KCRD 10-Q
Kindcard, Inc. (KCRD)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
Commission File Number
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(Exact name of registrant as specified in its charter) |
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(State or other jurisdiction of incorporation or organization) |
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Securities registered pursuant to Section 12(b) of the Act:
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ |
☐ | Smaller reporting company | ||
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| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Securities registered pursuant to Section 12(b) of the Act:
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None |
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As of December 15, 2023, there were
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Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
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| Table of Contents |
PART I—FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements.
Kindcard, Inc. and Subsidiaries
Consolidated Financial Statements
October 31, 2023
(Unaudited)
Consolidated Balance Sheets as of October 31, 2023 (unaudited) and January 31, 2023 |
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| F-1 |
| Table of Contents |
Kindcard, Inc. and Subsidiaries Consolidated Balance Sheets
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| October 31, 2023 |
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Assets |
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Current Assets: |
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Cash |
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Accounts receivable, net - unbilled |
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Prepaid expenses |
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Total Current Assets |
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Property, plant and equipment, net |
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Intellectual property, net |
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Total Other Assets |
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Total Assets |
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Liabilities and Stockholders’ Deficit |
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Current Liabilities |
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Accounts payable |
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Accrued interest |
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Accrued payroll expenses |
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Accrued tax expense |
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Deferred revenue |
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Due to related party |
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Notes payable |
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Current portion SBA loan |
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Total Current Liabilities |
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Long-term Liabilities |
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Accrued interest long term portion |
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SBA loan |
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Total Long-term Liabilities |
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Total Liabilities |
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Commitments and Contingencies-See Note 9 |
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Stockholders’ Deficit |
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Common Stock |
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Authorized |
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Additional Paid In Capital |
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Accumulated Deficit |
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Total Stockholders’ Deficit |
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Total Liabilities and Stockholders’ Deficit |
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The accompanying notes are an integral part of these unaudited consolidated financial statements
| F-2 |
| Table of Contents |
Kindcard, Inc. and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
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Revenue |
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Other Revenue |
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Total Revenue |
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Cost of Sales |
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Total Cost of Sales |
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Gross Profit |
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Operating Expenses |
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General and Administrative Expenses |
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Selling Expenses |
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Depreciation and Amortization |
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Total Operating Expenses |
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Net Loss from Operations |
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Other Income – Wholesale Payments-See Note 11 |
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Net loss before income taxes |
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Provision for income taxes |
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Net Loss |
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Net Loss Per Common Share – Basic and Diluted |
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Weighted Average Number of Common Shares Outstanding - |
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Basic and Diluted |
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The accompanying notes are an integral part of these unaudited consolidated financial statements
| F-3 |
| Table of Contents |
Kindcard, Inc. and Subsidiaries
Consolidated Statements of Stockholders’ Deficit
For the three and nine months ended October 31, 2023
(Unaudited)
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Balance, January 31, 2023 |
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Net loss for period ended April 30, 2023 |
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Balance, April 30, 2023 |
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Shares issued for cash |
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Shares issued for services |
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Net loss for period ended July 31, 2023 |
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Balance, July 31, 2023 |
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Shares issued for services |
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Net loss for period ended October 31, 2023 |
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Balance, October 31, 2023 |
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For the three and nine months ended October 31, 2022
(Unaudited)
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Balance, January 31, 2022 |
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Net income for period ended April 30, 2022 |
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Shares issued in exchange for services |
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Balance, April 30, 2022 |
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Net loss for period ended July 31, 2022 |
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Shares issued for cash |
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Shares issued with debt |
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Balance, July 31, 2022 |
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Net loss for period ended October 31, 2022 |
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Balance, October 31, 2022 |
