NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE
1 - NATURE OF OPERATIONS AND BASIS OF PRESENTATION
Two
Hands Corporation (the "Company") was incorporated in the state of Delaware on April 3, 2009 and on July 26, 2016, changed
its name from Innovative Product Opportunities Inc. to Two Hands Corporation.
The
Two Hands co-parenting application launched
on July 2018 and the Two Hands Gone application launched
In February 2019. The Company ceased work on these applications in 2021.
The
gocart.city online consumer grocery delivery application was released in early June 2020 and Cuore Food Services commenced sale of dry
goods and produce to other businesses in July 2020.
In
July 2021, the Company made the strategic decision to focus exclusively
on the grocery market through three on-demand branches of its grocery businesses: gocart.city, Grocery Originals, and Cuore Food Services.
| i) | gocart.city
is the Company’s online delivery marketplace, allowing consumers to shop online and
have their groceries delivered. |
| ii) | Grocery
Originals is the Company’s brick-and-mortar grocery store located in Mississauga Ontario
at the site of the Company’s warehouse. |
| iii) | Cuore
Food Services is the Company’s wholesale food distribution branch. |
On
May 1, 2023, the Company sold its gocarty.city and Grocery Originals branches. The Company will continue the business of Cuore Food Services.
The
operations of the business are carried on by Two Hands Canada Corporation, a wholly-owned subsidiary of the Company, incorporated under
the laws of Canada on February 7, 2014.
The
Company received approval from the Canadian Securities Exchange (the "CSE") to list its common shares (the "Common Shares")
on the CSE. Trading of the Common Shares in the capital of the Company commenced on August 5, 2022, under the symbol "TWOH".
NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The
accompanying condensed consolidated financial statements of Two Hands Corporation have been prepared without audit pursuant to the rules
and regulations of the Securities and Exchange Commission requirements for interim financial statements. Therefore, they do not include
all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial
statements. The financial statements should be read in conjunction with the annual financial statements for the year ended December 31,
2022 of Two Hands Corporation in our Form 10-K filed on April 3, 2023.
The
interim financial statements present the balance sheets, statements of operations, stockholders’ deficit and cash flows of Two
Hands Corporation. The financial statements have been prepared in accordance with accounting principles generally accepted in the United
States.
The
interim financial information is unaudited. In the opinion of management, all adjustments necessary to present fairly the financial position
as of March 31, 2023 and the results of operations and cash flows presented herein have been included in the financial statements. All
such adjustments are of a normal and recurring nature. Interim results are not necessarily indicative of results of operations for the
full year.
GOING CONCERN
The
Company's financial statements are prepared in accordance with generally accepted accounting principles applicable to a going concern.
This contemplates the realization of assets and the liquidation of liabilities in the normal course of business. During the three months
ended March 31, 2023, the Company incurred a net loss of $505,484 and used cash in operating activities of $198,659, and on March 31,
2023, had stockholders’ deficit of $4,684,426 and an accumulated deficit of $84,428,000. These factors, among others, raise substantial
doubt about the Company’s ability to continue as a going concern for a period one year from the date that the financial statements
are issued. The Company will be dependent upon the raising of additional capital through placement of its common stock in order to implement
its business plan. There can be no assurance that the Company will be successful in this situation. These financial statements do not
include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classifications of
liabilities that might result from this uncertainty. We are currently funding our operations by way of cash advances from our Chief Executive
Officer, note holders, shareholders and others; however, we do not have any oral or written agreements with them or others to loan or
advance funds to us. There can be no assurances that we will be able to receive loans or advances from them or other persons in the future.
PRINCIPLES
OF CONSOLIDATION
The
consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, Two Hands Canada Corporation.
All intercompany transactions and balances have been eliminated in consolidation.
USE
OF ESTIMATES AND ASSUMPTIONS
Preparation
of the financial statements in conformity with accounting principles generally accepted in the United States requires management to make
estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.
CONCENTRATIONS
The
following table summarizes accounts receivable and revenue concentrations:
| Schedule of concentration of risk, by risk factor | |
| | | |
| | |
| | |
Accounts
receivable at
March
31,
2023 | |
Revenue
for the three months ended
March
31,
2023 |
| Customer
#1 | |
| 25 | % | |
| 12%- | |
| Customer
#2 | |
| 19 | % | |
| — | |
| Total
concentration | |
| 44 | % | |
| 12 | % |
The
following table summarizes accounts payable and cost of goods sold concentrations:
| | |
Accounts
payable at
March
31,
2023 | |
Cost
of goods sold for the three months ended
March
31,
2023 |
| Supplier
#1 | |
| 31 | % | |
| — | |
| Supplier #2 | |
| 16 | % | |
| — | |
| Supplier #3 | |
| — | | |
| 18 | % |
| Supplier #4 | |
| — | | |
| 13 | % |
| Supplier #5 | |
| — | | |
| 13 | % |
| Supplier
#6 | |
| — | | |
| 11 | % |
| Total
concentration | |
| 47 | % | |
| 55 | % |
CASH
AND CASH EQUIVALENTS
For
purposes of the statement of cash flows, the Company considers highly liquid financial instruments purchased with a maturity of three
months or less to be cash equivalents.
