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.
The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our risk factors, financial
statements and related notes that appear elsewhere in this Annual Report on Form
10-K. In addition to historical 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. Risk factors that could cause or contribute to these
differences include those discussed below and elsewhere in this Form 10-K.
INTRODUCTION
Management's Discussion and Analysis ("MD&A") of our financial condition and
results of operations is provided as a supplement to the accompanying financial
statements and related notes to help provide an understanding of our financial
condition, the changes in our financial condition and the results of operations.
Overview
KWIKClick, Inc., a Delaware corporation. KWIKClick is a social interaction,
selling, and referral software platform. Stores and manufacturers ("Brands")
wishing to promote their products or services on the KWIKClick software
platform, pay nothing to use the platform, which connects them to promoters,
influencers, and customers, all referred to as "affiliates". The Brands
establish an incentive budget, which is an amount discounted from their regular
retail pricing, which is used by KWIKClick to entice users to promote a product
or refer others to purchase a product. With no conditions such as follower size,
invitation, or negotiation, any consumers or influencers who open a KWIKClick
account and become users or affiliates, may receive a cash-back reward, paid
from the Brand's incentive budget administered by KWIKClick, for all purchases
they make, and can immediately share their own automatically encoded link,
associated with the product they purchased, to other consumers. Shared links
that lead to a purchase and/or repurchases result in commission payments which
are electronically paid to the referrer. When the Brand is paid for the consumer
purchases through the KWIKClick platform, the Brand's incentive budget is paid
to KWIKClick. KWIKClick receives the entire incentive budget as revenue for
generating the sales through its platform and recognizes cost of sales upon
calculation and payment of the commissions paid to the wave of affiliates.
The essential driver of sales activity on the platform by sellers and buyers is
the free-use mobile application which has the potential to turn all social media
activity into a product solicitation on behalf of sellers in an unobtrusive
manner. Furthermore, the software automates person-to-person requests for
recommendations by simply sharing a link to any mobile device. Much like a "pin"
can be sent to share locations, the encoded link provides to the requestor a way
to
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instantly purchase the goods or services of interest. Traditionally on other
platforms, and based on the reach of a contracted influencer, compensation may
include only a single commission paid for an initial purchase attributable to
the influencer. Unique to KWIKClick, the affiliate commission program is not
limited to a single purchase produced by an influencer. Furthermore, no contract
is needed between the influencer and the seller. The KWIKClick software
passively identifies the participant in the campaign who made the referral, and
the corresponding individual who made the purchase. A commission is paid to the
influencer each and every time a purchase is made by a particular consumer.
The process of listing items for sale by a seller is referred to as a campaign.
Influencers or participants with ANY number of friends or followers, can join a
campaign by promoting items through social media with an encoded link within the
posted photo or video, or by sample sharing an encoded link to a mobile device
when they are asked for a recommendation. The potential number of campaigns that
can be created by sellers are virtually unlimited due to the number of goods or
services and/or orders made available in the KWIKClick platform. The number of
campaigns an individual can participate in is unlimited. The number of
permutations, or waves, in the campaigns of senders and recipients is virtually
endless. The potential length of the wave on any one campaign is limited only to
the number of potential unique consumers of any given product. The number of
waves on which an individual can earn commissions is based on the number of
links an individual earns commissions on and the net dollar amount of total
incentive budget offered by the seller. The larger the incentive budget, the
greater number of waves on which individuals earn and the total amount of
commissions earned at any given level in the wave follows an exponential growth
pattern. Accordingly, a single social media post, sent to anyone, could go viral
and create an exponential source of commissions on all units sold on any single
product to any number of individuals as long as the product continues to be
sold. Commissions are sent to the recipients electronic account of choice.
Participation in KWIKClick and earning commissions from this incentive sharing
is completely free to participants and completely voluntary. Participants have
nothing financially at stake.
Unlike current methods of affiliate marketing which are based on a seller's
contracts with influencers which are motivated by an influencer's number of
followers, number of views, engagements etc., sellers on the KWIKClick
application only pay commissions through the incentive budget they offer when a
sale actually occurs. Further, sellers are provided key analytical information
on purchases made, reviews, activity and purchasing habits of their customers
from the data collected from use of the KWIKClick application.
The patent pending KWIKClick application and website are free to download,
distribute and use. In any scenario, sellers and buyers all access the same
KWIKClick platform.