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The accompanying notes are an integral part of these unaudited consolidated financial statements
| F-4 |
| Table of Contents |
Kindcard, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
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Cash Flows from Operating Activities: |
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Net loss |
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Adjustments to reconcile net loss to net Cash used by operations |
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Stock issued for services |
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Shares issued with debt |
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Depreciation and amortization |
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Total |
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Decrease (increase) in operating assets/liabilities |
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Accounts receivable, net - unbilled |
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Prepaid expenses |
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Accounts payables |
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Accrued expenses |
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Deferred revenue |
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Total Adjustments |
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Net cash (used in) provided by operating activities |
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Cash flows from investing activities |
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Costs incurred to develop intellectual property |
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Net cash used in investing activities |
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Cash flows from financing activities |
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Shares issued for cash |
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Proceeds from notes payable, net |
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Net cash provided by financing activities |
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Net cash increase for the period |
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Cash at beginning of period |
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Cash at end of period* |
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Supplemental disclosures: |
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Non-cash investing & financing activities*: |
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Common Stock issued in exchange for services* |
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Shares issued with debt |
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Cash at the end of the period and non-cash investing & financing activities* |
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The accompanying notes are an integral part of these unaudited consolidated financial statements
| F-5 |
| Table of Contents |
Kindcard, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (unaudited)
October 31, 2023
NOTE 1 – NATURE OF OPERATIONS AND BASIS OF PRESENTATION
KindCard, Inc. (f/k/a MWF Global Inc.) (the “Company”) was incorporated in the State of Nevada on November 18, 2016, and established a fiscal year end of January 31. The Company was originally organized to sell unique country specific handcrafted natural products with a focus on sourcing these products from South-East Asia and offering these products for sale through the Company’s website and to establish other distribution channels. On June 1, 2021, RMR Management LLC (“RMR” and the “Majority Stockholder”) purchased
The Company, through its wholly owned operating subsidiaries, Deb, Inc. and Tendercard, Inc., is an innovative FinTech and PayTech company which provides alternative “Closed-Loop” payment solutions to consumers and businesses across a wide array of verticals.
Going concern
These unaudited financial statements have been prepared assuming the Company will be able to continue as a going concern. To date, the Company has generated revenues from its business operations and has incurred accumulated operating losses of $
| F-6 |
| Table of Contents |
Kindcard, Inc. and Subsidiaries
Condensed Notes to Consolidated Financial Statements (unaudited)
October 31, 2023
Basis of Presentation
The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for financial information and with the instructions to Form 10-Q. They do not include all information and footnotes required by United States generally accepted accounting principles for complete financial statements. However, except as disclosed herein, there has been no material changes in the information disclosed in the notes to the financial statements for the fiscal year ended January 31, 2023 included in the Company’s Form 10-K filed with the Securities and Exchange Commission. The unaudited financial statements should be read in conjunction with those financial statements included in the Form 10-K. In the opinion of Management, all adjustments considered necessary for a fair presentation, consisting solely of normal recurring adjustments, have been made. Operating results for the nine months ended October 31, 2023 are not necessarily indicative of the results that may be expected for the year ending January 31, 2024.
Use of Estimates and Assumptions
Preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Accordingly, actual results could differ from those estimates. These estimates include Accrued Revenue, Accounts Receivable, net – unbilled, Allowance of doubtful accounts, and Impairment of long-lived assets.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers highly liquid financial instruments purchased with a maturity of three months or less to be cash equivalents.
| F-7 |
| Table of Contents |
Kindcard, Inc. and Subsidiaries
Condensed Notes to Consolidated Financial Statements (unaudited)
October 31, 2023
Revenue Recognition
We recognize revenue when persuasive evidence of an arrangement exists, delivery has occurred or products have been sold, the purchase price is fixed or determinable and collectability is reasonably assured.
The Company follows ASC 606, Revenue from Contracts with Customers (Topic 606). This standard provides a single model for revenue arising from contracts with customers and supersedes previous revenue recognition guidance. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.
Revenue is recognized when all of the following criteria are met:
Identification of the contract, or contracts, with a customer (ii) Identification of the performance obligations in the contract (iii) Determination of the transaction price (iv) Allocation of the transaction price to the performance obligations in the contract (v) Recognition of revenue when, or as, we satisfy performance obligation.
We currently offer the following products and services:
Cash Pickup – Deb, Inc., our wholly owned subsidiary, provides cash pick up services for retail and wholesale merchants the within North American retail market through a strategic partnership agreement, per the agreement Deb, Inc.’s partner is responsible for all aspects of the cash pickup service performance obligations. Once performance obligations have been met by the partner Deb, Inc. receives commission revenues in the following month which are recorded as earned over the life of these multiyear contracts.
Tendercard Program – Tendercard, Inc., our wholly owned subsidiary, provides a stored value point of sale gift card processing solution to small and mid-sized businesses within North American retail market. The Company’s proprietary host-based program provides real time data and accurate records of all activity related to the gift card processing account and the related monthly reporting. Fixed monthly service fee revenues are recorded monthly. Fixed annual service fee revenues are collected in arrears and recorded as accrued revenue, un-billed at the end of each month until collected in Q3 FY2024, no revenue is estimated to be accrued or deferred at YE 2024.