ACCOUNTS RECEIVABLE
Trade
accounts receivable are recorded at the invoiced amount and do not bear interest. Accounts receivable are reduced by an allowance for
doubtful accounts, which is the Company’s best estimate of the amount of credit losses inherent in its existing accounts receivable.
In establishing the required allowance, management considers historical losses adjusted to take into account current market conditions
and customers’ financial condition, the amount of receivables in dispute, and the current receivables aging and current payment
patterns. The Company writes off accounts receivable against the allowance after all means of collection have been exhausted and the
potential for recovery is considered remote.
The
allowance for doubtful accounts at March 31, 2023 and December 31, 2022 is $160,093 and $156,693, respectively.
INVENTORY
Inventory
consisting of groceries and dry goods are measured at the lower of cost and net realizable value. Cost is determined pursuant
to the
first-in first out (“FIFO”) method. The cost of inventory includes the purchase price, shipping and handling costs incurred
to bring the inventories to their present location and condition. Inventory with a short shelf life that is not utilized within the planned
period are immediately expensed in the statement of operations. Estimated gross profit rates are used to determine the cost of goods
sold in interim periods. Any significant adjustment that results from the reconciliation with annual physical inventory is disclosed.
At March 31, 2023 and December 31, 2022, the inventory valuation allowance was $0.
PROPERTY
AND EQUIPMENT
Property
and equipment is stated at cost, less accumulated depreciation and amortization. Expenditures for maintenance and repairs are charged
to expense when incurred, while renewals and betterments that materially extend the life of an asset are capitalized.
The
costs of assets sold, retired, or otherwise disposed of, and the related allowance for depreciation, are eliminated from the accounts,
and any resulting gain or loss is recognized in the results from operations. Depreciation is provided over the estimated useful lives
of the assets, which are as follows:
Computer
equipment 50% declining balance over a three year useful life
In
the year of acquisition, one half the normal rate of depreciation is provided.
REVENUE RECOGNITION
In
accordance with ASC 606, revenue is recognized when a customer obtains control of promised goods or services. The amount of revenue recognized
reflects the consideration to which we expect to be entitled to receive in exchange for these goods or services. The provisions of ASC
606 include a five-step process by which we determine revenue recognition, depicting the transfer of goods or services to customers in
amounts reflecting the payment to which we expect to be entitled in exchange for those goods or services. ASC 606 requires us to apply
the following steps: (1) identify the contract with the customer; (2) identify the performance obligations in the contract; (3) determine
the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when,
or as, we satisfy the performance obligation. We recognize revenue for the sale of our products upon delivery to a customer.
During
the three months ended March 31, 2023 and 2022, the Company had revenue of $175,445 and $199,039 respectively. In 2023, the Company recognized
revenue of $12,805 from the sale of groceries to consumers via the gocart.city online grocery delivery application and $162,640 from
the sale of dry goods and produce to other businesses. In 2022 the Company recognized revenue of $66,628 from the sale of groceries to
consumers via the gocart.city online grocery delivery application and $132,411 from the sale of dry goods and produce to other businesses.
LEASES
Under
ASC 842, a right-of-use asset and lease liability is recorded for all leases and the statement of operations reflects the lease expense
for operating leases and amortization/interest expense for financing leases.
The
Company does not apply the recognition requirements in the standard to a lease that at commencement date has a lease term of twelve months
or less and does not contain a purchase option that it is reasonably certain to exercise and to not separate lease and related non-lease
components. Options to extend the leases are not included in the minimum lease terms unless they are reasonably certain to be exercised.
The
Company leases an automobile under non-cancelable operating lease. Right-of-use assets represent the right to use an underlying asset
for the lease term, and lease liabilities represent the obligation to make lease payments arising from the lease. Right-of-use assets
and lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. As most
of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information
available at commencement date in determining the present value of lease payments.
DEBT
DISCOUNT AND DEBT ISSUANCE COSTS
Debt
discounts and debt issuance costs incurred in connection with the issuance of convertible notes are capitalized and amortized to interest
expense based on the related debt agreements using the effective interest rate method. Unamortized discounts are netted against convertible
notes.
DERIVATIVE
LIABILITY
In
accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Paragraph
815-15-25-1 the conversion feature and certain other features are considered embedded derivative instruments, such as a conversion reset
provision, a penalty provision and redemption option, which are to be recorded at their fair value as its fair value can be separated
from the convertible note and its conversion is independent of the underlying note value. The Company records the resulting discount
on debt related to the conversion features at initial transaction and amortizes the discount using the effective interest rate method
over the life of the debt instruments. The conversion liability is then marked to market each reporting period with the resulting gains
or losses shown in the statements of operations.
