KwikClick, Inc. - Quarter Report: 2023 September (Form 10-Q)

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For quarterly period ended September 30, 2023

☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934  

Commission file number: 000-56349

KwikClick, Inc.

(Exact name of registrant as specified in its charter)

(385) 301-2792

Registrant’s telephone number, including area code:

Securities registered pursuant to Section 12(b) of the Act:

NONE

Securities registered pursuant to Section 12(g) of the Act:

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. ☒ Yes ☐ No

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). ☒ Yes ☐ No

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:

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) ☐ Yes ☒  No

As of November 13, 2023 the issuer had 151,748,705 shares of common stock issued and outstanding.

KWIKCLICK, INC.

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

KWIKCLICK, INC

CONSOLIDATED BALANCE SHEETS

(Unaudited)

The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements.

KWIKCLICK, INC

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements.

KWIKCLICK, INC

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)

Nine Months Ended September 30, 2023 and 2022

(Unaudited)

The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements.

KWIKCLICK, INC

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements.

KWIKCLICK, INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Nine Months Ended September 30, 2023 and 2022

(Unaudited)

NOTE 1. BUSINESS

KwikClick, Inc., (the “Company” or “Kwik”) was organized pursuant to the laws of the State of Delaware on November 16, 1993. Beginning in 2020, the Company commenced its Kwik business operations to allow sellers to make products or services available on the Kwik platform, at Kwik.com, offering a self-determined incentive budget on goods or services in exchange for exposure and substantially increased sales volume. Kwik is a social interaction, selling, and referral software platform.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”), including the instructions to Form 10-Q and Regulation S-X. Certain information and note disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”), have been condensed or omitted from these statements pursuant to such rules and regulations and, accordingly, they do not include all the information and notes necessary for comprehensive financial statements and should be read in conjunction with our audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2022.

In the opinion of the management of the Company, all adjustments, which are of a normal recurring nature, necessary for a fair statement of the results for the three and nine-month periods have been made. Results for the interim periods presented are not necessarily indicative of the results that might be expected for the entire fiscal year.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary Kwik LLC. Intercompany transactions and balances have been eliminated in consolidation.

Cash and Cash Equivalents

Cash equivalents include all highly liquid investments with an original maturity of three months or less when purchased. The Company did not have any cash equivalents as of September 30, 2023 or December 31, 2022.

Loss Per Share

The Company presents both basic and diluted earnings per share (EPS) on the face of the statements of operations. Basic EPS is computed by dividing net loss by the weighted average number of shares outstanding during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period under the treasury stock or if-converted method as applicable. Due to the incurrence of net losses, the Company did not include outstanding instruments convertible into common stock that would be anti-dilutive. As of September 30, 2023, the Company had 1,823,983 outstanding unvested and vested unissued stock awards, 102,470 warrants and 562,198 stock appreciation rights exercisable into shares of common stock that were potentially dilutive. As of September 30, 2022, the Company had 400,000 fully vested stock options outstanding that were potentially dilutive and expired unexercised on October 17, 2022.

Research and Development

Research and development costs primarily consist of internal and external engineering staff wages, coding, and related on-going activities associated with upgrading and enhancing the Company’s internally developed software platform. Research and development costs that do not meet the criteria for capitalization, including those costs determined to be probable to not result in additional functionality, are expensed as incurred. For the nine months ended September 30, 2023 and September 30, 2022 the Company did not capitalize any research and development costs.

Revenue Recognition

The Company determines the measurement of revenue and the timing of revenue recognition utilizing the following core principles:

Revenue is measured based on the amount of consideration that the Company expects to receive, reduced by estimates for return allowances, promotional discounts, and rebates. Revenue excludes any amounts collected on behalf of third parties, including product costs for goods not owned and indirect taxes. 

A description of the Company’s revenue generating activities is as follows:

Third-Party Seller Services (Brand Services Revenue):

The Company offers programs that provide sellers a software platform to sell their products. For some contracts the Company provides payment processing and order fulfillment facilitation. The Company is not the seller of record in these transactions.

The Company generally determines stand-alone revenue based on a percentage of the prices charged by the seller to deliver products sold. The commissions and any related fulfillment, shipping, and transaction processing fees the Company earns from these arrangements are recognized when the services are rendered, which generally occurs upon delivery of the related products to a third-party carrier or to the product purchaser. The Company does not incur material costs in obtaining third party seller contracts.

Software Licensing (Hosting Arrangement):

The Company licenses the use of its internally developed software to third parties for a fixed fee over a specified term. Revenue under these arrangements is recognized ratably over the contract term. The Company currently does not have any licensing agreements.

