QUARTERLY
REPORT
For
the quarterly period ended June 30, 2020
Doofus
Corporation
021-344061 (Securities
and Exchange Commission File Number) |
|
|
|
Delaware |
37-1836035 |
Badenerstrasse 549, 8048
Zurich
Switzerland
(Address of Principal Executive
Offices)
+41 44 551 0005
(Telephone
Number)
The number of shares of
common stock outstanding as of June 30, 2020 was 502,500,000.
TABLE
OF CONTENTS
|
|
Page |
|
PART
I – FINANCIAL INFORMATION |
|
Item 1. |
Financial Statements
(Unaudited) |
4 |
|
Balance Sheets as of June
30, 2020 and December 31, 2019 |
4 |
|
Statements of Operations
for the Three and Six Months Ended June 30, 2020 and June 30, 2019 |
5 |
|
Statements of
Comprehensive Loss for the Three and Six Months Ended June 30, 2020 and June
30, 2019 |
6 |
|
Statements of Stockholders’
Equity for the Three and Six Months Ended June 30, 2020 and June 30, 2019 |
7 |
|
Statements of Cash Flows
for the Six Months Ended June 30, 2020 and June 30, 2019 |
8 |
|
Notes to Financial
Statements |
9 |
Item 2. |
Management’s Discussion
and Analysis of Financial Condition and Results of Operations |
14 |
Item 3. |
Quantitative and
Qualitative Disclosures About Market Risk |
17 |
Item 4. |
Controls and Procedures |
18 |
|
|
|
|
PART
II – OTHER INFORMATION |
|
Item 1. |
Legal Proceedings |
19 |
Item 1. A. |
Risk Factors |
19 |
Item 2. |
Sales or Issues of
Unregistered Equity Securities and Use of Proceeds |
32 |
Item 3. |
Signature |
33 |
|
|
|
SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly
Report contains forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended, which statements involve substantial risks
and uncertainties. Forward-looking statements generally relate to future events
or our future financial or operating performance. In some cases, you can
identify forward-looking statements because they contain words such as “may,” “will,”
“should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,”
“contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue”
or the negative of these words or other similar terms or expressions that
concern our expectations, strategy, plans or intentions. Forward-looking
statements contained in this Quarterly Report include, but are not limited to,
statements about:
·
our ability to attract and retain users and increase their level of engagement;
·
our plans regarding health and safety and our other top priorities,
including our expectations regarding the impact on our reported metrics,
policies and enforcement;
·
the impact of the COVID-19 pandemic and related responses of businesses
and governments to the pandemic on our operations and personnel, and on
commercial activity and on our operating results;
·
our ability to develop new products, product features and services,
improve our existing products and services, including and increase the value of
our products and services;
·
our business strategies, plans and priorities, including our plans for
growth and hiring, investment in our research and development efforts and our
plans to scale capacity and enhance capability and reliability of our
infrastructure, including capital expenditures relating to infrastructure;
·
our work to increase the stability, performance, development velocity
and scale of our products;
·
our ability to provide content from third parties, including our ability
to secure content on terms that are acceptable to us;
·
our expectations regarding our user growth and growth rates and related opportunities;
·
our ability to increase our revenue and our revenue growth rate;
·
our ability to monetize and improve monetization of our products and services;
·
our future financial performance, including revenue, cost of revenue,
operating expenses, including stock-based compensation and income taxes;
·
our expectations regarding certain deferred tax assets and fluctuations
in our tax expense and cash taxes;
·
the impact of privacy and data protection laws and regulations;
·
the impact of content-related legislation or regulation;
·
our expectations on future litigation or the decisions of the courts;
·
the effects of trends on our results of operations;
·
the impact of our future transactions and corporate structuring on our
income and other taxes;
·
the sufficiency of our cash and cash equivalents together with cash
generated from operations to meet our working capital and capital expenditure requirements;
·
our ability to timely and effectively develop, invest in, scale and
adapt our existing technology and network infrastructure;
·
our ability to successfully acquire and integrate companies and assets;
and
·
our expectations regarding international operations and foreign exchange
gains and losses.
We caution you
that the foregoing list may not contain all of the
forward-looking statements made in this Quarterly Report.
You should not
rely upon forward-looking statements as predictions of future events. We have
based the forward-looking statements contained in this Quarterly Report
primarily on our current expectations and projections about future events and
trends that we believe may affect our business, financial condition, operating
results, cash flows or prospects. The outcome of the events described in these
forward-looking statements is subject to risks, uncertainties and other factors
described in the section titled “Risk Factors” and elsewhere in this Quarterly
Report. Moreover, we operate in a very competitive and rapidly changing
environment. New risks and uncertainties emerge from time to time and it is not
possible for us to predict all risks and uncertainties that could have an
impact on the forward-looking statements contained in this Quarterly Report. We
cannot assure you that the results, events and
circumstances reflected in the forward-looking statements will be achieved or
occur, and actual results, events or circumstances could differ materially from
those described in the forward-looking statements.
