U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Under
the Securities Exchange Act of 1934
For Quarter Ended: March 31, 2019
Commission File Number: 000-52898
Kisses From Italy, Inc.
(Exact name of small business issuer as specified in its charter)
Florida | 46-2388377 | |
(State of other jurisdiction of incorporation) | (IRS Employer ID No.) |
80 SW 8th ST.
Suite 2000
Miami, Florida 33130
(Address of principal executive offices)
305 423-7129
(Issuer’s Telephone Number)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes ☐ No ☑
Indicate by check mark whether the registrant
has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation
S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required
to submit such files).
Yes ☑ No ☐
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. (Check one)
Large accelerated filer ☐ | Accelerated filer ☐ | |
Non-accelerated filer ☒ | Smaller reporting company ☒ | |
Emerging growth company ☒ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☑ No
The number of shares of the registrant’s only class of common stock issued and outstanding as of May 17, 2019 was 81,780,170 shares.
Page No. | |||||||
PART I. | |||||||
FINANCIAL INFORMATION | |||||||
Item 1. | Financial Statements | 4 | |||||
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 5 | |||||
Item 3. | Quantitative and Qualitative Disclosures About Market Risk. | 8 | |||||
Item 4. | Controls and Procedures. | 8 | |||||
PART II | |||||||
OTHER INFORMATION | |||||||
Item 1. | Legal Proceedings | 9 | |||||
Item 1A. | Risk Factors | 9 | |||||
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 9 | |||||
Item 3. | Defaults Upon Senior Securities | 9 | |||||
Item 4. | Mine Safety Disclosures | 9 | |||||
Item 5. | Other Information | 9 | |||||
Item 6. | Exhibits | 9 | |||||
Signatures | 10 | ||||||
i |
CAUTIONARY STATEMENT ON FORWARD-LOOKING INFORMATION
This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based upon our current assumptions, expectations, and beliefs concerning future developments and their potential effect on our business. In some cases, you can identify forward-looking statements by the following words: “may,” “will,” “could,” “would,” “should,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “approximately,” “estimate,” “predict,” “project,” “potential,” “continue,” “ongoing,” or the negative of these terms or other comparable terminology, although the absence of these words does not necessarily mean that a statement is not forward-looking. This information may involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from the future results, performance or achievements expressed or implied by any forward-looking statements.
Factors that may cause or contribute actual results to differ from these forward-looking statements include, but are not limited to, for example:
· | adverse economic conditions; | |
· | the Company’s ability to raise capital to fund a portion of its operations | |
· | industry competition | |
· | the inability to attract and retain qualified senior management; and | |
· | other risks and uncertainties related to the restaurant industry and our business strategy. |
All forward-looking statements speak only as of the date of this Report. We undertake no obligation to update any forward-looking statements or other information contained herein. Stockholders and potential investors should not place undue reliance on these forward-looking statements. Although we believe that our plans, intentions, and expectations reflected in or suggested by the forward-looking statements in this report are reasonable, we cannot assure stockholders and potential investors that these plans, intentions or expectations will be achieved.
These forward-looking statements represent our intentions, plans, expectations, assumptions, and beliefs about future events and are subject to risks, uncertainties and other factors. Many of those factors are outside of our control and could cause actual results to differ materially from the results expressed or implied by those forward-looking statements. Considering these risks, uncertainties, and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than we have described. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of the Quarterly Report on Form 10-Q. All subsequent written and oral forward-looking statements concerning other matters addressed in this Quarterly Report on Form 10-Q and attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this Quarterly Report on Form 10-Q.
Except to the extent required by law, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, a change in events, conditions, circumstances or assumptions underlying such statements, or otherwise.
ii |
PART I – FINANCIAL INFORMATION
Our unaudited consolidated financial statements included in this Form 10-Q are as follows: | |
F-1 | Unaudited Consolidated Balance Sheets as of March 31, 2019 and December 31, 2018 |
F-2 | Interim Unaudited Consolidated Statements of Operations for the Three Months Ended March 31, 2019 and 2018 |
F-3 | Unaudited Consolidated Statements of Stockholders’ Equity (Deficit) as of March 31, 2019 and 2018 |
F-4 | Interim Unaudited Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2019 and 2018 |
F-5 | Notes to Interim Unaudited Consolidated Financial Statements |
4 |
Kisses From Italy Inc.
Unaudited Consolidated Balance Sheets
March 31, | December 31, | |||||||
2019 | 2018 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 31,694 | $ | 22,877 | ||||
Total current assets | 31,694 | 22,877 | ||||||
Property and equipment, net | 81,820 | 90,348 | ||||||
Other Assets | 1,092 | 1,093 | ||||||
Total assets | $ | 114,606 | $ | 114,318 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 65,691 | $ | 50,374 | ||||
Accrued liabilities | 152,163 | 158,089 | ||||||
Loans payable | 4,066 | 5,643 | ||||||
Total current liabilities | 221,920 | 214,106 | ||||||
Convertible Notes | 378,650 | 277,650 | ||||||
Total liabilities | 600,570 | 491,756 | ||||||
Stockholders' Equity: | ||||||||
Preferred stock, $0.001 par value, 25,000,000 shares authorized; zero shares issued and outstanding | – | – | ||||||
Common stock, $0.001 par value, 200,000,000 shares authorized; 81,780,170 and 81,780,170 shares issued and outstanding as of March 31, 2019 and December 31, 2018, respectively | 81,780 | 81,780 | ||||||
Additional paid-in capital | 1,671,886 | 1,638,253 | ||||||
Retained earnings deficit | (2,260,593 | ) | (2,124,631 | ) | ||||
Total Kisses From Italy Stockholders' Equity | (506,927 | ) | (404,598 | ) | ||||
Non-controlling interest | 20,963 | 27,160 | ||||||
Total stockholders' equity | (485,964 | ) | (377,438 | ) | ||||
Total liabilities and equity | $ | 114,606 | $ | 114,318 |
The accompanying notes are an integral part of the consolidated financial statements.
F-1 |
Kisses From Italy Inc.
Unaudited Consolidated Statements of Operations
March 31, | March 31, | |||||||
2019 | 2018 | |||||||
Sales | 115,572 | $ | 105,404 | |||||
Cost of goods sold | 48,144 | 46,379 | ||||||
Gross margin | 67,428 | 59,025 | ||||||
Operating expenses: | ||||||||
Depreciation and amortization | 10,528 | 9,938 | ||||||
Executive compensation | – | 16,953 | ||||||
Payroll and other expenses | 70,386 | 23,508 | ||||||
Rent | 31,455 | 20,783 | ||||||
Consulting and professional fees | 21,372 | 18,670 | ||||||
General and administrative | 28,165 | 25,509 | ||||||
Total operating expenses | 161,906 | 115,361 | ||||||
Income (loss) from operations | (94,478 | ) | (56,336 | ) | ||||
Other income (expense) | ||||||||
Interest income (expense), net | (47,681 | ) | (6,840 | ) | ||||
Total other income (expense) | (47,681 | ) | (6,840 | ) | ||||
Income (loss) before income taxes | (142,159 | ) | (63,176 | ) | ||||
Provision for income taxes (benefit) | – | – | ||||||
Net loss | (142,159 | ) | (63,176 | ) | ||||
Less: net gain (loss) attributable to non-controlling interests | (6,197 | ) | (1,028 | ) | ||||
Net loss attributable to Kisses From Italy, Inc. | $ | (135,962 | ) | $ | (62,148 | ) | ||
Basic and diluted earnings (loss) per common share | $ | (0.00 | ) | $ | (0.00 | ) | ||
Weighted-average number of common shares outstanding: | ||||||||
Basic and diluted | 81,780,170 | 81,780,170 |
The accompanying notes are an integral part of the consolidated financial statements.
