Kisses From Italy Inc 10-Q/A for FY2024 Q1
Kisses From Italy Inc. (KITL)
About this 10-Q/A
Kisses From Italy Inc filed this 10-Q/A on August 13, 2024, covering the quarter ended March 31, 2024 (FY2024 Q1).
Headline figures
Quarter ended March 31, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $33.12K
- down 71.3% from $115.46K a year earlier
- Net loss
- $135.22K
- compared with a net loss of $950.5K a year earlier
- Diluted EPS
- $0.00
- compared with $0.00 a year earlier
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
Amendment No. 1
For the quarterly period ended:
or
For the transition period from ________________ to ________________
Commission File Number:
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation) | (I.R.S. Employer Identification No.) |
(Address of principal executive offices)
(
(Registrant’s telephone number, including area code)
____________________________________________________________
Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act: None
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| Not applicable | Not applicable | Not applicable |
Indicate by check mark whether
the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Indicate by check mark whether
the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit
such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ | |
| Smaller reporting company | ||
| Emerging growth company |
If an emerging growth company, indicate by check mark
if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards
provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a
shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes
As of August 11, 2024, there were shares of the registrant's common stock outstanding.
EXPLANATORY NOTE
References throughout this Amendment No. 1 to the Quarterly Report on Form 10-Q to “we,” “us,” the “Company” or “our Company” are to Kisses From Italy, Inc. unless otherwise indicated.
This Amendment No. 1 (“Amendment No. 1”) on Form 10-Q/A amends the Form 10-Q of the Company for the three month period ended March 31, 2024, as filed with the Securities and Exchange Commission (the “SEC”) on July 15, 2021 (the “Original Filing”).
Rule 10-01(d) of Regulation S-X requires that interim financial statements included in quarterly reports on Form 10-Q be reviewed by an independent public accountant. The Company was unable to obtain a review by its independent public accountant of its financial statements before the Original Filing. Consequently, the consolidated financial statements in the Original Filing were not reviewed by an independent public accountant in accordance with Statement of Auditing Standards No. 100, Interim Financial Information (“SAS100”). The financial statements included herein have now been reviewed in accordance with SAS100 and the Company is filing this amended Form 10-Q/A. This Form 10-Q/A amends the Company’s Condensed Consolidated Financial Statements and related disclosures in Item 1 for the three months ended July 31, 2023, as well as Management’s Discussion and Analysis in Item 2.
Additionally, when the Company made its Original Filing, the Company incorrectly classified the amount of $8,223 in interest expense that should have been charged to other expense categories, and understated its accrued liabilities by $25,100. This reclassification and understatement of an accrued liability had the impact of understating the Company’s loss from operations for the three months ended March 31, 2024, by $25,100. See Footnote 8. “Restatement” addresses the impact of these errors.
The following items have been amended to reflect the restatements:
Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Part II, Item 8. Financial Statements and Supplementary Data
Part IV, Item 15. Financial Statement Schedules and Footnotes
Also the Company’s Principal Executive and Principal Financial Officer has provided new certifications dated as of the date of this filing in connection with this Form 10-K/A (Exhibits 31.1 and 32.1).
Except as described above, no other information included in the Original Filing is being amended or updated by this Amendment No. 1 and this Amendment No. 1 does not purport to reflect any information or events subsequent to the Original Filing. This Amendment No. 1 continues to describe the conditions as of the date of the Original Filing and, except as expressly contained herein, we have not updated, modified or supplemented the disclosures contained in the Original Filing. Accordingly, this Amendment No. 1 should be read in conjunction with the Original Filing and with our filings with the SEC subsequent to the Original Filing.
| i |
KISSES FROM ITALY INC.
QUARTERLY REPORT ON FORM 10-Q
March 31, 2024
TABLE OF CONTENTS
| Page No. | ||
| PART I FINANCIAL STATEMENTS | ||
| Item 1. | Financial Statements | F-2 |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 23 |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 26 |
| Item 4. | Controls and Procedures | 26 |
| PART II OTHER INFORMATION | ||
| Item 1. | Legal Proceedings | 27 |
| Item 1A. | Risk Factors | 27 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 27 |
| Item 3. | Defaults Upon Senior Securities | 27 |
| Item 4. | Mine Safety Disclosures | 27 |
| Item 5. | Other Information | 27 |
| Item 6. | Exhibits | 28 |
| SIGNATURES | 29 | |
| ii |
PART I – FINANCIAL INFORMATION
KISSES FROM ITALY INC.
Condensed Consolidated Financial Statements for the Three Months Ended March 31, 2024
Index to the Unaudited Condensed Consolidated Financial Statements
| F-1 |
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
Kisses From Italy Inc.
Condensed Consolidated Balance Sheets
| March 31, | December 31, | |||||||
| 2024 | 2023 | |||||||
| (Unaudited) Restated | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable | ||||||||
| Inventory | ||||||||
| Total current assets | ||||||||
| Equipment not in service | ||||||||
| Other Assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS' DEFICIT | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued liabilities | ||||||||
| Notes payable -related party | ||||||||
| Convertible notes | ||||||||
| Total current liabilities | ||||||||
| Notes payable long term -related party | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies | ||||||||
| Stockholders' Deficit: | ||||||||
| Preferred stock, Series A $ par value. shares authorized; shares issued and outstanding | ||||||||
| Preferred stock, Series B $ par value. shares authorized; shares issued and outstanding | ||||||||
| Preferred stock, Series C, $ par value shares authorized; shares and shares issued and outstanding as of March 31, 2024 and December 31 2023, respectively | ||||||||
| Common stock, $ par value, shares authorized; and shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Kisses From Italy Stockholders' Deficit | ( | ) | ( | ) | ||||
| Non-controlling interest | ( | ( | ) | |||||
| Total Stockholders' deficit | ( | ) | ( | ) | ||||
| Total liabilities and deficit | $ | $ | ||||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
| F-2 |
Kisses From Italy Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
| Three months | Three months | |||||||
| ended | ended | |||||||
| March 31, | March 31, | |||||||
| 2024 | 2023 | |||||||
| Restated | ||||||||
| Food sales | $ | $ | ||||||
| Cost of goods sold | ||||||||
| Gross profit | ||||||||
| Operating expenses: | ||||||||
| Depreciation and amortization | ||||||||
| Stock based compensation | ||||||||
| Payroll and other expenses | ||||||||
| Rent | ||||||||
| Consulting and professional fees | ||||||||
| Impairment of fixed assets | ||||||||
| General and administrative | ||||||||
| Total operating expenses | ||||||||
| Income (loss) from operations | ( | ) | ( | ) | ||||
| Other income (expense) | ||||||||
| Interest (expense) | ( | ) | ( | ) | ||||
| Gain (loss) on the extinguishment of debt | ( | ) | ||||||
| Change in the fair value of the derivative liability | ( | ) | ||||||
| Total other income (expense) | ( | ) | ( | ) | ||||
| Loss before income taxes | ( | ) | ( | ) | ||||
| Provision for income taxes (benefit) | ||||||||
| Net loss | ( | ) | ( | ) | ||||
| Less: net income (loss) attributable to non-controlling interests | ( | ) | ||||||
| Net loss attributable to Kisses From Italy, Inc. | $ | ( | ) | $ | ( | ) | ||
| Basic earnings (loss) per common share | $ | ( | ) | $ | ( | ) | ||
| Diluted earnings (loss) per common share | $ | ( | ) | $ | ( | ) | ||
| Weighted -weighted average number of shares outstanding: | ||||||||
| Basic | ||||||||
| Diluted | ||||||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
| F-3 |
Kisses From Italy Inc.