Other Revenue is related to a Kindcard Business Development agreement dated January 3, 2022, which provided certain material rights related to the Tendercard Program in exchange for a non-refundable fee of $
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Cash Pickup Commission Revenue |
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Tendercard Program Revenue |
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Other Revenue |
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Total Program Revenue |
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| F-8 |
| Table of Contents |
Kindcard, Inc. and Subsidiaries
Condensed Notes to Consolidated Financial Statements (unaudited)
October 31, 2023
The following table provides a roll forward of deferred revenue:
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Balance at beginning of period |
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Revenue recognized |
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Balance at end of period |
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Fair Value of Financial Instruments
The Company measures its financial and non-financial assets and liabilities, as well as makes related disclosures, in accordance with FASB Accounting Standards Codification No. 820, Fair Value Measurement (“ASC 820”), which provides guidance with respect to valuation techniques to be utilized in the determination of fair value of assets and liabilities. Approaches include, (i) the market approach (comparable market prices), (ii) the income approach (present value of future income or cash flow), and (iii) the cost approach (cost to replace the service capacity of an asset or replacement cost). ASC 820 utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:
Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: Inputs other than quoted prices that are observable, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
Level 3: Unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one more significant inputs or significant value drivers are unobservable.
Loss per Common Share
The basic loss per share is calculated by dividing the Company’s net loss available to common shareholders by the weighted average number of common shares during the year. The diluted loss per share is calculated by dividing the Company’s net loss available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. Diluted loss per share is the same as basic loss per share due to the lack of dilutive instruments in the Company. There are no common stock equivalents at October 31, 2023.
Income Taxes
The Company follows the liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax balances and tax loss carry-forwards. Deferred tax assets and liabilities are measured using enacted or substantially enacted tax rates expected to apply to the taxable income in the years in which those differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the date of enactment or substantive enactment.
| F-9 |
| Table of Contents |
Kindcard, Inc. and Subsidiaries
Condensed Notes to Consolidated Financial Statements (unaudited)
October 31, 2023
NOTE 2 – BUSINESS ACQUISITION
On June 7, 2021, the Company entered into a Stock Purchase Agreement (the “Purchase Agreement”) with Kindcard, Inc., a Massachusetts corporation (“KindCard MA”) and Croesus Holdings Corp., a Massachusetts corporation (“Croesus” and together with Kindcard MA, the “Seller”) pursuant to which the Company acquired 100% of the outstanding shares of common stock of Kindcard MA (the “Kindcard MA Shares”) and all of intellectual property and operational assets (collectively, the “Tendercard Assets”) of the “Tendercard” division of Croesus in consideration of an aggregate of
As a result, the goodwill from the acquisition of the Kindcard MA Shares was considered impaired and the Company recorded and impairment expense of $
The Company recorded the above acquisition in accordance with ASC-805, pertaining to business combinations. The following table summarizes the consideration paid for the acquisition and the amounts of the assets acquired at fair market value assumed recognized at the acquisition date.
Purchase Price Considerations |
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Stock Consideration |
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SBA Loan |
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Total Purchase Consideration & Assumed Liabilities |
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Tangible Assets |
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|
|
|
Cash |
|
|
| |
Accounts Receivable |
|
|
| |
Intangible Assets |
|
|
|
|
Customer Lists |
|
|
| |
Website |
|
|
| |
Trade Name |
|
|
| |
Technology |
|
|
| |
Goodwill |
|
|
| |
Total Assets |
| $ |
| |
NOTE 3 – ACCOUNTS RECEIVABLE, Net – unbilled
We estimate credit loss reserves for accounts receivable on an individual receivable basis. A specific allowance is established based on expected future cash flows and the financial condition of the debtor. We charge off customer balances in part or in full when it is more likely than not that we will not collect that amount of the balance due. We consider any balance unpaid after the contract payment period to be past due.
Tendercard Program Fees are collected in arrears resulting in accounts receivable, net – unbilled and are recorded as accrued revenue at the end of each month. There are $
| F-10 |
| Table of Contents |
Kindcard, Inc. and Subsidiaries
Condensed Notes to Consolidated Financial Statements (unaudited)
October 31, 2023
NOTE 4 – PROPERTY AND EQUIPMENT
Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation of property and equipment is calculated using the straight-line method over the estimated useful life of the asset generally ranging from three to seven years.