The forward-looking
statements made in this Quarterly Report relate only to events as of the date
on which the statements are made. We undertake no obligation to update any
forward-looking statements made in this Quarterly Report to reflect events or
circumstances after the date of this Quarterly Report or to reflect new
information or the occurrence of unanticipated events, except as required by
law. We may not actually achieve the plans, intentions or expectations
disclosed in our forward-looking statements and you should not place undue
reliance on our forward-looking statements. Our forward-looking statements do
not reflect the potential impact of any future acquisitions, mergers,
dispositions, joint ventures or investments we may
make.
PART
I – FINANCIAL INFORMATION
Item 1. Financial Statements
(Unaudited)
DOOFUS
CORPORATION
BALANCE
SHEETS
(Unaudited)
The accompanying notes are an integral part of
these financial statements.
DOOFUS
CORPORATION
STATEMENTS
OF OPERATIONS
(Unaudited)
|
|
Three Months Ended |
|
Six Months Ended |
||||||||
|
|
June 30, |
|
June 30, |
||||||||
|
|
2020 |
|
2019 |
|
2020 |
|
2019 |
||||
Revenue |
|
$ |
- |
|
$ |
- |
|
$ |
- |
|
$ |
- |
Costs and Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
Cost of Revenue |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
Research and Development |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
Sales and Marketing |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
General and Administrative |
|
|
25,945 |
|
|
280 |
|
|
28,130 |
|
|
960 |
Total Costs and Expenses |
|
|
25,945 |
|
|
280 |
|
|
28,130 |
|
|
960 |
Loss from Operations |
|
|
(25,945) |
|
|
(280) |
|
|
(28,130) |
|
|
(960) |
Interest Expense |
|
|
(1) |
|
|
- |
|
|
(1) |
|
|
- |
Interest Income |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
Other Expense, Net |
|
|
(286) |
|
|
32 |
|
|
(291) |
|
|
(22) |
Income Before Income Taxes |
|
|
(26,232) |
|
|
|
|
|
(28,422) |
|
|
(982) |
Benefit for Income Taxes |
|
|
4,407 |
|
|
52 |
|
|
4,775 |
|
|
176 |
Net Loss |
|
$ |
(21,825) |
|
$ |
(196) |
|
$ |
(23,647) |
|
$ |
(806) |
Net Loss per Share Attributable to Common Stockholders: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
(0.00008) |
|
$ |
(0.0000004) |
|
$ |
(0.00005) |
|
$ |
(0.000002) |
Diluted |
|
$ |
(0.00008) |
|
$ |
(0.0000004) |
|
$ |
(0.00005) |
|
$ |
(0.000002) |
Weighted-Average Shares
Used to Compute Net Loss per Share Attributable to Common Stockholders: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
501,730,769 |
|
|
500,016,484 |
|
|
501,615,385 |
|
|
500,008,287 |
Diluted |
|
|
501,730,769 |
|
|
500,016,484 |
|
|
501,615,385 |
|
|
500,008,287 |
The
accompanying notes are an integral part of these financial statements.
DOOFUS
CORPORATION
STATEMENTS
OF COMPREHENSIVE LOSS
(Unaudited)
|
|
Three Months Ended |
|
Six Months Ended |
||||||||
|
|
June 30, |
|
June 30, |
||||||||
|
|
2020 |
|
2019 |
|
2020 |
|
2019 |
||||
Net Loss |
|
$ |
(21,825) |
|
$ |
(196) |
|
$ |
(23,647) |
|
$ |
(806) |
Other Comprehensive Loss,
Net of Tax: |
|
|
|
|
|
|
|
|
|
|
|
|
Change in Foreign Currency
Translation Adjustment |
|
|
(174) |
|
|
(54) |
|
|
(393) |
|
|
(11) |
Net
Change in Accumulated Other Comprehensive Loss |
|
|
(174) |
|
|
(54) |
|
|
(393) |
|
|
(11) |
Comprehensive Loss |
|
$ |
(21,999) |
|
$ |
(250) |
|
$ |
(24,040) |
|
$ |
(817) |
The
accompanying notes are an integral part of these financial statements.
