NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - NATURE OF OPERATIONS AND BASIS OF PRESENTATION
Two Hands Corporation (the "Company") was
incorporated in the state of Delaware on April 3, 2009 and on July 26, 2016, changed its name from Innovative Product Opportunities Inc.
to Two Hands Corporation.
The Two Hands co-parenting
application launched on July 2018 and the Two Hands Gone application
launched In February 2019. The Company ceased work on
these applications in 2021.
The gocart.city online consumer grocery delivery application
was released in early June 2020 and Cuore Food Services commenced sale of dry goods and produce to other businesses in July 2020.
In July 2021,
the Company made the strategic decision to focus exclusively on the grocery market through three on-demand branches of its grocery
businesses: gocart.city, Grocery Originals, and Cuore Food Services.
| i) | gocart.city is the Company’s online delivery marketplace, allowing
consumers to shop online and have their groceries delivered. |
| ii) | Grocery Originals is the Company’s brick-and-mortar grocery store
located in Mississauga Ontario at the site of the Company’s warehouse. |
| iii) | Cuore Food Services is the Company’s wholesale food distribution branch.
|
The operations of the business are carried on by Two
Hands Canada Corporation, a wholly-owned subsidiary of the Company, incorporated under the laws of Canada on February 7, 2014.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying condensed consolidated financial
statements of Two Hands Corporation have been prepared without audit pursuant to the rules and regulations of the Securities and Exchange
Commission requirements for interim financial statements. Therefore, they do not include all of the information and footnotes required
by accounting principles generally accepted in the United States for complete financial statements. The financial statements should be
read in conjunction with the annual financial statements for the year ended December 31, 2021 of Two Hands Corporation in our Form 10-K
filed on March 31, 2022.
The interim financial statements present the balance
sheets, statements of operations and comprehensive income (loss), stockholders’ deficit and cash flows of Two Hands Corporation.
The financial statements have been prepared in accordance with accounting principles generally accepted in the United States.
The interim financial information is unaudited. In
the opinion of management, all adjustments necessary to present fairly the financial position as of March 31, 2022 and the results of
operations and cash flows presented herein have been included in the financial statements. All such adjustments are of a normal and recurring
nature. Interim results are not necessarily indicative of results of operations for the full year.
COVID-19
The recent outbreak of the coronavirus COVID-19 has
spread across the globe and is impacting worldwide economic activity. Conditions surrounding the coronavirus continue to rapidly evolve
and government authorities have implemented emergency measures to mitigate the spread of the virus. The outbreak and the related mitigation
measures have had and will continue to have a material adverse impact on global economic conditions as well as on the Company's business
activities. The extent to which COVID-19 may impact the Company's business activities will depend on future developments, such as the
ultimate geographic spread of the disease, the duration of the outbreak, travel restrictions, business disruptions, and the effectiveness
of actions taken in the Canada, United States and other countries to contain and treat the disease. These events are highly uncertain
and, as such, the Company cannot determine their financial impact at this time. No adjustments have been made to the amounts reported
in these condensed consolidated financial statements as a result of this matter.
GOING CONCERN
The Company's financial statements are prepared in
accordance with generally accepted accounting principles applicable to a going concern. This contemplates the realization of assets and
the liquidation of liabilities in the normal course of business. During the three months ended March 31, 2022, the Company incurred a
net loss of $1,353,597 and used cash in operating activities of $273,817, and on March 31, 2022, had stockholders’ deficit of $4,405,898.
These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern for a period one
year from the date that the financial statements are issued. The Company will be dependent upon the raising of additional capital through
placement of its common stock in order to implement its business plan. There can be no assurance that the Company will be successful in
this situation. The Company is unable to predict the effect, if any, that the coronavirus COVID-19 global pandemic may have on its access
to the financing markets. These financial statements do not include any adjustments relating to the recoverability and classification
of recorded asset amounts or amounts and classifications of liabilities that might result from this uncertainty. We are currently funding
our operations by way of cash advances from our Chief Executive Officer, note holders, shareholders and others. On April 14, 2022, the
Company entered into a binding Grid Promissory Note and Credit Facility Agreement (the “Line of Credit”) with The Cellular
Connection Ltd. Pursuant to the Line of Credit, the Company can borrow from the Lender up to CAD$750,000 in principal in increments of
at least CAD$50,000 upon five business days’ notice. The funds due for repayment on May 1, 2024, and the principal bears interest
at 8% per annum, payable monthly. As at the date of this Form 10-Q, no funds have been borrowed by the Company pursuant to the Line of
Credit. There can be no assurances that we will be able to receive further commitments, loans or advances from them or other persons in
the future.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the
accounts of the Company and its wholly owned subsidiary, Two Hands Canada Corporation. All intercompany transactions and balances have
been eliminated in consolidation.
USE OF ESTIMATES AND ASSUMPTIONS
Preparation of the financial statements in
conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
For purposes of the statement of cash flows,
the Company considers highly liquid financial instruments purchased with a maturity of three months or less to be cash equivalents.
ACCOUNTS RECEIVABLE
Trade accounts receivable are recorded at the invoiced
amount and do not bear interest. Accounts receivable are reduced by an allowance for doubtful accounts, which is the Company’s best
estimate of the amount of credit losses inherent in its existing accounts receivable. In establishing the required allowance, management
considers historical losses adjusted to take into account current market conditions and customers’ financial condition, the amount
of receivables in dispute, and the current receivables aging and current payment patterns. The Company writes off accounts receivable
against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.
The allowance for doubtful accounts at March 31, 2022
and December 31, 2021 is $50,283 and $68,673, respectively.
INVENTORY
Inventory consisting of groceries and dry goods are
measured at the lower of cost and net realizable value. Cost is determined pursuant
to the first-in first out (“FIFO”) method.
