Table of Contents

 

U.S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

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

 

For the quarterly period ended: March 31, 2021

 

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: 000-52898

 

Kisses From Italy Inc.

(Exact name of registrant as specified in its charter)

 

Florida   46-2388377
(State or other jurisdiction of incorporation)   (I.R.S. Employer Identification No.)

 

80 SW 8th Street

Suite 2000

Miami, Florida 33130

(Address of principal executive offices)

 

(305) 423-7129

(Registrant’s telephone number, including area code)

 

____________________________________________________________

Former name, former address and former fiscal year, if changed since last report)

 

Securities registered pursuant to Section 12(b) of the Act: None

 

Title of each class Trading Symbol(s) Name of each exchange on which registered
Not applicable Not applicable Not applicable

 

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: Yes ☒    No ☐

 

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒    No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

  Large accelerated filer  ☐ Accelerated filer  ☐
  Non-accelerated filer  ☒ Smaller reporting company  ☒
    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   ☒ No

 

As of May 17, 2021, there were 167,882,335 shares of the registrant's common stock outstanding.

 

 

     

 

 

TABLE OF CONTENTS

 

        Page No.
PART I
FINANCIAL INFORMATION
           
Item 1.   Financial Statements     4
Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations     17
Item 3.   Quantitative and Qualitative Disclosures About Market Risk     21
Item 4.   Controls and Procedures     21
           
PART II
OTHER INFORMATION
           
Item 1.   Legal Proceedings     23
Item 1A.   Risk Factors     23
Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds     23
Item 3.   Defaults Upon Senior Securities     23
Item 4.   Mine Safety Disclosures     23
Item 5.   Other Information     23
Item 6.   Exhibits     24
      Signatures     25

 

 

 

 

 

 

 

 

 

  2  

 

 

CAUTIONARY STATEMENT ON FORWARD-LOOKING INFORMATION

 

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based upon our current assumptions, expectations, and beliefs concerning future developments and their potential effect on our business. In some cases, you can identify forward-looking statements by the following words: “may,” “will,” “could,” “would,” “should,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “approximately,” “estimate,” “predict,” “project,” “potential,” “continue,” “ongoing,” or the negative of these terms or other comparable terminology, although the absence of these words does not necessarily mean that a statement is not forward-looking. This information may involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from the future results, performance or achievements expressed or implied by any forward-looking statements.

 

Factors that may cause or contribute actual results to differ from these forward-looking statements include, but are not limited to, for example:

 

  · adverse economic conditions;

 

  · the Company’s ability to raise capital to fund its operations;

 

  · industry competition;

 

  · the inability to attract and retain qualified senior management;

 

  · other risks and uncertainties related to the restaurant industry and our business strategy; and

 

  · the impact of the Covid-19 pandemic on our operations and franchise expansion.

  

All forward-looking statements speak only as of the date of this Report. Except to the extent required by law, we undertake no obligation to update any forward-looking statements or other information contained herein. You should not place undue reliance on these forward-looking statements. Although we believe that our plans, intentions, and expectations reflected in or suggested by the forward-looking statements in this Report are reasonable, we cannot assure you that these plans, intentions or expectations will be achieved.

 

 

 

 

 

 

 

 

  3  

 

 

PART I – FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

Kisses From Italy Inc.

Consolidated Balance Sheets

(Unaudited)

 

 

    March 31,     December 31,  
    2021     2020  
             
ASSETS                
Current assets:                
Cash and cash equivalents   $ 54,447     $ 37,336  
Accounts receivable     10,037       5,761  
Other receivable     4,839       4,839  
Inventory     4,336       4,051  
Total current assets     73,659       51,987  
Property and equipment, net     7,374       8,480  
Other Assets     1,092       2,635  
Total assets   $ 82,125     $ 63,102  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY                
Current liabilities:                
Accounts payable     58,495       64,762  
Accrued liabilities     149,487       148,519  
Total current liabilities     207,982       213,281  
Notes payable     12,171       12,171  
Convertible Notes     10,000       10,000  
Total liabilities     230,153       235,451  
                 
Commitments and contingencies            
                 
Stockholders' Equity:                
Preferred stock, Series A $0.001 par value. 1,500,000 shares authorized; no shares issued and outstanding            
Preferred stock, Series B $0.001 par value. 5,000,000 shares authorized; no shares issued and outstanding            
Preferred stock, Series C, $0.001 par value 1,000,000 shares authorized; 79,610 shares and 79,610 shares issued and outstanding as of March 31, 2021 and December 31 2020, respectively     80       80  
Common stock, $0.001 par value, 200,000,000 shares authorized; and 157,782,335 and 154,832,335 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively     157,782       154,832  
Additional paid-in capital     9,054,733       8,612,683  
Retained earnings deficit     (9,338,754 )     (8,916,893 )
Total Kisses From Italy Stockholders' Equity (Deficit)     (126,159 )     (149,298 )
Non-controlling interest     (21,869 )     (23,052 )
Total stockholders' equity     (148,028 )     (172,350 )
Total liabilities and equity   $ 82,125     $ 63,101  

 

The accompanying notes are an integral part of the consolidated financial statements.

 

 

 

  4  

 

 

Kisses From Italy Inc.

Consolidated Statements of Operations

(Unaudited)

 

 

    Three Months     Three Months  
    Ended     Ended  
    March 31,     March 31,  
    2021     2020  
             
Food sales   $ 114,679     $ 109,746  
Cost of goods sold     52,668       43,974  
Gross margin     62,011       65,771  
Operating expenses:                
Depreciation and amortization     3,016       12,951  
Executive compensation           9,994  
Stock based compensation     300,000       36,301  
Payroll and other expenses     50,755       47,018  
Rent     28,106       29,689  
Consulting and professional fees     63,752       29,830  
General and administrative     34,965       43,257  
Total operating expenses     480,594       209,040  
Income (loss) from operations     (418,583 )     (143,268 )
Other income (expense)                
Interest income (expense), net     (2,096 )     (354,633 )
Total other income (expense)     (2,096 )     (354,633 )
Income (loss) before income taxes     (420,679 )     (497,901 )
Provision for income taxes (benefit)            
Net loss     (420,679 )     (497,901 )
Less: net gain (loss) attributable to non-controlling interests     1,183       2,004  
Net loss attributable to Kisses From Italy, Inc.   $ (421,862 )   $ (499,905 )
                 
Basic and diluted earnings (loss) per common share   $ (0.00 )   $ (0.00 )
                 
Weighted-average number of common shares outstanding:                
Basic and diluted     157,381,779       127,092,335  

 

The accompanying notes are an integral part of the consolidated financial statements.

 

 

 

 

  5  

 

 

Kisses From Italy Inc.