Applicable sales commissions paid in connection with contracts exceeding one year are capitalized and amortized over the contract term. During the nine months ended September 30, 2023 and 2022, the Company did not incur material sales commissions.

Return Allowances

The fees earned by the Company are subject to returns under similar terms as set by the third-party services using the Company’s software platform. The Company does not assume responsibility for refund or replacement of product costs. Return allowances are estimated using historical experience. During the nine months ended September 30, 2023 and 2022, the Company did not incur material returns.

Reclassifications

The Company reclassified certain general and administrative and management and payroll costs totaling approximately $255,715 and $925,012 to research and development in the consolidated statements of operations for the three and nine months ended September 30, 2022 to conform to the current period presentation. These reclassifications did not have any impact on the previously reported financial position, results of operations, or cash flows.

NOTE 3. GOING CONCERN

Since the commencement of the Kwik platform, the Company has accumulated a deficit of $9,340,010 and working capital deficit of $2,622,414 as of September 30, 2023. The Company will require additional funding to finance the growth of its future operations as well as to achieve its strategic objectives. 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.

NOTE 4. STOCKHOLDERS' EQUITY

The following provides a description of the common stock issuances during the nine months ended September 30, 2023:

During the three and nine months ended September 30, 2023; 600,000 and 1,200,000 shares of common stock issued for services, respectively, totaling $60,000 and $120,000 vested. As of September 30, 2023, the unrecognized compensation cost of this award totaled $180,000 which the Company expects to recognize over the next nine months.

In September 2023 the Company issued 35,000 shares of fully vested common stock for services totaling $17,497.

On May 31, 2023, the Company issued 65,100 shares of common stock for previously vested but unissued awards as of December 31, 2022. The stock-based compensation related to these awards was fully recognized as of December 31, 2022.

On May 31, 2023, the Company issued 6,000 shares of fully vested common stock for services totaling $2,700.

In January 2023, the Company received $300,000 for common stock issuable.

Stock Based Compensation

During 2021 the Company adopted the 2021 Equity Incentive Plan (the “Plan”) the total number of shares of common stock authorized under Plan totals 10,000,000. The Plan requires that all equity and equity-linked awards are granted with exercise prices equal, or at a premium, to the estimated fair market value of the Company’s common stock at the date of grant. All awards vest on a grant-by-grant basis at the discretion of the Board and currently outstanding awards range from fully vested at the grant date to vesting periods of six months. Awards granted under the plan generally expire between two and seven years from the date of grant. The Plan terminates no later than the tenth anniversary of the approval of the incentive plans by the Company’s Board of Directors. As of September 30, 2023, approximately 9,438,000 shares of common stock were reserved for issuance under the Stock Option Plan.

In addition to awards granted from the Plan, the Company has granted equity and equity-linked awards for various employees and non-employees at the discretion of the Compensation Committee of the Board of Directors. The fair value of the awards estimated at the grant date are earned and recognized over the requisite service period.

Warrants

During the nine months ended September 30, 2023 the Company issued 102,470 fully vested warrants to purchase shares of common stock at an exercise price of $0.01 per share for a term of two years. Included in the issuance of the warrants were 41,801 warrants that a grantee elected to receive in lieu of common stock not yet issued in accordance with the terms of a prior agreement. The Company had previously recognized stock-based compensation expense associated with the unissued common stock owed to the grantee of $104,502 during the year ended December 31, 2022.

The grant date fair value of the warrants not previously recognized totaled $26,694 and the associated expense for the fully vested awards were recognized during the nine months ended September 30, 2023.

The Company estimated the fair value of the warrants on the grant date using a Black-Scholes options pricing model using the quoted market price on the grant date; exercise price of $0.01 per share; expected volatility of approximately 80%; the contractual term of two years; and the risk-free interest rate of 0.2%.

A summary of the common stock warrant activity is as follows:

Stock Appreciation Rights

During the quarter ended September 30, 2023 the Company issued 4,233,667 stock appreciation rights (“SARs”), of which 1,758,000 were fully vested on the date of grant, to purchase shares of common stock based on the fair market value in excess of the base price on the date of exercise for a period of seven years.

The Company estimated the fair value of the SARs on the grant date using a Black-Scholes options pricing model using the quoted market price on the grant date; exercise price of $0.44 per share; expected volatility of approximately 80%; the contractual term of seven years; and a risk-free interest rate of 3.0%.

A summary of the stock appreciation rights activity is as follows:

The grant date fair value of the stock appreciation rights issued during the nine months ended September 30, 2023 totaled $1,371,457.

