Quantum X Inc 10-K for FY2020
Quantum X Inc. (QUTX)
About this 10-K
Quantum X Inc filed this 10-K on March 29, 2021, covering the fiscal year ended December 31, 2020 (FY2020).
Headline figures
Fiscal year ended December 31, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $159.03K
- Net loss
- $7.67M
- compared with a net loss of $5.68M a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
x ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2020
¨ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 333-167667
TWO HANDS CORPORATION
(Exact name of registrant as specified in its charter)
| Delaware | 42-1770123 | |||
| (State or Other Jurisdiction of | (I.R.S. Employer | |||
| Incorporation or Organization) | Identification No.) | |||
| 1035 Queensway East, Mississauga, Ontario, Canada | L4Y 4C1 | |||
| (Address of Principal Executive Offices) | (Zip Code) |
(416) 357-0399
(Registrant's telephone number, including area code)
33 Davies Ave., Toronto, Ontario Canada M4M 2A9
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No x
Indicate by check mark whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the last 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨
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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 ¨ | |
| Non-accelerated filer x | Smaller reporting company x | |
| Emerging Growth Company x |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter. $849,267.
As of March 26, 2021, the registrant had 1,244,071,258 outstanding shares of Common Stock.
Documents incorporated by reference: None.
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TABLE OF CONTENTS
| PART I | Page | |
| Item 1. | Business | 5 |
| Item 1A. | Risk Factors | 6 |
| Item 1B. | Unresolved Staff Comments | 13 |
| Item 2. | Properties | 13 |
| Item 3. | Legal Proceedings | 13 |
| Item 4. | Mine Safety Disclosures | 13 |
| PART II | ||
| Item 5. | Market for Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 14 |
| Item 6. | Selected Financial Data | 15 |
| Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 16 |
| Item 7A. | Quantitative and Qualitative Disclosures About Market Risk | 20 |
| Item 8. | Financial Statements and Supplementary Data | 20 |
| Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure | 44 |
| Item 9A. | Controls and Procedures | 44 |
| Item 9B. | Other Information | 44 |
| PART III | ||
| Item 10. | Directors, Executive Officers and Corporate Governance | 44 |
| Item 11. | Executive Compensation | 48 |
| Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 49 |
| Item 13. | Certain Relationships and Related Transactions and Director Independence | 51 |
| Item 14. | Principal Accountant Fees and Services | 52 |
| PART IV | ||
| Item 15. | Exhibits, Financial Statement Schedules | 53 |
| Item 16. | Form 10-K Summary | 55 |
| Signatures | 55 |
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This report on Form 10-K contains "forward-looking statements" that involve risks and uncertainties. You should not place undue reliance on these forward-looking statements. Our actual results could differ materially from those anticipated in the forward-looking statements for many reasons, including the risks described in this Form 10-K and other filings we make with the Securities and Exchange Commission. Although we believe the expectations reflected in the forward-looking statements are reasonable, they relate only to events as of the date on which the statements are made. We do not intend to update any of the forward-looking statements after the date of this report to conform these statements to actual results or to changes in our expectations, except as required by law.
The following discussion and analysis of financial condition and results of operations is based upon, and should be read in conjunction with our audited financial statements and related notes thereto included elsewhere in this Form 10-K.
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PART I
ITEM 1. BUSINESS
Our Business
Two Hands Corporation (the "Company") was incorporated on April 3, 2009 in the State of Delaware and established a fiscal year end of December 31.
The Company is in the business of developing brand strategies. The Company executes and/or oversees the research, planning, pricing, creative development, tracking and deployment of all digital advertising projects needed to promote both ours and client products and services.
The gocart.city online consumer grocery delivery application was released in early June 2020 with currently 624 paid users and gocart.city wholesale commenced sale of dry goods and produce to other businesses in July 2020.
The Two Hands co-parenting application launched on July 2018 and the Two Hands Gone application launched In February 2019.
The operations of the business are carried on by a 100% owned subsidiary, I8 Interactive Corporation, a company incorporated under the laws of Canada.
Research and Development
We did not incur any research and development costs during the fiscal year ended December 31, 2020 and 2019.
Customers
We intend to market our services via internet marketing efforts. Many products developed are new and innovative that requires public recognition to realize potential. Where possible we plan to merge our efforts for both design and internet publishing to maximize our opportunities. Our co-parenting and two hands gone application customers are individuals and families. Our gocart.city are made up of online retail customers and commercial establishments for our wholesale customers.
Competition
We compete with other software developers and systems integrators who offer one or more services competitive with the service we intend to sell. The co-parenting application technology is competitive, with several well-established applications like Our Family Wizard and Custody X Change. Two hands gone application technology is competitive, with several well-established applications like WhatsApp and Signal.
gocart.city is competitive, with several well-established brands like Instacart, Voila and Grocery Gateway. Our competitors frequently introduce of new products and include numerous domestic and foreign companies, some of which are substantially larger and have greater financial and other resources than we do. We compete principally on the basis of offering quality products.
Product Development
We continue to update and modify our responsive web application for gocart.city launched in 2020. The mobile version of the Application in addition to can be downloaded from either the apple app store or Google play store. We are continuing to develop the Applications adding new features and capabilities and is currently available as a basic free version. The Company is currently reviewing revenue models such as advertising and/ or preferred paid versions.
Over the course of the next 12 months, the Company intends to bring the following additional features to market:
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Expanded order GEO location services;
| |
| • |
Expanded customer messaging services; and
| |
| • | Expanded payment system |
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Manufacturing and Product Sourcing
Most supplies used are readily available from any number of our local and international suppliers, at competitive prices. Delivery of product will vary depending on the area serviced and the number of orders per day.
Management's Plan of Operation
gocart.city Applications
The gocart.city grocery delivery application was released in early June 2020. The gocart.city grocery set of applications has been rolled out on-line and to both the Apple and Google Play stores. To meet the growing demand for grocery delivery on October 20, 2020 we expanded our Greater Toronto delivery area to now include more of southwestern Ontario.
We plan to capitalize on the growing online grocery delivery business which we believe the lack of capacity has been recently highlighted by the COVID-19 pandemic. Our core offerings include fresh-cut individually packaged fruits and vegetables, specialized foods including Italian themed, artisan, gluten-free and health conscience items. Italian themed products include oils, pasta, deserts, tea, coffee and wine. We also offer utensils to cook a proper Italian meal and accessories for an impressive presentation such as tableware, plates, table cloth, candles, aprons, hats and t-shirts.
The gocart.city grocery delivery application only lists items that are in stock so we can guarantee next day delivery.
Over the next several months we plan on utilizing and leveraging our agreement with SRAX, Inc. to market our grocery delivery application and services and expand our footprint in the Ontario region and beyond as our customer base grows.
It is our ultimate goal to improve the lives of families through the use of our applications, gocart.city, the Two Hands co-parenting solution or Two Hands Gone, our encrypted messaging app.
ITEM 1A. RISK FACTORS.
Risks Related to our Business
Our independent auditors have expressed substantial doubt about our ability to continue as a going concern.
As of December 31, 2020, we had cash of $21,843 and total liabilities of $1,655,160. During the year ended December 31, 2020, the Company incurred a net loss of $7,666,062 and used cash in operating activities of $314,429, and on December 31, 2020, had a stockholders’ deficit of $2,783,920. We are currently funding our initial operations by way of loans from our Chief Executive Officer and others and through the issuance of common stock in exchange for services. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern within one year of the date that the financial statements are issued. The Company’s independent registered public accounting firm, in their report on the Company’s financial statements for the year ending December 31, 2020, expressed substantial doubt about the Company’s ability to continue as a going concern.
If we are unable to raise enough capital in this offering or obtain additional financing, we may not be able to fulfill our business plan.
On December 31, 2020, we only had $21,843 cash on hand. To date, we have funded our operations by way of cash advances from our Chief Executive Officer, noteholders, stockholders and others on a “as-needed” basis. As such, our operating capital is currently limited to the personal resources of our Chief Executive Officer, noteholders, stockholders and others. If we unsuccessful at achieving a sufficient amount of net proceeds from this offering, we will continue to rely on loans from our Chief Executive Officer, noteholders, stockholders and others although they are under no obligation to loan any money to us. We may also raise capital in the future by relying on loans from third party lending sources. However, we believe it will be difficult to secure capital in the future because we have no assets to secure debt and there is currently no active trading market for our securities. Our inability to obtain financing or generate sufficient cash from operations could require us to reduce or eliminate expenditures for developing products and services, or otherwise curtail or discontinue our operations, which could have a material adverse effect on our business, financial condition and results of operations. Furthermore, to the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of such securities may result in dilution to existing stockholders. If we raise additional funds through the issuance of debt securities, these securities may have rights, preferences and privileges senior to holders of our common stock and the terms of such debt could impose restrictions on our operations.
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Because our principal executive officer, Nadav Elituv, currently devotes only a limited amount of his time to our operations, our business could fail if he is unable or unwilling to devote a sufficient amount of time to our business.
The responsibility of developing our core business, securing the financing necessary to fully execute our business plan and fulfilling the reporting requirements of a public company all fall upon our principal executive officer, Mr. Nadav Elituv. Mr. Elituv presently dedicates approximately 75% of his professional time to Company, or 30 hours per week. In the event Mr. Elituv is unable or unwilling to fulfill any aspect of his duties, we may experience a shortfall or complete lack of revenue resulting in little or no profits and the eventual closure of our business, whereby you may lose your entire investment. The loss of Mr. Elituv would have a material adverse effect on our business.
We may fail to attract, train and retain skilled and qualified employees, which could impair our ability to generate revenue, effectively service our clients and execute our growth strategy.
Our business depends in large part upon our ability to attract and retain sufficient numbers of highly qualified individuals. We compete for such qualified personnel with other companies and such competition is intense. Personnel with the requisites skills and qualifications may be in short supply or generally unavailable. If we are unable to recruit and retain a sufficient number of qualified employees, our ability to maintain and grow our business and to effectively service our clients could be limited and our future revenue and results of operations could be materially and adversely affected. Furthermore, to the extent that we are unable to make necessary permanent hires to appropriately service our clients, we could be required to engage larger numbers of contracted personnel, which could reduce our profit margins.
If we fail to successfully manage our new product development or if we fail to anticipate the issues associated with such development or expansion, our business may suffer.
We have only developed two applications. Our ability to anticipate and manage a variety of issues associated with any new product development or market expansion, such as market acceptance and effective management of our applications and other products. Our business would suffer if we fail to successfully anticipate and manage these issues associated with product development publishing and you may lose all or part of your investment.
If we cannot attract customers, we will not generate revenues and our business will fail.
We have not generated any profit. Going forward, we intend to generate revenues from our apps. We may not be able to successfully attract or maintain customers, resulting in our business failing. If our business fails, you will lose all or part of your investment.
We may encounter difficulties managing our planned growth, which would adversely affect our business and could result in increasing costs as well as a decrease in our stock price.
We intend to establish a customer base and develop new products for them. To manage our anticipated growth, we must continue to improve our operational and financial systems and expand, train, retain and manage our employee base to meet new opportunities. Because of the registration of our securities, we are subject to reporting and disclosure obligations, and we anticipate that we will hire additional finance and administrative personnel to address these obligations. In addition, the anticipated growth of our business will place a significant strain on our existing managerial and financial resources. If we cannot effectively manage our growth, our business may be harmed.
The recent global coronavirus outbreak could harm our business and results of operations.
In March 2020, the World Health Organization declared coronavirus COVID-19 a global pandemic. This contagious disease outbreak, which has continued to spread, and any related adverse public health developments, has adversely affected workforces, customers, economies, and financial markets globally, potentially leading to an economic downturn. It has also disrupted the normal operations of many businesses. This outbreak could decrease spending, adversely affect demand for our product and harm our business and results of operations. It is not possible for us to predict the duration or magnitude of the adverse results of the outbreak and its effects on our business or results of operations at this time.
Because we do not have an audit committee, shareholders will have to rely on the directors, who are not independent, to perform these functions.
We do not have an audit or compensation committee comprised of independent directors. These functions are performed by the board of directors as a whole. The members of the Board of Directors are not independent directors. Thus, there is a potential conflict in that the board members are also engaged in management and participate in decisions concerning management compensation and audit issues that may affect management performance.
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Material weaknesses in our internal control over financial reporting may adversely affect our common stock.
As an SEC reporting company, we are subject to the reporting requirements of the Exchange Act and governance requirements of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”). The Exchange Act requires that we file annual, quarterly and current reports with respect to our business and financial condition, proxy statement, and other information. The Sarbanes-Oxley Act requires, among other things, that we establish and maintain effective disclosure controls and procedures and internal controls and procedures for financial reporting. Section 404 of the Sarbanes-Oxley Act requires that we include a report of management on our internal control over financial reporting in our annual report on Form 10-K. That report must contain an assessment by management of the effectiveness of our internal control over financial reporting and must include disclosure of any material weaknesses in internal control over financial reporting that we have identified. Effective internal control is necessary for us to provide reliable financial reports and prevent fraud. If we cannot provide reliable financial reports or prevent fraud, we may not be able to manage our business as effectively as we would if an effective control environment existed, and our business and reputation with investors may be harmed. As a result, our small size and any current internal control deficiencies may adversely affect our financial condition, results of operation and access to capital. We have not performed an in-depth analysis to determine if historical un-discovered failures of internal controls exist and may in the future discover areas of our internal control that need improvement. Any inability to report and file our financial results accurately and timely could harm our reputation and adversely impact the trading price of our common stock.
Failure to protect our proprietary technology and intellectual property rights could substantially harm our business and results of operations.
Our success depends to a significant degree on our ability to protect our proprietary technology, methodologies, know-how and our brand. We will rely on a combination of contractual restrictions, and other intellectual property laws and confidentiality procedures to establish and protect our proprietary rights. However, the steps we will take to protect our intellectual property may be inadequate. We will not be able to protect our intellectual property if we are unable to enforce our rights or if we do not detect unauthorized use of our intellectual property. If we fail to protect our intellectual property rights adequately, our competitors may gain access to our technology and our business may be harmed. In addition, defending our intellectual property rights might entail significant expense. We may be unable to prevent third parties from acquiring domain names or trademarks that are similar to, infringe upon, or diminish the value of our trademarks and other proprietary rights.
As we grow our business, our plan is to enter into confidentiality and invention assignment agreements with our employees and consultants and enter into confidentiality agreements with other parties. No assurance can be given that these agreements will be effective in controlling access to and distribution of our proprietary information. Further, these agreements may not prevent our competitors from independently developing technologies that are substantially equivalent or superior to our products.
In order to protect our intellectual property rights, we may be required to spend significant resources to monitor and protect our intellectual property rights. Litigation may be necessary in the future to enforce our intellectual property rights and to protect our trade secrets. Litigation brought to protect and enforce our intellectual property rights could be costly, time-consuming, and distracting to management, and could result in the impairment or loss of portions of our intellectual property. Further, our efforts to enforce our intellectual property rights may be met with defenses, counterclaims, and countersuits attacking the validity and enforceability of our intellectual property rights. Our inability to protect our proprietary technology against unauthorized copying or use, as well as any costly litigation or diversion of our management’s attention and resources, could delay further sales or the implementation of our products, impair the functionality of our products, delay introductions of new products, result in our substituting inferior or more costly technologies into our products, or injure our reputation.
We could incur substantial costs as a result of any claim of infringement of another party’s intellectual property rights.
In recent years, there has been significant litigation involving patents and other intellectual property rights in the software industry. Companies providing software are increasingly bringing and becoming subject to suits alleging infringement of proprietary rights, particularly patent rights, we face a higher risk of being the subject of intellectual property infringement claims. We do not currently have a patent portfolio, which could prevent us from deterring patent infringement claims through our own patent portfolio, and our competitors and others may now and in the future have significantly larger and more mature patent portfolios than we have. The risk of patent litigation has been amplified by the increase in the number of a type of patent holder, which we refer to as a non-practicing entity, whose sole business is to assert such claims and against whom our own intellectual property portfolio may provide little deterrent value. We could incur substantial costs in prosecuting or defending any intellectual property litigation. If we sue to enforce our rights or are sued by a third party that claims that our solution infringes its rights, the litigation could be expensive and could divert our management resources. As of the date of this Report, we have not received any written notice of an infringement claim, invitation to license, or other intellectual property infringement action.
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Any intellectual property litigation to which we might become a party, or for which we are required to provide indemnification, may require us to do one or more of the following:
| ● | Cease selling or using products that incorporate the intellectual property that we allegedly infringe; |
| ● | Make substantial payments for legal fees, settlement payments or other costs or damages; |
| ● | Obtain a license, which may not be available on reasonable terms or at all, to sell or use the relevant technology; or |
| ● | Redesign the allegedly infringing products to avoid infringement, which could be costly, time-consuming or impossible. |
If we are required to make substantial payments or undertake any of the other actions noted above as a result of any intellectual property infringement claims against us or any obligation to indemnify our customers for such claims, such payments or actions could harm our business.
Our failure to protect personal information adequately could have an adverse effect on our business.
A wide variety of provincial, state, national, and international laws and regulations apply to the collection, use, retention, protection, disclosure, transfer, and other processing of personal data. These data protection and privacy-related laws and regulations are evolving and being tested in courts and may result in ever-increasing regulatory and public scrutiny as well as escalating levels of enforcement and sanctions. Any actual or perceived loss, improper retention or misuse of certain information or alleged violations of laws and regulations relating to privacy, data protection and data security, and any relevant claims, could result in enforcement action against us, including fines, imprisonment of company officials and public censure, claims for damages by customers and other affected individuals, damage to our reputation and loss of goodwill (both in relation to existing customers and prospective customers), any of which could have an adverse effect on our operations, financial performance, and business. Evolving and changing definitions of personal data and personal information, within the European Union, the United States, and elsewhere, especially relating to classification of IP addresses, machine identification, location data, and other information, may limit or inhibit our ability to operate or expand our business, including limiting strategic partnerships that may involve the sharing of data. Any perception of privacy or security concerns or an inability to comply with applicable laws, regulations, policies, industry standards, contractual obligations or other legal obligations, even if unfounded, may result in additional cost and liability to us, harm our reputation and inhibit adoption of our products by current and future customers, and adversely affect our business, financial condition, and operating results.
We have implemented and maintain security measures intended to protect personally identifiable information. However, our security measures remain vulnerable to various threats posed by hackers and criminals. If our security measures are overcome and any personally identifiable information that we collect or store becomes subject to unauthorized access, we may be required to comply with costly and burdensome breach notification obligations. We may also be subject to investigations, enforcement actions and private lawsuits. In addition, any data security incident is likely to generate negative publicity and have a negative effect on our business.
Limitations of Director Liability and Indemnification of Directors and Officers and Employees.