Property and equipment consist of the following at:
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| October 31, |
|
| January 31, |
| ||
|
| 2023 |
|
| 2023 |
| ||
Merchandise and equipment: Vault |
| $ |
|
| $ |
| ||
Merchandise and equipment: Office Equipment |
|
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| ||
Merchandise and equipment: IT Equipment |
|
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| ||
Total Cost |
| $ |
|
| $ |
| ||
Less: accumulated depreciation |
|
| ( | ) |
|
| ( | ) |
Total |
| $ |
|
| $ |
| ||
Depreciation expense amounted to approximately $
NOTE 5 – GOODWILL AND INTANGIBLE ASSETS
The Company records goodwill when the consideration paid for an acquisition exceeds the fair value of net tangible and intangible assets acquired and liabilities assumed, including related tax effects. Goodwill is not amortized; instead, goodwill is tested for impairment on an annual basis, or more frequently if the Company believes indicators of impairment exist. The Company first assesses qualitative factors such as macro-economic conditions, industry and market conditions, cost factors as well as other relevant events, to determine whether it is more-likely-than-not that the fair value of a reporting unit is less than its carrying value. If the Company determines that the fair value is less than the carrying value, the Company will recognize an impairment charge based on the excess of a reporting unit’s carrying value over its fair value. The Company did not note any impairment as of October 31, 2023.
Intangible assets
Intangible assets are comprised of customer relationships and brands acquired in a business combination specifically related to the Company’s Tendercard subsidiary (see Note 2) and also comprised of development costs for its proprietary payment processing “DEB Platform” through the Company’s wholly owned subsidiary, Deb, Inc. The Company amortizes intangible assets with a definitive life over their respective useful lives of 3-5 years. Assets with indefinite lives are tested for impairment on an annual basis, or more frequently if the Company believes indicators of impairment exist. The Company did not note any impairment as of October 31, 2023.
| F-11 |
| Table of Contents |
Kindcard, Inc. and Subsidiaries
Condensed Notes to Consolidated Financial Statements (unaudited)
October 31, 2023
NOTE 5 – GOODWILL AND INTANGIBLE ASSETS (continued)
Intangible assets (continued)
On December 21, 2021, the Company entered into a contract to develop its proprietary payment processing DEB Platform, for a total cost of $
|
| October 31, |
|
| January 31, |
| ||
|
| 2023 |
|
| 2023 |
| ||
Definite-lived intangible assets |
|
|
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|
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| ||
Technology: DEB Platform |
| $ |
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| $ |
| ||
Technology: Tendercard Program |
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Customer Lists |
|
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Website |
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Trade Name |
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Total |
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| ||
Less: accumulated amortization |
|
| ( | ) |
|
| ( | ) |
Definite-lived intangible assets, net |
| $ |
|
| $ |
| ||
The following is the future estimated amortization expense related to intangible assets as of October 31, 2023:
Year ending January 31, |
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| |
2024 - |
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| |
2025 - |
|
|
| |
2026 - |
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| |
2027 - |
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| |
Total - |
| $ |
| |
NOTE 6 – CURRENT LIABILITIES
Accounts Payable
Accounts Payable is comprised of Trade payables of $
Accrued Interest
Balance consists of Accrued Interest short term notes payable of $
| F-12 |
| Table of Contents |
Kindcard, Inc. and Subsidiaries
Condensed Notes to Consolidated Financial Statements (unaudited)
October 31, 2023
Accrued Payroll Expense
Balance consists of Accrued Salaries & Wages $
Accrued Tax Expense
Balance consists of Accrued Income Taxes of $
Deferred Revenue
Balance of $
NOTE 7 – DUE TO RELATED PARTY
Due to Related Party
During the three-month period ended October 31, 2023, the Company reimbursed the CEO $
| F-13 |
| Table of Contents |
Kindcard, Inc. and Subsidiaries
Condensed Notes to Consolidated Financial Statements (unaudited)
October 31, 2023
NOTE 8 – Loans
SBA Loan
The balance consists of Small Business Administration Economic Disaster Injury Loan assumed in the acquisition of Kindcard on June 7, 2021, with a principal balance of $