Included in the stock appreciation rights granted during the period ended September 30, 2023; 28,000 SARs with an estimated fair value of $9,078 were issued for the settlement of an outstanding liability totaling $70,000 resulting in the recognition of a gain on settlement totaling $60,922.

During the three and nine months ended September 30, 2023 the Company recognized total expense associated with the SARs totaling $580,711, respectively. As of September 30, 2023 the Company expects to recognize $781,668 of compensation expense over the next six months associated with the vesting of its currently outstanding stock appreciation rights.

As of September 30, 2023, the Company has committed 2,386,181 shares of stock for the fulfillment of the all of its outstanding equity and equity-linked awards.

NOTE 5. RELATED PARTY TRANSACTIONS

Shareholder Loans Payable

During the nine months ended September 30, 2023, Mr. Cooper funded the remainder of the Subscription Receivable of $520,261 in connection with a funding commitment totaling $2,000,000. Mr. Cooper also provided additional working capital advances of $1,191,739 to the Company during the nine months ended September 30, 2023. The working capital advances bear interest at 10% per annum and are payable upon demand. During the three and nine months ended September 30, 2023, we accrued $25,363 and $38,471 respectively, which are included in accounts payable in the accompanying consolidated balance sheets.

NOTE 6. COMMITMENTS AND CONTINGENCIES

On May 31, 2023, NAI Liquidation Trust, the successor in interest to the defunct NewAge, Inc. by and through its Liquidation Trustee, Steven Balasiano, filed an adversary proceeding against the Company in the Newage Chapter 11 bankruptcy case (Delaware Case #22-10819). The Company licensed some of its technology to NewAge pursuant to a license agreement that started in September 2021 and terminated in late 2022. A prior adversarial action was brought by NewAge in the same bankruptcy case but was never served and was dismissed on June 1, 2023. Like the prior dismissed action, NAI Liquidation Trust contends that they are the rightful owner of KwikClick’s intellectual property. NAI Liquidation Trust brings several causes of action related to that contention.

The Company believes that the code base and functionality of its software platform differs materially from any intellectual property owned by NewAge. The Company intends to vigorously defend and assert its intellectual property rights. In the event the Company does not prevail it may be required to impair substantially all of its intangible assets with a carrying value of approximately $1.5 million at September 30, 2023 and may be forced to discontinue its on-going fee-based sales platform. The litigation is in its early stages, an estimate of reasonably possible loss cannot be made at this time. As such, there has been no further adjustment to the accompanying consolidated statements of financial position, results of operations, or cash flows as of and for the three months ended September 30, 2023.

NOTE 7. SUBSEQUENT EVENTS

The Company has evaluated subsequent events through the date the consolidated financial statements were issued and has determined that there are no material events that need to be disclosed, except as follows:

Subsequent to September 30, 2023, Mr. Cooper provided additional working capital advances totaling $219,451 to the Company. The balance of working capital advances through November 3, 2023 totaled $1,368,739. These advances bear interest of 10% per annum and are due on demand. Mr. Cooper has informally agreed to defer repayment of these loans until the Company has achieved a more stable liquidity position, however, he is not legally obligated to continue to do so.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

As used in this Form 10-Q, references to the “Company,” “KwikClick,” “KWIK,” “we,” “our” or “us” refer to KwikClick, Inc. and KwikClick, LLC, unless the context otherwise indicates.

This Management’s Discussion and Analysis (“MD&A”) section discusses our results of operations, liquidity and financial condition and certain factors that may affect our future results. You should read this MD&A in conjunction with our financial statements and accompanying notes included elsewhere in this report.

This Quarterly Report on Form 10-Q contains statements that are considered forward-looking statements. Forward-looking statements give the Company’s current expectations and forecasts of future events. All statements other than statements of current or historical fact contained in this quarterly report, including statements regarding the Company’s future financial position, business strategy, budgets, projected costs and plans and objectives of management for future operations, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “estimate,” “expect,” “intend,” “may,” “plan,” and similar expressions, as they relate to the Company, are intended to identify forward-looking statements. These statements are based on the Company’s current plans, and the Company’s actual future activities and results of operations may be materially different from those set forth in the forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from the statements made. Any or all of the forward-looking statements in this annual report may turn out to be inaccurate. The Company has based these forward-looking statements largely on its current expectations and projections about future events and financial trends that it believes may affect its financial condition, results of operations, business strategy and financial needs. The forward-looking statements can be affected by inaccurate assumptions or by known or unknown risks, uncertainties and assumptions. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect events occurring after the date hereof. All subsequent written and oral forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by the cautionary statements contained in this quarterly report.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes that appear in our annual report on Form 10-K filed with the U.S. Securities and Exchange Commission (“SEC”) on April 17, 2023. In addition to historical consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Certain information included herein contains statements that may be considered forward-looking statements, such as statements relating to our anticipated revenues and operating results, future performance and operations, plans for future expansion, capital spending, sources of liquidity and financing sources. Such forward-looking information involves important risks and uncertainties that could significantly affect anticipated results in the future, and accordingly, such results may differ from those expressed in any forward-looking statements made herein. These risks and uncertainties include the “Risk Factors” included in our annual report on Form 10-K filed with the SEC on April 17, 2023, that can be read at www.sec.gov.