Our Certificate of Incorporation limits the liability of directors to the maximum extent permitted by Delaware law. Delaware law provides that directors of a corporation will not be personally liable for monetary damages for breach of their fiduciary duties as directors, except for liability for any:
| ● | breach of their duty of loyalty to us or our stockholders; |
| ● | act or omission not in good faith or that involves intentional misconduct or a knowing violation of law; |
| ● | unlawful payments of dividends or unlawful stock repurchases or redemptions as provided in Section 174 of the Delaware General Corporation Law; or |
| ● | transactions for which the directors derived an improper personal benefit. |
These limitations of liability do not apply to liabilities arising under the federal or state securities laws and do not affect the availability of equitable remedies such as injunctive relief or rescission. Our Bylaws provide that we will indemnify our directors, officers and employees to the fullest extent permitted by law. Our Bylaws also provide that we are obligated to advance expenses incurred by a director or officer in advance of the final disposition of any action or proceeding. We believe that these Bylaw provisions are necessary to attract and retain qualified persons as directors and officers. The limitation of liability in our Certificate of Incorporation and Bylaws may discourage stockholders from bringing a lawsuit against directors for breach of their fiduciary duties. They may also reduce the likelihood of derivative litigation against directors and officers, even though an action, if successful, might provide a benefit to us and our stockholders. Our results of operations and financial condition may be harmed to the extent we pay the costs of settlement and damage awards against directors and officers pursuant to these indemnification provisions.
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Limitation on remedies; indemnification.
Our Certificate of Incorporation, as amended from time to time, provides that officers, directors, employees and other agents and their affiliates shall only be liable to the Company and its shareholders for losses, judgments, liabilities and expenses that result from the fraud or other breach of fiduciary obligations. Additionally, we intend to enter into corporate indemnification agreements with each of our officers and directors consistent with industry practice. Thus, certain alleged errors or omissions might not be actionable by the Company. Our governing instruments also provide that, under the broadest circumstances allowed under law, we must indemnify its officers, directors, employees and other agents and their affiliates for losses, judgments, liabilities, expenses and amounts paid in settlement of any claims sustained by them in connection with the Company, including liabilities under applicable securities laws.
Risks Related Our Common Stock
We have the ability to issue additional shares of our common stock and shares of preferred stock without asking for stockholder approval, which could cause your investment to be diluted.
Our Certificate of Incorporation authorizes the Board of Directors to issue up to 3 billion shares of common stock and up to 1 million shares of “blank check” preferred stock. The power of the Board of Directors to issue shares of common stock, preferred stock or warrants or options to purchase shares of common stock or preferred stock is generally not subject to stockholder approval. Accordingly, any additional issuance of our common stock, or preferred stock that may be convertible into common stock, may have the effect of diluting your investment, and the new securities may have rights, preferences and privileges senior to those of our common stock.
Substantial sales of our stock may impact the market price of our common stock.
Future sales of substantial amounts of our common stock, including shares that we may issue upon exercise of options and warrants, could adversely affect the market price of our common stock. Further, if we raise additional funds through the issuance of common stock or securities convertible into or exercisable for common stock, the percentage ownership of our stockholders will be reduced, and the price of our common stock may fall.
Our common stock is thinly traded, and investors may be unable to sell some or all of their shares at the price they would like, or at all, and sales of large blocks of shares may depress the price of our common stock.
Our common stock has historically been sporadically or “thinly-traded,” meaning that the number of persons interested in purchasing shares of our common stock at prevailing prices at any given time may be relatively small or nonexistent. As a consequence, there may be periods of several days or more when trading activity in shares of our common stock is minimal or non-existent, as compared to a seasoned issuer that has a large and steady volume of trading activity that will generally support continuous sales without an adverse effect on share price.
This could lead to wide fluctuations in our share price. Investors may be unable to sell their common stock at or above their purchase price, which may result in substantial losses. Also, as a consequence of this lack of liquidity, the trading of relatively small quantities of shares by our stockholders may disproportionately influence the price of shares of our common stock in either direction. The price of shares of our common stock could, for example, decline precipitously in the event a large number of shares of our common stock are sold on the market without commensurate demand, as compared to a seasoned issuer that could better absorb those sales without adverse impact on its share price.
We do not intend to pay any cash dividends on our shares of common stock in the near future, so our stockholders will not be able to receive a return on their shares unless they sell their shares.
We intend to retain any future earnings to finance the development and expansion of our business. We do not anticipate paying any cash dividends on our common stock in the foreseeable future. There is no assurance that future dividends will be paid, and if dividends are paid, there is no assurance with respect to the amount of any such dividend. Unless we pay dividends, our stockholders will not be able to receive a return on their shares unless they sell such shares.
“Penny stock” rules may make buying or selling our securities difficult which may make our stock less liquid and make it harder for investors to buy and sell our shares.
Trading in our securities is subject to the SEC’s “penny stock” rules and it is anticipated that trading in our securities will continue to be subject to the penny stock rules for the foreseeable future. The SEC has adopted regulations that generally define a penny stock to be any equity security that has a market price of less than $5.00 per share, subject to certain exceptions. These rules require that any broker-dealer who recommends our securities to persons other than prior customers and accredited investors must, prior to the sale, make a special written suitability determination for the purchaser and receive the purchaser’s written agreement to execute the transaction. Unless an exception is available, the regulations require the delivery, prior to any transaction involving a penny stock, of a disclosure schedule explaining the penny stock market and the risks associated with trading in the penny stock market. In addition, broker-dealers must disclose commissions payable to both the broker-dealer and the registered representative and current quotations for the securities they offer. The additional burdens imposed upon broker-dealers by these requirements may discourage broker-dealers from recommending transactions in our securities, which could severely limit the liquidity of our securities and consequently adversely affect the market price for our securities.
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The Financial Industry Regulatory Authority (FINRA) sales practice requirements may also limit a stockholder’s ability to buy and sell our common stock.
In addition to the “penny stock” rules described above, the Financial Industry Regulatory Authority, which we refer to as FINRA, has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, the FINRA believes that there is a high probability that speculative low-priced securities will not be suitable for at least some customers. The FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our common stock and have an adverse effect on the market for shares of our common stock.
Our control stockholders hold a significant percentage of our outstanding voting securities, which could reduce the ability of minority stockholders to effect certain corporate actions.
Our control stockholders currently own or control approximately 76.72% of the voting power of the Company. As a result of this ownership, they possess and can continue to possess significant influence over our Board of Directors and corporate transactions. Their ownership and control may also have the effect of delaying or preventing a future change in control, impeding a merger, consolidation, takeover or other business combination or discourage a potential acquirer from making a tender offer. In the event we do not sell a sufficient number of shares in this Offering, they will continue to own a significant portion of our outstanding common stock and may have significant influence on our Company.
The preparation of our consolidated financial statements involves the use of estimates, judgments and assumptions, and our consolidated financial statements may be materially affected if such estimates, judgments or assumptions prove to be inaccurate.
Financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) typically require the use of estimates, judgments and assumptions that affect the reported amounts. Often, different estimates, judgments and assumptions could reasonably be used that would have a material effect on such financial statements, and changes in these estimates, judgments and assumptions may occur from period to period over time. Significant areas of accounting requiring the application of management’s judgment include, but are not limited to, determining the fair value of assets and the timing and amount of cash flows from assets. These estimates, judgments and assumptions are inherently uncertain and, if our estimates were to prove to be wrong, we would face the risk that charges to income or other financial statement changes or adjustments would be required. Any such charges or changes could harm our business, including our financial condition and results of operations and the price of our securities. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for a discussion of the accounting estimates, judgments and assumptions that we believe are the most critical to an understanding of our consolidated financial statements and our business.
If securities industry analysts do not publish research reports on us, or publish unfavorable reports on us, then the market price and market trading volume of our common stock could be negatively affected.
Any trading market for our common stock will be influenced in part by any research reports that securities industry analysts publish about us. We do not currently have and may never obtain research coverage by securities industry analysts. If no securities industry analysts commence coverage of us, the market price and market trading volume of our common stock could be negatively affected. In the event we are covered by analysts, and one or more of such analysts downgrade our securities, or otherwise reports on us unfavorably, or discontinues coverage or us, the market price and market trading volume of our common stock could be negatively affected.
Our stock price is likely to be highly volatile because of several factors, including a limited public float.
The market price of our common stock has been volatile in the past and the market price of our common stock is likely to be highly volatile in the future. You may not be able to resell shares of our common stock following periods of volatility because of the market’s adverse reaction to volatility.
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Other factors that could cause such volatility may include, among other things:
| ● | actual or anticipated fluctuations in our operating results; |
| ● | the absence of securities analysts covering us and distributing research and recommendations about us; |
| ● | we may have a low trading volume for a number of reasons, including that a large portion of our stock is closely held; |
| ● | overall stock market fluctuations; |
| ● | announcements concerning our business or those of our competitors; |
| ● | actual or perceived limitations on our ability to raise capital when we require it, and to raise such capital on favorable terms; |
| ● | conditions or trends in the industry; |
| ● | litigation; |
| ● | changes in market valuations of other similar companies; |
| ● | future sales of common stock; |
| ● | departure of key personnel or failure to hire key personnel; and |
| ● | general market conditions. |
Any of these factors could have a significant and adverse impact on the market price of our common stock and/or warrants. In addition, the stock market in general has at times experienced extreme volatility and rapid decline that has often been unrelated or disproportionate to the operating performance of particular companies. These broad market fluctuations may adversely affect the trading price of our common stock and/or warrants, regardless of our actual operating performance.
The Selling Stockholder may sell a large number of shares, resulting in substantial diminution to the value of shares held by existing stockholders.
Pursuant to the Equity Purchase Agreement, we are prohibited from delivering a Put Notice to the Selling Stockholder to the extent that the issuance of shares would cause the Selling Stockholder to beneficially own more than 4.99% of our then-outstanding shares of common stock. These restrictions; however, do not prevent the Selling Stockholder from selling shares of common stock received in connection with the Equity Line and then receiving additional shares of common stock in connection with a subsequent issuance. In this way, the Selling Stockholder could sell more than 4.99% of the outstanding shares of common stock in a relatively short time frame while never holding more than 4.99% at any one time. As a result, existing stockholders and new investors could experience substantial diminution in the value of their shares of common stock. Additionally, we do not have the right to control the timing and amount of any sales by the Selling Stockholder of the shares issued under the Equity Line.
Certain provisions of the General Corporation Law of the State of Delaware may have anti-takeover effects, which may make an acquisition of our company by another company more difficult.
We are subject to the provisions of Section 203 of the General Corporation Law of the State of Delaware, which prohibits a Delaware corporation from engaging in any business combination, including mergers and asset sales, with an interested stockholder (generally, a 15% or greater stockholder) for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner. The operation of Section 203 may have anti-takeover effects, which could delay, defer or prevent a takeover attempt that a holder of our common stock might consider in its best interest.
Provisions of our Certificate of Incorporation and Bylaws may delay or prevent a takeover which may not be in the best interests of our stockholders.
Provisions of our Certificate of Incorporation and our Bylaws may be deemed to have anti-takeover effects, which include when and by whom special meetings of our stockholders may be called, and may delay, defer or prevent a takeover attempt. Further, our certificate of incorporation, as amended, authorize the issuance of up to 1,000,000 shares of preferred stock with such rights and preferences as may be determined from time to time by our board of directors in their sole discretion. Our board of directors may, without stockholder approval, issue series of preferred stock with dividends, liquidation, conversion, voting or other rights that could adversely affect the voting power or other rights of the holders of our common stock.
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We do not expect to pay dividends in the foreseeable future.
We do not intend to declare dividends for the foreseeable future, as we anticipate that we will reinvest any future earnings in the development and growth of our business. Therefore, investors will not receive any funds unless they sell their common stock, and stockholders may be unable to sell their shares on favorable terms. We cannot assure you of a positive return on investment or that you will not lose the entire amount of your investment in our common stock.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None
ITEM 2. PROPERTIES.
Our executive offices are located at 1035 Queensway East, Mississauga, Ontario, Canada L4Y 4C1. We are provided this office space free of charge by our Chief Executive Officer.
We believe that these facilities are adequate for our current and near-term future needs.
ITEM 3. LEGAL PROCEEDINGS
We may from time to time be involved in various claims and legal proceedings of a nature we believe are normal and incidental to temporary employee staffing business. These matters may include product liability, intellectual property, employment, personal injury cause by our employees, and other general] claims. We will accrue for contingent liabilities when it is probable that a liability has been incurred and the amount can be reasonably estimated. We are not presently a party to any legal proceedings that, in the opinion of our management, are likely to have a material adverse effect on our business. Regardless of outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.
ITEM 4. MINE SAFETY DISCLOSURE.
Not applicable.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AN ISSUER PURCHASES OF EQUITY SECURITIES.
Market
Our common stock currently trades on the OTC Pinks under the symbol “TWOH” and the closing bid price of our common stock on March 26, 2021 was $0.0031. Our common stock currently trades on a sporadic and limited basis.
Record Holders
The number of record holders of our common stock as of March 26, 2021 was approximately 55, not including nominees of beneficial owners.
Cash Dividends
As of the date of this Report, we have not paid any cash dividends to stockholders. The declaration of any future cash dividend will be at the discretion of our Board of Directors and will depend upon our earnings, if any, our capital requirements and financial position, the general economic conditions, and other pertinent conditions. It is our present intention not to pay any cash dividends in the foreseeable future, but rather to reinvest earnings, if any, in our business operations.
Transfer Agent
The transfer agent and registrar, for our common stock and Series A Convertible Preferred Stock is Transhare Corporation. The transfer agent’s address is 2849 Executive Drive, Suite 200 Clearwater, FL 33762 and its telephone number is (303) 662-1112.
Options and Warrants
On February 12, 2020, the Board of Directors approved the 2020 Stock Incentive Plan (the “2020 Plan”) to attract and retain the best available personnel, to provide additional incentive to employees, directors and consultants, and to promote the success of the Company's business. Pursuant to the 2020 Plan, the Board may grant incentive stock options, non-qualified stock options, stock appreciation rights, restricted shares and restricted share units. to eligible persons. The maximum aggregate number of shares of common stock with respect to which awards granted under the Plan shall not exceed 50,000,000. On December 31, 2020, there are 10,500,000 shares of common stock available in the 2020 Plan.
Anti-takeover Provisions
Summarized in the following paragraphs are provisions included in our Certificate of Incorporation, as amended, and our Bylaws that may have the effect of discouraging, delaying or preventing a change in control or an unsolicited acquisition proposal that a stockholder might consider favorable, including a proposal that might result in the payment of a premium over the market price for the shares held by our stockholders.
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Effects of authorized but unissued common stock and blank check preferred stock. One of the effects of the existence of authorized but unissued common stock and undesignated preferred stock may be to enable our Board to make more difficult or to discourage an attempt to obtain control of our company by means of a merger, tender offer, proxy contest or otherwise, and thereby to protect the continuity of management. If the Board were to determine that a takeover proposal was not in our best interest, such shares could be issued by the Board without stockholder approval in one or more transactions that might prevent or render more difficult or costly the completion of the takeover transaction by diluting the voting or other rights of the proposed acquirer or insurgent stockholder group, by putting a substantial voting block in institutional or other hands that might undertake to support the position of the incumbent board of directors, by effecting an acquisition that might complicate or preclude the takeover, or otherwise.
In addition, our Certificate of Incorporation, as amended, grants our Board broad power to establish the rights and preferences of authorized and unissued shares of additional series of preferred stock. The creation and issuance of one or more additional series of preferred stock could decrease the amount of earnings and assets available for distribution to holders of shares of common stock. The issuance also may adversely affect the rights and powers, including voting rights, of those holders and may have the effect of delaying, deterring or preventing a change in control of our company. |
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| · | Cumulative Voting. Our Certificate of Incorporation, as amended, does not provide for cumulative voting in the election of directors which would allow holders of less than a majority of the voting stock to elect some directors. |
| · | Vacancies. Section 223 of the Delaware General Corporation Law and our bylaws provide that all vacancies, including newly created directorships, may be filled by the affirmative vote of a majority of directors then in office, even if less than a quorum. |
| · | Special Meeting of Stockholders. A special meeting of stockholders may be called by our Board or the Chairman of our Board and must be called by our Secretary at the request in writing of holders of record of a majority of our outstanding capital stock entitled to vote. The requirement that a majority of our outstanding capital stock is required to call a special meeting means that small stockholders will not have the power to call a special meeting to, for example, elect new directors. |
| · | Bylaws. Our bylaws authorize the board of directors to adopt, repeal, alter or amend our bylaws without shareholder approval. |
| · | Removal. Except as otherwise provided, a director may be removed from office with or without cause at any special meeting of stockholders by the affirmative vote of at least a majority of the voting power and outstanding stock entitled to vote. |
RECENT SALES OF UNREGISTERED SECURITIES
During the quarter ended December 31, 2020, the Company issued the following unregistered securities.
| ● | Issued 202,740,400 shares of common stock, with a fair value of $591,026, for conversion of non-redeemable convertible notes. | |
| ● | Issued 48,544,755 shares of common stock, with a fair value of $157,901, for conversion of convertible notes. | |
| ● | Issued 58,000,000 shares of common stock, with a fair value of $137,000, for stock-based compensation – officers and directors. | |
| ● | Issued 4,000,000 shares of common stock, with a fair value of $11,600, for consulting services. | |
| ● | Issued 5,000 shares of Series C Convertible Preferred Stock, with a fair value of $542,857, for prepaid services. |
ITEM 6. SELECTED FINANCIAL DATA.
As a Smaller Reporting Company as defined by Rule 12b-2 of the Exchange Act and in Item 10(f)(1) of Regulation S-K, we are electing scaled disclosure reporting obligations and therefore are not required to provide the information requested by this Item.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Two Hands Corporation (the "Company") was incorporated on April 3, 2009 in the State of Delaware and established a fiscal year end of December 31.
The Company is in the business of developing brand strategies. The Company executes and/or oversees the research, planning, pricing, creative development, tracking and deployment of all digital advertising projects needed to promote both ours and client products and services.
The gocart.city online consumer grocery delivery application was released in early June 2020 with currently 624 paid users and gocart.city wholesale commenced sale of dry goods and produce to other businesses in July 2020.
The Two Hands co-parenting application launched on July 2018 and the Two Hands Gone application launched In February 2019.
The operations of the business are carried on by a 100% owned subsidiary, I8 Interactive Corporation, a company incorporated under the laws of Canada.
Management's Plan of Operation
gocart.city Applications
The gocart.city grocery delivery application was released in early June 2020 and gocart.city wholesale commenced sale of dry goods and produce to other businesses in July 2020. The gocart.city grocery set of applications has been rolled out on-line and to both the Apple and Google Play stores. To meet the growing demand for grocery delivery on October 20, 2020 we expanded our Greater Toronto delivery area to now include more of southwestern Ontario.
We plan to capitalize on the growing online grocery delivery business which we believe the lack of capacity has been recently highlighted by the COVID-19 pandemic. Our core offerings include fresh-cut individually packaged fruits and vegetables, specialized foods including Italian themed, artisan, gluten-free and health conscience items. Italian themed products include oils, pasta, deserts, tea, coffee and wine. We also offer utensils to cook a proper Italian meal and accessories for an impressive presentation such as table ware, plates, table cloth, candles, aprons, hats and t-shirts.
The gocart.city grocery delivery application only lists items that are in stock so we can guarantee next day delivery.
Over the next several months we plan on utilizing and leveraging our agreement with SRAX, Inc. to market our grocery delivery application and services and expand our footprint in the Ontario region and beyond as our customer base grows.
