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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2023
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to __________
Commission File Number: 333-167667
TWO HANDS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware |
|
42-1770123 |
(State or Other Jurisdiction of |
|
(I.R.S. Employer |
Incorporation or Organization) |
|
Identification No.) |
373 Joicey Blvd., North York
Ontario, Canada
(Address of Principal Executive Offices) |
|
M5M 2W2
(Zip Code)
|
|
|
|
(416) 357-0399
(Registrant's telephone number, including area code)
1035 Queensway East, Mississauga, Ontario, Canada L4Y
4C1
(Former name, former address and former fiscal year,
if changed since last report)
Indicate
by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the
past 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 x
No ¨
Indicate
by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data
File required to be submitted and posted 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 and post such files). Yes
x No ¨
Indicate by check mark whether the registrant is a
large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.
Large accelerated filer |
¨ |
Accelerated filer |
¨ |
Non-accelerated filer |
x |
Smaller reporting company |
x |
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
x
Securities registered under Section 12(b) of the
Act:
Title of each class |
Name of each exchange on which registered |
N/A |
N/A |
Securities registered under Section 12(g) of the
Act:
Common Stock, $.0001 Par Value
(Title of class)
State the number of shares outstanding of each of
the issuer’s classes of common equity, as of the latest practicable date: As of August 6, 2023, the issuer had 1,030,558,548 shares
of its common stock issued and outstanding, par value $0.0001 per share.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING
STATEMENTS
This report on Form 10-Q contains "forward-looking
statements" that involve risks and uncertainties. You should not place undue reliance on these forward-looking statements. Our actual
results could differ materially from those anticipated in the forward-looking statements for many reasons, including the risks described
in our Form 10-K filed on April 3, 2023, and other filings we make with the Securities and Exchange Commission. Although we believe the
expectations reflected in the forward-looking statements are reasonable, they relate only to events as of the date on which the statements
are made. We do not intend to update any of the forward-looking statements after the date of this report to conform these statements to
actual results or to changes in our expectations, except as required by law.
The following discussion and analysis of financial
condition and results of operations is based upon and should be read in conjunction with our audited financial statements and related
notes thereto included elsewhere in this report, and in our Form 10-K filed on April 3, 2023.
TWO HANDS CORPORATION
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2023
TABLE OF CONTENTS
PART I |
|
PAGE |
Item 1. |
Financial Statements (Unaudited) |
4 |
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
19 |
Item 3. |
Quantitative and Qualitative Disclosures About Market Risk |
30 |
Item 4. |
Controls and Procedures |
30 |
PART II |
|
|
Item 1. |
Legal Proceedings |
31 |
Item 1A. |
Risk Factors |
31 |
Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds |
31 |
Item 3. |
Defaults Upon Senior Securities |
31 |
Item 4. |
Mining Safety Disclosures |
31 |
Item 5. |
Other Information |
31 |
Item 6. |
Exhibits |
32 |
|
Signatures |
34 |
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
TWO HANDS CORPORATION |
CONDENSED CONSOLIDATED BALANCE SHEETS |
| |
| |
|
| |
June 30,
2023 | |
December 31,
2022 |
ASSETS | |
(Unaudited) | |
|
| |
| |
|
Current assets | |
| | | |
| | |
Cash | |
$ | 8,615 | | |
$ | 17,137 | |
Accounts receivable, net | |
| 113,376 | | |
| 94,182 | |
VAT taxes receivable | |
| 3,431 | | |
| 8,157 | |
Inventory | |
| 46,713 | | |
| 73,621 | |
Total current assets | |
| 172,135 | | |
| 193,097 | |
| |
| | | |
| | |
Property and equipment, net | |
| 11,543 | | |
| 13,667 | |
Operating lease right-of-use asset | |
| 19,855 | | |
| 23,438 | |
| |
| | | |
| | |
Total assets | |
$ | 203,533 | | |
$ | 230,202 | |
| |
| | | |
| | |
LIABILITIES AND STOCKHOLDERS' DEFICIT | |
| | | |
| | |
Current liabilities | |
| | | |
| | |
Accounts payable and accrued liabilities | |
$ | 407,925 | | |
$ | 555,220 | |
Due to related party | |
| 431,855 | | |
| 185,473 | |
Notes payable | |
| 113,575 | | |
| 13,443 | |
Line of credit | |
| 494,827 | | |
| — | |
Deferred revenue | |
| 15,792 | | |
| 22,107 | |
Current portion of operating lease right-of-use liability | |
| 8,607 | | |
| 8,230 | |
Total current liabilities | |
| 1,472,581 | | |
| 784,473 | |
Long-term liabilities | |
| | | |
| | |
Line of credit | |
| — | | |
| 293,298 | |
Promissory notes | |
| 238,528 | | |
| 229,194 | |
Promissory note - related party | |
| — | | |
| 84,377 | |
Non-redeemable convertible notes, net | |
| 523,038 | | |
| 517,621 | |
Operating lease right-of-use liability, net of current portion | |
| 11,248 | | |
| 15,208 | |
Total long-term liabilities | |
| 772,814 | | |
| 1,139,698 | |
| |
| | | |
| | |
Total liabilities | |
| 2,245,395 | | |
| 1,924,171 | |
| |
| | | |
| | |
Commitments and Contingencies | |
| — | | |
| — | |
| |
| | | |
| | |
Temporary equity | |
| | | |
| | |
Series A convertible preferred stock; $0.01 par value; 200,000 shares designated, 25,000 shares issued and outstanding, respectively | |
| 249,505 | | |
| 249,505 | |
Series B convertible preferred stock; $0.01 par value; 100,000 shares designated, 0 and 11,000 shares issued and outstanding, respectively | |
| — | | |
| 109,783 | |
Series C convertible preferred stock; $0.001 par value; 150,000 shares designated, 80,000 shares and 90,000 shares issued and outstanding, respectively | |
| 2,288,000 | | |
| 2,584,951 | |
Series D convertible preferred stock; $0.001 par value; 200,000 shares designated, 0 shares issued and outstanding, respectively | |
| — | | |
| — | |
Series E convertible preferred stock; $0.0001 par value; 300,000 shares designated, 0 shares issued and outstanding | |
| — | | |
| — | |
Total temporary equity | |
| 2,537,505 | | |
| 2,944,239 | |
| |
| | | |
| | |
Stockholder's deficit | |
| | | |
| | |
Preferred stock; $0.001 par value; 1,000,000 shares authorized, 0 issued and outstanding | |
| — | | |
| — | |
Common stock; $0.0001 par value; 12,000,000,000 shares authorized, 618,958,548 and 137,402,624 shares issued and outstanding, respectively | |
| 61,897 | | |
| 13,742 | |
Additional paid-in capital | |
| 80,304,216 | | |
| 78,895,425 | |
Common stock to be issued | |
| — | | |
| 336,000 | |
Accumulated other comprehensive income | |
| 11,605 | | |
| 39,141 | |
Accumulated deficit | |
| (84,957,085 | ) | |
| (83,922,516 | ) |
Total stockholders' deficit | |
| (4,579,367 | ) | |
| (4,638,208 | ) |
| |
| | | |
| | |
Total liabilities and stockholders' deficit | |
$ | 203,533 | | |
$ | 230,202 | |
| |
| | | |
| | |
The accompanying footnotes are an integral part of these unaudited condensed financial statements. | |
TWO HANDS CORPORATION |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) |
(Unaudited) |
| |
| | | |
| | | |
| | | |
| | |
| |
| For the three months ended June 30, | | |
| For the six months ended June 30, | |
| |
| 2023 | | |
| 2022 | | |
| 2023 | | |
| 2022 | |
| |
| | | |
| | | |
| | | |
| | |
Sales | |
$ | 197,324 | | |
$ | 190,691 | | |
$ | 372,769 | | |
$ | 389,730 | |
Cost of goods sold | |
| 185,108 | | |
| 196,969 | | |
| 345,104 | | |
| 375,494 | |
Gross profit | |
| 12,216 | | |
| (6,278 | ) | |
| 27,665 | | |
| 14,236 | |
| |
| | | |
| | | |
| | | |
| | |
Operating expenses | |
| | | |
| | | |
| | | |
| | |
General and administrative | |
| 277,327 | | |
| 14,021,263 | | |
| 643,033 | | |
| 14,781,176 | |
Total operating expenses | |
| 277,327 | | |
| 14,021,263 | | |
| 643,033 | | |
| 14,781,176 | |
| |
| | | |
| | | |
| | | |
| | |
Loss from operations | |
| (265,111 | ) | |
| (14,027,541 | ) | |
| (615,368 | ) | |
| (14,766,940 | ) |
| |
| | | |
| | | |
| | | |
| | |
Other income (expense) | |
| | | |
| | | |
| | | |
| | |
Amortization of debt discount and interest expense | |
| (38,774 | ) | |
| (32,570 | ) | |
| (76,451 | ) | |
| (62,768 | ) |
Gain on disposition | |
| 50,750 | | |
| — | | |
| 50,750 | | |
| — | |
Loss on settlement of debt | |
| (275,950 | ) | |
| (2,287,450 | ) | |
| (393,500 | ) | |
| (2,871,450 | ) |
Total other income (expense) | |
| (263,974 | ) | |
| (2,320,020 | ) | |
| (419,201 | ) | |
| (2,934,218 | ) |
| |
| | | |
| | | |
| | | |
| | |
Net loss attributed to Two Hands Corporation | |
| (529,085 | ) | |
| (16,347,561 | ) | |
| (1,034,569 | ) | |
| (17,701,158 | ) |
| |
| | | |
| | | |
| | | |
| | |
Less: deemed dividend - Series A Stock modification | |
| — | | |
| (1,396,721 | ) | |
| — | | |
| (1,396,721 | ) |
Add: deemed contribution - Series B Stock modification | |
| — | | |
| 1,354,515 | | |
| — | | |
| 1,354,515 | |
Add: deemed contribution - Series C Stock modification | |