Consolidated Statements of Cash Flows

               

 

    Three months     Three months  
    Ended     Ended  
    March 31,     March 31,  
    2021     2020  
             
Cash flows from operating activities of continuing operations:                
Net income   $ (421,862 )   $ (499,905 )
Net income loss attributable to non-controlling interest     1,183       2,004  
Adjustments to reconcile net loss to cash used in operating activities:                
Depreciation and amortization     3,016       12,951  
Amortization of debt discount           351,920  
Stock-based compensation for services     300,000       36,301  
Changes in operating assets and liabilities:                
Other assets     1,544       29  
Account receivable     (4,276 )      
Inventory     (285 )      
Accounts payable     (6,267 )     1,985  
Accrued liabilities     968       15,440  
Net cash provided by (used in) operating activities     (125,979 )     (79,275 )
                 
Cash flows from investing activities:                
Purchase of fixed assets     (1,910 )      
Net cash provided by (used in) financing activities     (1,910 )      
                 
Cash flows from financing activities:                
Proceeds/payments from short term borrowings-net           (6,000 )
Proceeds from the sale of common stock     145,000        
Proceeds from the sale of preferred stock           66,490  
Net cash provided by (used in) financing activities     145,000       60,490  
                 
Impact of foreign exchange           587  
Net increase (decrease) in cash and cash equivalents     17,111       (18,785 )
Cash and cash equivalents at beginning of period     37,336       26,841  
Cash and cash equivalents at end of period   $ 54,447     $ 8,643  
                 
Supplemental disclosure of cash flow information:                
Cash paid for interest   $     $  
Cash paid for income taxes   $     $  

 

The accompanying notes are an integral part of the consolidated financial statements.

 

 

 

 

  6  

 

 

Kisses from Italy

Consolidated Statements of Changes in Stockholders' Equity

(Unaudited)

                                               

 

    Preferred Stock     Preferred Stock     Preferred Stock  
    Series A     Series B     Series C  
    Shares     Value     Shares     Value     Shares     Value  
Balance, December 31, 2019         $           $       50,000     $ 50.00  
                                                 
Net income (loss)                                    
                                                 
Non-controlling interest, net income (loss)                                    
                                                 
Issuance of Series C Preferred Stock                                   66  
                                                 
Beneficial conversion feature of convertible notes                                    
                                                 
Stock issued for services                                    
                                                 
Balance, March 31, 2020         $           $       50,000     $ 116.00  
                                                 
Balance, December 31, 2020         $           $       79,610     $ 80  
                                                 
Net income (loss)                                    
                                                 
Non-controlling interest, net income (loss)                                    
                                                 
Issuance of common stock for services                                    
                                                 
Issuance of common stock in private placement                                    
                                                 
Balance, March 31, 2021         $           $       79,610     $ 80  

 

                Additional     Non-           Total  
    Common Stock     Paid-in     controlling     Retained     Stockholders'  
    Shares     Value     Capital     Interest     Earnings     Equity  
Balance, December 31, 2019     126,550,535     $ 126,550     $ 4,945,109     $ 6,068     $ (5,207,491 )   $ (129,714 )
                                                 
Net income (loss)                             (499,905 )     (499,905 )
                                                 
Non-controlling interest, net income (loss)                       2,004             2,004  
                                                 
Issuance of Series C Preferred Stock                 66,424                   66,490  
                                                 
Beneficial conversion feature of convertible notes                 351,920                   55,669  
                                                 
Stock issued for services     541,800     $ 542       35,759                    
                                                 
Balance, March 31, 2020     127,092,335     $ 127,092     $ 5,399,212     $ 8,072     $ (5,707,396 )   $ (172,905 )
                                                 
Balance, December 31, 2020     154,832,335     $ 154,832     $ 8,612,683     $ (23,052 )   $ (8,916,893 )   $ (172,350 )
                                                 
Net income (loss)                             (421,862 )     (421,862 )
                                                 
Non-controlling interest, net income (loss)                       1,183             1,183  
                                                 
Issuance of common stock for services     1,500,000       1,500       298,500                   300,000  
                                                 
Issuance of common stock in private placement     1,450,000       1,450       143,550                   145,000  
                                                 
Balance, March 31, 2021     157,782,335     $ 157,782     $ 9,054,733     $ (21,869 )   $ (9,338,754 )   $ (148,028 )

 

The accompanying notes are an integral part of the consolidated financial statements.

 

 

  7  

 

 

Kisses From Italy Inc.

Notes to Unaudited Consolidated Financial Statements

For the Three Months Ended March 31, 2021, and 2020

 

 

NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS

 

Kisses From Italy Inc. (the “Company”) was incorporated in Florida on March 7, 2013. The Company’s main focus is to develop a fast, casual food dining chain restaurant business of corporate-owned restaurants and expanding through a nationwide/international franchise and territory sales program. The Company commenced operations in May 2015 by opening its first location in Fort Lauderdale, Florida. Three additional restaurants, which are located in various Wyndham Hotel properties in the Pompano Beach, Florida area, were then opened within the following ten months. All locations, which are in leased facilities, were fully operational by April 2016. In December 2017, the Company vacated one of its restaurants due to a hurricane and did not re-open that location in 2019. The Company opened its inaugural European location in Ceglie del Campo, Bari, Italy, in October 2019. Such location will serve as the distribution center for products for European locations. The Bari location was closed in the fourth quarter of 2020 and currently remains closed as of the date of this Report due to Covid-19.

 

In September 2019, the Company's common stock was approved for trading by FINRA and in mid-October 2019 was approved for up-listing by the OTC Markets Group to the OTCQB under the symbol KITL.

 

The Company’s accounting year-end is December 31.

 

COVID-19

 

On March 11, 2020, the World Health Organization declared the Covid-19 outbreak to be a global pandemic. In addition to the devastating effects on human life, the pandemic is having a negative ripple effect on the global economy, leading to disruptions and volatility in the global financial markets. Most US states and many countries have issued policies intended to stop or slow the further spread of the disease.

 

Covid-19 and the U.S’s response to the pandemic are significantly affecting the economy. There are no comparable events that provide guidance as to the effect the Covid-19 pandemic may have, and, as a result, the ultimate effect of the pandemic is highly uncertain and subject to change. We do not yet know the full extent of the effects on the economy, the markets we serve, our business, or our operations. If our restaurants are required to be closed or only allowed to operate at less than full capacity, we will continue to incur certain fixed expenses such as rent payments currently of approximately $10,000 per month.

