Condensed Notes to Consolidated Financial Statements (unaudited)
October 31, 2022
NOTE 1 – NATURE OF OPERATIONS AND BASIS OF PRESENTATION
KindCard, Inc. (f/k/a MWF Global Inc.) (the “Company”) was incorporated in the State of Nevada on November 18, 2016, and established a fiscal year end of January 31. The Company was originally organized to sell unique country specific handcrafted natural products with a focus on sourcing these products from South-East Asia and offering these products for sale through the Company’s website and to establish other distribution channels. On June 1, 2021, RMR Management LLC (“RMR” and the “Majority Stockholder”) purchased 54,000,000 shares of common stock of the Company, representing the majority of the Company’s issued and outstanding shares, from William D Mejia in consideration of a purchase price of $150,000. RMR is owned and controlled by Michael Rosen, the Company’s sole officer and director. On June 7, 2021, the Company entered into a Stock Purchase Agreement (the “Purchase Agreement”) with Kindcard, Inc., a Massachusetts corporation (“KindCard MA”) and Croesus Holdings Corp, a Massachusetts corporation (“Croesus” and together with Kindcard MA, the “Seller”), pursuant to which the Company acquired (i) all of the intellectual property and operational assets (collectively, the “Assets”) of the Tendercard Division of Croesus and (ii) 100% of the issued and outstanding shares of common stock of Kindcard MA in consideration of an aggregate of 8,000,000 shares of common stock of the Company. On June 16, 2021, Michael Rosen was appointed as a Director of the Company. On June 30, 2021, William D. Mejia resigned as a director and the sole officer of the Company and Michael Rosen was appointed as the sole officer of the Company. On July 9, 2021, the Company filed a Certificate of Amendment to Articles of Incorporation (the “Certificate”) with the State of Nevada effectuate a name change (the “Name Change”). As a result of the Name Change, the Company’s name changed from “MWF Global Inc.” to “Kindcard, Inc.”. The Certificate was approved by the Majority Stockholder and by the Board of Directors of the Company. The Purchase Agreement and the transactions contemplated therein closed on August 16, 2021 (the “Closing”). Subsequent to the Closing, the Company became aware that the Sellers failed to deliver certain of the Assets to the Company in material breach of the Purchase Agreement. A settlement arrangement is currently being negotiated between the Company and Sellers in connection with such matter. On August 26, 2021, Tendercard, Inc., a wholly owned subsidiary of the Company, was incorporated by the Company in the State of Nevada. In addition, on January 14, 2022, Deb, Inc., a wholly owned subsidiary of the Company, was incorporated by the Company in the State of Nevada. In connection with the Name Change, the Company filed an Issuer Company-Related Action Notification Form with the Financial Industry Regulatory Authority. The Name Change was implemented by FINRA on September 21, 2021. Our symbol on OTC Markets was KCRDD for 20 business days from September 21, 2021 (the “Notification Period”). Our new CUSIP number is 49452K105. As a result of the name change, our symbol was changed to “KCRD” following the Notification Period.
The Company, through its wholly owned operating subsidiaries, Deb, Inc. and Tendercard, Inc., is an innovative FinTech and PayTech company which provides alternative Closed-Loop payment solutions to consumers and businesses across a wide variety of verticals.
Going concern
These financial statements have been prepared assuming the Company will be able to continue as a going concern. To date, the Company has generated revenues from its business operations and has incurred accumulated operating losses of $720,929. At October 31, 2022, the Company has a working capital deficit of $568,272 and a net loss of $210,692 for the nine months ended October 31, 2022. The Company will require additional funding to meet its ongoing obligations and to fund anticipated operating losses. The ability of the Company to continue as a going concern is dependent on raising capital to fund its business plan and ultimately to attain profitable operations. Accordingly, these factors raise substantial doubt as to the Company’s ability to continue as a going concern from a period of one year from the issuance of these financial statements. The Company intends to continue to fund its business by way of private placements and advances from related parties as may be required. As of October 31, 2022, the Company has issued 86,945,000 shares of common stock issued and outstanding. These consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might result from this uncertainty.
Basis of Presentation
The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for financial information and with the instructions to Form 10-Q. They do not include all information and footnotes required by United States generally accepted accounting principles for complete financial statements. However, except as disclosed herein, there has been no material changes in the information disclosed in the notes to the financial statements for the fiscal year ended January 31, 2022 included in the Company’s Form 10-K filed with the Securities and Exchange Commission. The unaudited financial statements should be read in conjunction with those financial statements included in the Form 10-K. In the opinion of Management, all adjustments considered necessary for a fair presentation, consisting solely of normal recurring adjustments, have been made. Operating results for the nine months ended October 31, 2022 are not necessarily indicative of the results that may be expected for the year ending January 31, 2023.