Condensed Consolidated Statements of Changes in Stockholders' Deficit
(Unaudited)
(As Restated)
| Preferred Stock | Preferred Stock | Preferred Stock | Additional | Non- | Total | |||||||||||||||||||||||||||||||||||
| Series A | Series B | Series C | Common Stock | Paid-in | controlling | Accumulated | Stockholders' | |||||||||||||||||||||||||||||||||
| Shares | Value | Shares | Value | Shares | Value | Shares | Value | Capital | Interest | Deficit | Deficit | |||||||||||||||||||||||||||||
| Balance, December 31, 2022 | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||
| Common stock issued for accounts payable | – | – | – | |||||||||||||||||||||||||||||||||||||
| Stock based compensation | – | – | – | |||||||||||||||||||||||||||||||||||||
| Issuance of common stock as financing commitment shares | – | – | – | |||||||||||||||||||||||||||||||||||||
| Conversion of convertible notes and accrued interest into common stock | – | – | – | |||||||||||||||||||||||||||||||||||||
| Non-controlling interest, net loss | – | – | – | – | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Net loss | – | – | – | – | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Balance, March 31, 2023 | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||
| Preferred
Stock | Preferred Stock | Preferred Stock | Additional | Non- | Total | |||||||||||||||||||||||||||||||||||
| Series A | Series B | Series C | Common Stock | Paid-in | controlling | Accumulated | Stockholders' | |||||||||||||||||||||||||||||||||
| Shares | Value | Shares | Value | Shares | Value | Shares | Value | Capital | Interest | Deficit | Deficit | |||||||||||||||||||||||||||||
| Balance, December 31, 2023 | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||
| Footing error adjustment | – | – | – | – | ||||||||||||||||||||||||||||||||||||
| Share conversion error and reclassification adjustments | – | – | – | – | ( | ) | ||||||||||||||||||||||||||||||||||
| Conversion of convertible notes and into common stock | – | – | – | |||||||||||||||||||||||||||||||||||||
| Issuance of shares on the Company's equity line of credit | – | – | – | |||||||||||||||||||||||||||||||||||||
| Net loss | – | – | – | – | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Balance, March 31, 2024 Restated | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
| F-4 |
Kisses From Italy Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| Three months | Three months | |||||||
| ended | ended | |||||||
| March 31, | March 31, | |||||||
| 2024 | 2023 | |||||||
| Restated | ||||||||
| Cash flows from operating activities of continuing operations: | ||||||||
| Net income (loss) | $ | ( | ) | $ | ( | ) | ||
| Depreciation and amortization | ||||||||
| (Gain) Loss on the extinguishment of debt | ||||||||
| Stock-based compensation for services | ||||||||
| Change in the fair market value of derivative liability | ||||||||
| Impairment of fixed assets | ||||||||
| Issuance of financing commitment shares | ||||||||
| Sale of equipment | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Inventory | ( | ) | ||||||
| Accounts payable | ( | ) | ||||||
| Other assets | ||||||||
| Accrued liabilities | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities: | ||||||||
| Proceed from the Company's equity line of credit | ||||||||
| Net cash provided by financing activities | ||||||||
| Net increase in cash and cash equivalents | ( | ) | ( | ) | ||||
| Cash and cash equivalents at beginning of period | ||||||||
| Cash and cash equivalents at end of period | $ | $ | ||||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for income taxes | $ | $ | ||||||
| Supplemental disclosure of non-cash investing and financing activities | ||||||||
| Conversion of convertible notes and accrued interest into common stock | $ | $ | ||||||
| Reduction of accounts payable and accrued interest with common stock | $ | $ | ||||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
| F-5 |
KISSES FROM ITALY INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS
Kisses From Italy Inc. (the “Company”) was incorporated in Florida on March 7, 2013.
The Company’s accounting year-end is December 31.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Principles of Consolidation
The condensed consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). This basis of accounting involves the application of accrual accounting and consequently, revenues and gains are recognized when earned, and expenses and losses or recognized when incurred. The consolidated financials include the accounts of the Company and its wholly-owned subsidiaries; Kisses From Italy 9th LLC, Kisses From Italy-Franchising LLC, Kisses From Italy, Inc. (Canada) (a company incorporated under the laws of Canada and registered in Quebec on December 23, 2020), and Kisses From Italy Italia SRLS (a limited liability company incorporated in Italy), and its 70% owned subsidiary, Kisses-Palm Sea Royal LLC. Kisses-Palm Sea Royal closed its store on September 30, 2023 but remained as an operating entity.
Management is actively evaluating current market conditions and exploring the possibility of relocating our operations to other areas within South Florida. This decision stems from our ongoing commitment to strategic growth and optimizing our operational footprint. The consideration to relocate is driven by several factors, including but not limited to:
Market Dynamics: Analysis of market trends and opportunities suggests potential advantages in certain geographic locations within South Florida that align more closely with our strategic objectives.
Operational Efficiency: Evaluating alternative locations may provide opportunities to enhance operational efficiency, reduce costs, and improve service delivery to our customers.
Infrastructure and Resources: Assessing the availability of suitable infrastructure, resources, and talent pool in different areas to support our long-term growth plans.
At this time it has not been considered discontinued operations in accordance with ASC 205-20 because the division has not been disposed of nor is disposal in the plan.
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The most significant estimates relate to revenue recognition, valuation of accounts receivable and the allowance for doubtful accounts, inventories, valuation of financial instruments, income taxes, and contingencies. The Company bases its estimates on historical experience, known or expected trends and various other assumptions that are believed to be reasonable given the quality of information available as of the date of these condensed consolidated financial statements. The results of these assumptions provide the basis for making estimates about the carrying amounts of assets and liabilities that are not readily apparent from other sources. Actual results could differ from these estimates.
| F-6 |
Accounts Receivable and Allowance for Doubtful Accounts
Accounts receivables are recorded at the net value of the face amount less any allowance for doubtful accounts. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in its existing accounts receivable. The Company reviews the allowance for doubtful accounts on a regular basis, and all past due balances are reviewed individually for collectability. Account balances are charged against the allowance when placed for collection. Recoveries of receivables previously written off are recorded when received. Interest is not charged on past due accounts. These receivables are related to the sale of our private label branded products sold in retail and grocery stores in Canada.
As of March 31, 2024, and December 31, 2023, our trade
receivables amounted to $
Foreign Currency Translation
The functional and reporting currency of the Company’s Bari location in Italy is the Euro. Management has adopted ASC 830 “Foreign Currency Matters” for transactions that occur in foreign currencies. Monetary assets denominated in foreign currencies are translated using the exchange rate prevailing at the balance sheet date. Average monthly rates are used to translate revenues and expenses. To date, this difference has been immaterial for the Bari location.