| — | | |
| 834,001 | | |
| — | | |
| 834,001 | |
Add: deemed contribution - Series D Stock modification | |
| — | | |
| 749,085 | | |
| — | | |
| 749,085 | |
| |
| | | |
| | | |
| | | |
| | |
Net loss attributable to Two Hands Corporation common shareholders | |
$ | (529,085 | ) | |
$ | (14,806,681 | ) | |
$ | (1,034,569 | ) | |
$ | (16,160,278 | ) |
| |
| | | |
| | | |
| | | |
| | |
Other comprehensive income (loss) | |
| | | |
| | | |
| | | |
| | |
Foreign exchange income | |
| (20,448 | ) | |
| 2,884 | | |
| (27,536 | ) | |
| 1,701 | |
Total other comprehensive income | |
| (20,448 | ) | |
| 2,884 | | |
| (27,536 | ) | |
| 1,701 | |
| |
| | | |
| | | |
| | | |
| | |
Comprehensive loss | |
$ | (549,533 | ) | |
$ | (14,803,797 | ) | |
$ | (1,062,105 | ) | |
$ | (16,158,577 | ) |
| |
| | | |
| | | |
| | | |
| | |
Net loss per common share - basic and diluted | |
$ | (0.00 | ) | |
$ | (0.18 | ) | |
$ | (0.00 | ) | |
$ | (0.36 | ) |
| |
| | | |
| | | |
| | | |
| | |
Weighted average number of common shares outstanding - basic and diluted | |
| 315,394,461 | | |
| 82,169,404 | | |
| 238,787,933 | | |
| 44,674,229 | |
| |
| | | |
| | | |
| | | |
| | |
The accompanying footnotes are an integral part of these unaudited condensed financial statements. |
TWO HANDS CORPORATION |
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT |
For the three and six months ended June 30, 2023 and 2022 |
(Unaudited) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
| Common
Stock | |
| Common
Stock to be | | |
| Additional
Paid-in | | |
| Accumulated
Other Comprehensive | | |
| Accumulated | | |
| Total
Stockholders' | |
| |
| Shares | | |
| Amount | | |
| Issued | | |
| Capital | | |
| Income | | |
| Deficit | | |
| Deficit | |
Balance, March 31, 2023 | |
| 193,226,548 | | |
$ | 19,324 | | |
$ | 336,000 | | |
$ | 79,356,197 | | |
$ | 32,053 | | |
$ | (84,428,000 | ) | |
$ | (4,684,426 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Stock issued for conversion of non-redeemable convertible notes | |
| 417,700,000 | | |
| 41,770 | | |
| — | | |
| 275,950 | | |
| — | | |
| — | | |
| 317,720 | |
Stock issued for the conversion of Series B convertible preferred stock | |
| 4,000,000 | | |
| 400 | | |
| — | | |
| 39,521 | | |
| — | | |
| — | | |
| 39,921 | |
Stock issued for the conversion of Series Convertible preferred stock | |
| 4,000,000 | | |
| 400 | | |
| — | | |
| 296,551 | | |
| — | | |
| — | | |
| 296,951 | |
Stock issued to settle stock to be issued | |
| 32,000 | | |
| 3 | | |
| (336,000 | ) | |
| 335,997 | | |
| — | | |
| — | | |
| — | |
Foreign exchange loss | |
| — | | |
| — | | |
| — | | |
| — | | |
| (20,448 | ) | |
| — | | |
| (20,448 | ) |
Net loss | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (529,085 | ) | |
| (529,085 | ) |
Balance, June 30, 2023 | |
| 618,958,548 | | |
$ | 61,897 | | |
$ | — | | |
$ | 80,304,216 | | |
$ | 11,605 | | |
$ | (84,957,085 | ) | |
$ | (4,579,367 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
| Common
Stock | |
| Common
Stock to be | | |
| Additional
Paid-in | | |
| Accumulated
Other Comprehensive | | |
| Accumulated | | |
| Total
Stockholders' | |
| |
| Shares | | |
| Amount | | |
| Issued | | |
| Capital | | |
| Income | | |
| Deficit | | |
| Deficit | |
Balance, December 31, 2022 | |
| 137,402,624 | | |
$ | 13,742 | | |
$ | 336,000 | | |
$ | 78,895,425 | | |
$ | 39,141 | | |
$ | (83,922,516 | ) | |
$ | (4,638,208 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Stock issued for conversion of non-redeemable convertible notes | |
| 459,200,000 | | |
| 45,920 | | |
| — | | |
| 393,500 | | |
| — | | |
| — | | |
| 439,420 | |
Stock issued for settlement of debt - related party | |
| 7,323,924 | | |
| 732 | | |
| — | | |
| 274,061 | | |
| — | | |
| — | | |
| 274,793 | |
Stock issued for the conversion of Series B convertible preferred stock | |
| 11,000,000 | | |
| 1,100 | | |
| — | | |
| 108,682 | | |
| — | | |
| — | | |
| 109,782 | |
Stock issued for the conversion of Series Convertible preferred stock | |
| 4,000,000 | | |
| 400 | | |
| — | | |
| 296,551 | | |
| — | | |
| — | | |
| 296,951 | |
Stock issued to settle stock to be issued | |
| 32,000 | | |
| 3 | | |
| (336,000 | ) | |
| 335,997 | | |
| — | | |
| — | | |
| — | |
Foreign exchange loss | |
| — | | |
| — | | |
| — | | |
| — | | |
| (27,536 | ) | |
| — | | |
| (27,536 | ) |
Net loss | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (1,034,569 | ) | |
| (1,034,569 | ) |
Balance, June 30, 2023 | |
| 618,958,548 | | |
$ | 61,897 | | |
$ | — | | |
$ | 80,304,216 | | |
$ | 11,605 | | |
$ | (84,957,085 | ) | |
$ | (4,579,367 | ) |
The accompanying footnotes are an integral part of
these unaudited condensed financial statements.
TWO HANDS CORPORATION |
CONDENSED
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT (CONTINUED) |
For the three and six months ended June 30, 2023 and 2022 |
(Unaudited) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
| Common
Stock | |
| Common
Stock to be | | |
| Additional
Paid-in | | |
| Accumulated
Other Comprehensive | | |
| Accumulated | | |
| Total
Stockholders' | |
| |
| Shares | | |
| Amount | | |
| Issued | | |
| Capital | | |
| Income | | |
| Deficit | | |
| Deficit | |
Balance, March 31, 2022 | |
| 7,015,558 | | |
$ | 702 | | |
$ | 336,000 | | |
$ | 58,836,716 | | |
$ | 3,687 | | |
$ | (63,583,002 | ) | |
$ | (4,405,897 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Stock issued for conversion of non-redeemable convertible notes | |
| 18,400,000 | | |
| 1,840 | | |
| — | | |
| 2,287,450 | | |
| — | | |
| — | | |
| 2,289,290 | |
Stock issued for officer and director compensation | |
| 90,000,000 | | |
| 9,000 | | |
| — | | |
| 13,491,000 | | |
| — | | |
| — | | |
| 13,500,000 | |
Stock issued for the conversion of Series B Stock | |
| 4,000,000 | | |
| 400 | | |
| — | | |
| 39,521 | | |
| — | | |
| — | | |
| 39,921 | |
Stock issued for the conversion of Series D Stock | |
| 4,000,000 | | |
| 400 | | |
| — | | |
| 39,521 | | |
| — | | |
| — | | |
| 39,921 | |
Deemed dividend - Series A Stock modification | |
| — | | |
| — | | |
| — | | |
| (1,396,721 | ) | |
| — | | |
| — | | |
| (1,396,721 | ) |
Deemed contribution - Series B Stock modification | |
| — | | |
| — | | |
| — | | |
| 1,354,515 | | |
| — | | |
| — | | |
| 1,354,515 | |
Deemed contribution - Series C Stock modification | |
| — | | |
| — | | |
| — | | |
| 834,001 | | |
| — | | |
| — | | |
| 834,001 | |
Deemed contribution - Series D Stock modification | |
| — | | |
| — | | |
| — | | |
| 749,085 | | |
| — | | |
| — | | |
| 749,085 | |
Foreign exchange loss | |
| — | | |
| — | | |
| — | | |
| — | | |
| 2,884 | | |
| — | | |
| 2,884 | |
Net loss | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (16,347,561 | ) | |
| (16,347,561 | ) |
Balance, June 30, 2022 | |
| 123,415,558 | | |
$ | 12,342 | | |
$ | 336,000 | | |
$ | 76,235,088 | | |
$ | 6,571 | | |
$ | (79,930,563 | ) | |
$ | (3,340,562 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
| Common
Stock | |
| Common
Stock to be | | |
| Additional
Paid-in | | |
| Accumulated
Other Comprehensive | | |
| Accumulated | | |
| Total
Stockholders' | |
| |
| Shares | | |
| Amount | | |
| Issued | | |
| Capital | | |
| Income | | |
| Deficit | | |
| Deficit | |
Balance, December 31, 2021 | |
| 6,000,000 | | |
$ | 600 | | |
$ | 336,000 | | |
$ | 58,151,817 | | |
$ | 4,870 | | |
$ | (62,229,405 | ) | |
$ | (3,736,118 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Rounding on reverse split | |
| 5,558 | | |
| 1 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 1 | |
Stock issued for conversion of non-redeemable convertible notes | |
| 19,410,000 | | |
| 1,941 | | |
| — | | |
| 2,972,349 | | |
| — | | |
| — | | |
| 2,974,290 | |
Stock issued for officer and director compensation | |
| 90,000,000 | | |
| 9,000 | | |
| — | | |
| 13,491,000 | | |
| — | | |
| — | | |
| 13,500,000 | |
Stock issued for the conversion of Series B Stock | |
| 4,000,000 | | |
| 400 | | |
| — | | |
| 39,521 | | |
| — | | |
| — | | |
| 39,921 | |
Stock issued for the conversion of Series D Stock | |
| 4,000,000 | | |
| 400 | | |
| — | | |
| 39,521 | | |
| — | | |
| — | | |
| 39,921 | |
Deemed dividend - Series A Stock modification | |
| — | | |
| — | | |
| — | | |
| (1,396,721 | ) | |
| — | | |
| — | | |
| (1,396,721 | ) |
Deemed contribution - Series B Stock modification | |
| — | | |
| — | | |
| — | | |
| 1,354,515 | | |
| — | | |
| — | | |
| 1,354,515 | |
Deemed contribution - Series C Stock modification | |
| — | | |
| — | | |
| — | | |
| 834,001 | | |
| — | | |
| — | | |
| 834,001 | |
Deemed contribution - Series D Stock modification | |
| — | | |
| — | | |
| — | | |
| 749,085 | | |
| — | | |
| — | | |
| 749,085 | |
Foreign exchange loss | |
| — | | |
| — | | |
| — | | |
| — | | |
| 1,701 | | |
| — | | |
| 1,701 | |
Net loss | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (17,701,158 | ) | |
| (17,701,158 | ) |
Balance, June 30, 2022 | |
| 123,415,558 | | |
$ | 12,342 | | |
$ | 336,000 | | |
$ | 76,235,088 | | |
$ | 6,571 | | |
$ | (79,930,563 | ) | |
$ | (3,340,562 | ) |
The accompanying footnotes are an integral part of
these unaudited condensed financial statements.