Use of Estimates and Assumptions
Preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Accordingly, actual results could differ from those estimates. These estimates include Allowance of doubtful accounts, and Impairment of long-lived assets.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers highly liquid financial instruments purchased with a maturity of three months or less to be cash equivalents.
Kindcard, Inc. and Subsidiaries
Condensed Notes to Consolidated Financial Statements (unaudited)
October 31, 2022
Revenue Recognition
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). This standard provides a single model for revenue arising from contracts with customers and supersedes current revenue recognition guidance. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.
Revenue is recognized when all of the following criteria are met:
(i) Identification of the contract, or contracts, with a customer (ii) Identification of the performance obligations in the contract (iii) Determination of the transaction price (iv) Allocation of the transaction price to the performance obligations in the contract (v) Recognition of revenue when, or as, we satisfy performance obligation
We currently offer the following products and services:
Vault Program provides cash pick up services for retail & wholesale merchants the within North American retail market. Commission revenues are recorded over the life of these multiyear contracts.
Tendercard provides a stored value point of sale gift card processing solution to small and mid-sized businesses within North American retail market. The Company’s proprietary host-based program provides real time data and accurate records of all activity related to the gift card processing account and the related monthly reporting. Fixed monthly service fee revenues are recorded monthly over the life of these multiyear contracts. The fees are collected in arrears resulting in accounts receivable at the end of each month.
Fair Value of Financial Instruments
The Company measures its financial and non-financial assets and liabilities, as well as makes related disclosures, in accordance with FASB Accounting Standards Codification No. 820, Fair Value Measurement (“ASC 820”), which provides guidance with respect to valuation techniques to be utilized in the determination of fair value of assets and liabilities. Approaches include, (i) the market approach (comparable market prices), (ii) the income approach (present value of future income or cash flow), and (iii) the cost approach (cost to replace the service capacity of an asset or replacement cost). ASC 820 utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:
Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: Inputs other than quoted prices that are observable, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
Level 3: Unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one more significant inputs or significant value drivers are unobservable.
Loss per Common Share
The basic loss per share is calculated by dividing the Company’s net loss available to common shareholders by the weighted average number of common shares during the year. The diluted loss per share is calculated by dividing the Company’s net loss available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. Diluted loss per share is the same as basic loss per share due to the lack of dilutive instruments in the Company. There are no common stock equivalents at October 31, 2022.
Income Taxes
The Company follows the liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax balances and tax loss carry-forwards. Deferred tax assets and liabilities are measured using enacted or substantially enacted tax rates expected to apply to the taxable income in the years in which those differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the date of enactment or substantive enactment.
Kindcard, Inc. and Subsidiaries
Condensed Notes to Consolidated Financial Statements (unaudited)
October 31, 2022
NOTE 2 – BUSINESS ACQUISITION
On June 7, 2021, the Company entered into a Stock Purchase Agreement (the “Purchase Agreement”) with Kindcard, Inc., a Massachusetts corporation (“KindCard MA”) and Croesus Holdings Corp., a Massachusetts corporation (“Croesus” and together with Kindcard MA, the “Seller”) pursuant to which the Company acquired 100% of the outstanding shares of common stock of Kindcard MA (the “Kindcard MA Shares”) and all of intellectual property and operational assets (collectively, the “Tendercard Assets”) of the Tendercard Division of Croesus in consideration of an aggregate of 8,000,000 shares of common stock of the Company issued to the owners of KindCard MA and Croesus at a per share price of $0.003 per share representing a total cash value of $24,000 based on the equitable market value on the date of purchase (see Note 1). In addition, the Company assumed a SBA Loan from Kindcard MA in the amount of $157,212 resulting in total consideration paid by the Company valued at $177,160. The Purchase Agreement and the transactions contemplated therein closed on August 16, 2021 (the “Closing”). Subsequent to the Closing, the Company became aware that the Sellers failed to deliver certain of the Assets to the Company in material breach of the Purchase Agreement. A settlement arrangement is currently being negotiated between the Company and Sellers in connection with such matter.