Transactions denominated in currencies other than the functional currency, such as the Company’s current retails sales in Canada for Kisses From Italy branded products, are translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Exchange gains or losses arising from foreign currency transactions are included in the determination of net income for the respective periods.
Assets and liabilities of the Company’s operations are translated into the reporting currency, United States dollars, at the exchange rate in effect at the balance sheet dates. Revenue and expenses are translated at average rates in effect during the reporting periods. Equity transactions are recorded at the historical rate when the transaction occurs.
Revenue Recognition
The Company recognizes revenue under the guidelines of ASC 606. Sales, as presented in the Company’s consolidated statement of earnings, represent franchise revenue; and food and beverage products sold which is presented net of discounts, coupons, employee meals and complimentary meals. Revenue is recognized using the five step approach required under the guidelines of ASC 606:
1. Identify the contract with the client,
2. Identify the performance obligations in the contract,
3. Determine the transaction price,
4. Allocate the transaction price to performance obligations in the contract
5. Recognize revenues when or as the Company satisfies a performance obligation
At the corporate owned restaurants all five steps of revenue recognition occur almost simultaneously. The customer orders food from a menu, it is prepared, delivered to the customer who then pays for the food order at the cash register.
For our branded retail products goods sold in Canada, the Company receives a detailed purchase order from grocery store retailers that specifies the goods ordered, their price, payment terms and the required delivery date. Once the delivery of items on the purchase order is made to the client and title passes to the retailer, the Company has met its performance obligation and recognizes revenue.
| F-7 |
Non-controlling interest
A non-controlling interest represents third-party ownership in the net assets of one of our consolidated subsidiaries. For financial reporting purposes, the assets and liabilities of our majority-owned subsidiary consolidated with those of the Company’s wholly-owned subsidiaries, with any third-party investor’s interest shown as non-controlling interest.
Cash and Cash Equivalents
The Company considers all highly liquid temporary
cash investments with an original maturity of three months or less to be cash equivalents. On March 31, 2024 and December 31, 2023, the
Company’s cash equivalents totaled $
Property and equipment
Depreciation is computed by the straight-line method and is charged to operations over the estimated useful lives of the assets. Maintenance and repairs are charged to expense as incurred. The carrying amount and accumulated depreciation of assets sold or retired are removed from the accounts in the year of disposal and any resulting gain or loss is included in the results of operations. The estimated useful lives of property and equipment are as follows:
| Schedule of estimated useful lives of property | |
| Computers, software, and office equipment | |
| Machinery and equipment | |
| Leasehold improvements |
Income taxes
The Company accounts for income taxes under the Financial Accounting Standards Board (“FASB”) ASC 740, “Accounting for Income Taxes”. Under FASB ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under FASB ASC 740, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. FASB ASC 740-10-05,“Accounting for Uncertainty in Income Taxes” prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities.
The amount recognized is measured as the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. The Company assesses the validity of its conclusions regarding uncertain tax positions on a quarterly basis to determine if facts or circumstances have arisen that might cause it to change its judgment regarding the likelihood of a tax position’s sustainability under audit.
| F-8 |
Derivative Financial Instruments
The Company evaluates its financial instruments to
determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments
that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each
reporting date, with changes in the fair value reported in the consolidated statements of operations. The classification of derivative
instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting
period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not the net-cash
settlement of the derivative instrument could be required within twelve months of the balance sheet date. As of March 31, 2024 and December
31, 2023, the balance of the derivative liability was $-
The Company accounts for stock-based compensation using the fair method following the guidance set forth in Section 718-10 of the FASB Accounting Standards Codification for disclosure about Stock-Based Compensation. This section requires a public entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). That cost will be recognized over the period during which an employee is required to provide service in exchange for the award- the requisite service period (usually the vesting period). No compensation cost is recognized for equity instruments for which employees do not render the requisite service.
Leases
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which establishes a new lease accounting model for lessees. The updated guidance requires an entity to recognize assets and liabilities arising from financing and operating leases, along with additional qualitative and quantitative disclosures. The amended guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018, with early adoption permitted. In March 2019, the FASB issued ASU 2019-01, Codification Improvements, which clarifies certain aspects of the new lease standard. The FASB issued ASU 2018-10, Codification Improvements to Topic 842, Leases in July 2018. Also in 2018, the FASB issued ASU 2018-11, Leases (Topic 842) Targeted Improvements, which provides an optional transition method whereby the new lease standard is applied at the adoption date and recognized as an adjustment to retained earnings. The amendments have the same effective date and transition requirements as the new lease standard. On November 15, 2019, the FASB issued ASU 2019-10, which amends the effective dates for three major accounting standards. The ASU defers the effective dates for the credit losses, derivatives, and lease standards for certain companies. Since the Company is classified as a small reporting company and emerging growth company and has a calendar-year end, the Company was eligible for deferring the adoption of ASC 842 to January 1, 2022.
In the first quarter of fiscal 2022, we adopted ASU
2016-02 related solely to operating leases at our store locations. The most significant impact of adoption was the recognition of right
of use operating lease assets and right of use operating lease liabilities of approximately $
Inventory
Inventory is comprised of wholesale food inventory
at our retail operations. The value of the food at our US locations is very minimal at any one time and is charged to cost of sales as
soon as it arrives at the store. Our US locations do not have liquor licenses. The balance of inventory on March 31, 2024 and December
31, 2023 was $
| F-9 |
Net loss per common share is computed by dividing net loss by the weighted average shares of common stock outstanding during the period as defined by Financial Accounting Standards, ASC Topic 260, “Earnings per Share.” Basic earnings per common share (“EPS”) calculations are determined by dividing net income by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per common share calculations are determined by dividing net income by the weighted average number of shares of common stock and dilutive common share equivalents outstanding. Due to the Company’s net losses for the years ended December 31, 2023 and December 31, 2022, and for the three month period ended March 31, 2024 all of its outstanding stock options, warrants, and shares issuable if convertible notes or Preferred C shares was converted to common stock; are all considered anti-dilutive. The number of these anti-dilutive equivalents was not calculated and are excluded from the calculation of net loss per share.
Recent Accounting Pronouncements
In August 2020, FASB issued ASU 2020-06 Accounting for Convertible Instruments and Contracts in an Entity; Own Equity (“ASU 2020-06”), as part of its overall simplification initiative to reduce costs and complexity of applying accounting standards while maintaining or improving the usefulness of the information provided to users of financial statements. Among other changes, the new guidance removes from GAAP separation models for convertible debt that require the convertible debt to be separated into a debt and equity component, unless the conversion feature is required to be bifurcated and accounted for as a derivative or the debt is issued at a substantial premium. As a result, after adopting the guidance, entities will no longer separately present such embedded conversion features in equity, and will instead account for the convertible debt wholly as debt. The new guidance also requires use of the “if-converted” method when calculating the dilutive impact of convertible debt on earnings per share, which is consistent with the Company’s current accounting treatment under the current guidance. The Company adopted this guidance on January 1, 2022.
In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”) and also issued subsequent amendments to the initial guidance: ASU 2018-19, ASU 2019-04, and ASU 2019-05 (collectively, “Topic 326”). Topic 326 requires measurement and recognition of expected credit losses for financial assets held. The Company will be required to adopt this ASU for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The adoption of Topic 326 is not expected to have a material effect on the Company’s condensed consolidated financial statements and financial statement disclosures.