F-2 |
Kisses from Italy
Unaudited Consolidated Statements of Changes in Stockholders' Equity
Preferred Stock | Common Stock | Additional Paid-in | Non-controlling | Retained | Total Stockholders' | |||||||||||||||||||||||||||
Shares | Value | Shares | Value | Capital | Interest | Earnings | Equity | |||||||||||||||||||||||||
Balance, January 1, 2018 | – | $ | – | 81,780,170 | $ | 81,780 | $ | 1,545,796 | $ | 52,734 | $ | (1,679,183 | ) | $ | 1,127 | |||||||||||||||||
Net income (loss) | (1,029 | ) | $ | (63,176 | ) | $ | (64,205 | ) | ||||||||||||||||||||||||
Balance, March 31. 2018 | – | $ | – | 81,780,170 | $ | 81,780 | $ | 1,545,796 | $ | 51,705 | $ | (1,742,359 | ) | $ | (63,078 | ) | ||||||||||||||||
Balance January 1, 2019 | – | $ | – | 81,780,170 | $ | 81,780 | $ | 1,638,253 | $ | 27,160 | $ | (2,124,631 | ) | $ | (377,438 | ) | ||||||||||||||||
Beneficial conversion feature of convertible notes | 33,633 | 33,633 | ||||||||||||||||||||||||||||||
Net loss | (6,197 | ) | (135,962 | ) | (142,159 | ) | ||||||||||||||||||||||||||
Balance March 31, 2019 | – | – | 81,780,170 | $ | 81,780 | $ | 1,671,886 | $ | 20,963 | $ | (2,260,593 | ) | $ | (485,964 | ) |
The accompanying notes are an integral part of the consolidated financial statements.
F-3 |
Kisses From Italy Inc.
Unaudited Consolidated Statements of Cash Flows
March 31, | March 31, | |||||||
2019 | 2018 | |||||||
Cash flows from operating activities of continuing operations: | ||||||||
Net income (loss) | $ | (135,962 | ) | $ | (63,176 | ) | ||
Net income loss attributable to non-controlling interest | (6,197 | ) | (1,028 | ) | ||||
Adjustments to reconcile net loss to cash used in operating activities: | ||||||||
Depreciation and amortization | 10,528 | 9,938 | ||||||
Amortization of debt discount | 33,633 | – | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts payable | 15,319 | 8,314 | ||||||
Loan payable | – | (4,408 | ) | |||||
Accrued liabilities | (5,927 | ) | – | |||||
Net cash provided by (used in) operating activities | (88,606 | ) | (50,360 | ) | ||||
Cash flows from investing activities: | ||||||||
Purchase of fixed assets | (2,000 | ) | – | |||||
Net cash provided by (used in) financing activities | (2,000 | ) | – | |||||
Cash flows from financing activities: | ||||||||
Proceeds/payments from short term borrowings-net | ||||||||
Loans payable, net | (1,577 | ) | – | |||||
Proceeds from private placements | 101,000 | – | ||||||
Net cash provided by (used in) financing activities | 99,423 | – | ||||||
Net increase (decrease) in cash and cash equivalents | 8,817 | (50,360 | ) | |||||
Cash and cash equivalents at beginning of period | 22,877 | 51,955 | ||||||
Cash and cash equivalents at end of period | $ | 31,694 | $ | 1,595 | ||||
Supplemental disclosure of cash flow information: | ||||||||
Cash paid for interest | – | – | ||||||
Cash paid for income taxes | – | – |
The accompanying notes are an integral part of the consolidated financial statements.
F-4 |
Kisses From Italy, Inc.
Notes to Consolidated Unaudited Financial Statements
For the Three Months Ended March 31, 2019, and 2018
NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS
Kisses From Italy Inc. (the “Company”) was incorporated in Florida on March 7, 2013. The Company’s main focus is to develop a fast, casual food dining chain restaurant business of corporate-owned restaurants and expanding through a nationwide/international franchise and territory sales program. The Company commenced operations in May 2015 by opening its first location in Ft. Lauderdale, Florida. Three additional restaurants, which were located in various Wyndham Hotel properties in the Pompano Beach, Florida area, were then opened within the following ten months. All locations, which were in leased facilities, were fully operational by April 2016. In December 2017, the Company was forced to temporarily cease operations of its restaurants for approximately six months due to hurricane damage. As a further result, the Company vacated one of its restaurants due to hurricane incurred damage and permanently closed that location in 2018.
The Company’s accounting year end is December 31.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Management’s Representation of Interim Financial Statements
The accompanying unaudited consolidated financial statements have been prepared by the Company without audit pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been condensed or omitted as allowed by such rules and regulations, and management believes that the disclosures are adequate to make the information presented not misleading. In the opinion of management, the unaudited financial statements and notes have been prepared on the same basis as the audited financial statements for the year ended December 31, 2018 and include all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the Company’s financial position and results of operation. Interim results are not necessarily indicative of results for a full year. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements at December 31, 2018, and 2017 included in the Company’s Form 10-K filed with the SEC on April 16, 2019.
Basis of Presentation and Principles of Consolidation
The consolidated financial statements of the Company have been prepared in accordance with GAAP. This basis of accounting involves the application of accrual accounting and consequently, revenues and gains are recognized when earned, and expenses and losses or recognized when incurred. For the three month period ended March 31, 2019, the consolidated financials include the accounts of the Company and its wholly-owned subsidiaries; Kisses from Italy 9th LLC, Kisses from Italy-Franchising LLC; and its 70% owned subsidiary, Kisses-Palm Sea Royal LLC.
All intercompany accounts and transactions are eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The most significant estimates relate to revenue recognition, valuation of financial instruments, income taxes, and contingencies. The Company bases its estimates on historical experience, known or expected trends and various other assumptions that are believed to be reasonable given the quality of information available as of the date of these financial statements. The results of these assumptions provide the basis for making estimates about the carrying amounts of assets and liabilities that are not readily apparent from other sources. Actual results could differ from these estimates.
F-5 |
Revenue Recognition
Sales, as presented in the Company’s consolidated statement of operations, represents food and beverage product sold and is presented net of discounts, coupons, employee meals, and complimentary meals. Revenue from restaurant sales is recognized when food and beverage products are sold.
On January 1, 2018, the Company adopted Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”), using the modified retrospective method applied to those contracts which were not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018, are presented under ASC 606. As of March 31, 2019, and for the year ended December 31, 2018, the consolidated financial statements were not materially impacted as a result of the application of Topic 606.
Non-controlling interest
Non-controlling interest represents third-party ownership in the net assets of one of our consolidated subsidiaries. For financial reporting purposes, the assets and liabilities of our majority-owned subsidiary consolidated with those of the Company’s wholly-owned subsidiaries, with any third-party investor’s interest shown as non-controlling interest.
Cash and Cash Equivalents
The Company considers all highly liquid temporary cash investments with an original maturity of three months or less to be cash equivalents. At March 31, 2019 and December 31, 2018, the Company’s cash equivalents totaled $31,694 and $22,877, respectively.
Property and equipment
Property and equipment are stated at cost or fair value. During 2018 the Company permanently closed one of its locations and removed all property and detachable leaseholds. The Company believes that this equipment and leaseholds which are in excellent condition can be used at existing and new locations and that the undepreciated book value is equivalent to its fair market value, thus no impairment was recorded. Depreciation is computed by the straight-line method and is charged to operations over the estimated useful lives of the assets. Maintenance and repairs are charged to expense as incurred. The carrying amount and accumulated depreciation of assets sold or retired are removed from the accounts in the year of disposal and any resulting gain or loss is included in results of operations. The estimated useful lives of property and equipment are as follows:
Computers, software, and office equipment | 1 – 6 years |
Machinery and equipment | 3 – 5 years |
Leasehold improvements | Lesser of the lease term or estimated useful life |
Income taxes
The Company accounts for income taxes under FASB ASC 740, “Accounting for Income Taxes”. Under FASB ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under FASB ASC 740, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. FASB ASC 740-10-05, “Accounting for Uncertainty in Income Taxes” prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities.
F-6 |
The amount recognized is measured as the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. The Company assesses the validity of its conclusions regarding uncertain tax positions on a quarterly basis to determine if facts or circumstances have arisen that might cause it to change its judgment regarding the likelihood of a tax position’s sustainability under audit.
