidation preferences.
As of December 31, 2020, the 100,000 shares of Series B Super Voting Convertible Preferred Stock issued and outstanding were owned by Fred Cooper, our CEO. On or about September 21, 2021, Mr. Cooper tendered the
Common Stock and Stock Issuance Liability
The Company received $1,086,042 in cash for stock that was never issued in 2021. $30,000 was repaid in 2022.
There are
Stock Options
The Company agreed on October 14, 2021 to issue stock options to purchase 100,000 shares of KwikClick common shares to four individuals. The Company’s Board of Directors Daniel Shaw, Jeff Roberts, and David Hunt and the Company’s Attorney Rodney Wilkinson at an exercise price of $1.00 per share. The stock options expire three years from issuance and had a grant date fair value of $
The fair market value of stock options is estimated using the Black-Scholes-Merton valuation model and the Company used the following assumptions to determine the grant date fair value:
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2021 |
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Expected term (in years) |
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Expected stock price volatility |
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Risk-free interest rate |
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Expected dividend yield |
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The following table summarizes all stock option activity:
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Number of Options |
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Weighted
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Outstanding at December 31, 2021 |
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$
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Granted |
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- |
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Exercised |
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- |
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Forfeited |
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- |
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Outstanding at March 31, 2022 |
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$
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10
KWIKCLICK, INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three Months Ended March 31, 2022 and 2021
(Unaudited)
NOTE 5. RELATED PARTY TRANSACTIONS
Shareholder Loans Payable
During the three months ended March 31, 2022 and 2021, Fred Cooper, our majority shareholder and CEO, loaned the Company $500,000 and $0, respectively, to fund operations. During the same periods, the Company repaid $0 and $0, respectively.
The loans are non-interest bearing and due on demand. As of March 31, 2022 and December 31, 2021, $
Fred W. Cooper, our CEO, Chairman of our board of directors and our majority stockholder with voting control over our company, is a director and stockholder at NewAge. Mr. Cooper also was CEO and controlling stockholder of Ariix, Inc., which NewAge acquired in 2020. Mr. Cooper has significant connections at, and is able to have significant influence over, NewAge. The SL Agreement described in Note 1 is, at minimum in large part, a result of Mr. Cooper’s connection and influence at NewAge.
Accrued Liabilities – Related Party
Matt Williams, President of the Company, is being compensated solely with common stock and per his employment agreement is to receive 83,333 shares of common stock per month. The Company did not issue Mr. Williams 83,333 shares of common stock for the months of January, February and March. The Company sold stock for $1/share in September 2021 and determined to use the sale price of the stock as the fair market value of the stock owed to Mr. Williams. During the three months ended March 31, 2022, Mr. William’s compensation was entered as an expense on the Statement of Operations in the amount of $249,999 and recorded as Accrued Liabilities – Related Party on the balance sheet. As of March 31, 2022 and December 31, 2021, the balance owed to Mr. William’s was $
Steve Bouck, VP of Finance of the Company, earned 17,300 shares of common stock during the three months ended March 31, 2022. The shares of common stock were not issued and as of March 31, 2022 and December 31, 2021, the balance owed to Mr. Bouck was $
Bryan Boam, Internet Security of the Company, earned 4,000 shares of common stock during the three months ended March 31, 2022. The shares of common stock were not issued and as of March 31, 2022 and December 31, 2021, the balance owed to Mr. Boam was $
Revenue – Related Party and Accounts Receivable – Related Party
The Company recognized $
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NOTE 6. LEASES
The Company accounts for its leases under ASC 842 Leases. Accordingly, the Company determines whether an arrangement contains a lease at the inception of the arrangement. If a lease is determined to exist, the term of such lease is assessed based on the date on which the underlying asset is made available for the Company's use by the lessor. The Company's assessment of the lease term reflects the non-cancelable term of the lease, inclusive of any rent-free periods and/or periods covered by early-termination options which the Company is reasonably certain of not exercising, as well as periods covered by renewal options which the Company is reasonably certain of exercising. The Company also determines lease classification as either operating or finance at lease commencement, which governs the pattern of expense recognition and the presentation reflected in the consolidated statements of operations over the lease term.
For leases with a term exceeding 12 months, a lease liability is recorded on the Company's consolidated balance sheet at lease commencement reflecting the present value of its fixed minimum payment obligation over the lease term. A corresponding right-of-use (ROU) asset equal to the initial lease liability is also recorded, adjusted for any prepaid rent and/or initial direct costs incurred in connection with execution of the lease and reduced by any lease incentives received. For purposes of measuring the present value of its fixed payment obligations for a given lease, the Company uses its incremental borrowing rate, determined based on information available at lease commencement, as rates implicit in its leasing arrangements are typically not readily determinable. The Company's incremental borrowing rate reflects the rate it would pay to borrow on a secured basis and incorporates the term and economic environment of the associated lease.