NOTE 3 – GOING CONCERN AND LIQUIDITY
As of March 31, 2024 the Company had cash on hand
of $
Management has concluded that these condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. It is the Company’s current intention to raise debt and/or equity financing to fund ongoing operating expenses. There is no assurance that financing, whether debt or equity, will be available to the Company, satisfactorily completed or on terms favorable to the Company. Any issuance of equity securities, if accomplished, could cause substantial dilution to existing stockholders and any debt financing may contain covenants limiting certain corporate actions. Any failure by the Company to successfully raise additional financing would have a material adverse effect on its business, including the possible inability to continue operations.
NOTE 4 – EQUIPMENT NOT IN SERVICE
As of March 31, 2024 and December 31, 2023, all of
the Company fixed assets in service had been fully depreciated Also as of the March 31, 2024 and December 31, 2023 we had $-
| F-10 |
NOTE 5 – ACCRUED LIABILITIES
The following table sets forth the components of the Company’s accrued liabilities on March 31, 2024 and December 31, 2023.
| Schedule of accrued liabilities | ||||||||
| March 31, 2024 | December 31, 2023 | |||||||
| Sales tax payable | $ | $ | ||||||
| Accrued interest payable | ||||||||
| Total accrued liabilities | $ | $ | ||||||
NOTE 6 – PROMISSORY NOTES PAYABLE RELATED PARTIES
As of March 31, 2024 and December 31, 2023, the
balance of notes payable was $
NOTE 7 – CONVERTIBLE NOTES
As of March 31, 2024 and December 31, 2023, the outstanding
principal balance of convertible notes was $
On April 11, 2022, the Company entered into a securities
purchase agreement, dated as of April 6, 2022, (the “Talos Purchase Agreement”) with Talos Victory Fund, LLC, a Delaware limited
liability company (“Talos”), pursuant to which the Company issued to Talos a promissory note in the principal amount of $
On April 13, 2022, the Company entered into a securities
purchase agreement, dated as of April 11, 2022, (the “Blue Lake Purchase Agreement”) with Blue Lake Partners, LLC, a Delaware
limited liability company (“Blue Lake”), pursuant to which the Company issued to Blue Lake a promissory note in the principal
amount of $
On May 13, 2022, the Company entered into a securities
purchase agreement, dated as of May 11, 2022, (the “Fourth Man Purchase Agreement”) with Fourth Man, LLC (“Fourth Man”),
pursuant to which the Company issued to Fourth Man a promissory note in the principal amount of $
Each of the notes bear interest at
| F-11 |
Using the Black Scholes model, the Company recording
a financing expense of $
During the three months ended September 30,
2022, the Company granted an underwriter 162,000 warrants exercisable for five
years at an exercise price of $
As a result of the above transactions, the Company
has recorded $
As of June 30, 2022 the Talos Note, Blue Lake Note and the Fourth Man Note had converted their convertible notes to equity and no balance or accrued interest was due to these lenders.
On July 26, 2022 the Company entered into a $
On January 23, 2023 the Company paid off this $
On May 24, 2022, the Company, entered into a Securities
Purchase Agreement (the “JSC Purchase Agreement”) with Jefferson Street Capital LLC, a New Jersey limited liability company
(“JSC”), pursuant to which the Company issued to JSC a promissory note in the principal amount of $
The JSC Note bears interest at a rate of
The JSC Note is convertible at a fixed conversion
price of $
The JSC Warrant provides
for the purchase of up to
On June 6, 2023, but effective on June 12, 2023, the
Company, entered into a Securities Purchase Agreement (the “Firstfire Purchase Agreement”) with Firstfire Global Opportunity
Fund, LLC, a Delaware limited liability company (“Firstfire”), pursuant to which the Company issued to Firstfire a promissory
note in the principal amount of $
| F-12 |
The Firstfire Note bears interest at a rate of
The Firstfire Note is convertible at the option of
Firstfire, at any time at a fixed conversion price of $
The Firstfire Warrant issued to Firstfire provides
for the purchase of up to
The Company’s sales of shares of common stock to Firstfire under the Firstfire Transaction Documents are limited to no more than the number of shares that would result in the beneficial ownership Firstfire and its affiliates, at any single point in time, of more than 4.99% of the then outstanding shares of the Common Stock. The Company and Firstfire made certain representations and warranties to each other that are customary for transactions similar to this one, subject to specified exceptions and qualifications.
On June 16, 2023 the Company
paid off its $
On June 21, 2023, the Company entered into an amendment (the “Amendment”) to the JSC Warrant with JSC, pursuant to which the parties provided that any stock issuances to MacRab LLC, officers, directors, vendors, and suppliers of the Company in satisfaction of amounts owed to such parties, would not result in an adjustment to the exercise price. In consideration for the Amendment, the Company issued shares of Common Stock to JSC.
| F-13 |
NOTE 8 – RESTATEMENT
The following presents a reconciliation of the Balance Sheets, Statements of Operations, and Statements of Cash Flows from the prior period as previously reported to the restated amounts:
Kisses From Italy Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
| Reconciliation of restated financial statements | Restatement | |||||||||||
| As Reported | Adjustments | As Restated | ||||||||||
| March 31, | March 31, | |||||||||||
| 2024 | 2024 | |||||||||||
| ASSETS | ||||||||||||
| Current assets: | ||||||||||||
| Cash and cash equivalents | $ | $ | $ | |||||||||
| Accounts receivable | ||||||||||||
| Inventory | ||||||||||||
| Total current assets | ||||||||||||
| Equipment not in service | ||||||||||||
| Other Assets | ||||||||||||
| Total assets | $ | $ | $ | |||||||||
| LIABILITIES AND STOCKHOLDERS' DEFICIT | ||||||||||||
| Current liabilities: | ||||||||||||
| Accounts payable | $ | $ | ||||||||||
| Accrued liabilities | ||||||||||||
| Notes payable - related party | ||||||||||||
| Convertible notes | ||||||||||||
| Total current liabilities | ||||||||||||
| Notes payable long term - related party | ||||||||||||
| Total liabilities | ||||||||||||
| Stockholders' Deficit: | – | |||||||||||
| Preferred stock, Series A $0.001 par value. 1,500,000 shares authorized; zero shares issued and outstanding | ||||||||||||
| Preferred stock, Series B $0.001 par value. 5,000,000 shares authorized; zero shares issued and outstanding | ||||||||||||
| Preferred stock, Series C, $0.001 par value 1,000,000 shares authorized; 175,080 shares and 175,080 shares issued and outstanding as of March 31, 2024 and December 31 2023, respectively | ||||||||||||
| Common stock, $0.001 par value, 650,000,000 shares authorized; 372,920,331 and 336,763,187 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively | ||||||||||||
| Additional paid-in capital | ( |
) | ||||||||||
| Accumulated deficit | ( |
) | ( |
) | ||||||||
| Total Kisses From Italy Stockholders' Deficit | ( |
) | ( |
) | ( |
) | ||||||
| Non-controlling interest | ( |
) | ( |
) | ||||||||
| Total Stockholders' deficit | ( |
) | ( |
) | ( |
) | ||||||
| Total liabilities and deficit | $ | $ | $ | |||||||||
| F-14 |
Kisses From Italy Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
| Restatement | ||||||||||||
| As Reported | Adjustments | As Restated | ||||||||||
| Three months | Three months | |||||||||||
| ended | ended | |||||||||||
| March 31, | March 31, | |||||||||||
| 2024 | 2024 | |||||||||||
| Food sales | $ | $ | $ | |||||||||
| Cost of goods sold | ||||||||||||
| Gross profit | ||||||||||||
| Operating expenses: | ||||||||||||