Stock-based Compensation
The Company accounts for stock-based compensation using the fair value method following the guidance set forth in Section 718-10 of the FASB Accounting Standards Codification for disclosure about Stock-Based Compensation. This section requires a public entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). That cost will be recognized over the period during which an employee is required to provide service in exchange for the award- the requisite service period (usually the vesting period). No compensation cost is recognized for equity instruments for which employees do not render the requisite service.
Leases
The Company follows the guidance in ASC 840 “Leases,” which requires us to evaluate the lease agreements the Company enters into to determine whether they represent operating or capital leases at the inception of the lease.
Net Loss per Share
Net loss per Common Share is computed by dividing net loss by the weighted average Common Shares outstanding during the period as defined by Financial Accounting Standards, ASC Topic 260, "Earnings per Share." Basic earnings per common share (“EPS”) calculations are determined by dividing net income by the weighted average number of shares of Common Stock outstanding during the year. Diluted earnings per Common Share calculations are determined by dividing net income by the weighted average number of Common Shares and dilutive Common Share equivalents outstanding.
Recent Accounting Pronouncements
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which establishes a new lease accounting model for lessees. The updated guidance requires an entity to recognize assets and liabilities arising from financing and operating leases, along with additional qualitative and quantitative disclosures. The amended guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018, with early adoption permitted. In March 2019, the FASB issued ASU 2019-01, Codification Improvements, which clarifies certain aspects of the new lease standard. The FASB issued ASU 2018-10, Codification Improvements to Topic 842, Leases in July 2018. Also in 2018, the FASB issued ASU 2018-11, Leases (Topic 842) Targeted Improvements, which provides an optional transition method whereby the new lease standard is applied at the adoption date and recognized as an adjustment to retained earnings. The amendments have the same effective date and transition requirements as the new lease standard.
As an emerging growth company the Company has until December 15, 2019 to adopt ASC 842. While the Company continues to evaluate the impact of the new standard, the Company expects the adoption of this guidance will not have any impact on its financial statements.
NOTE 3 – GOING CONCERN AND LIQUIDITY
As of March 31, 2019, and December 31, 2018, the Company had $31,694 and $22,877 in cash on hand respectively, and revenues of $115,572 and $105,404, respectively. Additionally, as of March 31, 2019, the Company had outstanding liabilities totaling $600,570 and $31,694 in short term liquid assets.
F-7 |
In the Company’s financial statements for the fiscal years ended December 31, 2018, and 2017, the Reports of the Independent Registered Public Accounting Firm include an explanatory paragraph that describes substantial doubt about the Company’s ability to continue as a going concern. These financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. Based on the Company’s current financial projections, it believes it does not have sufficient existing cash resources to fund its current operations.
It is the Company’s current intention to raise debt and/or equity financing to fund ongoing operating expenses. There is no assurance that these events will be satisfactorily completed or at terms acceptable to the Company. Any issuance of equity securities, if accomplished, could cause substantial dilution to existing stockholders. Any failure by the Company to successfully implement these plans would have a material adverse effect on its business, including the possible inability to continue operations.
NOTE 4 – PROPERTY AND EQUIPMENT
The following table sets forth the components of the Company’s property and equipment at March 31, 2019 and December 31, 2018:
March 31, 2019 | December 31, 2018 | |||||||||||||||||||||||
Cost | Accumulated Depreciation | Net Book Value | Cost | Accumulated Depreciation | Net Book Value | |||||||||||||||||||
Capital assets subject to depreciation: | ||||||||||||||||||||||||
Furniture and equipment | $ | 54,868 | (37,488 | ) | 17,380 | $ | 52,868 | (35,200 | ) | 17,668 | ||||||||||||||
Leasehold improvements | 175,716 | (111,276 | ) | 64,440 | 175,716 | (103,036 | ) | 72,680 | ||||||||||||||||
Total fixed assets | $ | 230,584 | (148,764 | ) | 81,820 | $ | 228,584 | (138,236 | ) | 90,348 |
For the three months ended March 31, 2019, and 2018, the Company recorded depreciation and amortization of $10,528 and $9,938 respectively.
NOTE 5 – ACCRUED AND OTHER LIABILITIES
The following table sets forth the components of the Company’s accrued liabilities at March 31, 2019, and December 31, 2018.
March 31, 2019 | December 31, 2018 | |||||||
Sales tax payable | $ | 20,699 | $ | 12,605 | ||||
Accrued interest payable | 19,266 | 21,728 | ||||||
Accrued rent | – | 12,114 | ||||||
Payroll tax liabilities | 112,198 | 109,642 | ||||||
Accrued other | – | 2,000 | ||||||
Total accrued liabilities | $ | 152,163 | $ | 158,089 |
The Company is in arrears on its payroll tax payments as of March 31, 2019. Included in the “payroll tax liabilities” as of December 31, 2018, is approximately $27,251 in interest and penalties.
F-8 |
NOTE 6 – LOANS PAYABLE
The Company has one asset-based line of credit of $10,725. The amount of credit available to be accessed is dependent on the amount of documented credit receipts received by the Company’s restaurants. The due dates on these credit advances are typically between 90 and 180 days. The interest rate on the facility is approximately 32%, plus additional processing fees of approximately 5%.
As of March 31, 2019, and December 31, 2018, loan payable balances were $4,066 and $5,643 respectively. The amount of loans outstanding was significantly reduced due to proceeds from less expensive (in terms of the interest rate) convertible debt that was applied against loan balances.
NOTE 7 – CONVERTIBLE NOTES
As of March 31, 2019, and December 31, 2018, the balance of convertible notes was $378,650 and $277,650 respectively. In April 2018, the Company commenced a private offering of up to $250,000 in convertible debenture (the “Debentures”), to non-residents of the US. These notes accrue interest at the rate of 8% per annum and are convertible into shares of the Company’s Common Stock but are only convertible until such time as the Company’s Common Stock is approved for trading, of which there is no assurance, at a conversion rate of $0.0667 per share. Interest is payable annually, on or before February 15 of each year. The Debentures mature three years after the issuance date. None of the convertible debentures have been converted.
Since the Company’s shares were previously sold in a private placement at a price of $0.10 per share, the difference in price is considered a beneficial conversion feature. Since the holders of the Notes have the right to convert immediately, the beneficial conversion feature of $126,090 has been immediately expensed and recorded as interest expense.
NOTE 8 – STOCKHOLDERS EQUITY
Capital Stock
At March 31, 2019, and December 31, 2018, there were 81,780,170 shares of Common Stock issued and outstanding, with a $0.001 par value.
25,000,000 shares of Preferred Stock, with a par value $0.01 per share, are authorized, none of which have been issued or were outstanding as of March 31, 2019, or December 31, 2018.
In May 2018, the Company’s Board of Directors and Shareholders approved an amendment to the Company’s Articles of Incorporation, increasing the number of authorized Common Shares to 200,000,000, par value $0.01 per share.
Common Stock Issued in Private Placements
During the three months ended March 31, 2019, the Company did not issue any of its Common Stock in any private offering, or otherwise.
During the year ended December 31, 2018, the Company did not issue any of its Common Stock in any private offering, or otherwise.
Common Stock Issued in Exchange for Services
During the three months ended March 31, 2019, the Company did not issue any shares of its Common Stock for services.
F-9 |
During the year ended December 31, 2018, the Company did not issue any shares of its Common Stock for services.