It is our ultimate goal to improve the lives of families through the use of our applications, gocart.city, the Two Hands co-parenting solution or Two Hands Gone, our encrypted messaging app.
Critical Accounting Policies and Estimates
The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the Financial Statements and accompanying notes. Estimates are used for, but not limited to, the accounting for the allowance for doubtful accounts, inventories, impairment of long-term assets, stock-based compensation, income taxes and loss contingencies. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results could differ from these estimates under different assumptions or conditions.
We believe the following critical accounting policies, among others, may be impacted significantly by judgment, assumptions and estimates used in the preparation of the Financial Statements:
STOCK-BASED COMPENSATION
The Company accounts for stock incentive awards issued to employees and non-employees in accordance with FASB ASC 718, Stock Compensation. Accordingly, stock-based compensation is measured at the grant date, based on the fair value of the award. Stock-based awards to employees are recognized as an expense over the requisite service period, or upon the occurrence of certain vesting events. Additionally, stock-based awards to non-employees are expensed over the period in which the related services are rendered.
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DERIVATIVE LIABILITY
In accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Paragraph 815-15-25-1 the conversion feature and certain other features are considered embedded derivative instruments, such as a conversion reset provision, a penalty provision and redemption option, which are to be recorded at their fair value as its fair value can be separated from the convertible note and its conversion is independent of the underlying note value. The Company records the resulting discount on debt related to the conversion features at initial transaction and amortizes the discount using the effective interest rate method over the life of the debt instruments. The conversion liability is then marked to market each reporting period with the resulting gains or losses shown in the statements of operations.
In circumstances where the embedded conversion option in a convertible instrument is required to be bifurcated and there are also other embedded derivative instruments in the convertible instrument that are required to be bifurcated, the bifurcated derivative instruments are accounted for as a single, compound derivative instrument.
The Company follows ASC Section 815-40-15 (“Section 815-40-15”) to determine whether an instrument (or an embedded feature) is indexed to the Company’s own stock. Section 815-40-15 provides that an entity should use a two-step approach to evaluate whether an equity-linked financial instrument (or embedded feature) is indexed to its own stock, including evaluating the instrument’s contingent exercise and settlement provisions.
The Company evaluates its convertible debt, options, warrants or other contracts, if any, to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for in accordance with paragraph 810-10-05-4 and Section 815-40-25 of the FASB Accounting Standards Codification. The result of this accounting treatment is that the fair value of the embedded derivative is marked-to-market each balance sheet date and recorded as either an asset or a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the consolidated statement of operations as other income or expense. Upon conversion, exercise or cancellation of a derivative instrument, the instrument is marked to fair value at the date of conversion, exercise or cancellation and then that the related fair value is reclassified to equity.
The Company utilizes the binomial option pricing model to compute the fair value of the derivative and to mark to market the fair value of the derivative at each balance sheet date. The binomial option pricing model includes subjective input assumptions that can materially affect the fair value estimates. The expected volatility is estimated based on the most recent historical period of time equal to the remaining contractual term of the instrument granted.
REVENUE RECOGNITION
In accordance with ASC 606, revenue is recognized when a customer obtains control of promised goods or services. The amount of revenue recognized reflects the consideration to which we expect to be entitled to receive in exchange for these goods or services. The provisions of ASC 606 include a five-step process by which we determine revenue recognition, depicting the transfer of goods or services to customers in amounts reflecting the payment to which we expect to be entitled in exchange for those goods or services. ASC 606 requires us to apply the following steps: (1) identify the contract with the customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when, or as, we satisfy the performance obligation. We recognize revenue for the sale of our products upon delivery to a customer.
Recent Accounting Pronouncements
In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40). This update amends the guidance on convertible instruments and the derivatives scope exception for contracts in an entity's own equity and improves and amends the related EPS guidance for both Subtopics. This standard is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2023, which means it will be effective for our fiscal year beginning January 1, 2014. Early adoption is permitted but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. We are currently evaluating the impact of ASU 2020-06 on our consolidated financial statements.
Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company's present or future consolidated financial statements.
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RESULTS OF OPERATIONS
COMPARISON OF RESULTS FOR THE YEAR ENDED DECEMBER 31, 2020 AND 2019
REVENUES
Our revenue for the year ended December 31, 2020 was $159,025, compared to $0 for the year ended December 31, 2019. The Company recognized revenue in 2020 of $42,593 from the sale of groceries to consumers via the gocart.city online grocery delivery application, $112,751 from the sale of dry goods and produce to other businesses and $3,681 from the sale of computer equipment.
OPERATING EXPENSES
Our operating expenses for the year ended December 31, 2020 was $5,525,609, compared to $3,702,156 for the twelve months ended December 31, 2019, respectively. The increase in general and administrative expense is primarily due to an increase in stock-based compensation paid to officers, directors and consultants.
General and administrative expense includes stock-based compensation for the year ended December 31, 2020 and 2019 which comprises of 97,500,000 and 200 shares of common stock issued valued at $1,025,100 and $15,000, respectively for consulting services.
On December 19, 2019, the Company issued 4,000 shares of Series B Convertible Preferred Stock with a fair value of $1,520,000 ($380 per share) for consulting services to be provided from December 19, 2019 to December 19, 2020.
On October 7, 2020, the Company agree to issue 5,000 shares of Series C Convertible Preferred Stock with a fair value of $542,847 ($108.57 per share) for a one-year subscription with SRAX, Inc. to an online marketing platform to support the gocart.city grocery delivery application.
General and administrative expense also includes stock-based compensation for the year ended December 31, 2020 and 2019 which comprises of 154,000,000 and 3,938,055 shares of common stock issued valued at $1,896,800 and $2,940,548, respectively, for salaries and compensation for our officers and directors.
OTHER INCOME (EXPENSE)
Amortization of debt discount and interest expense for the year ended December 31, 2020 was $239,312, compared to $158,202 for the year ended December 31, 2019. Amortization of debt discount and interest expense relates to the issuance of non-redeemable convertible notes, convertible notes and promissory notes.
During the years ended December 31, 2020 and 2019, the Company elected to convert $31,569 and $12,993 of principal and interest of a non-redeemable convertible note into 315,665,264 and 354,700 shares of common stock of the Company resulting in a loss on settlement of debt of $1,907,879 and $1,338,707, respectively.
During the years ended December 31, 2020 and 2019, the holders of the convertible notes also elected to convert 91,031,792 shares and 337,600 shares of the Company with a fair value of $553,097 and $208,551 resulting in a loss on settlement of debt of $74,878 and $59,378, respectively.
On April 14, 2020, the Company issued 2,000,000 shares of common stock with a fair value of $111,800 to fully settle the 1,000,000 warrants issued in conjunction with the issuance of the Senior Convertible Note with Firstfire Global Opportunities Fund, LLC on March 1, 2019. The issue of the shares resulting in a loss on settlement of warrant liability of $70,299.
Initial derivative expense of $258,863 for the year ended December 31, 2020 represents the difference between the fair value of the total embedded derivative liability of $573,863 and the cash received of $290,000 and commitment fee of $25,000 for the convertible notes issued on January 20, 2020, February 3, 2020, April 14, 2020, July 13, 2020 and September 11, 2020.
Initial derivative expense of $274,717 for the year ended December 31, 2019 represents the difference between the fair value of the total embedded derivative liability of $449,717 and the cash received of $175,000 for the convertible note issued on March 1, 2019.
During the year ended December 31, 2020 and 2019, the gain (loss) due to the change in fair value of derivative liabilities was $390,157 and $(143,276), respectively.
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NET INCOME/LOSS
Our net loss for year ended December 31, 2020 was $7,666,062, compared to $5,676,436 for the year ended December 31, 2019, respectively. Our losses during the years ended December 31, 2020 and 2019 are primarily due to costs associated with professional fees, our transfer agent, investor relations, stock-based compensation paid to officers, directors and consultants, loss on settlement of debt and the issuance of a convertible notes.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 2020, we had cash of $21,843 and total liabilities of $1,655,160. Our current cash balance and cash flow from operating activities will not be sufficient to fund our operations during the next 12 months. We are completely dependent upon the willingness of our management to fund our initial operations by way of loans from our Chief Executive Officer, shareholders and others.
The Company’s financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. During the year ended December 31, 2020, the Company incurred a net loss of $7,666,062 and used cash in operating activities of $314,429, and on December 31, 2020, had stockholders’ deficit of $2,783,920. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern within one year of the date that the financial statements are issued. The Company’s independent registered public accounting firm, in their report on the Company’s financial statements for the year ending December 31, 2020, expressed substantial doubt about the Company’s ability to continue as a going concern. The Company’s financial statements do not include any adjustments that might result from the outcome of this uncertainty should we be unable to continue as a going concern.
Over the next 12 months we expect to expend approximately $50,000 in cash for legal, accounting and related services and an additional $500,000 in cash to implement our business plan. We hope to be able to compensate our independent contractors with stock-based compensation, which will not require us to use our cash, although there can be no assurances that we will be successful in these efforts.
We expect to be able to secure capital through advances from our Chief Executive Officer, note holders, shareholders and others in order to pay expenses such as organizational costs, filing fees, accounting fees and legal fees, however, we do not have any written or oral agreements with any third parties which require them to fund our operations and there can be no assurances that we will be able to obtain such funds. We believe it will be difficult to secure capital in the future because we have no assets to secure debt and there is currently no trading market for our securities. The Company is unable to predict the effect, if any, that the coronavirus COVID-19 global pandemic may have on its access to the financing markets. We will need additional capital in the next twelve months and if we cannot raise such capital on acceptable terms, we may have to curtail our operations or terminate our business entirely.
The inability to obtain financing or generate sufficient cash from operations could require us to reduce or eliminate expenditures for developing products and services, or otherwise curtail or discontinue our operations, which could have a material adverse effect on our business, financial condition and results of operations. Furthermore, to the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of such securities may result in dilution to existing stockholders. If we raise additional funds through the issuance of debt securities, these securities may have rights, preferences and privileges senior to holders of our common stock and the terms of such debt could impose restrictions on our operations. Regardless of whether our cash assets prove to be inadequate to meet our operational needs, we may seek to compensate providers of services by issuing stock in lieu of cash, which may also result in dilution to existing stockholders.
OPERATING CAPITAL AND CAPITAL EXPENDITURE REQUIREMENTS
We are currently funding our operations by way of cash advances from our Chief Executive Officer, note holders, shareholders and others. We hope to be able to compensate our independent contractors with stock-based compensation, which will not require us to use our cash, although there can be no assurances that we will be successful in these efforts. We expect that we will be required to raise an additional $200,000 in cash by issuing new debt or equity for operating costs in order to implement our business plan in the next twelve months. The funds are loaned to the Company as required to pay amounts owed by the Company. As such, our operating capital is currently limited to the personal resources of our Chief Executive Officer, note holders, shareholders and others. The loans from our Chief Executive Officer, note holders, shareholders and others are unsecured and non-interest bearing and have no set terms of repayment. Our common stock started trading over the counter and has been quoted on the Over-The Counter Bulletin Board since February 17, 2011. The stock currently trades under the symbol “TWOH.OB.”
OFF-BALANCE SHEET TRANSACTIONS
We currently have no off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
As a Smaller Reporting Company, as defined by Rule 12b-2 of the Exchange Act and in Item 10(f)(1) of Regulation S-K, we are electing scaled disclosure reporting obligations and therefore are not required to provide the information requested by this Item.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The financial statements and related notes are included as part of this Annual Report.
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TWO HANDS CORPORATION
INDEX
December 31, 2020 and 2019
| REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS | 22 |
| CONSOLIDATED FINANCIAL STATEMENTS | |
| Consolidated Balance Sheets | 25 |
| Consolidated Statements of Operations | 26 |
| Consolidated Statement of Stockholders' Deficit | 27 |
| Consolidated Statements of Cash Flows | 29 |
| Notes to Consolidated Financial Statements | 30 |
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of Two Hands Corporation:
Opinion on the Financial Statements
We have audited the accompanying balance sheets of Two Hands Corporation (“the Company”) as of December 31, 2020 and 2019, the related statements of operations, stockholders’ deficit, and cash flows for each of the years in the two-year period ended December 31, 2020 and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.
Explanatory Paragraph Regarding Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company incurred a net loss and has a stockholders’ deficit, which raises substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) related to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgements. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Going Concern
Critical Audit Matter Description
As described further in Note 2 to the financial statements, the Company incurred a net loss and has a stockholders’ deficit. The ability of the Company to continue as a going concern is dependent on raising capital to fund its initial business plan and ultimately to attain profitable operations. Accordingly, the Company has determined that these factors raise substantial doubt as to the Company’s ability to continue as a going concern for a period of one year from the issuance of these financial statements. Management intends to continue to fund its business by way of private placements, in order satisfy the Company’s obligations as they come due for at least one year from the financial statement issuance date. However, the Company has not concluded that these plans alleviate the substantial doubt related to its ability to continue as a going concern.
| 22 |
How the Critical Audit Matter was Addressed in the Audit
We determined the Company’s ability to continue as a going concern is a critical audit matter due to the estimation and uncertainty regarding the Company’s available capital and the risk of bias in management’s judgments and assumptions in their determination. Our audit procedures related to the Company’s assertion on its ability to continue as a going concern included the following, among others:
| · | We inquired of Company management and reviewed company records to assess whether there are additional factors that contribute to the uncertainties disclosed. |
| · | We assessed whether the Company’s determination that there is substantial doubt about its ability to continue as a going concern was adequately disclosed. |
| · | We performed testing procedures such as analytical procedures to identify conditions and events that indicate there could be substantial doubt about the entity's ability to continue as a going concern for a reasonable period of time. |
| · | We reviewed and evaluated management's plans for dealing with adverse effect of these conditions and event. |
Valuation of Derivative Liabilities
Critical Audit Matter Description
As described further in Notes 2, 6, 7, and 8 to the financial statements, the Company determined that the conversion features of its convertible notes and certain warrants issued in conjunction with financing arrangements required to be accounted for as derivative liabilities. The derivative liabilities are recorded at fair value when issued and subsequently re-measured to fair value each reporting period. The Company utilized a binomial option pricing model to determine the fair value of the derivative liabilities, which uses certain assumptions related to exercise price, term, expected volatility, and risk-free interest rate.
How the Critical Audit Matter was Addressed in the Audit
We determined the assessment of the fair values of the derivative liabilities as a critical audit matter due to the significant judgements used by the Company in determining the fair value of the derivative liabilities. Auditing the valuation of the derivative liabilities involved a high degree of auditor judgement and specialized skills and knowledge were needed.
Our audit procedures consisted of the following, among others:
| · | Testing management’s process for developing the fair value measurement. |
| · | Evaluating the appropriateness of the binomial option model used by the Company to value the derivative liabilities. |
| · | Testing the reasonableness of the assumptions used by the Company in the binomial option model including exercise price, term, expected volatility, and risk-free interest rate. |
| · | Testing the accuracy and completeness of data used by the Company in developing the assumptions use in the binomial option model. |
| · | Developing an independent expectation for comparison to the Company’s estimate which included developing our own binomial option model and assumptions. |
Professionals with specialized skill and knowledge were utilized by the Firm to assist in the evaluation of the Company estimate of fair value and development of our own independent expectation.
| 23 |
Issuance of Preferred Stock
Critical Audit Matter Description
As described Note 11 to the financial statements, the Company designated 5,000 shares of Series C Preferred Stock and issued such shares to a third-party vendor for future service. The fair value of the Series C Preferred Stock at the time of issuance was $542,847 and such amount will be expensed as the services are rendered, in a manner as if the Company had paid cash for the services. The Series C Preferred Stock is classified as temporary equity in the consolidated balance sheet due to the Company’s inability to assert that it has sufficient authorized but unissued shares available to settle the instrument considering all other commitments and the inclusion in the Series C Preferred Stock of a redemption provision related to a deemed liquidation such as a merger.
How the Critical Audit Matter was Addressed in the Audit
We determined the evaluation of the accounting for the issuance of the Series C Preferred Stock to be a critical audit matter due to the complexity of the instrument itself and the complexity involved in the Company’s determination of the appropriate accounting for the instrument. Auditing the accounting for the issuance of the Series C Preferred Stock involved a high degree of auditor judgement and specialized skills and knowledge were needed.
Our audit procedures consisted of the following, among others:
| · | Inspecting and reviewing the designation document for the establishment of the Series C Preferred Stock and the documents related to the issuance of the instrument to the third-party service provider. |
| · | Evaluating the reasonableness of the conclusions made by the Company related to the accounting treatment for embedded conversion feature and classification and presentation of the instrument as a whole in the consolidated balance sheet, including the Company’s consideration of relevant accounting standards. |
| · | Evaluating the reasonableness of the conclusions made by the Company in regard to the timing and recognition of expense related to the issuance of the Series C Preferred Stock for future services. |
Professionals with specialized skill and knowledge were utilized by the Firm to assist in the evaluation of the Company’s accounting for the issuance of the Series C Preferred Stock.
/s/ Sadler, Gibb & Associates, LLC
We have served as the Company’s auditor since 2017.