The cost of inventory includes the purchase price, shipping and handling costs incurred to bring the inventories to their present location
and condition. Inventory with a short shelf life that is not utilized within the planned period are immediately expensed in the statement
of operations. Estimated gross profit rates are used to determine the cost of goods sold in interim periods. Any significant adjustment
that results from the reconciliation with annual physical inventory is disclosed.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost, less accumulated
depreciation and amortization. Expenditures for maintenance and repairs are charged to expense when incurred, while renewals and betterments
that materially extend the life of an asset are capitalized.
The costs of assets sold, retired, or otherwise disposed
of, and the related allowance for depreciation, are eliminated from the accounts, and any resulting gain or loss is recognized in the
results from operations. Depreciation is provided over the estimated useful lives of the assets, which are as follows:
Computer equipment 50% declining
balance over a three year useful life
In the year of acquisition, one half the normal rate
of depreciation is provided.
REVENUE RECOGNITION
In accordance with ASC 606, revenue is recognized
when a customer obtains control of promised goods or services. The amount of revenue recognized reflects the consideration to which we
expect to be entitled to receive in exchange for these goods or services. The provisions of ASC 606 include a five-step process by which
we determine revenue recognition, depicting the transfer of goods or services to customers in amounts reflecting the payment to which
we expect to be entitled in exchange for those goods or services. ASC 606 requires us to apply the following steps: (1) identify the contract
with the customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction
price to the performance obligations in the contract; and (5) recognize revenue when, or as, we satisfy the performance obligation. We
recognize revenue for the sale of our products upon delivery to a customer.
During the three months ended March 31, 2022 and 2021,
the Company had revenue of $199,039 and $189,157 respectively. In 2022, the Company recognized revenue of $66,628 from the sale of groceries
to consumers via the gocart.city online grocery delivery application and $132,411 from the sale of dry goods and produce to other businesses.
In 2021, the Company recognized revenue of $55,042 from the sale of groceries to consumers via the gocart.city online grocery delivery
application and $134,115 from the sale of dry goods and produce to other businesses.
RESEARCH AND DEVELOPMENT COSTS
Software development costs are included in research
and development and are expensed as incurred. FASB ASC Topic 350 Intangibles—Goodwill and Other requires that software development
costs incurred subsequent to reaching technological feasibility be capitalized, if material. If the process of developing a new product
or major enhancement does not include a detailed program design, technological feasibility is determined only after completion of a working
model. To date, the period between achieving technological feasibility and the general availability of such software has been short, and
the software development costs qualifying for capitalization have been insignificant. The Company recorded research and development expense
of $0 and $0 for the three months ended March 31, 2022 and 2021, respectively.
LEASES
Under ASC 842, a right-of-use asset and lease liability
is recorded for all leases and the statement of operations reflects the lease expense for operating leases and amortization/interest expense
for financing leases.
The Company does not apply the recognition requirements
in the standard to a lease that at commencement date has a lease term of twelve months or less and does not contain a purchase option
that it is reasonably certain to exercise and to not separate lease and related non-lease components. Options to extend the leases are
not included in the minimum lease terms unless they are reasonably certain to be exercised.
The Company leases an automobile under non-cancelable
operating lease. Right-of-use assets represent the right to use an underlying asset for the lease term, and lease liabilities represent
the obligation to make lease payments arising from the lease. Right-of-use assets and lease liabilities are recognized at the commencement
date based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide an implicit
rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present
value of lease payments.
DEBT DISCOUNT AND DEBT ISSUANCE COSTS
Debt discounts and debt issuance costs incurred in
connection with the issuance of convertible notes are capitalized and amortized to interest expense based on the related debt agreements
using the effective interest rate method. Unamortized discounts are netted against convertible notes.
DERIVATIVE LIABILITY
In accordance with Financial Accounting Standards
Board (“FASB”) Accounting Standards Codification (“ASC”) Paragraph 815-15-25-1 the conversion feature and certain
other features are considered embedded derivative instruments, such as a conversion reset provision, a penalty provision and redemption
option, which are to be recorded at their fair value as its fair value can be separated from the convertible note and its conversion is
independent of the underlying note value. The Company records the resulting discount on debt related to the conversion features at initial
transaction and amortizes the discount using the effective interest rate method over the life of the debt instruments. The conversion
liability is then marked to market each reporting period with the resulting gains or losses shown in the statements of operations.
In circumstances where the embedded conversion option
in a convertible instrument is required to be bifurcated and there are also other embedded derivative instruments in the convertible instrument
that are required to be bifurcated, the bifurcated derivative instruments are accounted for as a single, compound derivative instrument.
The Company follows ASC Section 815-40-15 (“Section
815-40-15”) to determine whether an instrument (or an embedded feature) is indexed to the Company’s own stock. Section 815-40-15
provides that an entity should use a two-step approach to evaluate whether an equity-linked financial instrument (or embedded feature)
is indexed to its own stock, including evaluating the instrument’s contingent exercise and settlement provisions.
The Company evaluates its convertible debt, options,
warrants or other contracts, if any, to determine if those contracts or embedded components of those contracts qualify as derivatives
to be separately accounted for in accordance with paragraph 810-10-05-4 and Section 815-40-25 of the FASB Accounting Standards Codification.
The result of this accounting treatment is that the fair value of the embedded derivative is marked-to-market each balance sheet date
and recorded as either an asset or a liability. In the event that the fair value is recorded as a liability, the change in fair value
is recorded in the consolidated statement of operations as other income or expense. Upon conversion, exercise or cancellation of a derivative
instrument, the instrument is marked to fair value at the date of conversion, exercise or cancellation and then that the related fair
value is reclassified to equity.
The Company utilizes the binomial option pricing model
to compute the fair value of the derivative and to mark to market the fair value of the derivative at each balance sheet date. The binomial
option pricing model includes subjective input assumptions that can materially affect the fair value estimates. The expected volatility
is estimated based on the most recent historical period of time equal to the remaining contractual term of the instrument granted.