TWO HANDS CORPORATION |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
(Unaudited) |
| |
| | | |
| | |
| |
| For the six months ended June 30, | |
| |
| 2023 | | |
| 2022 | |
Cash flows from operating activities | |
| | | |
| | |
Net loss | |
$ | (1,034,569 | ) | |
$ | (17,701,158 | ) |
Adjustments to reconcile net loss to cash used in operating activities | |
| | | |
| | |
| |
| | | |
| | |
Depreciation and amortization | |
| 6,524 | | |
| 5,806 | |
Bad debt | |
| (28,936 | ) | |
| 9,328 | |
Stock-based compensation | |
| — | | |
| 13,504,200 | |
Gain on disposition | |
| (50,750 | ) | |
| — | |
Amortization of debt discount | |
| 76,451 | | |
| 62,768 | |
Loss on settlement of debt | |
| 393,500 | | |
| 2,871,450 | |
Change in operating assets and liabilities | |
| | | |
| | |
Accounts and taxes receivable | |
| (46,125 | ) | |
| (35,362 | ) |
Prepaid expense | |
| — | | |
| 561,764 | |
Inventory | |
| 14,671 | | |
| 82,254 | |
Deferred revenue | |
| (6,748 | ) | |
| — | |
Accounts payable and accrued liabilities | |
| 367,021 | | |
| 136,291 | |
Operating lease right-of-use liability | |
| (4,100 | ) | |
| (4,179 | ) |
Net cash used in operating activities | |
| (313,061 | ) | |
| (506,838 | ) |
| |
| | | |
| | |
Cash flows from investing activities | |
| | | |
| | |
Net cash used in investing activities | |
| — | | |
| — | |
| |
| | | |
| | |
Cash flow from financing activities | |
| | | |
| | |
Advances from related party | |
| 52,266 | | |
| 97,079 | |
Repayment of advances to related party | |
| (20,749 | ) | |
| (71,239 | ) |
Proceeds from notes payable | |
| 105,114 | | |
| — | |
Repayment of notes payable | |
| (7,044 | ) | |
| — | |
Proceeds from promissory notes | |
| 174,685 | | |
| — | |
Net cash provided by financing activities | |
| 304,272 | | |
| 25,840 | |
| |
| | | |
| | |
Change in foreign exchange | |
| 267 | | |
| (3,166 | ) |
| |
| | | |
| | |
Net change in cash | |
| (8,522 | ) | |
| (484,164 | ) |
| |
| | | |
| | |
Cash, beginning of the period | |
| 17,137 | | |
| 533,295 | |
| |
| | | |
| | |
Cash, end of the period | |
$ | 8,615 | | |
$ | 49,131 | |
| |
| | | |
| | |
Cash paid during the year | |
| | | |
| | |
Interest paid | |
$ | — | | |
$ | — | |
Income taxes paid | |
$ | — | | |
$ | — | |
| |
| | | |
| | |
Supplemental disclosure of non-cash investing and financing activities | |
| | | |
| | |
Stock issued to settle due to related party | |
$ | 188,871 | | |
$ | — | |
Stock issued to settle promissory note - related party | |
$ | 85,922 | | |
$ | — | |
Stock issued to settle non-redeemable convertible notes | |
$ | 439,420 | | |
$ | 2,974,290 | |
Stock issued for prepaid expense | |
$ | — | | |
$ | 2,288,000 | |
Transfer of accounts payable and accrued liabilities to promissory notes | |
$ | — | | |
$ | 85,285 | |
Deemed dividend - Series A Stock modification | |
$ | — | | |
$ | 1,396,721 | |
Deemed contribution - Series B Stock modification | |
$ | — | | |
$ | 1,354,515 | |
Deemed contribution - Series C Stock modification | |
$ | — | | |
$ | 834,001 | |
Deemed contribution - Series D Stock modification | |
$ | — | | |
$ | 749,085 | |
The accompanying footnotes are an integral part of these unaudited condensed financial statements. |
TWO HANDS CORPORATION
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 entered into
an asset sale agreement with a non-related private corporation (“Purchaser”) whereby the Company sold the assets of gocart.city.
The sale included the e-commerce site, branding, supporting components of the Grocery Originals store and inventory. The ongoing sales
and client base gocart.city and Grocery Originals was transferred as part of the asset sale. The Company received net proceeds from the
sale of gocart.city assets of $64,319 (CAD $86,742). The net proceeds comprise of the settlement $127,731 (CAD $172,261) of accounts payable
and $63,412 (CAD $85,519) of account receivable with the Purchaser resulting in a gain of $50,750 (CAD $68,442). After the asset sale
was completed, the Company owed the Purchaser an additional $37,099 (CAD $49,099) in accounts payable which was not settled in the asset
sale agreement. The Company and the Purchase agreed the $37,099 amount was due in twelve equal monthly installments commencing July 1,
2023 without interest. After May 1, 2023, the Company continued 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 June 30, 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 six months ended June 30, 2023, the Company
incurred a net loss of $1,034,569
and used cash in operating activities of $313,061,
and on June 30, 2023, had stockholders’ deficit of $4,579,367 4,876,317 and an accumulated deficit of $84,957,085.
These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern for a period
of 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
June 30,
2023 | |
Revenue for the
six
months ended
June 30,
2023 |
Customer #1 | |
| 17 | % | |
| — | |
Customer #2 | |
| 11 | % | |
| — | |
Total concentration | |
| 28 | % | |
| —% | |
The following table summarizes accounts payable and
purchases concentrations:
| |
Accounts payable at
June 30,
2023 | |
Purchases for the six months ended
June 30, 2023 |
Supplier #1 | |
| 13 | % | |
| — | |
Supplier #2 | |
| 12 | % | |
| 23 | % |
Supplier #3 | |
| 12 | % | |
| — | |
Supplier #4 | |
| — | | |
| 20 | % |
Supplier #5 | |
| — | | |
| 14 | % |
Total concentration | |
| 37 | % | |
| 57 | % |
For the 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 June 30, 2023
and December 31, 2022 is $101,190 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 the interim periods. Any significant adjustment
that results from the reconciliation with annual physical inventory is disclosed. At June 30, 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 six months ended June 30, 2023 and 2022,
the Company had revenue of $372,769 and $389,730 respectively. In 2023, the Company recognized revenue of $13,167 from the sale of groceries
to consumers via the gocart.city online grocery delivery application and $359,602 from the sale of dry goods and produce to other businesses.
In 2022 the Company recognized revenue of $121,305 from the sale of groceries to consumers via the gocart.city online grocery delivery
application and $268,425 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 a
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.
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 June 30, 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 5,809,249,200 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 of
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 the 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.
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 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 six months ended June 30, 2023, the Company elected to convert $37,820 of principal and
interest into 378,200,000 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 $294,500 due to the requirement to record the share issuance at fair value on the date the shares were
issued. The condensed consolidated statement of operations includes interest expense of $18,626 and $21,567 for the six months
ended June 30, 2023 and 2022, respectively, and $9,365 and $10,843 for the three months ended June 30, 2023 and 2022, respectively. On
June 30, 2023 and December 31, 2022, the carrying amount of the Note is $168,614 (face value of $187,549 less $18,935 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 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 six months ended June 30, 2023, the Company elected to convert $8,100 of principal and interest into 81,000,000 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 $99,000 due to the
requirement to record the share issuance at fair value on the date the shares were issued. The condensed consolidated statement of operations
includes interest expense of $840 and $3,221 for the six months ended June 30, 2023 and 2022, respectively, and $422 and
$1,619 for the three months ended June 30, 2022 and 2021, respectively. On June 30, 2023 and December 31, 2022, the carrying
amount of the Note is $1,211 (face value of $2,065 less $854 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 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 condensed consolidated statement of
operations includes interest expense of $9,872 and $8,226 for the six months ended June 30, 2023 and 2022 respectively,
and $4,963 and $4,136 for the three months ended June 30, 2023 and 2022 respectively. On June 30, 2023 and December 31,
2022, the carrying amount of the Note is $109,405 (face value of $119,440 less $10,035 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 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 condensed consolidated statement of operations includes interest expense of $21,999 and $18,332 for
the six months ended June 30, 2023 and 2022, respectively, and $11,060 and $9,217 for the three months ended June 30, 2023 and
2022, respectively. On June 30, 2023 and December 31, 2022, the carrying amount of the Note is $243,808 (face value of $266,171 less
$22,363 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 2.25 years at June 30,
2023. The weighted-average discount rate was 3.96% at June 30, 2023.
The Company’s operating lease expires
in 2025. The following shows future lease payments for the remaining periods under operating lease at June 30, 2023:
Schedule of operating lease liability maturity | |
|
Periods ending December 31, | |
Operating Lease Commitments |
| 2023 | | |
$ | 10,471 | |
| 2024 | | |
| 10,471 | |
| 2025 | | |
| 7,854 | |
| Total operating lease commitments | | |
| 28,796 | |
| Less: imputed interest | | |
| (8,941 | ) |
| Total right-of-use liability | | |
$ | 19,855 | |
The Company’s discounted current right-of-use
lease liability and discounted non-current right-of-use lease liability at June 30, 2023 is $8,607 and $11,248, 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 June 30, 2023 and December 31, 2022,
the Line of Credit of $494,827 (principal $475,335 (CAD $629,083) and interest of $19,492) 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 $8,987 and $0 for the three months ended June 30, 2023 and 2022, respectively, and $15,780 and $0 for the six months ended June
30, 2023 and 2022, respectively.