 

All of the Company’s four corporate-owned restaurants which are located in Fort Lauderdale, Florida, Bari, Italy, and within the Wyndham Palm Aire and the Wyndham Sea Gardens Hotels and Resorts in Pompano Beach, Florida, have fully re-opened subject to recommended social distancing guidelines. The Company’s hotel locations were closed longer than other sites due to CDC recommendations.  The Company’s flagship Fort Lauderdale restaurant re-opened on May 1, 2020, its Bari, Italy location re-opened on June 20, 2020, The Wyndham Palm Aire location re-opened on July 11, 2020, and the Wyndham Sea Gardens location re-opened on July 22, 2020.

 

Except for our Bari location, our US locations are now open and are operating at near pre-Covid revenue levels. There can be no assurances that we will be allowed to remain open at full capacity or that we can maintain current sales levels.

 

 

 

 

  8  

 

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

  

Management’s Representation of Interim Financial Statements

 

The accompanying unaudited consolidated financial statements have been prepared by the Company without audit pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been condensed or omitted as allowed by such rules and regulations, and management believes that the disclosures are adequate to make the information presented not misleading. These consolidated financial statements include all of the adjustments, which in the opinion of management are necessary to a fair presentation of financial position and results of operations. All such adjustments are of a normal and recurring nature. Interim results are not necessarily indicative of results for a full year. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements at and as of December 31, 2020, filed as part of the Company’s Annual Report on Form 10-K with the SEC on April 15, 2021.

 

Basis of Presentation and Principles of Consolidation

 

The consolidated financial statements of the Company have been prepared in accordance with GAAP. This basis of accounting involves the application of accrual accounting and consequently, revenues and gains are recognized when earned, and expenses and losses or recognized when incurred. The consolidated financials include the accounts of the Company and its wholly-owned subsidiaries; Kisses from Italy 9th LLC, Kisses from Italy-Franchising LLC, and Kisses from Italy Bari, Italy and its 70% owned subsidiary, Kisses-Palm Sea Royal LLC.

 

All intercompany accounts and transactions are eliminated in consolidation.

 

Going Concern

 

The accompanying unaudited consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business for the twelve months following the date of these financial statements. On a consolidated basis, the Company has incurred significant operating losses since inception.

 

Because the Company does not expect that existing operational cash flow will be sufficient to fund presently anticipated operations, this raises substantial doubt about the Company’s ability to continue as a going concern. Therefore, the Company will need to raise additional funds and is currently exploring alternative sources of financing. Historically, the Company has raised capital through private placements of equity and convertible debt as interim measures to finance working capital needs and may continue its efforts to raise additional capital through the sale of common stock or other securities and obtain short-term loans. The Company will be required to continue to do so until its consolidated operations become profitable. Also, the Company has, in the past, paid for consulting services with its common stock to maximize working capital, and intends to continue this practice where feasible.

 

Use of Estimates

 

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of liabilities and 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. The most significant estimates relate to revenue recognition, valuation of accounts receivable and the allowance for doubtful accounts, inventories, purchase price allocation of acquired businesses, impairment of long-lived assets and goodwill, valuation of financial instruments, income taxes, and contingencies. The Company bases its estimates on historical experience, known or expected trends and various other assumptions that are believed to be reasonable given the quality of information available as of the date of these financial statements. The results of these assumptions provide the basis for making estimates about the carrying amounts of assets and liabilities that are not readily apparent from other sources. Actual results could differ from these estimates.  

 

 

 

 

  9  

 

 

Accounts Receivable and Allowance for Doubtful Accounts

 

Accounts receivable are recorded at the net value of face amount less any allowance for doubtful accounts. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in its existing accounts receivable. The Company reviews the allowance for doubtful accounts on a regular basis, and all past due balances are reviewed individually for collectability. Account balances are charged against the allowance when placed for collection. Recoveries of receivables previously written off are recorded when received. Interest is not charged on past due accounts. These receivables are related to the sale of our private label branded products sold in retail and grocery stores in Canada.

 

As of March 31, 2021, and December 31, 2020, our trade receivable amounted to $10,037 and $5,761, respectively, with an allowance for doubtful accounts of $-0- for both periods.

 

Foreign Currency Translation

 

The functional and reporting currency of the Company’s Bari location in Italy is the Euro. Management has adopted ASC 830 “Foreign Currency Matters” for transactions that occur in foreign currencies. Monetary assets denominated in foreign currencies are translated using the exchange rate prevailing at the balance sheet date. Average monthly rates are used to translate revenues and expenses. To date, this difference has been immaterial for the Bari location.

  

Transactions denominated in currencies other than the functional currency, such as the Company’s current retails sales in Canada for Kisses From Italy branded products, are translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Exchange gains or losses arising from foreign currency transactions are included in the determination of net income for the respective periods.

 

Assets and liabilities of the Company’s operations are translated into the reporting currency, United States dollars, at the exchange rate in effect at the balance sheet dates. Revenue and expenses are translated at average rates in effect during the reporting periods. Equity transactions are recorded at the historical rate when the transaction occurred.

 

For the five-month period ended March 31, 2021 when the Company began the branded retail products operations initiative in Canada, the difference in the exchange rate and the average monthly rate was not material.

 

Revenue Recognition

 

Sales, as presented in the Company’s consolidated statement of earnings, represents food and beverage product sold and is presented net of discounts, coupons, employee meals and complimentary meals. Revenue from restaurant sales is recognized when food and beverage products are sold.

 

On January 1, 2018, the Company adopted Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”), using the modified retrospective method applied to those contracts which were not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under ASC 606, while prior period amounts are not adjusted and continue to be reported in accordance with the Company’s historic accounting under ASC 605. As of and for the periods ended March 31, 2021 and December 31, 2020, respectively, the consolidated financial statements were not materially impacted as a result of the application of Topic 606 compared to Topic 605.

 

Non-controlling interest

 

Non-controlling interest represents third-party ownership in the net assets of one of our consolidated subsidiaries. For financial reporting purposes, the assets and liabilities of our majority-owned subsidiary consolidated with those of the Company’s wholly-owned subsidiaries, with any third-party investor’s interest shown as non-controlling interest.

 

 

 

 

  10  

 

 

Cash and Cash Equivalents

 

The Company considers all highly liquid temporary cash investments with an original maturity of three months or less to be cash equivalents. On March 31, 2021 and December 31, 2020, the Company cash equivalents totaled $54,447 and $37,336, respectively.

 

Property and equipment

 

Depreciation is computed by the straight-line method and is charged to operations over the estimated useful lives of the assets. Maintenance and repairs are charged to expense as incurred. The carrying amount and accumulated depreciation of assets sold or retired are removed from the accounts in the year of disposal and any resulting gain or loss is included in results of operations. The estimated useful lives of property and equipment are as follows:

 

Computers, software, and office equipment 1 – 6 years
Machinery and equipment 3 – 5 years
Leasehold improvements Lesser of lease term or estimated useful life

  

Income taxes

 

The Company accounts for income taxes under FASB ASC 740, “Accounting for Income Taxes”. Under FASB ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under FASB ASC 740, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. FASB ASC 740-10-05, “Accounting for Uncertainty in Income Taxes” prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities.