In
circumstances where the embedded conversion option in a convertible instrument is required to be bifurcated and there are also other
embedded derivative instruments in the convertible instrument that are required to be bifurcated, the bifurcated derivative instruments
are accounted for as a single, compound derivative instrument.
The
Company follows ASC Section 815-40-15 (“Section 815-40-15”) to determine whether an instrument (or an embedded feature) is
indexed to the Company’s own stock. Section 815-40-15 provides that an entity should use a two-step approach to evaluate whether
an equity-linked financial instrument (or embedded feature) is indexed to its own stock, including evaluating the instrument’s
contingent exercise and settlement provisions.
The
Company evaluates its convertible debt, options, warrants or other contracts, if any, to determine if those contracts or embedded components
of those contracts qualify as derivatives to be separately accounted for in accordance with paragraph 810-10-05-4 and Section 815-40-25
of the FASB Accounting Standards Codification. The result of this accounting treatment is that the fair value of the embedded derivative
is marked-to-market each balance sheet date and recorded as either an asset or a liability. In the event that the fair value is recorded
as a liability, the change in fair value is recorded in the consolidated statement of operations as other income or expense. Upon conversion,
exercise or cancellation of a derivative instrument, the instrument is marked to fair value at the date of conversion, exercise or cancellation
and then that the related fair value is reclassified to equity.
The
Company utilizes the binomial option pricing model to compute the fair value of the derivative and to mark to market the fair value of
the derivative at each balance sheet date. The binomial option pricing model includes subjective input assumptions that can materially
affect the fair value estimates. The expected volatility is estimated based on the most recent historical period of time equal to the
remaining contractual term of the instrument granted.
On
October 1, 2021, the Company adopted a sequencing policy under Accounting Standards Codification (“ASC”) 815-40-35 Derivatives
and Hedging (“ASC 815”) whereby in the event that reclassification of contracts from equity to assets or liabilities
is necessary pursuant to ASC 815 due to the Company’s inability to demonstrate it has sufficient authorized shares as a result
of certain securities convertible or exchangeable for a potentially indeterminable number of shares, shares will be allocated on the
basis of the earliest issuance date of potentially dilutive instruments, with the earliest grants receiving the first allocation of shares.
Pursuant to ASC 815, issuances of securities to the Company’s employees or directors are not subject to the sequencing policy.
INCOME TAXES
The
Company accounts for income taxes in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification
("FASB ASC") 740, Income Taxes. Under the assets and liability method of FASB ASC 740, deferred tax assets and liabilities
are recognized for the estimated 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 in effect for the year in which those temporary differences are expected to be recovered or settled. The Company provides a valuation
allowance, if necessary, to reduce deferred tax assets to their estimated realizable value.
NET LOSS PER
SHARE
Basic
net income (loss) per share includes no dilution and is computed by dividing net income (loss) available to common stockholders by the
weighted average number of common shares outstanding for the period. Diluted earnings per share is computed by dividing earnings available
to common shareholders by the weighted average number of common shares outstanding for the period increased to include the number of
additional common shares that would have been outstanding if potentially dilutive securities had been issued. On March 31, 2023 and December
31, 2022, we excluded the common stock issuable upon conversion of non-redeemable convertible notes, convertible notes, Series A Stock,
Series B Stock, Series C Stock and common stock to be issued of 6,234,981,400 shares and 5,248,242,000 shares, respectively, as their
effect would have been anti-dilutive.
FOREIGN CURRENCY
TRANSLATION
The
consolidated financial statements are presented in United States dollars. The functional currency of the consolidated entities are determined
by evaluating the economic environment each entity. The functional currency of Two Hands Corporation is the United States dollar. Foreign
exchange translation adjustments are reported as gains or losses resulting from foreign currency transactions and are included in results
of operations.
Effective
October 1, 2021, the Company changed the functional currency of its Company’s Canadian subsidiary, Two Hands Canada Corporation,
to the Canadian dollar from United States dollar. The change in functional currency is due to the increase of Canadian dollar dominated
activities over time including sales, operating costs and share subscriptions. The change in functional currency is accounted for prospectively.
Two Hands Canada Corporation maintains its accounts in the Canadian dollar. Assets and liabilities are translated to United States dollars at
year-end exchange rates. Income and expenses are transaction at averages exchange rate during the year. Foreign currency transaction
adjustments are reported as other comprehensive income, a component of equity in the consolidated balance sheet.
STOCK-BASED COMPENSATION
The
Company accounts for stock incentive awards issued to employees and non-employees in accordance with FASB ASC 718, Stock Compensation.
