UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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
OR
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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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, 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 |
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Emerging growth company |
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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
As of April 30, 2025, the number of shares of the registrant’s Class A common stock outstanding was
Table of Contents
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Page |
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ii |
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PART I. |
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Item 1. |
1 |
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1 |
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2 |
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3 |
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4 |
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5 |
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Notes to Unaudited Condensed Consolidated Financial Statements |
6 |
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
20 |
Item 3. |
25 |
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Item 4. |
26 |
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PART II. |
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Item 1. |
27 |
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Item 1A. |
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Item 6. |
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30 |
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i
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, (the "Securities Act") and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which statements involve substantial risks and uncertainties. Forward-looking statements generally relate to future events or future financial or operating performance and include all statements that are not historical facts such as information concerning the strategic alternatives considered by our Board of Directors, including the decisions taken thereto and alternatives for the use of our cash or cash equivalents, our possible or assumed future results of operations and expenses, management strategies and plans, competitive position, business environment, potential growth strategies and opportunities and our continued listing on Nasdaq. In some cases, forward-looking statements can be identified by use of terms such as “anticipates,” “assumption,” “believes,” “continue,” “could,” “estimates,” “expects,” “foresees,” “forecasts,” “intends,” “goals,” judgment,” “may,” “might,” “outlook,” “plans,” “potential,” “predicts,” “projects,” “seeks,” “should,” “targets,” “will,” “would” or similar expressions and the negatives of those terms.
Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Those risks include those described in Part II, Item 1A. “Risk Factors” in this Quarterly Report on Form 10-Q, as well as in our condensed consolidated financial statements, related notes, and the other information appearing elsewhere in this Quarterly Report on Form 10-Q, our Annual Report on Form 10-K for the year ended December 31, 2024 filed with the Securities and Exchange Commission (the “SEC”) on March 12, 2025, as amended by Amendment No. 1 to Annual Report on Form 10-K/A which was filed with the SEC on April 17, 2025, and our other filings with the SEC. The inclusion of forward-looking information should not be regarded as a representation by us, our management or any other person that the future plans, estimates, or expectations contemplated by us will be achieved. Given these uncertainties, you should not place undue reliance on any forward-looking statements in this Quarterly Report on Form 10-Q.
In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject, including, but not limited to, statements regarding the strategic alternatives considered by our Board of Directors, including the decisions taken thereto; future financial performance; our future liquidity and operating expenditures; financial condition and results of operations; competitive changes in the marketplace; the outcome of ongoing litigation; our expected tax rate; the effect of changes in or the application of new or revised tax laws; the effect of new accounting pronouncements; and other characterizations of future events or circumstances. These statements are based on information available to us as of the date of this Quarterly Report on Form 10-Q. While we believe such information provides a reasonable basis for these statements, such information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely on these statements.
The forward-looking statements made in this Quarterly Report on Form 10-Q 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 on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q 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.
You should read this Quarterly Report on Form 10-Q and the documents that we reference in this Quarterly Report on Form 10-Q and have filed with the SEC as exhibits to this Quarterly Report on Form 10-Q with the understanding that our actual future results, levels of activity, performance, and events and circumstances may be materially different from what we expect.
ii
PART I—FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (Unaudited)
CONTEXTLOGIC INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
($ in millions, shares in thousands, except par value)
(Unaudited)
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As of March 31, |
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As of December 31, |
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2025 |
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2024 |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Marketable securities |
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Prepaid expenses and other current assets |
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Total current assets |
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Total assets |
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$ |
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$ |
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Liabilities, Redeemable Non-controlling Interest, and Stockholders’ Equity |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
— |
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Accrued liabilities |
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Total current liabilities |
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Total liabilities |
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Redeemable non-controlling interest (Note 6) |
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— |
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Stockholders’ equity: |
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Preferred stock, $ |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated deficit |
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Total stockholders’ equity |
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Total liabilities, redeemable non-controlling interest, and stockholders’ equity |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
1
CONTEXTLOGIC INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
($ in millions, shares in thousands, except per share data)
(Unaudited)
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Three Months Ended |
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March 31, |
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2025 |
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2024 |
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Revenue |
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$ |
— |
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$ |
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Cost of revenue |
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— |
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Gross profit |
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— |
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Operating expenses: |
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Sales and marketing |
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— |
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Product development |
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— |
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General and administrative |
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Total operating expenses |
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Loss from operations |
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Other income, net: |
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Interest and other income, net |
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— |
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Loss before provision for income taxes |
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( |
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( |
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Provision for income taxes |
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— |
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Net loss |
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( |
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( |
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Adjustments attributable to redeemable non-controlling interest (Note 6) |
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( |
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— |
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Net loss attributable to redeemable non-controlling interest (Note 6) |
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— |
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— |
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Net loss attributable to common stockholders |
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$ |
( |
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$ |
( |
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Net loss per share attributable to common stockholders, basic and diluted |
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$ |
( |
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$ |
( |
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Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
2
CONTEXTLOGIC INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(in millions)
(unaudited)
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Three Months Ended |
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March 31, |
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2025 |
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2024 |
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Net loss |
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$ |
( |
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$ |
( |
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Other comprehensive loss: |
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Unrealized holding losses on derivatives and marketable securities, net of tax |
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— |
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( |
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Foreign currency translation adjustment |
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— |
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( |
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Other comprehensive loss |
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— |
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( |
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Total comprehensive loss |
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( |
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Less: adjustments attributable to redeemable non-controlling interest |
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( |
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— |
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Less: comprehensive loss attributable to redeemable non-controlling interest |
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— |
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— |
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Comprehensive loss attributable to common stockholders |
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$ |
( |
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$ |
( |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
3
CONTEXTLOGIC INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
($ in millions, shares in thousands)
(Unaudited)
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Three Months Ended March 31, 2025 |
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Common Stock |
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Accumulated |
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Shares |
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Amount |
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Additional |
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Other |
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Accumulated |
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Total |
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Balances as of December 31, 2024 |
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$ |
— |
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$ |
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$ |
— |
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$ |
( |
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$ |
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Issuance of common stock upon settlement of restricted stock units |
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— |
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— |
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— |
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— |
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— |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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( |
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( |
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Accretion to adjust redemption value of subsidiary's Preferred Units |
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— |
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— |
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( |
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— |
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— |
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( |
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Balances as of March 31, 2025 |
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$ |
— |
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$ |
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$ |
— |
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$ |
( |