 

The amount recognized is measured as the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. The Company assesses the validity of its conclusions regarding uncertain tax positions on a quarterly basis to determine if facts or circumstances have arisen that might cause it to change its judgment regarding the likelihood of a tax position’s sustainability under audit.

 

On Dec. 18, 2019, the Financial Accounting Standards Board (FASB) released Accounting Standards Update (ASU) 2019-12, which affects general principles within Topic 740, Income Taxes. The amendments of ASU 2019-12 are meant to simplify and reduce the cost of accounting for income taxes. The FASB has stated that the ASU is being issued as part of its Simplification Initiative, which is meant to reduce complexity in accounting standards by improving certain areas of generally accepted accounting principles (GAAP) without compromising information provided to users of financial statements. The Company adopted this guidance on January 1, 2021 which had no impact on the Company’s financial statements.

 

Stock-based Compensation

 

The Company accounts for stock-based compensation using the fair value method following the guidance set forth in Section 718-10 of the FASB Accounting Standards Codification for disclosure about Stock-Based Compensation. This section requires a public entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). That cost will be recognized over the period during which an employee is required to provide service in exchange for the award- the requisite service period (usually the vesting period). No compensation cost is recognized for equity instruments for which employees do not render the requisite service.

 

Leases

 

The Company currently follows the guidance in ASC 840 “Leases,” which requires us to evaluate the lease agreements the Company enters into to determine whether they represent operating or capital leases at the inception of the lease.

 

 

 

 

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In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which establishes a new lease accounting model for lessees. The updated guidance requires an entity to recognize assets and liabilities arising from financing and operating leases, along with additional qualitative and quantitative disclosures. The amended guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018, with early adoption permitted. In March 2019, the FASB issued ASU 2019-01, Codification Improvements, which clarifies certain aspects of the new lease standard. The FASB issued ASU 2018-10, Codification Improvements to Topic 842, Leases in July 2018. Also in 2018, the FASB issued ASU 2018-11, Leases (Topic 842) Targeted Improvements, which provides an optional transition method whereby the new lease standard is applied at the adoption date and recognized as an adjustment to retained earnings. The amendments have the same effective date and transition requirements as the new lease standard On November 15, 2019, the FASB has issued ASU 2019-10, which amends the effective dates for three major accounting standards. The ASU defers the effective dates for the credit losses, derivatives, and lease standards for certain companies. Since the Company is classified as a small reporting company and has a calendar-year end companies the Company eligible for deferring the adoption of ASC 842 to December 15, 2021.

 

ASC 842 will be effective for the Company beginning on December 15, 2021. While we continue to evaluate the impact of the new standard, we expect the adoption of this guidance will have not have any impact on our financial statements.

 

Valued Added Tax (“VAT”)

 

The VAT is a broadly-based consumption tax which is assessed to the value that is added to goods and services. The Value Added Tax (“VAT”), applies to nearly all goods and services that are bought and sold within the European Union. In Italy where the Company operates, the VAT tax ranges between 4 and 10% for food products and alcohol. As of March 31, 2021 and December 31, 2020 the Company had a VAT net receivable from its Bari location amounting to $4,839.

 

Canadian Government and Provincial Sales Tax (“G.S.T.” and “P.S.T.”)

 

The Company does not collect any Canadian G.S.T. (Government Sales Tax) and P.S.T. (Provincial Sales Tax) as the Company acts as product distributor and not as a final sales retailer.

 

Inventory

 

The inventory is comprised of alcoholic beverages at our new Bari location in Italy which opened in 2019 and inventory for retail sales held in Canada. Our US locations do not have liquor licenses. The balance of inventory on March 31, 2021 and December 31, 2020 was $4,336 and $4,051, respectively.

 

Net Loss per Share

 

Net loss per common share is computed by dividing net loss by the weighted average common shares outstanding during the period as defined by Financial Accounting Standards, ASC Topic 260, "Earnings per Share." Basic earnings per common share (“EPS”) calculations are determined by dividing net income by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per common share calculations are determined by dividing net income by the weighted average number of common shares and dilutive common share equivalents outstanding.

 

Recent Accounting Pronouncements

 

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which establishes a new lease accounting model for lessees. The updated guidance requires an entity to recognize assets and liabilities arising from financing and operating leases, along with additional qualitative and quantitative disclosures. The amended guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018, with early adoption permitted. In March 2019, the FASB issued ASU 2019-01, Codification Improvements, which clarifies certain aspects of the new lease standard. The FASB issued ASU 2018-10, Codification Improvements to Topic 842, Leases in July 2018. Also in 2018, the FASB issued ASU 2018-11, Leases (Topic 842) Targeted Improvements, which provides an optional transition method whereby the new lease standard is applied at the adoption date and recognized as an adjustment to retained earnings. The amendments have the same effective date and transition requirements as the new lease standard. On November 15, 2019, the FASB has issued ASU 2019-10, which amends the effective dates for three major accounting standards. The ASU defers the effective dates for the credit losses, derivatives, and leases standards for certain companies. Since the Company is classified as a small reporting company and has a calendar-year end companies the Company eligible for deferring the adoption of ASC 842 to December 15, 2021.

 

On December 18, 2019, the Financial Accounting Standards Board (FASB) released Accounting Standards Update (ASU) 2019-12, which affects general principles within Topic 740, Income Taxes. The amendments of ASU 2019-12 are meant to simplify and reduce the cost of accounting for income taxes. The FASB has stated that the ASU is being issued as part of its Simplification Initiative, which is meant to reduce complexity in accounting standards by improving certain areas of generally accepted accounting principles (GAAP) without compromising information provided to users of financial statements. The Company adopted this guidance on January 1, 2021 which had no impact on the Company’s financial statements.

 

 

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While we continue to evaluate the impact of the new standard, we expect the adoption of this guidance will have not have any impact on our financial statements.

 

NOTE 3 – GOING CONCERN AND LIQUIDITY

 

As of March 31, 2021, and December 31, 2020, the Company had $54,447 and $37,336 in cash on hand, respectively, and for the three-month periods ended March 31, 2021, and 2020, the Company generated revenues of $114,679 and $109,746 and had losses of $420,679 and $497,901, respectively. As of March 31, 2021, the Company had a working capital deficiency of $134,323 and an accumulated deficit of $9,338,754.

 

The reports of the Company’s independent registered public accounting firm in the Company’s financial statements for the years ended December 31, 2020, and 2019, include an explanatory paragraph that describes substantial doubt about the Company’s ability to continue as a going concern. These financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business.