Accordingly, stock-based compensation is measured at the grant date, based on the fair value of the award. Stock-based awards to employees
are recognized as an expense over the requisite service period, or upon the occurrence of certain vesting events. Additionally, stock-based
awards to non-employees are expensed over the period in which the related services are rendered.
FAIR VALUE OF
FINANCIAL INSTRUMENTS
ASC
Topic 820 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements.
Included
in the ASC Topic 820 framework is a three level valuation inputs hierarchy with Level 1 being inputs and transactions that can be effectively
fully observed by market participants spanning to Level 3 where estimates are unobservable by market participants outside of the Company
and must be estimated using assumptions developed by the Company. The Company discloses the lowest level input significant to each category
of asset or liability valued within the scope of ASC Topic 820 and the valuation method as exchange, income or use. The Company uses
inputs which are as observable as possible and the methods most applicable to the specific situation of each company or valued item.
The
Company’s financial instruments such as cash, accounts payable and accrued liabilities, non-redeemable convertible notes, notes
payable and due to related parties are reported at cost, which approximates fair value due to the short-term nature of these financial
instruments.
Derivative
liabilities are measured at fair value on a recurring basis using Level 3 inputs.
The following
tables present assets and liabilities that are measured and recognized at fair value as on a recurring basis:
| Schedule of Fair Value of Assets and Liabilities Measured on Recurring Basis |
|
|
|
|
|
|
| |
|
March
31, 2023 |
| |
|
Level
1 |
|
Level
2 |
|
Level
3 |
| Description |
|
$ |
|
$ |
|
$ |
| Derivative
liabilities |
|
- |
|
- |
|
- |
| |
|
December
31, 2022 |
| |
|
Level
1 |
|
Level
2 |
|
Level
3 |
| Description |
|
$ |
|
$ |
|
$ |
| Derivative
liabilities |
|
- |
|
- |
|
- |
RECENT ACCOUNTING
PRONOUNCEMENTS
In
August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and
Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40). This update amends the guidance on convertible instruments
and the derivatives scope exception for contracts in an entity's own equity and improves and amends the related EPS guidance for both
Subtopics. This standard is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2023,
which means it will be effective for our fiscal year beginning January 1, 2024. Early adoption is permitted but no earlier than fiscal
years beginning after December 15, 2020, including interim periods within those fiscal years. We are currently evaluating the impact
of ASU 2020-06 on our consolidated financial statements.
Other
recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public
Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company's
present or future consolidated financial statements.
NOTE
3 – NON-REDEEMABLE CONVERTIBLE NOTES
On
January 8, 2018, the Company entered into a Side Letter Agreement (“Note”) with a non-related investor, Stuart Turk, to amend
and add certain terms to unsecured, non-interest bearing, due on demand notes payable totaling $244,065 issued by the Company during
the period of July 2014 and December 2017. The issue price of the Note is $244,065 with a face value of $292,878 and the Note has an
original maturity date of December 31, 2018 which is subject to automatic annual renewal. On June 29, 2021, the Company and Stuart Turk
entered into an Agreement to change the original maturity date of the Note to December 31, 2025. At the option of the Company, the Company
may convert principal and interest at a fixed conversion price of $0.0001 per share of the Company’s common stock. The Note allows
for the lender to secure a portion of the Company assets up to 200% of the face value of the Note. If the Note is not paid on December
31 each year, the outstanding face amount of the Note increases by 20% on January 1 the following year. During the three months ended
March 31, 2023, the Company elected to convert $2,050 of principal and interest into 20,500,000 shares of common stock of the Company
at a conversion price of $0.0001 per share. These conversions resulted in a loss on debt settlement of $60,150 due to the requirement
to record the share issuance at fair value on the date the shares were issued. The consolidated statement of operations includes interest
expense of $9,262 and $10,724 for the three months ended March 31, 2023 and 2022, respectively. On March 31, 2023 and December 31,
2022, the carrying amount of the Note is $195,020 (face value of $223,319 less $28,299 unamortized discount) and $187,808 (face value
of $187,808 less $0 unamortized discount), respectively.