NOTE 9 – COMMITMENTS AND CONTINGENCIES
As of March 31, 2019, and December 31, 2018, the Company had three operating store locations. The Company leases these spaces based upon the following schedules:
· | Kisses From Italy 9th LLC based in Fort Lauderdale, Fl. leases approximately 990 square feet of space at a cost of $2,650 per month through the period ended July 31, 2018. Beginning on August 1, 2018, the rent increased to $5,773 per month for eight months and then it will be reduced to $3,274 per month. The increased rent amount of $5,773 includes an additional payment of $2,500 per month for these 8 months, arising out of a $20,000 dispute settlement related to a rent dispute. For financial statement purposes, this amount for the months of September and August 2018 ($5,000) was recorded as “rent expense” on the Company’s financial statements for the year ended December 31, 2018. The lease ends on December 9, 2020. |
· | Kisses From Italy-Palm Aire based in Pompano Beach, Florida leases approximately 2,300 square feet of space at a cost of $3,600 per month. The Company has a one-year automatic renewal provision for this lease on May 1st of each year under the same terms. |
· | Kisses From Italy -Sea Gardens based in Pompano Beach, Florida leases approximately 600 square feet of space at a cost of $546 per month. The lease ended on August 1, 2018 and was renewed on the same terms. The Company has a one-year automatic renewal provision for this lease but is not obligated to exercise this renewal provision. |
The Company also rents professional and furnished space on a month to month basis in Miami, Florida at a cost of $223 per month, which has been designated the Company’s principal place of business.
NOTE 10 – SUBSEQUENT EVENTS
During the period from April 11 through May 8, 2019, the Company received $15,300 in proceeds from the sale of convertible notes to four accredited investors.
F-10 |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with our unaudited consolidated financial statements and notes thereto included herein. In connection with, and because we desire to take advantage of, the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, we caution readers regarding certain forward-looking statements in the following discussion and elsewhere in this report and in any other statement made by, or on our behalf, whether or not in future filings with the Securities and Exchange Commission. Forward-looking statements are statements not based on historical information and which relate to future operations, strategies, financial results or other developments. Forward-looking statements are necessarily based upon estimates and assumptions that are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control and many of which, with respect to future business decisions, are subject to change. These uncertainties and contingencies can affect actual results and could cause actual results to differ materially from those expressed in any forward-looking statements made by, or on our behalf. We disclaim any obligation to update forward looking statements.
Overview and History
We are a Florida corporation incorporated on March 7, 2013, focused on developing a fast, casual food dining chain restaurant business. We commenced operations by opening our initial corporately owned location in Fort Lauderdale, Florida, in May 2015. We opened three additional locations by April 2016, all in Southern Florida, through a working relationship with Wyndham Hotels. In September 2017, Hurricane Irma caused significant damage to the area. As a result of the damage from the Hurricane, our hotel locations closed due to the fact that the Wyndham hotel group had to halt operations at the respective hotel properties in order to begin the necessary repairs and renovations following the storm. All but one of our restaurants are located in timeshare developments. The storm impacted travel to Florida during this time and is just now reaching prior levels. While our Fort Lauderdale location was reopened in early November 2017, we were only able to reopen two of the hotel locations in Pompano Beach in late January 2018. We also elected not to reopen our 4th location, as the damages were too excessive. If we are able to raise additional capital, of which there is no assurance, our intention is to own and operate up to 10 of our restaurants and utilize them as a showcase in the marketing of our proposed franchise operations.
In May 2017, we completed our National Franchise License and now have the ability to sell franchises in all of the states in the US except for New York, Virginia, and Maryland which we intend to add at later dates if sufficient demand exists. In June 2017, we completed the sales of two franchise locations in Florida. We anticipate commencement of the building and development of these locations by the end of 2019 or early 2020.
We have never been subject to any bankruptcy proceeding. Our principal offices are located at 80 SW 8th St. Suite 2000, Miami, Florida, 33130, telephone (305) 423-7129 and our website is www.kissesfromitaly.com.
Results Of Operations
Comparison of Results of Operations for the three months ended March 31, 2019, and 2018
Revenue and Cost of Sales
During the three-month period ended March 31, 2019, our revenues remained relatively constant compared to the prior year similar period. We generated $115,572 in revenues, compared to revenues of $105,404 in revenue during the same period in 2018, an increase of $10,168. We are continuing our efforts to recover from the impact that Hurricane Irma had on our business and South Florida in general.
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Cost of goods sold during the three months ended March 31, 2019, was also relatively constant compared to the same period in 2018. Our costs of goods sold was $48,143 during the three months ended March 31, 2019, compared to $46,379 during the same period in 2018. Cost of sales as a percentage of sales was 58.3% and 56.0%, for the periods ended March 31, 2019, and 2018, respectively. We are not as efficient in terms of cost of sales at lower revenue levels. We expect our cost of sales as a percentage of sales to be reduced as sales levels increase, of which there is no assurance.
Operating expenses
Operating expense increased during this period, to $161,906 in the three months ended March 31, 2019, compared to $115,361 during the same period in 2018, an increase of $46,545. This increase was primarily as a result of increased payroll, which increased by $46,878 because in 2019 our hotel locations were operating at full capacity in comparison to 2018, whereby the locations were affected by the damage that greatly reduced the foot traffic to our restaurants thereby reducing the amount of staff required. Rent expense also increased by over $10,000 in this period as a result of rent abatements in the 2018 period. All other operating expenses remained consistent from the prior period in 2018.
Other income and expense
Other income and expense was $47,681 during the three months ended March 31, 2019, compared to $6,840 during the same period in 2018 due to increased interest expense from increased short term borrowing, related to our convertible notes issued subsequent to March 31, 2018, See “Liquidity and Capital Resources” below.
Net Loss
As a result, during the three months ended March 31, 2019, we incurred a net loss attributable to Kisses from Italy Inc. of ($135,962) or $0.00 per share and a net loss attributable to non-controlling interests of ($6,197); compared to a net losses of ($62,148) or $0.00 per share and a $(1,028) a net loss attributable to non-controlling interests; respectively, for the same three-month period in 2018.
Liquidity and Capital Resources
At March 31, 2019, we had $31,694 in cash and cash equivalents.
Net cash used in operating activities was ($88,606) during the three-month period ended March 31, 2019, compared to ($50,360) during the three months ended March 31, 2018. This increase in the cash used in the three months ended March 31, 2019, compared to the similar period in 2018 was primarily attributable to our increased operating loss in 2019 over 2018 levels of $72,786 offset by amortization of debt discount of $33,633.
Cash flows used in investing activities were $2,000 during the three months ended March 31, 2019, compared to $0 in 2018 due to the purchase of equipment in the 2019 period.
Net cash provided by financing activities was $99,423 for the period ended March 31, 2019. We did not engage in any financing activities during the three months ended March 31, 2018. The increase is attributable to proceeds from convertible notes we received in 2019 of $101,000 offset by net repayments on loan balance of $1,577. The amount of capital we raise will vary from period to period based on the effectiveness of our fundraising efforts.
Our audited consolidated financial statements for the year ended December 31, 2018, were prepared assuming we will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business for the twelve-month period following the date of these financial statements. We have incurred annual losses since inception and expect we may incur additional losses in future periods.
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We have one asset-based line of credit for $10,725 with one lender. The amount of credit available to be accessed is dependent on the amount of documented credit receipts received by our restaurants. The due dates on these credit advances are typically between 90 and 180 days. The interest rates on these facilities are approximately 31 to 38% respectively, plus additional processing fees of approximately 5%. As of the date of this Report, the balance on asset-based line was $4,066.
In order to continue our business development, including opening additional company-owned restaurants and continuing to develop and enhance the marketing of our franchise concept, we estimate we will need approximately $1 million in additional capital. We believe we can open at least 2 additional locations for approximately $300,000. We intend to use the balance of the funds to either open additional locations or use the balance of the funds on franchise marketing. We believe that by continuing to open company-owned restaurants we can use these locations to market the franchises.
We can provide no assurance that additional funding will be available on a timely basis, on terms acceptable to us, or at all. While we have had discussions with potential investors and investment bankers, we have no agreement with any third party to provide us this additional financing and there can be no assurances that we will obtain this financing, either debt or equity or both, on favorable terms, or at all. Our inability to receive this financing may have a significant negative impact on our continued development and results of our operations.
