UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _______________ to _______________.
Commission file number:
(Exact name of registrant as specified in its charter) |
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(State or other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification No.) |
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(Address of principal executive offices) |
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Registrant’s telephone number, including area code
_________________________________
(Former address, if changed since last report)
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(Former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
| Trading Symbol(s) |
| Name of each exchange on which registered |
None |
| None |
| None |
Securities registered pursuant to Section 12(g) of the Act:
(Title of class)
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 preceding 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.
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).
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.
Large accelerated filer | ☐ | Accelerated filer | ☐ |
Non-accelerated filer | ☒ | Smaller reporting company | |
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| Emerging growth company |
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
Applicable only to issuers involved in bankruptcy proceedings during the preceding five years:
Indicate by check mark whether the registrant filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☐ No ☐
Applicable only to corporate issuers:
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. As of May 20, 2024, there were
GOFBA, INC.
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION | ||||||
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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| Table of Contents |
ITEM 1. Condensed Consolidated Financial Statements
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets as of March 31, 2024 (Unaudited) and December 31, 2023 | F-2 |
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F-4 |
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F-5 |
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Notes to Condensed Consolidated Financial Statements (Unaudited) | F-6 |
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| F-1 |
| Table of Contents |
GOFBA, INC.
Condensed Consolidated Balance Sheets
As of March 31, 2024 (Unaudited) and December 31, 2023
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Assets |
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Current assets |
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Cash and cash equivalents |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment, net |
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Right-of-use assets (Note 8) |
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Total assets |
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Liabilities and Stockholders’ Deficit |
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Current liabilities |
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Accounts payable and accrued expenses |
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Current lease liabilities (Note 8) |
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Deposits on common stock subscriptions (Note 4) |
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Stockholder payable (Note 5) |
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Note payable (Note 6) |
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Interest payable (Note 6) |
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Note payable - related party (Note 7) |
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Total current liabilities |
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Long-term liabilities |
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Note payable (Note 6) |
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Note payable - related party (Note 7) |
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Interest payable – related party (Note 7) |
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Noncurrent lease liabilities (Note 8) |
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Total noncurrent liabilities |
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Total liabilities |
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Commitments and contingencies (Notes 6, 7, 8, 10, 11) |
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Stockholders’ deficit (Note 4) |
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Common stock, no par value; |
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Non-controlling interest |
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Accumulated deficit |
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Total stockholders’ deficit |
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Total liabilities and stockholders’ deficit |
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See accompanying notes to unaudited condensed consolidated financial statements
| F-2 |
| Table of Contents |
GOFBA, INC.
Condensed Consolidated Statements of Operations
For the Three Months Ended March 31, 2024 and 2023 (Unaudited)
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Costs and expenses |
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General and administrative |
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Professional fees |
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Depreciation and amortization |
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Total costs and expenses |
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Net loss |
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Net loss attributable to non-controlling interest |
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Net loss attributable to the Company |
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Net loss per share |
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Basic |
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Diluted |
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Weighted average common shares outstanding |
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Basic |
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Diluted |
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See accompanying notes to unaudited condensed consolidated financial statements
| F-3 |
| Table of Contents |
GOFBA, INC.
Condensed Consolidated Statements of Stockholders’ Deficit
For the Three Months Ended March 31, 2024 and 2023
(Unaudited)
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Balance, December 31, 2023 |
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Net loss |
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Balance, March 31, 2024 |
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Balance, December 31, 2022 |
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Net loss |
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Balance, March 31, 2023 |
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See accompanying notes to unaudited condensed consolidated financial statements
| F-4 |
| Table of Contents |
GOFBA, INC.
Consolidated Statements of Cash Flows
For the Three Months ended March 31, 2024 and 2023 (Unaudited)
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Cash flows from operating activities |
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Net loss |
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Adjustments to reconcile net loss to net cash used in operating activities: |
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Non-cash lease expense (Note 8) |
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Depreciation and amortization expense |
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Changes in: |
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Accounts payable and accrued expenses |
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Interest payable - note payable |
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Interest payable - related party |
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Net cash used in operating activities |
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Cash flows from financing activities |
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Proceeds from note payable - related party |
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Net advances from stockholder payable |
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Net cash provided by financing activities |
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Net increase (decrease) in cash and cash equivalents |
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Cash and cash equivalents, beginning of the period |
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Cash and cash equivalents, end of period |
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Supplemental disclosures of cash flow information: |
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Cash paid during the period for: |
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Interest |
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Income taxes |
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See accompanying notes to unaudited condensed consolidated financial statements
| F-5 |
| Table of Contents |
GOFBA, INC.
Notes to Condensed Consolidated Financial Statements (Unaudited)
1. Business and Significant Accounting Policies
Business
Gofba, Inc. (“Gofba”) was incorporated on November 6, 2008, pursuant to the laws of the State of California. The Company has developed a unique bundled internet solution, consisting of search, chat, email, and offsite file transfer and storage modules, created to address dangerous, pressing issues not adequately addressed by its competitors. Gofba was established to provide users with a safe haven on the internet.
Basis of Presentation
The accompanying condensed consolidated financial statements have been prepared on an accrual basis of accounting in accordance with United States Generally Accepted Accounting Principles (“U.S. GAAP”), as set forth in the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”).
The unaudited condensed consolidated financial statements herein have been prepared by the Company pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”). The accompanying interim unaudited condensed consolidated financial statements have been prepared under the presumption that users of the interim financial information have either read or have access to the audited consolidated financial statements for the latest fiscal year ended December 31, 2023. Accordingly, note disclosures which would substantially duplicate the disclosures contained in the December 31, 2023 audited consolidated financial statements may have been omitted from these interim unaudited condensed consolidated financial statements.
Certain information and note disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2024 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2024. For further information, refer to the audited consolidated financial statements and notes for the fiscal year ended December 31, 2023.
Principles of Consolidation
The accompanying condensed consolidated financial statements include the accounts of Gofba and the accounts of Great Tech, Inc. (“GTI”), an entity wholly-owned by Gofba’s Chairperson, President and majority stockholder. The condensed consolidated entities are referred to herein as the “Company” and intercompany balances and transactions have been eliminated in consolidation.
Management determined that GTI is a variable interest entity primarily because it is thinly capitalized and may require additional capital to finance its activities. Management also determined that Gofba is the primary beneficiary of GTI based primarily on common stockholders and the related party nature of GTI’s decision-makers and daily business operators.