 

It is the Company’s current intention to raise debt and/or equity financing to fund ongoing operating expenses. The Company believes it will be successful in raising sufficient capital to operate for the next 12 months, however, there is no assurance that financing, whether debt or equity, will be available to the Company, satisfactorily completed or on terms favorable to the Company. Any issuance of equity securities, if accomplished, could cause substantial dilution to existing stockholders and any debt financing may contain covenants limiting certain corporate actions. Any failure by the Company to successfully raise additional financing would have a material adverse effect on its business, including the possible inability to continue operations.

 

NOTE 4 – PROPERTY AND EQUIPMENT

 

As of March 31, 2021 and December 31, 2020 the Company had $7,374 and $8,480 in property and equipment, all located at its Bari location in Italy. As of March 31, 2021 all property and equipment and leaseholds at its US locations had been fully depreciated. 

 

NOTE 5 – ACCRUED AND OTHER LIABILITIES

 

The following table sets forth the components of the Company’s accrued liabilities on March 31, 2021 and December 31, 2020.

 

    March 31,
2021
    December 31,
2020
 
Sales tax payable   $ 2,058     $ 3,804  
Accrued interest payable     2,714       2,067  
Payroll tax liabilities     144,715       142,648  
Total accrued liabilities   $ 149,487     $ 148,519  

 

The Company is in arrears on its payroll tax payments as of March 31, 2021. Included in the “payroll tax liabilities” as of March 31, 2021, is approximately $32,389 in interest and penalties.

 

NOTE 6 – PROMISSORY NOTES PAYABLE

 

As of March 31, 2021 and December 31, 2020 we had two unsecured 8% notes payable amounting to $12,171 that mature in June 2023.

 

 

 

 

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NOTE 7 – CONVERTIBLE NOTES

 

As of March 31, 2021 and December 31, 2020, the outstanding principal balance of convertible notes was $10,000.

 

NOTE 8 – STOCKHOLDERS EQUITY

 

Common Stock

 

The Company has authorized 200,000,000 shares of Common Stock. On March 31, 2021 and December 31, 2020, there were 157,782,335 and 154,832,335 shares of common stock issued and outstanding, respectively, with a $0.001 par value. During the three months ended March 31, 2021, the Company issued 1,500,000 shares of common stock to an investor relations firm. These shares were valued at $300,000. Additionally during this period the Company raised $145,000 from the sale of 1,450,000 shares of common stock to three accredited investors.

 

Preferred Stock

 

On December 19, 2019, the Company filed a Certificate of Designation with the State of Florida to set up three categories of preferred stock: Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock (the “Certificate of Designation”). The Certificate of Designation designated 1,500,000 shares of the Company’s authorized preferred stock as Series A Preferred Stock (“Series A Stock”), 5,000,000 shares as Series B Preferred Stock (“Series B Stock”) and 1,000,000 shares as Series C Preferred Stock (“Series C Stock”).

 

A summary of the material provisions of the Certificate of Designation governing the Series A Stock, the Series B Stock and the Series C Stock is as follows:

 

Series A Stock

 

The Series A Stock is not convertible. Each share of Series A Stock shall entitle the holder to three hundred (300) votes for each share of Series A Stock. Any amendment to the Certificate of Designation requires the consent of the holders of at least two-thirds of the shares of Series A Stock then outstanding. The holders of Series A Stock are not entitled to dividends until and unless determined by the Board of Directors of the Company.

 

Liquidation Preference

 

No distribution shall be made to holders of shares of capital stock ranking junior to the Series A Preferred Stock upon liquidation, dissolution or winding-up of the Company. The Series A Stock ranks pari passu with the Series C Stock.

 

There were no shares of Series A Stock outstanding as of March 31, 2021 and March 31, 2020.

 

Series B Stock

 

The Series B Stock is convertible at any time by the holder into the number of shares of common stock of the Company based on two times the price paid by the holder paid for the shares. The Board has the authorization to establish a minimum price for the price the Series B Stock (so that if the market price of the common stock of the Company drops below the issuance price, the conversion rate will then be based on the minimum price established by the Board and not the price paid for the shares). The holders of the Series B Stock shall not be entitled to voting rights except as otherwise provided for in the law. The holders of Series B Stock are not entitled to dividends until and unless determined by the Board.

 

 

 

 

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Liquidation Preference

 

The holders of Series B Stock shall not be entitled to any distributions upon a liquidation of the Company.

 

Restrictions of Transferability

 

The shares of the Series B Stock shall not, directly, or indirectly, be sold, hypothecated, transferred, assigned, or disposed of in any manner without the prior written consent of the Board and applicable securities laws.

 

There were no shares of Series B Stock outstanding as of March 31, 2021.

 

Series C Stock

 

The Series C Stock is convertible at any time by the holder into the number of shares of common stock of the Company on the basis of three times the price paid for the shares. The Board has established a minimum conversion price of $0.10 per share. The holders of the Series C Stock shall not be entitled to voting rights except as otherwise provided for in the law. The holders of Series C Stock are not entitled to dividends until and unless determined by the Board.

 

Liquidation Preference

 

Upon any liquidation of the Company, the holders of Series C Stock shall be entitled to the amount paid for the shares of Series C Stock prior to the holders of shares ranking junior to the Series C Stock. Upon the holders of the Series C Stock and any series of stock ranking pari passu with the Series C Stock having received distributions to which they are entitled, the remaining assets of the Company shall be distributed to the other holders pro rata in proportion to the shares held by each holder.

 

Restrictions of Transferability

 

The shares of the Series C Preferred Stock shall not, directly, or indirectly, be sold, hypothecated, transferred, assigned, or disposed of in any manner without the prior written consent of the Board and applicable securities laws.

 

As of March 31, 2021 and December 31, 2020 there were 79,610 shares and 79,610 shares of Series C Preferred outstanding, respectively, which were purchased at a price of $1.00 per share.

 

NOTE 9 – COMMITMENTS AND CONTINGENCIES

 

As of March 31, 2021, and December 31, 2020, the Company had four operating restaurants. The Company leases these spaces based upon the following schedules:

 

  · Kisses From Italy 9th LLC based in Fort Lauderdale, Florida leases approximately 990 square feet for $3,273.00 per month through the period ended July 31, 2018. Beginning on August 1, 2018, the rent increased to $5,773 per month for eight months, and then was reduced to $3,274 per month. The lease expired on December 9, 2020 and was renewed for an additional one-year term.

 

  · Kisses From Italy-Palm Aire based in Pompano Beach, Florida leases approximately 2,300 square feet for $3,933.00 per month. The Company has a one-year automatic renewal provision for this lease on May 1st of each year under the same terms.