NOTE 6 – NOTES PAYABLE
As of June 30, 2023 and December 31, 2022, notes payable
due to Piero Manzini, and The Cellular Connection Limited, a corporation controlled by Stuart Turk, totaling $113,575 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 June 30, 2023 and December 31, 2022, promissory
notes of $238,528 (principal $186,672 and interest of $51,856) 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 June 30, 2023 and December 31, 2022, promissory
note – related party of $0 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 of $85,922 (Note 10).
NOTE 8 – RELATED PARTY TRANSACTIONS
As of June 30, 2023 and December 31, 2022, advances
and accrued salary of $431,855 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 six months ended June 30, 2023 and 2022,
the Company issued advances due to related party for $52,266 of expenses paid on behalf of the Company and advances due to related party
were repaid by the Company with $20,749 in cash. In addition, the Company accrued salary of $399,739 due to Nadav Elituv for the six months
ended June 30, 2023. 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 six months ended June 30, 2022, the
Company issued advances due to related party for $97,079 of expenses paid on behalf of the Company and advances due to related party were
repaid by the Company with $71,239 in cash. In addition, the Company accrued salary of $99,013 due to Nadav Elituv for the six months
ended June 30, 2022 and issued a promissory note for $82,740 to settle due to related party.
During the six months ended June 30, 2023 and 2022,
the Company paid Linus Creative Services, a business controlled by Bradley Southam, a director of the Company, $2,720 and $16,984, 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 six months ended June 30, 2023 and 2022 is $0 and $13,504,200, 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.
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 June 30, 2023 and December 31, 2022, since share settlement is not within control of the Company.
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 six months ended June 30, 2023, the Company
elected to convert $45,920 of principal and interest of non-redeemable convertible notes into 459,200,000 shares of common stock of the
Company with a fair value of $439,420 resulting in a loss of extinguishment of debt of $393,500.
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.
On May 12, 2023, the Company issued 32,000 shares
of common stock to satisfy an obligation for common stock to be issued with a carrying value of $336,000.
On May 16, 2023, the Holder of Series B Stock elected
to convert 4,000 shares of Series B Stock into 4,000,000 shares of common stock resulting in a $39,921 reduction in the carrying value
of Series B Stock.
On June 30, 2023, 10,000 shares of Series C Stock
automatically converted into 4,000,000 shares of common stock in accordance with the Certificate of Designation resulting in a $296,951
reduction in the carrying value of Series C Stock.
Common stock to be issued
On June 30, 2023 and December 31, 2022, the Company
had an obligation to issue 0 shares of common stock valued at $0 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 July 1, 2023 to August 6, 2023, the Company
elected to convert $41,160 of principal and interest of non-redeemable convertible notes into 411,600,000 shares of common stock of
the Company with a fair value of $114,090 resulting in a loss of extinguishment of debt of $72,930.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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. All three of such branches of the Company’s business share
industry standard warehouse storage space and inventory. The Company’s inventory is updated continuously and generally consists
of produce, meats, pantry items, bakery & pastry goods, gluten-free goods, and organic items, acquired from various different suppliers
in Canada and internationally, with whom the Company and its principals have cultivated long-term relationships.
gocart.city
gocart.city is the Company’s online delivery
marketplace, allowing consumers to shop online and have their groceries delivered. The gocart.city online platform stores all inventory
in the Company’s warehouse located at its head office in Mississauga. The aim of gocart.city is to deliver fresh and high-quality
food products directly to retail consumers throughout Southern Ontario. The Company recently engaged local renowned chef, Grace DiFede,
to curate a new line of meal kits and bundles to sell on the gocart.city platform alongside the Company’s other grocery essentials.
The gocart.city platform is available online and through
applications for handheld devices supporting iOS or Android. The features and functions of gocart.city include customers having the ability
to search for products by category and name, customers saving items in their cart and being able to share their cart with others, and
being able to opt-in to digital weekly alerts that provide information on promotions and discounts on certain products. gocart.city also
includes standard payment options for customers, such as PayPal, American Express and Visa.
The Company also employs a social media manager to
oversee and increase engagement with customers by using platforms such as Facebook, Twitter, Instagram and Google. The ads that are posted
on these platforms are generic branding related to the Company, as well as the promotion of particular sale items. Moreover, the Company
has agreements with SRAX, Inc. and Adfuel Media Inc. to boost such engagement.
The Company sold the gocarty.city branch on May 1,
2023.
Grocery Originals
Grocery Originals is the Company’s brick-and-mortar
grocery store located in Mississauga Ontario at the site of the Company’s warehouse. Grocery Originals was originally intended for
curbside pickup but has expanded into a full service store, that includes a deli, cold storage, a stone pizza oven, and offering a wide
variety of fresh and specialty meals curated by Grace Di Fede.
The Company sold the Grocery Originals branch on May
1, 2023.
Cuore Food Services
Cuore Food Services is the Company’s wholesale
food distribution branch. Cuore Food Services uses inventory from the Company’s warehouse as well as inventory it acquires on an
ad hoc basis, and focuses on bulk delivery of goods to food service business such as restaurants, hotels, event planning/hosting businesses.
Orders distributed through Cuore Food Services can be made over the phone or online through a different front-end of the gocart.city platform.
On May 1, 2023, the Company sold its gocarty.city
and Grocery Originals branches. The Company continued Cuore Food Services after May 1, 2023.
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.
Management's Plan of Operation
The Company is focused exclusively on the grocery
market through its on-demand grocery business: Cuore Food Services.
Products and Services
The Company plans to continue to expand it reach to
additional customers and geographies across Canada and continue to enhance its product offering with fresh, natural and organic foods.
Operations and Logistics
The company plans to expand storage and warehousing,
expand warehouse staff, add more delivery trucks and expand the delivery area.
Critical Accounting Policies and Estimates
The preparation of financial statements and related
disclosures in conformity with accounting principles generally accepted in the United States requires management to make estimates and
assumptions that affect the amounts reported in the Financial Statements and accompanying notes. Estimates are used for, but not limited
to, the accounting for the allowance for doubtful accounts, inventories, impairment of long-term assets, stock-based compensation, derivatives,
income taxes and loss contingencies. Management bases its estimates on historical experience and on various other assumptions that are
believed to be reasonable under the circumstances. Actual results could differ from these estimates under different assumptions or conditions.
We believe the following critical accounting policies,
among others, may be impacted significantly by judgment, assumptions and estimates used in the preparation of the Financial Statements:
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.
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 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.
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.
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, 2014. 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.
COMPARISON OF RESULTS FOR THE THREE MONTHS ENDED JUNE
30, 2023 AND 2022
Sales, Cost of goods sold, Gross profit:
| |
Three months ended June 30, | |
Change |
| |
2023
$ | |
2022
$ | |
$ | |
% |
Sales | |
| 197,324 | | |
| 190,691 | | |
| 6,633 | | |
| 3 | |
Cost of goods sold | |
| 185,108 | | |
| 196,969 | | |
| (11,861 | ) | |
| (6 | ) |
Gross profit | |
| 12,216 | | |
| (6,278 | ) | |
| 18,494 | | |
| (295 | ) |
Gross profit % | |
| 6.2 | % | |
| (3.3 | )% | |
| | | |
| | |
Breakdown of sales by branch:
| |
Three months ended June 30, | |
Change |
| |
2023
$ | |
2022
$ | |
$ | |
% |
gocart.city – online delivery | |
| 362 | | |
| 54,677 | | |
| (54,315 | ) | |
| (99 | ) |
Grocery Originals and Cuore Food Service – retail and wholesale distribution | |
| 196,962 | | |
| 136,014 | | |
| 60,948 | | |
| 45 | |
Total sales | |
| 197,324 | | |
| 190,691 | | |
| 6,633 | | |
| 3 | |
The gocart.city grocery delivery application was released
in early June 2020 and gocart.city wholesale commenced sale of dry goods and produce to other businesses in July 2020. Our revenue from
gocart.city – online delivery has decreased from the previous period because we (1) have decreased advertising expenditures as part
of our overall plan to reduce expenses (2) have concentrated our efforts on our wholesale business and (3) on May 1, 2023, gocart.city
and Grocery Originals was sold.
Cost of goods sold as a percentage of sales decreased
from 2022 to 2023. This was due to the write-off of expired inventory in 2022.