Management 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 the disclosure of contingent assets and liabilities, at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
| F-6 |
| Table of Contents |
Future Operations, Liquidity, and Capital Resources
The Company has not yet commenced its primary revenue-generating operations and has a material working capital deficit, a history of experiencing operating losses, and a net stockholders’ deficit. Historically, the Company’s primary sources of liquidity come from sales of subscriptions to purchase shares of the Company’s common stock. During the three months ended March 31, 2024, subject to available cash flows, the Company continued to develop its technologies, its strategy to monetize its intellectual properties and its business plan. Management intends to rely on additional sales of the Company’s common stock, as well as related party relationships, to provide sufficient liquidity to meet the Company’s cash requirements for a period of at least the next twelve months. Given the uncertain nature of management’s plans, combined with the Company’s significant stockholders’ deficit, there is substantial doubt about the Company’s ability to continue as a going concern. The accompanying condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern; however, there can be no assurance that its operations will become profitable or that sources of financing, including the issuance of debt and/or equity securities, will be available at times and on terms acceptable to the Company, or at all. From January 1, 2024 through March 31, 2024, the Company received cash proceeds of $
The Company plans to continue its focus on creating new revenue generating activities through various initiatives. Since the Company experienced impairment losses (further discussed below) and since the Company has not completed development of its technologies and has not established any sources of recurring revenue to cover its operating costs, the Company plans to continue to fund its losses through continued issuance of its common stock and support from its primary stockholder and other related parties.
Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of three months or less, when acquired, to be cash equivalents. Substantially all of the Company’s cash and cash equivalents are maintained at two financial institutions domiciled in the United States. Amounts on deposit with these financial institutions may, from time to time, exceed the federally-insured limit.
Property and Equipment
Property and equipment is recorded at cost. The Company provides for depreciation over estimated useful lives of between three and nine years using the straight-line method. Leasehold improvements are depreciated over the lesser of the estimated useful life or the lease term. Repairs and maintenance expenditures that do not significantly add value to property and equipment, or prolong its life, are charged to expense as incurred. Gains and losses on dispositions of property and equipment are included in the operating results of the related period.
Software Development Costs
Software development costs are capitalized once the technological feasibility of a product is established. Significant management judgments and estimates are utilized in the assessment of when technological feasibility is established and the evaluation is performed on a product-by-product basis. For products where proven technology exists, this may occur early in the development cycle. When a product is ready for its intended use, capitalized software development costs are amortized over an estimated useful life of four years.
| F-7 |
| Table of Contents |
Impairment of Long-Lived Assets
Management reviews the recoverability of long-lived assets, such as property and equipment and software development costs, whenever events or changes in circumstances occur that indicate the carrying value of the asset or asset group may not be recoverable. The assessment for possible impairment is based on the Company’s ability to recover the carrying value of the asset or asset group from the expected pre-tax cash flows, undiscounted and without interest charges, from the related operations. If the aggregation of the net cash flows is less than the carrying value of such assets, an impairment loss is recognized for the difference between estimated fair value and carrying value. The determination and measurement of impairment of long-lived assets requires management to estimate future cash flows and the fair value of long-lived assets.
Factors that management estimates include, among others, the economic lives of the assets, sales volume, pricing, inflation, long-term growth rates, cost of capital, marketing and capital spending. The variability of these factors depends on a number of conditions, and thus our accounting estimates may change from period to period. When performing impairment tests, the Company estimates the fair values of the assets using management’s best assumptions, which it believes are consistent with those a market participant would use. Furthermore, if management uses different assumptions in future periods and estimates when impairment tests are performed, different results amounts could occur.
During 2022 we completed an impairment assessment of our capitalized software and determined that the fair value of our capitalized software costs is zero at December 31, 2022. In the three months ended 2024 and 2023, we continued to expense software development costs as they were incurred.
Income Taxes
The Company uses the asset and liability method of accounting for income taxes. Accordingly, deferred income tax liabilities and assets are determined based on the difference between the financial statement and tax bases of assets and liabilities, using enacted tax rates in effect for the year in which the differences are expected to reverse. Current income taxes are based on the year’s taxable income for federal and state income tax reporting purposes.
The Company’s net deferred tax assets at March 31, 2024 and December 31, 2023 consist principally of net operating losses. The Company provided a
U.S. GAAP prescribes a comprehensive model for how a company should recognize, measure, present, and disclose in its financial statements uncertain tax positions that it has taken or expects to take on a tax return. A favorable tax position is to be included in the calculation of tax liabilities and expenses if a company concludes that it is more likely than not that its adopted tax position will prevail if challenged by tax authorities. The Company did not recognize any adjustments regarding its tax accounting treatments for the three months ended March 31, 2024 and 2023. As a result of the Company’s net operating losses, all income tax return years remain open to examination by tax authorities.
Net Loss per Share
Basic net loss per share is calculated by dividing net loss by the weighted-average common shares outstanding during the period. Diluted net loss per share is calculated by dividing the net loss by the weighted-average shares and dilutive potential common shares outstanding during the period. When applicable, dilutive potential shares may consist of dilutive shares issuable upon the exercise or vesting of outstanding stock options and warrants computed using the treasury stock method. During a period where a net loss is incurred, dilutive potential shares are excluded from the computation of dilutive net loss per share, as the inclusion is anti-dilutive.
| F-8 |
| Table of Contents |
Leases
The Company determines if a contract contains a lease at its inception based on whether or not the Company has the right to control the asset during the contract period and other facts and circumstances. The Company is the lessee in a lease contract when it obtains the right to control the asset. Operating lease right-of-use (“ROU”) assets represent the Company’s right to use an underlying asset for the lease. Operating lease liabilities represent the Company’s obligation to make lease payments arising from the lease and are included in our current and noncurrent liabilities in its condensed consolidated balance sheet. Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. Leases with a lease term of 12 months or less at inception are not recorded on the Company's condensed consolidated balance sheet and are expensed on a straight-line basis over the lease term in the Company's condensed consolidated statement of income. When determining the lease term, the Company includes renewal or termination options that it is reasonably certain to exercise. As most of the Company leases do not provide an implicit interest rate, the Company uses an incremental borrowing rate based on the information available at the commencement date in determining the present value of future payments.