 

 

 

 

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  · Kisses From Italy – Sea Gardens based in Pompano Beach, Florida leases approximately 600 square feet for $578.06 per month. The lease ended on August 1, 2018, and was renewed on the same terms. The Company has a one-year optional automatic renewal provision for this lease.

 

  · Kisses From Italy – based in Bari, Italy, leases approximately 2,200 square feet of space for 1,400 euros per month under the terms of a six-year lease which ends on May 5, 2024 and has an optional automatic renewal provision for six years.

 

During the three months ended March 31, 2021, the Bari location received approximately $2,700 in Covid rent subsidies from the government of Italy.

 

The Company also rents furnished office space on a month-to-month basis in Miami, Florida for $223 per month which serves as its principal executive offices. The Company will remain responsible for rent payments for its restaurant space even if its restaurants are required to close or are permitted to open at limited occupancy, due to the continuing Covid-19 outbreak.

 

NOTE 10 – SUBSEQUENT EVENTS

 

In accordance with FASB ASC 855-10, Subsequent Events, the Company has analyzed its operations subsequent to March 31,2021 to the date these consolidated financial statements were issued, and has determined that the following material events occurred:

 

On April 22, 2021, the Company’s wholly-owned subsidiary, Kisses from Italy-Franchising, LLC (“Franchisor”), entered into a consulting agreement (the “Consulting Agreement”) with Fransmart, LLC, a Delaware limited liability company (“Fransmart”), effective as of April 16, 2021, pursuant to which the Franchisor engaged Fransmart as its exclusive global franchise developer and representative for a period of ten years.

 

In consideration for its services under the Consulting Agreement, Fransmart is entitled to receive certain fees, royalties, and commissions expressly contingent upon Fransmart achieving certain agreed upon milestones on behalf of the Company. In addition, Fransmart was granted a stock option to purchase 16,000,000 shares of the Company’s common stock, exercisable by Fransmart on a cashless basis.

 

Fransmart is entitled to terminate the Agreement in the event of a default by Franchisor of its obligations under the Agreement, if not cured within thirty days of written notice. In the event of early termination due to Franchisor’s default, in addition to all other amounts due and payable to Fransmart as of the date of termination, Franchisor shall pay Fransmart an amount equal to the trailing twelve months commissionable revenue generated by franchising, as described in the Consulting Agreement, multiplied by the number of years remaining of the term of the Consulting Agreement. If Fransmart is in default of its obligations under the Consulting Agreement, Franchisor may terminate the Consulting Agreement if such default is not cured within forty-five days after receipt of a written notice of default. Franchisor also has the right, after the beginning of the sixth year of the term of the Consulting Agreement, upon written notice to Fransmart, to terminate this Agreement by paying Fransmart, in one lump sum, unless otherwise approved by Fransmart, an early termination fee of $4,000,000, if the sales of qualified franchise units to date are under 110% of the performance requirements; $6,000,000 if the sales are between 111% and 200% of the performance requirements; and $8,000,000 if the sales are over 200%.

 

On April 19, 2021, the Company issued 100,000 shares to a service provider. These shares were valued at $0.081 or $8,100. Additionally, on the same day, the Company issued 5,000,000 shares of common stock to its Co-Chief Executive Officer, and 5,000,000 shares of common stock to its President and Co-Chief Executive Officer for services. These shares were valued at $0.081 each or a total valuer of $405,000 and $324,000 respectively. subsequent to March 31, 2021 the Company has raised $80,000 from the sale of 80,000 shares of Series C Preferred stock.

 

 

 

 

 

 

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The following discussion should be read in conjunction with our unaudited consolidated financial statements and notes thereto included herein. In connection with, and because we desire to take advantage of, the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, we caution readers regarding certain forward-looking statements in the following discussion and elsewhere in this report and any other statement made by, or on our behalf, whether or not in future filings with the Securities and Exchange Commission. Forward-looking statements are statements not based on historical information and which relate to future operations, strategies, financial results, or other developments. Forward-looking statements are necessarily based upon estimates and assumptions that are inherently subject to significant business, economic and competitive uncertainties, and contingencies, many of which are beyond our control and many of which, with respect to future business decisions, are subject to change. These uncertainties and contingencies can affect actual results and could cause actual results to differ materially from those expressed in any forward-looking statements made by, or on our behalf. We disclaim any obligation to update forward-looking statements.

 

Overview

 

We were incorporated in the State of Florida on March 7, 2013, with a focus on developing a fast, casual food dining chain restaurant business. We commenced operations by opening our initial corporately owned restaurant in Fort Lauderdale, Florida in May 2015. By April 2016, we opened three additional restaurants located in various Wyndham Hotel properties in the Pompano Beach, Florida area. In September 2017, Hurricane Irma caused significant damage to the area which resulted in Wyndham halting operations at its hotel properties for repairs and renovations and the closure of our Wyndham hotel locations. The Hurricane also impacted travel to Florida during this time. While our Fort Lauderdale location was reopened in early November 2017, we were only able to reopen two of the hotel locations in Pompano Beach in late January 2018. We also elected not to reopen our fourth location, as the damages were too excessive. If we can raise additional capital, of which there is no assurance, we intend to own and operate up to 10 restaurants and utilize them as a showcase in the marketing of our proposed franchise operations.

 

In May 2017, we completed our National Franchise License which permits us to sell franchises in all of the United States, except New York, Virginia, and Maryland which licenses we hope to obtain if sufficient demand exists in the future. In September 2017, we completed the purchase of two franchise locations in Florida. We currently anticipate the commencement of the building and development of these locations by mid-2021.  

 

On October 24, 2019, we opened our first restaurant in Italy, at Strada Provinciale 70 #100, Via Vittorio Veneto 100 Ceglie del Campo, Bari, Italia which we intend to also use as a training facility for franchises in Europe. 

 

Management has scouted various locations in Italy and believes that the regions of Rome and Puglia may offer opportunities for additional corporate-owned and franchise expansion. However, there are no agreements in place as of the date of this Report to open any new facilities, either Company-owned or franchises, and no assurances can be provided that we will expand our operations accordingly.

 

In September 2019, the Company's common stock was approved for trading by FINRA and in mid-October 2019 was approved for up-listing to the OTCQB under the symbol “KITL”.

 

The Company opened its inaugural European location in Ceglie del Campo, Bari, Italy, in October 2019.

 

In January of 2020, the Company completed its first franchise agreement for a restaurant in the State of California. As a result of the COVID-19 pandemic, the opening of this restaurant has been delayed and is currently expected to begin operating at the end of May 2021. Due to the ongoing impact of Covid-19, and based on the delays that have been encountered to date, there can be no assurances that this location will open as scheduled.