DOOFUS
CORPORATION
STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)
|
|
Three Months Ended |
|
Six Months Ended |
||||||||||||||||
|
|
June 30, |
|
June 30, |
||||||||||||||||
|
|
2020 |
|
2019 |
|
2020 |
|
2019 |
||||||||||||
|
|
Shares |
|
Amount |
|
Shares |
|
Amount |
|
Shares |
|
Amount |
|
Shares |
|
Amount |
||||
Common Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, Beginning of Period |
|
501,500,000 |
|
$ |
502 |
|
500,000,000 |
|
$ |
500 |
|
501,500,000 |
|
$ |
502 |
|
500,000,000 |
|
$ |
500 |
Issuance of Common Stock |
|
1,000,000 |
|
|
1 |
|
500,000 |
|
|
1 |
|
1,000,000 |
|
|
1 |
|
500,000 |
|
|
1 |
Balance,
End of Period |
|
502,500,000 |
|
|
503 |
|
500,500,000 |
|
|
501 |
|
502,500,000 |
|
|
503 |
|
500,500,000 |
|
|
501 |
Additional Paid-In Capital |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, Beginning of Period |
|
- |
|
|
14,998 |
|
- |
|
|
- |
|
- |
|
|
14,998 |
|
- |
|
|
- |
Issuance of Common Stock |
|
- |
|
|
9,999 |
|
- |
|
|
4,999 |
|
- |
|
|
9,999 |
|
- |
|
|
4,999 |
Balance,
End of Period |
|
- |
|
|
24,997 |
|
- |
|
|
4,999 |
|
- |
|
|
24,997 |
|
- |
|
|
4,999 |
Accumulated Other Comprehensive Loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, Beginning of Period |
|
- |
|
|
(100) |
|
- |
|
|
22 |
|
- |
|
|
(26) |
|
- |
|
|
- |
Other Comprehensive Loss |
|
- |
|
|
(174) |
|
- |
|
|
(54) |
|
- |
|
|
(393) |
|
- |
|
|
(11) |
Balance,
End of Period |
|
- |
|
|
(274) |
|
- |
|
|
(32) |
|
- |
|
|
(419) |
|
- |
|
|
(11) |
Accumulated Deficit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, Beginning of Period |
|
- |
|
|
(17,117) |
|
- |
|
|
(4,830) |
|
- |
|
|
(15,150) |
|
- |
|
|
(4,241) |
Net Loss |
|
- |
|
|
(21,825) |
|
- |
|
|
(196) |
|
- |
|
|
(23,647) |
|
- |
|
|
(806) |
Balance,
End of Period |
|
- |
|
|
(38,942) |
|
- |
|
|
(5,026) |
|
- |
|
|
(38,797) |
|
- |
|
|
(5,047) |
Total Stockholders' Equity |
|
502,500,000 |
|
$ |
(13,716) |
|
500,500,000 |
|
$ |
442 |
|
502,500,000 |
|
$ |
(13,716) |
|
500,500,000 |
|
$ |
442 |
The
accompanying notes are an integral part of these financial statements.
DOOFUS
CORPORATION
STATEMENTS
OF CASH FLOWS
(Unaudited)
|
|
|
|
Six Months Ended |
||||||||
|
|
|
|
June 30, |
||||||||
|
|
|
|
|
|
2020 |
|
2019 |
||||
Cash Flows from Operating Activities |
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss |
|
|
|
|
|
|
|
$ |
(23,647) |
|
$ |
(805) |
Adjustments to Reconcile Net Income to Net Cash Provided by
Operating Activities: |
|
|
|
|
|
|
|
|
|
|||
Depreciation and Amortization Expense |
|
|
|
|
|
|
|
|
479 |
|
|
- |
Deferred Income Taxes |
|
|
|
|
|
|
|
|
(4,842) |
|
|
(176) |
Other Adjustments |
|
|
|
|
|
|
|
|
(126) |
|
|
44 |
Changes in Assets and
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid Expenses and Other Assets |
|
|
|
|
|
|
|
|
(1,079) |
|
|
(135) |
Accounts Payable |
|
|
|
|
|
|
|
|
3,579 |
|
|
- |
Accrued and Other Liabilities |
|
|
|
|
|
|
|
|
14,753 |
|
|
- |
Net Cash Used in
Operating Activities |
|
|
|
|
|
|
|
|
(10,883) |
|
|
(1,072) |
Cash Flows from Investing
Activities |
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of Property and
Equipment |
|
|
|
|
|
|
|
|
(1,649) |
|
|
- |
Net Cash Used in Investing Activities |
|
|
|
|
|
|
|
|
(1,649) |
|
|
- |
Cash Flows from Financing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from Debt |
|
|
|
|
|
|
|
|
2,700 |
|
|
738 |
Proceeds from Issuances of
Common Stock |
|
|
|
|
|
|
|
|
10,000 |
|
|
5,000 |
Net Cash Provided by Financing Activities |
|
|
|
|
|
|
|
|
12,700 |
|
|
5,738 |
Net Increase in Cash, Cash Equivalents and Restricted Cash |
|
|
|
|
|
168 |
|
|
4,666 |
|||
Foreign Exchange Effect on
Cash, Cash Equivalents and Restricted Cash |
|
|
|
|
|
(292) |
|
|
(22) |
|||
Cash, Cash Equivalents and Restricted Cash at Beginning of Period |
|
|
|
|
|
|
|
|
369 |
|
|
286 |
Cash, Cash Equivalents and
Restricted Cash at End of Period |
|
|
|
|
|
|
|
$ |
245 |
|
$ |
4,930 |
Supplemental Disclosures of Non-Cash Investing and Financing
Activities |
|
|
|
|
|
|
|
|
|
|||
Changes in Accrued Property and Equipment
Purchases |
|
|
|
|
|
|
|
|
(1,649) |
|
|
- |
Reconciliation of Cash, Cash Equivalents and
Restricted Cash as Shown in the Statements of Cash Flows |
|
|
|
|
|
|
||||||
Cash and Cash Equivalents |
|
|
|
|
|
|
|
$ |
245 |
|
$ |
4,930 |
Restricted Cash Included
in Prepaid Expenses and Other Current Assets |
|
|
|
|
|
- |
|
|
- |
|||
Restricted Cash Included in Other Assets |
|
|
|
|
|
|
|
|
- |
|
|
- |
Total Cash, Cash
Equivalents and Restricted Cash |
|
|
|
|
|
|
|
$ |
245 |
|
$ |
4,930 |
The
accompanying notes are an integral part of these financial statements.