The following is the future estimated principal payments related to SBA Loan as of October 31, 2023:
Year ending January 31,
2024: |
| $ |
| |
2025: |
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2026: |
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2027: |
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2028: |
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Thereafter |
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Total future minimum loan payments |
| $ |
| |
Less: current portion |
|
| ( | ) |
Long-term portion |
| $ |
|
Notes Payable
Loans payable consists of $
NOTE 9 – COMMITMENTS AND CONTINGENCIES
On May 25, 2022, the Company and an advisor entered into an Advisory Agreement related to the development, design and build of its compliance and state licensing program related to the Company’s Deb Platform. The initial term of the agreement is six months at a rate of $
On August 9, 2023, effective as of August 1, 2023, the Company and a consultant entered into a consulting agreement (the “Agreement”) pursuant to which the Company agreed to issue to the consultant a fee of an aggregate of
On September 15, 2023 the
| F-14 |
| Table of Contents |
Kindcard, Inc. and Subsidiaries
Condensed Notes to Consolidated Financial Statements (unaudited)
October 31, 2023
NOTE 10 – COMMON STOCK
The Company is authorized to issue
On August 16, 2021, the Company issued an aggregate of
On February 25, 2022, the Company issued
On May 13, 2022, the Company issued
On May 17, 2022, the Company entered into a subscription agreement with an accredited investor pursuant to which the Company issued
On June 12, 2022, the Company issued
On January 26, 2023, the Company issued
On January 26, 2023, the Company issued
On June 6, 2023, the Company and a consultant entered into a consulting agreement (the “Agreement”) pursuant to which the Company agreed to issue to the consultant 675,000 restricted shares of common stock in consideration for certain business and operations consulting services to be provided by the consultant to the Company.
On June 20, 2023, an accredited investor purchased from the Company
On August 9, 2023, effective as of August 1, 2023, the Company and a consultant entered into a consulting agreement (the “Agreement”) pursuant to which the Company agreed to issue to the consultant a fee of an aggregate of
NOTE 11 – TERMINATION OF MATERIAL DEFINITIVE AGREEMENT
On January 1, 2022, the Company entered into an Asset Purchase Agreement (the “APA”) with Wholesale Payments LLC, a Wyoming limited liability company (“Seller”) pursuant to which the Company was to purchase
NOTE 12 – SUBSEQUENT EVENTS
The Company evaluates events that occur after the period’s end date through the date the financial statements are available to be issued. Accordingly, management has evaluated subsequent events through the date these financial statements are issued and has determined that no subsequent events require disclosure in these financial statements.
| F-15 |
| Table of Contents |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q and with our audited financial statements and notes thereto for the year ended January 31, 2023, included in our Annual Report on Form 10-K for the fiscal year ended January 31, 2023 filed on May 19, 2023 (the “Annual Report”) with the U.S. Securities and Exchange Commission (the “SEC”). This Quarterly Report on Form 10-Q contains forward-looking statements, including without limitation, statements related to our plans, strategies, objectives, expectations, intentions and adequacy of resources. Investors are cautioned that such forward-looking statements involve risks and uncertainties including without limitation the following: (i) our plans, strategies, objectives, expectations and intentions are subject to change at any time at our discretion; (ii) our plans and results of operations will be affected by our ability to manage growth; and (iii) other risks and uncertainties indicated from time to time in our filings with the Securities and Exchange Commission.
In some cases, you can identify forward-looking statements by terminology such as ‘may,’ ‘will,’ ‘should,’ ‘could,’ ‘expects,’ ‘plans,’ ‘intends,’ ‘anticipates,’ ‘believes,’ ‘estimates,’ ‘predicts,’ ‘potential,’ or ‘continue’ or the negative of such terms or other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of such statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. We are under no duty to update any of the forward-looking statements after the date of this report.
Unless otherwise indicated, references to the “Company,” “Kindcard”, “us”, or “we” refer to Kindcard, Inc. and its subsidiaries.