Although we have sought to identify the most significant risks to our business, we cannot predict whether, or to what extent, any of such risks may be realized, nor can there be any assurance that we have identified all possible issues which we might face. For all of these reasons, the reader is cautioned not to place undue reliance on forward-looking statements contained herein, which speak only as of the date hereof. We assume no responsibility to update any forward-looking statements as a result of new information, future events, or otherwise except as required by law.

Overview

The Company was organized pursuant to the laws of the State of Delaware on November 16, 1993. Beginning in 2020, the Company commenced its Kwik business operations to allow sellers to make products or services available on the Kwik platform, at Kwik.com, offering a self-determined incentive budget on goods or services in exchange for exposure and substantially increased sales volume. Kwik is a social interaction, selling, and referral software platform.  Stores and manufacturers (“Brands”) wishing to promote their products or services on the Kwik software platform, which connects them to promoters, influencers, and customers.  When the Brand is paid for the consumer purchases through the Kwik platform, the Brand pays an incentive budget to Kwik.  Kwik receives the entire incentive budget as revenue for generating the sales through its platform, and recognizes cost of sales upon calculation and payment of the commissions paid to the wave of affiliates.  

Comparison of operations for the three and nine months ended September 30, 2023 to September 30, 2022

Revenues

During the three and nine months ended September 30, 2023, we recognized net revenues of $91,088 and $227,883, respectively. The decrease from the prior comparable three- and nine-month periods of approximately 45% and 33% was the result of lower brand product sales on our platform. During the comparable period of 2022, we had a licensing agreement that expired in the third quarter of 2022. Management anticipates that Brand Services revenues will continue to increase as we continue to develop our KWIK services, add vendors, and add users. The Company is currently in negotiations with several new brands, influencers, and influencer agencies who anticipate joining the platform within the next three to nine months.

Cost of Sales

Our costs of revenue, totaling $88,546 and $159,228, respectively, for the three months ended September 30, 2023 and 2022, and $126,531 and $205,370, respectively, for the nine months ended September 30, 2023 and 2022, primarily consists of marketing incentives and services for products that are sold on our platform.  We expect the costs of revenue to fluctuate consistently with our sales volume and future product mix which is currently unpredictable based on the early stages of the KWIK platform.

Other Operating Expenses

Exclusive of the non-cash expense of issuing stock appreciation rights totaling $5580,711, we reduced our operating costs for the three months ended September 30, 2023 by approximately 35% from the same period in 2022. During the nine months ended September 30, 2023 and 2022, we incurred total other operating expenses of $2,931,640 and $3,537,967, respectively. The majority of the approximate $600,000 decrease resulted from non-recurring management and payroll costs incurred in 2022 and declines in our research and development activities throughout 2023. We do not expect to see substantial increases in our research and development activities until we are able generate the necessary funding from operations and / or the receipt of additional capital investment.

In the event we are able to raise additional capital, we would anticipate our total operating expenses will trend upward as we add additional employees and consultants to work on the execution of our business plan, which includes activities such as design and coding of our website and app, vendor acquisition, cybersecurity, and user acquisition. We anticipate that much of this work will be done by outside consultants and consulting firms. In the coming 12 months, we anticipate increasing our promotional and marketing activities which will increase our operating expenses in our efforts to increase our product sales and user volumes.

Liquidity and capital resources

At September 30, 2023, we had a working capital deficit of $2,622,414. Approximately 45% of current liabilities as of September 30, 2023 are due to our majority shareholder, Mr. Fred Cooper. Mr. Cooper has provided $1,191,739 in working capital advances through September 30, 2023 and an additional $219,451 through the date of this report. These advances are due on demand. Mr. Cooper has informally agreed to defer repayment of these loans until the Company has achieved a more stable liquidity position, however, he is not legally obligated to continue to do so.