On
May 10, 2018, the Company entered into a Side Letter Agreement (“Note”) with a non-related investor, Jordan Turk, to amend
and add certain terms to unsecured, non-interest bearing, due on demand notes payable totaling $35,000 issued by the Company on May 9,
2018. The issue price of the Note is $35,000 with a face value of $42,000 and the Note has an original maturity date of December 31,
2018 which is subject to automatic annual renewal. On June 29, 2021, the Company and Jordan Turk entered into an Agreement to change
the original maturity date of the Note to December 31, 2025. At the option of the Company, the Company may convert principal and interest
at a fixed conversion price of $0.0001 per share of the Company’s common stock. The Note allows for the lender to secure a portion
of the Company assets up to 200% of the face value of the Note. If the Note is not paid on December 31 each year, the outstanding face
amount of the Note increases by 20% on January 1 the following year. During the three months ended March 31, 2023, the Company elected
to convert $2,100 of principal and interest into 21,000,000 shares of common stock of the Company at a conversion price of $0.0001 per
share. These conversions resulted in a loss on debt settlement of $57,400 due to the requirement to record the share issuance at fair
value on the date the shares were issued. The consolidated statement of operations includes interest expense of $418 and $1,602 for the
three months ended March 31, 2023 and 2022, respectively. On March 31, 2023 and December 31, 2022, the carrying amount of the Note
is $6,789 (face value of $8,065 less $1,276 unamortized discount) and $8,471 (face value of $8,471 less $0 unamortized discount), respectively.
On
September 13, 2018, the Company entered into a Side Letter Agreement (“Note”) with a non-related investor, Jordan Turk, to
amend and add certain terms to unsecured, non-interest bearing, due on demand notes payable totaling $40,000 issued by the Company during
the period of July 10 to September 13, 2018. The issue price of the Note is $40,000 with a face value of $48,000 and the Note has an
original maturity date of December 31, 2018 which is subject to automatic annual renewal. On June 29, 2021, the Company and Jordan Turk
entered into an Agreement to change the original maturity date of the Note to December 31, 2025. At the option of the Company, the Company
may convert principal and interest at a fixed conversion price of $0.0001 per share of the Company’s common stock. The Note allows
for the lender to secure a portion of the Company assets up to 200% of the face value of the Note. If the Note is not paid on December
31 each year, the outstanding face amount of the Note increases by 20% on January 1 the following year. The consolidated statement of
operations includes interest expense of $4,908 and $4,090 for the three months ended March 31, 2023 and 202, respectively. On March 31,
2023 and December 31, 2022, the carrying amount of the Note is $104,441 (face value of $119,439 less $14,998 unamortized discount) and
$99,533 (face value of $99,533 less $0 unamortized discount), respectively.
On
January 31, 2019, the Company entered into a Side Letter Agreement (“Note”) with Stuart Turk to amend and add certain terms
to unsecured, non-interest bearing, due on demand notes payable totaling $106,968 issued by the Company during the period of January
3, 2018 to December 28, 2018. The issue price of the Note is $106,968 with a face value of $128,362 and the Note has an original maturity
date of December 31, 2019 which is subject to automatic annual renewal. On June 29, 2021, the Company and Stuart Turk entered into an
Agreement to change the original maturity date of the Note to December 31, 2025. At the option of the Company, the Company may convert
principal and interest at a fixed conversion price of $0.0001 per share of the Company’s common stock. The Note allows for the
lender to secure a portion of the Company assets up to 200% of the face value of the Note. If the Note is not paid on December 31 each
year, the outstanding face amount of the Note increases by 20% on January 1 the following year. The consolidated statement of operations
includes interest expense of $10,939 and $9,115 for the three months ended March 31, 2023 and 2022, respectively. On March 31, 2023 and
December 31, 2022, the carrying amount of the Note is $232,748 (face value of $266,171 less $33,423 unamortized discount) and $221,809
(face value of $221,809 less $0 unamortized discount), respectively.
NOTE
4 – LEASES
The
Company entered into an operating lease agreement on October 14, 2021 for an automobile, resulting in the recording of an initial liability
and corresponding right-of-use asset of $35,906. The weighted-average remaining non-cancelable lease term for the Company’s operating
lease was 2.50 years at March 31, 2023. The weighted-average discount rate was 3.96% at March 31, 2023.
The
Company’s operating lease expires in 2025. The following shows future lease payments for the remaining periods under operating
lease at March 31, 2023:
| Operating Lease Liability Maturity | |
|
| Periods ending
December 31, | |
Operating
Lease Commitments |
| | 2023 | | |
$ | 7,683 | |
| | 2024 | | |
| 10,244 | |
| | 2025 | | |
| 7,683 | |
| | Total
operating lease commitments | | |
| 25,610 | |
| | Less:
imputed interest | | |
| (4,133 | ) |
| | Total
right-of-use liability | | |
$ | 21,477 | |
The
Company’s discounted current right-of-use lease liability and discounted non-current right-of-use lease liability at March 31,
2023 is $8,337 and $13,140, respectively.