Operating expenses:
| |
Three months ended June 30, | |
Change |
| |
2023
$ | |
2022
$ | |
$ | |
% |
Salaries and benefits | |
| 172,852 | | |
| 13,571,665 | | |
| (13,398,813 | ) | |
| (99 | ) |
Occupancy expense | |
| 12,375 | | |
| 25,309 | | |
| (12,934 | ) | |
| (51 | ) |
Advertising and travel | |
| 11,930 | | |
| 19,169 | | |
| (7,239 | ) | |
| (38 | ) |
Auto expenses | |
| 5,502 | | |
| 11,739 | | |
| (6,237 | ) | |
| (53 | ) |
Consulting | |
| 67,018 | | |
| 282,145 | | |
| (215,127 | ) | |
| (76 | ) |
Depreciation and Amortization | |
| 3,219 | | |
| 747 | | |
| 2,472 | | |
| 331 | |
Bad debt | |
| (31,940 | ) | |
| 9,328 | | |
| (41,268 | ) | |
| (442 | ) |
Office and general expenses | |
| 14,674 | | |
| 21,478 | | |
| (6,804 | ) | |
| (32 | ) |
Professional fees | |
| 19,571 | | |
| 58,199 | | |
| (38,628 | ) | |
| (66 | ) |
Freight and delivery | |
| 2,126 | | |
| 21,484 | | |
| (19,358 | ) | |
| (90 | ) |
Total operating expenses | |
| 277,327 | | |
| 14,021,263 | | |
| (13,743,936 | ) | |
| (98 | ) |
Our total operating expenses for the three months
ended June 30, 2023 was $277,327, compared to $14,021,263 for the three months ended June 30, 2022, respectively. The decrease in total
operating expense is primarily due to an decrease in expenditure for prepaid advertising credits with SRAX Inc. and stock-based compensation
paid to Nadav Elituv, our Chief Executive Officer.
Salaries and benefits for the three months ended June
30, 2023, comprise primarily of accrued but unpaid salary due to Nadav Elituv, our Chief Executive Officer, of $150,000.
Salaries and benefits for the three months ended June
30, 2022, comprise primarily of stock issued to Nadav Elituv, our Chief Executive Officer with a fair value of $13,500,000.
Advertising and travel includes expenses for online
advertising, website, meals and entertainment.
For the three months ended June 30, 2023, consulting
comprises primarily stock-based compensation expense (i) $0 for the expenditure of advertising credits with SRAX, Inc. (ii) $49,091 for
consulting fees and (iii) $17,927 paid to contractors to manage our grocery business.
For the three months ended June 30, 2022, consulting
comprises primarily stock-based compensation expense (i) $143,184 for the expenditure of advertising credits with SRAX, Inc. (ii) $65,445
for consulting fees and (iii) $73,473 paid to contractors to manage our grocery business.
Professional fees comprise of audit, legal, filing
fees and contract accountant. The decrease in professional fees is primarily due to legal fees related to the prospectus dated April 21,
2022 filed with Ontario Securities Commission and British Columbia Securities Commission and our listing application with the Canadian
Securities Exchange.
Other income (expense):
| |
Three months ended June 30, | |
Change |
| |
2023
$ | |
2022
$ | |
$ | |
% |
Amortization of debt discount and interest expense | |
| (38,774 | ) | |
| (32,570 | ) | |
| (6,204 | ) | |
| 19 | |
Loss on settlement of debt | |
| (275,950 | ) | |
| (2,287,450 | ) | |
| 2,011,500 | | |
| (88 | ) |
Gain on disposition | |
| 50,750 | | |
| — | | |
| 50,750 | | |
| — | |
Total operating expenses | |
| (263,974 | ) | |
| (2,320,020 | ) | |
| 2,056,044 | | |
| (89 | ) |
Amortization of debt discount and interest expense
for the three months ended June 30, 2023 was $38,774, compared to $32,570 for the three months ended June 30, 2022. Amortization of debt
discount and interest expense relates to the issuance of non-redeemable convertible notes and promissory notes.
During the three months ended June 30, 2023 and 2022,
the Company elected to convert $41,770 and $1,840 of principal and interest of a non-redeemable convertible note into 417,700,000 and
18,400,000 shares of common stock of the Company resulting in a loss on settlement of debt of $275,950 and $2,287,450, respectively.
During the three months ended June 30, 2023 the Company
received net proceeds from the sale of gocart.city assets of $64,319 (CAD $86,742). The net proceeds comprise of the settlement $127,731
(CAD $172,261) of accounts payable and $63,412 (CAD $85,519) of account receivable with the Purchaser resulting in a gain of $50,750 (CAD
$68,442).
Net loss for the period:
| |
Three months ended June 30, | |
Change |
| |
2023
$ | |
2022
$ | |
$ | |
% |
Net loss for the period | |
| (529,085 | ) | |
| (16,347,561 | ) | |
| 15,818,476 | | |
| (97 | ) |
Our net loss for the three months ended June 30, 2023
was $529,085, compared to $16,347,561 for the three months ended June 30, 2022, respectively. Our losses during the three months ended
June 30, 2023 and 2022 are primarily due to costs associated with professional fees, compensation due to our CEO, interest expense and
loss on settlement of debt.
COMPARISON OF RESULTS FOR THE SIX MONTHS ENDED JUNE
30, 2023 AND 2022
Sales, Cost of goods sold, Gross profit:
| |
Six months ended June 30, | |
Change |
| |
2023
$ | |
2022
$ | |
$ | |
% |
Sales | |
| 372,769 | | |
| 389,730 | | |
| (16,961 | ) | |
| (4 | ) |
Cost of goods sold | |
| 345,104 | | |
| 375,494 | | |
| (30,390 | ) | |
| (8 | ) |
Gross profit | |
| 27,665 | | |
| 14,236 | | |
| 13,429 | | |
| 94 | |
Gross profit % | |
| 7.4 | % | |
| 3.7 | % | |
| | | |
| | |
Breakdown of sales by branch:
| |
Six months ended June 30, | |
Change |
| |
2023
$ | |
2022
$ | |
$ | |
% |
gocart.city – online delivery | |
| 13,167 | | |
| 121,305 | | |
| (108,137 | ) | |
| (89 | ) |
Grocery Originals and Cuore Food Service – retail and wholesale distribution | |
| 359,602 | | |
| 268,425 | | |
| 91,176 | | |
| 34 | |
Total sales | |
| 372,769 | | |
| 389,730 | | |
| (16,961 | ) | |
| (4 | ) |
The gocart.city grocery delivery application was released
in early June 2020 and gocart.city wholesale commenced sale of dry goods and produce to other businesses in July 2020. Our revenue from
gocart.city – online delivery has decrease from the previous period because we (1) have decreased advertising expenditures as part
of our overall plan to reduce expenses (2) have concentrated our efforts on our wholesale business and (3) On May 1, 2023, gocart.city
and Grocery Originals was sold.
Operating expenses:
| |
Six months ended June 30, | |
Change |
| |
2023
$ | |
2022
$ | |
$ | |
% |
Salaries and benefits | |
| 368,422 | | |
| 13,634,471 | | |
| (13,266,049 | ) | |
| (97 | ) |
Occupancy expense | |
| 30,800 | | |
| 53,955 | | |
| (23,155 | ) | |
| (43 | ) |
Advertising and travel | |
| 18,525 | | |
| 66,286 | | |
| (47,761 | ) | |
| (72 | ) |
Auto expenses | |
| 13,624 | | |
| 23,757 | | |
| (10,133 | ) | |
| (43 | ) |
Consulting | |
| 127,099 | | |
| 706,289 | | |
| (579,190 | ) | |
| (82 | ) |
Depreciation and Amortization | |
| 6,524 | | |
| 3,706 | | |
| 2,818 | | |
| 76 | |
Bad debt | |
| (28,937 | ) | |
| 9,328 | | |
| (38,265 | ) | |
| (410 | ) |
Office and general expenses | |
| 28,001 | | |
| 96,208 | | |
| (68,207 | ) | |
| (71 | ) |
Professional fees | |
| 72,168 | | |
| 140,521 | | |
| (68,353 | ) | |
| (49 | ) |
Freight and delivery | |
| 6,807 | | |
| 46,655 | | |
| (39,848 | ) | |
| (85 | ) |
Total operating expenses | |
| 643,033 | | |
| 14,781,176 | | |
| (14,138,143 | ) | |
| (96 | ) |
Our total operating expenses for the six months ended
June 30, 2023 was $643,033, compared to $14,781,176 for the six months ended June 30, 2022, respectively. The decrease in total operating
expense is primarily due to an decrease in expenditure for prepaid advertising credits with SRAX Inc.
Salaries and benefits for the six months ended June
30, 2023, comprise primarily of accrued but unpaid salary due to Nadav Elituv, our Chief Executive Officer, of $300,000.
Salaries and benefits for the six months ended June
30, 2022, comprise primarily of stock issued to Nadav Elituv, our Chief Executive Officer with a fair value of $13,504,200.
Advertising and travel includes expenses for online
advertising, website, meals and entertainment.
For the six months ended June 30, 2023, consulting
comprises primarily stock-based compensation expense (i) $0 for the expenditure of advertising credits with SRAX, Inc. (ii) $97,878 for
consulting fees and (iii) $29,221 paid to contractors to manage our grocery business.
For the six months ended June 30, 2022, consulting
comprises primarily stock-based compensation expense (i) $415,866 for the expenditure of advertising credits with SRAX, Inc. (ii) $130,171
for consulting fees and (iii) $156,051 paid to contractors to manage our grocery business.
Professional fees comprise of audit, legal, filing
fees and contract accountant. The decrease in professional fees is primarily due to legal fees related to the prospectus dated April 21,
2022 filed with Ontario Securities Commission and British Columbia Securities Commission and our listing application with the Canadian
Securities Exchange.