Recent Accounting Pronouncements
In December 2023, the FASB issued Accounting Standards Update (“ASU”) No. 2023-09, Improvements to Income Tax Disclosures (“ASU 2023-09”). Under ASU 2023-09, public benefit entities must disclose specific categories and provide additional information in the tax rate reconciliation if the effect of those reconciling items is equal to or greater than 5 percent of the amount computed by multiplying pretax income or loss by the applicable statutory income tax rate. The amendments from ASU 2023-09 are effective for annual periods beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. The Company does not expect this guidance to have a material impact to its condensed consolidated financial statements or related disclosures.
2. Property and Equipment
Property and equipment, net consisted of the following:
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Office furniture, equipment and software |
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Less accumulated depreciation |
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Property and equipment, net |
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Depreciation expense for the three months ended March 31, 2024 and 2023 was $
3. Software Development Costs
Software development costs, net consisted of the following:
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Capitalized software in-process |
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Website development |
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Less accumulated amortization |
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Software impairment |
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Software development costs, net |
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| F-9 |
| Table of Contents |
4. Stockholders’ Equity (Deficit)
Preferred Stock
The Company is authorized to issue
Common Stock
The Company has authorized
In 2014, the Company agreed to issue
In 2014, the Company agreed to issue
On the date these shares were agreed to be issued, the Company’s business model was still in development, as was a significant portion of its technologies. Further, the Company’s liquidity was extremely limited. As a result, the estimated fair value of these ‘founder shares’ was nominal on the date the Company committed to their issuance.
During the first quarter of 2018, the Company’s board of directors voluntarily elected to approve the issuance of shares of common stock to a number of individuals and entities, including directors and officers, that have worked with the Company over the last several years and assisted with the creation and testing of the Company’s various products. The Company was not obligated to issue these shares and the shares were not issued pursuant to any consulting agreement or stock compensation plan. In total, the Company approved the issuance of an aggregate of
During the three months ended March 31, 2024, the Company sold no subscriptions and issued no shares of common stock.
Deposits on Common Stock Subscriptions
Since inception of the Company, and before the issuance of the Company’s disclosure statement in January 2017 (see below), the Company received gross cash proceeds of approximately $
In a disclosure statement from the Company dated January 9, 2017, each potential investor was asked to ratify their investment decision and thereby acquire shares of the Company’s common stock. The Company also provided each potential investor the option of rescinding its investment interest, in which case the Company would return any deposit they submitted and would not issue them any shares of common stock. As of March 31, 2024 and December 31, 2023, deposits of approximately $
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In addition, as of March 31, 2024, the Company has not received a response from individuals or entities representing deposits of $
Warrants and Stock Options
There are no warrants or stock options granted, issued or outstanding as of March 31, 2024 and December 31, 2023.
5. Stockholder Payable
The Company has primarily relied on the financial and human resources, relationships, funding and expertise of its founding stockholders, who are husband and wife, since inception. As a result, the Company advances and receives funds as the Company’s cash needs dictated and during the three months ended March 31, 2024 and 2023, amounts funded and/or loaned to the Company by its Chairperson, President and majority stockholder were $
6. Note Payable and Interest Payable
On June 18, 2021, the Company entered into a promissory note with an investor of the Company. Under the terms of the promissory note, the Company borrowed $
On November 18, 2021, the Company entered in another promissory note with the same investor. Under the terms of the promissory note, the Company borrowed $
On February 24, 2022, the Company entered in another promissory note with a different investor and member of the Board of Directors of the Company. Under the terms of the promissory note, the Company borrowed $
On March 31, 2022, the Company entered in another promissory note with the same investor. Under the terms of the promissory note, the Company borrowed $
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7. Note Payable – Related Party
On January 1, 2024, the Company amended and consolidated all the existing promissory notes payable to the trust controlled by the Company’s Chairperson, President and majority stockholder into one single note in the principal sum of $
As of March 31, 2024 and December 31, 2023, the balance of the consolidated note and the original notes was $
On May 1, 2018, the Company entered into a promissory note with a trust controlled by the Company’s Chairperson, President and majority stockholder. Under the terms of the promissory note, the Company borrowed $
On May 6, 2022, the Company entered into another promissory note with the same trust. Under the terms of the promissory note, the Company borrowed $
On July 21, 2022, the Company entered into another promissory note with the same trust. Under the terms of the promissory note, the Company borrowed $
On December 12, 2022, the Company entered into another promissory note with the same trust. Under the terms of the promissory note, the Company borrowed $
On February 28, 2023, the Company entered into another promissory note with the same trust. Under the terms of the promissory note, the Company borrowed $
On February 28, 2023, the Company entered into another promissory note with the same trust. Under the terms of the promissory note, the Company borrowed $161,295 at
On March 03, 2023, the Company entered into another promissory note with the same trust. Under the terms of the promissory note, the Company borrowed $
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On April 26, 2023, the Company entered into another promissory note with the same trust. Under the terms of the promissory note, the Company borrowed $
On September 7, 2023, the Company entered into another promissory note with the same trust. Under the terms of the promissory note, the Company borrowed $
On December 4, 2023, the Company entered into another promissory note with the same trust. Under the terms of the promissory note, the Company borrowed $
8. Commitments and Contingencies
Commitments
Since inception, the Company has leased access to computer storage and processing space from a trust controlled by the Company’s Chairperson, President and majority stockholder.
In October 2017, the Company entered into an operating lease with a trust controlled by the Company’s Chairperson, President, and majority stockholder for office and internet server space located in Chino Hills, California for monthly rent of $
In August 2015, the Company entered into an operating lease (as amended) for office space in Ontario, California, which expired on October 31, 2021. Currently, the Company leases space at the location on a month-to-month basis.
Rent expense for office space for the three months ended March 31, 2024 and 2023 was $
Balance sheet information related to operating leases with terms of more than 12 months is as follows:
|
| March 31, |
|
| December 31, |
| ||
|
| 2024 |
|
| 2023 |
| ||
Operating lease right-of-use assets |
| $ |
|
| $ |
| ||
Current portion of operating lease liabilities |
|
|
|
|
|
| ||
Noncurrent portion of operating lease liabilities |
|
|
|
|
|
| ||
Total operating lease liabilities |
| $ |
|
| $ |
| ||
The Company had operating leases costs of $
The Company's leases have remaining lease terms of
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The following table summarizes the maturities of the Company's operating lease liabilities as of March 31, 2024:
|
| Maturities of Operating Lease Liabilities |
| |
2024 |
| $ |
| |
2025 |
|
|
| |
2026 |
|
|
| |
2027 |
|
|
| |
Total operating lease payments |
|
|
| |
Less: Imputed interest |
|
| ( | ) |
Total operating lease liabilities |
| $ |
| |
Concentrations
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and money market funds. Management mitigates such potential risks by maintaining the Company’s cash balances with entities that management believes possess high-credit quality.