NOTES
TO FINANCIAL STATEMENTS
(Unaudited)
Note 1. Description of
Business and Summary of Significant Accounting Policies
Description
of Business
Doofus
Corporation (the “Corporation”) was incorporated in
Delaware on August 29, 2016 and is headquartered in Zurich, Switzerland. The
Corporation is engaged in the business of computer and software services.
Fiscal
Year
The Corporation’s
fiscal year ends on December 31.
Basis of
Presentation
The accompanying
balance sheets as of June 30, 2020 and December 31, 2019 and the statements
of operations, the statements of comprehensive income, statements of
stockholders’ equity and the statements of cash flows for the three and
six months ended June 30, 2020, respectively, and for
the three and six months ended June 30, 2019, respectively, are unaudited.
The
accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles in the United States (U.S. GAAP).
The unaudited interim financial statements reflect, in management’s opinion,
all adjustments of a normal, recurring nature that are necessary for the fair
statement of the Corporation’s financial position, results of operations and
cash flows for the interim periods, but are not necessarily indicative of the
results expected for the full fiscal year or any other period.
Prior
Period Reclassifications
Certain prior
period amounts have been reclassified to conform to the current period
presentation.
Prior
Period Restatements
The
Corporation’s financial statements for 2019 and for the three months ended
March 31, 2020 have been restated for the effect of foreign currency
translation adjustments that were made in the conversion of its Zurich branch’s
financial statements from Swiss francs. As the financial statements are not
determined to be materially misstated, the Corporation is not required to issue
restated financial statements for 2019 and for the three months ended March 31,
2020.
Use of
Estimates
The
preparation of the Corporation’s financial
statements in conformity with U.S. GAAP requires management to make estimates
and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, as well as related disclosure of
contingent assets and liabilities. Actual results could differ materially from
the Corporation’s estimates. To the extent that there are material differences
between these estimates and actual results, the Corporation’s financial
condition or operating results will be affected. The Corporation bases its
estimates on past experience and other assumptions
that the Corporation believes are reasonable under the circumstances, and the Corporation
evaluates these estimates on an ongoing basis.
COVID-19
Impacts
The COVID-19
pandemic has caused widespread economic disruption and has impacted the Corporation
in several ways. The Corporation expects the extent of the impact on its
financial and operational results will depend on the duration and severity of
the economic disruption caused by the COVID-19 pandemic.
The Corporation considered the impacts of the COVID-19
pandemic on its significant estimates and judgments used in applying its
accounting policies in the three and six months ended June 30, 2020. In light
of the pandemic, there is a greater degree of uncertainty in applying these
judgments and depending on the duration and severity of the pandemic, changes
to its estimates and judgments could result in a meaningful impact on the
Corporation’s financial statements in future periods.
Recent
Accounting Pronouncements
In December
2019, the FASB issued a new accounting standard update to simplify the
accounting for income taxes. The new guidance removes certain exceptions for
recognizing deferred taxes for investments, performing intraperiod allocation
and calculating income taxes in interim periods. It also adds guidance to
reduce complexity in certain areas, including recognizing deferred taxes for
tax goodwill and allocating taxes to members of a consolidated group. The Corporation
adopted this guidance on January 1, 2020, using the modified retrospective
method, and the adoption did not have a material impact on the Corporation's
financial statements and related disclosures.
With the
exception of the standards discussed above, there have been no other recent
accounting pronouncements or changes in accounting pronouncements during the
three and six months ended June 30, 2020, as compared to the recent accounting
pronouncements described in the Corporation's Financial Statements for the
fiscal year ended December 31, 2019, that are of significance or potential
significance to the Corporation.