In April 2018, we commenced a $250,000 private offering of convertible debentures (the “Debentures”) to non-residents of the US. These Debentures accrue interest at the rate of 8% per annum and are convertible into shares of our Common Stock beginning upon issuance until such time as our Common Stock is approved for trading, of which there is no assurance, at a conversion rate of $0.0667 per share. Interest is payable annually, on or before February 15 of each year. Each Debenture matures 3 years after the issuance date. As of the date hereof an aggregate of $378,650 in Debentures have been issued. None have been converted.
Our management recently began scouting locations throughout the different regions of Italy and have found interesting locations with great potential in the regions of Rome and further south in the region of Puglia. We have deemed these locations as opportunities for additional corporate-owned and franchise program expansion. However, there are no agreements in place as of the date of this Report to open any new facilities, either Company owned or franchises and no assurances can be provided that we will expand our operations accordingly.
Inflation
Although our operations are influenced by general economic conditions, we do not believe that inflation had a material effect on our results of operations during the three-month period ended March 31, 2019.
Critical Accounting Estimates
The discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The following represents a summary of our critical accounting policies, defined as those policies that we believe are the most important to the portrayal of our financial condition and results of operations and that require management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effects of matters that are inherently uncertain.
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Off Balance Sheet Arrangements
None
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
We are a smaller reporting company and are not required to provide the information under this item pursuant to Regulation S-K.
ITEM 4. CONTROLS AND PROCEDURES.
Disclosure Controls and Procedures – Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as of the end of the period covered by this Report.
These controls are designed to ensure that information required to be disclosed in the reports we file or submit pursuant to the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission, and that such information is accumulated and communicated to our management, including our CEO and CFO to allow timely decisions regarding required disclosure.
Based on this evaluation, our CEO and CFO have concluded that our disclosure controls and procedures were effective as of March 31, 2019, at a reasonable assurance level.
We believe that our financial statements presented in this quarterly report on Form 10-Q fairly present, in all material respects, our financial position, results of operations, and cash flows for all periods presented herein.
Inherent Limitations – Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdown can occur because of simple error or mistake. In particular, many of our current processes rely upon manual reviews and processes to ensure that neither human error nor system weakness has resulted in erroneous reporting of financial data.
Changes in Internal Control over Financial Reporting – There were no changes in our internal control over financial reporting during the three month period ended March 31, 2019, which were identified in conjunction with management’s evaluation required by paragraph (d) of Rules 13a-15 and 15d-15 under the Exchange Act, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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We are not involved in any material legal proceedings, nor are we aware of any legal proceedings threatened or in which any director or officer or any of their affiliates is a party adverse to our Company or has a material interest adverse to us.
We are a smaller reporting company and are not required to provide the information under this item pursuant to Regulation S-K.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
During the three months ended March 31, 2019, we did not issue any shares of our Common Stock.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURE
Not Applicable.
None.
101.INS | XBRL Instance Document* | |
101.SCH | XBRL Schema Document* | |
101.CAL | XBRL Calculation Linkbase Document* | |
101.DEF | XBRL Definition Linkbase Document* | |
101.LAB | XBRL Label Linkbase Document* | |
101.PRE | XBRL Presentation Linkbase Document* | |
______________________
* Pursuant to Rule 406T of Regulation S-T, these interactive data files are not deemed filed or part of a registration statement or prospectus for purposes of Section 11 or 12 of the Securities Act or Section 18 of the Securities Exchange Act and otherwise not subject to liability.
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Pursuant to the requirements of Section 12 of the Securities and Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized on May 20, 2019.
KISSES FROM ITALY, INC. | |||
By: | s/ Michele Di Turi | ||
Michele Di Turi, | |||
Principal Executive Officer | |||
By: | s/ Claudio Ferri | ||
Claudio Ferri Principal Financial Officer and |
|||
Principal Accounting Officer |
10 |
Exhibit 31.1
CERTIFICATION PURSUANT TO
18 USC, SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES OXLEY ACT OF 2002
I, Michael Di Turi, certify that:
1. | I have reviewed this quarterly report on Form 10-Q of Kisses From Italy, Inc..; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary in order 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 controls 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 procedure 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 upon 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 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 our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Dated: May 20, 2019 |
/s/ Michael Di Turi Michael Di Turi, Chief Executive Officer |
Exhibit 31.2
CERTIFICATION PURSUANT TO
18 USC, SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES OXLEY ACT OF 2002
I, Claudio Ferri, certify that:
1. | I have reviewed this quarterly report on Form 10-Q of Kisses From Italy, Inc..; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary in order 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 controls 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 procedure 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 upon 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 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 our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Dated: May 20, 2019 |
/s/ Claudio Ferri Claudio Ferri, Chief Financial Officer |
Exhibit 32
CERTIFICATION PURSUANT TO
18 USC, SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with this quarterly report of Kisses From Italy, Inc. (the “Company”) on Form 10-Q for the three month period ended March 31, 2019, as filed with the Securities and Exchange Commission on May 20, 2019 (the “Report”), we, the undersigned, in the capacities and on the date indicated below, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of our knowledge:
1. | The Report fully complies with the requirements of Rule 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. |
Dated: May 20, 2019 |
/s/ Michael Di Turi Michael Di Turi, Chief Executive Officer |
Dated: May 20, 2019 |
/s/ Claudio Ferri Claudio Ferri, Chief Financial Officer |
Document and Entity Information - shares |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
May 17, 2019 |
|
Document And Entity Information | ||
Entity Registrant Name | Kisses From Italy, Inc. | |
Entity Central Index Key | 0001608092 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2019 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Is Entity's Reporting Status Current? | No | |
Is Entity Emerging Growth Company? | true | |
Elected Not To Use the Extended Transition Period | false | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Common Stock, Shares Outstanding | 81,780,170 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2019 |
Consolidated Balance Sheets (Parenthetical) - $ / shares |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Preferred stock, par value | $ .001 | $ 0.001 |
Preferred stock, shares authorized | 25,000,000 | 25,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value | $ .001 | $ 0.001 |
Common stock, shares authorized | 200,000,000 | 200,000,000 |
Common stock, shares issued | 81,780,170 | 81,780,170 |
Common stock, shares outstanding | 81,780,170 | 81,780,170 |
Consolidated Statements of Changes in Stockholders Equity (Unaudited) - USD ($) |
Preferred Stock |
Common Stock |
Additional Paid-In Capital |
Noncontrolling Interest |
Retained Earnings / Accumulated Deficit |
Total |
---|---|---|---|---|---|---|
Beginning balance, shares at Dec. 31, 2017 | 0 | 81,780,170 | ||||
Beginning balance, value at Dec. 31, 2017 | $ 0 | $ 81,780 | $ 1,545,796 | $ 52,734 | $ (1,679,183) | $ 1,127 |
Net income (loss) | (1,029) | (63,176) | (63,176) | |||
Ending balance, shares at Mar. 31, 2018 | 0 | 81,780,170 | ||||
Ending balance, value at Mar. 31, 2018 | $ 0 | $ 81,780 | 1,545,796 | 51,705 | (1,742,359) | (63,078) |
Beginning balance, shares at Dec. 31, 2018 | 0 | 81,780,170 | ||||
Beginning balance, value at Dec. 31, 2018 | $ 0 | $ 81,780 | 1,638,253 | 27,160 | (2,124,631) | (377,438) |
Beneficial conversion feature of convertible notes | 33,633 | 33,633 | ||||
Net income (loss) | (6,197) | (135,962) | (142,159) | |||
Ending balance, shares at Mar. 31, 2019 | 0 | 81,780,170 | ||||
Ending balance, value at Mar. 31, 2019 | $ 0 | $ 81,780 | $ 1,671,886 | $ 20,963 | $ (2,260,593) | $ (485,964) |
1. Organization and Description of Business |
3 Months Ended |
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Mar. 31, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization and Description of Business | NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS
Kisses From Italy Inc. (the “Company”) was incorporated in Florida on March 7, 2013. The Company’s main focus is to develop a fast, casual food dining chain restaurant business of corporate-owned restaurants and expanding through a nationwide/international franchise and territory sales program. The Company commenced operations in May 2015 by opening its first location in Ft. Lauderdale, Florida. Three additional restaurants, which were located in various Wyndham Hotel properties in the Pompano Beach, Florida area, were then opened within the following ten months. All locations, which were in leased facilities, were fully operational by April 2016. In December 2017, the Company was forced to temporarily cease operations of its restaurants for approximately six months due to hurricane damage. As a further result, the Company vacated one of its restaurants due to hurricane incurred damage and permanently closed that location in 2018.