Company Overview
KindCard, Inc. (f/k/a MWF Global Inc.) (the “Company”) was incorporated in the State of Nevada on November 18, 2016, and established a fiscal year end of January 31. The Company was originally organized to sell unique country specific handcrafted natural products with a focus on sourcing these products from South-East Asia and offering these products for sale through the Company’s website and to establish other distribution channels. On June 1, 2021, RMR Management LLC (“RMR” and the “Majority Stockholder”) purchased 54,000,000 shares of common stock of the Company, representing the majority of the Company’s issued and outstanding shares, from William D. Mejia in consideration of a purchase price of $150,000. RMR is owned and controlled by Michael Rosen, the Company’s sole officer and director. On June 7, 2021, the Company entered into a Stock Purchase Agreement (the “Purchase Agreement”) with Kindcard, Inc., a Massachusetts corporation (“KindCard MA”) and Croesus Holdings Corp, a Massachusetts corporation (“Croesus” and together with Kindcard MA, the “Seller”), pursuant to which the Company acquired (i) all of the intellectual property and operational assets (collectively, the “Tendercard Assets”) of the “Tendercard” division of Croesus, and (ii) 100% of the issued and outstanding shares of common stock of Kindcard MA, in consideration of an aggregate of 8,000,000 shares of common stock of the Company. On June 16, 2021, Michael Rosen was appointed as a Director of the Company. On June 30, 2021, William D. Mejia resigned as a director and the sole officer of the Company and Michael Rosen was appointed as the sole officer of the Company. On July 9, 2021, the Company filed a Certificate of Amendment to Articles of Incorporation (the “Certificate”) with the State of Nevada effectuating a name change of the Company (the “Name Change”). As a result of the Name Change, the Company’s name changed from “MWF Global Inc.” to “Kindcard, Inc.”. The Certificate was approved by the Majority Stockholder and by the Board of Directors of the Company. The Purchase Agreement and the transactions contemplated therein closed on August 16, 2021 (the “Closing”). Subsequent to the Closing, the Company became aware that the Sellers failed to deliver certain of the Tendercard Assets to the Company in material breach of the Purchase Agreement. A settlement arrangement is currently being negotiated between the Company and Sellers in connection with such matter. On August 26, 2021, Tendercard, Inc., a wholly owned subsidiary of the Company, was incorporated by the Company in the State of Nevada. In addition, on January 14, 2022, Deb, Inc., a wholly owned subsidiary of the Company, was incorporated by the Company in the State of Nevada. In connection with the Name Change, the Company filed an Issuer Company-Related Action Notification Form with the Financial Industry Regulatory Authority (the “FINRA Corporate Action”). The Name Change was implemented by FINRA on September 21, 2021. Our symbol on OTC Markets was KCRDD for 20 business days from September 21, 2021 (the “Notification Period”). Our new CUSIP number is 49452K105. In connection with the FINRA Corporate Action, our symbol was changed to “KCRD” following the Notification Period.
| 3 |
| Table of Contents |
The Company, through its wholly owned operating subsidiaries, Deb, Inc. and Tendercard, Inc., is an innovative FinTech and PayTech company which provides alternative “Closed-Loop” payment solutions to consumers and businesses across a wide array of verticals. The Company believes that mobile wallet technology will ultimately grow to become the preferred method for merchants and consumers to transact at the point of sale, and it is our goal to capture significant market share from the mobile wallet segment through our proprietary “Pay with Deb” consumer app and merchant services platform (“Pay with Deb”).
Through Pay with Deb, Deb, Inc. targets the high-risk merchant market where businesses operating within innovative verticals and e-commerce are incurring higher transaction costs, utilizing a robust compliance policy for onboarding users and businesses in accordance with federal and state regulations. Pay with Deb operates on a “closed-loop” system, whereby consumers can purchase “Deb Tokens” to store in their mobile wallets and use their Deb Tokens to make purchases within the Pay with Deb merchant network. Deb Tokens are not a crypto currency, stable coins, or tied to any exchange. Funds used by consumers to purchase Deb Tokens are kept in a custodial deposit account ensuring that Deb Tokens are valued 1:1 with the US dollar. Businesses using Deb Tokens to transact with customers, suppliers, vendors, and employees can send and receive money without using traditional banking infrastructure or credit card rails. In addition, Pay with Deb eliminates the transaction fees incurred by businesses associated with traditional payment processors at the point of sale. For consumers, Pay with Deb transactions at the point of sale only appear on the consumer’s mobile wallet’s statement, not bank or credit card statements, offering additional privacy to the consumer.
Tendercard, Inc. (“Tendercard”) provides independent merchants with a gift card and loyalty platform, allowing businesses to purchase their own proprietary gift card program to promote and sell to their own customers, where their customers can also earn points. Tendercard’s gift card and loyalty platform replaces paper gift certificates and all manual recordkeeping with an electronic accounting and reporting system hosted by Tendercard. Unlike other gift card providers, Tendercard settles gift card purchases directly to the merchant’s account, never taking control of the money. Tendercard processing is available through the “Bridgepay” payment gateway and can be used with a dedicated terminal, or with “Pax”, and “Dejavoo” terminals.