| Payroll and other expenses | ||||||||||||
| Rent | ||||||||||||
| Consulting and professional fees | ||||||||||||
| Impairment of fixed assets | ||||||||||||
| General and administrative | ||||||||||||
| Total operating expenses | ||||||||||||
| Income (loss) from operations | ( | ) | ( | ) | ( | ) | ||||||
| Other income (expense) | ||||||||||||
| Interest (expense) | ( | ) | ( | ) | ||||||||
| Other income (expense) | ( | ) | ||||||||||
| Total other income (expense) | ( | ) | ( | ) | ( | ) | ||||||
| Loss before income taxes | ( | ) | ( | ) | ( | ) | ||||||
| Provision for income taxes (benefit) | ||||||||||||
| Net loss | ( | ) | ( | ) | ( | ) | ||||||
| Less: net income (loss) attributable to non-controlling interests | ||||||||||||
| Net loss attributable to Kisses From Italy, Inc. | $ | ( | ) | ( | ) | $ | ( | ) | ||||
| Basic earnings (loss) per common share | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Diluted earnings (loss) per common share | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Weighted -weighted average number of shares outstanding: | ||||||||||||
| Basic | $ | |||||||||||
| Diluted | $ | |||||||||||
| F-15 |
Kisses From Italy Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| Restatement | ||||||||||||
| As Reported | Adjustments | As Restated | ||||||||||
| Three months | Three months | |||||||||||
| ended | ended | |||||||||||
| March 31, | March 31, | |||||||||||
| 2024 | 2024 | |||||||||||
| Cash flows from operating activities of continuing operations: | ||||||||||||
| Net income (loss) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Depreciation and amortization | ||||||||||||
| (Gain) Loss on the extinguishment of debt | ||||||||||||
| Stock-based compensation for services | ||||||||||||
| Change in the fair market value of derivative liability | ||||||||||||
| Impairment of fixed assets | ||||||||||||
| Issuance of financing commitment shares | ||||||||||||
| Sale of equipment | ||||||||||||
| Issuance of financing commitment warrants and exercises | ||||||||||||
| Changes in operating assets and liabilities: | ||||||||||||
| Accounts receivable | ||||||||||||
| Inventory | ||||||||||||
| Accounts payable | ( | ) | ||||||||||
| Other assets | ||||||||||||
| Accrued liabilities | ||||||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||||||
| Cash flows from financing activities: | ||||||||||||
| Proceed from the Company's equity line of credit | ||||||||||||
| Net cash provided by financing activities | ||||||||||||
| Net increase in cash and cash equivalents | ( | ) | ( | ) | ||||||||
| Cash and cash equivalents at beginning of period | ||||||||||||
| Cash and cash equivalents at end of period | $ | $ | $ | |||||||||
| Supplemental disclosure of cash flow information: | ||||||||||||
| Cash paid for interest | $ | $ | $ | |||||||||
| Cash paid for income taxes | $ | $ | $ | |||||||||
| Supplemental disclosure of non-cash investing and financing activities | ||||||||||||
| Conversion of convertible notes and accrued interest into common stock | $ | $ | $ | |||||||||
| Reduction of accounts payable and accrued interest with common stock | $ | $ | $ | |||||||||
| F-16 |
NOTE 9 – STOCKHOLDERS EQUITY
Common Stock
The Company has authorized shares of common stock. On March 31, 2024 and December 31, 2023, there were and shares of common stock issued and outstanding, respectively, with a $ par value per share.
During the three months ended March 31, 2024, the Company issued the following shares of common stock:
| · | shares were issued upon the conversion of convertible notes into common stock. These shares
were valued at $ | |
| · | shares were issued on the Company’s equity line of credit. These shares were valued at $ |
During the three months ended December 31, 2023, the Company issued the following shares of common stock:
| · | shares were issued for related party services which were valued at $ | |
| · | shares were issued for services which were valued at $ | |
| · | shares were issued as commitment fees with the exercise of warrants which were valued at $ | |
| · | shares valued at $ | |
| · | shares valued at $ |
| F-17 |
During the three months ended September 30, 2023, the Company issued the following shares of common stock:
| · | shares were issued for related party services which were valued at $ | |
| · | shares were issued for services which were valued at $ | |
| · | shares were issued upon the exercise of warrants which were valued at $ | |
| · | shares valued at $ were issued as a commitment fee to obtain financing | |
| · | common shares were sold pursuant to the Company’s credit line for gross proceeds of $ |
During the three months ended June 30, 2023, the Company issued the following shares of common stock:
| · | shares were issued for related party services which were valued at $ | |
| · | shares were issued for services which were valued at $ | |
| · | shares were issued upon the conversion of convertible notes and accrued interest. These shares were valued at $ | |
| · | shares valued at $ were issued as a commitment fee to obtain financing | |
| · | common shares were sold pursuant to the Company’s credit line for gross proceeds of $ |
During the three months ended March 31, 2023, the Company issued the following shares of common stock:
| · | shares for services valued at $ | |
| · | shares for financing commitments valued at $ | |
| · | shares upon the conversion of convertible notes and accrued interest valued at $ | |
| · | shares to pay off an accounts payable balance of $ |
During the year ended December 31, 2022, the Company issued the following shares of stock:
| · | shares upon the conversion of Series C Stock | |
| · | shares for financing commitments valued at $ | |
| · | shares upon the conversion of convertible notes valued at $ |
| F-18 |
Preferred Stock
On December 19, 2019, the Company filed a Certificate of Designation with the State of Florida to designate shares of the Company’s authorized preferred stock as Series A Preferred Stock (“Series A Stock”), shares as Series B Preferred Stock (“Series B Stock”) and shares as Series C Preferred Stock (“Series C Stock”).
A summary of the material provisions of the Certificate of Designation governing the Series A Stock, the Series B Stock and the Series C Stock is as follows:
Series A Stock
The Series A Stock is not convertible. Each share of Series A Stock shall entitle the holder to three hundred votes for each share of Series A Stock. Any amendment to the Certificate of Designation requires the consent of the holders of at least two-thirds of the shares of Series A Stock then outstanding. The holders of Series A Stock are not entitled to dividends until and unless determined by the Board of Directors of the Company.
Liquidation Preference
No distribution shall be made to holders of shares of capital stock ranking junior to the Series A Preferred Stock upon liquidation, dissolution or winding-up of the Company. The Series A Stock ranks pari passu with the Series C Stock.
There were shares of Series A Stock outstanding as of March 31, 2024 and December 31, 2023
Series B Stock
The Series B Stock is convertible at any time by the holder into the number of shares of common stock of the Company based on two times the price paid by the holder for the shares. The Board has the authorization to establish a minimum price for the conversion price of the Series B Stock (so that if the market price of the common stock of the Company drops below the issuance price, the conversion rate will then be based on the minimum price established by the Board and not the price paid for the shares). The holders of Series B Stock shall not be entitled to voting rights except as otherwise provided by applicable law. The holders of Series B Stock are not entitled to dividends until and unless determined by the Board.