NOTE
5 – LINE OF CREDIT
On
April 14, 2022, the Company entered into a binding Grid Promissory Note and Credit Facility Agreement (the “Line of Credit”)
with The Cellular Connection Ltd. (the “Lender”) Pursuant to the Line of Credit, the Company can borrow from the Lender up
to CAD $750,000 in principal in increments of at least CAD $50,000 upon five business days’ notice. The line of credit is due on
May 1, 2024 and the outstanding principal bears interest at 8% per annum, payable monthly. Any indebtedness under the Line of Credit
are secured against accounts receivable and inventory of the Company, and is convertible into shares of common stock of the Company at
the Company’s option any time after twelve months from the first advance at a conversion price of $0.10 per share, subject to a
restriction on the Lender holding more than 4.99% of the Company’s Common Shares. As of March 31, 2023 and December 31, 2022, the
Line of Credit of $406,037 (principal $395,928 ((CAD $535,617) and interest of $10,109) and $293,298 (principal $289,970 ((CAD $393,500)
and interest of $3,328), respectively, was outstanding. The consolidated statement of operations includes interest expense of $6,771
and $0 for the three months ended March 31, 2023 and 2022, respectively.
NOTE
6 – NOTES PAYABLE
As
of March 31, 2023 and December 31, 2022, notes payable due to Piero Manzini, and The Cellular Connection Limited, a corporation controlled
by Stuart Turk, totaling $84,163 and $13,443, respectively, were outstanding. The balances are non-interest bearing, unsecured and have
no specified terms of repayment.
NOTE
7 – PROMISSORY NOTES
Promissory
Notes
As
of March 31, 2023 and December 31, 2022, promissory notes of $233,861 (principal $186,672 and interest of $47,189) and $229,194 (principal
$186,672 and interest of $42,522), respectively, were outstanding. The promissory notes bears interest of 10% per annum, are unsecured
and mature on December 31, 2025.
Promissory
Notes – Related Party
As
of March 31, 2023 and December 31, 2022, promissory note – related party of $712 (principal $0 and interest of $712) and $84,377
(principal $78,490 and interest of $5,887), respectively, were outstanding. The promissory notes – related party bear interest
of 10% per annum, are unsecured, mature on December 31, 2025 and are due to 2130555 Ontario Limited, a Company controlled by Nadav Elituv,
the Company's Chief Executive Officer. On February 2, 2023, the Company issued common stock to settle promissory note – related
party and interest with a carrying value $85,922 (Note 10).
NOTE
8 – RELATED PARTY TRANSACTIONS
As
of March 31, 2023 and December 31, 2022, advances and accrued salary of $209,313 and $185,473, respectively, were due to Nadav Elituv,
the Company's Chief Executive Officer. The balance is non-interest bearing, unsecured and have no specified terms of repayment.
During
the three months ended March 31, 2023 and 2022, the Company issued advances due to related party for $22,334 of expenses paid on behalf
of the Company and advances due to related party were repaid by the Company with $15,356 in cash. In addition, the Company accrued salary
of $198,787 due to Nadav Elituv. On February 2, 2022, the Company issued common stock to settle due to related party with a carrying
value of $188,871 (Note 10).
During
the three months ended March 31, 2022, the Company issued advances due to related party for $48,102 of expenses paid on behalf of the
Company and advances due to related party were repaid by the Company with $37,182 in cash. In addition, the Company accrued salary of
$47,744 due to Nadav Elituv for the three months ended March 31, 2022 and issued a promissory note for $85,285 to settle due to related
party.
During
the three months ended March 31, 2023 and 2022, the Company paid Linus Creative Services, a business controlled by Bradley Southam, a
director of the Company, $2,661 and $8,307, respectively, for advertising services.
Employment
Agreements
On
July 1, 2021, the Company executed an employment agreement for the period from July 1, 2021 to June 30, 2022 with Nadav Elituv, the Chief
Executive Officer of the Company whereby the Company shall pay 30,000 shares of Series A Convertible Preferred Stock of the Company,
60,000,000 shares of Common Stock of the Company and an annual salary of $216,000 payable monthly on the first day of each month from
available funds, commencing on July 1, 2021. On October 1, 2021, the Company and Nadav Elituv amended the employment agreement to (i)
cancel annual salary of $216,000 payable monthly and (ii) enter in to a consulting agreement to pay 2130555 Ontario Limited, a Company
controlled by Nadav Elituv, a monthly consulting fee of $17,400 (CAD $22,000 per month) for services for the period from October 1, 2021
to June 30, 2022.
On
March 26, 2022, the Company and Nadav Elituv further amended the employment agreement to (i) change the termination date from June 30,
2022 to December 31, 2022; (ii) pay an additional 10,500 shares of Series A Convertible Preferred Stock of the Company and (iii) pay
an additional 50,000,000 shares of Common Stock of the Company.
On
July 1, 2022, the term of the consulting contract with 2130555 Ontario Limited was extended to June 30, 2023.
On
January 15, 2023, the Company executed an employment agreement for the period from January 1, 2023 to December 31, 2023 with Nadav Elituv,
the Chief Executive Officer of the Company whereby the Company shall pay an annual salary of $600,000 from available funds.