As a result, the goodwill from the acquisition of the Kindcard MA Shares was considered impaired and the Company recorded and impairment expense of $110,291 as of January 31, 2022. The other intangible assets recorded related to the acquisition of the Tendercard Assets from Croesus. In addition, the Purchase Agreement included certain contingent consideration for additional shares to be issued to Seller upon certain conditions being met related to the Company’s quoted common stock price. Given that the Seller failed to deliver certain of the Assets as noted, the Company did not issue any additional shares to Seller and therefore the contingent consideration was value at $0 initially. At October 31, 2022, the Company reevaluated the contingent consideration noting that it was still valued at $0.00.
On August 26, 2021, Tendercard, Inc., a wholly owned subsidiary of the Company, was incorporated by the Company in the State of Nevada. In addition, on January 14, 2022, Deb, Inc., a wholly owned subsidiary of the Company, was incorporated by the Company in the State of Nevada.
The Company, through its wholly owned operating subsidiaries, Deb, Inc. and Tendercard, Inc., is an innovative FinTech and PayTech company which provides alternative Closed-Loop payment solutions to consumers and businesses across a wide variety of verticals.
The Company recorded the above acquisition in accordance with ASC-805, pertaining to business combinations. The following table summarizes the consideration paid for the acquisition and the amounts of the assets acquired at fair market value assumed recognized at the acquisition date.
Purchase Price Considerations | | Fair Value | |
Stock Consideration | | $ | 24,000 | |
SBA Loan | | | 153,160 | |
Total Purchase Consideration & Assumed Liabilities | | $ | 177,160 | |
Tangible Assets | | | | |
Cash | | | 19,048 | |
Accounts Receivable | | | 26,721 | |
Intangible Assets | | | | |
Customer Lists | | | 9,900 | |
Website | | | 5,200 | |
Trade Name | | | 2,800 | |
Technology | | | 3,200 | |
Goodwill | | | 110,291 | |
Total Assets | | $ | 177,160 | |
NOTE 3 – ACCOUNTS RECEIVABLE, Net
We estimate credit loss reserves for accounts receivable on an individual receivable basis. A specific allowance is established based on expected future cash flows and the financial condition of the debtor. We charge off customer balances in part or in full when it is more likely than not that we will not collect that amount of the balance due. We consider any balance unpaid after the contract payment period to be past due. There are $31,082 and $31,745 in accounts receivables net of $606 and $220 allowances at October 31, 2022 and January 31, 2022, respectively.
Kindcard, Inc. and Subsidiaries
Condensed Notes to Consolidated Financial Statements (unaudited)
October 31, 2022
NOTE 4 – PROPERTY AND EQUIPMENT
Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation of property and equipment is calculated using the straight-line method over the estimated useful life of the asset generally ranging from three to seven years.
Property and equipment consist of the following at:
| | October 31, | | | January 31, | |
| | 2022 | | | 2022 | |
Merchandise and equipment: Vault | | $ | 10,000 | | | $ | 10,000 | |
Merchandise and equipment: Office Equipment | | | 4,286 | | | | 2,545 | |
Merchandise and equipment: IT Equipment | | | 4,945 | | | | - | |
Less: accumulated depreciation | | | (5,658 | ) | | | (1,170 | ) |
Total | | $ | 13,573 | | | $ | 11,375 | |
Depreciation expense amounted to approximately $1,819 and $NIL during the three months ended October 31, 2022 and October 31, 2021, respectively.
NOTE 5 – GOODWILL AND INTANGIBLE ASSETS
The Company records goodwill when the consideration paid for an acquisition exceeds the fair value of net tangible and intangible assets acquired and liabilities assumed, including related tax effects. Goodwill is not amortized; instead, goodwill is tested for impairment on an annual basis, or more frequently if the Company believes indicators of impairment exist. The Company first assesses qualitative factors such as macro-economic conditions, industry and market conditions, cost factors as well as other relevant events, to determine whether it is more-likely-than-not that the fair value of a reporting unit is less than its carrying value. If the Company determines that the fair value is less than the carrying value, the Company will recognize an impairment charge based on the excess of a reporting unit’s carrying value over its fair value. The Company did not note any impairment as of October 31, 2022.
Goodwill
Goodwill recorded was $110,291 and related specifically to the acquisition of Kindcard with no other assets assumed on June 7, 2021 (see note 2). KindCard failed to deliver its registered trademark and failed to deliver the software that conforms to industry standards. As a result, the goodwill from the acquisition of Kindcard was considered impaired in full and the Company recorded and impairment expense of $110,291 during the year ended January 31, 2022.