Other Contingencies
From inception of the Company through January 9, 2017, the date of the disclosure statement described in Note 4, the Company received cash proceeds as deposits from individuals who indicated an interest in purchasing shares of the Company’s stock. At the time of these transactions, management does not believe that the Company offered securities for sale, as defined by the Securities Act of 1933. However, if such transactions were deemed to be an offering of securities, management believes that the Company complied with Section 4(a)(2) of the Securities Act of 1933, including the requirement that each purchaser be an accredited investor (as defined) or a sophisticated investor (as defined). In the event that the Company was deemed to have offered securities for sale and did not comply with Section 4(a)(2) of the Securities Act of 1933, the Company may be required to refund amounts received and/or be subject to penalties from security regulators. The accompanying condensed consolidated financial statements do not include any amounts related to this uncertainty.
Periodically, the Company receives services from individuals that the Company classifies as independent contractors. Management believes that such individuals are independent contractors because, among other things, they can choose whether, when, and where to provide services and are free to provide services to others. However, if the Company was required to classify such individuals as employees, it would likely incur significant additional expenses, potentially including expenses associated with the application of wage and hour laws, employee benefits, social security contributions, taxes, and penalties. The accompanying condensed consolidated financial statements do not include any amounts related to this uncertainty.
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9. Income Taxes
As of March 31, 2024, the Company has net deferred income tax assets that are mainly comprised of Federal and state net operating loss carry forwards in the amounts of approximately $
Management has established a valuation allowance equal to the entire amount of the Company’s net deferred income tax assets due to the uncertainty that the deferred income tax assets will be realized by the Company’s ability to generate sufficient future taxable income.
Utilization of the net operating loss carry forwards may be subject to annual limitations under Sections 382 and 383 of the Internal Revenue Code of 1986 and similar state provisions due to equity ownership changes that have occurred previously or that could occur in future. These ownership changes may limit the amount of net operating loss carry forwards that can be utilized to offset future taxable income and tax.
The Company has reviewed its tax positions and has determined that it has no significant uncertain tax positions at March 31, 2024 and December 31, 2023.
10. Legal Proceedings
In the ordinary course of business, the Company is from time to time, involved in various pending or threatened legal actions.
Cogito Software Solutions Ltd. v. Gofba, Inc., et al
On July 21, 2023, Cogito Software Solutions, Ltd., a company claiming to be a corporation qualified to do business in California, filed a form Complaint against the Company for Breach of Contract and Common Counts for an Open Book Account for Money Due, alleging the Company breached a contract by failing to pay for software services performed by the Plaintiff, causing Plaintiff damages of $
On September 1, 2023, the Company filed a Demurrer to the Plaintiff’s Complaint on the basis that the Plaintiff does not appear as a corporation registered to do business in California and that the Complaint fails to state of action for Breach of Contract and Common Counts for Amounts Owed on an Open Account since the basic elements of each cause of action are not specified in the Complaint. On October 30, 2023, the Court heard the motion and the Company’s Demurrer was granted.
On November 15, 2023, the Company and Plaintiff entered into a settlement agreement and mutual release. Both parties agreed to waive, discharge, and otherwise extinguish their actual or possible claims of the Complaint against each other in exchange for the parties to dismiss their respective actions and the lawsuit with prejudice against one another. As a result, the Company recorded a reduction in liability by the outstanding balance due to the Plaintiff and recorded gain from settlement in the amount of $
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Chin Li Shih v. Anna Chin and Gofba, Inc.
On November 13, 2023, the Plaintiff filed a form Complaint against us for Breach of Contract and Fraud, alleging we breached a contract by failing to provide a location for Plaintiff to use for stray animals as she alleges was an understanding between the parties when Plaintiff invested in Gofba, Inc., and also by failing to repay an alleged separate $
On January 10, 2024, we filed an Answer to the Complaint generally denying the allegations in the Complaint and denying that Plaintiff suffered any damages, and, in addition to the general denial, specifically alleged that Plaintiff’s causes of action are barred by the applicable statute of limitations. On May 13, 2024, the parties appeared for a Trial Setting Conference, wherein the parties informed the Court they are conducting initial discovery but not opposed to setting trial dates. The Court scheduled a Trial Readiness Conference for May 29, 2025, and set a jury trial date for June 2, 2025. We plan to continue conducting discovery in the interim. We plan to vigorously defend ourselves against the allegations in the Complaint if the lawsuit moves forward.
In the ordinary course of business, we are from time to time involved in various pending or threatened legal actions. The litigation process is inherently uncertain and it is possible that the resolution of such matters might have a material adverse effect upon our financial condition and/or results of operations. However, in the opinion of our management, matters currently pending or threatened against us are not expected to have a material adverse effect on our financial position or results of operations.
11. Related Party Employment Agreement
On May 14, 2018, the Company entered into employment agreements with Anna Chin and William DeLisi to serve as the Company’s President and Chief Executive Officer, respectively, under which the Company agreed to compensate Ms. Chin and Mr. DeLisi each at the annual salary of $
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Disclaimer Regarding Forward Looking Statements
Our Management’s Discussion and Analysis or Plan of Operation contains not only statements that are historical facts, but also statements that are forward-looking. Forward-looking statements are, by their very nature, uncertain and risky. These risks and uncertainties include international, national and local general economic and market conditions; demographic changes; our ability to sustain, manage, or forecast growth; our ability to successfully make and integrate acquisitions; new product development and introduction; existing government regulations and changes in, or the failure to comply with, government regulations; adverse publicity; competition; the loss of significant customers or suppliers; fluctuations and difficulty in forecasting operating results; changes in business strategy or development plans; business disruptions; the ability to attract and retain qualified personnel; the ability to protect technology; and other risks that might be detailed from time to time in our filings with the Securities and Exchange Commission.
Although the forward-looking statements in this Annual Report reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by them. Consequently, and because forward-looking statements are inherently subject to risks and uncertainties, the actual results and outcomes may differ materially from the results and outcomes discussed in the forward-looking statements. You are urged to carefully review and consider the various disclosures made by us in this report and in our other reports as we attempt to advise interested parties of the risks and factors that may affect our business, financial condition, and results of operations and prospects.