On October 1, 2021, the Company adopted a sequencing
policy under Accounting Standards Codification (“ASC”) 815-40-35 Derivatives and Hedging (“ASC 815”)
whereby in the event that reclassification of contracts from equity to assets or liabilities is necessary pursuant to ASC 815 due to the
Company’s inability to demonstrate it has sufficient authorized shares as a result of certain securities convertible or exchangeable
for a potentially indeterminable number of shares, shares will be allocated on the basis of the earliest issuance date of potentially
dilutive instruments, with the earliest grants receiving the first allocation of shares. Pursuant to ASC 815, issuances of securities
to the Company’s employees or directors are not subject to the sequencing policy.
INCOME TAXES
The Company accounts for income taxes in accordance
with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("FASB ASC") 740, Income Taxes.
Under the assets and liability method of FASB ASC 740, deferred tax assets and liabilities are recognized for the estimated future tax
consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary
differences are expected to be recovered or settled. The Company provides a valuation allowance, if necessary, to reduce deferred tax
assets to their estimated realizable value.
NET LOSS PER SHARE
Basic net income (loss) per share includes
no dilution and is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares
outstanding for the period. Diluted earnings per share is computed by dividing earnings available to common shareholders by the weighted
average number of common shares outstanding for the period increased to include the number of additional common shares that would have
been outstanding if potentially dilutive securities had been issued. On March 31, 2022 and 2021, we excluded the common stock issuable
upon conversion of non-redeemable convertible notes, convertible notes, Series A Stock, Series B Stock, Series C Stock, Series D Stock
and common stock to be issued of 5,518,142,000 shares and 9,602,051,330 shares, respectively, as their effect would have been anti-dilutive.
FOREIGN CURRENCY TRANSLATION
The consolidated financial statements are presented
in United States dollars. The functional currency of the consolidated entities are determined by evaluating the economic environment each
entity. The functional currency of Two Hands Corporation is the United States dollar. Foreign exchange translation adjustments are reported
as gains or losses resulting from foreign currency transactions and are included in results of operations.
The functional currency of its Company’s Canadian
subsidiary, Two Hands Canada Corporation, to the Canadian dollar from United States dollar. The change in functional currency is due to
the increase of Canadian dollar dominated activities over time including sales, operating costs and share subscriptions. The change in
functional currency is accounted for prospectively. Two Hands Canada Corporation maintains its accounts in the Canadian dollar. Assets
and liabilities are translated to United States dollars at year-end exchange rates. Income and expenses are transaction at averages
exchange rate during the year. Foreign currency transaction adjustments are reported as other comprehensive income, a component of equity
in the consolidated balance sheet.
STOCK-BASED COMPENSATION
The Company accounts for stock incentive awards issued
to employees and non-employees in accordance with FASB ASC 718, Stock Compensation. Accordingly, stock-based compensation is measured
at the grant date, based on the fair value of the award. Stock-based awards to employees are recognized as an expense over the requisite
service period, or upon the occurrence of certain vesting events. Additionally, stock-based awards to non-employees are expensed over
the period in which the related services are rendered.
FAIR VALUE OF FINANCIAL INSTRUMENTS
ASC Topic 820 defines fair value, establishes a framework
for measuring fair value, and expands disclosures about fair value measurements.
Included in the ASC Topic 820 framework is a three
level valuation inputs hierarchy with Level 1 being inputs and transactions that can be effectively fully observed by market participants
spanning to Level 3 where estimates are unobservable by market participants outside of the Company and must be estimated using assumptions
developed by the Company. The Company discloses the lowest level input significant to each category of asset or liability valued within
the scope of ASC Topic 820 and the valuation method as exchange, income or use. The Company uses inputs which are as observable as possible
and the methods most applicable to the specific situation of each company or valued item.
The Company’s financial instruments such as
cash, accounts receivable, accounts payable and accrued liabilities, non-redeemable convertible notes, notes payable, due to related parties
and promissory notes are reported at cost, which approximates fair value due to the short-term nature of these financial instruments.
RECENT ACCOUNTING PRONOUNCEMENTS
In August 2020, the FASB issued ASU 2020-06,
Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own
Equity (Subtopic 815-40). This update amends the guidance on convertible instruments and the derivatives scope exception for contracts
in an entity's own equity and improves and amends the related EPS guidance for both Subtopics. This standard is effective for fiscal years
and interim periods within those fiscal years beginning after December 15, 2023, which means it will be effective for our fiscal year
beginning January 1, 2014. Early adoption is permitted but no earlier than fiscal years beginning after December 15, 2020, including interim
periods within those fiscal years. We are currently evaluating the impact of ASU 2020-06 on our consolidated financial statements.
Other recent accounting pronouncements issued by the
FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange
Commission did not or are not believed by management to have a material impact on the Company's present or future consolidated financial
statements.
NOTE 3 – NON-REDEEMABLE CONVERTIBLE NOTES
On September 1, 2016, Doug Clark, former Chief Executive
Officer and related party, assigned the Side Letter Agreement (“Note”) dated June 10, 2014 with a total carrying value $382,016
to DC Design Inc. (“DC Design”). On September 1, 2016, the Company entered into an amended Side Letter Agreement with DC Design
to amend and add certain terms to the Side Letter Agreement and advances from the period from June 25, 2014 to December 24, 2014. Under
the terms of the amended Side Letter Agreement, the issue price of the Note is $174,252 with an interest rate 20% per annum and an original
maturity date of December 31, 2017 which is subject to automatic annual renewal. In addition, on September 30, 2019, the Company and DC
Design entered into an Agreement to change the original maturity date of the Note to December 31, 2021. At the option of the Company,
the Company may convert principal and interest at a fixed conversion price of $0.003 per share of the Company’s common stock. The
Note allows for the lender to secure a portion of the Company assets up to 200% of the face value of the note. During the year ended December
31, 2021, the Company elected to convert $39,612 of principal and interest into 13,204 shares of common stock of the Company at a conversion
price of $3.00 per share. This conversion resulted in a gain on debt settlement of $6,602 due to the requirement to record the share issuance
at fair value on the date the shares were issued. The condensed consolidated statement of operations includes interest expense of $0 and
$1,628 for the three months ended March 31, 2022 and 2021, respectively. On March 31, 2022 and 2021, the carrying amount of the Note
is $0 and $0, respectively. This Note has been paid in full.