Intangible assets
Intangible assets are comprised of customer relationships and brands acquired in a business combination specifically related to the Company’s Tendercard division (see note 2) and also comprised of development costs for its proprietary payment processing “DEB Platform” through the Company’s wholly owned subsidiary, Deb, Inc. The Company amortizes intangible assets with a definitive life over their respective useful lives of 3-5 years. Assets with indefinite lives are tested for impairment on an annual basis, or more frequently if the Company believes indicators of impairment exist. The Company did not note any impairment as of October 31, 2022.
Kindcard, Inc. and Subsidiaries
Condensed Notes to Consolidated Financial Statements (unaudited)
October 31, 2022
NOTE 5 – GOODWILL AND INTANGIBLE ASSETS (continued)
Intangible assets (continued)
On December 21, 2021 the Company entered into a contract to develop its proprietary payment processing DEB Platform, a for a total cost of $150,000. On June 8, 2022, the Company entered into a contract to further customize the platform for an additional cost of $51,965 which has been paid as of October 31, 2022 for the work performed and completed. The platform is currently in testing, is anticipated to go into production in the fourth quarter of FY 2023 and will be depreciated over 3 - 5 years.
| | October 31, 2022 | | | January 31, 2022 | |
Definite-lived intangible assets | | | | | | |
Technology: DEB Platform | | $ | 201,965 | | | $ | 75,000 | |
Technology: Tendercard Program | | | 3,200 | | | | 3,200 | |
Customer Lists | | | 9,900 | | | | 9,900 | |
Website | | $ | 5,200 | | | $ | 5,200 | |
Trade Name | | | 2,800 | | | | 2,800 | |
Less: accumulated amortization | | | (37,527 | ) | | | (1,060 | ) |
Definite-lived intangible assets, net | | $ | 185,538 | | | $ | 95,040 | |
The following is the future estimated amortization expense related to intangible assets as of October 31, 2022:
Year ending January 31, | | | |
2023 - | | | 22,737 | |
2024 - | | | 72,235 | |
2025 - | | | 72,235 | |
2026 - | | | 17,802 | |
2027 - | | | 529 | |
Total - | | $ | 185,538 | |
NOTE 6 – CURRENT LIABILITIES
Accounts Payable
Accounts Payable is comprised of Trade payables of $136,984 and $106,395 at October 31, 2022 and January 31, 2022, respectively.
Accrued Payroll Expenses
Balance consists of Accrued Salaries & Wages $10,208 and $14,834, Accrued Payroll Tax $781 and $1,323 and Payroll Tax Payable of $27,838 and $52,846 at October 31, 2022 and January 31, 2022, respectively.
NOTE 7 – DUE TO RELATED PARTY
Due to Related Party
The total amount owed to the Company’s CEO as of October 31, 2022 and January 31, 2022 were $296,501 and $296,498, respectively. The amounts due to related party are unsecured and non-interest bearing with no set terms of repayment.
Kindcard, Inc. and Subsidiaries
Condensed Notes to Consolidated Financial Statements (unaudited)
October 31, 2022
NOTE 8 – Loans
SBA Loan
The balance consists of Small Business Administration Economic Disaster Injury Loan assumed in the acquisition of Kindcard on June 7, 2021, with a principal balance of $150,000 and $3,160 accrued interest for a total balance of $153,160. An additional $8,259 of interest was accrued for the seventeen months ended October 31, 2022 for a total balance of $161,419. The term of the note is 30 years with an interest rate of 3.75% per annum, Installment payments of $713 currently scheduled to begin April 14, 2023.
Year ending January 31,
2023: | | $ | 6,417 | |
2024: | | | 8,556 | |
2025: | | | 8,556 | |
2026: | | | 8,556 | |
2027: | | | 8,556 | |
Thereafter | | | 120,778 | |
Total future minimum loan payments | | $ | 161,419 | |
Less: current portion | | | (4,991 | ) |
Long-term portion | | | 156,428 | |
Notes Payable
Loans payable consists of $142,192 and $0.00 in short term loans payable and accrued interest of $3,539 and $0.00 at October 31, 2022 and January 31, 2022, respectively. These loans with non-related parties are unsecured and have interest rates ranging from 7% to 12% per annum and maturity dates within one to twelve months.
NOTE 9 – COMMITMENTS AND CONTINGENCIES
The recent outbreak of the coronavirus COVID-19 has spread across the globe and is impacting worldwide economic activity. Conditions surrounding the coronavirus continue to rapidly evolve and government authorities have implemented emergency measures to mitigate the spread of the virus. The outbreak and the related mitigation measures have had and will continue to have a material adverse impact on global economic conditions as well as on the Company’s business activities. The extent to which COVID-19 may impact the Company’s business activities will depend on future developments, such as the ultimate geographic spread of the disease, the duration of the outbreak, travel restrictions, business disruptions, and the effectiveness of actions taken in the United States and other countries to contain and treat the disease. These events are highly uncertain and, as such, the Company cannot determine their financial impact at this time. No adjustments have been made to the amounts reported in these consolidated financial statements as a result of this matter.