The Company is dedicated to providing universal access to digital payment tools for all entities, persons, and governments, who accept money or pay with money. Each of our business units has a focused value proposition, delivering cutting-edge fintech and paytech solutions within their target markets. Combined with excellent customer service, the Company aims to grow our user base and merchant network significantly over the next two years.
Results of Operations
For the three-month period ended October 31, 2023, we had revenues of 125,410 as compared to $148,162 in revenues for the three-month period ended October 31, 2022. Total Cost of Sales for the three-month period ended October 31, 2023 was $30,146 resulting in a Gross Profit of $95,264 as compared to Total Cost of Sales for the three-month period ended October 31, 2022 of $24,240 resulting in a Gross Profit of $123,922. Operating Expenses for the three-month period ended October 31, 2023 were $143,960 resulting in Net Loss from Operations of $48,696. The net loss for the three-month period ended October 31, 2023 is comprised of General and Administrative Expenses of $124,763, Selling Expenses of $NIL and Depreciation and Amortization of $19,917, as compared to the Net loss for the three-month period ended October 31, 2022 of $114,458 which were comprised of General and Administrative Expenses of $215,024, Selling Expenses of $NIL, and Depreciation and Amortization of $23,356. The changes in results of operations for the three-month period ended October 31, 2023 as compared to the three-month period ended October 31, 2022 are primarily a result of a decrease in Operating Expenses for the three month period ended October 31, 2023.
| 4 |
| Table of Contents |
For the nine-month period ended October 31, 2023, we had revenues of $381,373 as compared to $472,316 in revenues for the nine-month period ended October 31, 2022. Total Cost of Sales for the nine-month period ended October 31, 2023 was $67,695 resulting in a Gross Profit of $313,678 as compared to Total Cost of Sales for the nine-month period ended October 31, 2022 of $60,248 resulting in a Gross Profit of $412,068. Operating Expenses for the nine-month period ended October 31, 2023 were $411,294 resulting in Net Loss from Operations of $97,616. The net loss for the nine-month period ended October 31, 2023 is comprised of General and Administrative Expenses of $354,159, Selling Expenses of $389 and Depreciation and Amortization of $56,746, as compared to the Net loss for the nine-month period ended October 31, 2022 of $259,660 which were comprised of General and Administrative Expenses of $630,773, Selling Expenses of $NIL, and Depreciation and Amortization of $40,955. The changes in results of operations for the nine-month period ended October 31, 2023 as compared to the nine-month period ended October 31, 2022 are primarily a result of a decrease in Operating Expenses for the nine month period ended October 31, 2023.
Liquidity and Capital Resources
Although we have raised limited funds in the form of debt financing, we anticipate that until we generate more revenue, we will require additional financings in order to fully implement our plan of operations.
As of October 31, 2023, we had $13,028 in cash, $21,108 in Accounts Receivable, $9,030 in Prepaid Expenses, and Other Assets of $136,304. Total liabilities as of October 31, 2023, were $910,563 compared to $945,998 in total liabilities at January 31, 2023. The funds available to the Company will not be sufficient to fund the planned operations of the Company and maintain a reporting status.
The total amount owed to the Company’s CEO as of October 31, 2023 was $NIL, the total owed to RMR Management Group, LLC (“RMR”) was $296,498. RMR is a company owned and controlled by the Company’s CEO. The amounts due to related party are unsecured and non-interest bearing with no set terms of repayment.
The remaining balance consists of Accounts Payable of $244,370, Accrued Interest of $15,495, Accrued Payroll Expenses of $18,767, Accrued Tax Expense of $3,220, Deferred Revenue of $6,250, Notes Payable of $164,035, the Small Business Administration Economic Disaster Injury Loan assumed in the acquisition of Kindcard on June 7, 2021 current portion of $8,772, Accrued Interest long term portion of $3,156 and a principal balance of $150,000.
Off-balance sheet arrangements
Other than the situation described in the section titled Capital Recourses and Liquidity, the company has no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect or change on the company’s financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors. The term “off-balance sheet arrangement” generally means any transaction, agreement or other contractual arrangement to which an entity unconsolidated with the company is a party, under which the company has (i) any obligation arising under a guarantee contract, derivative instrument or variable interest; or (ii) a retained or contingent interest in assets transferred to such entity or similar arrangement that serves as credit, liquidity or market risk support for such assets
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.
Item 4. Controls and Procedures.