Overview
We have developed a unique bundled internet solution, consisting of search, chat, email, and offsite file transfer and storage modules, created to address dangerous, pressing issues not adequately addressed by our competitors. Gofba was established to address the current dangers that threaten the everyday internet user. We see two primary threats. The first is unrestricted, free access to inappropriate material. We have developed proprietary search algorithms which eliminate or make scarce inappropriate material from search results. The second is security. To address this, we have developed proprietary security algorithms which provide an enhanced level of protection for users.
Our management has identified several key initiatives as part of our long-term strategy.
First, we plan to continue investing in software development to create new software products and services that meet the evolving needs of the current marketplace. We recognize that technology and consumer preferences are constantly changing, and it is essential to stay ahead of these changes to remain competitive in the market.
Secondly, we plan to establish partnerships with potential customers to develop custom software solutions and explore possible new revenue streams. This involves building relationships with key industry players and leveraging our expertise to deliver high-quality solutions.
Thirdly, we plan to optimize our operations and improve efficiency to reduce costs and maximize profitability. This involves implementing lean software development processes and investing in automation and technology to streamline operations and improve productivity.
Furthermore, we plan to continue to monitor our assets for potential impairments and adjust the carrying values of our assets as necessary. This ongoing assessment ensures that our financial statements accurately reflect the value of our assets and provide investors with a transparent view of our financial position.
Overall, our management is confident in our ability to execute on our long-term strategy and deliver long-term shareholder value. While the recognition of impairment charges during the current year has had an impact on our financial position, management believes that our ongoing business operations are sound, and we remain committed to investing in our business and driving seeking growth opportunities.
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Corporate Overview
We were incorporated in the State of California as Gofba, Inc. on November 6, 2008.
Our offices are located at 3281 E. Guasti Road, Suite 700, Ontario, CA 91761, telephone number (909) 212-7662.
This discussion and analysis should be read in conjunction with our condensed consolidated financial statements included as part of this report.
Critical Accounting Policies
Critical Accounting Estimates
The preparation of financial statements in conformity with GAAP requires estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent liabilities in the condensed consolidated financial statements and accompanying notes. These judgments and estimates are based on past events and expectations of future outcomes. Actual results may differ from our estimates.
We continually review our accounting policies, how they are applied and how they are reported and disclosed in our financial statements. We have reviewed our critical accounting estimates with the audit and compliance committee of our Board of Directors.
See Note 1 of the Notes to the Consolidated Financial Statements included this Form 10-Q for a summary of significant accounting policies and the effect on our financial statements.
Following is a summary of our critical accounting estimates and how they are applied in preparation of the financial statements.
Website development in progress
We capitalize the software development costs once the technological feasibility of a product is established. Significant management judgments and estimates are utilized in the assessment of when technological feasibility is established and the evaluation is performed on a product-by-product basis. The technological feasibility of product is established when we have completed all planning, designing, coding, and testing activities that are necessary to establish that the product can be produced to meet its design specifications including functions, features, and technical performance requirements. The amount of software development costs to be capitalized is allocated based on the time and cost of our employees and service providers spend creating and developing the product. As of March 31, 2024 and December 31, 2023, we determined that the website development in progress did not meet the criteria for capitalization, and as a result, such costs were expensed as incurred.
Impairment of Long-lived Assets
We review the recoverability of long-lived assets, such as property and equipment and software development costs, whenever events or changes in circumstances occur that indicate the carrying value of the asset or asset group may not be recoverable. The assessment for possible impairment is based on our ability to recover the carrying value of the asset or asset group from the expected pre-tax cash flows, undiscounted and without interest charges, from the related operations. If the aggregation of the net cash flows is less than the carrying value of such assets, an impairment loss is recognized for the difference between estimated fair value and carrying value. The determination and measurement of impairment of long-lived assets requires us to estimate future cash flows and the fair value of long-lived assets.
Factors that we estimate include, among others, the economic lives of the assets, sales volume, pricing, inflation, long-term growth rates, cost of capital, marketing and capital spending. The variability of these factors depends on a number of conditions, and thus our accounting estimates may change from period to period. When performing impairment tests, we estimate the fair values of the assets using our best assumptions, which we believe are consistent with those a market participant would use. Furthermore, if we use different assumptions in future periods and estimates when impairment tests are performed, different results could occur.
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During 2022 we completed an impairment assessment of our capitalized software and determined that the fair value of our capitalized software costs is zero at December 31, 2022. In the three months ended March 31, 2024 and 2023, we continued to expense software development costs as they incurred
Principles of Consolidation
Our condensed consolidated financial statements include the accounts of Gofba and the accounts of Great Tech, Inc. (GTI), an entity wholly-owned by Gofba’s Chairperson, President and majority stockholder. The condensed consolidated entities are referred to herein as the "Company" and intercompany balances and transactions have been eliminated in consolidation.
Management determined that GTI is a variable interest entity primarily because it is thinly capitalized and may require additional capital to finance its activities. Management also determined that Gofba is the primary beneficiary of GTI based primarily on common stockholders and the related party nature of GTI’s decision-makers and daily business operators.
Recent Accounting Pronouncements
Recent accounting pronouncements are disclosed in Note 1 to our condensed consolidated financial statements.
In December 2023, the FASB issued Accounting Standards Update (“ASU”) No. 2023-09, Improvements to Income Tax Disclosures (“ASU 2023-09”). Under ASU 2023-09, public benefit entities must disclose specific categories and provide additional information in the tax rate reconciliation if the effect of those reconciling items is equal to or greater than 5 percent of the amount computed by multiplying pretax income or loss by the applicable statutory income tax rate. The amendments from ASU 2023-09 are effective for annual periods beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. The Company does not expect this guidance to have a material impact to its condensed consolidated financial statements or related disclosures.
Results of Operations
We have no revenue-generating operations, a material working capital deficit, a history of experiencing operating losses, and a net stockholders’ deficit. Historically, our primary sources of liquidity have come from deposits on common stock subscriptions and operating expenses paid on our behalf by our Chairperson, President and majority stockholder. During 2022 and 2023, we continued to develop our technologies, our strategy to monetize our intellectual properties and our business plan. Our management intends to rely on additional sales of our common stock, as well as loans and/or payments from our Chairperson, President and majority stockholder, to provide sufficient liquidity to meet our cash requirements for a period of at least the next twelve months. Given the uncertain nature of our plans, and our reliance on related parties, there is substantial doubt about our ability to continue as a going concern. The accompanying condensed consolidated financial statements have been prepared assuming that we will continue as a going concern; however, there can be no assurance that our operations will generate substantial revenue or become profitable or that sources of financing, including the issuance of debt and/or equity securities, and continued borrowings from related parties, will be available at times and on terms acceptable to us, or at all..