On January 8, 2018, the Company entered into a Side
Letter Agreement (“Note”) with Stuart Turk, to amend and add certain terms to unsecured, non-interest bearing, due on demand
notes payable totaling $244,065 issued by the Company during the period of July 2014 and December 2017. The issue price of the Note is
$244,065 with a face value of $292,878 and the Note has an original maturity date of December 31, 2018 which is subject to automatic annual
renewal. On June 29, 2021, the Company and Stuart Turk entered into an Agreement to change the original maturity date of the Note to December
31, 2025. At the option of the Company, the Company may convert principal and interest at a fixed conversion price of $0.0001 per share
of the Company’s common stock. The Note allows for the lender to secure a portion of the Company assets up to 200% of the face value
of the Note. If the Note is not paid on the maturity date, the outstanding face amount of the Note shall increase by 20% on January 1,
2022. During the year ended December 31, 2020, the Company elected to convert $1,400 of principal and interest into 14,000 shares of common
stock of the Company at a conversion price of $0.10 per share. These conversions resulted in a loss on debt settlement of $58,800 due
to the requirement to record the share issuance at fair value on the date the shares were issued. During the year ended December 31, 2021,
the Company elected to convert $286,957 of principal and interest into 2,869,571 shares of common stock of the Company at a conversion
price of $0.10 per share. These conversions resulted in a loss on debt settlement of $7,693,428 due to the requirement to record the share
issuance at fair value on the date the shares were issued. During the three months ended March 31, 2022, the Company elected to convert
$71,000 of principal and interest into 710,000 shares of common stock of the Company at a conversion price of $0.10 per share. These conversions
resulted in a loss on debt settlement of $374,000 due to the requirement to record the share issuance at fair value on the date the shares
were issued. The condensed consolidated statement of operations includes interest expense of $10,724 and $20,729 for the three months
ended March 31, 2022 and 2021, respectively. On March 31, 2022 and December 31, 2021, the carrying amount of the Note is $157,181
(face value of $189,948 less $32,767 unamortized discount) and $217,457 (face value of $217,457 less $0 unamortized discount), respectively.
On April 12, 2018, the Company entered into a Side
Letter Agreement (“Note”) with Jordan Turk to amend and add certain terms to unsecured, non-interest bearing, due on demand
notes payable totaling $45,000 issued by the Company during the period of March 19, 2018 to April 12, 2018. The issue price of the Note
is $45,000 with a face value of $54,000 and the Note has an original maturity date of December 31, 2018 which is subject to automatic
annual renewal. On June 29, 2021, the Company and Jordan Turk entered into an Agreement to change the original maturity date of the Note
to December 31, 2025. At the option of the Company, the Company may convert principal and interest at a fixed conversion price of $0.0001
per share of the Company’s common stock. The Note allows for the lender to secure a portion of the Company assets up to 200% of
the face value of the Note. During the year ended December 31, 2020, the Company elected to convert $2,000 of principal and interest into
20,000 shares of common stock of the Company at a conversion price of $0.10 per share. These conversions resulted in a loss on debt settlement
of $62,000 due to the requirement to record the share issuance at fair value on the date the shares were issued. During the year ended
December 31, 2021, the Company elected to convert $90,048 of principal and interest into 900,480 shares of common stock of the Company
at a conversion price of $0.10 per share. These conversions resulted in a loss on debt settlement of $2,918,242 due to the requirement
to record the share issuance at fair value on the date the shares were issued. The condensed consolidated statement of operations includes
interest expense of $0 and $3,701 for the three months ended March 31, 2022 and 2021, respectively. On March 31, 2022 and December
31, 2021, the carrying amount of the Note is $0 and $0, respectively. This Note has been paid in full.
On May 10, 2018, the Company entered into a Side Letter
Agreement (“Note”) with Jordan Turk to amend and add certain terms to unsecured, non-interest bearing, due on demand notes
payable totaling $35,000 issued by the Company on May 9, 2018. The issue price of the Note is $35,000 with a face value of $42,000 and
the Note has an original maturity date of December 31, 2018 which is subject to automatic annual renewal. On June 29, 2021, the Company
and Jordan Turk entered into an Agreement to change the original maturity date of the Note to December 31, 2025. At the option of the
Company, the Company may convert principal and interest at a fixed conversion price of $0.0001 per share of the Company’s common
stock. The Note allows for the lender to secure a portion of the Company assets up to 200% of the face value of the Note. During the year
ended December 31, 2021, the Company elected to convert $40,100 of principal and interest into 401,000 shares of common stock of the Company
at a conversion price of $0.10 per share. These conversions resulted in a loss on debt settlement of $846,100 due to the requirement to
record the share issuance at fair value on the date the shares were issued. During the three months ended March 31, 2022, the Company
elected to convert $30,000 of principal and interest into 300,000 shares of common stock of the Company at a conversion price of $0.10
per share. These conversions resulted in a loss on debt settlement of $210,000 due to the requirement to record the share issuance at
fair value on the date the shares were issued. The condensed consolidated statement of operations includes interest expense of $1,602
and $2,983 for the three months ended March 31, 2022 and 2021, respectively. On March 31, 2022 and December 31, 2021, the carrying
amount of the Note is $4,077 (face value of $8,971 less $4,894 unamortized discount) and $32,476 (face value of $32,476 less $0 unamortized
discount), respectively.