Disclosure Controls and Procedures
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time period specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 is accumulated and communicated to management including our principal executive officer and principal financial officer as appropriate, to allow timely decisions regarding required disclosure.
In connection with this quarterly report, as required by Rule 15d-15 under the Securities Exchange Act of 1934, we have carried out an evaluation of the effectiveness of the design and operation of our company’s disclosure controls and procedures. This evaluation was carried out under the supervision and with the participation of our company’s management, including our company’s principal executive officer and principal financial officer. Based upon that evaluation, our company’s principal executive officer and principal financial officer concluded that subject to the inherent limitations noted in this Part II, Item 9A(T) as of October 31, 2023, our disclosure controls and procedures were not effective due to the existence of material weaknesses in our internal controls over financial reporting.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) or 15d-15(f)) during the quarter ended October 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
| 5 |
| Table of Contents |
PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
We are not currently involved in any pending litigation or legal proceeding.
Item 1A. Risk Factors.
We are a “smaller reporting company” as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.
Item 2. Unregistered Sales of Securities and Use of Proceeds.
On August 9, 2023, effective as of August 1, 2023, the Company and a consultant entered into a consulting agreement (the “Agreement”) pursuant to which the Company agreed to issue to the consultant a fee of an aggregate of 200,000 restricted shares of common stock (the “Shares”) in consideration for certain financial and management consulting services to be provided by the consultant to the Company, subject to the following vesting schedule: The Shares vest as to (i) 50,000 Shares on the August 1, 2023 effective date, (ii) 50,000 Shares on the six (6) month anniversary of the Agreement, (iii) 50,000 Shares on the nine (9) month anniversary of the Agreement, and (iv) 50,000 Shares on the 12-month anniversary of the Agreement.
On September 15, 2023, the Company issued a 1% Convertible Promissory Note in the amount of $296,497.87 (the “Note”) to RMR Management Group LLC (“RMR”) in exchange for full and final settlement of an aggregate amount of $296,497.87 previously loaned by RMR to the Company. The Note is convertible at the RMR’s option into shares of common stock of the Company at a per share conversion price of $0.01. RMR is a company owned and controlled by the Company’s CEO.
The offers, sales, and issuances of the securities described above were deemed to be exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”), in reliance on Section 4(a)(2) of the Securities Act and/or Rule 506 as promulgated under Regulation D as transactions by an issuer not involving a public offering. The recipients of securities in each of these transactions acquired the securities for investment only and not with a view to or for sale in connection with any distribution thereof and appropriate legends were affixed to the securities issued in these transactions. Each of the recipients of securities in these transactions was an accredited investor as defined in Rule 501 of Regulation D promulgated under the Securities Act or a sophisticated person and had adequate access, through employment, business or other relationships, to information about us. As of the date hereof, the Company is obligated on the above Note issued to the investor. The above Note is a debt obligation arising other than in the ordinary course of business which constitutes a direct financial obligation of the Company.
The foregoing information is a summary of each of the agreements involved in the transactions described above, is not complete, and is qualified in its entirety by reference to the full text of those agreements, each of which is attached an exhibit to this Quarterly Report on Form 10-Q. Readers should review those agreements for a complete understanding of the terms and conditions associated with this transaction.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
None.
Item 5. Other Information.
None.
| 6 |
| Table of Contents |
Item 6. Exhibits
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
EXHIBIT INDEX
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101.INS |
| Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document) |
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101.SCH |
| Inline XBRL Taxonomy Extension Schema Document |
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101.CAL |
| Inline XBRL Taxonomy Extension Calculation Linkbase Document |
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101.DEF |
| Inline XBRL Taxonomy Extension Definition Linkbase Document |
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101.LAB |
| Inline XBRL Taxonomy Extension Labels Linkbase Document |
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101.PRE |
| Inline XBRL Taxonomy Extension Presentation Linkbase Document |
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104 |
| Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
* | Filed herewith |
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# | Indicates management contract or compensatory plan. |
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+ | Included in Exhibit 31.1 |
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++ | Included in Exhibit 32.1 |
| 7 |
| Table of Contents |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Kindcard, Inc. |
| |
| (Registrant) |
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Date: December 15, 2023 | By: | /s/ Michael Rosen |
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| Michael Rosen |
| |
| CEO, CFO, President, and Director |
| |
| (Principal Executive Officer, |
| |
| Principal Financial and Accounting Officer) |
| |
| 8 |