 

 

 

 

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Recent Developments

 

Development Agreement

 

On June 18, 2020, Kisses From Italy Franchising LLC, its wholly-owned subsidiary, entered into a multi-unit development agreement (the “Development Agreement”) pursuant to which it granted development rights to Demasar Management Inc., a Canadian corporation (“Developer”) to open and operate up to 100 Kisses From Italy Italian restaurants in Canada. Under the Agreement, Developer is obligated to open a minimum of 20 restaurants by June 17, 2025.

 

In consideration of the development rights, the Development Agreement provides for a franchise fee of $4,000 Canadian dollars (“CAD”) for each restaurant. Upon execution of the Development Agreement, the Developer paid $400,000 CAD to the Company, and the Company issued Denis Senecal, a director of the Developer, 9,500,000 shares of common stock of the Company.

 

The Developer will have a right of first refusal to obtain development rights to additional restaurants in Canada if it is in compliance with the Development Agreement and has opened the minimum 20 restaurants. If the Developer receives a bona fide offer from an unaffiliated third party to purchase the Developer’s rights under the Development Agreement, Kisses From Italy-Franchising LLC will have the option, exercisable for 30 days to purchase such business, If Kisses From Italy Franchising LLC does not exercise such option, the Developer may sell its rights to said third party for a $5,000 transfer fee.

 

The Agreement contains certain non-competition and non-solicitation provisions.

 

The Company and Developer will share profits for all locations developed and agreed to an allocation of franchise royalties.

 

Advisory Agreement 

 

On June 17, 2020, the Company entered into a five-year distribution-financing-lead generation agreement (“Advisory Agreement”) with Denis Senecal pursuant to which he will provide business development, financial advisory and franchise lead generation services to the Company in consideration for the issuance of 9,500,000 shares of the Company’s common stock. Such common stock has “piggyback” registration rights for one year from the date of issuance for one registration statement. The Advisory Agreement will automatically be renewed for an additional five-year term unless either party notifies the other within 180 days prior to the expiration of the initial term that it desires not to renew the Agreement.

 

Fransmart Consulting Agreement

 

On April 22, 2021, Kisses from Italy-Franchising, LLC (“Franchisor”), to enter into a consulting agreement (the “Consulting Agreement”) with Fransmart, LLC, a Delaware limited liability company (“Fransmart”), effective as of April 16, 2021, pursuant to which the Fransmart will serve as Franchisor’s exclusive global franchise developer and representative for a period of ten years.

 

In consideration for its services, Fransmart is entitled to certain fees, royalties, and commissions contingent upon Fransmart achieving certain agreed upon milestones. In addition, Fransmart was granted a stock option to purchase 16,000,000 shares of the Company’s common stock, exercisable by Fransmart on a cashless basis.

 

Covid-19 Pandemic

 

On March 11, 2020, the World Health Organization declared the Covid-19 outbreak to be a global pandemic. In addition to the devastating effects on human life, the pandemic has had a negative ripple effect on the global economy, leading to disruptions and volatility in the global financial markets. Many states and countries have issued policies intended to stop or slow the further spread of the disease.

 

 

 

 

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There are no comparable events that provide guidance as to the effect the Covid-19 pandemic may have, and, as a result, the full impact of the pandemic continues to evolve, is highly uncertain, and is subject to change. Management is actively monitoring the situation but given the daily evolution of the Covid-19 outbreak, the Company is not currently able to estimate the full effects on the economy, the markets we serve, our business, or on our operations and financial condition.

 

As a result of Covid-19, our two restaurants located in Florida in the Wyndham hotels closed on March 17, 2020 and re-opened on July 11, 2020 and July 22, 2020 for the Wyndham Palm Aire and the Wyndham Sea Gardens, respectively. Our Fort Lauderdale location closed on April 1, 2020 and re-opened on May 1, 2020. The only restrictions currently imposed on our business are recommended social distancing guidelines along with the requirements that our employees wear masks. Our restaurant in Bari, Italy closed on March 1, 2020, and re-opened on July 1, 2020 and. may be subject to future closure due to Covid-19.

 

Going forward there can be no assurance that our restaurants will be allowed to remain open or if open, at full capacity, or that we can achieve historic sales levels.

 

Results of Operations

 

Comparison of Results of Operations for the three months ended March 31, 2021, and March 31, 2020

 

Revenue and Cost of Sales

 

Total revenues for the three months ended March 31, 2021 were $114,679 compared to $109,746 during the three months ended March 31, 2020. Revenues for the three months ended March 31, 2021were comprised of $104,894 in food sales and $9,785 in sales of branded products to retail locations in Canada, which the Company began selling in the fourth quarter of 2020, compared to food sales of $109,746 during the three months ended March 31, 2021. The slight decrease in food sales in the three months ended March 31, 2021 compared to the three months ended March 31, 2020 is beginning to approach pre-Covid sales levels due to the mitigation of some of the impact of Covid-19 on the restaurant industry.

 

Cost of goods sold during the three months ended March 31, 2021, was $52,668 compared to $43,974 during the three months ended March 31, 2020. This slight increase is attributable to higher sales volumes.

 

Operating expenses

 

Operating expenses were $480,593 for the three months ended March 31, 2021, compared to $209,040 during the three months ended March 31, 2020. Non-cash stock-based compensation was $300,000 and $36,301, for the periods ended March 31, 2021 and March 31, 2020, respectively. Excluding the stock-based compensation in both periods, operating expenses were $180,593 for the three months ended March 31, 2021 compared to $172,739 for the three months ended March 31, 2020. This increase is primarily attributable to an increase in consulting and professional fees, offset to a lesser extent by decreases in depreciation and amortization, executive compensation, and general and administrative expenses.

 

Other income and expense

 

Other expenses comprised of interest expense was $2,096 for the three months ended March 31, 2021 compared to $354,633 during the three months ended March 31, 2020. The significant decrease in other expenses is attributable to the interest expense associated with the issuance of Series C preferred stock with a beneficial conversion features that was charged to interest expense in the three months ended March 31, 2020, compared to no issuances of Series C preferred stock in the three months ended March 31, 2021.

 

 

 

 

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Net Loss

 

During the three months ended March 31, 2021, we incurred a net loss of $421,862 and a net profit of $1,183 attributable to non-controlling interests, compared to a net loss of $499,905 and a net profit of $2,004 attributable to non-controlling interests for the three months ended March 31, 2020. The decrease in the net loss during the three months ended March 31, 2021 is primarily attributable to a decrease in interest expense of $352,537 in the three months ended March 31, 2021 offset by an increase in stock-based compensation of $263,699.

 

Liquidity and Capital Resources

 

On March 31, 2021, we had $54,447 in cash and cash equivalents.