Liquidation Preference
The holders of Series B Stock shall not be entitled to any distributions upon a liquidation of the Company.
Restrictions of Transferability
The shares of the Series B Stock shall not, directly, or indirectly, be sold, hypothecated, transferred, assigned, or disposed of in any manner without the prior written consent of the Board and applicable securities laws.
There were shares of Series B Stock outstanding as of March 31, 2024, or December 31, 2023.
| F-19 |
Series C Stock
The Series C Stock is convertible at any time by the holder into the number of shares of common stock of the Company on the basis of three times the price paid for the shares divided by the floor price of $0.10 established by the Board of Directors. The holders of the Series C Stock shall not be entitled to voting rights except as otherwise provided for by applicable law. The holders of Series C Stock are not entitled to dividends until and unless determined by the Board.
Liquidation Preference
Upon any liquidation of the Company, the holders of Series C Stock shall be entitled to the amount paid for the shares of Series C Stock prior to the holders of shares ranking junior to the Series C Stock. Upon the holders of the Series C Stock and any series of stock ranking pari passu with the Series C Stock having received distributions to which they are entitled, the remaining assets of the Company shall be distributed to the other holders pro rata in proportion to the shares held by each holder.
Restrictions of Transferability
The Series C Stock shall not, directly, or indirectly, be sold, hypothecated, transferred, assigned, or disposed of in any manner without the prior written consent of the Board and applicable securities laws.
As of March 31, 2024 and December 31, 2023 there were and shares of Series C Stock outstanding, respectively, which were purchased at a price of $ per share.
On July 11, 2023 (the “Issue Date”), the
Company, entered into a Securities Purchase Agreement (the “GSC Purchase Agreement”) with GS Capital Partners, LLC, (“GSC”),
pursuant to which the Company issued to GSC a
The GSC Note bears interest at a rate of
The GSC Note can be accelerated upon the occurrence
of an event of default, which shall occur, among other events, (i) if the Company defaults in the payment of principal or interest on
the GSC Note or any other note issued to GSC by the Company, (ii) if a majority of the members of the board of directors of the Company
on the Issue Date are no longer serving as members of the board, (iii) the Company is not current in its filings with the Securities and
Exchange Commission, (iv) if the Common Stock are delisted from an exchange (including the OTC Market exchange), or if the Common Stock
trades on an exchange, and trading in the Common Stock is suspended for more than 10 consecutive days, or (v) the Company ceases to file
its reports under the Securities Act of 1933, as amended (the “Act”). Upon an event of default, interest on the GSC Note
shall accrue at a default interest rate of
| F-20 |
The parties agree that while any principal amount,
interest or fees, or expenses are still outstanding under the GSC Note, the Company will not enter into any public or private offering
of its securities in which the Company receives cash proceeds in the aggregate of more than $
The GSC Warrant provides
for the purchase of up to
The Company’s sales of shares of Common Stock to GSC under the GSC Purchase Agreement is limited to no more than the number of shares that would result in the beneficial ownership by the Buyer and its affiliates, at any single point in time, of more than 4.99% of the then outstanding shares of the Common Stock.
The Company and GSC made certain representations and warranties to each other that are customary for transactions similar to this one, subject to specified exceptions and qualifications.
On August 22, 2023 (the “Coventry Issue Date”),
the Company entered into a Securities Purchase Agreement (the “Coventry Purchase Agreement”) with Coventry Enterprises, LLC,
(“Coventry”), pursuant to which the Company issued to Coventry a
The Coventry Note bears interest at a rate of
The Coventry Note can be accelerated upon the occurrence
of an event of default, which shall occur, among other events, (i) if the Company defaults in the payment of principal or interest on
the Coventry Note or any other note issued to Coventry by the Company, (ii) if a majority of the members of the board of directors of
the Company on the Coventry Issue Date are no longer serving as members of the board, (iii) the Company is not current in its filings
with the Securities and Exchange Commission, (iv) if the Common Stock are delisted from an exchange (including the OTC Market exchange),
or if the Common Stock trades on an exchange, and trading in the Common Stock is suspended for more than 10 consecutive days, or (v) the
Company ceases to file its reports under the Act. Upon an event of default, interest on the Coventry Note shall accrue at a default
interest rate of
The Warrant provides for
the purchase of up to
| F-21 |
The Company’s sales of shares of Common Stock to Coventry under the Purchase Agreement is limited to no more than the number of shares that would result in the beneficial ownership by Coventry and its affiliates, at any single point in time, of more than 4.99% of the then outstanding shares of Common Stock.
The Company and the Buyer made certain representations and warranties to each other that are customary for transactions similar to this one, subject to specified exceptions and qualifications.
Stock Options
As of March 31, 2024, there were vested 10-year stock options outstanding. options had a strike price of $0.07, had a strike price of $0.25 and had a strike price of $0.50 and a remaining life of years. All options were immediately expensed during the second quarter of 2022 and the Company recorded an expense of $ related to these options. There have been no stock option issuances since June 30, 2021. As of March 31, 2024, these options had intrinsic value.
NOTE 10 – SUBSEQUENT EVENTS
Effective as of May 3, 2024, Kisses from Italy Inc. dismissed BF Borgers CPA P.C. (“BF Borgers”) as its independent registered public accounting firm. The decision to change independent registered public accounting firms was made with the recommendation and approval of the Company’s board of directors.
BF Borgers had served as the Company’s independent auditor since 2018. BF Borgers’ audit reports on the Company’s consolidated financial statements as of and for the fiscal years ended December 31, 2022 and December 31, 2021 did not contain an adverse opinion or a disclaimer of opinion and were not qualified or modified as to audit scope or accounting principles, except that such reports included explanatory paragraphs with respect to the Company’s ability, in light of its accumulated losses and negative cash flows from operations, to continue as a going concern.
During the fiscal years ended December 31, 2022 and 2021, and the subsequent interim period through the date of this report, there were no disagreements, as that term is defined in Item 304(a)(1)(iv) of Regulation S-K, between the Company and BF Borgers on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to BF Borgers’ satisfaction, would have caused BF Borgers to make reference to such disagreements in its audit reports.
During the fiscal years ended December 31, 2022 and 2021, and the subsequent interim period through the date of this report, there were no reportable events within the meaning of Item 304(a)(1)(v) of Regulation S-K.
The U.S. Securities and Exchange Commission (the “SEC”) has advised that, in lieu of obtaining a letter from BF Borgers stating whether or not it agrees with the statements herein, the Company may indicate that BF Borgers is not currently permitted to appear or practice before the SEC for reasons described in the SEC’s Order Instituting Public Administrative and Cease-and-Desist Proceedings pursuant to Section 8A of the Securities Act of 1933, Sections 4C and 21C of the Securities Exchange Act of 1934 and Rule 102(e) of the Commission’s Rules of Practice, Making Findings, and Imposing Remedial Sanctions and a Cease-and-Desist Order, dated May 3, 2024.