Draper, UT
March 29, 2021
| 24 |
| TWO HANDS CORPORATION |
| CONSOLIDATED BALANCE SHEETS |
| December 31, 2020 | December 31, 2019 | |||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash | $ | 21,843 | $ | 293 | ||||
| Accounts receivable | 41,097 | — | ||||||
| Taxes receivable | 8,824 | 9,250 | ||||||
| Prepaid expense | 891,889 | 1,759,481 | ||||||
| Total current assets | 963,653 | 1,769,024 | ||||||
| Property and equipment, net | 3,444 | 2,697 | ||||||
| Total assets | $ | 967,097 | $ | 1,771,721 | ||||
| LIABILITIES AND STOCKHOLDERS' DEFICIT | ||||||||
| Current liabilities | ||||||||
| Accounts payable and accrued liabilities | $ | 162,536 | $ | 65,888 | ||||
| Non-redeemable convertible notes, net | 75,040 | 66,078 | ||||||
| Due to related party | 106,928 | 17,840 | ||||||
| Notes payable | 83,332 | 48,461 | ||||||
| Convertible note, net | 7,833 | 19,752 | ||||||
| Derivative liabilities | 172,261 | 452,549 | ||||||
| Total current liabilities | 607,930 | 670,568 | ||||||
| Long-term liabilities | ||||||||
| Promissory note | 85,796 | 78,170 | ||||||
| Promissory notes - related party | 194,485 | 177,197 | ||||||
| Non-redeemable convertible notes, net | 766,949 | 661,885 | ||||||
| Total long-term liabilities | 1,047,230 | 917,252 | ||||||
| Total liabilities | 1,655,160 | 1,587,820 | ||||||
| Commitments and Contingencies | — | — | ||||||
| Temporary equity | ||||||||
| Series A convertible preferred stock; $0.01 par value; 200,000 shares authorized, 30,000 shares issued and outstanding, respectively | 33,000 | 33,000 | ||||||
| Series B convertible preferred stock; $0.01 par value; 100,000 shares authorized, 4,000 shares issued and outstanding, respectively | 1,520,000 | 1,520,000 | ||||||
| Series C convertible preferred stock; $0.001 par value; 5,000 shares authorized, 5,000 shares issued and outstanding, respectively | 542,857 | — | ||||||
| Total temporary equity | 2,095,857 | 1,553,000 | ||||||
| Stockholder's deficit | ||||||||
| Preferred stock; $0.001 par value; 1,000,000 shares authorized, 0 issued and outstanding | — | — | ||||||
| Common stock; $0.0001 par value; 3,000,000,000 shares authorized, 695,575,506 and 6,267,340 shares issued and outstanding, respectively | 69,560 | 627 | ||||||
| Additional paid-in capital | 42,703,888 | 36,857,580 | ||||||
| Common stock to be issued | 336,000 | — | ||||||
| Accumulated deficit | (45,893,368 | ) | (38,227,306 | ) | ||||
| Total stockholders' deficit | (2,783,920 | ) | (1,369,099 | ) | ||||
| Total liabilities and stockholders' deficit | $ | 967,097 | $ | 1,771,721 | ||||
| The accompanying footnotes are an integral part of these financial statements. | ||||||||
| 25 |
| TWO HANDS CORPORATION |
| CONSOLIDATED STATEMENTS OF OPERATIONS |
| For the year ended December 31, | ||||||||
| 2020 | 2019 | |||||||
| Sales | $ | 159,025 | $ | — | ||||
| Cost of goods sold | 138,405 | — | ||||||
| Gross profit | 20,620 | — | ||||||
| Operating expenses | ||||||||
| General and administrative | 5,525,609 | 3,702,156 | ||||||
| Total operating expenses | 5,525,609 | 3,702,156 | ||||||
| Loss from operations | (5,504,989 | ) | (3,702,156 | ) | ||||
| Other income (expense) | ||||||||
| Amortization of debt discount and interest expense | (239,312 | ) | (158,202 | ) | ||||
| Loss on settlement of debt | (2,053,055 | ) | (1,398,085 | ) | ||||
| Initial derivative expense | (258,863 | ) | (274,717 | ) | ||||
| Change in fair value of derivative liabilities | 390,157 | (143,276 | ) | |||||
| Total other income (expense) | (2,161,073 | ) | (1,974,280 | ) | ||||
| Net loss | $ | (7,666,062 | ) | $ | (5,676,436 | ) | ||
| Net loss per common share - basic and diluted | $ | (0.04 | ) | $ | (15.50 | ) | ||
| Weighted average number of common shares outstanding - basic and diluted | 206,466,594 | 366,157 | ||||||
| The accompanying footnotes are an integral part of these financial statements. | ||||||||
| 26 |
| TWO HANDS CORPORATION | ||||||||||||||||||||||||
| CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT | ||||||||||||||||||||||||
| For the years ended December 31, 2020 and 2019 | ||||||||||||||||||||||||
| Common Stock | ||||||||||||||||||||||||
| Shares | Amount | Common Stock to be Issued | Additional Paid-in Capital | Accumulated Deficit | Total Stockholders' Deficit | |||||||||||||||||||
| Balance, December 31, 2019 | 6,267,340 | $ | 627 | $ | — | $ | 36,857,580 | $ | (38,227,306 | ) | $ | (1,369,099 | ) | |||||||||||
| Stock issued for conversion of non-redeemable convertible notes | 315,665,264 | 31,569 | — | 1,907,875 | — | 1,939,444 | ||||||||||||||||||
| Stock issued for conversion of convertible notes | 91,031,792 | 9,103 | — | 543,994 | — | 553,097 | ||||||||||||||||||
| Stock issued for warrant liability settlement | 2,000,000 | 200 | — | 111,600 | — | 111,800 | ||||||||||||||||||
| Stock issued for prepaid | 29,111,110 | 2,911 | 336,000 | 386,089 | — | 725,000 | ||||||||||||||||||
| Stock issued for consulting | 97,500,000 | 9,750 | — | 1,015,350 | — | 1,025,100 | ||||||||||||||||||
| Stock issued for officer and director compensation | 154,000,000 | 15,400 | — | 1,881,400 | — | 1,896,800 | ||||||||||||||||||
| Net loss | — | — | — | — | (7,666,062 | ) | (7,666,062 | ) | ||||||||||||||||
| Balance, December 31, 2020 | 695,575,506 | $ | 69,560 | $ | 336,000 | $ | 42,703,888 | $ | (45,893,368 | ) | $ | (2,783,920 | ) | |||||||||||
| 27 |
| Common Stock | ||||||||||||||||||||||||
| Shares | Amount | Common Stock to be Issued | Additional Paid-in Capital | Accumulated Deficit | Total Stockholders' Deficit | |||||||||||||||||||
| Balance, December 31, 2018 | 152,199 | $ | 16 | $ | 345,174 | $ | 31,895,258 | $ | (32,550,870 | ) | $ | (310,422 | ) | |||||||||||
| Rounding at reverse split | 3,553 | — | — | — | — | — | ||||||||||||||||||
| Stock issued for conversion of non-redeemable convertible notes | 354,700 | 35 | — | 1,351,665 | — | 1,351,700 | ||||||||||||||||||
| Stock issued for conversion of convertible notes | 337,600 | 34 | — | 208,517 | — | 208,551 | ||||||||||||||||||
| Stock issued for prepaid | 1,471,369 | 147 | — | 294,127 | — | 294,274 | ||||||||||||||||||
| Stock issued for debt settlement | 5,910 | 1 | — | 31,911 | — | 31,912 | ||||||||||||||||||
| Stock issued for debt settlement - officer | 1,524 | — | — | 9,448 | — | 9,448 | ||||||||||||||||||
| Stock issued for consulting | 200 | — | (8,000 | ) | 15,000 | — | 7,000 | |||||||||||||||||
| Stock issued for officer and director compensation | 3,938,055 | 394 | (337,174 | ) | 2,940,154 | — | 2,603,374 | |||||||||||||||||
| Stock issued for cash | 2,230 | — | — | 111,500 | — | 111,500 | ||||||||||||||||||
| Net loss | — | — | — | — | (5,676,436 | ) | (5,676,436 | ) | ||||||||||||||||
| Balance, December 31, 2019 | 6,267,340 | $ | 627 | $ | — | $ | 36,857,580 | $ | (38,227,306 | ) | $ | (1,369,099 | ) | |||||||||||
| The accompanying footnotes are an integral part of these financial statements. | ||||||||||||||||||||||||
| 28 |
| TWO HANDS CORPORATION |
| CONSOLIDATED STATEMENTS OF CASH FLOWS |
| For the year ended December 31, | ||||||||
| 2020 | 2019 | |||||||
| Cash flows from operating activities | ||||||||
| Net loss | $ | (7,666,062 | ) | $ | (5,676,436 | ) | ||
| Adjustments to reconcile net loss | ||||||||
| to cash used in operating activities | ||||||||
| Depreciation and amortization | 1,482 | 1,218 | ||||||
| Amortization of prepaid expense | 2,135,449 | 480,037 | ||||||
| Stock-based compensation | 2,921,900 | 2,643,374 | ||||||
| Amortization of debt discount | 239,312 | 158,202 | ||||||
| Loss on settlement of debt | 2,053,055 | 1,398,085 | ||||||
| Initial derivative expense | 258,863 | 274,717 | ||||||
| Change in fair value of derivative liabilities | (390,157 | ) | 143,276 | |||||
| Change in operating assets and liabilities | ||||||||
| Accounts and taxes receivable | (38,695 | ) | (9,250 | ) | ||||
| Prepaid expense | — | (500 | ) | |||||
| Accounts payable and accrued liabilities | 170,424 | 115,156 | ||||||
| Net cash used in operating activities | (314,429 | ) | (472,121 | ) | ||||
| Cash flows from investing activities | ||||||||
| Purchase of property and equipment | (2,229 | ) | (1,616 | ) | ||||
| Net cash used in investing activities | (2,229 | ) | (1,616 | ) | ||||
| Cash flow from financing activities | ||||||||
| Advances by related party | 100,159 | 112,617 | ||||||
| Repayment of advances to related party | (86,649 | ) | (52,542 | ) | ||||
| Proceeds from notes payable | 152,040 | 232,106 | ||||||
| Repayments of notes payable | (117,170 | ) | (107,380 | ) | ||||
| Proceeds from convertible notes | 290,000 | 175,000 | ||||||
| Proceeds from issuance of common stock | — | 111,500 | ||||||
| Net cash provided by financing activities | 338,380 | 471,301 | ||||||
| Change in foreign exchange | (172 | ) | — | |||||
| Net change in cash | 21,550 | (2,436 | ) | |||||
| Cash, beginning of the period | 293 | 2,729 | ||||||
| Cash, end of the period | $ | 21,843 | $ | 293 | ||||
| Cash paid during the year | ||||||||
| Interest paid | $ | — | $ | — | ||||
| Income taxes paid | $ | — | $ | — | ||||
| Supplemental disclosure of non-cash investing and financing activities | ||||||||
| Stock issued to settle accounts payable and accrued liabilities | $ | — | $ | 41,360 | ||||
| Issue of non-redeemable convertible notes to settle notes payable | $ | — | $ | 127,853 | ||||
| Stock issued to settle non-redeemable convertible notes | $ | 1,939,444 | $ | 1,351,699 | ||||
| Stock issued to settle common stock to be issued | $ | — | $ | 911,000 | ||||
| Stock issued to settle convertible notes | $ | 553,097 | $ | 208,551 | ||||
| Stock issued and to be issued for prepaid expense | $ | 1,267,857 | $ | 1,814,274 | ||||
| Initial debt discount from derivative | $ | 290,000 | $ | 175,000 | ||||
| Stock issued for warrant liability | $ | 111,800 | $ | — | ||||
| Transfer of trade accounts payable to due to related party | $ | — | $ | 11,817 | ||||
| Transfer of accrued compensation to promissory note | $ | — | $ | 103,952 | ||||
| Transfer of advances to promissory note | $ | — | $ | 68,924 | ||||
| Transfer of notes payable to promissory note | $ | — | $ | 76,263 | ||||
The accompanying footnotes are an integral part of these financial statements.
| 29 |
Two Hands Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2020 and 2019
NOTE 1 - NATURE OF OPERATIONS
Two Hands Corporation (the "Company") was incorporated on April 3, 2009 in the State of Delaware and established a fiscal year end of December 31.
The Company is in the business of developing brand strategies. The Company executes and/or oversees the research, planning, pricing, creative development, tracking and deployment of all digital advertising projects needed to promote both ours and client products and services.
The gocart.city online consumer grocery delivery application was released in early June 2020 and gocart.city wholesale commenced sale of dry goods and produce to other businesses in July 2020.
The Two Hands co-parenting application launched on July 2018 and the Two Hands Gone application launched In February 2019.
The operations of the business are carried on by a 100% owned subsidiary, I8 Interactive Corporation, a company incorporated under the laws of Canada.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The financial statements present the balance sheets and statements of operations, stockholders' equity and cash flows of the Company. These financial statements are presented in United States dollars and have been prepared in accordance with accounting principles generally accepted in the United States.
COVID-19
The recent outbreak of the coronavirus COVID-19 has spread across the globe and is impacting worldwide economic activity. Conditions surrounding the coronavirus continue to rapidly evolve and government authorities have implemented emergency measures to mitigate the spread of the virus. The outbreak and the related mitigation measures have had and will continue to have a material adverse impact on global economic conditions as well as on the Company's business activities. The extent to which COVID-19 may impact the Company's business activities will depend on future developments, such as the ultimate geographic spread of the disease, the duration of the outbreak, travel restrictions, business disruptions, and the effectiveness of actions taken in the Canada, United States and other countries to contain and treat the disease. These events are highly uncertain and, as such, the Company cannot determine their financial impact at this time. No adjustments have been made to the amounts reported in these consolidated financial statements as a result of this matter.
GOING CONCERN
The Company's financial statements are prepared in accordance with generally accepted accounting principles applicable to a going concern. This contemplates the realization of assets and the liquidation of liabilities in the normal course of business. During the year ended December 31, 2020, the Company incurred a net loss of $7,666,062 and used cash in operating activities of $314,429, and on December 31, 2020, had stockholders’ deficit of $2,783,920. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern for a period one year from the date that the financial statements are issued. The Company will be dependent upon the raising of additional capital through placement of its common stock in order to implement its business plan. There can be no assurance that the Company will be successful in this situation. The Company is unable to predict the effect, if any, that the coronavirus COVID-19 global pandemic may have on its access to the financing markets. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classifications of liabilities that might result from this uncertainty. We are currently funding our operations by way of cash advances from our Chief Executive Officer, note holders, shareholders and others; however, we do not have any oral or written agreements with them or others to loan or advance funds to us. There can be no assurances that we will be able to receive loans or advances from them or other persons in the future.
| 30 |
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, I8 Interactive Corporation. All intercompany transactions and balances have been eliminated in consolidation.
USE OF ESTIMATES AND ASSUMPTIONS
Preparation of the financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
For purposes of the statement of cash flows, the Company considers highly liquid financial instruments purchased with a maturity of three months or less to be cash equivalents.
ACCOUNTS RECEIVABLE
Trade accounts receivable are recorded at the invoiced amount and do not bear interest. Accounts receivable are reduced by an allowance for doubtful accounts, which is the Company’s best estimate of the amount of credit losses inherent in its existing accounts receivable. In establishing the required allowance, management considers historical losses adjusted to take into account current market conditions and customers’ financial condition, the amount of receivables in dispute, and the current receivables aging and current payment patterns. The Company writes off accounts receivable against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.
The allowance for doubtful accounts at December 31, 2020 and 2019 is $0 and $0, respectively.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost, less accumulated depreciation and amortization. Expenditures for maintenance and repairs are charged to expense when incurred, while renewals and betterments that materially extend the life of an asset are capitalized.
The costs of assets sold, retired, or otherwise disposed of, and the related allowance for depreciation, are eliminated from the accounts, and any resulting gain or loss is recognized in the results from operations. Depreciation is provided over the estimated useful lives of the assets, which are as follows:
Computer equipment 50% declining balance over a three year useful life
In the year of acquisition, one half the normal rate of depreciation is provided.
REVENUE RECOGNITION
In accordance with ASC 606, revenue is recognized when a customer obtains control of promised goods or services. The amount of revenue recognized reflects the consideration to which we expect to be entitled to receive in exchange for these goods or services. The provisions of ASC 606 include a five-step process by which we determine revenue recognition, depicting the transfer of goods or services to customers in amounts reflecting the payment to which we expect to be entitled in exchange for those goods or services. ASC 606 requires us to apply the following steps: (1) identify the contract with the customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when, or as, we satisfy the performance obligation. We recognize revenue for the sale of our products upon delivery to a customer.
During the year ended December 31, 2020 and 2019, the Company had revenue of $159,025 and $0, respectively. The Company recognized revenue of $42,593 from the sale of groceries to consumers via the gocart.city online grocery delivery application, $112,751 from the sale of dry goods and produce to other businesses and $3,681 from the sale of computer equipment.
RESEARCH AND DEVELOPMENT COSTS
We incurred research and development costs primarily to the development of Two Hands gone application. Research and development costs are comprised primarily of contract labor and services. As of December 31, 2020 and 2019, the Company incurred $0 and $0 in research and development costs.
| 31 |
Software development costs are included in research and development and are expensed as incurred. FASB ASC Topic 350 Intangibles—Goodwill and Other requires that software development costs incurred subsequent to reaching technological feasibility be capitalized, if material. If the process of developing a new product or major enhancement does not include a detailed program design, technological feasibility is determined only after completion of a working model. To date, the period between achieving technological feasibility and the general availability of such software has been short, and the software development costs qualifying for capitalization have been insignificant. The Company recorded research and development expense of $0 and $0 for the year ended December 31, 2020 and 2019, respectively.
DEBT DISCOUNT AND DEBT ISSUANCE COSTS
Debt discounts and debt issuance costs incurred in connection with the issuance of convertible notes are capitalized and amortized to interest expense based on the related debt agreements using the effective interest rate method. Unamortized discounts are netted against convertible notes.
DERIVATIVE LIABILITY
In accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Paragraph 815-15-25-1 the conversion feature and certain other features are considered embedded derivative instruments, such as a conversion reset provision, a penalty provision and redemption option, which are to be recorded at their fair value as its fair value can be separated from the convertible note and its conversion is independent of the underlying note value. The Company records the resulting discount on debt related to the conversion features at initial transaction and amortizes the discount using the effective interest rate method over the life of the debt instruments. The conversion liability is then marked to market each reporting period with the resulting gains or losses shown in the statements of operations.
In circumstances where the embedded conversion option in a convertible instrument is required to be bifurcated and there are also other embedded derivative instruments in the convertible instrument that are required to be bifurcated, the bifurcated derivative instruments are accounted for as a single, compound derivative instrument.
The Company follows ASC Section 815-40-15 (“Section 815-40-15”) to determine whether an instrument (or an embedded feature) is indexed to the Company’s own stock. Section 815-40-15 provides that an entity should use a two-step approach to evaluate whether an equity-linked financial instrument (or embedded feature) is indexed to its own stock, including evaluating the instrument’s contingent exercise and settlement provisions.
The Company evaluates its convertible debt, options, warrants or other contracts, if any, to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for in accordance with paragraph 810-10-05-4 and Section 815-40-25 of the FASB Accounting Standards Codification. The result of this accounting treatment is that the fair value of the embedded derivative is marked-to-market each balance sheet date and recorded as either an asset or a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the consolidated statement of operations as other income or expense. Upon conversion, exercise or cancellation of a derivative instrument, the instrument is marked to fair value at the date of conversion, exercise or cancellation and then that the related fair value is reclassified to equity.
The Company utilizes the binomial option pricing model to compute the fair value of the derivative and to mark to market the fair value of the derivative at each balance sheet date. The binomial option pricing model includes subjective input assumptions that can materially affect the fair value estimates. The expected volatility is estimated based on the most recent historical period of time equal to the remaining contractual term of the instrument granted.
INCOME TAXES
The Company accounts for income taxes in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("FASB ASC") 740, Income Taxes. Under the assets and liability method of FASB ASC 740, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The Company provides a valuation allowance, if necessary, to reduce deferred tax assets to their estimated realizable value.
| 32 |
NET LOSS PER SHARE
Basic net income (loss) per share includes no dilution and is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share is computed by dividing earnings available to common shareholders by the weighted average number of common shares outstanding for the period increased to include the number of additional common shares that would have been outstanding if potentially dilutive securities had been issued. On December 31, 2020 and 2019, we excluded the common stock issuable upon conversion of non-redeemable convertible notes, convertible notes, Series A Stock, Series B Stock, Series C Stock, common stock to be issued and warrants of 8,379,046,549 shares and 7,016,249,249 shares, respectively, as their effect would have been anti-dilutive. On December 31, 2020, common stock equivalents exceed authorized shares of common stock of the Company.