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$ |
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Three Months Ended March 31, 2024 |
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Common Stock |
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Accumulated |
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Shares |
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Amount |
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Additional |
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Other |
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Accumulated |
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Total |
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Balances as of December 31, 2023 |
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$ |
— |
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$ |
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$ |
( |
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$ |
( |
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$ |
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Issuance of common stock upon settlement of restricted stock units |
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— |
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— |
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— |
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— |
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— |
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Shares withheld related to net share settlement |
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( |
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— |
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( |
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— |
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— |
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( |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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Other comprehensive loss, net |
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— |
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— |
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— |
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( |
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— |
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( |
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Net loss |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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Balances as of March 31, 2024 |
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$ |
— |
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$ |
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$ |
( |
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$ |
( |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
4
CONTEXTLOGIC INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
(unaudited)
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Three Months Ended |
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March 31, |
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2025 |
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2024 |
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Cash flows from operating activities: |
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Net loss attributable to common stockholders |
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$ |
( |
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$ |
( |
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Net loss and adjustment attributable to redeemable non-controlling interest |
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— |
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Net loss |
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( |
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( |
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Adjustments to reconcile net loss to net cash used in operating activities: |
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Depreciation and amortization |
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— |
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Noncash lease expense |
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— |
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Stock-based compensation |
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Net accretion of discounts and premiums on marketable securities |
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( |
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— |
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Other |
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— |
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( |
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Changes in operating assets and liabilities: |
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Funds receivable |
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— |
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( |
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Prepaid expenses, other current and noncurrent assets |
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— |
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Accounts payable |
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( |
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Merchants payable |
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— |
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( |
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Accrued and refund liabilities |
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( |
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( |
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Lease liabilities |
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— |
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( |
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Other current and noncurrent liabilities |
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— |
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Net cash used in operating activities |
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( |
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( |
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Cash flows from investing activities: |
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Purchases of marketable securities |
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( |
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— |
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Maturities of marketable securities |
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Net cash (used in) provided by investing activities |
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( |
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Cash flows from financing activities: |
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Proceeds from issuance of redeemable convertible Preferred Units, net |
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— |
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Payment of taxes related to RSU settlement |
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— |
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( |
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Net cash provided by (used in) financing activities |
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( |
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Foreign currency effects on cash, cash equivalents and restricted cash |
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— |
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( |
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Net (decrease) increase in cash, cash equivalents and restricted cash |
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( |
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Cash, cash equivalents and restricted cash at beginning of period |
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Cash, cash equivalents and restricted cash at end of period |
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$ |
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$ |
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Reconciliation of cash, cash equivalents, and restricted cash to the condensed consolidated balance sheets: |
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Cash and cash equivalents |
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$ |
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$ |
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Restricted cash included in prepaid and other current assets in the condensed consolidated balance sheets |
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— |
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Total cash, cash equivalents and restricted cash |
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$ |
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$ |
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Supplemental cash flow disclosures: |
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Cash paid for operating leases |
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$ |
— |
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$ |
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Cash paid for income taxes, net of refunds |
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$ |
— |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
5
CONTEXTLOGIC INC.
Notes to Unaudited Condensed Consolidated Financial Statements
NOTE 1. OVERVIEW, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
ContextLogic Inc. (the "Company", "ContextLogic", "we", “our” or "us") is a publicly traded company currently seeking to develop and grow a de novo business and finance potential future bolt-on acquisitions of assets or businesses that are complementary to its operations. The Company currently does not generate revenue.
The Company was incorporated in the state of
Asset Sale
On April 19, 2024, following the vote by a majority of the outstanding shares of the Company’s common stock and the satisfaction of other customary closing conditions the Company consummated the transaction pursuant to that certain asset purchase agreement (the “Asset Purchase Agreement”) with Qoo10 Inc., a Delaware corporation (“Qoo10 Delaware”), and, for certain specified purposes, Qoo10 Pte. Ltd., a Singapore private limited company and Qoo10 Delaware’s parent company (“Qoo10”), pursuant to which (i) the Company agreed to sell substantially all of its assets to Qoo10 Delaware or an affiliate designated by Qoo10 Delaware (such designated affiliate, the “Buyer”), other than (A) the Company’s net operating losses (“NOLs”) and certain other tax attributes, (B) the Company’s marketable securities and (C) certain of the Company’s cash and cash equivalents, and (ii) Qoo10 agreed to acquire those assets and assume substantially all of the Company’s liabilities as specified in the Asset Purchase Agreement (the “Asset Sale”).
Prior to the Asset Sale, the Company owned and operated the Wish platform (“Wish”). The Wish platform generated revenue for the Company from the marketplace and logistics services provided to merchants. As a result of the Asset Sale, the Wish platform and all related operating assets were sold to the Buyer. The condensed consolidated financial statements presented in this Quarterly Report on Form 10-Q reflect the Asset Sale as it was completed on April 19, 2024. Accordingly, the condensed consolidated financial statements and the narrative description of the Company’s business, assets, liabilities and risks contained in the related Notes to Unaudited Condensed Consolidated Financial Statements, as well as in the accompanying Management’s Discussion and Analysis of Financial Condition and Results of Operations reflect, where applicable, the pre-Asset Sale operations, the results of the Asset Sale, and the post-Asset Sale activities.
The net assets associated with the Asset Purchase Agreement met the criteria to be classified as assets held for sale upon approval of the stockholders on April 18, 2024. On April 19, 2024, all outstanding unvested restricted awards for employees and directors were accelerated and fully vested. Following the Asset Sale, substantially all of the Company's employees became employees of the Buyer.
Basis of Presentation and Consolidation
The accompanying condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”). The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries along with the ContextLogic Holdings, LLC entity for which the Company is the majority owner. All intercompany balances and transactions have been eliminated in consolidation. The interim condensed consolidated financial statements as of March 31, 2025 and for the three months ended March 31, 2025 and 2024 are unaudited. In the opinion of management, the interim financial data includes all adjustments, consisting only of normal recurring adjustments, necessary to a fair statement of the results for the interim periods. The consolidated balance sheet as of December 31, 2024 is derived from consolidated financial statements audited by BPM LLP, an independent registered public accounting firm, however, it does not include all of the information and footnotes required by U.S. GAAP for complete financial statements. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, which was filed with the SEC on March 12, 2025, as amended by Amendment No. 1 to Annual Report on Form 10-K/A, which was filed with the SEC on April 17, 2025 (as amended, the “2024 Form 10-K”). The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for the year ending December 31, 2025 or for any future interim periods.
Use of Estimates
The preparation of condensed consolidated financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period. These estimates form the basis for judgments the Company makes
6
about the carrying values of its assets and liabilities that are not readily available from other sources. These estimates include, but are not limited to, fair value of financial instruments, contingent liabilities, and uncertain tax positions.
Redeemable Non-Controlling Interest
Redeemable non-controlling interest represents the shares of the Class A convertible preferred units ("Preferred Units") issued by ContextLogic Holdings, LLC (“Holdings”), a Delaware limited liability company and subsidiary of the Company, to BCP Special Opportunities Fund III Originations LP, a Delaware limited partnership (the “Investor”) who has a
The balance of the redeemable non-controlling interest is reported at the greater of the initial carrying value amount adjusted for the redeemable non-controlling interest's share of earnings or losses or its estimated redemption value. The resulting changes in the estimated redemption amount are recorded with corresponding adjustments against retained earnings or, in the absence of retained earnings, additional paid-in-capital. These interests are presented on the condensed consolidated balance sheet outside of stockholders' equity under the caption "Redeemable non-controlling interest." Refer to Note 6 - Redeemable Non-Controlling Interest for additional information.