Significant
Accounting Policies
There have
been no material changes to the Corporation’s significant accounting policies
from its Financial Statements for the fiscal year ended December 31, 2019.
Note 2. Revenue
Revenue
Recognition
The
Corporation is pre-revenue and will derive its revenues from subscription fees,
which are comprised of once off and recurring subscription fees.
Note 3. Cash and Cash Equivalents
Cash and cash
equivalents consist of the following:
|
|
|
|
|
|
|
|
June 30, |
|
December 31, |
||
|
|
|
|
|
|
|
|
2020 |
|
2019 |
||
Cash |
|
|
|
|
|
|
|
$ |
245 |
|
$ |
369 |
Total |
|
|
|
|
|
|
|
$ |
245 |
|
$ |
369 |
Note 4. Fair Value
Measurements
The Corporation
measures its cash equivalents at fair value.
Note 5. Prepaid Expenses and
Other Current Assets
Prepaid expenses
and other current assets consist of the following:
|
|
|
|
|
|
|
|
June 30, |
|
December 31, |
||
|
|
|
|
|
|
|
|
2020 |
|
2019 |
||
Prepaid Expenses |
|
|
|
|
|
|
|
$ |
1,011 |
|
$ |
184 |
Total |
|
|
|
|
|
|
|
$ |
1,011 |
|
$ |
184 |
Note 6. Depreciation
Property and
equipment are stated at cost. Depreciation is calculated on a straight-line
basis over the estimated useful lives of those assets as follows:
Computer, Equipment and
Software |
|
|
|
|
|
3 to 9 years |
Furniture and Fixtures |
|
|
|
|
|
3
to 9 years |
Leasehold Improvements |
|
|
|
|
|
The remaining lease term or up to 10
years |
When assets
are retired or otherwise disposed of, the cost and accumulated depreciation and
amortization are removed from their respective accounts and any loss on such
retirement is reflected in operating expenses.
Note 7. Property and
Equipment, Net
The following
tables set forth property and equipment, net by type and by geographic area for
the periods presented:
|
|
|
|
|
|
|
|
June 30, |
|
December 31, |
||
|
|
|
|
|
|
|
|
2020 |
|
2019 |
||
Property and Equipment, Net |
|
|
|
|
|
|
|
|
|
|
|
|
Equipment |
|
|
|
|
|
|
|
$ |
1,648 |
|
$ |
- |
Total |
|
|
|
|
|
|
|
|
1,648 |
|
|
- |
Less: Accumulated
Depreciation and Amortization |
|
|
|
|
|
|
|
|
(479) |
|
|
- |
Property and Equipment,
Net |
|
|
|
|
|
|
|
$ |
1,169 |
|
$ |
- |
|
|
|
|
|
|
|
|
June 30, |
|
December 31, |
||
|
|
|
|
|
|
|
|
2020 |
|
2019 |
||
Property and Equipment, Net |
|
|
|
|
|
|
|
|
|
|
|
|
Switzerland |
|
|
|
|
|
|
|
$ |
1,169 |
|
$ |
- |
United States |
|
|
|
|
|
|
|
|
- |
|
|
- |
Total Property and Equipment, Net |
|
|
|
|
|
|
|
$ |
1,169 |
|
$ |
- |
Note 8. Other Assets
The following
table presents the detail of other assets for the periods presented:
|
|
|
|
|
|
|
|
June 30, |
|
December 31, |
||
|
|
|
|
|
|
|
|
2020 |
|
2019 |
||
Security Deposits |
|
|
|
|
|
|
|
$ |
252 |
|
$ |
- |
Total |
|
|
|
|
|
|
|
$ |
252 |
|
$ |
- |
Note 9. Accrued and Other
Current Liabilities
The following
table presents the detail of accrued and other current liabilities for the
periods presented:
|
|
|
|
|
|
|
|
June 30, |
|
December 31, |
||
|
|
|
|
|
|
|
|
2020 |
|
2019 |
||
Accrued Compensation |
|
|
|
|
|
|
|
$ |
11,315 |
|
$ |
- |
Accrued Social Security |
|
|
|
|
|
|
|
|
2,612 |
|
|
- |
Accrued Tax Liabilities |
|
|
|
|
|
|
|
|
(216) |
|
|
- |
COVID-19 Assistance Loan |
|
|
|
|
|
|
|
|
1,051 |
|
|
- |
Credit Cards |
|
|
|
|
|
|
|
|
(9) |
|
|
- |
Total |
|
|
|
|
|
|
|
$ |
14,753 |
|
$ |
- |
Note 10. Net Loss per Share
Basic net loss
per share is computed by dividing net loss attributable to common stockholders
by the weighted-average common shares outstanding during the period.
Diluted net
loss per share is computed by dividing the net loss attributable to common
stockholders by the weighted-average number of common shares outstanding during
the period, including potential dilutive common stock instruments.
