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.
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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.
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KWIKCLICK, INC. 