Summary of Significant Accounting Policies
Besides the above mentioned policy on the redeemable non-controlling interest, there have been no changes to the Company’s significant accounting policies described in its 2024 Form 10-K that have had a material impact on its condensed consolidated financial statements.
Accounting Pronouncements
The Company has reviewed recent accounting pronouncements and concluded as follows:
In November 2024, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires disclosure of specified information about certain costs and expenses including the amounts of purchase of inventory, employee compensation, depreciation, intangible asset amortization, and depreciation, depletion, and amortization recognized as part of oil- and gas-producing activities, and the total amount of selling expenses and an entity's definition of selling expenses. The amendments in this ASU are effective to all public business entities for fiscal years beginning after December 15, 2026. Early adoption is permitted. The Company is evaluating the impact this amended guidance may have on the footnotes to the consolidated financial statements.
In November 2024, the FASB issued ASU No. 2024-04, Debt—Debt with Conversion and Other Options (Subtopic 470-20): Induced Conversions of Convertible Debt Instruments, which clarifies the requirements for determining whether certain settlements of convertible debt instruments should be accounted for as an induced conversion. The amendments in this ASU are effective to entities that settle convertible debt instruments for fiscal years beginning after December 15, 2025. Early adoption is permitted for all entities that have adopted the amendments in ASU No. 2020-06. This amended guidance is not expected to have an impact on the footnotes of the consolidated financial statements.
In January 2025, the FASB issued ASU No. 2025-01, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date, which clarified the effective date of ASU No. 2024-03 to be annual reporting periods beginning after December 15, 2026 and interim periods within the annual reporting periods beginning after December 15, 2027. The amendments in this ASU are effective to all public business entities. Early adoption is permitted. This amended guidance is not expected to have an impact on the footnotes of the consolidated financial statements.
In March 2025, the FASB issued ASU No. 2025-02, Liabilities (Topic 405)—Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 122, which deleted an SEC paragraph originally titled "Accounting for Obligations to Safeguard Crypto Assets an Entity Holds for Its Platform User." This amended guidance is not applicable to the Company.
7
NOTE 2. DISAGGREGATION OF REVENUE
Following the completion of the Asset Sale, the Company
Prior to the Asset Sale, the Company generated revenue from marketplace and logistics services provided to its customers.
Prior to the Asset Sale, revenue was recognized as the Company transferred control of promised goods or services to its customers in an amount that reflects the consideration the Company expected to be entitled to in exchange for those goods or services. The Company considered both the merchant and the user to be customers, depending on the revenue stream. The Company evaluated whether it is appropriate to recognize revenue on a gross or net basis based upon its evaluation of whether the Company obtained control of the specified goods or services by considering if it was primarily responsible for fulfillment of the promise, had inventory risk and had latitude in establishing pricing and selecting suppliers, among other factors. Based on these factors, marketplace revenue was generally recognized on a net basis and logistics revenue was generally recognized on a gross basis. Revenue excluded any amounts collected on behalf of third parties, including indirect taxes.
Marketplace Revenue
Prior to the Asset Sale, the Company provided a mix of marketplace services to its customers. The Company provided merchants access to its marketplace where merchants displayed and sold their products to users. The Company also provided ProductBoost services to help merchants promote their products within the Company’s marketplace.
Prior to the Asset Sale, marketplace revenue included commission fees collected in connection with user purchases of the merchants’ products. The commission fees varied depending on factors such as geography, product category, Wish Standards' tier, item value and dynamic pricing. The Company recognized revenue when a user’s order was processed, and the related order information had been made available to the merchant. Commission fees were recognized net of estimated refunds and chargebacks. Marketplace revenue also included ProductBoost revenue generated by increasing exposure for a merchant’s relevant products within the Company's marketplace. The Company recognized ProductBoost revenue based on the number of impressions delivered, or clicks by users.
Logistics Revenue
Prior to the Asset Sale, the Company’s logistics offering for merchants was designed for direct end-to-end single order shipment from a merchant’s location to the user. Logistics services included transportation and delivery of the merchant’s products to the user. Merchants were required to prepay for logistics services on a per order basis.
Prior to the Asset Sale, the Company recognized revenue over time as the merchant simultaneously received and consumed the logistics services benefit as the logistics services were performed. The Company used an output method of progress based on days in transit as the Company believed that it best depicted the Company’s progress toward complete satisfaction of the performance obligation.
The following table shows the disaggregated revenue for the applicable periods:
|
|
Three Months Ended |
|
|||||
|
|
March 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
|
|
(in millions) |
|
|||||
Core marketplace revenue |
|
$ |
— |
|
|
$ |
|
|
ProductBoost revenue |
|
|
— |
|
|
|
|
|
Marketplace revenue |
|
|
— |
|
|
|
|
|
Logistics revenue |
|
|
— |
|
|
|
|
|
Revenue |
|
$ |
— |
|
|
$ |
|
|
8
NOTE 3. FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENT
The Company’s financial instruments consist of cash equivalents, marketable securities, accounts payable, and accrued liabilities. Cash equivalents’ carrying value approximates fair value at the balance sheet dates, due to the short period of time to maturity. Marketable securities are recognized at fair value. Accounts payable and accrued liabilities carrying values approximate fair value due to the short time to the expected receipt or payment date.
Assets and liabilities recognized at fair value on a recurring basis in the condensed consolidated balance sheets consisting of cash equivalents and marketable securities are categorized based upon the level of judgment associated with the inputs used to measure their fair values. Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
Financial assets and liabilities subject to fair value measurements on a recurring basis and the level of inputs used in such measurements are as follows:
|
|
March 31, 2025 |
|
|||||||||||||
|
|
Total |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
||||
|
|
(in millions) |
|
|||||||||||||
Financial assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Money market funds |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
||
U.S. Treasury bills |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Total cash equivalents: |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|||
Marketable securities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. treasury bills |
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
||
Total marketable securities |
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
||
Total financial assets |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|||
|
|
December 31, 2024 |
|
|||||||||||||
|
|
Total |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
||||
|
|
(in millions) |
|
|||||||||||||
Financial assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Money market funds |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
||
U.S. treasury bills |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Total cash equivalents |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|||
Marketable securities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. treasury bills |
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
||
Total marketable securities |
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
||
Total financial assets |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|||
As of March 31, 2025, the Company’s “cash and cash equivalents” line item was comprised of cash deposited with banks, U.S. Treasury bills, and money market funds, and “marketable securities” was comprised solely of government securities. The Company classifies cash equivalents and marketable securities within Level 1 or Level 2 because the Company uses quoted market prices or alternative pricing sources and models utilizing market observable inputs to determine their fair value
The following table summarizes the contractual maturities of the Company’s marketable securities:
|
|
March 31, |
|
|
December 31, |
|
||||||||||
|
|
2025 |
|
|
2024 |
|
||||||||||
|
|
Amortized |
|
|
Estimated |
|
|
Amortized |
|
|
Estimated |
|
||||
|
|
(in millions) |
|
|||||||||||||
Due within one year |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Total marketable securities |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
9
All of the Company’s available-for-sale marketable securities are subject to a periodic evaluation for a credit loss allowance and impairment review. The Company did not identify any of its available-for-sale marketable securities requiring an allowance for credit loss or as other-than-temporarily impaired in any of the periods presented. Additionally, the unrealized net loss and net gain on available-for-sale marketable securities as of March 31, 2025 and December 31, 2024 were insignificant. As of March 31, 2025 and December 31, 2024, those investments with an original maturity of three months or less were classified as cash equivalents and those investments with original maturities beyond three months were classified as marketable securities. The Company has classified all of the marketable securities as available-for-sale.