The following
table presents the calculation of basic and diluted net loss per share for
periods presented:
|
|
Three Months Ended |
|
Six Months Ended |
||||||||
|
|
June 30, |
|
June 30, |
||||||||
|
|
2020 |
|
2019 |
|
2020 |
|
2019 |
||||
Basic Net Loss per Share: |
|
|
|
|
|
|
|
|
|
|
|
|
Numerator |
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss |
|
$ |
(21,825) |
|
$ |
(196) |
|
$ |
(23,647) |
|
$ |
(806) |
Denominator |
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-Average Common
Shares Outstanding |
|
|
501,730,769 |
|
|
500,016,484 |
|
|
501,615,385 |
|
|
500,008,287 |
Weighted-Average Shares Used to Compute
Basic Net Loss per Share |
|
|
501,730,769 |
|
|
500,016,484 |
|
|
501,615,385 |
|
|
500,008,287 |
Basic Net Loss per Share Attributable to Common Stockholders |
|
$ |
(0.00008) |
|
$ |
(0.0000004) |
|
$ |
(0.00005) |
|
$ |
(0.000002) |
Diluted Net Loss per
Share: |
|
|
|
|
|
|
|
|
|
|
|
|
Numerator |
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss |
|
$ |
(21,825) |
|
$ |
(196) |
|
$ |
(23,647) |
|
$ |
(806) |
Denominator |
|
|
|
|
|
|
|
|
|
|
|
|
Number of Shares Used in Basic Computation |
|
|
501,730,769 |
|
|
500,016,484 |
|
|
501,615,385 |
|
|
500,008,287 |
Weighted-Average Shares
Used to Compute Diluted Net Loss |
|
|
501,730,769 |
|
|
500,016,484 |
|
|
501,615,385 |
|
|
500,008,287 |
Diluted Net Loss per Share
Attributable to Common Stockholders |
|
$ |
(0.00008) |
|
$ |
(0.0000004) |
|
$ |
(0.00005) |
|
$ |
(0.000002) |
Note 11. Stockholders'
Equity
2020 Equity
Incentive Plan
The Corporation’s
2020 Equity Incentive Plan was adopted by the Board
of Directors on May 15, 2020 and approved by shareholders on June 24, 2020. The
number of shares of the Corporation’s common stock available for issuance under
the 2020 Equity Incentive Plan is 100,000,000. Under the 2020 Equity Incentive
Plan the Corporation may grant incentive stock options, non-statutory stock options
and restricted stock to directors, officers, employees
and consultants.
Note 12. Income Taxes
The Corporation’s
tax provision or benefit from income taxes for interim periods is determined
using an estimate of its annual effective tax rate, adjusted for discrete
items, if any. Each quarter the Corporation updates its estimate of the annual
effective tax rate and makes a year-to-date adjustment to the provision.
The Corporation
recorded an income tax benefit of $4,407 and $4,775 for
the three and six months ended June 30, 2020, respectively, and an income
tax benefit of $52 and $176 for the three and six months ended June 30, 2019,
respectively. The Corporation’s effective tax rate is based on forecasted annual
results which may fluctuate significantly through the rest of the year.
As of June 30,
2020, the Corporation had $8,240 of unrecognized tax benefits which could
result in a reduction of the Corporation’s effective tax rate, if recognized.
The Corporation
is subject to taxation in the United States and various states and foreign
jurisdictions. Earnings from non-U.S. activities are subject to local country income
tax. The material jurisdictions in which the Corporation is subject to
potential examination by taxing authorities include the United States and Switzerland.
The Corporation believes that adequate amounts have been provided for in these
jurisdictions.
Note 13. Commitments and
Contingencies
Credit
Facility
The Corporation has a revolving credit agreement with certain
directors and stockholders which provides for a $50,000 unsecured revolving credit
facility maturing on August 28, 2021. The Corporation is not obligated to pay
interest on loans under this credit facility or other customary fees for a
credit facility of this size and type, including an upfront fee and an unused
commitment fee. As of June 30, 2020, $5,585 had been drawn under the credit
facility compared to $3,314 on June 30, 2019.
Contractual
Obligations
The Corporation
had no contractual commitments for the three and six months
ended June 30, 2020, respectively, and for the three and six months ended
June 30, 2019, respectively.
Legal
Proceedings
The Corporation
was not involved in any legal proceedings, claims, investigations, and
government inquiries and investigations for the three and six months ended June
30, 2020, respectively, and for the three and six months ended June 30, 2019,
respectively.
Non-Income
Taxes
The Corporation
was not subject to any non-income tax audits by domestic or foreign tax
authorities for the three and six months ended June 30, 2020, respectively, and
for the three and six months ended June 30, 2019, respectively.
Note 14. Related Party
Transactions
No related
party transactions, other than the revolving credit agreement with certain
directors and stockholders disclosed in Note 13, occurred in the three and six
months ended June 30, 2020, respectively, and in the three and six months ended
June 30, 2019, respectively.