We plan to focus on creating revenue generating activities through various initiatives. Since we have not established any recurring sources of revenue to cover our operating costs, we plan to continue to fund our losses through continued issuance of our common stock and receiving financial support from related parties, including our Chairperson, President and majority stockholder.
During the three months ended March 31, 2024, we continued efforts in launching our Five Star Business Listing services and GOFBA News modules. During 2024, there were no revenues generated from these two new modules. We expect these new modules to grow and increase in user activity but we cannot reasonably estimate the financial impact at this time on our business.
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Summary of Results of Operations
|
| The Three Months Ended March 31, |
| |||||
|
| 2024 |
|
| 2023 |
| ||
|
| (000's) |
|
| (000's) |
| ||
Revenues |
| $ | - |
|
| $ | - |
|
Cost of goods sold |
|
| - |
|
|
| - |
|
Gross profit (loss) |
|
| - |
|
|
| - |
|
Operating expenses: |
|
|
|
|
|
|
|
|
General and administrative |
|
| 441 |
|
|
| 438 |
|
Professional fees |
|
| 82 |
|
|
| 64 |
|
Depreciation and amortization |
|
| 1 |
|
|
| 0 |
|
Total operating expenses |
|
| 524 |
|
|
| 502 |
|
Net Loss |
| $ | (524 | ) |
| $ | (502 | ) |
Revenue and Gross Profit
We generated no revenue during the three months ended March 31, 2024 and 2023.
Net Loss
Our net loss increased by $22,000 to $524,000 during the three months ended March 31, 2024 from $502,000 during the same period last year. The increase in net loss compared to the prior year is a result of the increase in general and administrative expenses of $3,000, in professional fees of $18,000 and in depreciation and amortization of $1,000.
For the three months ended March 31, 2024, our most significant expense is included in general and administrative expense and represents over $300,000 of services related to our use of a related party’s office space, server towers, super computers and virtual servers. The counterparty to this agreement is a trust controlled by our Chairperson, President and majority stockholder. The annual agreement stipulating the equipment utilized and the monthly fee is ratified and approved by our board of directors.
General and Administrative Expenses
General and administrative expenses increased by $3,000 to $441,000 for the three months ended March 31, 2024 from $438,000 during the same period last year. During the three months ended March 31, 2024, the most significant expenses related to our use of a related party’s server towers, office space, super computers and virtual servers from a trust controlled by our Chairperson, President and majority stockholder in the amount of $319,000, and executive compensation of approximately $70,000. The salary expense results from executive agreements, further discussed below and in the notes.
General and administrative expense also includes legal, accounting and public company related expenses of approximately $71,000 associated with us preparing our 2023 Annual Report on Form 10-K. We expect professional fees to fluctuate with the needs of our business and overall strategy to implement our business plan. In the event we undertake a significant transaction, such as an acquisition, securities offering, or file a registration statement, we would expect these fees to substantially increase during that period.
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Depreciation and Amortization Expenses
Our depreciation and amortization expenses increased by $1,000 to $1,000 from zero during the three months ended March 31, 2024, as compared to the same period last year.
Liquidity and Capital Resources
We are still developing our technology platforms and technologies and are incurring operating losses. As a result, we have no recurring revenue streams and we have never generated positive operating cash flows. Our cash on hand as of March 31, 2024 was $1,000 and our monthly cash flow burn rate was approximately $15,000. To assist with our cash requirements, during the three months ended March 31, 2024, we received $12,000 of cash proceeds from the advance of existing investors and Board of Director. We need to continue raising funds through debt or equity financings to meet our current monthly cash requirements. In addition, we have incurred a significant amounts of debt, $3.0 million including accrued interest, which is due beginning January 1, 2024. Since inception, our liquidity has been tight and we have significant short-term cash needs. Historically, these needs were satisfied through proceeds from deposits received for the sales of our common stock and loan and/or payments made on our behalf by our Chairperson, President and majority stockholder. We currently do not believe we will be able to satisfy our cash needs from our revenues for at least several years to come.
During the three months ended March 31, 2024, we continued to develop our platform and technologies, strategy to monetize our intellectual properties and our business plan. We intend to rely on additional sales of the our common stock, as well as related party relationships and resources, to provide sufficient liquidity to meet our cash requirements for a period of at least the next twelve months. Given the uncertain nature of these plans, there is substantial doubt about our ability to continue as a going concern. There can be no assurance that our operations will become profitable or that sources of financing, including the issuance of debt and/or equity securities, and borrowings from related parties, will be available at times and on terms acceptable to us, or at all. During the three months ended March 31, 2024, we sold no shares of stock subscriptions and made no payments to return deposits on common stock subscriptions.
We plan to focus on creating plans to revenue generating activities through various initiatives. Since we have not established any sources of recurring revenue to cover our operating costs, we plan to continue to fund our losses through continued issuance of our common stock and support from our majority stockholder and other related parties.
In order to repay our obligations in full, or in part, when due, we will be required to raise significant capital from other sources. There is no assurance, however, that we will be successful in these efforts.
Cash Requirements
We had cash balances of $1,000 and $1,000 as of March 31, 2024 and December 31, 2023, respectively. Based on no revenues, current cash balances and current expected monthly cash burn rate, we will need financial support from related parties and will need to raise money from the issuance of equity and/or debt securities, to fund operations. During the three months ended March 31, 2024, we continued to seek out additional debt and/or equity financing by obtaining promissory notes and advances from the major stockholder. We may not be successful in obtaining the continued financial support of related parties and unrelated parties, borrowing additional funds or raising money from the issuance of our securities.
Sources and Uses of Cash
Operating
We used cash for operating activities of $12,000 during the three months ended March 31, 2024, as compared to $254,000 for the same period in 2023. The most significant factor in our operating cash used is our net loss, adjusted for non-cash expenses. In the three months ended March 31, 2024, the net cash used in operating activities consisted primarily of our net loss of $524,000, offset by non-cash lease expenses of $319,000 and increase in accounts payable of $157,000. In the three months ended March 31, 2023, the net cash used in operating activities consisted primarily of our net loss of $502,000, which was offset by non-cash lease expenses of $319,000. We expect to continue to use significant cash amounts in our operating activities.
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Investing
We did not use any cash in investing activities during the three months ended March 31, 2024 and 2023. We expect to use cash in investing activities in future periods, the extent of which is dependent on the availability of cash and business needs.