Other income (expense):
| |
Six months ended June 30, | |
Change |
| |
2023
$ | |
2022
$ | |
$ | |
% |
Amortization of debt discount and interest expense | |
| (76,451 | ) | |
| (62,768 | ) | |
| (13,683 | ) | |
| 22 | |
Loss on settlement of debt | |
| (393,500 | ) | |
| (2,871,450 | ) | |
| 2,477,950 | | |
| (86 | ) |
Gain on disposition | |
| 50,750 | | |
| — | | |
| 50,750 | | |
| — | |
Total operating expenses | |
| (419,201 | ) | |
| (2,934,218 | ) | |
| 2,515,017 | | |
| (86 | ) |
Amortization of debt discount and interest expense
for the six months ended June 30, 2023 was $76,451, compared to $62,768 for the six months ended June 30, 2022. Amortization of debt discount
and interest expense relates to the issuance of non-redeemable convertible notes and promissory notes.
During the six months ended June 30, 2023 and 2022,
the Company elected to convert $45,920 and $2,871,450 of principal and interest of a non-redeemable convertible note into 459,200,000
and 19,410,000 shares of common stock of the Company resulting in a loss on settlement of debt of $393,500 and $2,871,450, respectively.
During the six months ended June 30, 2023 the
Company received net proceeds from the sale of gocart.city assets of $64,076 (CAD $86,742). The net proceeds comprise of the settlement
$127,249 (CAD $172,261) of accounts payable and $63,173 (CAD $85,519) of account receivable with the Purchaser resulting in a gain of
$50,750 (CAD $68,442).
Net loss for the period:
| |
Six months ended June 30, | |
Change |
| |
2023
$ | |
2022
$ | |
$ | |
% |
Net loss for the period | |
| (1,034,569 | ) | |
| (17,701,158 | ) | |
| 16,666,590 | | |
| (94 | ) |
Our net loss for the six months ended June 30, 2023
was $1,034,569, compared to $17,701,158 for the six months ended June 30, 2022, respectively. Our losses during the six months ended June
30, 2023 and 2022 are primarily due to costs associated with professional fees, compensation due to our CEO, interest expense and loss
on settlement of debt.
QUARTERLY RESULTS OF OPERATIONS
The following is a summary of selected quarterly information
that has been derived from the financial statements of the Company. This summary should be read in conjunction with the consolidated financial
statements of the Company.
Quarter Ended | |
June 301, 2023 | |
March 31, 2023 | |
December 31, 2022 | |
September 30, 2022 | |
June 30, 2022 | |
March 31, 2022 | |
December 31, 2021 | |
September 30, 2021 |
Sales | |
$ | 197,324 | | |
$ | 175,446 | | |
$ | 168,790 | | |
$ | 172,782 | | |
$ | 190,691 | | |
$ | 199,039 | | |
$ | 324,748 | | |
$ | 241,417 | |
Gross profit | |
$ | 12,216 | | |
$ | 15,449 | | |
$ | 21,299 | | |
$ | 13,659 | | |
$ | (6,278 | ) | |
$ | 20,514 | | |
$ | 19,117 | | |
$ | 39,808 | |
Operating expenses | |
$ | (277,327 | ) | |
$ | (365,706 | ) | |
$ | (2,759,699 | ) | |
$ | (304,452 | ) | |
$ | (14,021,263 | ) | |
$ | (759,913 | ) | |
$ | (1,270,225 | ) | |
$ | (693,259 | ) |
Other income (expense) | |
$ | (263,974 | ) | |
$ | (155,227 | ) | |
$ | (194,173 | ) | |
$ | (768,587 | ) | |
$ | (2,320,020 | ) | |
$ | (614,198 | ) | |
$ | (2,155,703 | ) | |
$ | (7,397,246 | ) |
Net loss for the period | |
$ | (529,085 | ) | |
$ | (505,484 | ) | |
$ | (2,932,573 | ) | |
$ | (1,059,380 | ) | |
$ | (16,347,561 | ) | |
$ | (1,353,597 | ) | |
$ | (3,406,811 | ) | |
$ | (8,050,697 | ) |
Basic and diluted net loss per share | |
$ | (0.00 | ) | |
$ | (0.00 | ) | |
$ | (0.02 | ) | |
$ | (0.01 | ) | |
$ | (0.18 | ) | |
$ | (0.20 | ) | |
$ | (0.63 | ) | |
$ | (2.68 | ) |
LIQUIDITY AND CAPITAL RESOURCES
For the six months ended June 30, 2023
Cash flows used in operating activities
| |
Six months ended June 30, | |
Change |
| |
2023
$ | |
2022
$ | |
$ | |
% |
Net cash used in operating activities | |
| (313,061 | ) | |
| (506,838 | ) | |
| 193,777 | | |
| (38 | ) |
Our net cash used in operating activities for the
six months ended June 30, 2023 and 2022 is $313,061 and $506,838, respectively. Our net loss for the six months ended June 30, 2023 of
$1,034,569 was the main contributing factor for our negative cash flow. We were able to mostly offset the cash used in operating activities
by using our stock to pay for expenses such as, amortization of debt discount of $76,451 and loss on debt settlement of $393,500.
Cash flows used in investing activities
| |
| Six months ended June 30, | | |
| Change | | |
| | |
| |
| 2023
$ | $ | |
| 2022
$ |
| |
| $ | | |
| % | |
Net cash used in investing activities | |
| — | | |
| — | | |
| — | | |
| — | |
Our net cash (used in) provided by investing activities
for the six months ended June 30, 2023 and 2022 is $0.
Cash flows from financing activities
| |
Six months ended June 30, | |
Change |
| |
2023
$ | |
2022
$ | |
$ | |
% |
Net cash from financing activities | |
| 304,272 | | |
| 25,840 | | |
| 278,432 | | |
| 1,078 | |
Our net cash provided by financing activities for
the six months ended June 30, 2023 and 2022 is $304,272 and $25,840, respectively.
During the six months ended June 30, 2023, the Company
received $174,685 (CAD $235,583) in cash from its line of credit with The Cellular Connection Ltd. dated April 14, 2022, net cash advances
from related party of $31,517 and net proceeds from notes payable of $98,070. The cash advances are non-interest bearing, unsecured and
have no specific terms of repayment.
As of June 30, 2023, we had cash of $8,615, working
capital (deficiency) of $(1,300,446) and total liabilities of $2,245,395.
Our working capital as of June 30, 2023 and December
31, 2022 is as follows:
| |
June 30,
2023 | |
December 31,
2022 |
Current assets | |
$ | 172,135 | | |
$ | 193,097 | |
Current liabilities | |
| 1,472,581 | | |
| 784,473 | |
Working capital (Deficiency) | |
$ | (1,300,446 | ) | |
$ | (591,376 | ) |
The Company is continuing to focus improving cash
flows from operations by reducing incentives to customers, by making purchases from different suppliers, accelerating the collection of
accounts receivable, reducing expenses, managing accounts payable balances and by paying our officers, directors, consultants and staff
with our stock.
The Company’s financial statements have been
prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities
in the normal course of business. During the six months ended June 30, 2023, the Company incurred a net loss of $1,034,569 and used cash
in operating activities of $313,061, and on June 30, 2023, had stockholders’ deficit of $4,579,367 and an accumulated deficit of
$84,957,085. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern within
one year of the date that the financial statements are issued. The Company’s independent registered public accounting firm, in their
report on the Company’s financial statements for the six months ended June 30, 2023, expressed substantial doubt about the Company’s
ability to continue as a going concern. The Company’s financial statements do not include any adjustments that might result from
the outcome of this uncertainty should we be unable to continue as a going concern.
Over the next 12 months we expect to spend approximately
$268,000 in cash for legal, accounting and related services and to implement our business plan. We hope to be able to compensate our independent
contractors with stock-based compensation, which will not require us to use our cash, although there can be no assurances that we will
be successful in these efforts.
| |
Cash Required to Implement of Business Plan |
General and Administration | |
$ | 268,000 | |
Total Estimated Cash Expenditures | |
$ | 268,000 | |
On April 14, 2022, the Company entered into a binding
Line of Credit with The Cellular Connection Ltd. Pursuant to the Line of Credit, the Company can borrow from the Lender up to CAD $90,499
(CAD $750,000 available on the Line of Credit less CAD $659,501 of funds drawn and outstanding at August 6, 2023) in principal. If required,
we expect to be able to secure additional capital through advances from our Chief Executive Officer, note holders, shareholders and others
in order to pay expenses such as organizational costs, filing fees, accounting fees and legal fees, however, we do not have any written
or oral agreements with any other third parties which require them to fund our operations. Although there can be no assurances that we
will be able to obtain such funds in the future, the Company has been able to secure financing to continue operations since its inception
on April 3, 2009. We are currently quoted on OTC Pink.. If we need additional capital in the next twelve months and if we cannot raise
such capital on acceptable terms, we may have to curtail our operations or terminate our business entirely.
The inability to obtain financing or generate sufficient
cash from operations could require us to reduce or eliminate expenditures for developing products and services, or otherwise curtail or
discontinue our operations, which could have a material adverse effect on our business, financial condition and results of operations.
Furthermore, to the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of
such securities may result in dilution to existing stockholders. If we raise additional funds through the issuance of debt securities,
these securities may have rights, preferences and privileges senior to holders of our common stock and the terms of such debt could impose
restrictions on our operations. Regardless of whether our cash assets prove to be inadequate to meet our operational needs, we may seek
to compensate providers of services by issuing stock in lieu of cash, which may also result in dilution to existing stockholders.
Our common stock started trading over the counter
and has been quoted on the Over-The Counter Bulletin Board since February 17, 2011. The stock currently trades under the symbol “TWOH.OB.”