10
NOTE 4. BALANCE SHEET COMPONENTS
Accrued Liabilities
Accrued liabilities consist of the following:
|
|
March 31, |
|
|
December 31, |
|
||
|
|
2025 |
|
|
2024 |
|
||
|
|
(in millions) |
|
|||||
Accrued services(1) |
|
$ |
|
|
$ |
|
||
Other (2) |
|
|
|
|
|
|
||
Total accrued liabilities |
|
$ |
|
|
$ |
|
||
11
NOTE 5. COMMITMENTS AND CONTINGENCIES
Revolving Credit Facility
In November 2020, the Company entered into a
The Revolving Credit Facility contained customary conditions to borrowing, events of default and covenants, including covenants that restricted the Company’s ability (and the ability of certain of the Company’s subsidiaries) to incur indebtedness, grant liens, make certain fundamental changes and asset sales, make distributions to stockholders, make investments or engage in transactions with affiliates. It also contained a minimum liquidity financial covenant of $
At the closing of the Asset Sale on April 19, 2024, the Company terminated the Revolving Credit Facility. At that closing, the Letter of Credit ceased to be issued under the Revolving Credit Facility and was cash collateralized in equal amounts by the Company and the Buyer. Furthermore, the Company's previous headquarters was transferred to the Buyer, which has assumed the Company's obligations under the lease for those headquarters upon closing of the Asset Sale.
During the three months ended March 31, 2025, the Letter of Credit was reduced to $
Legal Contingencies and Proceedings
Beginning in May 2021,
In August 2021, a shareholder derivative action purportedly brought on behalf of the Company, Patel v. Szulczewski, was filed in the U.S. District Court for the Northern District of California alleging that the Company’s directors and officers made or caused the Company to make false and/or misleading statements about the Company’s business operations and financial prospects in various public filings. Plaintiff asserts claims for breach of fiduciary duties, unjust enrichment, abuse of control, gross mismanagement, waste of corporate assets, violations of Section 14(a) of the Exchange Act, and for contribution under Sections 10(b) and 21D of the Exchange Act and is seeking monetary damages. This matter is currently stayed. The Company believes this lawsuit is without merit and it intends to vigorously defend it. Based on the preliminary nature of the proceedings in these cases, the Company cannot estimate a range of potential losses at this point in time.
As of March 31, 2025, in the opinion of management, there were no other legal contingency matters that arose in the ordinary course of business, either individually or in aggregate, that would have a material adverse effect on the financial position, results of operations, or cash flows of the Company. Given the unpredictable nature of legal proceedings, the Company bases its estimate on the information available at the time of the assessment. As additional information becomes available, the Company will reassess the potential liability and may revise the estimate.
12
NOTE 6. REDEEMABLE NON-CONTROLLING INTEREST
In March 2025, Holdings entered into the A&R Investment Agreement with the Investor under which Holdings may issue up to
The Preferred Units (a) have a stated value of $
The Preferred Units are convertible only into Common Units of Holdings and only redeemable upon (i) an “ordinary liquidation”, (ii) at the Investor's option upon Holdings' failure to complete an acquisition on or prior to the second anniversary of the Initial Closing or (iii) at Holdings' option on or after the fifth anniversary of an acquisition event. Holdings is required to seek written consent from the Investor prior to the consummation of an acquisition. As such, the redemption of the Preferred Units is outside the control of Holdings and the Company has classified the Preferred Units as mezzanine equity.
The Preferred Units included the right to participate in a future investment of
The Preferred Units have been initially recognized at a fair value of $
The following table summarizes Holdings' non-controlling interest presented as a separate component of the Company's condensed consolidated statements of operations:
|
Three months ended |
|
|
|
March 31, 2025 |
|
|
|
(in millions) |
|
|
Net loss attributable to redeemable non-controlling interest |
$ |
— |
|
The following table summarizes the activity in the redeemable non-controlling interest for the period indicated below:
|
Three months ended |
|
|
|
March 31, 2025 |
|
|
|
(in millions) |
|
|
Balance, beginning of period |
$ |
— |
|
Issuance of subsidiary's Preferred Units to redeemable non-controlling interest |
|
|
|
Accretion to adjust redemption value of subsidiary's Preferred Units |
|
|
|
Dividends accrued to holders of subsidiary's Preferred Units |
|
— |
|
Balance, end of period |
$ |
|
|
13
NOTE 7. EQUITY Award activity and STOCK-based compensation
Equity Award Activity
A summary of activity under the equity plans and related information was as follows:
|
|
Options Outstanding |
|
|
RSUs Outstanding |
|
||||||||||
|
|
Number of |
|
|
Weighted- |
|
|
Weighted- |
|
|
Number of |
|
||||
|
|
(in thousands) |
|
|
|
|
|
|
|
|
(in thousands) |
|
||||
Balances as of December 31, 2024 |
|
|
|
|
$ |
|
|
|
|
|
|
|
||||
Granted |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|||
Exercised or vested |
|
|
— |
|
|
|
|
|
|
|
|
|
( |
) |
||
Forfeited or cancelled |
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
||
Balances as of March 31, 2025 |
|
|
|
|
$ |
|
|
|
|
|
|
|||||
The weighted-average grant date fair value of restricted stock was $
Stock-Based Compensation Expense
Total stock-based compensation expense included in the condensed consolidated statements of operations was as follows:
|
|
Three Months Ended |
|
|||||
|
|
March 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
|
|
(in millions) |
|
|||||
Sales and marketing |
|
$ |
— |
|
|
$ |
|
|
Product development |
|
|
— |
|
|
|
|
|
General and administrative |
|
|
|
|
|
|
||
Total stock-based compensation |
|
$ |
|
|
$ |
|
||
The Company will recognize the remaining $
Class P Units
On March 6, 2025, the Board approved, and the Company entered into, an employment agreement for Mr. Rishi Bajaj to serve as the Chief Executive Officer ("CEO"), including a revised compensation package (the “Employment Agreement”), effective March 6, 2025 (the “Effective Date” or "Valuation Date"). On the Effective Date, Mr. Bajaj was awarded
If Mr. Bajaj’s employment is terminated due his death or Disability (as defined in the Employment Agreement), then (a) the Time Vesting Grant will immediately vest upon termination; and (b) the Performance Vesting Grant will remain outstanding through the four (4) year anniversary of the Effective Date and will vest as follows: (A)
14
thousand of the Class P Units will vest upon the date the performance metrics applicable to such Class P Units are achieved; and (C)
If Mr. Bajaj’s employment is terminated by the Company without Cause (other than by reason of Disability) or by Mr. Bajaj for Good Reason (as such terms are defined in the Employment Agreement), then (a) the Time Vesting Grant will immediately vest upon termination; and (b) the Performance Vesting Grant will remain outstanding through the four (4) year anniversary of the Effective Date and will vest as follows: (A)
Changes in non-vested Class P Units as of March 31, 2025, were as follows (in thousands, except per share amounts):
|
|
Time Vesting Grant |
|
|
Performance Vesting Grant |
|
||||||||||
|
|
Number of Units |
|
|
Weighted Average Grant Date Fair Value |
|
|
Number of Units |
|
|
Weighted Average Grant Date Fair Value |
|
||||
Nonvested at January 1, 2025 |
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
— |
|
Granted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Vested |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Forfeited |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Nonvested at March 31, 2025 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
A Monte Carlo simulation model under the option pricing method was used to estimate the fair value of the Class P Units. The fair value included a discount for lack of marketability, as these units are non-marketable, minority interests in Holdings, without an active market and are subject to restrictions on transfer. The total cumulative fair value of the Time Vesting Grant and Performance Vesting Grant was $
The valuation assumptions utilized for the Class P Units as of the March 6, 2025, grant date were as follows:
Expected time to a liquidity event (1) |
|
|
||
Expected volatility (2) |
|
|
% |
|
Risk-free interest rate (3) |
|
|
% |
|
Equity value (4) |
|
$ |
|
|
Discount for lack of marketability |
|
|
% |
|
(1) Represents the expected time to a liquidity event as of the measurement date.