Financing
Net cash provided by financing activities for the three months ended March 31, 2024 was $12,000, compared to $254,000 for the same period in 2023. During the three months ended March 31, 2024, cash proceeds from the promissory notes issued to existing members of Board of Directors were zero, and net advances from stockholder payable were $12,000. During the same period last year, cash proceeds from the promissory notes issued to existing members of Board of Directors were $247,000, and net advances from stockholder payable were $7,000.
Contractual Obligations
As a smaller reporting company, we are not required to provide this information.
Off Balance Sheet Arrangements
We have no off balance sheet arrangements.
Related Party Transactions
On May 14, 2018, we entered into employment agreements with Anna Chin and William DeLisi to serve as our President and Chief Executive Officer, respectively, under which we agreed to compensate Ms. Chin and Mr. DeLisi each at the annual salary of $121,000, beginning January 1, 2018 and terminating on December 31, 2023, with the possibility of extending the term for one additional year. In the event we are not able to pay Ms. Chin and/or Mr. DeLisi cash compensation for their salaries, we may issue shares of our common stock, valued at $5.00 per share, in lieu of such cash compensation. Ms. Chin and Mr. DeLisi are also entitled to standard executive employee health and life insurance benefits and certain severance payments in the event of termination. As of March 31, 2024 and December 31, 2023, $1,173,000 and $1,103,000 are due to these officers.
Since our inception, we have leased access to server towers, super computers and virtual servers from a trust controlled by our Chairperson, President and majority stockholder. Under the terms of the agreement, we first became obligated to pay for these services on January 1, 2009, when the monthly payment was $44,000 or $525,000 for the 2009 year. From 2010 to 2014, the service payments were $875,000 annually. From 2015 through 2019, the service payments were $1,050,000 annually. The parties agreed to renew the agreement for 2020 under the same terms. On June 1, 2020, we leased two additional computer servers. As a result, the monthly lease payment was increased by $35,000 annually. For 2021, the parties agreed to renew the agreement under the same terms as the end of 2020. For the three months ended March 31, 2024 and 2023, expenses associated with these services were $271,000 and $271,000, respectively. Our board of directors has ratified and approved the terms of each annual service agreement. The agreement expired on October 30, 2020 and was renewed through October 30, 2025. Amounts owed to the Chairperson, President and majority stockholder for amounts owing under this arrangement are included in stockholder payable.
In October 2017, we entered into an operating lease with a trust controlled by our Chairperson, President, and majority stockholder for office and internet server space for monthly rent of $16,000. The agreement expires October 1, 2027. Amounts owed to the Chairperson, President and majority stockholder under this arrangement are included in stockholder payable.
We have primarily relied on the financial and human resources, relationships, funding and expertise of our founding stockholders, who are husband and wife, since inception. As a result, we advance and receive funds as our cash needs dictate and during the three months ended March 31, 2024 and 2023, amounts funded to us by our Chairperson, President and majority stockholder were $351,000 and $327,000 respectively, and amounts returned during the same periods were $1,000 and $1,000, respectively. As of March 31, 2024 and December 31, 2023, the stockholder payable balance outstanding was $9,959,000 and $9,609,000, respectively. The stockholder payable does not bear interest, is not collateralized and has no formal repayment terms.
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On December 4, 2023, September 7, 2023, April 26, 2023, March 02, 2023, February 28, 2023, December 12, 2022, July 21, 2022, May 6, 2022, February 24, 2022, March 31, 2022, November 18, 2021, and June 18, 2021, we entered into promissory notes with investors and a member of the Board of Director of the Company. On January 1, 2024, the Company amended and consolidated all the existing notes payable to the trust controlled by the Company’s Chairperson, President and majority stockholder into one single note in the principal sum of $2,212,000. See Note 7 to the accompanying condensed consolidated financial statements included in this report for further discussion.
ITEM 3 Quantitative and Qualitative Disclosures About Market Risk
As a smaller reporting company, we are not required to provide the information required by this Item.
ITEM 4 Controls and Procedures
We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer (our Principal Accounting Officer), of the effectiveness of our disclosure controls and procedures (as defined) in Exchange Act Rules 13a – 15(c) and 15d – 15(e)). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer, who are our principal executive officer and principal financial officer, respectively, concluded that, as of March 31, 2024, our disclosure controls and procedures were not effective (1) to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and (2) to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to us, including our chief executive and chief financial officers, as appropriate to allow timely decisions regarding required disclosure.
Our Chief Executive Officer and Chief Financial Officer (our Principal Accounting Officer) do not expect that our disclosure controls or internal controls will prevent all error and all fraud. No matter how well conceived and operated, our disclosure controls and procedures can provide only a reasonable level of assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented if there exists in an individual a desire to do so. There can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
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Furthermore, smaller reporting companies face additional limitations. Smaller reporting companies employ fewer individuals and find it difficult to properly segregate duties. Often, one or two individuals control every aspect of the company’s operation and are in a position to override any system of internal control. Additionally, smaller reporting companies tend to utilize general accounting software packages that lack a rigorous set of software controls.
Our disclosure controls and procedures are not effective because of material weaknesses in internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. Our management assessed the effectiveness of our internal control over financial reporting as of March 31, 2024. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013). Based on this assessment, management has identified the following material weaknesses that have caused management to conclude that, as of March 31, 2024, our disclosure controls and procedures, and our internal control over financial reporting, were not effective at the reasonable assurance level:
1. We do not have sufficient segregation of duties within accounting functions, which is a basic internal control. Due to our size and nature, segregation of all conflicting duties may not always be possible and may not be economically feasible. However, to the extent possible, the initiation of transactions, the custody of assets and the recording of transactions should be performed by separate individuals. Management evaluated the impact of our failure to have segregation of duties on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness.
2. We have not documented our internal controls. We have limited policies and procedures that cover the recording and reporting of financial transactions and accounting provisions. As a result, we may be delayed in our ability to calculate certain accounting provisions. While we believe these provisions are accounted for correctly in the attached financial statements, our lack of internal controls could lead to a delay in our reporting obligations. Management evaluated the impact of our failure to have written documentation of our internal controls and procedures on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness.
3. Our corporate governance and U.S. GAAP and SEC accounting resources were not commensurate with those required of a public company. Although we are working to increase our accounting resources as our budget allows, we do not have all resources in place, which could lead to a delay in our reporting obligations.