Effective as of May 16, 2024, the Board of Directors of the Company unanimously approved the engagement of Victor Mokuolu, CPA PLLC (“Victor Mokuolu”) as the Company’s independent registered public accounting firm for the fiscal year ended December 31, 2023 and to review the Company’s unaudited financial information for each of the three quarters, March 31, 2024, June 30, 2024, September 30, 2024.
During the fiscal years ended December 31, 2023 and 2022, and the subsequent interim period through the date of this report, neither the Company nor anyone on its behalf has consulted with Victor Mokuolu regarding either (a) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company’s financial statements, and neither a written report was provided nor oral advice was provided to the Company that Victor Mokuolu concluded was an important factor considered by the Company in reaching a decision as to the accounting, auditing or financial reporting issue; or (b) any matter that was either the subject of a disagreement (as defined in paragraph 304(a)(1)(iv) of Regulation S-K and the related instructions thereto) or a reportable event (as described in paragraph 304(a)(1)(v)) of Regulation S-K).
| F-22 |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The information set forth in this Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) contains certain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. We caution readers regarding certain forward-looking statements in the following discussion and elsewhere in this Quarterly Report and any other statement made by, or on our behalf, whether or not in future filings with the Securities and Exchange Commission. Forward-looking statements are statements not based on historical information and which relate to future operations, strategies, financial results, or other developments. Forward-looking statements are necessarily based upon estimates and assumptions that are inherently subject to significant business, economic and competitive uncertainties, and contingencies, many of which are beyond our control and many of which, with respect to future business decisions, are subject to change. These uncertainties and contingencies can affect actual results and could cause actual results to differ materially from those expressed in any forward-looking statements made by, or on our behalf. We disclaim any obligation to update forward-looking statements.
References in this section to “Kisses from Italy” “we,” “us,” “our,” “the Company” refer to Kisses from Italy Inc., a Florida corporation, and its consolidated subsidiaries.
Overview
The Company was incorporated in the State of Florida on March 7, 2013, with a focus on developing a fast, casual food dining chain restaurant business. It currently operates through the following wholly-owned subsidiaries: (1) Kisses From Italy 9th LLC, (2) Kisses From Italy-Franchising LLC; and (3) Kisses From Italy, Inc. (Canada), a company incorporated under the laws of Canada and registered in Quebec on December 23, 2020.
The Company’s main focus is to develop a fast, casual food dining chain restaurant business of corporate-owned restaurants and expanding through a nationwide/international franchise and territory sales program. The Company commenced operations in May 2015 by opening its first location in Fort Lauderdale, Florida, which is the only operating restaurant as of the date of this Quarterly Report. The Company also opened in 2016 three additional restaurants, located in various Wyndham Hotel properties in the Pompano Beach, Florida area, but these restaurants are no longer operational (in December 2017, the Company vacated one of its restaurants due to a hurricane; in June 2021, the Company consolidated its two Wyndham restaurants into one location to become more efficient, and in May 2023, the Company made the decision not to renew a lease in Wyndham Palm Aire location and to close its operations there.
On September 30, 2023 the Company’s Wyndham Palm-Aire store closed but remained as an operating entity.
Management is actively evaluating current market conditions and exploring the possibility of relocating our operations to other areas within South Florida. This decision stems from our ongoing commitment to strategic growth and optimizing our operational footprint. The consideration to relocate is driven by several factors, including but not limited to:
Market Dynamics: Analysis of market trends and opportunities suggests potential
advantages in certain geographic locations within South Florida that align more closely with our strategic objectives.
Operational Efficiency: Evaluating alternative locations may provide opportunities
to enhance operational efficiency, reduce costs, and improve service delivery to our customers.
Infrastructure and Resources: Assessing the availability of suitable infrastructure,
resources, and talent pool in different areas to support our long-term growth plans.
At this time it has not been considered discontinued operations in accordance with ASC 205-20 because the division has not been disposed of nor is disposal in the plan.
| 23 |
Recent Developments
On February 8, 2024, the Company and SC Culinary LLC entered into a termination agreement, pursuant to which the parties terminated the Strategic Alliance Agreement (the “SAA”) dated the March 1, 2023 and agreed that neither the Company nor SC Culinary has any further liability or obligation to the other with respect to the terms of the SAA, and the Company has no interest in any intellectual property rights owned or used by either SC Culinary or Scott Conant. In connection with the termination of the SAA, on February 8, 2024, Scott Conant resigned from the board of directors of the Company effective immediately. On February 16, 2024, the Company dissolved its subsidiary, The Ponte San’gwich Shoppe & Italian Deli.
On February 9, 2024, the Company received the notification letter from OTC Markets, Inc. notifying the Company that its bid price has closed below $0.01 for more than 30 consecutive calendar days and that the Company no longer meets the Standards for Continued Eligibility for OTCQB (the “OTCQB Standards”), which requires maintaining proprietary priced quotations published by a Market Maker in OTC Link with a minimum closing bid price of $0.01 per share on at least one of the prior 30 consecutive calendar days (the “Minimum Closing Bid Price”). Initially, OTC Markets granted the Company a cure period of 90 calendar days, or until May 9, 2024, to regain compliance with the Minimum Closing Bid Price under the OTCQB Standards, which was extended by OTC Markets to July 12, 2024.
Results of Operations
The information set forth below should be read in conjunction with the financial statements and accompanying notes elsewhere in this Quarterly Report.
Comparison of Results of Operations for the three months ended March 31, 2024, and March 31, 2023
Revenue and Cost of Sales
Total revenues for the three months ended March 31, 2024, were $33,119 compared to $115,460 during the three months ended March 31, 2023. Revenues for the three months ended March 31, 2024, were comprised of $29,527 in food sales and $3,592 in retail sales, compared to food sales of $112,149 and $3,310 in retail sales during the three months ended March 31, 2023. The significant decrease in revenues is attributable to the closing of the PSR location in September 2023.
Cost of goods sold during the three months ended March 31, 2024 was $16,495 compared to $58,871 during the three months ended March 31, 2023. This decrease is attributable to lower sales volumes.
Operating expenses
Operating expenses were $125,197 for the three months ended March 31, 2024, compared to $531,283 during the three months ended March 31, 2023. Non-cash stock-based compensation was $-0- and $206,700 for the periods ended March 31, 2024, and March 31, 2023, respectively. Excluding the stock-based compensation in both periods, operating expenses were $116,974 for the three months ended March 31, 2024, compared to $324,583 for the three months ended March 31, 2023. The significant decrease in expenses primarily attributable to a decrease of approximately $131,000 in consulting fees and a decrease of approximately $64,000 in general and administrative expenses in the 2024 period compared to 2023, partially offset by an impairment of fixed assets of $34,221 in the 2024 period.
Other income and expense
Other expenses were comprised solely of interest expense $26,645, for the three months ended March 31, 2024, compared to $477,687 during the three months ended March 31, 2023. The significant decrease is primarily attributable to a reduction in interest expense, loss on the extinguishment of debt and change in the fair value of the derivative liability.
| 24 |
Net Loss
As a result of the foregoing, during the three months ended March 31, 2024, we incurred a net loss of $110,118 and a net loss of $110,118 attributable to non-controlling interests, compared to a net loss of $952,381 and a net loss of $950,498 attributable to non-controlling interests for the three months ended March 31, 2023.