(2) Because Holdings is a private company that was formed on the grant date, it is not possible to base Holding’s expected volatility assumption on the historical volatility of the Holding’s stock price. A selected specific peer group was used to develop a volatility indication for Holdings as of the Valuation Date using each peer company’s historical equity volatility over the period commensurate with the expected time to a liquidity event, adjusting for differences in financial leverage. The peer group was selected based on the types of companies that Holdings will likely acquire.
(3) The risk-free rate equals the continuously compounded yield on zero-coupon U.S. Treasury Separate Trading of Registered Interest and Principal of Securities as of the Valuation Date for a period equal to the time from the Valuation Date until the expected liquidity event, assuming linear interpolation between terms.
(4) The fair value of the Company’s equity was estimated based on the capital contributions for the Preferred Units and Class B common units given that capital was contributed on the measurement date.
Compensation costs related to Class P Units are recognized based on the grant date fair value on a straight-line basis over the period starting on the grant date and ending on the fourth anniversary of the grant date. The Time Vesting grant vests based on satisfying a service-based condition. The Performance Vesting Grant vests based on satisfying a service-based vesting condition and a market condition. Compensation costs related to the Class P Units were insignificant for the quarter ended March 31, 2025. As of March 31, 2025, the number of non-vested units was
Compensation cost previously recognized for an award forfeited due to a failure to satisfy a service condition will be reversed by the Company in the period of the forfeiture.
15
NOTE 8. INCOME TAXES
The Company’s tax provision for the interim periods is determined using an estimate of the annual effective tax rate, adjusted for discrete items, if any, that arise during the period. Each quarter, the Company assesses its estimate of the annual effective tax rate, and if the estimated annual effective tax rate changes, the Company makes a cumulative adjustment in the period of change.
The Company’s quarterly tax provision and the estimate of the annual effective tax rate is subject to fluctuation due to several factors, including variability in pre-tax earnings, the geographic distribution of the pre-tax earnings, tax law changes, non-deductible expenses, such as stock-based compensation, and changes in the estimate of the valuation allowance.
The provision for income taxes was $
The Company had
The Company files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. The Company is not currently under examination by income tax authorities in federal, state or other jurisdictions. All tax returns will remain open for examination by the federal and state authorities for three and four years, respectively, from the date of utilization of any net operating loss or credits. Certain tax years are subject to foreign income tax examinations by tax authorities until the statute of limitations expire.
16
NOTE 9. Net loss per share
The following table sets forth the computation of basic and diluted net loss per share:
|
|
Three Months Ended |
|
|||||
|
|
March 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
|
|
($ in millions, shares in thousands, except per share data) |
|
|||||
Numerator: |
|
|
|
|
|
|
||
Net loss attributable to common stockholders |
|
$ |
( |
) |
|
$ |
( |
) |
Denominator: |
|
|
|
|
|
|
||
Weighted-average shares used in computing net loss per share, basic and diluted |
|
|
|
|
|
|
||
Net loss per share, basic and diluted |
|
$ |
( |
) |
|
$ |
( |
) |
The following outstanding shares of potentially dilutive securities were excluded from the computation of diluted net loss per share because including them would have had an anti-dilutive effect:
|
|
As of March 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
|
|
(in thousands) |
|
|||||
Common stock options outstanding |
|
|
|
|
|
|
||
Unvested restricted stock units outstanding |
|
|
|
|
|
|
||
Employee stock purchase plan |
|
|
— |
|
|
|
|
|
Total |
|
|
|
|
|
|
||
17
NOTE 10. SEGMENT INFORMATION
The Company has determined that from January 1, 2024 through the date of the Asset Sale in April 2024, it operated in
The measure of segment assets is reported on the Company’s condensed consolidated balance sheets.
The Company’s only significant measures of profit and loss are general and administrative expenses and interest and other income, net which are each separately presented on the Company’s condensed consolidated statements of operations.
Prior to the Asset Sale, China accounted for substantially all of marketplace and logistics revenue during the three months ended March 31, 2024 based on the location of the merchants’ operations. Marketplace and logistics revenue from merchants based in the United States was immaterial.
Prior to the Asset Sale, the Company believed it was relevant to disclose geographical revenue information determined by the location of the users. Following the closing of the Asset Sale, the Company no longer considers geographic revenue information by users to be relevant.
18
NOTE 11. SUBSEQUENT EVENTS
On April 16, 2025, Richard Parisi and Elizabeth LaPuma delivered notice to the board of directors (the "Board") of the Company of their resignation as directors, effective immediately, to pursue other opportunities. The Board elected to fully accelerate the vesting of all outstanding RSU awards held by Richard Parisi and Elizabeth LaPuma, consequently, the aggregate unvested
19
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition, results of operations and cash flows should be read in conjunction with (1) the unaudited condensed consolidated financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q, and (2) the audited consolidated financial statements and notes thereto and management’s discussion and analysis of financial condition and results of operations for the year ended December 31, 2024 included in our Annual Report on Form 10-K for the year ended December 31, 2024, as amended by Amendement No. 1 to Annual Report on Form 10-K/A (as amended, the "2024 Form 10-K"). Unless otherwise indicated, all results presented are prepared in a manner that complies, in all material respects, with U.S. GAAP. Additionally, unless otherwise indicated, all changes identified for the current-period results represent comparisons to results for the prior corresponding fiscal period. Our discussion and analysis may contain forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth under “Risk Factors” in Part II, Item 1A of this Quarterly Report on Form 10-Q, the Special Note Regarding Forward-Looking Statements in this Quarterly Report on Form 10-Q, and elsewhere in this Quarterly Report on Form 10-Q. All references to "we", "us", "our", or "ContextLogic" or the "Company" refer to ContextLogic Inc.