On September 13, 2018, the Company entered into a
Side Letter Agreement (“Note”) with Jordan Turk to amend and add certain terms to unsecured, non-interest bearing, due on
demand notes payable totaling $40,000 issued by the Company during the period of July 10 to September 13, 2018. The issue price of the
Note is $40,000 with a face value of $48,000 and the Note has an original maturity date of December 31, 2018 which is subject to automatic
annual renewal. On June 29, 2021, the Company and Jordan Turk entered into an Agreement to change the original maturity date of the Note
to December 31, 2025. At the option of the Company, the Company may convert principal and interest at a fixed conversion price of $0.0001
per share of the Company’s common stock. The Note allows for the lender to secure a portion of the Company assets up to 200% of
the face value of the Note. The condensed consolidated statement of operations includes interest expense of $4,090 and $3,409 for the
three months ended March 31, 2022 and 2021, respectively. On March 31, 2022 and December 31, 2021, the carrying amount of the Note is
$87,035 (face value of $99,533 less $12,498 unamortized discount) and $82,944 (face value of $82,944 less $0 unamortized discount), respectively.
On January 31, 2019, the Company entered into a Side
Letter Agreement (“Note”) with Stuart Turk to amend and add certain terms to unsecured, non-interest bearing, due on demand
notes payable totaling $106,968 issued by the Company during the period of January 3, 2018 to December 28, 2018. The issue price of the
Note is $106,968 with a face value of $128,362 and the Note has an original maturity date of December 31, 2019 which is subject to automatic
annual renewal. On June 29, 2021, the Company and Stuart Turk entered into an Agreement to change the original maturity date of the Note
to December 31, 2025. At the option of the Company, the Company may convert principal and interest at a fixed conversion price of $0.0001
per share of the Company’s common stock. The Note allows for the lender to secure a portion of the Company assets up to 200% of
the face value of the Note. If the Note is not paid on the maturity date, the outstanding face amount of the Note shall increase by 20%
on January 1, 2022. The condensed consolidated statement of operations includes interest expense of $9,115 and $7,596 for the three months
ended March 31, 2022 and 2021, respectively. On March 31, 2022 and December 31, 2021, the carrying amount of the Note is $193,956 (face
value of $221,809 less $27,853 unamortized discount) and $184,841 (face value of $184,841 less $0 unamortized discount), respectively.
On January 31, 2019, the Company entered into a Side
Letter Agreement (“Note”) with The Cellular Connection Ltd. to amend and add certain terms to unsecured, non-interest bearing,
due on demand notes payable totaling $20,885 issued by the Company during the period of January 23, 2018 to October 16, 2018. The issue
price of the Note is $20,885 with a face value of $25,062 and the Note has an original maturity date of December 31, 2019 which is subject
to automatic annual renewal. On September 30, 2019, the Company and The Cellular Connection Ltd. entered into an Agreement to change the
original maturity date of the Note to December 31, 2021. At the option of the Company, the Company may convert principal and interest
at a fixed conversion price of $0.0001 per share of the Company’s common stock. The Note allows for the lender to secure a portion
of the Company assets up to 200% of the face value of the Note. During the year ended December 31, 2020, the Company elected to convert
$115 of principal and interest into 1,150 shares of common stock of the Company at a conversion price of $0.10 per share. These conversions
resulted in a loss on debt settlement of $3,795 due to the requirement to record the share issuance at fair value on the date the shares
were issued. During the year ended December 31, 2021, the Company elected to convert $35,952 of principal and interest into 359,517 shares
of common stock of the Company at a conversion price of $0.10 per share. These conversions resulted in a loss on debt settlement of $1,357,400
due to the requirement to record the share issuance at fair value on the date the shares were issued. The condensed consolidated statement
of operations includes interest expense of $0 and $1,477 for the three months ended March 31, 2022 and 2021, respectively. On March
31, 2022 and December 31, 2021, the carrying amount of the Note is $0 and $0, respectively. This Note has been paid in full.
On January 20, 2021, the Company entered into a Side
Letter Agreement (“Note”) with Francesco Bisignano for cash proceeds of $15,823. The issue price of the Note is $15,823 with
a face value of $23,735. At the option of the Company, the Company may convert principal and interest at a fixed conversion price of $0.0034
per share of the Company’s common stock. During the year ended December 31, 2021, the Company elected to convert $23,735 of principal
and interest into 8,823 shares of common stock of the Company at a conversion price of $3.40 per share. This conversion resulted in a
loss on debt settlement of $2,736 due to the requirement to record the share issuance at fair value on the date the shares were issued.
The condensed consolidated statement of operations includes interest expense of $0 and $7,912 for the three months ended March 31, 2022
and 2021, respectively. On March 31, 2022 and December 31, 2021, the carrying amount of the Note is $0 and $0, respectively. This Note
has been paid in full.
NOTE 4 – LEASES
The Company entered into an operating lease agreement
on October 14, 2021 for an automobile, resulting in the recording of an initial liability and corresponding right-of-use asset of $35,906.
The weighted-average remaining non-cancelable lease term for the Company’s operating lease was 3.50 years at March 31, 2022. The
weighted-average discount rate was 3.96% at March 31, 2022.
The Company’s operating leases expires in 2025.
The following shows the undiscounted cash flows for the remaining periods under operating lease at March 31, 2022:
| Operating Lease Liability Maturity | |
|
| Periods ending December 31, | |
Operating Lease Commitments |
| | 2022 | | |
$ | 11,096 | |
| | 2023 | | |
| 11,096 | |
| | 2024 | | |
| 11,096 | |
| | 2025 | | |
| 8,322 | |
| | Total operating lease commitments | | |
| 41,610 | |
| | Less: imputed interest | | |
| (9,665 | ) |
| | Total right-of-use liability | | |
$ | 31,945 | |
The Company’s discounted current right-of-use
lease liability and discounted non-current right-of-use lease liability at March 31, 2022 is $8,681 and $23,264, respectively.