For the Company's operating leases, fixed lease payments are recognized as lease expense on a straight-line basis over the lease term. For leases with a term of 12 months or less, any fixed lease payments are recognized on a straight-line basis over the lease term and are not recognized on the Company's consolidated balance sheet as an accounting policy election. Leases qualifying for the short-term lease exception were insignificant. Variable lease costs are recognized as incurred.
During the three months ended March 31, 2022
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Lease Expense |
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2022 |
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Expensed |
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$
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As the Company’s lease does not provide an implicit rate, the Company used an incremental borrowing rate in determining the present value of lease payments. The discount rate used in the computation was 8%. Balance Sheet Classification of Operating Lease Assets and Liabilities
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Asset |
Balance Sheet Line |
2022 |
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Operating Lease Right of Use Asset |
Right of Use Asset |
$
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Liability |
Balance Sheet Line |
2022 |
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Current Operating Lease Obligation |
Lease Obligation - Current |
$
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Long Term Lease Obligation |
Lease Obligation |
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The following table represents our future minimum operating lease payments in accordance with ASC 842 during the following periods:
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Year Ended December 31: |
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2022 (remaining 9 months) |
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$
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2023 |
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2024 |
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2025 |
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Total of undiscounted lease payments |
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Less imputed interest |
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(
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Present value of lease liability |
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$
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12
NOTE 7. Subsequent Events
Subsequent events were evaluated through the date the financial statements were issued and no subsequent events have happened that require disclosure.
13
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
This Quarterly Report on Form 10-Q contains certain statements that are “forward-looking” within the meaning of the federal securities laws. These forward-looking statements and other information are based on our beliefs as well as assumptions made by us using information currently available.
The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “will,” “should” and similar expressions, as they relate to us, are intended to identify forward-looking statements. Such statements reflect our current views with respect to future events and are subject to certain risks, uncertainties and assumptions, and are not guaranties of future performance. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described herein as anticipated, believed, estimated, expected, intended or using other similar expressions. We are making investors aware that such forward-looking statements, because they relate to future events, are by their very nature subject to many important factors that could cause actual results to differ materially from those contemplated by the forward-looking statements contained in this Quarterly Report on Form 10-Q. Important factors that could cause actual results to differ from our predictions include, without limitation:
● Market acceptance of our products and services;
● Competition from existing products or new products that may emerge;
● The implementation of our business model and strategic plans for our business and our products;
● Estimates of our future revenue, expenses, capital requirements and our need for financing;
● Our financial performance;
● Current and future government regulations;
● Developments relating to our competitors; and
● Other risks and uncertainties, including those listed under the section titled “Risk Factors” in our annual report filed on Form 10-K filed with the Securities and Exchange Commission on April 14, 2022.
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. We urge readers to review carefully the risk factors described in this Quarterly Report and in our annual report filed on Form 10-K filed with the Securities and Exchange Commission on April 15, 2022. You can read these documents at www.sec.gov .
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. The Company commenced revenue generation in September 2021 in connection with its software license with NewAge. Despite the 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 KwikClick platform. The platform is designed to allow sellers to make products or services available on the KwikClick platform and offer a self-determined discount on good(s) or service(s) or entire order(s) in exchange for exposure and substantially increased sales volume from KwikClick participants. This discount provided by third-party sellers of products is divided among the purchaser (0-10%), KwikClick (15-25%) and the balance is paid in the form of commissions to other participants on social media who introduce the product to contacts, friends, followers etc. that result in additional purchases.
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Revenues
As of the date of the March 31, 2022 financial statements, the Company is early revenue. The Company commenced revenue generation in September 2021 in connection with its software license with NewAge. Despite the 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 KwikClick platform. The platform is designed to allow sellers to make products or services available on the KwikClick platform and offer a self-determined discount on good(s) or service(s) or entire order(s) in exchange for exposure and substantially increased sales volume from KwikClick participants. This discount provided by third-party sellers of products is divided among the purchaser (0-10%), KwikClick (15-25%) and the balance is paid in the form of commissions to other participants on social media who introduce the product to contacts, friends, followers etc. that result in additional purchases.
Operating Expenses
Since KwikClick, LLC’s inception in 2020, the Company has spent considerable time and effort developing its intellectual property and business plan. Operating expenses for the quarter ended March 31, 2022 were $1,129,645 as compared to $245,604 for the comparable March 31, 2021 period, an increase of approximately 360%. The increase is primarily a result of adding approximately 35 employees and consultants to our monthly expense outlays, including approximately a dozen full-time employees. The employees and consultants worked on design and coding of our website, applications and platform, marketing, legal, accounting and typical general and administrative expenses in connection with running the business. The expenses in connection with the Company’s primary revenue source is expected to mostly consists of Commission payments made to influencers/users of the KwikClick platform.
Liquidity and capital resources
Since the acquisition of the KwikClick subsidiary in June 2020, the Company has been primarily funded by loans and sales of stock to third-party investors. In 2021, we raised an additional $220,000 by selling 220,000 shares of common stock and also received $1,086,042 for stock that has yet to be issued of which $30,000 has been repaid in 2022.