 

Net cash used in operating activities was $125,979 during the three months ended March 31, 2021, compared to net cash used of $79,275 during the three months ended March 31, 2020. The increase in net cash used in operating activities of $46,703 is primarily attributable to our increase losses in the three months ended March 31, 2021 compared to the three months ended March 31, 2020 after subtracting non-cash items in both periods.

 

Net cash provided by financing activities was $145,000 for the three months ended March 31, 2021, compared to $60,490 during the three months ended March 31, 2020. The increase in net cash provided by financing activities is primarily attributable to the sale of common stock in a private offering for proceeds of $145,000 in the three months ended March 31, 2021 compared to proceeds from the sale of Series C Preferred Stock of $66,490 in the three months ended March 31, 2020.

 

We estimate that we will need approximately $1,000,000 to fully effectuate our business development plans, including opening additional company-owned restaurants and continuing to develop and enhance the marketing of our franchise concept. Subject to the continued impact of Covid-19, we currently believe that we can open at least two additional restaurants for approximately $300,000. We may use some of the cash we received from the Development Agreement to open additional locations or for franchise marketing. We believe that continuing to open company-owned restaurants will assist us to market other locations.

 

There can be no assurances that additional financing, either through equity or debt, will be available on a timely basis, on favorable terms or at all. While we have had discussions with potential investors and investment bankers, we have no agreement with any third party to provide additional financing. Our inability to obtain additional financing may have a significant negative impact on our continued development and results of our operations.

 

Covid-19 has also caused significant disruptions to the global financial markets, which impacts our ability to raise additional capital. If the Company is unable to obtain adequate capital due to the continued spread of Covid-19, the Company may be required to reduce the scope, delay, or eliminate some or all of its planned operations.

 

Going Concern

 

Our consolidated financial statements were prepared assuming that we will continue as a going concern and do not include adjustments for the recoverability and the realization of assets and the satisfaction of liabilities in the normal course of business for the twelve months following the date of these financial statements that may be necessary should we be unable to continue in operation. Our report from our independent registered public accounting firm for the fiscal year ended December 31, 2020, includes an explanatory paragraph stating that the Company has suffered recurring losses from operations and has a significant accumulated deficit. In addition, the Company continues to experience negative cash flows from operations. Also, if the Company is unable to obtain adequate capital due to the continued spread of Covid-19, the Company may be required to further reduce the scope, delay, or eliminate some or all of its planned operations. These factors, among others, raise substantial doubt about the Company's ability to continue as a going concern, These factors raise substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

 

 

 

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Off-Balance Sheet Arrangements

 

We have no off-balance sheet arrangements.

 

Critical Accounting Estimates

 

Management’s discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Our critical accounting policies are defined as those policies that we believe are the most important to the portrayal of our financial condition and results of operations and that require management’s most difficult, subjective, or complex judgments, often as a result of the need to make estimates about the effects of matters that are inherently uncertain. See notes to our financial statements, Note 2 – Summary Of Significant Accounting Policies.

 

Recent Accounting Pronouncements

 

There were various accounting standards and interpretations issued recently, none of which are expected to have a material effect on the Company's operations, financial position, or cash flows.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

 

The Company is a smaller reporting company and is not required to provide this information.

 

ITEM 4. CONTROLS AND PROCEDURES.

 

Disclosure Controls and Procedures – Our management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as of the end of the period covered by this Report.

 

These controls are designed to ensure that information required to be disclosed in the reports we file or submit pursuant to the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the periods specified in the rules and forms of the Securities and Exchange Commission, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.

 

Based on this evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures were effective as of March 31, 2021.

 

 

 

 

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Inherent Limitations – Our management, including our principal executive officer and principal financial officer, does not expect that our disclosure controls and procedures will prevent all errors and all fraud. A control system, no matter how well-conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. The design of any system of controls is 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. 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 our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdown can occur because of simple error or mistake. In particular, many of our current processes rely upon manual reviews and processes to ensure that neither human error nor system weakness has resulted in erroneous reporting of financial data.

 

Changes in Internal Control over Financial Reporting –. During the period covered by this report, there were no changes in our internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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PART II. OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

There are no pending legal proceedings to which the Company is a party or in which any director, officer or affiliate of the Company, any owner of record or beneficially of more than 5% of any class of voting securities of the Company, or security holder is a party adverse to the Company or has a material interest adverse to the Company. The Company's property is not the subject of any pending legal proceedings.

 

ITEM 1A. RISK FACTORS

 

We are a smaller reporting company and are not required to provide this information.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

Except as set forth below, there were no sales of equity securities during the period covered by this Report that were not registered under the Securities Act and were not previously reported by the Company.

 

On January 8, 2021, the Company issued 1,500,000 shares of common stock to an investor relations firm for investor relation services provided to the Company.

 

On January 14, 2021, January 19, 2021, and January 20, 2021, the Company sold 800,000, 150,000 and 500,000 shares, respectively, for a total of 1,450,000 shares of common stock to three accredited investors at a purchase price of $0.10 per share, for total proceeds of $145,000.

 

On April 16, 2021 we issued Fransmart an option to purchase 16,000,000 shares of common stock, exercisable on a cashless basis, for services provided in connection with the Fransmart Consulting Agreement.

 

The above issuances did not involve any underwriters, underwriting discounts or commissions, or any public offering and we believe is exempt from the registration requirements of the Securities Act of 1933 by virtue of Section 4(2) thereof and/or Regulation D promulgated thereunder.

 

The above issuances did not involve any underwriters, underwriting discounts or commissions, or any public offering and we believe is exempt from the registration requirements of the Securities Act of 1933 by virtue of Section 4(2) thereof and/or Regulation D promulgated thereunder.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not Applicable.

 

ITEM 5. OTHER INFORMATION

 

None.

 

 

 

 

 

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ITEM 6. EXHIBITS

 

Exhibit No.   Description
     
31.1   Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2   Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1   Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2   Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

101.INS   XBRL Instance Document
101.SCH   XBRL Schema Document
101.CAL   XBRL Calculation Linkbase Document
101.DEF   XBRL Definition Linkbase Document
101.LAB   XBRL Label Linkbase Document
101.PRE   XBRL Presentation Linkbase Document

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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SIGNATURES

 

Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

 

KISSES FROM ITALY INC.

 

Date: May 17, 2021

   
  By: /s/ Michele Di Turi                                 
   

Michele Di Turi

Co-Chief Executive Officer and President

    (Principal Executive Officer)
     
Date: May 17, 2021    
  By: /s/ Claudio Ferri                                      
   

Claudio Ferri

Co-Chief Executive Officer and Chief Investment Officer

(Principal Financial Officer and

    Principal Accounting Officer)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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