NOTE 5 – NOTES PAYABLE
As of March 31, 2022 and December 31, 2021, notes
payable due to Stuart Turk, Jordan Turk and The Cellular Connection Limited, a corporation controlled by Stuart Turk, totaling $6,109
and $6,103, respectively, were outstanding. The balances are non-interest bearing, unsecured and have no specified terms of repayment.
During the three months ended March 31, 2021, $7,860
of cash was advanced to the Company and the Company settled notes payable of $23,047 by issuing a promissory note.
NOTE 6 – PROMISSORY NOTES
Promissory Notes
As of March 31, 2022 and December 31, 2021, promissory
notes of $215,194 (principal $186,672 and interest of $28,522) and $210,527 (principal $186,672 and interest of $23,855), respectively,
were outstanding. The promissory notes bears interest of 10% per annum, are unsecured and mature on December 31, 2025.
During the three months ended March 31, 2021, the
Company issued promissory notes of $19,217 for cash and $23,047 to settle notes payable.
Promissory Note – Related Party
As of March 31, 2022, promissory note – related
party of $85,285 (principal $85,285 and interest of $0) and $0, respectively, were outstanding. The promissory notes – related party
bear interest of 10% per annum, are unsecured, mature on December 31, 2025 and are due to 2130555 Ontario Limited, a Company controlled
by Nadav Elituv, the Company's Chief Executive Officer.
During the three months ended March 31, 2022, the
Company issued promissory notes – related party of $85,285 to settle accrued liabilities for consulting fees due to 2130555 Ontario
Limited.
NOTE 7 – CONVERTIBLE NOTES
Power Up Lending Group
Ltd.
On July 13, 2020 the Company
entered into a Securities Purchase Agreement with Power Up Lending Group Ltd. (“Holder”) relating to the issuance and sale
of a Senior Convertible Note (the “Note”) with an original principal amount of $53,000 less transaction costs of $3,000 bearing
an 8% annual interest rate and maturing July 13, 2021 for $50,000 in cash. After 180 days after the issue date, the Note together with
any unpaid accrued interest is convertible into shares of common stock of the Company at the Holder’s option at a variable conversion
price calculated at 65% of the market price defined as the lowest three average trading price during the ten trading day period ending
on the latest trading day prior to the conversion date. The Company may prepay the Note in cash, if repaid within 90 days of date of issue,
at 118% of the original principal amount plus interest, between 91 days and 120 days at 123% of the original principal amount plus interest,
between 121 days and 180 days at 129% of the original principal amount plus interest and after 181 days 175% of the original principal
amount plus interest. From January 15, 2021 to January 19, 2021, the Holder converted 30,622 shares of common stock of the Company with
a fair value of $98,262 to settle principal and interest of $55,120. The conversions resulted in the settlement of derivative liabilities
of $64,501 and a loss on settlement of debt of $25,604. On March 31, 2022 and December 31, 2021, the Note was recorded at amortized cost
of $0 and $0, respectively. This Note has been paid in full.
On September 11, 2020 the
Company entered into a Securities Purchase Agreement with Power Up Lending Group Ltd. (“Holder”) relating to the issuance
and sale of a Senior Convertible Note (the “Note”) with an original principal amount of $78,000 less transaction costs of
$3,000 bearing an 8% annual interest rate and maturing March 11, 2022 for $75,000 in cash. After 180 days after the issue date, the Note
together with any unpaid accrued interest is convertible into shares of common stock of the Company at the Holder’s option at a
variable conversion price calculated at 65% of the market price defined as the lowest three average trading price during the ten trading
day period ending on the latest trading day prior to the conversion date. The Company may prepay the Note in cash, if repaid within 90
days of date of issue, at 118% of the original principal amount plus interest, between 91 days and 120 days at 123% of the original principal
amount plus interest, between 121 days and 180 days at 129% of the original principal amount plus interest and after 181 days 175% of
the original principal amount plus interest. From March 15, 2021 to March 16, 2021, the Holder converted 33,050 shares of common stock
of the Company with a fair value of $119,865 to settle principal and interest of $81,120. The conversions resulted in the settlement of
derivative liabilities of $89,884 and a loss on settlement of debt of $17,437. On March 31, 2022 and 2021, the Note was recorded at amortized
cost of $0 and $0, respectively. This Note has been paid in full.
Redstart Holdings Corp.
On February 23, 2021, the
Company entered into a Securities Purchase Agreement with Redstart Holdings Corp. (“Holder”) relating to the issuance and
sale of a Convertible Note (the “Note”) with an original principal amount of $153,000 less transaction costs of $3,000 bearing
an 8% annual interest rate and maturing August 23, 2022 for $150,000 in cash. After 180 days after the issue date, the Note together with
any unpaid accrued interest is convertible into shares of common stock of the Company at the Holder’s option at a variable conversion
price calculated at 65% of the market price defined as the lowest three average trading price during the ten trading day period ending
on the latest trading day prior to the conversion date. The Company may prepay the Note in cash, if repaid within 90 days of date of issue,
at 118% of the original principal amount plus interest, between 91 days and 120 days at 123% of the original principal amount plus interest,
between 121 days and 180 days at 129% of the original principal amount plus interest and after 181 days 175% of the original principal
amount plus interest. From August 25, 2021 to August 30, 2021, the Holder converted 83,195 shares of common stock of the Company with
a fair value of $228,323 to settle principal and interest of $159,120. The conversions resulted in the settlement of derivative liabilities
of $108,249 and a loss on settlement of debt of $40,086. On March 31, 2022 and December 31, 2021, the Note was recorded at amortized cost
of $0 and $0, respectively. This Note has been paid in full.
Geneva Roth Remark Holdings
Inc.