On May 25, 2022, the Company entered into an Advisory Agreement related to the development, design and build of its compliance and state licensing program. The initial term of the agreement is six months at a rate of $5,000 per month ($30,000) with an option to renew on a month-to-month basis thereafter. The contract includes a stock grant allowing the Advisor the opportunity to earn up to a total of 1,000,000 shares of common stock (the “Shares”) of Company to be issued one year from the effective date of the Advisory Agreement subject to approval by the Company’s Board of Directors and the achievement of certain mutually agreed goals and objectives. As of October 31, 2022, no Shares have been issued.
On May 25, 2022, the Company entered into an Advisory Agreement for the oversight of all regulatory BSA/AML compliance matters and the drafting of the Company’s comprehensive BSA/AML compliance program policies and procedures. The initial term of the agreement is six months at a rate of $5,000 per month ($30,000) with an option to renew on a month-to-month basis thereafter. The contract includes a stock grant allowing the Advisor the opportunity to earn up to a total of 500,000 shares of common stock (the “Shares”) of Company subject to approval by the Company’s Board of Directors and the achievement of certain mutually agreed goals and objectives. As of October 31, 2022, no Shares have been issued.
NOTE 10 – COMMON STOCK
The Company is authorized to issue 200,000,000 common shares with a par value of $0.001 per share. No preferred shares have been authorized or issued.
On August 16, 2021, the Company issued an aggregate of 8,000,000 shares of common stock to KindCard, Inc. and Croesus Holdings Corp. at the closing of the business acquisition for a total value of $24,000 (see note 2).
On February 25, 2022, the Company issued 20,000 shares of common stock to Start Here, Inc. in exchange for rebranding services provided to the Company at $0.007 per share ($140) based on the current weighted average cost per share calculated using subsequent share prices issued for cash given the Company does not have an active trading market, with a par value of $0.001 per share.
On May 13, 2022, the Company issued 50,000 shares of common stock in connection with a promissory note. The $2,500 cost of the shares was allocated based on the relative fair value. Given the short term maturity of the note, the cost was expensed in full during the quarter.
On May 17, 2022, the Company entered into a subscription agreement with an accredited investor pursuant to which the Company issued 3,000,000 restricted shares of common stock at $0.05 per share for a total purchase price of $150,000 on May 23, 2022.
On June 12, 2022, the Company issued 50,000 shares of common stock in connection with a promissory note. The $2,500 cost of the shares was allocated based on the relative fair value. Given the short term maturity of the note, the cost was expensed in full during the quarter.
Kindcard, Inc. and Subsidiaries
Condensed Notes to Consolidated Financial Statements (unaudited)
October 31, 2022
NOTE 11 – TERMINATION OF MATERIAL DEFINITIVE AGREEMENT
On January 1, 2022, the Company entered into an Asset Purchase Agreement (the “APA”) with Wholesale Payments LLC, a Wyoming limited liability company (“Seller”) pursuant to which the Company was to purchase 100% of the assets of Seller. On March 9, 2022, the Company and Seller agreed terminate the APA pursuant to Sections 206(b)(ii) and 206(b)(iii) of the APA and, accordingly, no assets of Seller were transferred to the Company. The Company received net proceeds of $48,968 from Seller related to a one-time commission that would not be considered revenue and was recorded as other income prior to the APA being terminated.
NOTE 12 – SUBSEQUENT EVENTS
On November 1, 2022, the Company received a short-term loan from Voxel Supply, LLC in the amount of $5,400. The loan accrues interest at the rate of 7% per annum. Principal and interest are due on October 31, 2023.
On December 12, 2022, the Company entered into a corporate advisory agreement with Brian Schultz (“Schultz”) pursuant to which Schultz provides certain business, operations, and financial advisory services to the Company (the “Services”). In consideration of the Services, the Company issued to Schultz 6,500,000 restricted shares of common stock of the Company.
On December 12, 2022, the Company entered into a corporate advisory agreement with Nicholas Cardoso (“Cardoso”) pursuant to which Cardoso provides certain business, operations, and financial advisory services to the Company (the “Services”). In consideration of the Services, the Company issued to Cardoso 3,500,000 restricted shares of common stock of the Company.