Item 2. Management’s
Discussion and Analysis of Financial Condition and Results of Operations
The following
discussion and analysis of our financial condition and results of operations
should be read in conjunction with the financial statements and related notes
thereto included in Item 1 “Financial Statements” in this Quarterly Report.
This discussion contains forward-looking statements that involve risks and
uncertainties. Our actual results could differ materially from those discussed
below. Factors that could cause or contribute to such differences include, but
are not limited to, those identified below and those discussed in the section
titled “Risk Factors” included elsewhere in this Quarterly Report.
Overview
and Highlights of Quarterly Results
The
Corporation was pre-revenue for the three and six months ended June 30, 2020,
respectively, and for the three and six months ended June 30, 2019,
respectively.
Net loss was $21,825
and $23,647 for the three and six months ended June 30, 2020, respectively,
compared to net loss of $196 and $806 for the three and six months ended June 30,
2019.
Loss from
operations was $25,945 and $28,130 for the three and six months ended June 30,
2020, respectively, compared to loss from operations of $280 and $960 for the
three and six months ended June 30, 2019, respectively.
Cash, cash equivalents
and restricted cash totaled $245 as of June 30, 2020.
COVID-19
Update
The COVID-19
pandemic has resulted in public health responses including travel bans,
restrictions, social distancing requirements, and shelter-in-place orders,
which could negatively impact our operations and financial performance,
including our ability to raise funding.
Given the
unprecedented uncertainty and rapidly shifting market conditions of the
business environment, we cannot reasonably estimate the full impacts of the
COVID-19 pandemic on our future financial and operational results. We continue
to monitor the evolving situation and guidance from international and domestic
authorities, including federal, state and local public
health authorities, and there may be developments outside our control requiring
us to adjust our operating plan. As such, given the unprecedented uncertainty
around the duration and severity of the impact on market conditions and the business
environment, we cannot reasonably estimate the full impacts of the COVID-19
pandemic on our operating results in the future.
The risks
related to the COVID-19 pandemic on our business are further described in “Part
II – Other Information, Item 1A. Risk Factors.”
Results
of Operations
The following
tables set forth our statements of operations data for each of the periods
presented:
|
|
Three Months Ended |
|
Six Months Ended |
||||||||
|
|
June 30, |
|
June 30, |
||||||||
|
|
2020 |
|
2019 |
|
2020 |
|
2019 |
||||
Revenue |
|
$ |
- |
|
$ |
- |
|
$ |
- |
|
$ |
- |
Costs and Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
Cost of Revenue |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
Research and Development |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
Sales and Marketing |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
General and Administrative |
|
|
25,945 |
|
|
280 |
|
|
28,130 |
|
|
960 |
Total Costs and Expenses |
|
|
25,945 |
|
|
280 |
|
|
28,130 |
|
|
960 |
Loss from Operations |
|
|
(25,945) |
|
|
(280) |
|
|
(28,130) |
|
|
(960) |
Interest Expense |
|
|
(1) |
|
|
- |
|
|
(1) |
|
|
- |
Interest Income |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
Other Expense, Net |
|
|
(286) |
|
|
32 |
|
|
(291) |
|
|
(22) |
Income Before Income Taxes |
|
|
(26,232) |
|
|
|
|
|
(28,422) |
|
|
(982) |
Benefit for Income Taxes |
|
|
4,407 |
|
|
52 |
|
|
4,775 |
|
|
176 |
Net Loss |
|
$ |
(21,825) |
|
$ |
(196) |
|
$ |
(23,647) |
|
$ |
(806) |
Revenue
No revenue was
generated for the three and six months ended June 30, 2020, respectively, and for
the three and six months ended June 30, 2019, respectively.
Cost of
Revenue
No cost of
revenue was incurred for the three and six months ended June 30, 2020,
respectively, and for the three and six months ended June 30, 2019,
respectively.
Research
and Development
No research
and development costs were incurred for the three and six months ended June 30,
2020, respectively, and for the three and six months ended June 30, 2019,
respectively.
Sales
and Marketing
No sales and marketing costs were incurred for the three and
six months ended June 30, 2020, respectively, and for the three and six months
ended June 30, 2019, respectively.
General
and Administrative
General and
administrative expenses consist primarily of personnel-related costs, including
salaries, benefits, and social security contributions for our executive, administrative,
finance, human resources, legal, technology and other employees. In addition,
general and administrative expenses include fees and costs for professional
services, including third-party services and facilities costs and other
supporting overhead costs that are not allocated to other departments.
In the three and
six months ended June 30, 2020, general and administrative expenses increased
by $25,665 and $27,170 respectively, compared to the three and six months ended
June 30, 2019, respectively. The increases were attributable to an increase in
personnel-related costs mainly driven by an increase in employee headcount, facilities,
and other supporting overhead expenses.