On May 27, 2021, the Company
entered into a Securities Purchase Agreement with Geneva Roth Remark Holdings Inc. (“Holder”) relating to the issuance and
sale of a Convertible Note (the “Note”) with an original principal amount of $78,750 less transaction costs of $3,750 bearing
an 8% annual interest rate and maturing May 27, 2022 for $75,000 in cash. After 180 days after the issue date, the Note together with
any unpaid accrued interest is convertible into shares of common stock of the Company at the Holder’s option at a variable conversion
price calculated at 65% of the market price defined as the lowest three average trading price during the ten trading day period ending
on the latest trading day prior to the conversion date. The Company may prepay the Note in cash, if repaid within 90 days of date of
issue, at 118% of the original principal amount plus interest, between 91 days and 120 days at 123% of the original principal amount
plus interest, between 121 days and 180 days at 129% of the original principal amount plus interest and after 181 days 175% of the original
principal amount plus interest. From December 1, 2021 to December 2, 2021, the Holder converted 67,462 shares of common stock of the
Company with a fair value of $105,985 to settle principal and interest of $81,900. The conversions resulted in the settlement of derivative
liabilities of $52,689 and a gain on settlement of debt of $3,667. On March 31, 2021 and December 31, 2021, the Note was recorded at
amortized cost of $0 and $0, respectively. This Note has been paid in full.
NOTE 8 - CONVERTIBLE PROMISSORY NOTE DERIVATIVE
LIABILITIES
The Convertible Promissory Notes with Power
Up Lending Group Ltd., Redstart Holdings Corp. and Geneva Roth Remark Holdings Inc. with issue dates of July 13, 2020, September 11, 2020,
February 23, 2021 and May 27, 2021 are accounted for under ASC 815. The variable conversion price is not considered predominantly
based on a fixed monetary amount settleable with a variable number of shares due to the volatility and trading volume of the Company’s
common stock. The Company’s convertible promissory note derivative liabilities have been measured at fair value on December 31,
2020, February 23, 2021, May 27, 2021 and December 2, 2021 using the binomial model.
The inputs into the binomial models are as follows:
| Fair Value of Convertible Promissory Note Derivative Liabilities |
|
|
|
|
| |
December 31, 2020 |
February 23, 2021 |
May 27, 2021 |
December 2, 2021 |
| Closing share price |
$0.0031 |
$0.0068 |
$0.0026 |
$0.0014 |
| Conversion price |
$0.0019 |
$0.0037 |
$0.0017 |
$0.0011 |
| Risk free rate |
0.09% to 0.10% |
0.13% |
0.13% |
0.08% |
| Expected volatility |
228% to 284% |
276% |
194% |
152% |
| Dividend yield |
0% |
0% |
0% |
0% |
| Expected life |
0.53 to 1.19 years |
1.5 years |
1.0 years |
0.48 years |
The fair value of the convertible promissory note
derivative liability relating to the Notes issued to Power Up Lending Group Ltd., Redstart Holdings Corp. and Geneva Roth Remark Holdings
Inc on July 13, 2020, September 11, 2020, February 23, 2021 and May 27, 2021 is $0 (December 31, 2021 - $0, December 31, 2020 - $172,261.
During the three months ended March 31, 2021, the convertible promissory note derivative liability was reduced by $154,384 for settlement
of derivative liabilities due to conversion of the Notes into common stock by the Holders. The decrease in the fair value of the conversion
option derivative liability of $68,613 is recorded as a loss in the condensed consolidated statements of operations for the three months
ended March 31, 2021.
NOTE 9 – RELATED PARTY TRANSACTIONS
As of March 31, 2022 and December 31, 2021,
advances and accrued salary of $14,054 and $39,985, respectively, were due to Nadav Elituv, the Company's Chief Executive Officer. The
balance is non-interest bearing, unsecured and have no specified terms of repayment.
During the three months ended March 31, 2022,
the Company issued advances due to related party for $48,102 of expenses paid on behalf of the Company and advances due to related party
were repaid by the Company with $37,182 in cash. In addition, the Company accrued salary of $47,744 due to Nadav Elituv for the three
months ended March 31, 2022 and issued a promissory note for $85,285 to settle due to related party.
During the three months ended March 31, 2021,
the Company issued advances due to related party for $18,203 of expenses paid on behalf of the Company and advances due to related party
were repaid by the Company with $20,505 in cash. In addition, the Company accrued salary of $37,800 for the three months ended March 31,
2021 and issued 30,000 shares of Series A Convertible Preferred Stock with a fair value of $110,000 to settled compensation due on March
31, 2021.
Employment Agreements
On
August 7, 2020, the Company executed an employment agreement for the period from July 1, 2020 to June 30, 2021 with Nadav Elituv,
the Chief Executive Officer of the Company whereby the Company shall pay 50,000,000 (pre-split) shares of Common Stock of the
Company and an annual salary of $151,200 payable monthly on the first day of each month from available funds.
On June 30, 2021, there were no shares of common stock due Nadav Elituv under the employment agreement.
On
July 1, 2021, the Company executed an employment agreement for the period from July 1, 2021 to June 30, 2022 with Nadav Elituv, the
Chief Executive Officer of the Company whereby the Company shall pay 30,000 shares of Series A Convertible Preferred Stock of the
Company, 60,000,000 (pre-split) shares of Common Stock of the Company and an annual salary of $216,000 payable monthly on the first
day of each month from available funds, commencing on July 1, 2021. On October 1, 2021, the Company and Nadav
Elituv amended the employment agreement to (i) cancel annual salary of $216,000
payable monthly and (ii) enter in to a consulting agreement to pay 2130555 Ontario Limited, a Company controlled by Nadav Elituv, a
monthly consulting fee of $17,400
(CAD $22,000 per month) for services for the period from October 1, 2021 to June 30, 2022. On March 26, 2022, the Company and Nadav
Elituv further amended the employment agreement to (i) change the termination date from June 30, 2022 to December 31, 2022; (ii) pay
an additional 10,500
shares of Series A Convertible Preferred Stock of the Company and (iii) pay an additional 50,000,000
(pre-split) shares of Common Stock of the Company.