FOREIGN CURRENCY TRANSLATION
The financial statements are presented in the Company’s functional currency which is the United States dollars. The functional currency of the Company’s Canadian subsidiary, I8 Interactive Corporation, is the United States dollar. In accordance with FASB ASC 830, Foreign Currency Matters, foreign denominated monetary assets and liabilities are translated to their United States dollar equivalents using foreign exchange rates which prevailed at the balance sheet date. Non-monetary assets and liabilities are translated at exchange rates prevailing at the transaction date. Revenue and expenses are translated at average rates of exchange during the periods presented. Related translation adjustments are reported as gains or losses resulting from foreign currency transactions and are included in results of operations.
STOCK-BASED COMPENSATION
The Company accounts for stock incentive awards issued to employees and non-employees in accordance with FASB ASC 718, Stock Compensation. Accordingly, stock-based compensation is measured at the grant date, based on the fair value of the award. Stock-based awards to employees are recognized as an expense over the requisite service period, or upon the occurrence of certain vesting events. Additionally, stock-based awards to non-employees are expensed over the period in which the related services are rendered.
FAIR VALUE OF FINANCIAL INSTRUMENTS
ASC Topic 820 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements.
Included in the ASC Topic 820 framework is a three level valuation inputs hierarchy with Level 1 being inputs and transactions that can be effectively fully observed by market participants spanning to Level 3 where estimates are unobservable by market participants outside of the Company and must be estimated using assumptions developed by the Company. The Company discloses the lowest level input significant to each category of asset or liability valued within the scope of ASC Topic 820 and the valuation method as exchange, income or use. The Company uses inputs which are as observable as possible and the methods most applicable to the specific situation of each company or valued item.
The Company’s financial instruments such as cash, accounts payable and accrued liabilities, non-redeemable convertible notes, notes payable and due to related parties are reported at cost, which approximates fair value due to the short-term nature of these financial instruments.
Derivative liabilities are measured at fair value on a recurring basis using Level 3 inputs.
The following table presents assets and liabilities that are measured and recognized at fair value as of December 31, 2020 on a recurring basis:
| 2020 | ||||||||||||
| Level 1 | Level 2 | Level 3 | ||||||||||
| Description | $ | $ | $ | |||||||||
| Derivative liabilities | — | — | 172,261 | |||||||||
| 2019 | ||||||||||||
| Level 1 | Level 2 | Level 3 | ||||||||||
| Description | $ | $ | $ | |||||||||
| Derivative liabilities | — | — | 452,549 | |||||||||
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RECENT ACCOUNTING PRONOUNCEMENTS
In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40). This update amends the guidance on convertible instruments and the derivatives scope exception for contracts in an entity's own equity and improves and amends the related EPS guidance for both Subtopics. This standard is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2023, which means it will be effective for our fiscal year beginning January 1, 2014. Early adoption is permitted but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. We are currently evaluating the impact of ASU 2020-06 on our consolidated financial statements.
Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company's present or future consolidated financial statements.
NOTE 3 – NON-REDEEMABLE CONVERTIBLE NOTES
On June 10, 2014, the Company agreed to amend and add certain terms to unsecured, non-interest bearing, due on demand notes payable issued to The Cellular Connection Ltd. during the period from February 22, 2013 to June 10, 2014 with a total carrying value $42,189. The issue price of the Note is $42,189 with a face value of $54,193 and the Note has an original maturity date of December 31, 2014 which is subject to automatic renewal. At the option of the Company, the Company may convert principal and interest at a fixed conversion price of $0.0001 per share of the Company’s common stock. The Note allows for the lender to secure a portion of the Company assets up to 200% of the face value of the Note. If the Note is not paid on the maturity date, the outstanding face amount of the Note shall increase by 20% on January 1, 2015. The outstanding face value of the Note shall increase by another 20% on January 1, 2016 and again on each one-year anniversary of the Note until the Note has been paid in full. During the year ended December 31, 2020, the Company elected to convert $2,252 of principal and interest into 22,524,864 shares of common stock of the Company at a fixed conversion price of $0.0001 per share. These conversions resulted in a loss on debt settlement of $890,986 due to the requirement to record the share issuance at fair value on the date the shares were issued. The consolidated statement of operations includes interest expense of $376 and $2,378 for the year ended December 31, 2020 and 2019, respectively. On December 31, 2020 and 2019, the carrying amount of the Note is $0 and $1,878 (face value of $1,878 less $0 unamortized discount), respectively.
On September 1, 2016, Doug Clark, former Chief Executive Officer and related party, assigned the Side Letter Agreement (“Note”) dated June 10, 2014 with a total carrying value $382,016 to DC Design Inc. (“DC Design”). On September 1, 2016, the Company entered into an amended Side Letter Agreement with DC Design to amend and add certain terms to the Side Letter Agreement and advances from the period from June 25, 2014 to December 24, 2014. Under the terms of the amended Side Letter Agreement, the issue price of the Note is $174,252 with an interest rate 20% per annum and an original maturity date of December 31, 2017 which is subject to automatic renewal. In addition, on September 30, 2019, the Company and DC Design entered into an Agreement to change the original maturity date of the Note to December 31, 2021. At the option of the Company, the Company may convert principal and interest at a fixed conversion price of $0.003 per share of the Company’s common stock. The Note allows for the lender to secure a portion of the Company assets up to 200% of the face value of the note. If the Note is not paid on the maturity date, the outstanding face amount of the Note shall increase by 20% on January 1, 2022. The outstanding face value of the Note shall increase by another 20% on January 1, 2023 and again on each one-year anniversary of the Note until the Note has been paid in full. The consolidated statement of operations includes interest expense of $5,502 and $4,585 for the year ended December 31, 2020 and 2019, respectively. On December 31, 2020 and 2019, the carrying amount of the Note is $33,010 (face value of $33,010 less $0 unamortized discount) and $27,508 (face value of $27,508 less $0 unamortized discount), respectively.
On January 8, 2018, the Company entered into a Side Letter Agreement (“Note”) with The Cellular Connection Ltd., to amend and add certain terms to unsecured, non-interest bearing, due on demand notes payable totaling $14,930 issued by the Company during the period of June 2014 and December 2017. The issue price of the Note is $14,930 with a face value of $17,916 and the Note has an original maturity date of December 31, 2018 which is subject to automatic renewal. On September 30, 2019, the Company and The Cellular Connection Ltd. entered into an Agreement to change the original maturity date of the Note to December 31, 2021. At the option of the Company, the Company may convert principal and interest at a fixed conversion price of $0.0001 per share of the Company’s common stock. The Note allows for the lender to secure a portion of the Company assets up to 200% of the face value of the Note. If the Note is not paid on the maturity date, the outstanding face amount of the Note shall increase by 20% on January 1, 2022. The outstanding face value of the Note shall increase by another 20% on January 1, 2023 and again on each one-year anniversary of the Note until the Note has been paid in full. During the year ended December 31, 2020, the Company elected to convert $25,799 of principal and interest into 257,990,370 shares of common stock of the Company at a fixed conversion price of $0.0001 per share. These conversions resulted in a loss on debt settlement of $892,297 due to the requirement to record the share issuance at fair value on the date the shares were issued. The consolidated statement of operations includes interest expense of $4,300 and $3,583 for the year ended December 31, 2020 and 2019, respectively. On December 31, 2020 and 2019, the carrying amount of the Note is $0 and $21,499 (face value of $21,499 less $0 unamortized discount), respectively.
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On January 8, 2018, the Company entered into a Side Letter Agreement (“Note”) with Stuart Turk, to amend and add certain terms to unsecured, non-interest bearing, due on demand notes payable totaling $244,065 issued by the Company during the period of July 2014 and December 2017. The issue price of the Note is $244,065 with a face value of $292,878 and the Note has an original maturity date of December 31, 2018 which is subject to automatic renewal. On September 30, 2019, the Company and Stuart Turk entered into an Agreement to change the original maturity date of the Note to December 31, 2021. At the option of the Company, the Company may convert principal and interest at a fixed conversion price of $0.0001 per share of the Company’s common stock. The Note allows for the lender to secure a portion of the Company assets up to 200% of the face value of the Note. If the Note is not paid on the maturity date, the outstanding face amount of the Note shall increase by 20% on January 1, 2022. The outstanding face value of the Note shall increase by another 20% on January 1, 2023 and again on each one-year anniversary of the Note until the Note has been paid in full. During the year ended December 31, 2020, the Company elected to convert $1,400 of principal and interest into 14,000,000 shares of common stock of the Company at a fixed conversion price of $0.0001 per share. These conversions resulted in a loss on debt settlement of $58,800 due to the requirement to record the share issuance at fair value on the date the shares were issued. The consolidated statement of operations includes interest expense of $70,291 and $58,576 for the year ended December 31, 2020 and 2019, respectively. On December 31, 2020 and 2019, the carrying amount of the Note is $420,344 (face value of $420,344 less $0 unamortized discount) and $351,454 (face value of $351,454 less $0 unamortized discount), respectively.
On April 12, 2018, the Company entered into a Side Letter Agreement (“Note”) with Jordan Turk to amend and add certain terms to unsecured, non-interest bearing, due on demand notes payable totaling $45,000 issued by the Company during the period of March 19, 2018 to April 12, 2018. The issue price of the Note is $45,000 with a face value of $54,000 and the Note has an original maturity date of December 31, 2018 which is subject to automatic renewal. At the option of the Company, the Company may convert principal and interest at a fixed conversion price of $0.0001 per share of the Company’s common stock. The Note allows for the lender to secure a portion of the Company assets up to 200% of the face value of the Note. If the Note is not paid on the maturity date, the outstanding face amount of the Note shall increase by 20% on January 1, 2019. The outstanding face value of the Note shall increase by another 20% on January 1, 2020 and again on each one-year anniversary of the Note until the Note has been paid in full. During the year ended December 31, 2020, the Company elected to convert $2,000 of principal and interest into 20,000,000 shares of common stock of the Company at a fixed conversion price of $0.0001 per share. These conversions resulted in a loss on debt settlement of $62,000 due to the requirement to record the share issuance at fair value on the date the shares were issued. The consolidated statement of operations includes interest expense of $12,840 and $10,800 for the year ended December 31, 2020 and 2019, respectively. On December 31, 2020 and 2019, the carrying amount of the Note is $75,040 (face value of $75,040 less $0 unamortized discount) and $64,200 (face value of $64,200 less $0 unamortized discount), respectively.
On May 10, 2018, the Company entered into a Side Letter Agreement (“Note”) with Jordan Turk to amend and add certain terms to unsecured, non-interest bearing, due on demand notes payable totaling $35,000 issued by the Company on May 9, 2018. The issue price of the Note is $35,000 with a face value of $42,000 and the Note has an original maturity date of December 31, 2018 which is subject to automatic renewal. On September 30, 2019, the Company and Jordan Turk entered into an Agreement to change the original maturity date of the Note to December 31, 2021. At the option of the Company, the Company may convert principal and interest at a fixed conversion price of $0.0001 per share of the Company’s common stock. The Note allows for the lender to secure a portion of the Company assets up to 200% of the face value of the Note. If the Note is not paid on the maturity date, the outstanding face amount of the Note shall increase by 20% on January 1, 2022. The outstanding face value of the Note shall increase by another 20% on January 1, 2023 and again on each one-year anniversary of the Note until the Note has been paid in full. The consolidated statement of operations includes interest expense of $10,080 and $8,400 for the year ended December 31, 2020 and 2019, respectively. On December 31, 2020 and 2019, the carrying amount of the Note is $60,480 (face value of $60,480 less $0 unamortized discount) and $50,400 (face value of $50,400 less $0 unamortized discount), respectively.
On September 13, 2018, the Company entered into a Side Letter Agreement (“Note”) with Jordan Turk to amend and add certain terms to unsecured, non-interest bearing, due on demand notes payable totaling $40,000 issued by the Company during the period of July 10 to September 13, 2018. The issue price of the Note is $40,000 with a face value of $48,000 and the Note has an original maturity date of December 31, 2018 which is subject to automatic renewal. On September 30, 2019, the Company and Jordan Turk entered into an Agreement to change the original maturity date of the Note to December 31, 2021. At the option of the Company, the Company may convert principal and interest at a fixed conversion price of $0.0001 per share of the Company’s common stock. The Note allows for the lender to secure a portion of the Company assets up to 200% of the face value of the Note. If the Note is not paid on the maturity date, the outstanding face amount of the Note shall increase by 20% on January 1, 2022. The outstanding face value of the Note shall increase by another 20% on January 1, 2023 and again on each one-year anniversary of the Note until the Note has been paid in full. The consolidated statement of operations includes interest expense of $11,520 and $9,600 for the year ended December 31, 2020 and 2019, respectively. On December 31, 2020 and 2019, the carrying amount of the Note is $69,120 (face value of $69,120 less $0 unamortized discount) and $57,600 (face value of $57,600 less $0 unamortized discount), respectively.
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On January 31, 2019, the Company entered into a Side Letter Agreement (“Note”) with Stuart Turk to amend and add certain terms to unsecured, non-interest bearing, due on demand notes payable totaling $106,968 issued by the Company during the period of January 3, 2018 to December 28, 2018. The issue price of the Note is $106,968 with a face value of $128,362 and the Note has an original maturity date of December 31, 2019 which is subject to automatic renewal. On September 30, 2019, the Company and Stuart Turk entered into an Agreement to change the original maturity date of the Note to December 31, 2021. At the option of the Company, the Company may convert principal and interest at a fixed conversion price of $0.0001 per share of the Company’s common stock. The Note allows for the lender to secure a portion of the Company assets up to 200% of the face value of the Note. If the Note is not paid on the maturity date, the outstanding face amount of the Note shall increase by 20% on January 1, 2022. The outstanding face value of the Note shall increase by another 20% on January 1, 2023 and again on each one-year anniversary of the Note until the Note has been paid in full. The consolidated statement of operations includes interest expense of $25,672 and $21,394 for the year ended December 31, 2020 and 2019, respectively. On December 31, 2020 and 2019, the carrying amount of the Note is $154,034 (face value of $154,034 less $0 unamortized discount) and $128,362 (face value of $128,362 less $0 unamortized discount), respectively.
On January 31, 2019, the Company entered into a Side Letter Agreement (“Note”) with The Cellular Connection Ltd. to amend and add certain terms to unsecured, non-interest bearing, due on demand notes payable totaling $20,885 issued by the Company during the period of January 23, 2018 to October 16, 2018. The issue price of the Note is $20,885 with a face value of $25,062 and the Note has an original maturity date of December 31, 2019 which is subject to automatic renewal. On September 30, 2019, the Company and The Cellular Connection Ltd. entered into an Agreement to change the original maturity date of the Note to December 31, 2021. At the option of the Company, the Company may convert principal and interest at a fixed conversion price of $0.0001 per share of the Company’s common stock. The Note allows for the lender to secure a portion of the Company assets up to 200% of the face value of the Note. If the Note is not paid on the maturity date, the outstanding face amount of the Note shall increase by 20% on January 1, 2022. The outstanding face value of the Note shall increase by another 20% on January 1, 2023 and again on each one-year anniversary of the Note until the Note has been paid in full. During the year ended December 31, 2020, the Company elected to convert $115 of principal and interest into 1,150,030 shares of common stock of the Company at a fixed conversion price of $0.0001 per share. These conversions resulted in a loss on debt settlement of $3,795 due to the requirement to record the share issuance at fair value on the date the shares were issued. The consolidated statement of operations includes interest expense of $5,012 and $4,177 for the year ended December 31, 2020 and 2019, respectively. On December 31, 2020 and 2019, the carrying amount of the Note is $29,960 (face value of $29,960 less $0 unamortized discount) and $25,062 (face value of $25,062 less $0 unamortized discount), respectively.
NOTE 4 – NOTES PAYABLE
As of December 31, 2020 and 2019, notes payable due to Stuart Turk, Jordan Turk and The Cellular Connection Limited, a corporation controlled by Stuart Turk, totaling $83,332 and $48,461, respectively, were outstanding. The balances are non-interest bearing, unsecured and have no specified terms of repayment. During the year ended December 31, 2020, notes payable were issued for $137,415 expenses paid on behalf of the Company and $14,626 for cash advanced to the Company and notes payable were repaid by the Company with $117,170 in cash.
During the year ended December 31, 2019, notes payable were issued for $222,615 expenses paid on behalf of the Company and $9,489 cash advanced to the Company and notes payable were repaid by the Company with $107,380 of cash and the issuance of $127,853 in non-redeemable convertible notes. On September 30, 2019, the Company issued promissory notes to settle notes payable of $76,263 (See Note 5).
NOTE 5 – PROMISSORY NOTES
Promissory Note
As of December 31, 2020 and 2019, a promissory note of $85,796 (principal $76,263 and interest of $9,533) and $78,170 (principal $76,263 and interest of $1,907), respectively, was outstanding. The promissory note bears interest of 10% per annum, is unsecured and matures on December 31, 2021. The promissory note was issued on September 30, 2019 to settle notes payable of $76,263.
Promissory Notes – Related Party
As of December 31, 2020 and 2019, promissory notes – related party of $194,485 (principal $172,876 and interest of $21,609) and $177,197 (principal $172,876 and interest of $4,321), respectively, were outstanding. The promissory notes – related party bear interest of 10% per annum, are unsecured, mature on December 31, 2021 and are due to Nadav Elituv, the Company's Chief Executive Officer.
The promissory notes – related party were issued on September 30, 2019 to settle advances and accrued salary due to related party of $172,876.
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NOTE 6 – CONVERTIBLE NOTE
Firstfire Global Opportunities Fund, LLC
On March 1, 2019, the Company entered into a Securities Purchase Agreement with Firstfire Global Opportunities Fund, LLC, (“Holder”) relating to the issuance and sale of a Senior Convertible Note (the “Note”) with an original principal amount of $200,000 less an original issue discount of $20,000 and transaction costs of $5,000 bearing a 7% annual interest rate and maturing September 1, 2020 for $175,000 in cash. The Note and accrued interest, at the option of the Holder, is convertible into common shares of the Company at $0.10 per share. After 180 days after the issue date, the Note together with any unpaid accrued interest is convertible into shares of common stock of the Company at the Holder’s option at the lessor of (i) $0.10 per share or (ii) a variable conversion price calculated at 65% of the market price defined as the lowest trading price during the ten trading day period ending on the latest trading day prior to the conversion date. The Company may prepay the Note in cash, if repaid within 90 days of date of issue, at 115% of the original principal amount plus interest, between 90 days and 120 days at 120% of the original principal amount plus interest and between 120 days and 180 days at 130% of the original principal amount plus interest. Thereafter, the Company does not have the right of prepayment. During the year ended December 31, 2020, the Holder converted 2,695,000 shares of common stock of the Company with a fair value of $208,285 to settle principal and interest of $106,232 ($94,232 of principal and $12,000). The conversions resulted in the settlement of derivative liabilities of $153,668 and a loss on settlement of debt of $48,097. On December 31, 2020 and 2019, the Note was recorded at amortized cost of $0 and $19,752 (comprised of principal of $94,232 plus accrued interest of $10,284 less debt discount of $84,764), respectively.
Power Up Lending Group Ltd.