Liquidity and Capital Resources
On March 31, 2024, we had $2,008 in cash and cash equivalents.
Net cash used in operating activities was $55,249 during the three months ended March 31, 2024, compared to net cash used of $290,238 during the three months ended March 31, 2023. The in net cash used in operating activities is primarily attributable to changes in operating assets and liabilities.
Net cash provided by financing activities was $32,415 for the three months ended March 31, 2024, compared to $-0- during the three months ended March 31, 2023. The increase is due to draws on the Company’s equity line of credit.
We estimate that we will need approximately $1,000,000 to fully effectuate our business development plans.
There can be no assurances that additional financing, either through equity or debt, will be available on a timely basis, on favorable terms or at all. While we have had discussions with potential investors and investment bankers, we have no agreement with any third party to provide additional financing. Our inability to obtain additional financing may have a significant negative impact on our continued development and results of our operations.
Going Concern
Our consolidated financial statements were prepared to assume that we will continue as a going concern and do not include adjustments for the recoverability and the realization of assets and the satisfaction of liabilities in the normal course of business for the twelve months following the date of the financial statements that may be necessary should we be unable to continue in operation. In addition, the Company continues to experience negative cash flows from operations. These factors, among others, raise substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
Critical Accounting Estimates
Management’s discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Our critical accounting policies are defined as those policies that we believe are the most important to the portrayal of our financial condition and results of operations and that require management’s most difficult, subjective, or complex judgments, often as a result of the need to make estimates about the effects of matters that are inherently uncertain. See notes to our financial statements, Note [*] – Summary of Significant Accounting Policies.
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Recent Accounting Pronouncements
There were various accounting standards and interpretations issued recently, none of which are expected to have a material effect on the Company's operations, financial position, or cash flows.
| ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
The Company is a smaller reporting company and is not required to provide this information.
| ITEM 4. | CONTROLS AND PROCEDURES |
Disclosure Controls and Procedures – Our management, with the participation of our Principal Executive Officer and Principal Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as of the end of the period covered by this Quarterly Report.
These controls are designed to ensure that information required to be disclosed in the reports we file or submit pursuant to the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the periods specified in the rules and forms of the Securities and Exchange Commission, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.
Based on this evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures were effective as of March 31, 2024.
Inherent Limitations – Our management, including our Principal Executive Officer and Principal Financial Officer, does not expect that our disclosure controls and procedures will prevent all errors and all fraud. A control system, no matter how well-conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdown can occur because of simple error or mistake. In particular, many of our current processes rely upon manual reviews and processes to ensure that neither human error nor system weakness has resulted in erroneous reporting of financial data.
Changes in Internal Control over Financial Reporting –. During the period covered by this Quarterly Report, there were no changes in our internal controls over financial reporting that have materially affected or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II – OTHER INFORMATION
| ITEM 1. | LEGAL PROCEEDINGS |
There are no pending legal proceedings to which the Company is a party or in which any director, officer, or affiliate of the Company, any owner of record or beneficially of more than 5% of any class of voting securities of the Company, or security holder is a party adverse to the Company or has a material interest adverse to the Company. The Company's property is not the subject of any pending legal proceedings.
| ITEM 1A. | RISK FACTORS |
We are a smaller reporting company and are not required to provide this information.
| ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
Except as set forth below, there were no sales of equity securities sold during the period covered by this Report that were not registered under the Securities Act and were not previously reported in a Current Report on Form 8-K filed by the Company.
On February 23, 2024, the Company issued 600,000 shares of Series A Preferred voting stock to each of Mr. Ferri and Mr. Di Turi.
On January 26, 2024 the Company sold 2,346,674 shares to MacRab LLC through the Company’s equity line of credit.
On February 14, 2024, the Company sold 16,921,582 shares to MacRab LLC through the Company’s equity line of credit.
On February 28, 2024, the Company issued 16,888,888 shares of common stock to Jefferson Street Capital upon the conversion of convertible notes, accrued interest and fees.
These transactions were exempt from registration under Section 4(a)(2) and/or Rule 506(b) of Regulation D as promulgated by the Securities and Exchange Commission under the Securities Act, as transactions by an issuer not involving any public offering. None of the securities were sold through an underwriter and, accordingly, there were no underwriting discounts or commissions involved.
| ITEM 3. | DEFAULTS UPON SENIOR SECURITIES |
None.
| ITEM 4. | MINE SAFETY DISCLOSURES |
Not Applicable.
| ITEM 5. | OTHER INFORMATION |
During the quarter
ended March 31, 2024, no director or officer of the Company
| 27 |
| ITEM 6. | EXHIBITS |
| Exhibit No. | Description | |
| 31.1 | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 31.2 | Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 32.1 | Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 32.2 | Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 101.INS | XBRL Instance Document | |
| 101.SCH | XBRL Schema Document | |
| 101.CAL | XBRL Calculation Linkbase Document | |
| 101.DEF | XBRL Definition Linkbase Document | |
| 101.LAB | XBRL Label Linkbase Document | |
| 101.PRE | XBRL Presentation Linkbase Document | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
| 28 |
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
| KISSES FROM ITALY INC. | ||
|
Date: August 13, 2024 |
||
| By: | /s/ Michele Di Turi | |
|
Michele Di Turi Co-Chief Executive Officer | ||
| (Principal Executive Officer) | ||
| Date: August 13, 2024 | ||
| By: | /s/ Claudio Ferri | |
|
Claudio Ferri Co-Chief Executive Officer | ||
| Principal Accounting Officer) | ||
‘
| 29 |
EXHIBIT 31.1
CERTIFICATION PURSUANT TO 18 USC, SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES OXLEY ACT OF 2002
I, Michele Di Turi, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q/A of Kisses From Italy Inc.; | |
| 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 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 and I have disclosed, based on our 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 13, 2024 | By: | /s/ Michele Di Turi |
Michele Di Turi Co-Chief Executive Officer |
EXHIBIT 31.2
CERTIFICATION PURSUANT TO
18 USC, SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES OXLEY ACT OF 2002
I, Claudio Ferri, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q/A of Kisses From Italy Inc.; | |
| 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 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 and I have disclosed, based on our 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 13, 2024 | By: | /s/ Claudio Ferri |
| Claudio Ferri | ||
| Co-Chief Executive Officer | ||
| (Principal Financial and Accounting Officer) |
EXHIBIT 32.1
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 this quarterly report of Kisses From Italy Inc. (the “Company”) on Form 10-Q/A for the quarter ended March 31, 2024, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, the undersigned, in the capacity and on the date indicated below, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
| (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 result of operations of the Company. |
| Dated: August 13, 2024 | By: | /s/ Michele DI Turi |
| Michele DI Turi | ||
| Co-Chief Executive Officer (Principal Executive Officer) |
EXHIBIT 32.2
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 this quarterly report of Kisses From Italy Inc. (the “Company”) on Form 10-Q/A for the quarter ended March 31, 2024, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, the undersigned, in the capacity and on the date indicated below, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
| (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 result of operations of the Company. |
| Dated: August 13, 2024 | By: | /s/ Claudio Ferri |
| Claudio Ferri | ||
| Co-Chief Executive Officer | ||
| (Principal Financial and Accounting Officer) |