Stock-based
compensation – salaries expense related to these employment agreements for the three months ended March 31, 2023 and 2022 is $0
and $4,200, respectively. Stock-based compensation – salaries expense was recognized ratably over the requisite service period.
(See Note 10).
NOTE
9 – PREFERRED STOCK
On
August 6, 2013, the Company filed a Certificate of Designation with the Delaware Secretary of State thereby designating two hundred thousand
(200,000) shares as Series A Convertible Preferred Stock (“Series A Stock”). Each share of Series A Stock is convertible
into one thousand (1,000) shares of common stock of the Company. On April 21, 2022, the Company amended its articles to amend the terms
of its Series A Convertible Preferred Stock to become non-voting shares. Previously Series A Stock were entitled to the number of votes
equal to the aggregate number of shares of common stock into which the Holder’s share of Series A Stock is convertible, multiplied
by one hundred (100).
On
December 12, 2019, the Company filed a Certificate of Designation with the Delaware Secretary of State thereby designating one hundred
thousand (100,000) shares as Series B Convertible Preferred Stock (“Series B Stock”). After a one year holding period, each
share of Series B Stock is convertible into one thousand (1,000) shares of common stock of the Company. Series B Stock is non-voting.
On
October 7, 2020, the Company filed a Certificate of Designation with the Delaware Secretary of State thereby designating thirty thousand
(30,000) shares as Series C Convertible Preferred Stock, par value $0.001 per share (“Series C Stock”). Each share of Series
C Stock (i) has a liquidation value of $100, subject to various anti-dilution protections (ii) is convertible into shares of common stock
of the Company six months after the date of issuance at a price of $0.25 per share effective June 30, 2022, subject to various anti-dilution
protections (iii) on conversion will receive an aggregate number of shares of common stock as is determined by dividing the liquidation
value by the conversion price. Series C Stock are non-voting. On June 24, 2021, the board of directors approved the increase in the number
of designated shares of Series C Convertible Preferred Stock from 5,000 to 30,000 and reduction of the conversion price from $0.0035
per share to $0.002 per share. On April 27, 2022, a 1 for 1,000 reverse stock split of the Company’s common stock took effect which
increased the conversion rate of from $0.002 per share to $2.00 per share. On June 30, 2022, the Company made an amendment to the Certificate
of Designation of its Series C Stock which lowered the fixed conversion price from $2.00 per share to $0.25 per share.
On
September 1, 2021, the Company filed a Certificate of Designation with the Delaware Secretary of State thereby designating two hundred
thousand (200,000) shares as Series D Convertible Preferred Stock, par value $0.001 per share (“Series D Stock”). Each share
of Series D Stock is convertible into one hundred (100) shares of common stock of the Company six months after the date of issuance.
Series D Stock are non-voting.
On
June 30, 2022, the Company made an amendment to the Certificate of Designation of its Series C Stock which lowered the fixed conversion
price from $2.00 per share to $0.25 per share. The Company accounted for the amendment as an extinguishment and recorded a deemed dividend
in accordance with ASC 260-10-599-2. As such, on June 30, 2022, the shares of Series C Stock recorded at fair value of 296,951 resulting
in a deemed contribution of $834,001.
On
October 4, 2022, the Company filed a Certificate of Designation with the Delaware Secretary of State that had the effect of designating
300,000 shares of preferred stock as Series E Convertible Preferred Stock (“Series E Stock”). Series E Stock are non-voting,
have a par value of $0.0001 per share and have a stated value of $1.00 per share. Each share of Series E Stock carries an annual cumulative
dividend of 10% of the stated value. The Company may redeem Series E
Stock in cash, if redeemed within 60 days of issuance date, at 110% of the stated value plus accrued unpaid dividends and between 61
days and 180 days at 115% of the stated value plus unpaid accrued dividends. After 180 days of the issuance date, the Company does not
have the right to redeem Series E Stock. After 180 days after the issue date, Series E Stock at the stated value together with any unpaid
accrued dividends are convertible into shares of common stock of the Company at the Holder’s option at a variable conversion price
calculated at 75% of the market price defined as the lowest three average trading price during the ten trading day period ending on the
latest trading day prior to the conversion date. After 18 months following the issuance date, the Company must redeem for cash Series
E Stock at its stated value plus any accrued unpaid dividends and the default adjustment, if any.
On
March 26, 2022, the Company issued 10,500 shares of Series A Convertible Preferred Stock with a fair value of $4,200 ($2.50 per share)
for compensation due to Nadav Elituv, the Chief Executive Officer of the Company.