To address these material weaknesses, management performed additional analyses and other procedures to ensure that the financial statements included herein fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented. Accordingly, we believe that the condensed consolidated financial statements included in this report fairly present, in all material respects, our financial condition, results of operations and cash flows for the periods presented.
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Remediation of Material Weaknesses
In order to remediate the material weakness in our documentation, evaluation and testing of internal controls, we intend to hire additional qualified and experienced personnel to assist us in remedying these material weaknesses as our business grows and as additional financial and other resources become available to us.
Changes in Internal Control over Financial Reporting
There have been no changes in the our internal controls over financial reporting during the period covered by this report that have materially affected, or are reasonably likely to materially affect, such internal control over financial reporting.
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PART II – OTHER INFORMATION
ITEM 1 Legal Proceedings
Cogito Software Solutions Ltd. v. Gofba, Inc., et al
On July 21, 2023, Cogito Software Solutions, Ltd., a company claiming to be a corporation qualified to do business in California, filed a form Complaint against us for Breach of Contract and Common Counts for an Open Book Account for Money Due, alleging we breached a contract by failing to pay for software services performed by the Plaintiff, causing Plaintiff damages of $960,000, plus interest. The Complaint was filed in the Superior Court of the State of California, County of San Bernadino (Cogito Software Solutions Ltd. v. Gofba, Inc., Case No. CIV SB 2315264).
On September 1, 2023, we filed a Demurrer to the Plaintiff’s Complaint on the basis that the Plaintiff does not appear as a corporation registered to do business in California and that the Complaint fails to state of action for Breach of Contract and Common Counts for Amounts Owed on an Open Account since the basic elements of each cause of action are not specified in the Complaint. On October 30, 2023, the Court heard the motion and our Demurrer was granted. As a result, the Plaintiff’s Complaint was dismissed and the Court granted Plaintiff 20 days to file an amended Complaint.
On November 15, 2023, we and Plaintiff entered into a settlement agreement and mutual release. Both parties agreed to waive, discharge, and otherwise extinguish their actual or possible claims of the Complaint against each other in exchange for the parties to dismiss their respective actions and the lawsuit with prejudice against one another.
Chin Li Shih v. Anna Chin and Gofba, Inc.
On November 13, 2023, the Plaintiff filed a form Complaint against us for Breach of Contract and Fraud, alleging we breached a contract by failing to provide a location for Plaintiff to use for stray animals as she alleges was an understanding between the parties when Plaintiff invested in Gofba, Inc., and also by failing to repay an alleged separate $30,000 loan. Plaintiff also alleges fraud due to principals at Gofba, Inc., allegedly telling Plaintiff the company was going to be a public company and that they would provide a location for Plaintiff to use for stray animals. According to the Complaint, Plaintiff is seeking $72,500, plus interest, as damages. The Complaint was filed in the Superior Court of the State of California, County of San Bernadino (Chin Li Shih v. Anna Chin and Gofba, Inc., Case No. CIV SB 2327457).
On January 10, 2024, we filed an Answer to the Complaint generally denying the allegations in the Complaint and denying that Plaintiff suffered any damages, and, in addition to the general denial, specifically alleged that Plaintiff’s causes of action are barred by the applicable statute of limitations. On May 13, 2024, the parties appeared for a Trial Setting Conference, wherein the parties informed the Court they are conducting initial discovery but not opposed to setting trial dates. The Court scheduled a Trial Readiness Conference for May 29, 2025, and set a jury trial date for June 2, 2025. We plan to continue conducting discovery in the interim. We plan to vigorously defend ourselves against the allegations in the Complaint if the lawsuit moves forward.
In the ordinary course of business, we are from time to time involved in various pending or threatened legal actions. The litigation process is inherently uncertain and it is possible that the resolution of such matters might have a material adverse effect upon our financial condition and/or results of operations. However, in the opinion of our management, matters currently pending or threatened against us are not expected to have a material adverse effect on our financial position or results of operations.
ITEM 1A Risk Factors
As a smaller reporting company, we are not required to provide the information required by this Item.
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ITEM 2 Unregistered Sales of Equity Securities and Use of Proceeds
During the three months ended March 31, 2024, we did not issue any unregistered securities.
ITEM 3 Defaults Upon Senior Securities
There have been no events which are required to be reported under this Item.
ITEM 4 Mine Safety Disclosures
There have been no events which are required to be reported under this Item.
ITEM 5 Other Information
Status of Refunds to Pre-Subscribers
As noted in our previous filings with the Commission, certain individuals or entities that gave us pre-subscription orders between 2009 and 2016 for shares of our common stock at between $1 and $5 per share, to be issued in the future if certain conditions were met, requested the return of their funds prior to the conditions being met. In 2017, we sent a Disclosure Statement to those individuals asking if they wished to confirm their investment in Gofba and receive shares of our common stock, or if they desired to rescind their investment and receive their investment money back. Approximately 350 of those individuals or entities confirmed their investment in Gofba and indicated they wish to receive shares of Gofba common stock, and 76 indicated they wish to rescind their investment in Gofba and receive their investment funds back. In early May 2020, we sent letters to all those pre-subscribers that had requested a return of their funds but had not received them yet, asking that they confirm their address to us so we can return their funds. As we received those letters back from pre-subscribers we returned their funds timely to the address indicated by each pre-subscriber. As of March 31, 2024, we had refunded all investments back to pre-subscribers that requested them but still have not received a response from pre-subscribers representing deposits of $131,000, while pre-subscribers representing deposits of $9,000 have rescinded their investments. These amounts represent the only amounts still owed to pre-subscribers.
During the three months ended March 31, 2024, we did not make any payment to return deposits on common stock subscriptions, and as of March 31, 2024, $131,000 is owed to the pre-subscribers.
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ITEM 6 Exhibits
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* | Filed herewith. |
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** | XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections. |
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(1) | Incorporated by reference from our Registration Statement on Form S-1 filed with the Commission on May 25, 2018. |
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(2) | Incorporated by reference from our Annual Report on Form 10-K (12/31/19) filed with the Commission on April 14, 2020. |
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(3) | Incorporated by reference from our Annual Report on Form 10-K (12/31/20) filed with the Commission on March 25, 2021 |
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(4) | Incorporated by reference from our Annual Report on Form 10-K (12/31/23) filed with the Commission on April 16, 2024 |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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Dated: May 20, 2024 | By: | /s/ William DeLisi | |
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| William DeLisi |
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| Chief Executive Officer |
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Dated: May 20, 2024 | By: | /s/ Anna Chin |
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| Anna Chin |
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| Chief Financial Officer | |
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