On March 31, 2022, there were 90,000,000
(post-split) shares of common stock due Nadav Elituv under the employment agreement.
Stock-based compensation – salaries expense
related to these employment agreements for the three months ended March 31, 2022 and 2021 is $4,200 and $20,350, respectively. Stock-based
compensation – salaries expense was recognized ratably over the requisite service period.
NOTE 10 – PREFERRED STOCK
On August 6, 2013, the Company filed a Certificate
of Designation with the Delaware Secretary of State thereby designating two hundred thousand (200,000) shares as Series A Convertible
Preferred Stock (“Series A Stock”). Each share of Series A Stock is convertible into one thousand (1,000) shares of common
stock of the Company. On April 21, 2022, the Company amended its articles to amend the terms of its Series A Convertible Preferred Stock
to become non-voting shares. Previously Series A Stock were entitled to the number of votes equal to the aggregate number of shares of
common stock into which the Holder’s share of Series A Stock is convertible, multiplied by one hundred (100).
On December 12, 2019, the Company filed a Certificate
of Designation with the Delaware Secretary of State thereby designating one hundred thousand (100,000) shares as Series B Convertible
Preferred Stock (“Series B Stock”). After a one year holding period, each share of Series B Stock is convertible into one
thousand (1,000) shares of common stock of the Company. Series B Stock is non-voting.
On October 7, 2020, the Company filed a Certificate
of Designation with the Delaware Secretary of State thereby designating thirty thousand (30,000) shares as Series C Convertible Preferred
Stock, par value $0.001 per share (“Series C Stock”). Each share of Series C Stock (i) has a liquidation value of $100, subject
to various anti-dilution protections (ii) is convertible into shares of common stock of the Company six months after the date of issuance
at a price of $2.00 per share, subject to various anti-dilution protections (iii) on conversion will receive an aggregate number of shares
of common stock as is determined by dividing the liquidation value by the conversion price. Series C Stock are non-voting. On June 24,
2021, the board of directors approved the increase in the number of designated shares of Series C Convertible Preferred Stock from 5,000
to 30,000 and reduction of the conversion price from $0.0035 per share to $0.002 per share.
On September 1, 2021, the Company filed a Certificate
of Designation with the Delaware Secretary of State thereby designating two hundred thousand (200,000) shares as Series D Convertible
Preferred Stock, par value $0.001 per share (“Series D Stock”). Each share of Series D Stock is convertible into one hundred
(100) shares of common stock of the Company six months after the date of issuance. Series D Stock are non-voting.
On March 26, 2022, the Company issued 10,500
shares of Series A Convertible Preferred Stock with a fair value of $4,200 ($2.50 per share) for compensation due to Nadav Elituv, the
Chief Executive Officer of the Company.
NOTE 11 - STOCKHOLDERS' EQUITY
The Company is authorized to issue an aggregate of
12,000,000,000 common shares with a par value of $0.0001 per share and 1,000,000 shares of preferred stock with a par value of $0.0001
per share.
On March 21, 2022, pursuant to stockholder consent,
our Board of Directors authorized an amendment (the "Amendment") to our Certificate of Incorporation, as amended, to affect
a reverse stock split of the issued and outstanding shares of our common stock, par value $0.0001, on a 1 for 1,000 basis. We filed the
Amendment with the Delaware Secretary of State on March 21, 2022. On April 25, 2022 the Financial Industry Regulatory Authority, Inc.
notified us that the reverse stock split would take effect on April 27, 2022. All common stock share and per-share amounts for all periods
presented in these consolidated financial statements have been adjusted retroactively to reflect the reverse stock split.
During the three months ended March 31, 2022, the
Company elected to convert $101,000 of principal and interest of non-redeemable convertible notes into 1,010,000 shares of common stock
of the Company with a fair value of $685,000 resulting in a loss of extinguishment of debt of $584,000.
Common stock to be issued
On March 31, 2022 and December 31, 2021, the Company
had an obligation to issue 32,000 shares of common stock valued at $336,000 and 32,000 shares of common stock valued at $336,000, respectively,
for stock-based compensation – consulting services. These shares relate to an agreement dated August 1, 2020 for services to be
provided from August 1, 2020 to July 31, 2022 whereby the Company shall pay 50,000 shares of Common Stock of the Company with a fair value
of $525,000 for consulting. The shares are expensed the earlier of (i) the date of issue of shares or (ii) on a straight line over the
life of the contract.
On March 31, 2022, there were 90,000,000
(post-split) shares of common stock due to Nadav Elituv under his employment agreement.
NOTE 12 - SUBSEQUENT EVENTS
On April 14, 2022, the Company entered into a binding
Grid Promissory Note and Credit Facility Agreement (the “Line of Credit”) with The Cellular Connection Ltd. (the “Lender”)
Pursuant to the Line of Credit, the Company can borrow from the Lender up to CAD$750,000 in principal in increments of at least CAD$50,000
upon five business days’ notice. The funds due for repayment on May 1, 2024, and the principal bears interest at 8% per annum, payable
monthly. Any indebtedness under the Line of Credit are secured against accounts receivable and inventory of the Company, and is convertible
into equity of the Company at the Company’s option any time after twelve months from the first advance, subject to a restriction
on the Lender holding more than 4.99% of the Company’s Common Shares. As at the date of this Form 10-Q, no funds have been borrowed
by the Company pursuant to the Line of Credit.
On April 27, 2022, the Company issued 90,000,000
(post-split) shares of common stock with a fair value of $13,500,000
to Nadav Elituv, the Company's Chief Executive Officer, due under his employment agreement dated July 1, 2021, amended on October 1,
2021 and March 26, 2022.
On April 28, 2022, the Holders of Series B Stock
elected to convert 4,000
shares of Series B Stock into 4,000,000
(post-split) shares of common stock.
On May 4, 2022, the Holders of Series D Stock
elected to convert 40,000
shares of Series D Stock into 4,000,000
(post-split) shares of common stock.