On February 3, 2020 the Company entered into a Securities Purchase Agreement with Power Up Lending Group Ltd. (“Holder”) relating to the issuance and sale of a Senior Convertible Note (the “Note”) with an original principal amount of $103,000 less transaction costs of $3,000 bearing an 8% annual interest rate and maturing July 31, 2021 for $100,000 in cash. After 180 days after the issue date, the Note together with any unpaid accrued interest is convertible into shares of common stock of the Company at the Holder’s option at a variable conversion price calculated at 65% of the market price defined as the lowest three average trading price during the ten trading day period ending on the latest trading day prior to the conversion date. The Company may prepay the Note in cash, if repaid within 90 days of date of issue, at 118% of the original principal amount plus interest, between 91 days and 120 days at 123% of the original principal amount plus interest, between 121 days and 180 days at 129% of the original principal amount plus interest and after 181 days 175% of the original principal amount plus interest. From August 5, 2020 to August 24, 2020, the Holder converted 29,392,037 shares of common stock of the Company with a fair value of $145,312 to settle principal and interest of $107,120 ($103,000 of principal and $4,120). The conversions resulted in the settlement of derivative liabilities of $131,380 and a loss on settlement of debt of $490. On December 31, 2020 and 2019, the Note was recorded at amortized cost of $0 and $0, respectively.
On April 14, 2020 the Company entered into a Securities Purchase Agreement with Power Up Lending Group Ltd. (“Holder”) relating to the issuance and sale of a Senior Convertible Note (the “Note”) with an original principal amount of $68,000 less transaction costs of $3,000 bearing an 8% annual interest rate and maturing October 14, 2021 for $65,000 in cash. After 180 days after the issue date, the Note together with any unpaid accrued interest is convertible into shares of common stock of the Company at the Holder’s option at a variable conversion price calculated at 65% of the market price defined as the lowest three average trading price during the ten trading day period ending on the latest trading day prior to the conversion date. The Company may prepay the Note in cash, if repaid within 90 days of date of issue, at 118% of the original principal amount plus interest, between 91 days and 120 days at 123% of the original principal amount plus interest, between 121 days and 180 days at 129% of the original principal amount plus interest and after 181 days 175% of the original principal amount plus interest. During the year ended December 31, 2020, the Holder converted 36,290,909 shares of common stock of the Company with a fair value of $108,885 to settle principal and interest of $70,720 ($68,000 of principal and $2,720). The conversions resulted in the settlement of derivative liabilities of $90,117 and a loss on settlement of debt of $9,486. On December 31, 2020 and 2019, the Note was recorded at amortized cost of $0 and $0, respectively.
On July 13, 2020 the Company entered into a Securities Purchase Agreement with Power Up Lending Group Ltd. (“Holder”) relating to the issuance and sale of a Senior Convertible Note (the “Note”) with an original principal amount of $53,000 less transaction costs of $3,000 bearing an 8% annual interest rate and maturing July 13, 2021 for $50,000 in cash. After 180 days after the issue date, the Note together with any unpaid accrued interest is convertible into shares of common stock of the Company at the Holder’s option at a variable conversion price calculated at 65% of the market price defined as the lowest three average trading price during the ten trading day period ending on the latest trading day prior to the conversion date. The Company may prepay the Note in cash, if repaid within 90 days of date of issue, at 118% of the original principal amount plus interest, between 91 days and 120 days at 123% of the original principal amount plus interest, between 121 days and 180 days at 129% of the original principal amount plus interest and after 181 days 175% of the original principal amount plus interest. On December 31, 2020 and 2019, the Note was recorded at amortized cost of $5,274 (comprised of principal of $53,000 plus accrued interest of $1,986 less debt discount of $49,712) and $0, respectively.
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On September 11, 2020 the Company entered into a Securities Purchase Agreement with Power Up Lending Group Ltd. (“Holder”) relating to the issuance and sale of a Senior Convertible Note (the “Note”) with an original principal amount of $78,000 less transaction costs of $3,000 bearing an 8% annual interest rate and maturing March 11, 2022 for $75,000 in cash. After 180 days after the issue date, the Note together with any unpaid accrued interest is convertible into shares of common stock of the Company at the Holder’s option at a variable conversion price calculated at 65% of the market price defined as the lowest three average trading price during the ten trading day period ending on the latest trading day prior to the conversion date. The Company may prepay the Note in cash, if repaid within 90 days of date of issue, at 118% of the original principal amount plus interest, between 91 days and 120 days at 123% of the original principal amount plus interest, between 121 days and 180 days at 129% of the original principal amount plus interest and after 181 days 175% of the original principal amount plus interest. On December 31, 2020 and 2019, the Note was recorded at amortized cost of $2,559 (comprised of principal of $78,000 plus accrued interest of $1,898 less debt discount of $77,339) and $0, respectively.
Crown Bridge Partners, LLC
On January 20, 2020, the Company entered into an Equity Purchase Agreement (“Agreement”) with Crown Bridge Partners, LLC, (“Holder”). In conjunction with the Agreement the Company entered into a Convertible Promissory Note (“Note”) for the commitment fee due to the Holder with an original principal amount of $25,000 bearing an 8% annual interest rate and maturing July 20, 2020. The Note and accrued interest, at the option of the Holder, is convertible into common shares of the Company at the Holder’s option at the lessor of (i) at a fixed conversion price of $0.20 per share or (ii) at a variable conversion price, while this Note is outstanding, at the greatest discount to market price of the shares of common stock of the Company in effect for other promissory notes outstanding for the Company. The greatest discount to market price is calculated at 65% of the market price defined as the lowest trading price during the ten trading day period ending on the latest trading day prior to the conversion date. The Company may prepay the Note in cash within 90 days of date of issue, at 118% of the original principal amount plus interest. On July 20, 2020, the Note went into default for non-payment. Due to the default, in accordance with the original terms of the Note, on July 20, 2020 outstanding principal and interest at was increased by 36% to $36,720 resulting in a loss on extinguishment of $21,546 (increase in principal and interest of $10,724 and increase in derivative liability of $10,822) and interest rate on the Note was increased to 12% per annum. On August 31, 2020, the Holder issued 10,400,000 shares of common stock of the Company with a fair value of $41,600 to settle principal of $19,104. The conversions resulted in the settlement of derivative liabilities of $26,332 and a gain on settlement of debt of $3,825. On October 8, 2020, the Holder issued 12,253,846 shares of common stock of the Company with a fair value of $49,015 to settle principal of $18,102. The conversions resulted in the settlement of derivative liabilities of $31,829 and a gain on settlement of debt of $916. On December 31, 2020 and 2019, the Note was recorded at amortized cost of $0 and $0, respectively.
NOTE 7 - CONVERTIBLE PROMISSORY NOTE DERIVATIVE LIABILITIES
The Convertible Promissory Notes with Firstfire Global Opportunities Fund, LLC, Crown Bridge Partners, LLC and Power Up Lending Group Ltd. with issue dates of March 1, 2019, January 20, 2020, February 3, 2020, April 14, 2020, July 13, 2020 and September 11, 2020, respectively, are accounted for under ASC 815. The variable conversion price is not considered predominantly based on a fixed monetary amount settleable with a variable number of shares due to the volatility and trading volume of the Company’s common stock. The Company’s convertible promissory note derivative liabilities have been measured at fair value on March 1, 2019, December 31, 2019, January 20, 2020, February 3, 2020, April 14, 2020, July 13, 2020, September 11, 2020 and December 31, 2020 using the binomial model.
The inputs into the binomial models are as follows:
| March 1, 2019 | December 31, 2019 | January 20, 2020 | February 3. 2020 | April 14, 2020 | July 13, 2020 | September 11, 2020 | December 31, 2020 | |||||||||||||||||||||||||
| Closing share price | $ | 0.07 | $ | 0.20 | $ | 0.18 | $ | 0.115 | $ | 0.0559 | $ | 0.0105 | $ | 0.0037 | $ | 0.0031 | ||||||||||||||||
| Conversion price | $ | 0.0364 | $ | 0.0683 | $ | 0.0488 | $ | 0.0587 | $ | 0.0338 | $ | 0.0068 | $ | 0.0024 | $ | 0.0019 | ||||||||||||||||
| Risk free rate | 2.55 | % | 1.60 | % | 1.57 | % | 1.60 | % | 2.40 | % | 0.16 | % | 0.13 | % | 0.09% to 0.10% | |||||||||||||||||
| Expected volatility | 403 | % | 294 | % | 351 | % | 434 | % | 330 | % | 294 | % | 270 | % | 228% to 284% | |||||||||||||||||
| Dividend yield | 0 | % | 0 | % | 0 | % | 0 | % | 0 | % | 0 | % | 0 | % | 0 | % | ||||||||||||||||
| Expected life | 1.51 years | 0.67 years | 0.5 years | 1.49 years | 1.5 years | 1.0 years | 1.5 years | 0.53 to 1.19 years | ||||||||||||||||||||||||
The fair value of the convertible promissory note derivative liability relating to the Notes issued to Firstfire Global Opportunities Fund, LLC, Power Up Lending Group Ltd. and Crown Bridge Partners, LLC on March 1, 2019, February 3, 2020, January 20, 2020, April 14, 2020, July 13, 2020 and September 11, 2020 was $573,863 (2019 - $380,919), of which $315,000 (2019 - $175,000) was recorded as a debt discount and the remainder of $258,863 (2019 - $205,919) was recorded as initial derivative expense. During the year ended December 31, 2020, the convertible promissory note derivative liability was reduced by $422,492 (2019 - $0) for settlement of derivative liabilities due to conversion of the Notes into common stock by the Holders. The decrease (increase) in the fair value of the conversion option derivative liability of $246,098 and $(26,514), respectively is recorded as a gain (loss) in the consolidated statements of operations for the years ended December 31, 2020 and 2019, respectively. The fair value of the convertible promissory note derivative liabilities is $172,261 and $266,989 December 31, 2020 and 2019, respectively.
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NOTE 8 – WARRANT LIABILITY
In conjunction with the issuance of the Senior Convertible Note with Firstfire Global Opportunities Fund, LLC (the “Note”) on March 1, 2019, the Company issued 1,000,000 warrants with an exercise price of $0.20 and a term of two years. The warrants are subject to down round and other anti-dilution protections. The warrant is tainted and classified as a liability as a result of the issuance of the Note since there is a possibility during the life of the warrant the Company would not have enough authorized shares available if the warrant is exercised. The Company’s warrant liability has been measured at fair value on March 1, 2019, December 31, 2019 and April 14, 2020 using the binomial model.
The inputs into the binomial models are as follows:
March 1, 2019 | December 31, 2019 | April 14, 2020 | ||||||||||
| Closing share price | $ | 0.07 | $ | 0.20 | $ | 0.0559 | ||||||
| Exercise price | $ | 0.20 | $ | 0.20 | $ | 0.20 | ||||||
| Risk free rate | 2.27 | % | 1.59 | % | 1.59 | % | ||||||
| Expected volatility | 364 | % | 338 | % | 310 | % | ||||||
| Dividend yield | 0 | % | 0 | % | 0 | % | ||||||
| Expected life | 2.0 years | 1.17 years | 0.88 years | |||||||||
The fair value of the warrant liability on March 1, 2019 was $68,798. The decrease (increase) in the fair value of the warrant liability of $144,059 and $(116,762) is recorded as a gain (loss) in the consolidated statements of operations for the years ended December 31, 2020 and 2019, respectively. The fair value of the warrant liability is $0 and $185,560 on December 31, 2020 and 2019, respectively.
On April 14, 2020, the Company issued 2,000,000 shares of common stock with a fair value of $111,800 to fully settle the 1,000,000 warrants issued in conjunction with the issuance of the Senior Convertible Note with Firstfire Global Opportunities Fund, LLC on March 1, 2019. The issue of the shares resulting in a loss on settlement of warrant liability of $70,299.
NOTE 9 – RELATED PARTY TRANSACTIONS
As of December 31, 2020 and 2019, advances and accrued salary of $106,928 and $17,840, respectively, were due to Nadav Elituv, the Company's Chief Executive Officer. The balance is non-interest bearing, unsecured and have no specified terms of repayment. During the year ended December 31, 2020, the Company issued advances due to related party for $94,944 expenses paid on behalf of the Company and for $5,215 cash advanced to the Company and advances due to related party were repaid by the Company with $86,671 in cash. During the year ended December 31, 2019, the Company issued advances due to related party of $84,163 for expenses paid on behalf of the Company, cash received of $28,455, settlement of accrued compensation of $75,600 and settlement of account payable of $11,817 and Company repaid advance due to related party with $52,542 in cash and $9,448 in shares of common stock of the Company. On September 30, 2019, the Company issued promissory notes to settle advances and accrued salary of $172,876 (See Note 5).
Employment Agreements
On September 10, 2018, the Company executed an employment agreement for the period from July 1, 2018 to June 30, 2019 with Nadav Elituv, the Chief Executive Officer of the Company whereby the Company shall pay 50,000 shares of Common Stock of the Company and an annual salary of $151,200 payable monthly on the first day of each month from available funds.
On September 10, 2019, the Company executed an employment agreement for the period from July 1, 2019 to June 30, 2020 with Nadav Elituv, the Chief Executive Officer of the Company whereby the Company shall pay 50,000 shares of Common Stock of the Company and an annual salary of $151,200 payable monthly on the first day of each month from available funds. On November 1, 2019, this employment agreement was amended to include additional stock-based compensation comprising of 30,000 shares of Series A Convertible Preferred Stock. On December 20, 2019, January 29, 2020, February 28, 2020, March 30, 2020 and April 30, 2020 the employment agreement was further amended to include additional stock-based compensation comprising of 873,609 shares, 1,000,000 shares, 1,000,000 shares, 2,500,000 shares and 2,000,000 shares of common stock of the Company, respectively.
On August 7, 2020, the Company executed an employment agreement for the period from July 1, 2020 to June 30, 2021 with Nadav Elituv, the Chief Executive Officer of the Company whereby the Company shall pay 50,000,000 shares of Common Stock of the Company and an annual salary of $151,200 payable monthly on the first day of each month from available funds.
Stock-based compensation – salaries expense related to these employment agreements for the years ended December 31, 2020 and 2019 is $491,450 and $1,762,557, respectively. Stock-based compensation – salaries expense was recognized ratably over the requisite service period.
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NOTE 10 - INCOME TAXES
A reconciliation of the provision for income taxes at the United States federal statutory rate compared to the Company’s income tax
expense as reported is as follows:
| 2020 | 2019 | |||||||
| Net loss before income taxes per consolidated financial statements | $ | (7,666,062 | ) | $ | (5,676,436 | ) | ||
| Income tax rate | 21 | % | 21 | % | ||||
| Income tax recovery | (1,610,000 | ) | (1,192,100 | ) | ||||
| Non-deductible share-based payments | 1,062,100 | 566,600 | ||||||
| Non-deductible interest | 50,300 | 33,200 | ||||||
| Loss on settlement of debt | 431,200 | 293,600 | ||||||
| Initial derivative expense | 54,400 | 57,700 | ||||||
| Change in fair value of derivative expense | (82,000 | ) | 30,000 | |||||
| Valuation allowance change | 94,000 | 211,000 | ||||||
| Income tax expense (recovery) | $ | — | $ | — | ||||
The significant component of deferred income tax assets on December 31, 2020 and 2019 is as follows:
| 2020 | 2019 | |||||||
| Net operating loss carry-forward | $ | 893,000 | $ | 799,900 | ||||
| Valuation allowance | (893,000 | ) | (799,900 | ) | ||||
| Net deferred income tax asset | $ | — | $ | — | ||||
The amount taken into income as deferred income tax assets must reflect that portion of the income tax loss carry forwards that is more likely-than-not to be realized from future operations. The Company has chosen to provide a full valuation allowance against all available income tax loss carry forwards. The Company has recognized a valuation allowance for the deferred income tax asset since the Company cannot be assured that it is more likely than not that such benefit will be utilized in future years. The valuation allowance is reviewed annually. When circumstances change and which cause a change in management’s judgment about the realizability of deferred income tax assets, the impact of the change on the valuation allowance is generally reflected in current income.
As of December 31, 2020 and 2019 the Company has no unrecognized income tax benefits. The Company’s policy for classifying interest and penalties associated with unrecognized income tax benefits is to include such items as tax expense. No interest or penalties have been recorded during the year ended December 31, 2020 and 2019 and no interest or penalties have been accrued as of December 31, 2020 and 2019. As of December 31, 2020 and 2019, the Company did not have any amounts recorded pertaining to uncertain tax positions.
The tax years from 2009 and forward remain open to examination by federal and state authorities due to net operating loss and credit carryforwards. The Company is currently not under examination by the Internal Revenue Service or any other taxing authorities.
NOTE 11 – PREFERRED STOCK
On August 6, 2013, the Company filed a Certificate of Designation with the Delaware Secretary of State thereby designating two hundred thousand (200,000) shares as Series A Convertible Preferred Stock (“Series A Stock”). Each share of Series A Stock is (i) convertible into one thousand (1,000) shares of common stock of the Company and (ii) entitled to the number of votes equal to the aggregate number of shares of common stock into which the Holder’s share of Series A Stock is convertible, multiplied by one hundred (100).
On December 12, 2019, the Company filed a Certificate of Designation with the Delaware Secretary of State thereby designating one hundred thousand (100,000) shares as Series B Convertible Preferred Stock (“Series B Stock”). After a one year holding period, each share of Series B Stock is convertible into one thousand (1,000) shares of common stock of the Company. Series B Stock is non-voting.
On October 7, 2020, the Company filed a Certificate of Designation with the Delaware Secretary of State thereby designating five thousand (5,000) shares as Series C Convertible Preferred Stock, par value $0.001 per share (“Series C Stock”). Each share of Series C Stock (i) has a liquidation value of $100, subject to various anti-dilution protections (ii) is convertible into shares of common stock of the Company six months after the date of issuance at a price of $0.0035 per share, subject to various anti-dilution protections (iii) on conversion will receive an aggregate number of shares of common stock as is determined by dividing the liquidation value by the conversion price. Series C Stock are non-voting.
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Series A Stock, Series B Stock and Series C Stock has been classified as temporary equity (outside of permanent equity) on the consolidated balance sheet on December 31, 2020 and 2019 because other tainting contracts such as convertible notes have inadequate available authorized shares of the Company for settlement.
On October 7, 2020, the Company agree to issue 5,000 shares of Series C Convertible Preferred Stock with a fair value of $542,857 ($108.57 per share) for a one-year subscription to an online marketing platform to support the gocart.city grocery delivery application.
On November 1, 2019, the Company issued 30,000 shares of Series A Convertible Preferred Stock with a fair value of $33,000 ($1.10 per share) for stock-based compensation due to Nadav Elituv, the Chief Executive Officer of the Company.
On December 19, 2019, the Company issued 4,000 shares of Series B Convertible Preferred Stock with a fair value of $1,520,000 ($380 per share) for services to be provided from December 19, 2019 to December 19, 2020.
NOTE 12 - STOCKHOLDERS' EQUITY
The Company is authorized to issue an aggregate of 3,000,000,000 common shares with a par value of $0.0001 per share and 1,000,000 shares of preferred stock with a par value of $0.0001 per share.