Asset Sale
On February 10, 2024, we entered into an asset purchase agreement (the “Asset Purchase Agreement”) with Qoo10 Inc., a Delaware corporation (“Qoo10 Delaware”), and, for certain specified purposes, Qoo10 Pte. Ltd., a Singapore private limited company and Qoo10 Delaware’s parent company (“Qoo10”), pursuant to which (i) we agreed to sell substantially all of our assets to Qoo10 Delaware or an affiliate designated by Qoo10 Delaware (such designated affiliate, the “Buyer”), other than (A) our net operating losses (“NOLs”) and certain other tax attributes, (B) our marketable securities and (C) certain of our cash and cash equivalents, and (ii) Qoo10 agreed to acquire those assets and assume substantially all of our liabilities as specified in the Asset Purchase Agreement (the “Asset Sale”). On April 18, 2024, the holders of a majority of the outstanding shares of our common stock voted to approve the Asset Sale. Pursuant to such vote and satisfaction of other customary closing conditions, the Asset Sale closed on April 19, 2024, and immediately following the closing of the Asset Sale, we received/retained approximately $162 million in cash, cash equivalents and marketable securities (consisting of government securities)(the "Post-Closing Cash"), as well as the NOLs and other tax attributes described herein.
Following the completion of the Asset Sale, we have exited the operation of our marketplace and logistics business and other historical operations. However, we do not currently intend to liquidate. We are actively developing processes and procedures for evaluating strategic alternatives for the use of our Post-Closing Cash and reviewing, identifying and executing those strategic opportunities for the benefit of ContextLogic and its stockholders. Those alternatives are currently expected to include using the Post-Closing Cash to fund, at least in part, the acquisition of assets or a business that will potentially allow us to utilize and derive benefits from our NOLs and certain other tax attributes.
Overview
Prior to the completion of the Asset Sale, we were an marketplace and logistics business that connected merchants and consumers from around the world. Since the Asset Sale was consummated, as we pursue strategic opportunities, our primary source of income is interest earned on our marketable securities and cash and cash equivalents. We also have retained a payment license in Europe that we still hold from two subsidiaries in the Netherlands pending approval of transfer to Qoo10 by the Dutch National Bank of certain licenses. Although our Board of Directors is evaluating various strategic alternatives regarding the use of the proceeds from the Asset Sale with a goal to maximize stockholder value, we have not yet identified any particular acquisitions or investments or committed to making any such decision by a particular date. We can provide no assurance that our Board of Directors and management will be able to attract the businesses we identify as viable for our objectives, due to competitive forces in the marketplace beyond our control, or consummate strategic transactions, including the acquisition of assets or a business, on terms and conditions that we believe will be in the best
20
interests of ContextLogic and its stockholders. The Company is not registered under the Investment Company Act of 1940, as amended (“ICA”), and is not required to register as an investment company under the ICA.
Results of Operations
The following table shows our results of operations for the periods presented. The period-to-period comparison of financial results reflects business that we no longer operate and is not indicative of future results.
|
|
Three Months Ended |
|
|||||
|
|
March 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
|
|
(in millions) |
|
|||||
Revenue |
|
$ |
— |
|
|
$ |
36 |
|
Cost of revenue |
|
|
— |
|
|
|
30 |
|
Gross profit |
|
|
— |
|
|
|
6 |
|
Operating expenses: |
|
|
|
|
|
|
||
Sales and marketing |
|
|
— |
|
|
|
15 |
|
Product development |
|
|
— |
|
|
|
22 |
|
General and administrative |
|
|
6 |
|
|
|
22 |
|
Total operating expenses |
|
|
6 |
|
|
|
59 |
|
Loss from operations |
|
|
(6 |
) |
|
|
(53 |
) |
Other income, net |
|
|
|
|
|
|
||
Interest and other income, net |
|
|
2 |
|
|
|
— |
|
Loss before provision for income taxes |
|
|
(4 |
) |
|
|
(53 |
) |
Provision for income taxes |
|
|
— |
|
|
|
6 |
|
Net loss |
|
|
(4 |
) |
|
|
(59 |
) |
Adjustment attributable to redeemable non-controlling interest (Note 6) |
|
|
(3 |
) |
|
|
— |
|
Net loss attributable to redeemable non-controlling interest (Note 6) |
|
|
— |
|
|
|
— |
|
Net loss attributable to common stockholders |
|
$ |
(7 |
) |
|
$ |
(59 |
) |
Comparison of The Three Months Ended March 31, 2025 and 2024
Since the consummation of the Asset Sale on April 19, 2024, we no longer earn operating revenue or incur related cost associated with the prior marketplace and logistics operations. We expect to incur general and administrative costs associated with evaluation of business opportunities and in the course of overseeing and curating the remaining assets.
Revenue
|
|
Three Months Ended |
|
|
|
|
|
|||||||
|
|
March 31, |
|
Change |
|
|||||||||
|
|
2025 |
|
|
2024 |
|
$ |
|
% |
|
||||
|
|
($ in millions, except percentages) |
|
|||||||||||
Core marketplace revenue |
|
$ |
— |
|
|
$ |
11 |
|
$ |
(11 |
) |
|
(100 |
)% |
ProductBoost revenue |
|
|
— |
|
|
|
3 |
|
|
(3 |
) |
|
(100 |
)% |
Marketplace revenue |
|
|
— |
|
|
|
14 |
|
|
(14 |
) |
|
(100 |
)% |
Logistics revenue |
|
|
— |
|
|
|
22 |
|
|
(22 |
) |
|
(100 |
)% |
Revenue |
|
$ |
— |
|
|
$ |
36 |
|
$ |
(36 |
) |
|
(100 |
)% |
Revenue decreased $36 million, or 100%, to zero for the three months ended March 31, 2025 as compared to $36 million for the three months ended March 31, 2024. The decrease was attributable to the consummation of the Asset Sale in the prior year. As such, the comparable period of the three months ended March 31, 2025 has none of the previous marketplace and logistics operations.
Cost of Revenue and Gross Margin
|
|
Three Months Ended |
|
|
|
|
|
|
|
|||||||
|
|
March 31, |
|
|
Change |
|
||||||||||
|
|
2025 |
|
|
2024 |
|
|
$ |
|
|
% |
|
||||
|
|
($ in millions, except percentages) |
|
|||||||||||||
Cost of revenue |
|
$ |
— |
|
|
$ |
30 |
|
|
$ |
(30 |
) |
|
|
(100 |
)% |
Gross Margin |
|
|
— |
|
|
|
17 |
% |
|
|
|
|
|
|
||
21
Cost of revenue decreased $30 million, or 100%, to zero for the three months ended March 31, 2025 as compared to $30 million for the three months ended March 31, 2024. This decrease was due to the consummation of the Asset Sale in the prior year. As such, the comparable period of the three months ended March 31, 2025 has none of the previous marketplace and logistics operations.