Through the nine months ended September 30, 2023, the Company’s cash used in operations was approximately $1,822,331. We expect our cash provided by operations to not be sufficient to meet our on-going obligations until such time that we increase our brand offerings and overall user volumes.

While the Company continues to incur negative operational cash flows, it does not expect to pursue significant investing activities with the exception of the costs defend and maintain its patents.

Our founder and main shareholder, Fred Cooper, has almost exclusively funded our operations with cash contributions totaling $1,712,000 through September 30, 2023.

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. We anticipate as our current monthly capital needs or “burn rate” to be approximately $275,000 for at least the next twelve months which is not sustainable without significantly increasing our operational cash flows and obtaining additional financing.

We have historically been funded primarily from private placements of stock and loans from Company affiliates and may continue to be so funded in for the foreseeable future. However, there is no assurance that we can obtain additional funds from any source. We have generated limited revenue though we have developed much of our technology in order to conduct business in the online, social media, consumer product marketing space. We have also been required to maintain our corporate existence and satisfy the requirements of being a public company since we have become a filer with the SEC. We will need to obtain capital to continue operations. There is no assurance that our Company will be able to secure such funding on acceptable (or any) terms.

Off-Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements.

Critical Accounting Estimates

There has been no change in our critical accounting estimates from those disclosed in our annual report on Form 10-K filed with the SEC on April 17, 2023.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Based on an evaluation under the supervision and with the participation of our management, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act were not effective as of September 30, 2023 to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms and (ii) accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. Based on this evaluation, our management concluded that, as of September 30,2023, our internal control over financial reporting was not effective due to (i) insufficient segregation of duties in the finance and accounting functions due to limited personnel; and (ii) inadequate corporate governance policies. In the future, subject to working capital limitations, we intend to take appropriate and reasonable steps to make improvements to remediate these deficiencies.

Changes in Internal Control Over Financial Reporting

There have not been any changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) under the Exchange Act) during the fiscal period to which this report relates that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations of the Effectiveness of Internal Controls

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the internal control system are met. Because of the inherent limitations of any internal control system, no evaluation of controls can provide absolute assurance that all control issues, if any, within a company have been detected.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

On May 31, 2023, NAI Liquidation Trust, the successor in interest to the defunct NewAge, Inc. by and through its Liquidation Trustee, Steven, Balasiano filed an adversary proceeding against the Company in the Newage Chapter 11 bankruptcy case (Delaware Case #22-10819). The Company licensed some of its technology to NewAge pursuant to a license agreement that started in September 2021 and terminated in late 2022. A prior adversarial action was brought by NewAge in the same bankruptcy case but was never served and was dismissed on June 1, 2023. Like the prior dismissed action, NAI Liquidation Trust contends that they are the rightful owner of KwikClick’s intellectual property. NAI Liquidation Trust brings several causes of action related to that contention.

The Company believes that the code base and functionality of its software platform differs materially from any intellectual property owned by NewAge. The Company intends to vigorously defend and assert its intellectual property rights. In the event the Company does not prevail it may be required to impair substantially all of its intangible assets with a carrying value of approximately $1.5 million at September 30, 2023 and may be forced to discontinue its on-going fee-based sales platform. The litigation is in its early stages, an estimate of reasonably possible loss cannot be made at this time. As such, there has been no further adjustment to the accompanying consolidated statements of financial position, results of operations, or cash flows as of and for the nine months ended September 30, 2023.

Item 1A. Risk Factors

The Risk Factors identified in our Annual Report on Form 10-K for the year ended December 31, 2022, which was filed on April 17, 2023, continue to represent the most significant risks to the Company’s future results of operations and financial condition.

Item 2. Unregistered Sales of Equity Securities

On September 29, 2023, the Company issued 35,000 shares of restricted common stock for services totaling $17,497.

On May 31, 2023, the Company issued 6,000 shares of restricted common stock for services totaling $2,700.

On May 31, 2023, the Company issued 65,100 shares of restricted common stock for the fulfillment of previously vested stock-based compensation awards.

No underwriters were involved in the issuance of the securities noted above. All of the securities issued were deemed to be exempt from registration under the Securities Act in reliance upon Section 4(a)(2) of the Securities Act. The issuance of stock that was exempt under Section 4(a)(2) was a private offering to an accredited investor. Each of the investors represented to the Company that it (i) is an “accredited investor” as defined in Rule 501(a) of Regulation D promulgated under the Securities Act of 1933, as amended, (ii) is knowledgeable, sophisticated, and experienced in making investment decisions of this kind, and (iii) has had adequate access to information about the Company.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not Applicable.

Item 5. Other Information

Item 6. Exhibit

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.