On November 5, 2019, pursuant to stockholder consent, our Board of Directors authorized an amendment (the "Amendment") to our Certificate of Incorporation, as amended, to affect a reverse stock split of the issued and outstanding shares of our common stock, par value $0.0001, on a 1 for 1,000 basis. We filed the Amendment with the Delaware Secretary of State on November 18, 2019. On December 11, 2019 the Financial Industry Regulatory Authority, Inc. notified us that the reverse stock split would take effect on December 12, 2019. All common stock share and per-share amounts for all periods presented in these consolidated financial statements have been adjusted retroactively to reflect the reverse stock split.
During the year ended December 31, 2020, the Holders of the Senior Convertible Notes issued on March 1, 2019, January 20, 2020, February 3, 2020 and April 14, 2020 elected to convert $302,438 of principal and $18,840 of interest into 91,031,792 shares of common stock of the Company with a fair value of $553,097 resulting in a loss on extinguishment of debt of $53,332.
On April 14, 2020, the Company issued 2,000,000 shares of common stock with a fair value of $111,800 to fully settle the 1,000,000 warrants issued in conjunction with the issuance of the Senior Convertible Note with Firstfire Global Opportunities Fund, LLC on March 1, 2019. The issue of the shares resulting in a loss on settlement of warrant liability of $70,299.
On May 7, 2020, The Company issued 11,111,111 shares of common stock with a fair value of $200,000 for a subscription to an online marketing platform to support the gocart.city grocery delivery application.
During the year ended December 31, 2020, the Company issued 17,999,999 shares of common stock and incurred an obligation to issue 32,000,001 shares of common stock for prepaid stock-based compensation for consulting services with a fair value of $525,000.
During the year ended December 31, 2020, the Company issued 97,500,000 shares of common stock for stock-based compensation for consulting services with a fair value of $1,025,100.
During the year ended December 31, 2020, the Company issued 154,000,000 shares of common stock for stock-based compensation due to officer and directors with a fair value of $1,896,800.
On April 5, 2019, the Company issued 100 shares of common stock to settle shares to be issued for professional services (common stock to be issued) valued at $8,000 ($80.00 per share).
On April 5, 2019, the Company issued 100 shares of common stock valued at $7,000 ($70.00 per share) for professional services.
On June 11, 2019, the Company issued 30,000 shares of common stock to settle shares to be issued (common stock to be issued) valued at $903,000 ($30.10 per share), which has been recorded ratably over the contract period of July 1, 2018 to June 30, 2019, for stock based compensation due to Nadav Elituv, the Chief Executive Officer of the Company.
On September 10, 2019, the Company issued 50,000 shares of common stock valued at $765,000 ($15.30 per share) for stock based compensation due to Nadav Elituv, the Chief Executive Officer of the Company.
On September 19, 2019, the Company issued 24,387 shares of common stock valued at $151,200 ($6.20 per share), to fully settle salary payable, for the period July 1, 2019 to June 30, 2020, due to Nadav Elituv, the Chief Executive Officer of the Company.
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On September 19, 2019, the Company issued 1,524 shares of common stock valued at $9,448 ($6.20 per share), to settle advances payable due to Nadav Elituv, the Chief Executive Officer of the Company.
On September 20, 2019, the Company issued 5,910 shares of common stock valued at $31,912 ($5.40 per share), to settle accounts payable.
On December 20, 2019, the Company issued 873,609 shares of common stock valued at $255,531 ($0.2925 per share) for stock based compensation due to Nadav Elituv, the Chief Executive Officer of the Company.
On December 20, 2019, the Company issued 2,960,059 shares of common stock valued at $865,817 ($0.2925 per share) for stock based compensation due to Directors of the Company.
During the year ended December 31, 2019, the Company issued 1,471,369 shares of common stock valued at $294,274 ($0.2000 per share) for stock based compensation.
During the year ended December 31, 2019, the Company elected to convert $12,933 of principal and interest of non-redeemable convertible notes into 354,700 shares of common stock of the Company valued at $1,351,700. The conversions resulted in a loss on settlement of debt of $1,338,767.
During the year ended December 31, 2019, the Holder of the Convertible Note elected to convert $105,768 of principal and debt discount of $97,038 into 337,600 shares of common stock of the Company with a fair value of $208,551. The conversions resulted in the settlement of derivative liabilities of $140,444 and a loss on settlement of debt of $59,378.
During the year ended December 31, 2019, the Company issued 2,230 shares of common stock for $111,500 in cash.
During the year ended December 31, 2020, the Company elected to convert $31,569 of principal and interest of non-redeemable convertible notes into 315,665,264 shares of common stock of the Company with a fair value of $1,939,444 resulting in a loss of extinguishment of debt of $1,907,875.
Common stock to be issued
On December 31, 2020 and 2019, the Company had an obligation to issue 32,000,001 shares of common stock valued at $336,000 and 0 shares of common stock, respectively, for stock-based compensation – consulting services.
2015 Stock Option Plan
On February 12, 2020, the Board of Directors approved the 2020 Stock Incentive Plan (the “2020 Plan”) to attract and retain the best available personnel, to provide additional incentive to employees, directors and consultants, and to promote the success of the Company's business. Pursuant to the 2020 Plan, the Board may grant incentive stock options, non-qualified stock options, stock appreciation rights, restricted shares and restricted share units. to eligible persons. The maximum aggregate number of shares of common stock with respect to which awards granted under the Plan shall not exceed 50,000,000. On December 31, 2020, there are 10,500,000 shares of common stock available in the 2020 Plan.
NOTE 13 – SUBSEQUENT EVENTS
From January 1, 2021 to March 26, 2021, the Company elected to convert $44,350 of principal and interest of non-redeemable convertible notes into 443,500,000 shares of common stock of the Company with a fair value of $1,938,150 resulting in a loss of extinguishment of debt of $1,893,800.
From January 1, 2021 to March 26, 2021, the Holders of the Senior Convertible Notes issued on July 13, 2020 and September 11, 2020 elected to convert $131,000 of principal and $5,240 of interest into 63,672,223 shares of common stock of the Company with a fair value of $218,127.
From January 1, 2021 to March 26, 2021, the Company issued 30,000,000 shares of common stock for stock-based compensation for consulting services with a fair value of $270,000.
From January 1, 2021 to March 26, 2021, the Company issued 2,500,000 shares of common stock for stock-based compensation due to officer and directors with a fair value of $16,000.
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On January 20, 2021, the Company issued a Side Letter Convertible Promissory Note (“Note”) for $15,823 in cash. The issue price of the Note is $15,823 with a face value of $23,735 and the Note is due on demand. At the option of the Company, the Company may convert principal and interest at a fixed conversion price of $0.0034 per share of the Company’s common stock. On January 20, 2021, the Company and the holder of the Note agreed to convert $23,735 of principal and interest into 8,823,529 shares of common stock of the Company.
Redstart Holdings Corp.
On February 23, 2021, the Company entered into a Securities Purchase Agreement with Redstart Holdings Corp. (“Holder”) relating to the issuance and sale of a Convertible Note (the “Note”) with an original principal amount of $153,000 less transaction costs of $3,000 bearing an 8% annual interest rate and maturing August 23, 2022 for $150,000 in cash. After 180 days after the issue date, the Note together with any unpaid accrued interest is convertible into shares of common stock of the Company at the Holder’s option at a variable conversion price calculated at 65% of the market price defined as the lowest three average trading price during the ten trading day period ending on the latest trading day prior to the conversion date. The Company may prepay the Note in cash, if repaid within 90 days of date of issue, at 118% of the original principal amount plus interest, between 91 days and 120 days at 123% of the original principal amount plus interest, between 121 days and 180 days at 129% of the original principal amount plus interest and after 181 days 175% of the original principal amount plus interest.
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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
We have had no changes in or disagreements with our accountants. None of our principal independent accountants have resigned or declined to stand for re-election.
ITEM 9A(T). CONTROLS AND PROCEDURES.
As required by Rule 13a-15 under the Securities Exchange Act of 1934, we have carried out an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this annual report, being December 31, 2020. This evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer.
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 periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in our company’s reports filed under the Securities Exchange Act of 1934 is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
Based upon that evaluation, including our Chief Executive Officer and Chief Financial Officer, we have concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this annual report for the reasons discussed below.
MANAGEMENT'S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934). Management has assessed the effectiveness of our internal control over financial reporting as of December 31, 2020 based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO-2013). As a result of this assessment, management concluded that, as of December 31, 2020, our internal control over financial reporting was not effective. Our management identified the following material weaknesses in our internal control over financial reporting, which are indicative of many small companies with small staff: (i) inadequate segregation of duties and effective risk assessment; and (ii) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both US GAAP and SEC guidelines.
We plan to take steps to enhance and improve the design of our internal control over financial reporting. During the period covered by this annual report on Form 10-K, we have not been able to remediate the material weaknesses identified above. To remediate such weaknesses, we hope to implement the following changes during our fiscal year ending December 31, 2021: (i) appoint additional qualified personnel to address inadequate segregation of duties and ineffective risk management; and (ii) adopt sufficient written policies and procedures for accounting and financial reporting. The remediation efforts set out in (i) and (ii) are largely dependent upon our securing additional financing to cover the costs of implementing the changes required. If we are unsuccessful in securing such funds, remediation efforts may be adversely affected in a material manner.
This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to an exemption for non-accelerated filers set forth in Section 989G of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting, which are included within disclosure controls and procedures, that occurred during our fiscal quarter ended December 31, 2020 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION.
None.
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PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
Our bylaws state the number of the directors of the Company shall be determined by resolution of the Board of Directors. The Board of Directors currently consists of three (3) directors who are expected to hold office until our nest meeting of the shareholders. Each director is elected at our annual meeting of shareholders and holds office until the next annual meeting of shareholders, or until his successor is elected and qualified, or his earlier death, resignation or removal. Officers are elected by and serve at the discretion of the Board of Directors.
The following table sets forth information regarding our executive officers, directors and significant employees, including their ages as of the date of this Report:
The names of our director and executive officers as of the date of this Report, their respective ages, positions, and biographies are set forth below. Our executive officers are appointed by, and serve at the discretion of, our board of directors.
| Name | Age | Position(s) | ||||
| Nadav Elituv | 58 |
CEO, President., Secretary, Treasurer and Director (Principal Executive Officer) | ||||
| Steven Gryfe | 52 |
Chief Financial Officer (Principal Financial and Accounting Officer) | ||||
| Ryan Wilson | 45 | Director | ||||
| Bradley Southam | 49 | Director | ||||
Professional Experience
The biographies of each executive officer below contain information regarding the person’s service as an executive officer, business experience, director positions held currently or at any time during the last five years, and information regarding involvement in certain legal or administrative proceedings, if applicable.
A description of the principal occupation for the past five years and summary of the experience of the directors and officers of the Company is as follows:
Nadav Elituv, President, Secretary, Treasurer & Director
Nadav Elituv has been serving as our Chief Executive Officer, President, Secretary, Treasurer and as a member of the Board of Directors since June 2014. Since August 2008, Mr. Elituv has served as the President and Founder of Imagin8. Imagin8 is a startup and leading developer of hand and body motion-based interactive digital technologies that are designed to enhance new consumer experiences from touch-screens to floor-screens. Mr. Elituv is the results-driven leader of an innovative digital technology enterprise, for over 20 years. With a track record for building, developing and motivating high-performance teams and is an expert in high-tech systems. This includes the design and implementation of computer-vision and gesture-recognition software. Mr. Elituv has solid career experience driving strategic initiatives and meeting critical business mandates.
Steven Gryfe, Chief Financial Officer
Steven Gryfe was appointed Chief Financial Officer on June 18, 2019. Mr. Gryfe has had a career over 20 years in the technology field in the roles of sales and marketing and as Chief Operating Officer of On the Go Technologies Group (“OTG”). While at OTG Mr. Gryfe was instrumental in its growth from revenue of $91,584 in 2003 to over $30 million in 2006. Mr. Gryfe was also President and CEO of HCQ Technologies from 2008 until 2011. He has also had an active role in community serving as President and GM of Toronto Avenue Road Hockey Association.
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Ryan Wilson, Director
Ryan Wilson has been serving as a member of our Board of Directors since January 31, 2019. Mr. Wilson has an extensive career in the digital field spanning more than 20 years of his career advancing digital initiatives, with a track record that speaks for itself, including digital marketing, digital strategy and digital transformation through innovation for financial services. Most recently acting as Principal Consultant for e-commerce digital innovation at msg Global Solutions, starting back in May 2017, msg specializes in SAP enterprise implementations. Prior to that, Ryan spent over 4 years defining the digital experiences for Ontario Teachers’ Pension Plan from March 2013 to May 2017 primarily influencing leadership teams and building implementation teams for site and app development. From developer to director Mr. Wilson has been involved in all aspects of digital development. Currently focusing on technologies such as Block Chains, NLP (natural language processing), AI and machine learning, at an insurrect innovation lab. Using design thinking methodologies and an agile approach, Mr. Wilson’s career has centered around implementing pilot projects, planning migrations, post implementation iterations, risk planning, and digital transformation. As an avid investor, Mr. Wilson focuses heavily on the Cannabis sector, and follows the big 5 producers/ cultivators closely. With a broad knowledge for the CBD industry and a solid understanding of ancillary product lines ranging from oils to edibles. With a focus on the future Mr. Wilson sees a bright diverse need for both CBD products and THC based offerings for medicinal/ recreational use.
Bradley Southam, Director
Bradley Southam was appointed to the Board of Directors on June 11, 2019. Mr. Southam has a career for over 19 years in the digital marketing, strategy and design services industry. Most recently he has been the owner and creative director of Linus Creative Services. Mr. Southam is the vice chair of the Cambridge Arts and culture advisory committee, and a board member of the grand river film festival. Previously Mr. Southam was creative director with “Go Motion and Design” a division of On the Go Technologies Group, which was a publicly traded company on the US OTC from 2005 to 2008. Mr. Southam follows the CBD industry and has a solid understanding of ancillary product lines, Mr. Southam sees a need for both CBD products for medicinal use.
Family Relationships
There are no family relationships between any of our officers and directors.
Significant Employees
We do not have any significant employees other than our current executive officers named in this Report.
Involvement in Certain Legal Proceedings
Our directors and executive officers have not been personally involved in any of the following events during the past ten years:
| ● | any bankruptcy petition filed by or against such person or any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; | |
| ● | any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); | |
| ● | being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from or otherwise limiting his involvement in any type of business, securities or banking activities or to be associated with any person practicing in banking or securities activities; | |
| ● | being found by a court of competent jurisdiction in a civil action, the SEC or the Commodity Futures Trading Commission to have violated a Federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated; | |
| ● | being subject of, or a party to, any federal or state judicial or administrative order, judgment decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of any Federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or | |
| ● | being subject of or party to any sanction or order, not subsequently reversed, suspended, or vacated, of any self-regulatory organization, any registered entity or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member. |
Conflicts of Interest
Investors should be aware of the following potential conflicts of interest:
| ● | None of our officers and directors is required to commit their full time to our affairs and, accordingly, they may have conflicts of interest in allocating their time among various business activities. |
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Board Leadership Structure and the Board’s Role in Risk Oversight
The Board of Directors currently does not have an independent Chairman. Our Chief Executive Officer acts as the Chairman of the Board. The Board determined that in the best interest of the Company the most effective leadership structure at this time is not to separate the roles of Chairman and Chief Executive Officer. A combined structure provides the Company with a single leader who represents the Company to our stockholders, regulators, business partners and other stakeholders, among other reasons set forth below. Should the Board conclude otherwise, the Board will separate the roles and appoint an independent Chairman.
| ● | This structure creates efficiency in the preparation of the meeting agendas and related Board materials as the Company’s Chief Executive Officer works directly with those individuals preparing the necessary Board materials and is more connected to the overall daily operations of the Company. Agendas are also prepared with the permitted input of the full Board of Directors allowing for any concerns or risks of any individual director to be discussed as deemed appropriate. The Board believes that the Company has benefited from this structure, and Mr. Elituv’s continuation in the combined role of the Acting Chairman and Chief Executive Officer is in the best interest of the stockholders. |
| ● | The Company believes that the combined structure is necessary and allows for efficient and effective oversight, given the Company’s relatively small size, its corporate strategy and focus. |
The Board of Directors does not have a specific role in risk oversight of the Company. The Chairman, President and Chief Executive Officer and other executive officers and employees of the Company provide the Board of Directors with information regarding the Company’s risks.
Independent Directors
Our Board of Directors has determined that Ryan Wilson and Bradley Southam are “independent directors” within the meaning of NASDAQ Marketplace Rule 5605(a)(2). As of March 26, 2021, our common stock is quoted on the OTC Pinks tier of the OTC Markets.
Committees of the Board
The Board of Directors has the responsibility for establishing broad corporate policies and reviewing our overall performance rather than day-to-day operations. The Board's primary responsibility is to oversee management of our company and, in so doing, serve the best interests of our company and our stockholders. Our full Board of Directors performs all of the functions normally designated to an Audit Committee, Compensation Committee and Nominating Committee.
Audit Committee
We do not have a separately-designated standing audit committee. The entire Board of Directors performs the functions of an audit committee, but no written charter governs the actions of the Board when performing the functions of what would generally be performed by an audit committee. The Board approves the selection of our independent accountants and meets and interacts with the independent accountants to discuss issues related to financial reporting. In addition, the Board reviews the scope and results of the audit with the independent accountants, reviews with management and the independent accountants our annual operating results, considers the adequacy of our internal accounting procedures and considers other auditing and accounting matters including fees to be paid to the independent auditor and the performance of the independent auditor. Our Board of Directors, which performs the functions of an audit committee, does not have a member who would qualify as an “audit committee financial expert” within the definition of Item 407(d)(5)(ii) of Regulation S-K.
Procedure of Nominating Directors
There have been no material changes to the procedures by which security holders may recommend nominees to our Board of Directors.
The Board of Directors will consider candidates for director positions that are recommended by any of our stockholders. The recommended candidate should be submitted to us in writing addressed to 1035 Queensway East, Mississauga, Ontario L4Y 4C1. The recommendation shall include the following information: name of candidate; address, phone, and fax number of candidate; a statement signed by the candidate certifying that the candidate wishes to be considered for nomination to our Board of Directors and stating why the candidate believes that he or she meets the director qualification criteria and would otherwise be a valuable addition to our Board of Directors; a summary of the candidate's work experience for the prior five years and the number of shares of our stock beneficially owned by the candidate.
The Board will evaluate the recommended candidate and will determine whether or not to proceed with the candidate in accordance with our procedures. We reserve the right to change our procedures at any time to comply with the requirements of applicable laws.
| 47 |
Code of Ethics
We have adopted a code of ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. We will provide a copy of our Code of Ethics to any person, free of charge, upon written request to Nadav Elituv at Two Hands Corporation, 1035 Queensway East, Mississauga, Ontario, Canada L4Y 4C1.
ITEM 11. EXECUTIVE COMPENSATION.