Revenues
As of the date of the December 31, 2022 financial statements, the Company is in
early stage revenue. The Company commenced revenue generation in September 2021
in connection with its software license with Newage Inc., a network marketing
company. Despite the license agreement being the source of the Company's initial
revenues until July 2022, revenues hereafter are anticipated to be primarily
sourced from the Company's KwikClick platform. The Company is currently working
with Shopify, which facilitates over $200 Billion Gross Merchandise Volume (GMV)
annually for other ecommerce platforms. Once the Company integration with
Shopify is fully approved, the Company will then initiate planned integrations
with WooCommerce, BigCommerce, Magento and others. With these integrations, we
believe the company will then be on track to generate positive cash flows and
increasing profitability.
Operating Expenses
Operating expenses for the fiscal year ended December 31, 2022 were $4,619,470
as compared to $2,622,362 for the comparable prior period, an increase of
$1,997,108 or 76%. The increase is primarily the result of a full year of
expenses related to the approximately 35 employees and consultants. 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 revenue source is expected to mostly consist of
commission payments made to influencers, users and other affiliates of the Kwik
platform. We anticipate operating expenses to continue at current levels
through the first two quarters of 2023, then will accelerate to service an
increase in revenues through the remainder of 2023.
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Capitalized Patent Costs
Since KwikClick, LLC's inception in 2020, the Company has spent considerable
time and effort developing its intellectual property and developing its software
platform. Throughout 2022, the most significant use of cash was for legal
counsel, including patent and trademark counsel. Our patent counsel has prepared
and filed dozens of patent applications, the purpose of which is to protect the
Company's "first-mover" advantage and to hinder and/or exclude competing
"me-too" products and reduce or deter industry competition. Recently, the
Company was granted its first patent with the remainder currently pending
approval. Furthermore, we may provide licensing to markets and products where we
do not wish to directly operate. We have filed applications with the United
States Patent and Trademark Office in connection with 35 inventions that we
believe cover the base technology for our "single product tree" multi-level
marketing method and many derivative inventions covering the related value
chain. We believe that the inventions for which we seek patent protection span
our unique KwikClick platform's various applications. Areas covered include
using social media plug-ins for enhanced marketing, motivating and growth
techniques, product ratings and recommendations, attaching KwikClick to other
companies with multi-level sales compensation structures and other marketing
portal connections. We anticipate similar capital expenditures throughout the
year ending December 31, 2023.
Liquidity and capital resources
As of December 31, 2022, we had cash and cash equivalents of $30,583 compared to
$609,682 of cash at December 31, 2021. Most of the cash depletion in 2022 has
been due to software and platform development payments as well as payments to
our patent legal counsel. Based on currently available capital resources (cash),
we estimate that we would not be able to conduct our planned operations without
immediate additional funding. Our current "burn rate" of cash is approximately
$275,000 per month, at which rate we cannot survive unless we increase revenues
or obtain additional equity or debt financing. While our majority shareholder
has committed to continue to provide funding for the foreseeable future, there
is no assurance that we can increase revenues and/or obtain additional necessary
financing, much less on reasonable terms.
Our current liabilities as of December 31, 2022, totaled $729,663, 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 for the
foreseeable future. However, there is no assurance that we can obtain additional
funds.
During the quarter ended December 31, 2022, the Company converted its loan
principal of $1,459,489 and accrued interest payable of $20,250 totaling
$1,479,739 owed to Fred Cooper, a majority shareholder, in exchange for a
funding commitment for up to $2,000,000 and 20,000,000 shares. The shares were
issued in December 2022, and the balance of $520,261 under the commitment was
recorded as a subscription receivable at December 31, 2022. During the first
quarter of 2023, Mr. Cooper funded the remainder of the Subscription Receivable
in connection with the funding commitment also provided additional funding of
$75,000 to the Company. In connection with the additional funding, the Company
entered into a promissory note which will be subject to a security agreement
that will require us to pledge our patents and other intellectual property as
collateral for the loan. We believe that our patents and intellectual property
are valuable assets and are important to our business operations. However, we
have entered into this loan agreement in order to meet our financial obligations
and to ensure that we have sufficient working capital to continue our
operations. While we do not anticipate any default on the loan, in the event
that we do default, Mr. Cooper may take possession of our intellectual property
and patents. This could have a material adverse effect on our business and
operations.
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
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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 has a net
loss of $3,946,791 for the year ended December 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
outside and related parties to sustain the Company's existence. 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.
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
Occasionally, the Company utilizes its shares to compensate certain employees
and consultants to develop the KwikClick platform or provide other services to
the Company. Due to the lack of an active trading market for the Company's
shares, it is difficult to measure the fair market value of shares issued for
compensation. The Company carefully considers the price of the shares
contemporary to the event of compensation and applies a reasonable valuation
upon issuance.
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KWIKCLICK, INC. 