Commitments for future capital expenditures at June
30, 2023 is as follows:
| |
Payments Due by Period |
Contractual obligations | |
Total $ | |
Less than 1 year $ | |
1 - 3 years $ | |
4 – 5 years $ | |
After 5 years $ |
Accounts payable and accrued liabilities | |
| 407,924 | | |
| 407,924 | | |
| — | | |
| — | | |
| — | |
Debt | |
| 1,278,785 | | |
| 1,040,257 | | |
| 238,528 | | |
| — | | |
| — | |
Deferred revenue | |
| 15,792 | | |
| 15,792 | | |
| — | | |
| — | | |
| — | |
Non-redeemable convertible notes | |
| 523,038 | | |
| — | | |
| 523,038 | | |
| — | | |
| — | |
Financial lease Obligations | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
Operating leases(1) | |
| 19,855 | | |
| 8,607 | | |
| 11,248 | | |
| — | | |
| — | |
Purchase obligations | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
Total contractual obligations | |
| 2,245,394 | | |
| 1,472,580 | | |
| 772,814 | | |
| — | | |
| — | |
Notes:
| (1) | Leases for retail space, equipment and warehousing is currently month to month. Deliveries are currently
outsourced. |
OPERATING CAPITAL AND CAPITAL EXPENDITURE REQUIREMENTS
We are currently funding our operations by way of
cash advances from our Chief Executive Officer, note holders, shareholders and others. We hope to be able to compensate our independent
contractors with stock-based compensation, which will not require us to use our cash, although there can be no assurances that we will
be successful in these efforts. On April 14, 2022, the Company entered into a binding Line of Credit with The Cellular Connection Ltd.
Pursuant to the Line of Credit, the Company can borrow from the Lender up to up to CAD $90,499 (CAD $750,000 available on the Line of
Credit less CAD $659,501 of funds drawn and outstanding at August 6, 2023) in principal. We believe our current cash balance and the Line
of Credit is sufficient to fund our operations during the next 12 months The loans from our Chief Executive Officer, note holders, shareholders
and others are unsecured and non-interest bearing and have no set terms of repayment. Our common stock started trading over the counter
and has been quoted on the Over-The Counter Bulletin Board since February 17, 2011. The stock currently trades under the symbol “TWOH.OB.”
RELATED PARTY TRANSACTIONS
Six months ended June 30, 2023 and 2022
Due to Related Party
As of June 30, 2023 and December 31, 2022, advances
and accrued salary of $431,855 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 six months ended June 30, 2023 and 2022,
the Company issued advances due to related party for $52,266 of expenses paid on behalf of the Company and advances due to related party
were repaid by the Company with $20,749 in cash. In addition, the Company accrued salary of $399,739 due to Nadav Elituv for the six months
ended June 30, 2023. 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 six months ended June 30, 2022, the
Company issued advances due to related party for $97,079 of expenses paid on behalf of the Company and advances due to related party were
repaid by the Company with $71,239 in cash. In addition, the Company accrued salary of $99,013 due to Nadav Elituv for the six months
ended June 30, 2022 and issued a promissory note for $82,740 to settle due to related party.
During the six months ended June 30, 2023 and 2022,
the Company paid Linus Creative Services, a business controlled by Bradley Southam, a director of the Company, $2,720 and $16,984, respectively,
for advertising services.
Promissory Notes – Related Party
As of June 30, 2023 and December 31, 2022,
promissory note – related party of $0 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 of $85,922 (Note
10).
Our policy with regard to transactions with related
persons or entities is that such transactions must be on terms no less favorable than could be obtained from non-related persons.
The above related party transactions are not necessarily
indicative of the amounts that would have been incurred had a comparable transaction been entered into with an independent party. The
terms of these transactions were more favorable than would have been attained if the transactions were negotiated at arm's length.
PROPOSED TRANSACTIONS
The Company is not anticipating any transactions.
CHANGES IN ACCOUNTING POLICIES INCLUDING INITIAL ADOPTION
Refer to Note 2 in the consolidated financial statements
for the six months ended June 30, 2023 and Note 2 in the consolidated financial statement for the year ended December 31, 2022 for information
on accounting policies.
FINANCIAL INSTRUMENTS
The main risks of the Company’s financial instrument
are exposed to are credit risk, market risk, foreign exchange risk, and liquidity risk.
Credit risk
The Company’s credit risk is primarily attributable
to trade receivables. Trade receivables comprise amounts due from other businesses from the sale of groceries and dry goods. The Company
mitigates credit risk through approvals, limits and monitoring. The amounts disclosed in the consolidated balance sheet are net of allowances
for expected credit losses, estimated by the Company’s management based on past experience and specific circumstances of the customer.
The Company manages credit risk for cash by placing deposits at major Canadian financial institutions.
Market risk
Market risk is the risk that changes in market prices
and interest rates will affect the Company’s net earnings or the value of financial instruments. These risks are generally outside
the control of the Company. The objective of the Company is to mitigate market risk exposures within acceptable limits, while maximizing
returns. The Company’s market risk consists of risks from changes in foreign exchange rates, interest rates and market prices that
affect its financial liabilities, financial assets and future transactions.
Refer to Note 2 in the consolidated financial statements
for the six months ended June 30, 2023 and Note 2 in the consolidated financial statements for the year ended December 31, 2022 for information
on market risk.
Foreign Exchange risk
Our revenue is derived from operations in Canada.
Our consolidated financial statements are presented in U.S. dollars and our liabilities other than trade payables are primarily due in
U.S. dollars. The revenue we earn in Canadian dollars is adversely impacted by the increase in the value of the U.S. dollar relative to
the Canadian dollar.
Liquidity risk
Liquidity risk relates to the risk the Company will
encounter difficulty in meeting its obligations associated with financial liabilities. The financial liabilities on our consolidated balance
sheets consist of accounts payable and accrued liabilities, due to related party, notes payable, convertible notes, net, derivative liabilities,
promissory notes, promissory notes – related party and non-redeemable convertible notes, Management monitors cash flow requirements
and future cash flow forecasts to ensure it has access to funds through its existing cash and from operations to meet operational and
financial obligations. The Company believes it has sufficient liquidity to meet its cash requirements for the next twelve months.
OUTSTANDING SHARE DATA
As of August 6, 2023, the following securities were
outstanding:
Common stock: 1,030,558,548 shares
Series A Convertible Preferred Stock: 25,000
Series C Convertible Preferred Stock: 80,000
OFF-BALANCE SHEET TRANSACTIONS
We currently have no off-balance sheet arrangements
that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition,
revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
As a Smaller Reporting Company, as defined by Rule
12b-2 of the Exchange Act and in Item 10(f)(1) of Regulation S-K, we are electing scaled disclosure reporting obligations and therefore
are not required to provide the information requested by this Item.
ITEM 4T. CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
As required by Rule 13a-15 of the Securities Exchange
Act of 1934, our principal executive officer and principal financial officer evaluated our company's disclosure controls and procedures
(as defined in Rules 13a-15(e) of the Securities Exchange Act of 1934) as of the end of the period covered by this report. Based on this
evaluation, our principal executive officer and principal financial officer concluded that as of the end of the period covered by this
report, these disclosure controls and procedures were not effective to ensure that the information required to be disclosed by our company
in reports it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time
periods specified in the rules and forms of the Securities Exchange Commission and to ensure that such information is accumulated and
communicated to our company's management, including our principal executive officer and principal financial officer, to allow timely decisions
regarding required disclosure. The conclusion that our disclosure controls and procedures were not effective was due to the presence of
the following material weaknesses in internal control over financial reporting which are indicative of many small companies with small
staff: (i) inadequate segregation of duties and effective risk assessment; and (ii) insufficient written policies and procedures for accounting
and financial reporting with respect to the requirements and application of both United States generally accepted accounting principles
and Securities and Exchange Commission guidelines. Management anticipates that such disclosure controls and procedures will not be effective
until the material weaknesses are remediated.
We plan to take steps to enhance and improve the design
of our internal controls over financial reporting. During the period covered by this quarterly report on Form 10-Q, we have not been able
to remediate the material weaknesses identified above. To remediate such weaknesses, we plan to implement the following changes during
our fiscal year ending December 31, 2023, subject to obtaining additional financing: (i) appoint additional qualified personnel to address
inadequate segregation of duties and ineffective risk management; and (ii) adopt sufficient written policies and procedures for accounting
and financial reporting. The remediation efforts set out above are largely dependent upon our securing additional financing to cover the
costs of implementing the changes required. If we are unsuccessful in securing such funds, remediation efforts may be adversely affected
in a material manner.
Because of the inherent limitations in all control
systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within our company have been detected.
These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because
of simple error or mistake.
CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING
There were no changes in our internal control over financial reporting
during the quarter ended June 30, 2023 that have materially affected or are reasonably likely to materially affect, our internal control
over financial reporting.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
We may be involved from time to time in ordinary litigation,
negotiation and settlement matters that will not have a material effect on our operations or finances. We are not aware of any pending
or threatened litigation against our Company or our officers and directors in their capacity as such that could have a material impact
on our operations or finances.
ITEM 1A. RISK FACTORS
A smaller reporting company is not required to provide
the information required by this Item.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES
AND USE OF PROCEEDS.
For the three months ended June 30, 2023, the Company
elected to convert $41,770 of principal and interest of non-redeemable convertible notes into 417,700,000 shares of common stock of the
Company with a fair value of $317,720 resulting in a loss of extinguishment of debt of $275,950.
On May 12, 2023, the Company issued 32,000 shares
of common stock to satisfy an obligation for common stock to be issued with a carrying value of $336,000.
On May 16, 2023, the Holder of Series B Stock elected
to convert 4,000 shares of Series B Stock into 4,000,000 shares of common stock resulting in a $39,921 reduction in the carrying value
of Series B Stock.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
During the quarter ended June 30, 2023,
we did not have any defaults upon senior securities.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION.
Not applicable.