EXECUTIVE COMPENSATION
Summary Compensation Table
| Name & Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | Nonqualified Deferred Compensation Earnings ($) | All Other Compensation ($) | Total ($) | |||||||||||||||||||||||||
| Nadav Elituv, Principal Executive Officer, President, Chairman and Director (3) | 2020 | $ | 75,600 | $ | — | $491,450 (3) | $ | — | $ | — | $ | — | $ | — | $ | 567,050 | ||||||||||||||||||
| 2019 | $ 151,200 (2) (3) | $ | — | $1,762,557 (3) | $ | — | $ | — | $ | — | $ | — | $ | 1,913,757 | ||||||||||||||||||||
| Steven Gryfe, Chief Executive Officer (1) | 2020 | $ | — | $ | — | $ 468,450 (3) | $ | — | $ | — | $ | — | $ | — | $ | 468,450 | ||||||||||||||||||
| 2019 | $ | — | $ | — | $ 289,008 (3) | $ | — | $ | — | $ | — | $ | — | $ | 289,008 | |||||||||||||||||||
| (1) | Mr. Gryfe was appointed as Chief Financial Officer on June 18, 2019. |
| (2) | On September 19, 2019, the Company issued 24,387 shares of common stock valued at $151,200 ($6.20 per share), to fully settle salary payable, for the period July 1, 2019 to June 30, 2020, due to Nadav Elituv. |
| (3) | No shares of common stock of the Company have been sold by the Officers other than reported on Form 4, Statement of Changes of Beneficial Ownership of Securities, filed with the Securities Exchange Commission and remain in book-entry held by the Company’s transfer agent. |
Stock Option Grants
We have not granted any stock options to the executive officers or directors since our inception.
Outstanding Equity Awards at Fiscal Year-End
On December 31, 2020, there were no unexercised options and no equity incentive plan awards for each name executive officer.
We do not have any qualified or non-qualified defined benefit plans or nonqualified defined contribution plans or other deferred compensation plans. There are no contracts, agreements, plans or arrangements that provide for payment to our named executive officer following or in connection with the resignation, retirement or termination of the named executive officer, a change in control of our Company, or a change in the named executive officer's responsibilities following a change in control.
Employment Agreements
On September 10, 2018, the Company executed an employment agreement for the period from July 1, 2018 to June 30, 2019 with Nadav Elituv, the Chief Executive Officer of the Company whereby the Company shall pay 50,000 shares of Common Stock of the Company and an annual salary of $151,200 payable monthly on the first day of each month from available funds.
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On September 10, 2019, the Company executed an employment agreement for the period from July 1, 2019 to June 30, 2020 with Nadav Elituv, the Chief Executive Officer of the Company whereby the Company shall pay 50,000 shares of Common Stock of the Company and an annual salary of $151,200 payable monthly on the first day of each month from available funds. On November 1, 2019, this employment agreement was amended to include additional stock-based compensation comprising of 30,000 shares of Series A Convertible Preferred Stock. On December 20, 2019, January 29, 2020, February 28, 2020, March 30, 2020 and April 30, 2020 the employment agreement was further amended to include additional stock-based compensation comprising of 873,609 shares, 1,000,000 shares, 1,000,000 shares, 2,500,000 shares and 2,000,000 shares of common stock of the Company, respectively.
On August 7, 2020, the Company executed an employment agreement for the period from July 1, 2020 to June 30, 2021 with Nadav Elituv, the Chief Executive Officer of the Company whereby the Company shall pay 50,000,000 shares of Common Stock of the Company and an annual salary of $151,200 payable monthly on the first day of each month from available funds.
COMPENSATION OF DIRECTORS
The following table summarizes compensation paid to all of our directors who were not our named executive officers during the fiscal year ended December 31, 2020:
| Name | Fees Earned of Paid in Cash ($) | Stock Awards ($) | Option Awards ($) | All Other Compensation ($) | Total ($) | |||||||||||||||
| Ryan Wilson, Director | $ | — | $ | 468,450 | $ | — | $ | — | $ | 468,450 | ||||||||||
| Bradley Southam, Director | $ | — | $ | 468,450 | $ | — | $ | — | $ | 468,450 | ||||||||||
During the year ended December 31, 2020, the Company issued 36,500,000 shares of common stock valued at $468,450 to the Ryan Wilson, a Director of the Company and 36,500,000 shares of common stock valued at $468,450 to the Bradley Southam, Director of the Company.
DIRECTOR COMPENSATION
We did not provide any cash compensation to directors for their service as directors during the last fiscal year.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ended December 31, 2020, Nadav Elituv, Ryan Wilson, Bradley Southam and Brandon Milner served as our directors. We do not have a separately standing compensation committee and our board of directors did not perform similar functions as there was no executive compensation paid from our inception on April 3, 2009 through the end of our most recently completed fiscal year ended December 31, 2020. Our board of directors performs the functions of a compensation committee, however as of date of this Report, the board of directors have not have any set compensation.
During the fiscal year ended December 31, 2020, none of our executive officers:
| · | served as a member of the compensation committee (or other board committee performing equivalent functions or, in the absence of any such committee, the entire the board of directors) of another entity, one of whose executive officers served as a member of our board of directors; |
| · | served as a director of another entity, one of whose executive officers served as a member of our board of directors; or |
| · | served as a member of the compensation committee (or other board committee performing equivalent functions or, in the absence of any such committee, the entire the board of directors) of another entity, one of whose executive officers served as a member of our board of directors. |
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of March 26, 2021, as to shares of our shares of common stock beneficially owned by: (1) each person who is known by us to own beneficially more than 5% of our shares of common stock, (2) our named executive officer listed in the summary compensation table, (3) each of our directors and (4) all of our directors and executive officers as a group.
We have determined beneficial ownership in accordance with the rules of the SEC. Except as indicated by the footnotes below, we believe, based on the information furnished to us, that the persons and entities named in the table below have sole voting and investment power with respect to all shares of common stock that they beneficially own, subject to applicable community property laws.
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| Common Stock | Series A Convertible Preferred Stock | |||||||
| Beneficial Owner (1) | Number of Shares Beneficially Owned | Percentage of Class (2) | Number of Shares Beneficially Owned | Percentage of Class (3) | ||||
| Nadav Elituv, Chief Executive Officer and Director | 77,000,000 (4) | 6.04% | 30,000 (5) | 100% | ||||
| Ryan Wilson, Director | 37,500,000 | 3.01% | 0 | - | ||||
| Bradley Southam, Director | 37,500,000 | 3.01% | 0 | - | ||||
| Steven Gryfe, CFO | 37,500,000 | 3.01% | 0 | - | ||||
| All directors and executive officers (4 persons) | 189,500,000 (4) | 14.87% | 30,000 | 100% | ||||
Notes:
| (1) | Unless otherwise noted, the address of the reporting person is c/o Two Hands Corporation, 1035 Queensway East, Mississauga, Ontario, Canada L4Y 4C1. |
| (2) | Based on 1,244,071,258 shares of common stock outstanding as of March 26, 2021 and shares of common stock that the reporting person has the right to acquire within 60 days from the date thereof. |
| (3) | Based on 30,000 shares of Series A Convertible Preferred Stock outstanding as of March 26, 2021. |
| (4) | Includes 30,000,000 shares of common stock issuable up on the conversion of 30,000 shares of Series A Convertible Preferred Stock. Each share of our Series A Convertible Preferred Stock converts into 1,000 shares of our common stock. |
| (5) | Holders of our Series A Convertible Preferred Stock have such number of votes as is determined by multiplying: (a) the number of shares of Series A Convertible Preferred Stock held by such holder; (b) 1,000 (number which each share of our Series A Convertible Preferred Stock converts into our common stock); and (c) 100. Accordingly, on any shareholders vote, Nadav Elituv has a total of 3,047,000,000 votes, and greater than 74% of the issued and outstanding voting stock of the Company. |
Securities Authorized for Issuance Under Equity Compensation Plans
On February 12, 2020, the Board of Directors approved the 2020 Stock Incentive Plan (the “2020 Plan”) to attract and retain the best available personnel, to provide additional incentive to employees, directors and consultants, and to promote the success of the Company's business. Pursuant to the 2020 Plan, the Board may grant incentive stock options, non-qualified stock options, stock appreciation rights, restricted shares and restricted share units. to eligible persons. The maximum aggregate number of shares of common stock with respect to which awards granted under the Plan shall not exceed 50,000,000. On December 31, 2020, there are 11,500,000 shares of common stock available in the 2020 Plan.
Disclosure of Commission Position of Indemnification for Securities Act Liabilities
In accordance with the provisions in our articles of incorporation, we will indemnify an officer, director, or former officer or director, to the full extent permitted by law.
Insofar as indemnification for liabilities arising under the U.S. Securities Act may be permitted to our directors, officers and controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the U.S. Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by us of expenses incurred or paid by a director, officer or controlling person of us in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the U.S. Securities Act and will be governed by the final adjudication of such issue.
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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
Our Policy Concerning Transactions with Related Persons
Under Item 404 of SEC Regulation S-K, a related person transaction is any actual or proposed transaction, arrangement or relationship or series of similar transactions, arrangements or relationships, including those involving indebtedness not in the ordinary course of business, to which we or our subsidiaries were or are a party, or in which we or our subsidiaries were or are a participant, in which the amount involved exceeded or exceeds the lesser of $120,000 or one percent of the average of our total assets at year-end for the last two completed fiscal years and in which any of our directors, nominees for director, executive officers, beneficial owners of more than 5% of any class of our voting securities (a “significant shareholder”), or any member of the immediate family of any of the foregoing persons, had or will have a direct or indirect material interest.
We recognize that transactions between us and any of our Directors or Executives or with a third party in which one of our officers, directors or significant shareholders has an interest can present potential or actual conflicts of interest and create the appearance that our decisions are based on considerations other than the best interests of our Company and stockholders.
The Board of Directors is charged with responsibility for reviewing, approving and overseeing any transaction between the Company and any related person (as defined in Item 404 of Regulation S-K), including the propriety and ethical implications of any such transactions, as reported or disclosed to the Committee by the independent auditors, employees, officers, members of the Board of Directors or otherwise, and to determine whether the terms of the transaction are not less favorable to us than could be obtained from an unaffiliated party.
Transactions
As of December 31, 2020 and 2019, advances and accrued salary of $106,928 and $17,840, respectively, were due to Nadav Elituv, the Company's Chief Executive Officer. The balance is non-interest bearing, unsecured and have no specified terms of repayment. During the year ended December 31, 2020, the Company issued advances due to related party for $94,944 expenses paid on behalf of the Company and for $5,215 cash advanced to the Company and advances due to related party were repaid by the Company with $86,671 in cash. During the year ended December 31, 2019, the Company issued advances due to related party of $84,163 for expenses paid on behalf of the Company, cash received of $28,455, settlement of accrued compensation of $75,600 and settlement of account payable of $11,817 and Company repaid advance due to related party with $52,542 in cash and $9,448 in shares of common stock of the Company. On September 30, 2019, the Company issued promissory notes to settle advances and accrued salary of $172,876.
Our policy with regard to transactions with related persons or entities is that such transactions must be on terms no less favorable than could be obtained from non-related persons.
The above related party transactions are not necessarily indicative of the amounts that would have been incurred had a comparable transaction been entered into with an independent party. The terms of these transactions were more favorable than would have been attained if the transactions were negotiated at arm's length.
Director Independence
Our Board of Directors has determined that Ryan Wilson and Bradley Southam are “independent directors” within the meaning of NASDAQ Marketplace Rule 5605(a)(2). As of the of this Report, our common stock is quoted on the OTC Pinks tier of the OTC Markets.
Indemnification
In accordance with the provisions in our Certificate of Incorporation, we will indemnify an officer, director, or former officer or director, to the full extent permitted by law.
Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended (the “Act”) may be permitted to our directors, officers and controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by us of expenses incurred or paid by a director, officer or controlling person of us in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.
Fees related to services performed by Sadler, Gibb & Associates, LLC for the years ended December 31, 2020 and 2019 were as follows:
| 2020 | 2019 | |||||||
| Audit Fees | $ | 50,975 | $ | 46,275 | ||||
| Audit-Related Fees | 0 | 0 | ||||||
| Tax Fees | 0 | 0 | ||||||
| All Other Fees | 0 | 0 | ||||||
| Total | $ | 50,975 | $ | 46,275 | ||||
Pre-Approval Policies
The Board's policy is to pre-approve all audit services and all non-audit services before they commence, including the fees and terms thereof, to be provided by our independent auditor. All of the services provided during the fiscal year ended December 31, 2020 were pre-approved. No audit, review or attest services were approved in accordance with Section 2-01(c)(7)(i)(C) of Regulation S-X during the fiscal year ended December 31, 2020.
During the approval process, the Board considered the impact of the types of services and the related fees on the independence of the independent registered public accounting firm. The services and fees were deemed compatible with the maintenance of that firm's independence, including compliance with rules and regulations of the SEC. Throughout the year, the Board will review any revisions to the estimates of audit fees initially estimated for the engagement.
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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
a. The following documents are filed as part of this annual report on Form 10-K:
1. FINANCIAL STATEMENTS
The following documents are filed in Part II, Item 8 of this annual report on Form 10-K:
Reports of Independent Registered Public Accounting Firm
Consolidated Balance Sheets on December 31, 2020 and 2019
Consolidated Statements of Operations for the years ended December 31, 2020 and 2019
Consolidated Statement of Stockholders' Deficit for the years ended December 31, 2020 and 2019
Consolidated Statements of Cash Flows for the years ended December 31, 2020 and 2019
Notes to Consolidated Financial Statements
2. FINANCIAL STATEMENT SCHEDULES
All financial statement schedules have been omitted as they are not required, not applicable, or the required information is otherwise included.
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3. EXHIBITS
The exhibits listed below are filed with or incorporated by reference in this annual report on Form 10-K.
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| Incorporated by reference | |||
Exhibit | Exhibit Description | Filed herewith | Form | Period ending | Exhibit | Filing date |
Certificate of Incorporation, dated April 3, 2009 | S-1 |
| 3.1 | 6/22/2010 | ||
Bylaws, dated April 3, 2009 | S-1 |
| 3.2 | 6/22/2010 | ||
Certificate of Amendment to the Certificate of Incorporation, dated August 8, 2013 | 10-Q | 6/30/2013 | 3.3 | 8/14/2013 | ||
Specimen Stock Certificate | S-1 |
| 4.1 | 6/22/2010 | ||
Certificate of Designation of Preferences, Rights and Limitations of Series A Convertible Preferred Stock, dated August 6, 2013 |
| 10-Q | 6/30/2013 | 4.2 | 8/14/2013 | |
Innovative Product Opportunities Inc. Trust Agreement |
| S-1 |
| 10.1 | 6/22/2010 | |
Side Letter Agreement, The Cellular Connection Ltd., dated January 8, 2018 |
| 10-K | 12/31/2017 | 10.2 | 3/29/2018 | |
Side Letter Agreement, Stuart Turk, dated January 8, 2018 |
| 10-K | 12/31/2017 | 10.3 | 3/29/2018 | |
Side Letter Agreement, Jordan Turk, dated April 12, 2018 |
| 10-Q | 3/31/2018 | 10.4 | 5/21/2018 | |
Side Letter Agreement, Jordan Turk, dated May 10, 2018 |
| 10-Q | 3/31/2018 | 10.5 | 5/21/2018 | |
| 10.6 | Side Letter Agreement, Jordan Turk, dated September 13, 2018 | 10-K | 12/31/2018 | 10.6 | 4/1/2019 | |
| 10.7 | Side Letter Agreement, Cellular Connection Ltd., dated January 31, 2019 | 10-K | 12/31/2018 | 10.7 | 4/1/2019 | |
| 10.8 | Side Letter Agreement, Stuart Turk, dated January 31, 2019 | 10-K | 12/31/2018 | 10.8 | 4/1/2019 | |
| 31.1
| Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | X |
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| 32.1
| Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | X |
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101.INS | XBRL Instance Document | * |
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101.SCH | XBRL Taxonomy Extension Schema Document | * |
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101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | * |
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101.LAB | XBRL Taxonomy Extension Label Linkbase Document | * |
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101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document | * |
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101.DEF | XBRL Taxonomy Extension Definition Linkbase Definition | * |
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*Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability under those sections.
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ITEM 16. FORM 10-K SUMMARY. None
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| TWO HANDS CORPORATION | |
| Dated: March 29, 2021 |
By: /s/ Nadav Elituv Name: Nadav Elituv Title: President, Chief Executive Officer and Director (Principal Executive Officer) |
|
By: /s/ Steven Gryfe Name: Steven Gryfe Title: Chief Financial Officer (Principal Financial and Accounting Officer) |
In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.
| SIGNATURE | TITLE | DATE |
|
By: /s/ Nadav Elituv Nadav Elituv |
President, Chief Executive Officer and Director (Principal Executive Officer) |
March 29, 2021 |
|
By: /s/ Steven Gryfe Steven Gryfe |
Chief Financial Officer (Principal Financial and Accounting Officer) |
March 29, 2021 |
|
By: /s/ Ryan Wilson Ryan Wilson |
Director | March 29, 2021 |
|
By: /s/ Bradley Southam Bradley Southam |
Director | March 29, 2021 |
| 55 |
EXHIBIT 31.1
TWO HANDS CORPORATION
OFFICER'S CERTIFICATE PURSUANT TO SECTION 302
I, Nadav Elituv, certify that:
1. I have reviewed this Form 10-K of TWO HANDS CORPORATION;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Dated: March 29, 2021
By: /s/ Nadav Elituv
Name: Nadav Elituv
Title: President, Chief Executive Officer and Director
(Principal Executive Officer)
| 1 |
EXHIBIT 31.2
TWO HANDS CORPORATION
OFFICER'S CERTIFICATE PURSUANT TO SECTION 302
I, Steven Gryfe, certify that:
1. I have reviewed this Form 10-K of TWO HANDS CORPORATION;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Dated: March 29, 2021
By: /s/ Steven Gryfe
Name: Steven Gryfe
Title: Chief Financial Officer
(Principal Financial and Accounting Officer)
| 2 |
EXHIBIT 32.1
TWO HANDS CORPORATION
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF
THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of TWO HANDS CORPORATION (the Registrant) on Form 10-K for the period ended December 31, 2020 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Nadav Elituv, Principal Executive Officer of the Company, certify, pursuant to 18 U.S.C. ss.1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
A signed original of this written statement required by Section 906 has been provided to Nadav Elituv and will be retained by TWO HANDS CORPORATION and furnished to the Securities and Exchange Commission or its staff upon request.
Dated: March 29, 2021
By: /s/ Nadav Elituv
Name: Nadav Elituv
Title: President, Chief Executive Officer and Director
(Principal Executive Officer)
| 1 |
EXHIBIT 32.2
TWO HANDS CORPORATION
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF
THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of TWO HANDS CORPORATION (the Registrant) on Form 10-K for the period ended December 31, 2020 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Steven Gryfe, Principal Financial and Accounting Officer of the Company, certify, pursuant to 18 U.S.C. ss.1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
A signed original of this written statement required by Section 906 has been provided to Steven Gryfe and will be retained by TWO HANDS CORPORATION and furnished to the Securities and Exchange Commission or its staff upon request.
Dated: March 29, 2021
By: /s/ Steven Gryfe
Name: Steven Gryfe
Title: Chief Financial Officer
(Principal Financial and Accounting Officer)
| 2 |