The Company’s accounting year end is December 31. |
2. Summary of Significant Accounting Policies |
3 Months Ended | ||||||
---|---|---|---|---|---|---|---|
Mar. 31, 2019 | |||||||
Accounting Policies [Abstract] | |||||||
Summary of Significant Accounting Policies | NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Management’s Representation of Interim Financial Statements
The accompanying unaudited consolidated financial statements have been prepared by the Company without audit pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been condensed or omitted as allowed by such rules and regulations, and management believes that the disclosures are adequate to make the information presented not misleading. In the opinion of management, the unaudited financial statements and notes have been prepared on the same basis as the audited financial statements for the year ended December 31, 2018 and include all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the Company’s financial position and results of operation. Interim results are not necessarily indicative of results for a full year. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements at December 31, 2018, and 2017 included in the Company’s Form 10-K filed with the SEC on April 16, 2019.
Basis of Presentation and Principles of Consolidation
The consolidated financial statements of the Company have been prepared in accordance with GAAP. This basis of accounting involves the application of accrual accounting and consequently, revenues and gains are recognized when earned, and expenses and losses or recognized when incurred. For the three month period ended March 31, 2019, the consolidated financials include the accounts of the Company and its wholly-owned subsidiaries; Kisses from Italy 9th LLC, Kisses from Italy-Franchising LLC; and its 70% owned subsidiary, Kisses-Palm Sea Royal LLC.
All intercompany accounts and transactions are eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The most significant estimates relate to revenue recognition, valuation of financial instruments, income taxes, and contingencies. The Company bases its estimates on historical experience, known or expected trends and various other assumptions that are believed to be reasonable given the quality of information available as of the date of these financial statements. The results of these assumptions provide the basis for making estimates about the carrying amounts of assets and liabilities that are not readily apparent from other sources. Actual results could differ from these estimates.
Revenue Recognition
Sales, as presented in the Company’s consolidated statement of operations, represents food and beverage product sold and is presented net of discounts, coupons, employee meals, and complimentary meals. Revenue from restaurant sales is recognized when food and beverage products are sold.
On January 1, 2018, the Company adopted Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”), using the modified retrospective method applied to those contracts which were not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018, are presented under ASC 606. As of March 31, 2019, and for the year ended December 31, 2018, the consolidated financial statements were not materially impacted as a result of the application of Topic 606.
Non-controlling interest
Non-controlling interest represents third-party ownership in the net assets of one of our consolidated subsidiaries. For financial reporting purposes, the assets and liabilities of our majority-owned subsidiary consolidated with those of the Company’s wholly-owned subsidiaries, with any third-party investor’s interest shown as non-controlling interest.
Cash and Cash Equivalents
The Company considers all highly liquid temporary cash investments with an original maturity of three months or less to be cash equivalents. At March 31, 2019 and December 31, 2018, the Company’s cash equivalents totaled $31,694 and $22,877, respectively.
Property and equipment
Property and equipment are stated at cost or fair value. During 2018 the Company permanently closed one of its locations and removed all property and detachable leaseholds. The Company believes that this equipment and leaseholds which are in excellent condition can be used at existing and new locations and that the undepreciated book value is equivalent to its fair market value, thus no impairment was recorded. Depreciation is computed by the straight-line method and is charged to operations over the estimated useful lives of the assets. Maintenance and repairs are charged to expense as incurred. The carrying amount and accumulated depreciation of assets sold or retired are removed from the accounts in the year of disposal and any resulting gain or loss is included in results of operations. The estimated useful lives of property and equipment are as follows:
Income taxes
The Company accounts for income taxes under FASB ASC 740, “Accounting for Income Taxes”. Under FASB ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under FASB ASC 740, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. FASB ASC 740-10-05, “Accounting for Uncertainty in Income Taxes” prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities.
The amount recognized is measured as the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. The Company assesses the validity of its conclusions regarding uncertain tax positions on a quarterly basis to determine if facts or circumstances have arisen that might cause it to change its judgment regarding the likelihood of a tax position’s sustainability under audit.
Stock-based Compensation
The Company accounts for stock-based compensation using the fair value method following the guidance set forth in Section 718-10 of the FASB Accounting Standards Codification for disclosure about Stock-Based Compensation. This section requires a public entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). That cost will be recognized over the period during which an employee is required to provide service in exchange for the award- the requisite service period (usually the vesting period). No compensation cost is recognized for equity instruments for which employees do not render the requisite service.
Leases
The Company follows the guidance in ASC 840 “Leases,” which requires us to evaluate the lease agreements the Company enters into to determine whether they represent operating or capital leases at the inception of the lease.
Net Loss per Share
Net loss per Common Share is computed by dividing net loss by the weighted average Common Shares outstanding during the period as defined by Financial Accounting Standards, ASC Topic 260, "Earnings per Share." Basic earnings per common share (“EPS”) calculations are determined by dividing net income by the weighted average number of shares of Common Stock outstanding during the year. Diluted earnings per Common Share calculations are determined by dividing net income by the weighted average number of Common Shares and dilutive Common Share equivalents outstanding.
Recent Accounting Pronouncements
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which establishes a new lease accounting model for lessees. The updated guidance requires an entity to recognize assets and liabilities arising from financing and operating leases, along with additional qualitative and quantitative disclosures. The amended guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018, with early adoption permitted. In March 2019, the FASB issued ASU 2019-01, Codification Improvements, which clarifies certain aspects of the new lease standard. The FASB issued ASU 2018-10, Codification Improvements to Topic 842, Leases in July 2018. Also in 2018, the FASB issued ASU 2018-11, Leases (Topic 842) Targeted Improvements, which provides an optional transition method whereby the new lease standard is applied at the adoption date and recognized as an adjustment to retained earnings. The amendments have the same effective date and transition requirements as the new lease standard.
As an emerging growth company the Company has until December 15, 2019 to adopt ASC 842. While the Company continues to evaluate the impact of the new standard, the Company expects the adoption of this guidance will not have any impact on its financial statements. |
3. Going Concern and Liquidity |
3 Months Ended |
---|---|
Mar. 31, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Going Concern and Liquidity | NOTE 3 – GOING CONCERN AND LIQUIDITY
As of March 31, 2019, and December 31, 2018, the Company had $31,694 and $22,877 in cash on hand respectively, and revenues of $115,572 and $105,404, respectively. Additionally, as of March 31, 2019, the Company had outstanding liabilities totaling $600,570 and $31,694 in short term liquid assets.
In the Company’s financial statements for the fiscal years ended December 31, 2018, and 2017, the Reports of the Independent Registered Public Accounting Firm include an explanatory paragraph that describes substantial doubt about the Company’s ability to continue as a going concern. These financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. Based on the Company’s current financial projections, it believes it does not have sufficient existing cash resources to fund its current operations.
It is the Company’s current intention to raise debt and/or equity financing to fund ongoing operating expenses. There is no assurance that these events will be satisfactorily completed or at terms acceptable to the Company. Any issuance of equity securities, if accomplished, could cause substantial dilution to existing stockholders. Any failure by the Company to successfully implement these plans would have a material adverse effect on its business, including the possible inability to continue operations. |
4. Property and Equipment |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property and Equipment | NOTE 4 – PROPERTY AND EQUIPMENT
The following table sets forth the components of the Company’s property and equipment at March 31, 2019 and December 31, 2018:
For the three months ended March 31, 2019, and 2018, the Company recorded depreciation and amortization of $10,528 and $9,938 respectively. |
5. Accrued and Other Liabilities |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Payables and Accruals [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accrued and Other Liabilities | NOTE 5 – ACCRUED AND OTHER LIABILITIES
The following table sets forth the components of the Company’s accrued liabilities at March 31, 2019, and December 31, 2018.