On
April 27, 2022, a 1 for 1,000 reverse stock split of the Company’s common stock took effect which increased the conversion rate
of
(i)
Series A Stock from 1 (one) share of Series A Stock for 1 (one) share of common stock (pre-reverse stock-split) to 1 (one) share of Series
A Stock for 1,000 (one thousand) shares of common stock (post-reverse stock-split) (ii) Series B Stock from 1 (one) share of Series B
Stock for 1 (one) share of common stock (pre-reverse stock-split) to 1 (one) share of Series B Stock for 1,000 (one thousand) shares
of common stock (post-reverse stock-split) and (iii) Series D Stock from 1 (one) share of Series D Stock for 1 (one) share of common
stock (pre-reverse stock-split) to 1 (one) share of Series D Stock for 100 (one hundred) shares of common stock (post-reverse stock-split).
The Company accounted for the increase in the conversion rates as an extinguishment and recorded a deemed dividend (contribution) in
accordance with ASC 260-10-599-2. As such, on April 27, 2022, the shares of Series A Stock, Series B Stock and Series D Stock were recorded
at fair value of $1,966,043, $209,585 and $39,921, respectively, and resulting in a deemed dividend (contribution) of $1,396,721, ($1,354,515)
and ($749,085), respectively.
On
June 30, 2022, the Company made an amendment to the Certificate of Designation of its Series C Stock which lowered the fixed conversion
price from $2.00 per share to $0.25 per share. The Company accounted for the amendment as an extinguishment and recorded a deemed dividend
in accordance with ASC 260-10-599-2. As such, on June 30, 2022, the shares of Series C Stock recorded at fair value of 296,951 resulting
in a deemed contribution of $834,001.
Series
A Stock, Series B Stock, Series C Stock, Series D Stock and Series E Stock has been classified as temporary equity (outside of permanent
equity) on the consolidated balance sheet on March 31, 2023 and December 31, 2022 because other tainting contracts such as convertible
notes have inadequate available authorized shares of the Company for settlement.
NOTE 10 -
STOCKHOLDERS' EQUITY
The
Company is authorized to issue an aggregate of 12,000,000,000 common shares with a par value of $0.0001 per share and 1,000,000 shares
of preferred stock with a par value of $0.0001 per share.
On
March 21, 2022, pursuant to stockholder consent, our Board of Directors authorized an amendment (the "Amendment") to our Certificate
of Incorporation, as amended, to affect a reverse stock split of the issued and outstanding shares of our common stock, par value $0.0001,
on a 1 for 1,000 basis. We filed the Amendment with the Delaware Secretary of State on March 21, 2022. On April 25, 2022 the Financial
Industry Regulatory Authority, Inc. notified us that the reverse stock split would take effect on April 27, 2022. All common stock share
and per-share amounts for all periods presented in these consolidated financial statements have been adjusted retroactively to reflect
the reverse stock split.
For
the three months ended March 31, 2023, the Company elected to convert $4,150 of principal and interest of non-redeemable convertible
notes into 41,500,000 shares of common stock of the Company with a fair value of $121,700 resulting in a loss of extinguishment of debt
of $117,500.
On
February 2, 2023, the Company agreed to issue 977,889 shares of common stock with a fair value of $3,912 to settle advances with a carrying
value of $36,690 (CAD $48,894) due to Nadav Elituv, the Chief Executive Officer of the Company resulting an increase in additional paid-in
capital of $32,778.
On
February 2, 2023, the Company agreed to issue 6,346,035 shares of common stock with a fair value of $25,384 to settle consulting fees
with a carrying value of $238,103 (CAD $317,302) due to 2130555 Ontario Limited resulting an increase in additional paid-in capital of
$212,720. 2130555 Ontario Limited is controlled by Nadav Elituv, the Chief Executive Officer of the Company.
On
March 3, 2023, the Holder of Series B Stock elected to convert 7,000 shares of Series B Stock into 7,000,000 shares of common stock resulting
in a $69,162 reduction in the carrying value of Series B Stock.
Common
stock to be issued
On
March 31, 2023 and December 31, 2022, the Company had an obligation to issue 32,000 shares of common stock valued at $336,000 and 32,000
shares of common stock valued at $336,000, respectively, for stock-based compensation – consulting services. These shares relate
to an agreement dated August 1, 2020 for services to be provided from August 1, 2020 to July 31, 2022 whereby the Company shall pay 50,000
shares of Common Stock of the Company with a fair value of $525,000 for consulting. The shares are expensed the earlier of (i) the date
of issue of shares or (ii) on a straight line over the life of the contract.
NOTE
11 - SUBSEQUENT EVENTS
From
April 1, 2023 to May 9, 2023, the Company elected to convert $6,600 of principal and interest of non-redeemable convertible notes into
66,000,000 shares of common stock of the Company with a fair value of $81,800 resulting in a loss of extinguishment of debt of $75,200.
On
May 1, 2023, the Company sold its gocart.city business, e-commerce site, branding, Grocery Original store and related inventory to a
private purchaser for estimated proceeds of CAD$84,000 by settling trade account receivable and accounts payable with the purchaser.