Sales and Marketing
|
|
Three Months Ended |
|
|
|
|
|
|
|
|||||||
|
|
March 31, |
|
|
Change |
|
||||||||||
|
|
2025 |
|
|
2024 |
|
|
$ |
|
|
% |
|
||||
|
|
($ in millions, except percentages) |
|
|||||||||||||
Sales and marketing |
|
$ |
— |
|
|
$ |
15 |
|
|
$ |
(15 |
) |
|
|
(100 |
)% |
Sales and marketing expense decreased $15 million, or 100%, to zero for the three months ended March 31, 2025, compared to $15 million for the three months ended March 31, 2024. This decrease was due to the consummation of the Asset Sale in the prior year. As such, the comparable period of the three months ended March 31, 2025 has none of the previous marketplace and logistics operations.
Product Development
|
|
Three Months Ended |
|
|
|
|
|
|
|
|||||||
|
|
March 31, |
|
|
Change |
|
||||||||||
|
|
2025 |
|
|
2024 |
|
|
$ |
|
|
% |
|
||||
|
|
($ in millions, except percentages) |
|
|||||||||||||
Product development |
|
$ |
— |
|
|
$ |
22 |
|
|
$ |
(22 |
) |
|
|
(100 |
)% |
Product development expense decreased $22 million, or 100%, to zero for the three months ended March 31, 2025, compared to $22 million for the three months ended March 31, 2024. This decrease was due to the consummation of the Asset Sale in the prior year. As such, the comparable period of the three months ended March 31, 2025 has none of the previous marketplace and logistics operations.
General and Administrative
|
|
Three Months Ended |
|
|
|
|
|
|
|
|||||||
|
|
March 31, |
|
|
Change |
|
||||||||||
|
|
2025 |
|
|
2024 |
|
|
$ |
|
|
% |
|
||||
|
|
($ in millions, except percentages) |
|
|||||||||||||
General and administrative |
|
$ |
6 |
|
|
$ |
22 |
|
|
$ |
(16 |
) |
|
|
(73 |
)% |
General and administrative expense decreased $16 million, or 73%, to $6 million for the three months ended March 31, 2025, compared to $22 million for the three months ended March 31, 2024. This decrease was primarily due to the consummation of the Asset Sale in the prior year. As such, the comparable period of the three months ended March 31, 2025 has none of the previous marketplace and logistics operations. The decrease was offset by $3 million of expenses for employees, which includes $1 million of stock based compensation; $2 million of expenses for the evaluation and pursuit of strategic alternatives; and $1 million of expenses for legal and other professional services.
Interest and Other Income, net
|
|
Three Months Ended |
|
|
|
|
|
|
|
|||||||
|
|
March 31, |
|
|
Change |
|
||||||||||
|
|
2025 |
|
|
2024 |
|
|
$ |
|
|
% |
|
||||
|
|
($ in millions, except percentages) |
|
|||||||||||||
Interest and other income, net |
|
$ |
2 |
|
|
$ |
— |
|
|
$ |
2 |
|
|
|
— |
|
Interest and other income, net increased to $2 million for the three months ended March 31, 2025 as compared to zero for the three months ended March 31, 2024. The increase was driven by the lack of foreign exchange gains or losses in 2025, which had previously offset the interest income earned in the three months ended March 31, 2024.
Since the consummation of the Asset Sale, we expect to earn interest income on marketable securities and cash and cash equivalents that remain following the Asset Sale.
22
Provision for Income Taxes
|
|
Three Months Ended |
|
|
|
|
|
|
|
|||||||
|
|
March 31, |
|
|
Change |
|
||||||||||
|
|
2025 |
|
|
2024 |
|
|
$ |
|
|
% |
|
||||
|
|
($ in millions, except percentages) |
|
|||||||||||||
Provision for income taxes |
|
$ |
— |
|
|
$ |
6 |
|
|
$ |
(6 |
) |
|
|
(100 |
)% |
Provision for income taxes for the three months ended March 31, 2025 decreased $6 million, or 100% compared to the same period in 2024. The 2024 provision was primarily related to withholding taxes accrued on certain intercompany dividends in the first quarter of fiscal 2024.
Liquidity and Capital Resources
As of March 31, 2025, we had cash and cash equivalents of $64 million, a majority of which were held in cash deposits and U.S. treasury bills, and marketable securities of $158 million, which funds were held for working capital purposes. We believe that our existing cash, cash equivalents and marketable securities will be sufficient to meet our anticipated cash needs for at least the next 12 months.
Our material cash requirements outside our normal operating costs include $3 million in total liabilities.
While we maintain our cash and short-term investments with a diverse group of large national financial institutions, there can be no assurance that any of our other deposits in excess of the Federal Deposit Insurance Corporation or other comparable insurance limits will be backstopped by the U.S. or that any bank or financial institution with which we do business will be able to obtain needed liquidity from other banks, government institutions or by acquisition in the event of a failure or liquidity crisis.
Sources of Liquidity
As of March 31, 2025, we had cash and cash equivalents of $64 million and marketable securities of $158 million (consisting of government securities).
We (i) earn interest income on cash and marketable securities; (ii) have no other sources of revenue and related costs; and (iii) incur minimal administrative costs.
Cash Flows
|
|
Three Months Ended March 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
|
|
(in millions) |
|
|||||
Net cash provided by (used in): |
|
|
|
|
|
|
||
Operating activities |
|
$ |
(5 |
) |
|
$ |
(75 |
) |
Investing activities |
|
$ |
(75 |
) |
|
$ |
90 |
|
Financing activities |
|
$ |
72 |
|
|
$ |
(1 |
) |
Net Cash Used in Operating Activities
Net cash used in our operating activities for the three months ended March 31, 2025 was $5 million. This was driven by our net loss of $4 million and $1 million unfavorable changes in our operating assets and liabilities, mainly driven by reductions in accrued liabilities.
Net cash used in our operating activities for the three months ended March 31, 2024 was $75 million. This was driven by our net loss of $59 million and $26 million unfavorable changes in our operating assets and liabilities, which was partially offset by non-cash expenses of $10 million. Unfavorable working capital movement was mainly driven by reductions in accounts payable, merchants payable and accrued and refund liabilities. Accounts payable, merchants payable, and accrued and refund liabilities decreased by $32 million primarily due to lower order volumes and reduced digital advertising expenditures.
Net Cash (Used in) Provided by Investing Activities
Net cash used in investing activities was $75 million for the three months ended March 31, 2025. This was primarily due to $158 million in purchases of marketable securities, partially offset by $83 million in maturities of marketable securities.
23
Net cash provided by investing activities was $90 million for the three months ended March 31, 2024, primarily due to maturities in marketable securities.
Net Cash Provided By (Used in) Financing Activities
Net cash provided by our financing activities was $72 million for the three months ended March 31, 2025, due to proceeds from the issuance of redeemable convertible Preferred Units.
Net cash used in our financing activities was $1 million for the three months ended March 31, 2024, due to tax payments related to employee RSU settlement.
Off Balance Sheet Arrangements
For the three months ended March 31, 2025 and March 31, 2024, we did not have any relationships with unconsolidated organizations or financial partnerships, such as structured finance or special purpose entities that would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.