The Company is in arrears on its payroll tax payments as of March 31, 2019. Included in the “payroll tax liabilities” as of December 31, 2018, is approximately $27,251 in interest and penalties. |
6. Loans Payable |
3 Months Ended |
---|---|
Mar. 31, 2019 | |
Debt Disclosure [Abstract] | |
Loans Payable | NOTE 6 – LOANS PAYABLE
The Company has one asset-based line of credit of $10,725. The amount of credit available to be accessed is dependent on the amount of documented credit receipts received by the Company’s restaurants. The due dates on these credit advances are typically between 90 and 180 days. The interest rate on the facility is approximately 32%, plus additional processing fees of approximately 5%.
As of March 31, 2019, and December 31, 2018, loan payable balances were $4,066 and $5,643 respectively. The amount of loans outstanding was significantly reduced due to proceeds from less expensive (in terms of the interest rate) convertible debt that was applied against loan balances. |
7. Convertible Notes |
3 Months Ended |
---|---|
Mar. 31, 2019 | |
Debt Disclosure [Abstract] | |
Convertible Notes | NOTE 7 – CONVERTIBLE NOTES
As of March 31, 2019, and December 31, 2018, the balance of convertible notes was $378,650 and $277,650 respectively. In April 2018, the Company commenced a private offering of up to $250,000 in convertible debenture (the “Debentures”), to non-residents of the US. These notes accrue interest at the rate of 8% per annum and are convertible into shares of the Company’s Common Stock but are only convertible until such time as the Company’s Common Stock is approved for trading, of which there is no assurance, at a conversion rate of $0.0667 per share. Interest is payable annually, on or before February 15 of each year. The Debentures mature three years after the issuance date. None of the convertible debentures have been converted.
Since the Company’s shares were previously sold in a private placement at a price of $0.10 per share, the difference in price is considered a beneficial conversion feature. Since the holders of the Notes have the right to convert immediately, the beneficial conversion feature of $126,090 has been immediately expensed and recorded as interest expense. |
8. Stockholders Equity |
3 Months Ended |
---|---|
Mar. 31, 2019 | |
Equity [Abstract] | |
Stockholders Equity | NOTE 8 – STOCKHOLDERS EQUITY
Capital Stock
At March 31, 2019, and December 31, 2018, there were 81,780,170 shares of Common Stock issued and outstanding, with a $0.001 par value.
25,000,000 shares of Preferred Stock, with a par value $0.01 per share, are authorized, none of which have been issued or were outstanding as of March 31, 2019, or December 31, 2018.
In May 2018, the Company’s Board of Directors and Shareholders approved an amendment to the Company’s Articles of Incorporation, increasing the number of authorized Common Shares to 200,000,000, par value $0.01 per share.
Common Stock Issued in Private Placements
During the three months ended March 31, 2019, the Company did not issue any of its Common Stock in any private offering, or otherwise.
During the year ended December 31, 2018, the Company did not issue any of its Common Stock in any private offering, or otherwise.
Common Stock Issued in Exchange for Services
During the three months ended March 31, 2019, the Company did not issue any shares of its Common Stock for services.
During the year ended December 31, 2018, the Company did not issue any shares of its Common Stock for services. |
9. Commitments and Contingencies |
3 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2019 | ||||||||||
Commitments and Contingencies Disclosure [Abstract] | ||||||||||
Commitments and Contingencies |
NOTE 9 – COMMITMENTS AND CONTINGENCIES
As of March 31, 2019, and December 31, 2018, the Company had three operating store locations. The Company leases these spaces based upon the following schedules:
The Company also rents professional and furnished space on a month to month basis in Miami, Florida at a cost of $223 per month, which has been designated the Company’s principal place of business. |
10. Subsequent Events |
3 Months Ended |
---|---|
Mar. 31, 2019 | |
Subsequent Events [Abstract] | |
Subsequent Events |
NOTE 10 – SUBSEQUENT EVENTS
During the period from April 11 through May 8, 2019, the Company received $15,300 in proceeds from the sale of convertible notes to four accredited investors. |
2. Summary of Significant Accounting Policies (Policies) |
3 Months Ended | ||||||
---|---|---|---|---|---|---|---|
Mar. 31, 2019 | |||||||
Accounting Policies [Abstract] | |||||||
Management's Representation of Interim Financial Statements | Management’s Representation of Interim Financial Statements
The accompanying unaudited consolidated financial statements have been prepared by the Company without audit pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been condensed or omitted as allowed by such rules and regulations, and management believes that the disclosures are adequate to make the information presented not misleading. In the opinion of management, the unaudited financial statements and notes have been prepared on the same basis as the audited financial statements for the year ended December 31, 2018 and include all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the Company’s financial position and results of operation. Interim results are not necessarily indicative of results for a full year. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements at December 31, 2018, and 2017 included in the Company’s Form 10-K filed with the SEC on April 16, 2019. |
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Basis of Presentation and Principles of Consolidation | Basis of Presentation and Principles of Consolidation
The consolidated financial statements of the Company have been prepared in accordance with GAAP. This basis of accounting involves the application of accrual accounting and consequently, revenues and gains are recognized when earned, and expenses and losses or recognized when incurred. For the three month period ended March 31, 2019, the consolidated financials include the accounts of the Company and its wholly-owned subsidiaries; Kisses from Italy 9th LLC, Kisses from Italy-Franchising LLC; and its 70% owned subsidiary, Kisses-Palm Sea Royal LLC.
All intercompany accounts and transactions are eliminated in consolidation. |
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Going Concern | NOTE 3 – GOING CONCERN AND LIQUIDITY
As of March 31, 2019, and December 31, 2018, the Company had $31,694 and $22,877 in cash on hand respectively, and revenues of $115,572 and $105,404, respectively. Additionally, as of March 31, 2019, the Company had outstanding liabilities totaling $600,570 and $31,694 in short term liquid assets.
In the Company’s financial statements for the fiscal years ended December 31, 2018, and 2017, the Reports of the Independent Registered Public Accounting Firm include an explanatory paragraph that describes substantial doubt about the Company’s ability to continue as a going concern. These financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. Based on the Company’s current financial projections, it believes it does not have sufficient existing cash resources to fund its current operations.
It is the Company’s current intention to raise debt and/or equity financing to fund ongoing operating expenses. There is no assurance that these events will be satisfactorily completed or at terms acceptable to the Company. Any issuance of equity securities, if accomplished, could cause substantial dilution to existing stockholders. Any failure by the Company to successfully implement these plans would have a material adverse effect on its business, including the possible inability to continue operations. |
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Use of Estimates | Use of Estimates
The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The most significant estimates relate to revenue recognition, valuation of financial instruments, income taxes, and contingencies. The Company bases its estimates on historical experience, known or expected trends and various other assumptions that are believed to be reasonable given the quality of information available as of the date of these financial statements. The results of these assumptions provide the basis for making estimates about the carrying amounts of assets and liabilities that are not readily apparent from other sources. Actual results could differ from these estimates. |
||||||
Revenue Recognition | Revenue Recognition
Sales, as presented in the Company’s consolidated statement of operations, represents food and beverage product sold and is presented net of discounts, coupons, employee meals, and complimentary meals. Revenue from restaurant sales is recognized when food and beverage products are sold.