ITEM 6. EXHIBITS
|
|
|
Incorporated
by reference |
Exhibit |
Exhibit
Description |
Filed
herewith |
Form |
Period
ending |
Exhibit |
Filing
date |
3.1 |
Certificate of Incorporation,
dated April 3, 2009 |
|
S-1 |
|
3.1 |
6/22/2010 |
3.2 |
Bylaws, dated April
3, 2009 |
|
S-1 |
|
3.2 |
6/22/2010 |
3.3 |
Certificate of Amendment
to the Certificate of Incorporation, dated August 8, 2013 |
|
10-Q |
6/30/2013 |
3.3 |
8/14/2013 |
3.4 |
Certificate of Amendment
to the Certificate of Incorporation, dated July 27, 2016 |
|
8-K |
9/1/2016 |
3.1 |
9/1/2016 |
3.5 |
Certificate of Amendment
to the Certificate of Incorporation, dated August 27, 2018 |
|
8-K |
9/10/2018 |
3.1 |
9/10/2018 |
3.6 |
Certificate of Amendment
to the Certificate of Incorporation, dated November 18, 2019 |
|
8-K |
12/12/2019 |
3.1 |
12/12/2019 |
3.7 |
Certificate of Amendment
to the Certificate of Incorporation, dated July 16, 2021 |
|
8-K |
7/16/2021 |
3.1 |
7/22/2021 |
3.8 |
Certificate of Amendment
to the Certificate of Incorporation, dated January 3, 2022 |
|
8-K |
1/3/2022 |
3.1 |
1/6/2022 |
3.9 |
Certificate
of Amendment to the Certificate of Incorporation, As Amended, dated
March 21,
2022 |
|
8-K |
4/25/2022 |
3.1 |
4/26/2022 |
4.1 |
Specimen Stock Certificate |
|
S-1 |
|
4.1 |
6/22/2010 |
4.2 |
Certificate of Designation
of Preferences, Rights and Limitations of Series A Convertible Preferred Stock, dated August 6, 2013 |
|
10-Q |
6/30/2013 |
4.2 |
8/14/2013 |
4.3 |
Certificate of Designation
of Preferences, Rights and Limitations of Series B Convertible Preferred Stock, dated December 12, 2019 |
|
8-K
|
12/12/2019
|
3.1
|
12/19/2019
|
4.4 |
Certificate of Designation
of Preferences, Rights and Limitations of Series C Convertible Preferred Stock, dated October 7, 2020 |
|
8-K |
10/07/2020 |
3.1 |
10/08/2020 |
4.5 |
Amended and Restated
Certificate of Designation of Preferences, Rights and Limitations of Series C Convertible Preferred Stock, dated June 24, 2021 |
|
8-K |
6/24/2021 |
3.1 |
7/1/2021 |
4.6 |
Certificate of Designation
of Preferences, Rights and Limitations of Series D Convertible Preferred Stock, dated September 1, 2021 |
|
8-K |
9/1/2021 |
3.1 |
9/1/2021 |
4.7 |
Amended and Restated
Designation of Series A Convertible Preferred Stock of Two Hands Corporation, dated April 21, 2022 |
|
8-K |
4/21/2022 |
3.1 |
4/26/2022 |
4.8 |
Amended and Restated
Certificate of Designation of Preferences, Rights and Limitations of Series C Convertible Preferred Stock, dated July 5, 2022 |
|
10-Q |
6/30/2022 |
4.8 |
8/15/2022 |
4.9 |
Certificate of Designation,
Preference and Rights of Series E Preferred Stock, dated October 3, 2022 |
|
8-K |
10/4/2022 |
3.1 |
10/11/2022 |
10.1 |
Innovative Product
Opportunities Inc. Trust Agreement |
|
S-1 |
|
10.1 |
6/22/2010 |
10.2 |
Side Letter Agreement,
The Cellular Connection Ltd., dated January 8, 2018 |
|
10-K |
12/31/2017 |
10.2 |
3/29/2018 |
10.3 |
Side Letter Agreement,
Stuart Turk, dated January 8, 2018 |
|
10-K |
12/31/2017 |
10.3 |
3/29/2018 |
10.4 |
Side Letter Agreement,
Jordan Turk, dated April 12, 2018 |
|
10-Q |
3/31/2018 |
10.4 |
5/21/2018 |
10.5 |
Side Letter Agreement,
Jordan Turk, dated May 10, 2018 |
|
10-Q |
3/31/2018 |
10.5 |
5/21/2018 |
10.6 |
Side Letter Agreement,
Jordan Turk, dated September 13, 2018 |
|
10-K |
12/31/2018
|
10.6 |
4/1/2019 |
10.7 |
Side Letter Agreement,
The Cellular Connection Ltd., dated January 31, 2019 |
|
10-K |
12/31/2018 |
10.7 |
4/1/2019 |
10.8 |
Side Letter Agreement,
Stuart Turk, dated January 31, 2019 |
|
10-K |
12/31/2018 |
10.8 |
4/1/2019 |
31.1 |
Certification of Principal
Executive Officer and Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
X |
|
|
|
|
32.1 |
Certification of Principal
Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
X |
|
|
|
|
101.INS |
XBRL Instance
Document – the instance document does not appear in the Interactive Data Files as its XBRL tags are embedded within the Inline
XBRL document |
X |
|
|
|
|
101.SCH |
XBRL Taxonomy Extension
Schema Document |
X |
|
|
|
|
101.CAL |
XBRL Taxonomy Extension
Calculation Linkbase Document |
X |
|
|
|
|
101.LAB |
XBRL Taxonomy Extension
Label Linkbase Document |
X |
|
|
|
|
101.PRE |
XBRL Taxonomy Extension
Presentation Linkbase Document |
X |
|
|
|
|
101.DEF |
XBRL Taxonomy Extension
Definition Linkbase Definition |
X |
|
|
|
|
104 |
Cover page formatted
as Inline XBRL and contained in Exhibit 101 |
X |
|
|
|
|
SIGNATURES
In accordance with the requirements of the Exchange
Act, the registrant caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
|
TWO HANDS CORPORATION
|
|
|
|
|
August 14, 2023 |
By: /s/ Nadav Elituv
Nadav Elituv, President, Chief Executive Officer
and Director
(Principal Executive Officer) |
|
|
|
By: /s/ Steven Gryfe
Steven Gryfe, Chief Financial Officer
(Principal Financial and Accounting Officer) |
EXHIBIT 31.1
TWO HANDS CORPORATION
OFFICER'S CERTIFICATE PURSUANT TO SECTION 302
I, Nadav Elituv, certify that:
1. I have reviewed this Form 10-Q
of TWO HANDS CORPORATION;
2. Based on my knowledge, this report does
not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in
light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements,
and other financial information included in this report, fairly present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying
officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))
for the registrant and have:
a. Designed such disclosure controls and procedures,
or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating
to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during
the period in which this report is being prepared;
b. Designed such internal control over financial
reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant's
disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the
registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter
(the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely
to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying
officer(s) and I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant's
auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material
weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect
the registrant's ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that
involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Dated: August 14, 2023
By: /s/ Nadav Elituv
Name: Nadav Elituv
Title: President, Chief Executive Officer and
Director
(Principal Executive Officer)
EXHIBIT 31.2
TWO HANDS CORPORATION
OFFICER'S CERTIFICATE PURSUANT TO SECTION 302
I, Steven Gryfe, certify that:
1. I have reviewed this Form 10-Q
of TWO HANDS CORPORATION;
2. Based on my knowledge, this report does
not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in
light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements,
and other financial information included in this report, fairly present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying
officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))
for the registrant and have:
a. Designed such disclosure controls and procedures,
or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating
to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during
the period in which this report is being prepared;
b. Designed such internal control over financial
reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant's
disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the
registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter
(the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely
to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying
officer(s) and I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant's
auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material
weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect
the registrant's ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that
involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Dated: August 14, 2023
By: /s/ Steven Gryfe
Name: Steven Gryfe
Title: Chief Financial Officer
(Principal Financial and Accounting Officer)
EXHIBIT 32.1
TWO HANDS CORPORATION
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION
1350,
AS ADOPTED PURSUANT TO SECTION 906 OF
THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report
of TWO HANDS CORPORATION (the Registrant) on Form 10-Q for the period ended June 30, 2023 as filed with the Securities
and Exchange Commission on the date hereof (the Report), I, Nadav Elituv, Principal Executive Officer of the
Company, certify, pursuant to 18 U.S.C. ss.1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that:
(1) The Report fully complies with the
requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in
the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
A signed original of this written statement required
by Section 906 has been provided to Nadav Elituv and will be retained by TWO HANDS CORPORATION and furnished
to the Securities and Exchange Commission or its staff upon request.
Dated: August 14, 2023
By: /s/ Nadav Elituv
Name: Nadav Elituv
Title: President, Chief Executive Officer and
Director
(Principal Executive Officer)
EXHIBIT 32.2
TWO HANDS CORPORATION
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION
1350,
AS ADOPTED PURSUANT TO SECTION 906 OF
THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of TWO
HANDS CORPORATION (the Registrant) on Form 10-Q for the period ended June 30, 2023 as filed with the Securities and
Exchange Commission on the date hereof (the Report), I, Steven Gryfe, Principal Financial and Accounting Officer of the
Company, certify, pursuant to 18 U.S.C. ss.1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, that:
(1) The Report fully complies with the
requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in
the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
A signed original of this written statement required
by Section 906 has been provided to Steven Gryfe and will be retained by TWO HANDS CORPORATION and furnished
to the Securities and Exchange Commission or its staff upon request.
Dated: August 14, 2023
By: /s/ Steven Gryfe
Name: Steven Gryfe
Title: Chief Financial Officer
(Principal Financial and Accounting Officer)
v3.23.2