Critical Accounting Policies
Besides the previously mentioned redeemable non-controlling interest, there have been no material changes to our critical accounting policies and estimates as compared to those described in our 2024 Form 10-K, filed with the SEC on March 12, 2025.
Recent Accounting Pronouncements
See Note 1 of Part I, Item 1 of this Quarterly Report on Form 10-Q for a full description of recent accounting pronouncements.
24
Item 3. Quantitative and Qualitative Disclosures About Market Risk
As a “smaller reporting company,” as defined by Item 10 of Regulation S-K, we are not required to provide this information.
25
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission (“SEC”) and to ensure that information required to be disclosed is accumulated and communicated to management, including our principal executive and financial officers, to allow timely decisions regarding required disclosure.
Our Chief Executive Officer and Chief Financial Officer, with assistance from other members of management, have evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2025, and based on their evaluation, have concluded that our disclosure controls and procedures were effective as of such date at a reasonable assurance level.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal controls over financial reporting during the quarter ended March 31, 2025, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitations on the Effectiveness of Disclosure Controls and Procedures
Our management, including our principal executive officer and principal financial officer, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. 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, 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 by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Due to inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
26
PART II—
Item 1. Legal Proceedings.
The information set forth under Note 5, Commitments and Contingencies, in the Notes to Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1, of this Quarterly Report on Form 10-Q, is incorporated herein by reference.
Item 1A. Risk Factors.
Investing in our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties set forth below, together with all of the other information contained in this Quarterly Report on Form 10-Q, including our condensed consolidated financial statements and related notes, and in our Annual Report on Form 10-K for the year ended December 31, 2024, before making a decision to invest in our common stock. Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that affect our business. These risk factors could materially and adversely affect our business, financial condition and results of operations, and the market price of our common stock could decline. These risk factors do not identify all risks that we face – our financial condition and/or operations could also be affected by factors that are not presently known to us or that we currently consider to be immaterial to our financial conditions and/or operations. Due to risks and uncertainties, known and unknown, as well as the completion of the Asset Sale on April 19, 2024, our past financial results will not be a reliable indicator of future performance and historical trends should not be unduly used to anticipate results or trends in future periods. Other than as described below, there have been no additional material changes from the risk factors previously disclosed under the heading "Risk Factors" in Part I, Item 1A of our 2024 Form 10-K.
Risks Related to the Asset Purchase Agreement
We have counterparty risk with the Buyer and its affiliates for certain ongoing obligations under the Asset Purchase Agreement and the failure of the Buyer and its affiliates to perform their obligations could cause us to suffer losses.
In connection with the Asset Sale, under the Asset Purchase Agreement, we agreed with the Buyer to transfer and assign the lease for the facility located at One Sansome Street (the “Lease”) to the Buyer and for the Buyer to assume all obligations under the Lease. The Company relinquished control of the leased facility after the Asset Sale. In order to obtain the landlord’s consent to the transfer of the Lease and effect its assignment, we agreed to maintain a letter of credit for an additional 90 days following the April 19, 2024 closing date during which time (i) the Buyer was obligated to secure a replacement security acceptable to the landlord and (ii) we and the Buyer agreed to provide the landlord with cash collateral in the amount of $7 million funded equally by the parties. As of October 31, 2024, the landlord had consented to the assignment of the Lease to the Buyer. We maintain the letter of credit for the facility, however, in March 2025, the landlord agreed to amend the Lease which lowered the letter of credit amount to $1 million and decreased the cash collateral to approximately $1 million. Until the landlord accepts a replacement security proposed by the Buyer, any event by the landlord to draw on the security will come from the maintained letter of credit. Under the Asset Purchase Agreement, the Buyer agreed to assume all obligations under the Lease since the Asset Sale.
As of March 2025, the letter of credit is expected to expire in the third quarter of 2025. If the Buyer fails to pay the rent under the Lease or comply with other obligations under the Lease, we would be responsible for the remaining obligations under the Lease. While the cash collateral held as restricted cash on our consolidated balance sheet could be utilized to satisfy obligations under the Lease should the Buyer fail to meet them, approximately one-third of the cash collateral has been funded by the Company, and if more than two-thirds of the cash collateral is used to satisfy obligations under the Lease, such funds will not be returned to the Company. While the Buyer would be responsible for such obligations under the terms of the Asset Purchase Agreement, we can provide no assurance that we would be successful in obtaining payment or reimbursement from the Buyer or Qoo10 for such losses.
Risks Related to Our Common Stock
There is no assurance that we will remain compliant with Nasdaq's listing requirements.
On March 25, 2025, we were notified by the Listing Qualifications Department (the “Staff”) of The Nasdaq Stock Market LLC (“Nasdaq”) that the Staff believes the Company is a “public shell,” as that term is defined by Nasdaq under Nasdaq Listing Rule 5101, and therefore subject to delisting unless the Company timely requests a hearing before the Nasdaq Hearings Panel (the “Panel”). The Company disagrees with the Staff’s conclusion and timely requested a hearing before the Panel, which request will stay any further action by Nasdaq at least pending the hearing and the issuance of the Panel’s formal decision thereafter. The requested hearing before the Panel was held on May 8, 2025.
At the hearing, we presented a comprehensive overview of our business and, more specifically, our efforts to maximize the value of our assets, including opportunities to invest in or acquire one or more operating businesses that provide opportunities for appreciation in value, and to request the continued listing of our securities on Nasdaq. There can be no assurance, however, that the Panel will grant our request for continued listing on Nasdaq.
27
In the event that we are unsuccessful in our appeal to maintain our listing on Nasdaq, our common stock may be delisted. Any delisting of our common stock from Nasdaq could adversely affect our ability to attract new investors, decrease the liquidity of our outstanding shares of common stock, reduce our flexibility to raise additional capital, reduce the price at which our common stock trades and increase the transaction costs inherent in trading such shares with overall negative effects for our stockholders. In addition, delisting of our common stock could deter broker-dealers from making a market in or otherwise seeking or generating interest in our common stock, and might deter certain institutions and persons from investing in our securities at all. For these reasons and others, delisting could adversely affect the price of our common stock and our business, financial condition and results of operations.
28
Item 6. Exhibits.
Exhibit Number |
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Description |
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||
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||
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||
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||
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|
31.1* |
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|
|
31.2* |
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|
|
|
32.1** |
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|
|
32.2** |
|
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|
|
101.INS* |
|
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. |
101.SCH* |
|
Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents |
104* |
|
Cover Page Interactive Data File (embedded within the Inline XBRL document) |
* Filed herewith.
** Furnished herewith.
# Indicates management contract or compensatory plan.
29
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.
|
|
ContextLogic Inc. |
|
|
|
|
|
Date: May 9, 2025 |
|
By: |
/s/ Rishi Bajaj |
|
|
|
Rishi Bajaj |
|
|
|
Chief Executive Officer |
|
|
|
(Principal Executive Officer)
|
|
|
By: |
/s/ Brett Just |
|
|
|
Brett Just |
|
|
|
Chief Financial Officer |
|
|
|
(Principal Financial Officer) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30