On January 1, 2018, the Company adopted Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”), using the modified retrospective method applied to those contracts which were not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018, are presented under ASC 606. As of March 31, 2019, and for the year ended December 31, 2018, the consolidated financial statements were not materially impacted as a result of the application of Topic 606. |
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Non-controlling interest | Non-controlling interest
Non-controlling interest represents third-party ownership in the net assets of one of our consolidated subsidiaries. For financial reporting purposes, the assets and liabilities of our majority-owned subsidiary consolidated with those of the Company’s wholly-owned subsidiaries, with any third-party investor’s interest shown as non-controlling interest. |
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Cash and Cash Equivalents | Cash and Cash Equivalents
The Company considers all highly liquid temporary cash investments with an original maturity of three months or less to be cash equivalents. At March 31, 2019 and December 31, 2018, the Company’s cash equivalents totaled $31,694 and $22,877, respectively. |
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Property and equipment | Property and equipment
Property and equipment are stated at cost or fair value. During 2018 the Company permanently closed one of its locations and removed all property and detachable leaseholds. The Company believes that this equipment and leaseholds which are in excellent condition can be used at existing and new locations and that the undepreciated book value is equivalent to its fair market value, thus no impairment was recorded. Depreciation is computed by the straight-line method and is charged to operations over the estimated useful lives of the assets. Maintenance and repairs are charged to expense as incurred. The carrying amount and accumulated depreciation of assets sold or retired are removed from the accounts in the year of disposal and any resulting gain or loss is included in results of operations. The estimated useful lives of property and equipment are as follows:
|
||||||
Income taxes | Income taxes
The Company accounts for income taxes under FASB ASC 740, “Accounting for Income Taxes”. Under FASB ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under FASB ASC 740, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. FASB ASC 740-10-05, “Accounting for Uncertainty in Income Taxes” prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities.
The amount recognized is measured as the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. The Company assesses the validity of its conclusions regarding uncertain tax positions on a quarterly basis to determine if facts or circumstances have arisen that might cause it to change its judgment regarding the likelihood of a tax position’s sustainability under audit. |
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Stock-based Compensation | Stock-based Compensation
The Company accounts for stock-based compensation using the fair value method following the guidance set forth in Section 718-10 of the FASB Accounting Standards Codification for disclosure about Stock-Based Compensation. This section requires a public entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). That cost will be recognized over the period during which an employee is required to provide service in exchange for the award- the requisite service period (usually the vesting period). No compensation cost is recognized for equity instruments for which employees do not render the requisite service. |
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Leases | Leases
The Company follows the guidance in ASC 840 “Leases,” which requires us to evaluate the lease agreements the Company enters into to determine whether they represent operating or capital leases at the inception of the lease. |
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Net Loss per Share | Net Loss per Share
Net loss per Common Share is computed by dividing net loss by the weighted average Common Shares outstanding during the period as defined by Financial Accounting Standards, ASC Topic 260, "Earnings per Share." Basic earnings per common share (“EPS”) calculations are determined by dividing net income by the weighted average number of shares of Common Stock outstanding during the year. Diluted earnings per Common Share calculations are determined by dividing net income by the weighted average number of Common Shares and dilutive Common Share equivalents outstanding. |
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Recent Accounting Pronouncements | Recent Accounting Pronouncements
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which establishes a new lease accounting model for lessees. The updated guidance requires an entity to recognize assets and liabilities arising from financing and operating leases, along with additional qualitative and quantitative disclosures. The amended guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018, with early adoption permitted. In March 2019, the FASB issued ASU 2019-01, Codification Improvements, which clarifies certain aspects of the new lease standard. The FASB issued ASU 2018-10, Codification Improvements to Topic 842, Leases in July 2018. Also in 2018, the FASB issued ASU 2018-11, Leases (Topic 842) Targeted Improvements, which provides an optional transition method whereby the new lease standard is applied at the adoption date and recognized as an adjustment to retained earnings. The amendments have the same effective date and transition requirements as the new lease standard.
As an emerging growth company the Company has until December 15, 2019 to adopt ASC 842. While the Company continues to evaluate the impact of the new standard, the Company expects the adoption of this guidance will not have any impact on its financial statements. |
2. Summary of Significant Accounting Policies (Tables) |
3 Months Ended | ||||||
---|---|---|---|---|---|---|---|
Mar. 31, 2019 | |||||||
Accounting Policies [Abstract] | |||||||
Estimated useful lives of property |
|
4. Property and Equipment (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of property and equipment |
|
5. Accrued and Other Liabilities (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Payables and Accruals [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of accrued and other liabilities |
|
2. Summary of Significant Accounting Policies (Details) |
3 Months Ended |
---|---|
Mar. 31, 2019 | |
Computers, software and office equipment [Member] | |
Property and equipment useful life | 1-6 years |
Machinery and Equipment [Member] | |
Property and equipment useful life | 3-5 years |
Leasehold Improvements [Member] | |
Property and equipment useful life | Lesser of lease term or estimated useful life |
2. Summary of Significant Accounting Policies (Details Narrative) - USD ($) |
Mar. 31, 2019 |
Dec. 31, 2018 |
Mar. 31, 2018 |
Dec. 31, 2017 |
---|---|---|---|---|
Accounting Policies [Abstract] | ||||
Cash and cash equivalents | $ 31,694 | $ 22,877 | $ 1,595 | $ 51,955 |
3. Going Concern and Liquidity (Details Narrative) - USD ($) |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
Dec. 31, 2018 |
|
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||
Cash | $ 31,694 | $ 22,877 | |
Revenues | 115,572 | $ 105,404 | |
Liabilities | $ 600,570 | $ 491,756 |
4. Property and Equipment (Details) - USD ($) |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Property and equipment, gross | $ 230,584 | $ 228,584 |
Accumulated depreciation | (148,764) | (138,236) |
Property and equipment, net | 81,820 | 90,348 |
Furniture and equipment [Member] | ||
Property and equipment, gross | 54,868 | 52,868 |
Accumulated depreciation | (37,488) | (35,200) |
Property and equipment, net | 17,380 | 17,668 |
Leasehold Improvements [Member] | ||
Property and equipment, gross | 175,716 | 175,716 |
Accumulated depreciation | (111,276) | (103,036) |
Property and equipment, net | $ 64,440 | $ 72,680 |
4. Property and Equipment (Details Narrative) - USD ($) |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Property, Plant and Equipment [Abstract] | ||
Depreciation and amortization | $ 10,528 | $ 9,938 |
5. Accrued and Other Liabilities (Details) - USD ($) |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Payables and Accruals [Abstract] | ||
Sales tax payable | $ 20,699 | $ 12,605 |
Accrued interest payable | 19,266 | 21,728 |
Accrued Rent | 0 | 12,114 |
Payroll tax liabilities | 112,198 | 109,642 |
Accrued Other | 0 | 2,000 |
Total accrued liabilities | $ 152,163 | $ 158,089 |
5. Accrued and Other Liabilities (Details Narrative) - USD ($) |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Payroll tax liabilities | $ 112,198 | $ 109,642 |
Interest and Penalties [Member] | ||
Payroll tax liabilities | $ 27,251 |
6. Loans Payable (Details Narrative) - USD ($) |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Dec. 31, 2018 |
|
Line of credit balance | $ 4,066 | $ 5,643 |
Credit Line 1 [Member] | ||
Credit line maximum amount | $ 10,725 | |
Credit line interest rates | 32.00% |
7. Convertible Notes (Details Narrative) - USD ($) |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Dec. 31, 2018 |
|
Debt Disclosure [Abstract] | ||
Convertible notes payable | $ 378,650 | $ 277,650 |
Notes payable face value | $ 250,000 | |
Debt interest rate | 8.00% | |
Debt term | 3 years | |
Conversion rate | 0.0667% | |
Beneficial conversion feature | $ 126,090 |
9. Commitments and Contingencies (Details Narrative) |
3 Months Ended |
---|---|
Mar. 31, 2019
USD ($)
ft²
| |
Fort Lauderdale, FL [Member] | |
Rental space in sq. ft. | ft² | 990 |
Lease payment frequency | monthly |
Lease periodic payment | $ 5,773 |
Palm Aire [Member] | |
Rental space in sq. ft. | ft² | 2,300 |
Lease payment frequency | monthly |
Lease periodic payment | $ 3,600 |
Sea Gardens [Member] | |
Rental space in sq. ft. | ft² | 600 |
Lease payment frequency | monthly |
Lease periodic payment | $ 546 |
Miami, FL [Member] | |
Lease payment frequency | monthly |
Lease periodic payment | $ 223 |
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