In 2020, Fred Cooper loaned the Company $116,000 and was repaid $100,000. This increased the Note to Shareholder by $16,000 bringing the balance to $34,489 on December 31, 2020 and 2021. During the three months ended March 31, 2022 Fred Cooper loaned the Company $500,000 and $0 was repaid. This increased the Note to Shareholder by $500,000 bringing the balance to $534,489 on March 31, 2022.
As of March 31, 2022, we had cash of $339,807 compared to $609,862 in cash on December 31, 2021. Most of the cash depletion in 2022 quarter to date has been due to a significantly larger number of employees and expanded business operations. Based on currently available capital resources (cash), we estimate that we would be able to conduct our planned operations for one or two months. We have increased our “burn rate” to approximately $200,000 per month. We estimate that at our current cash “burn rate”, we cannot survive for more than a month or two unless we continue to receive revenues from New Age pursuant to the SL Agreement, increase commission revenues, and obtain at least another $1,000,000 to $2,000,000 in additional equity financing. There is no assurance that we can maintain revenues, increase revenues and/or obtain the necessary equity financing, much less on reasonable terms.
Our current liabilities as of March 31, 2022 totaled $2,807,978, compared to $2,038,398 on December 31, 2021. If the Company doesn’t begin to generate sufficient revenue or raise additional funds through financing, the Company may need to incur additional liabilities with certain related parties to sustain the Company’s existence. Currently, there can be no assurance that the Company will be able to raise additional funds necessary to further develop or operate its business or that such funding can be at commercially reasonable terms.
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. We have generated limited revenue though we have developed much of our technology in order to initiate business in the online, social media 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. During the quarter ended March 31, 2022 we reported a net loss of $922,852 compared to $245,604 for the period ended March 31, 2021 and had negative cash flows from operating activities totaling $732,516 in the first quarter of 2022 compared to $242,977 to the comparative period ended March 31, 2021.
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The revenues, if any, generated from our operations in the next 12 months may not be sufficient to fund our operations or planned growth. We may 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.
We are obligated to file annual, quarterly and current reports with the SEC pursuant to the Exchange Act. In addition, the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”) and the rules subsequently implemented by the SEC and the Public Company Accounting Oversight Board have imposed various requirements on public companies, including requiring changes in corporate governance practices. We expect these rules and regulations to increase our legal and financial compliance costs and to make some activities of ours more time- consuming and costly. To meet the needs to comply with the requirements of the Securities Exchange Act, we will need investment of capital.
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 $922,852 for the quarter ended March 31, 2022, and an accumulated deficit of $3,475,512 at March 31, 2022. If the Company doesn’t begin to generate sufficient revenue or raise additional funds through financing, the Company may need to incur additional liabilities with certain related parties to sustain the Company’s existence. There are currently no plans or 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. As a result of the Covid-19 crisis, the Company may experience difficulties in raising these funds due to economic impacts on funding sources. This raises substantial doubt about the Company’s ability to continue as a going concern. 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 Policies
Critical accounting policies are discussed in Note 1 of the financial statements accompanying this quarterly report.
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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 March 31, 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 March 31, 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
We are not the subject of any pending legal proceedings; and to the knowledge of management, no proceedings are presently contemplated against us by any federal, state or local governmental agency. Further, to the knowledge of management, no director or executive officer is party to any 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 continue to represent the most significant risks to the Company’s future results of operations and financial conditions, without further modification or amendment.
Item 2. Unregistered Sales of Equity Securities
We claimed exemption from registration under the Securities Act for the sales and issuances of securities in the following 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
None.
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Item 6. Exhibit
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Exhibit No. |
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Description |
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3.1* |
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3.2* |
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10.1* |
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10.2* |
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Employment Agreement dated September 21, 2021 – Matthew Williams |
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This Form |
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10-K |
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March 31, 2022 |
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31.1 |
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31.2 |
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Certification of principal financial officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 executed by Jeffery A. Jensen |
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32.1 |
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32.2 |
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101.INS |
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XBRL Instance Document |
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101.PRE |
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XBRL Taxonomy Extension Presentation Linkbase |
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101.LAB |
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XBRL Taxonomy Extension Label Linkbase |
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101.DEF |
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XBRL Taxonomy Extension Definition Linkbase |
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101.CAL |
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XBRL Taxonomy Extension Calculation Linkbase |
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101.SCH |
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XBRL Taxonomy Extension Schema |
* Filed with the Registration Statement Form 10-12(g) on September 30, 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.
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KwikClick, Inc. |
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By: /s/ Fred W. Cooper |
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Fred W. Cooper, |
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Chief Executive Officer and Director |
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Principal Executive Officer |
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Date: May 13, 2022 |
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By: /s/ Jeffery A Jensen, CPA |
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Jeffery A Jensen, |
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CPA, Controller and Treasurer |
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Principal Financial Officer |
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Date: May 13, 2022 |
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20