We plan to
continue to invest in general and administrative functions to ensure we have an
appropriate level of support for our key priorities and objectives.
Interest expense in the three and six months ended June 30, 2020
comprised $1 and $1, respectively. No interest expense was incurred for the
three and six months ended June 30, 2019, respectively.
Interest
Income
No interest
income was generated for the three and six months ended June 30, 2020,
respectively, and for the three and six months ended June 30, 2019, respectively.
Other
Expense, Net
Other expense,
net, consists primarily of unrealized foreign exchange gains and losses due to
re-measurement of monetary assets and liabilities denominated in non-functional
currencies and realized foreign exchange gains and losses on foreign exchange
transactions. We expect our foreign exchange gains and losses will vary
depending upon movements in the underlying exchange rates.
Benefit
for Income Taxes
Our benefit
from income taxes increased by $4,355 and $4,599 in the three and six months
ended June 30, 2020, respectively, compared to the three and six months ended June
30, 2019, respectively. In the three and six months ended June 30, 2020, the
benefit from income taxes was $4,407 and $4,775 respectively, and in the three and
six months ended June 30, 2019 the benefit from income
taxes was $52 and $176 respectively. The increase in benefit from income taxes
was due to the increase in loss before tax.
Credit
Facility
We have a
revolving credit agreement with certain directors and stockholders which
provides for a $50,000 revolving unsecured credit facility maturing on August 28,
2021. We are not obligated to pay interest on loans under the credit facility or
other customary fees for a credit facility of this size and type, including an
upfront fee and an unused commitment fee. As of June 30, 2020, $5,585 had been
drawn under the credit facility compared to $3,314 on June 30, 2019.
Operating
Activities
Cash used by
operating activities consists of net loss adjusted for certain non-cash items
including depreciation and amortization, deferred income taxes as well as the
effect of changes in working capital and other activities. We expect that cash
provided by operating activities will fluctuate in future periods as a result of a number of factors, including fluctuations
in our revenue and increases in operating expenses. For additional discussion,
see “Part II – Other Information, Item 1A. Risk Factors.”
Cash used by
operating activities in the six months ended June 30, 2020 was $10,883, an increase
in cash outflow of $9,811 compared to the six months ended June 30, 2019. Cash used
by operating activities was driven by a net loss of $23,647, as adjusted for
the exclusion of non-cash expenses and other adjustments totaling $12,764, of
which $479 was related to depreciation and amortization expense, and $12,285 was
related to the effect of changes in working capital and other carrying
balances.
Cash used by
operating activities in the six months ended June 30, 2019 was $1,072. Cash used
by operating activities was driven by net loss of $805, as adjusted for the
exclusion of non-cash expenses and other adjustments totaling $267.
Investing
Activities
Our primary
investing activities consist of purchases of property and equipment,
particularly computer and related equipment.
Cash used by
investing activities in the six months ended June 30, 2020 was $1,649, an increase in cash outflow of $1,649 compared
to the six months ended June 30, 2019. The increase was primarily due to a $1,649
increase in purchases of property and equipment in the six months ended June 30,
2020.
Financing
Activities
Our primary
financing activities consist of loans from directors and stockholders.
Cash provided
by financing activities in the six months ended June 30, 2020 was $12,700,
compared to $5,738 in the six months ended June 30, 2019. The change was
primarily due to $10,000 in proceeds from the issuances of common stock in the six
months ended June 30, 2020.
Contractual
Obligations
Refer to Note 13
– “Commitments and Contingencies” for details.
Off
Balance Sheet Arrangements
We do not have
any off-balance sheet arrangements and did not have any such arrangements as of
June 30, 2020.
Critical
Accounting Policies and Estimates
We prepare our
financial statements and related notes in accordance with U.S. GAAP. In doing
so, we make estimates and assumptions that affect our reported amounts of
assets, liabilities, revenue and expenses, as well as
related disclosure of contingent assets and liabilities. To the extent that
there are material differences between these estimates and actual results, our
financial condition or operating results would be affected. We base our
estimates on past experience and other assumptions
that we believe are reasonable under the circumstances, and we evaluate these
estimates on an ongoing basis. We refer to accounting estimates of this type as
critical accounting policies and estimates. Please refer to our Financial
Statements for the fiscal year ended December 31, 2019 for a more complete
discussion of our critical accounting policies and estimates.
There have
been no material changes to our critical accounting policies and estimates as
compared to the critical accounting policies and estimates described in our Financial
Statements for the fiscal year ended December 31, 2019.
Recent Accounting
Pronouncements
For
information with respect to recent accounting pronouncements and the impact of
these pronouncements on our financial statements, see Note 1 – “Description of
Business and Summary of Significant Accounting Policies” in the notes to the
financial statements included in Part I of this Quarterly Report.